Timberland Bancorp, Inc. (Nasdaq: TSBK) (“Timberland” or “the Company”) today reported net income of $3.13 million, or $0.42 per diluted common share, for its second fiscal quarter ended March 31, 2017. This compares to net income of $2.38 million, or $0.34 per diluted common share, for the quarter ended March 31, 2016, and net income of $3.15 million, or $0.43 per diluted common share, for the preceding quarter ended December 31, 2016.
For the first six months of fiscal 2017, Timberland earned $6.28 million, or $0.86 per diluted common share, an increase in net income of 28% and an increase in earnings per diluted common share (“EPS”) of 25% from the $4.91 million, or $0.69 per diluted common share, reported for the first six months of fiscal 2016.
Timberland’s Board of Directors also declared a quarterly dividend of $0.11 per common share, payable on May 26, 2017 to shareholders of record on May 12, 2017.
“We continue to see solid growth opportunities in the Western Washington markets we serve,” stated Michael R. Sand, President and CEO.“Growth in assets to a Company record $947 million contributed to higher revenues and increased profitability for the first half of our current fiscal year.Revenue for this period increased 12% while expenses increased 4%, resulting in a 25% increase in our earnings per share compared to the first half of the prior fiscal year.We continue to see strong loan demand in our markets and remain pleased that core deposit growth has been sufficient to fund the Bank’s loan growth.”
Second Fiscal Quarter 2017 Earnings and Balance Sheet Highlights (at or for the period ended March 31, 2017, compared to December 31, 2016, or March 31, 2016):
Earnings Highlights:
Balance Sheet Highlights:
Operating Results
Operating revenue (net interest income before the recapture of loan losses, plus non-interest income excluding other than temporary impairment (“OTTI”) charges on investment securities) increased 11% to $11.30 million for the current quarter from $10.21 million for the comparable quarter one year ago and decreased 2% from $11.53 million for the preceding quarter. Operating revenue increased 12% to $22.83 million for the first six months of fiscal 2017 from $20.44 million for the comparable period one year ago.
Net interest income for the current quarter increased 10% to $8.45 million from $7.67 million for the comparable quarter one year ago and increased 2% from $8.31 million for the preceding quarter.The increased net interest income for the current quarter compared to the preceding quarter was primarily due to an increase in the amount of non-accrual interest collected. For the first six months of fiscal 2017, net interest income increased 9% to $16.76 million from $15.38 million for the first six months of fiscal 2016.
The net interest margin for the current quarter was 3.88% compared to 3.91% for the preceding quarter and 3.92% for the comparable quarter one year ago. The net interest margin for the current quarter was increased by approximately nine basis points due to the collection of $204,000 of non-accrual interest.The net interest margin for the preceding quarter was increased by approximately one basis point due to the collection of $21,000 of non-accrual interest.The net interest margin for the comparable quarter one year ago was increased by approximately 12 basis points due to the collection of $189,000 in pre-payment penalties and the collection of $46,000 of non-accrual interest. Timberland’s net interest margin for the first six months of fiscal 2017 was 3.90% compared to 3.96% for the first six months of fiscal 2016.
Non-interest income increased 13% to $2.85 million from $2.51 million for the comparable quarter one year ago and decreased 11% from $3.22 million for the preceding quarter.The decrease in non-interest income for the current quarter compared to the preceding quarter was primarily due to a $283,000 decrease in gain on sale of loans and smaller decreases in several other categories. The decrease in gain on sale of loans was primarily due to a decrease in the dollar volume of fixed-rate one- to four-family loans sold during the current quarter. Fiscal year-to-date non-interest income increased 21% to $6.07 million from $5.03 million for the first six months of fiscal 2016.
Total operating (non-interest) expenses for the current quarter increased 1% to $6.86 million from $6.81 million for the preceding quarter and increased 3% from $6.63 million for the comparable quarter one year ago. The increased expenses for the current quarter compared to the preceding quarter were primarily due to a $75,000 increase in salaries and employee benefits and smaller increases in several other categories.These increases were partially offset by a $95,000 decrease in loan administration and foreclosure expense and smaller decreases in several other categories.The increase in salaries and employee benefits expense was primarily due to a decrease in loan originations during the current quarter compared to the prior quarter and a corresponding reduction in the amount of loan origination fees collected.Under generally accepted accounting principles (“GAAP”), the portion of a loan origination fee that is attributable to the estimated employee costs to generate the loan is recorded as a reduction of salaries and employee benefits expense.The decrease in loan administration and foreclosure expense was primarily due to the recovery of $75,000 in legal and foreclosure related expenses on a troubled debt restructured loan (“TDR”) that paid off during the quarter.The efficiency ratio for the current quarter was 60.67% compared to 65.09% for the comparable quarter one year ago and 59.07% for the preceding quarter. Fiscal year-to-date operating expenses increased 4% to $13.67 million from $13.11 million for the first six months of fiscal 2016. The efficiency ratio for the first six months of fiscal 2017 improved to 59.86% from 64.21% for the first six months of fiscal 2016.
The provision for income taxes remained level at $1.57 million for the current quarter and the preceding quarter. The effective tax rate was 33.4% for the current quarter compared to 33.3% for the quarter ended December 31, 2016.
Balance Sheet Management
Total assets increased 2% to $946.68 million at March 31, 2017 from $923.75 million at December 31, 2016.The increase was primarily due to a $12.57 million increase in cash and cash equivalents and a $6.94 million increase in net loans receivable.These increases were primarily funded by an $18.88 million increase in deposits during the quarter.
Liquidity, as measured by cash and cash equivalents, CDs held for investment and available for sale investments securities, was 24.0% of total liabilities at March 31, 2017, compared to 23.1% at December 31, 2016, and 21.6% one year ago.
Net loans receivable increased $6.94 million, or 1%, to $676.08 million at March 31, 2017, from $669.14 million at December 31, 2016. The increase was primarily due to an $11.12 million increase in multi-family mortgage loans, a $3.51 million increase in land loans, a $3.40 million increase in one- to four-family mortgage loans, a $3.01 million increase in custom and owner/builder one- to four-family construction loans, a $2.14 million increase in commercial construction loans, and a $1.62 million increase in commercial real estate loans. These increases were partially offset by an $11.03 million decrease in multi-family construction loans, a $5.56 million increase in the amount of undisbursed construction loans in process and smaller decreases in several other categories.The increase in multi-family mortgage loans and the decrease in multi-family construction loans was primarily due to several multi-family construction projects being completed and converting to permanent financing.
Timberland originated $79.50 million in loans during the quarter ended March 31, 2017, compared to $59.58 million for the comparable quarter one year ago and $90.15 million for the preceding quarter.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. Timberland also (on a much smaller volume) sells the guaranteed portion of U.S. Small Business Administration (“SBA”) loans. During the second quarter of fiscal 2017, fixed-rate one- to four-family mortgage loans and SBA loans totaling $15.01 million were sold compared to $13.94 million for the comparable quarter one year ago and $24.20 million for the preceding quarter.
Timberland’s investment securities decreased $108,000, or 1%, during the quarter to $8.60 million at March 31, 2017, from $8.71 million at December 31, 2016, primarily due to scheduled amortization.
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