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Northwest Bancorporation, Inc. Reports Third Quarter 2014 Financial Results

SPOKANE, Wash., Oct. 16, 2014 (GLOBE NEWSWIRE) -- Northwest Bancorporation, Inc. (OTCQB:NBCT) (the "Company"), the holding company of Inland Northwest Bank (the "Bank" or "INB"), today reported financial results for the quarter ended September 30, 2014.

Net income for the third quarter of 2014 was $976 thousand, compared to $878 thousand for the corresponding period in 2013. For the nine months ended September 30, 2014, net income was $2.3 million, compared to $2.7 million for the corresponding period in 2013. The Company's results for the nine months ended September 30, 2013, included nonrecurring income of $742 thousand resulting from the benefit recognized from recapturing its deferred tax asset valuation allowance.

After preferred stock dividends and related accretion adjustments, net income available to common shareholders was $976 thousand, or $0.23 per diluted share, for the third quarter of 2014, compared to $708 thousand, or $0.22 per diluted share, for the corresponding period in 2013. Net income available for common shareholders was $2.3 million, or $0.55 per diluted share, for the nine months ended September 30, 2014, compared to $2.2 million, or $0.70 per diluted share, for the corresponding period in 2013. Without the nonrecurring income in 2013, net income available to common shareholders would have been approximately $1.5 million, or $0.46 per diluted share.

Financial highlights

  • Achieved eleventh consecutive quarter of profitability, with net income of $976 thousand.
  • Nonperforming assets decreased 80% year over year.
  • Noninterest bearing deposits increased 11% year over year.
  • The number of checking and savings accounts increased by 4% year over year.
  • Loans grew by $24 million, or 8%, during the first nine months of 2014 and are up by $31 million year over year.
  • Book value of the Company's stock increased 7.7% during the third quarter, to $9.14 per share.

Balance sheet

As of September 30, 2014, the Company had total assets of $421.3 million, compared to $394.2 million on December 31, 2013 and $393.5 million on September 30, 2013. This represents an increase of $27.1 million, or 6.9%, over year end and an increase of $27.8 million, or 7.1%, year over year. "Total assets of $421 million is a new record for our Company," President and CEO, Randall Fewel said. "We are very pleased to be setting a new record for total assets at the same time as we are celebrating the 25-year anniversary of the founding of Inland Northwest Bank on October 2, 1989."

The investment portfolio was $44.4 million as of September 30, 2014, down $10.0 million, or 18.3%, from $54.4 million at December 31, 2013. The decrease reflects a shift in the deployment of capital from investments to loans. The net unrealized gain in the portfolio was $1.3 million, which was 40% higher than the $929 thousand net unrealized gain at year-end 2013.

The net loan portfolio was $321.0 million on September 30, 2014. This was up $24.1 million, or 8.1%, from year end and was up $29.6 million, or 10.2%, from September 30, 2013, when the loan portfolio was $291.4 million. The increase from prior periods primarily reflects increased commercial lending activity.

Deposits at September 30, 2014 were $358.8 million, an increase of $38.2 million, or 11.9%, compared to December 31, 2013, and an increase of $28.5 million, or 8.6%, compared to September 30, 2013. Core deposits (all deposits except time deposits) ended the quarter at $273.2 million, which is 76.1% of total deposits. This represents an increase of $17.4 million, or 6.8%, since the beginning of the year and an increase of $12.9 million, or 5.0%, over the $260.2 million level on September 30, 2013.

Noninterest bearing deposits, a subset of core deposits, were $95.2 million at quarter end, representing 26.5% of total deposits. This compares to noninterest bearing deposits of $85.9 million, or 26.0% of total deposits, at September 30, 2013, and to $83.1 million, or 25.9% of total deposits, at the end of 2013. The level of noninterest bearing deposits at quarter end represented growth of $9.3 million, or 10.8%, compared to September 30, 2013. "Noninterest bearing deposits are important to our long-term success," Fewel commented, "and it is very gratifying to see continued steady growth in this significant component of our balance sheet."

Asset quality, provision and allowance for loan losses

The Bank's nonperforming assets ("NPAs") were $1.6 million at quarter end, representing 0.38% of total assets. NPAs are defined as loans on which the Bank has stopped accruing interest and includes foreclosed real estate. NPAs at the end of 2013 were $5.3 million, representing 1.34% of total assets, and at September 30, 2013, NPAs were $7.8 million, representing 1.99% of total assets.

