HOQUIAM, WA — (Marketwire) — 07/26/11 — Timberland Bancorp, Inc. (NASDAQ: TSBK) (“Timberland” or “the Company”) today reported a net loss of $(1.28 million) for its fiscal third quarter ended June 30, 2011 and net income of $1.16 million for the fiscal year to date. The quarter-s net loss to common shareholders after adjusting for the preferred stock dividend and the preferred stock discount accretion was $(1.55 million), or $(0.23) per diluted common share. This compares to net income to common shareholders of $819,000, or $0.12 per diluted common share for the quarter ended March 31, 2011 and net income to common shareholders of $543,000, or $0.08 per diluted common share for the quarter ended June 30, 2010.
Timberland earned $1.16 million for the first nine months of fiscal 2011 compared to a net loss of $(2.15 million) for the same period in the prior fiscal year. Net income available to shareholders for the first nine months of fiscal 2011 after the preferred stock dividend and discount accretion was $370,000, or $0.05 per diluted common share, compared to a loss of $(2.93 million), or $(0.44) per diluted common share, in the like period one year ago.
(at or for the period ended June 30, 2011, compared to June 30, 2010, or March 31, 2011):
Capital levels remain very strong: Total Risk Based Capital of 16.60%; Tier 1 Leverage Capital Ratio of 11.01%; Tangible Capital to Tangible Assets Ratio of 11.01%, all solidly above well capitalized levels;
Net interest margin remained strong at 3.76%;
Year-to-date net income of $1.16 million compared to a net loss of $(2.15 million) for the same period one year ago;
Total delinquent loans (past due 30 days or more) and non-accrual loans decreased 15% to $45.0 million from $52.8 million at March 31, 2011;
Fiscal year to date net charge-offs decreased 59.5% compared to the same fiscal quarters in the prior year
“For the quarter ended June 30, 2011, Timberland provisioned $3.4 million to its allowance for loan losses. The majority of this amount was due to three appraisal updates involving the security for two lending relationships,” said Michael R. Sand, President and CEO. “A provision of $2.15 million was established for a mini-storage facility. Of this amount, $704,000 represents an impairment that we expect to recover as occupancy increases.” Timberland also recorded an expense of $137,000 for the quarter due to the valuation of its mortgage servicing rights portfolio. “We expect to recover $187,000 from future valuations of the mortgage servicing rights portfolio as rates rise,” Sand also stated. “While the residual effects of the recession continue to impact business loan demand we are starting to see good lending opportunities in our market areas. We continue to market to strong borrowers with solid collateral and strong business enterprises and continued generating strong core operating revenues this quarter.”
Timberland Bancorp remains very well capitalized with a total risk-based capital ratio of 16.60%, a Tier 1 leverage capital ratio of 11.01% and a tangible capital to tangible assets ratio of 11.01% at June 30, 2011.
Timberland provisioned $3.40 million to its loan loss allowance during the quarter ended June 30, 2011. The provision was primarily the result of receiving updated appraisals reflecting decreased valuations for three properties involving two borrowing relationships. Net charge-offs, however, declined for the quarter by 48% to $3.41 million compared to $6.54 million for the comparable quarter one year prior. Non-accrual loans decreased to $21.5 million at June 30, 2011 from $23.7 million at March 31, 2011 and were comprised of 63 loans and 52 credit relationships. By category: 47% of non-accrual loans are secured by land and land development properties; 27% are secured by commercial properties; 11% are secured by residential properties; 11% are secured by residential construction projects; 3% are secured by commercial real estate construction projects, and 1% of non-accrual loans are secured by consumer assets. The loan loss allowance of $11.8 million represented 2.21% of loans receivable and loans held for sale at June 30, 2011. Total delinquent loans (past due 30 days or more) and non-accrual loans declined 15% to $45.0 million at June 30, 2011 compared to $52.8 million at March 31, 2011. The non-performing assets (“NPAs”) to total assets ratio was 5.53% at June 30, 2011 compared to 5.04% at March 31, 2011 and 5.28% at June 30, 2010.
Loans past due 90 days and still accruing increased to $4.9 million at June 30, 2011. One of the loans added to the category with a principal balance of $1.8 million was brought current shortly after quarter end and the commercial real estate collateral securing the loan is sold with an anticipated closing date in Timberland-s fourth fiscal quarter. Management believes that three additional loans totaling $2.3 million retain a high probability of being brought current during the Bank-s fourth fiscal quarter or shortly thereafter.
Other real estate owned (“OREO”) and other repossessed assets decreased 15.1% to $11.0 million at June 30, 2011 from $13.0 million at June 30, 2010, and increased from $10.1 million at March 31, 2011. At June 30, 2011 the OREO portfolio consisted of 42 individual properties and four other repossessed assets. The properties consisted of two condominium projects totaling $3.6 million, 24 land parcels totaling $2.7 million, 11 single family homes totaling $2.4 million, three commercial real estate properties totaling $1.2 million and two land development projects totaling $1.0 million. During the quarter ended June 30, 2011 nine OREO properties totaling $1.1 million were sold for a net loss of $21,000.
Total assets decreased 1% to $735.0 million at June 30, 2011 from $743.9 million at March 31, 2011. The decrease in total assets was primarily the result of a $5.9 million decrease in net loans receivable and a $4.7 million decrease in cash and cash equivalents. Liquidity as measured by cash and cash equivalents, CDs held for investment and available for sale investments was 21.6% of total liabilities at June 30, 2011 compared to 22.0% at March 31, 2011 and 18.9% one year ago.
Primarily as a result of decreases in land loan and one-to-four family home loan balances, net loans receivable decreased 1% to $521.3 million at June 30, 2011 from $527.2 million at March 31, 2011. The Bank-s land loan portfolio decreased 13% to $50.2 million at June 30, 2011 from $57.6 million at March 31, 2011. The well diversified land portfolio consists of 405 loans on a variety of land types including individual building lots, acreage, raw land and commercially zoned properties. The average loan balance for the entire land portfolio was approximately $124,000 at June 30, 2011.
“Construction loans represent a modest but important part of our loan portfolio,” Sand noted. “We have observed declining multi-family vacancy rates and rising rents in our markets. In the third fiscal quarter we added $4.3 million in multi-family construction loans to our portfolio and increased our commercial real estate construction loans by funding loans to construct pre-leased medical office space.”
Timberland originated $35.7 million of loans during the quarter ended June 30, 2011 compared to $38.3 million for the preceding quarter and $36.5 million for the comparable quarter one year ago. Timberland continues to sell fixed rate one-to-four family mortgage loans into the secondary market for asset-liability management purposes and to generate non-interest income. During the quarter ended June 30, 2011, $8.2 million of one-to-four family fixed-rate mortgage loans were sold compared to $11.4 million for the preceding quarter and $12.1 million for the quarter ended one year ago.
Timberland-s mortgage-backed securities (“MBS”) and other investments decreased by $428,000 during the quarter to $12.0 million at June 30, 2011 from $12.4 million at March 31, 2011, primarily as a result of prepayments and scheduled amortization. During the quarter ended June 30, 2011, other-than-temporary-impairment (“OTTI”) credit related write-downs and realized losses of $165,000 were recorded on the private label mortgage-backed securities that were acquired in the in-kind redemption from the AMF family of mutual funds in June 2008. At June 30, 2011 the Bank-s remaining private label mortgage-backed securities portfolio had been reduced to $4.1 million from an original acquired balance of $15.3 million.
Total deposits decreased 1% to $589.5 million at June 30, 2011, from $597.2 million at March 31, 2011 primarily as a result of a $5.0 million decrease in CD account balances, a $3.2 million decrease in money market account balances, a $1.2 million decrease in non-interest bearing account balances and a $685,000 decrease in N.O.W. checking account balances. These decreases were partially offset by a $2.4 million increase in a savings account balances.
Total shareholders- equity decreased $1.25 million to $86.33 million at June 30, 2011, from $87.58 million at March 31, 2011. The decrease in equity was primarily a result of the net loss for the quarter. Timberland continues to remain very well capitalized with a total risk based capital ratio of 16.60% and a Tier 1 leverage capital of 11.01%. Book value per common share was $9.99 and tangible book value per common share was $9.13 at June 30, 2011.
Fiscal third quarter operating revenue (net interest income before provision for loan losses, plus non-interest income excluding OTTI charges and valuation allowances or recoveries on mortgage servicing rights (“MSRs”)), increased to $8.48 million from $8.29 million for the preceding quarter and from $8.46 million for the comparable quarter one year ago. Operating revenue increased in the current quarter compared to the preceding quarter primarily due to an increase in service charges on deposits and ATM transaction fees. For the first nine months of fiscal 2011, operating revenue decreased slightly to $25.55 million from $25.60 million for the first nine months of fiscal 2010 primarily due to a decrease in net interest income.