Net charge-offs were $168 thousand and $383 thousand for the three and nine-month periods ending on September 30, 2014, respectively, compared to $480 thousand and $744 thousand for the comparable periods in 2013. The provision for loan losses was $50 thousand and $467 thousand for the three and nine-month periods ending on September 30, 2014, compared to $366 thousand and $854 thousand for the comparable periods in 2013. As of September 30, 2014, the allowance for loan losses ("ALLL") was $5.9 million, or 1.80% of gross loans. This is slightly higher than on December 31, 2013, when it was $5.8 million and represented 1.91% of the loan portfolio, and is $516 thousand higher than a year ago when the ALLL was $5.4 million and represented 1.81% of gross loans.

Capital

Shareholders' equity has increased $2.7 million during 2014. The increase reflects earnings retention and an increase in accumulated other comprehensive income and equity-based compensation costs. The book value of the Company's common stock was $9.14 per share on September 30, 2014, up $0.65, or 7.7%, over the $8.49 per share book value on December 31, 2013.

The Bank continues to maintain capital levels in excess of the requirements to be categorized as "well-capitalized" under applicable regulatory standards. The Bank's Tier 1 leverage capital to average assets ratio at September 30, 2014 was 11.2%, compared to 11.3% on September 30, 2013; the regulatory minimum to be considered well-capitalized is 5.0%. The Bank's total capital to risk-weighted assets ratio at September 30, 2014 was 13.4% compared to 13.9% on September 30, 2013; for a bank to be considered well-capitalized, the regulatory threshold for this ratio is 10.0%.

Total revenue

Total revenue was $4.9 million for the third quarter of 2014, compared to $5.6 million for the same period in 2013. Total revenue was $14.0 million and $15.3 million for the nine months ended September 30, 2014 and 2013, respectively. Total revenue is defined as net interest income plus noninterest income. "The decline in total revenue year over year was largely due to a drop off in mortgage refinance activity," Fewel commented. "Our gains from the sale of mortgage loans dropped from $1.2 million for the first nine months of last year to $584 thousand this year – a decline of $583 thousand, or 50%."

Net interest income

Net interest income was $4.0 million for the quarter ended September 30, 2014, compared to $4.4 million for the comparable period in 2013, representing a decrease of $476 thousand, or 10.7%. Net interest income was $11.4 million for the nine months ended September 30, 2014, compared to $11.7 million for the comparable period in 2013, representing a decrease of $324 thousand, or 2.8%.

The net interest margin (interest income minus interest expense, divided by average earning assets) decreased from 4.93% in the third quarter of 2013 to 4.13% in the third quarter of 2014. This compares to a net interest margin of 4.09% year-to-date and 4.36% last year through September. "The pressure on every bank's net interest margin today is enormous," Fewel said, "and INB is no different. As loans in the portfolio pay off or hit their repricing triggers, they are either getting replaced with loans at a lower rate or they reprice at a lower rate. We are offsetting some of this by increasing the size of the loan portfolio and reducing the lower yielding bond portfolio. Our third quarter net interest margin of 4.13% actually improved by two basis points over our second quarter net interest margin of 4.11%. So we believe that the margin compression may be easing," Fewel concluded.

Noninterest income

Noninterest income decreased by $230 thousand, or 20.1%, from $1.1 million in the third quarter last year, to $913 thousand in the third quarter this year. Noninterest income for the first nine months of 2014 was $2.6 million, compared to $3.5 million for the same period in 2013. This represents a decline in noninterest income for the nine months of the year of $962 thousand, or 27.3%. This decrease was related to lower service charges on deposits, lower gains from sales of loans, and lower operating income generated from foreclosed real estate properties. Net gains on sales of investment securities were $0 and $65 thousand for the three and nine-month periods ending on September 30, 2014, respectively, compared to $89 thousand and $195 thousand for the comparable periods in 2013.

Noninterest expense

Noninterest expense for the third quarter decreased by $537 thousand, or 13.7%, from $3.9 million last year to $3.4 million this year. Noninterest expense for the nine months ending September 30, 2014, was $10.2 million, compared to $11.6 million for the same period in 2013. This represents a decline in noninterest expense of $1.4 million, or 12.4%. Nearly all categories of noninterest expenses were down year over year, with the most significant reductions resulting from lower costs related to operating, maintaining or selling foreclosed real estate properties.

"The continued decline in the level of foreclosed assets and nonperforming loans helps us in so many ways," Fewel commented. "Reduced carrying costs, legal and collection expenses, recaptured interest income, and reduced provision expense are all benefits of having fewer nonperforming assets."

Summary

Fewel summarized the quarterly results by saying, "We are extremely proud of achieving a 0.94% return on average assets and 10.6% return on average equity in the third quarter. These compare very favorably to the third quarter last year when our return on average assets was 0.72% and the return on average equity was 7.3%."

About Northwest Bancorporation, Inc.

Northwest Bancorporation, Inc. is the parent company of Inland Northwest Bank, a state-chartered community bank which operates seven branches in Spokane County, Washington, and four branches in Kootenai County, Idaho. INB specializes in meeting the financial needs of individuals and small to medium-sized businesses, including professional corporations, by providing a full line of commercial, retail, mortgage and private banking products and services. More information about INB can be found on its website at www.inb.com. The Company's stock is quoted on the OTC Market's OTCQB Marketplace, www.otcmarkets.com, under the symbol NBCT.

Forward-Looking Statements

This release contains forward-looking statements that are not historical facts and that are intended to be "forward-looking statements" as that term is defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, but are not limited to, statements about the Company's plans, objectives, expectations and intentions and other statements contained in this release that are not historical facts and pertain to the Company's future operating results. When used in this release, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward-looking statements. Actual results may differ materially from the results discussed in these forward-looking statements, because such statements are inherently subject to significant assumptions, risks and uncertainties, many of which are difficult to predict and are generally beyond the Company's control. These include but are not limited to: the possibility of adverse economic developments that may, among other things, increase default and delinquency risks in the Company's loan portfolios; shifts in interest rates; shifts in the rate of inflation; shifts in the demand for the Company's loan and other products; unforeseen increases in costs and expenses; changes in accounting policies; changes in the monetary and fiscal policies of the federal government; and changes in laws, regulations and the competitive environment. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Northwest Bancorporation, Inc.
Consolidated Statements of Financial Condition
(Unaudited)
(dollars in thousands) Sept. 30,
2014
Dec. 31,
2013
Sept. 30,
2013
Assets:
Cash and due from banks $ 13,895 $ 13,951 $ 16,737
Interest bearing deposits 15,593 2,129 140
Time deposits held for investment 1,935 2,655 2,655
Securities available for sale 42,468 51,706 54,017
Federal Home Loan Bank stock, at cost 1,160 1,194 1,205
Loans receivable, net 321,006 296,938 291,392
Loans held for sale 1,463 1,139 1,595
Premises and equipment, net 15,025 15,614 15,897
Accrued interest receivable 1,363 1,261 1,363
Foreclosed real estate 1,250 1,675 3,074
Bank-owned life insurance 4,250 4,160 4,129
Other assets 1,923 1,781 1,281
Total assets $ 421,331 $ 394,203 $ 393,485
Liabilities:
Deposits:
Noninterest bearing deposits $ 95,182 $ 83,063 $ 85,895
Interest bearing transaction and savings deposits 177,997 172,754 174,346
Time deposits 85,671 64,807 70,060
358,850 320,624 330,301
Accrued interest payable 130 131 341
Federal funds purchased -- 12,170 750
Borrowed funds 21,672 23,256 17,744
Other liabilities 2,981 3,065 5,060
Total liabilities 383,633 359,246 354,196
Shareholders' equity:
Preferred stock -- -- 10,986
Common stock 32,831 32,657 26,324
Retained earnings 4,009 1,687 1,281
Accumulated other comprehensive income 858 613 698
Total shareholders' equity 37,698 34,957 39,289
Total liabilities and shareholders' equity $ 421,331 $ 394,203 $ 393,485
Northwest Bancorporation, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
(dollars in thousands, except per share data) Sept. 30,
2014
June 30,
2014
Sept. 30,
2013
Sept. 30,
2014
Sept. 30,
2013
Interest and dividend income:
Loans receivable $ 4,147 $ 3,999 $ 4,519 $ 11,938 $ 12,013