Net interest income increased to $6.41 million for the quarter ended June 30, 2011, from $6.35 million for the immediately prior quarter and from $6.39 million for the comparable quarter one year ago. The net interest margin for the current quarter of 3.76% was relatively unchanged from the 3.78% margin reported for the preceding quarter and declined from the 3.85% margin reported for the comparable quarter one year ago. The net interest margin was reduced by approximately eight basis points for the quarter ended June 30, 2011 by the reversal of interest income on loans placed on non-accrual status during the quarter. For the first nine months of fiscal 2011, net interest income decreased 1% to $19.01 million from $19.23 million for the first nine months of fiscal 2010. Timberland-s net interest margin for the first nine months of fiscal 2011 was 3.78% compared to 3.91% for the first nine months of fiscal 2010.
Timberland provisioned $3.40 million to its loan loss allowance for the quarter ended June 30, 2011, compared to $700,000 in the preceding quarter and $750,000 in the comparable quarter one year prior. For the first nine months of fiscal 2011, the provision for loan losses decreased 41.5% to $5.00 million compared to $8.55 million in the first nine months of fiscal 2010. Net charge-offs for the quarter ended June 30, 2011 decreased 47.9% to $3.41 million compared to $6.54 million for the quarter ended June 30, 2010. Net charge-offs were $651,000 for the quarter ended March 31, 2011. Fiscal year to date, net charge-offs decreased 59.5% to $4.79 million compared to $11.82 million for the first nine months of fiscal 2010.
Non-interest income decreased to $1.76 million for the quarter ended June 30, 2011, from $2.11 million for the preceding quarter and from $1.94 million for the comparable quarter one year ago. Non-interest income was reduced in the current quarter by a $165,000 OTTI credit related write-down on private label mortgage-backed securities and a $137,000 non-cash valuation allowance on the Bank-s mortgage servicing rights (“MSRs”) asset. The valuation allowance on the Bank-s MSR asset was primarily a result of a decrease in mortgage interest rates at June 30, 2011 relative to March 31, 2011. The decrease in mortgage interest rates increased estimated mortgage prepayment speeds, shortened the estimated average life of loans comprising the MSR asset and reduced the fair value of the MSR asset. Year to date, non-interest income increased to $6.82 million from $4.34 million for the first nine months of fiscal 2010, primarily due to a $1.69 million reduction in the OTTI charges recorded and a $703,000 MSR valuation allowance recovery.
Total operating (non-interest) expenses increased 10% to $6.78 million for the third fiscal quarter from $6.18 million for the immediately prior quarter and 6% from $6.42 million for the comparable quarter one year ago. The increased expenses for the current quarter compared to the preceding quarter were primarily the result of recording a $490,000 increase in OREO related expenses and an increase in foreclosure and loan administration expenses, which were reflected in the other non-interest expense category. OREO related expenses were lower in the preceding quarter primarily because a $533,000 gain on sale of OREO properties was recorded which offset other OREO related expenses for the quarter ended March 31, 2011. Year to date, operating expenses increased 4% to $19.34 million from $18.61 million for the first nine months of fiscal 2010, primarily as a result of increased salary and employee benefits expense, increased foreclosure and loan administration expenses, and increased OREO related expenses. These increases were partially offset by a reduction in FDIC insurance expense and premises and equipment expense.
Timberland Bancorp, Inc., a Washington corporation, is the holding company for Timberland Bank (“Bank”). The Bank opened for business in 1915 and serves consumers and businesses across Grays Harbor, Thurston, Pierce, King, Kitsap and Lewis counties, Washington with a full range of lending and deposit services through its 22 branches (including its main office in Hoquiam).
Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and often include the words “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about future performance. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results anticipated, including, but not limited to: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; secondary market conditions for loans and our ability to sell loans in the secondary market; results of examinations of us by the Federal Reserve and our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; our compliance with regulatory enforcement actions, including regulatory memoranda of understandings (“MOUs”) to which we are subject; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules; our ability to attract and retain deposits; further increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, the interpretation of regulatory capital or other rules and any changes in the rules applicable to institutions participating in the TARP Capital Purchase Program; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations; pricing, products and services; and other risks detailed in our reports filed with the Securities and Exchange Commission.
Any of the forward-looking statements that we make in this press release and in the other public statements we make are based upon management-s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. We caution readers not to place undue reliance on any forward-looking statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for fiscal 2011 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of us, and could negatively affect the Company-s operations and stock price performance.
President & CEO
CFO
(360) 533-4747