Investment securities 345 347 404 1,085 1,254
Other 13 9 11 32 39
Total interest and dividend income 4,505 4,355 4,934 13,055 13,306
Interest expense:
Deposits 358 352 394 1,053 1,270
Borrowed funds 190 192 107 580 290
Total interest expense 548 544 501 1,633 1,560
Net interest income 3,957 3,811 4,433 11,422 11,746
Provision for loan losses 50 167 366 467 854
Noninterest income:
Service charges on deposits 238 246 292 710 810
Gains from sale of loans, net 248 177 298 584 1,167
Gain on investment securities, net -- 44 89 65 195
Other noninterest income 427 403 464 1,204 1,353
Total noninterest income 913 870 1,143 2,563 3,525
Noninterest expense:
Salaries and employee benefits 1,740 1,720 1,795 5,242 5,362
Occupancy and equipment 325 332 311 998 990
Depreciation and amortization 284 290 306 867 925
Advertising and promotion 114 116 103 332 282
FDIC assessments 69 72 124 207 381
Loss (gain) on foreclosed real estate, net -- (87) 215 (150) 527
Other noninterest expense 862 958 1,077 2,684 3,149
Total noninterest expense 3,394 3,401 3,931 10,180 11,616
Income before income taxes 1,426 1,113 1,279 3,338 2,801
Income tax expense 450 355 401 1,016 100
NET INCOME $ 976 $ 758 $ 878 $ 2,322 $ 2,701
Preferred stock dividends and discount accretion, net -- -- 170 -- 508
Net income available to common shares $ 976 $ 758 $ 708 $ 2,322 $ 2,193
Earnings per common share - basic $ 0.24 $ 0.18 $ 0.23 $ 0.56 $ 0.71
Earnings per common share - diluted $ 0.23 $ 0.18 $ 0.22 $ 0.55 $ 0.70
Weighted average common shares outstanding - basic 4,121,071 4,117,673 3,089,957 4,118,818 3,089,986
Weighted average common shares outstanding - diluted 4,199,334 4,195,568 3,149,379 4,190,688 3,144,667
Northwest Bancorporation, Inc.
Key Financial Ratios and Data
(Unaudited)
Three Months Ended Nine Months Ended
(dollars in thousands, except per share data) Sept. 30,
2014
June 30,
2014
Sept. 30,
2013
Sept. 30,
2014
Sept. 30,
2013
PERFORMANCE RATIOS (annualized)
Return on average assets 0.94% 0.76% 0.72% 0.77% 0.74%
Return on average equity 10.61% 8.37% 7.27% 8.58% 7.58%
Yield on earning assets 4.71% 4.70% 5.49% 4.68% 4.94%
Cost of funds 0.80% 0.80% 0.75% 0.81% 0.78%
Net interest margin 4.13% 4.11% 4.93% 4.09% 4.36%
Noninterest income to average assets 0.88% 0.87% 1.16% 0.85% 1.19%
Noninterest expense to average assets 3.28% 3.40% 4.00% 3.37% 3.94%
Provision expense to average assets 0.05% 0.17% 0.37% 0.15% 0.29%
Efficiency ratio(1) 69.7% 72.7% 70.5% 72.8% 76.1%
Sept. 30,
2014
Dec. 31,
2013
Sept. 30,
2013
ASSET QUALITY RATIOS AND DATA
Nonaccrual loans $348 $3,614 $4,741
Foreclosed real estate $1,250 $1,675 $3,074
Nonperforming assets $1,598 $5,289 $7,815
Loans 30-89 days past due and on accrual $2,627 $1,279 $328
Restructured loans $5,050 $8,375 $9,547
Allowance for loan losses $5,887 $5,803 $5,371
Nonperforming assets to total assets 0.38% 1.34% 1.99%
Allowance for loan losses to total loans 1.80% 1.91% 1.81%
Allowance for loan losses to nonaccrual loans 1691.67% 160.57% 113.29%
Net charge-offs $168 (2) $480 (2) $383 (3) $744 (3)
Net charge-offs to average loans (annualized) 0.21% (2) 0.66% (2) 0.16% (3) 0.35% (3)
CAPITAL RATIOS AND DATA
Common shares outstanding at period end 4,124,325 4,117,673 3,090,340
Book value per common share $9.14 $8.49 $9.16
Tangible common equity $37,698 $34,957 $28,303
Shareholders' equity to total assets 8.9% 8.9% 10.0%
Total capital to risk-weighted assets (3) 13.4% 13.4% 13.9%
Tier 1 capital to risk-weighted assets (3) 12.2% 12.1% 12.7%
Tier 1 leverage capital ratio (3) 11.2% 11.0% 11.3%
DEPOSIT RATIOS AND DATA
Core deposits (4) $273,179 $255,817 $260,241
Core deposits to total deposits 76.1% 79.8% 78.8%
Noninterest bearing deposits to total deposits 26.5% 25.9% 26.0%
Net loan to deposit ratio 89.5% 92.6% 88.2%
Notes:
(1) Efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Net charge-offs for the three-month period.
(3) Regulatory capital ratios are reported for Inland Northwest Bank.
(4) Core deposits include all deposits except time deposits.

CONTACT: Randall L. Fewel, President and CEO Holly Poquette, Chief Financial Officer 509.456.8888 nbct@inb.comSource:Northwest Bancorporation, Inc.