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Northwest Bancorporation, Inc. Reports Second Quarter 2016 Financial Results

SPOKANE, Wash., July 22, 2016 (GLOBE NEWSWIRE) -- Northwest Bancorporation, Inc. (OTC Pink:NBCT) (the “Company”), the holding company of Inland Northwest Bank (the “Bank” or “INB”), today reported financial results for the quarter ended June 30, 2016.

Net income for the second quarter of 2016 was $1.27 million, compared to $839 thousand for the previous quarter and $902 thousand for the second quarter of 2015. Earnings per diluted share increased 53.8%, from $0.13 for the first quarter of 2016, to $0.20 for the second quarter of 2016, but are down $0.01 from the second quarter of last year due to a 53% increase in the number of shares outstanding resulting from the Company’s capital raise during the third quarter of 2015. Excluding nonrecurring second quarter acquisition expenses of $67 thousand, net of tax, earnings for the second quarter of 2016 would have been $1.34 million and earnings per diluted share would have been $0.21 per share.

For the six months ended June 30, 2016, net income was $2.11 million, compared to $1.60 million for the corresponding period in 2015, representing an increase of $515 thousand, or 32.2%. Earnings per diluted share decreased 15.8%, from $0.38 for the first six months of 2015, to $0.32 for the first six months of 2016. Excluding nonrecurring acquisition expenses of $306 thousand, net of tax, earnings for the first six months of 2016 would have been $2.42 million and earnings per diluted share would have been $0.37 for the first six months of 2016.

Company President and CEO, Russell Lee, commented, “We are very pleased with our results for the second quarter of 2016, which is essentially the first quarter after our merger with Bank of Fairfield that was, for the most part, unaffected by one-time acquisition-related expenses. This quarter allowed us to begin to show the prospects for increased shareholder value that we knew this business combination would deliver.”

Balance sheet

As of June 30, 2016, the Company had total assets of $594.0 million, compared to $604.3 million on March 31, 2016 and $449.2 million on June 30, 2015. The decrease in assets of $10.3 million, or 1.7%, during the second quarter was primarily related to a decrease in deposits. Year over year, assets are up $144.8 million, or 32.2%; this increase was primarily related to the acquisition of Fairfield Financial Holdings Corp. (“Fairfield”) during the fourth quarter of 2015.

The investment portfolio was $32.6 million as of June 30, 2016, down $4.5 million, or 12.1%, from $37.1 million at March 31, 2016. The net unrealized gain in the portfolio was $1.0 million, 7.3% higher than the $958 thousand net unrealized gain at March 31, 2016.

The net loan portfolio was $479.1 million on June 30, 2016. This represents an increase of $2.6 million, or 0.5%, over last quarter. Year over year, the net loan portfolio was up $116.1 million, or 32.0%.

Deposits at June 30, 2016 were $507.3 million, a decrease of $11.3 million, or 2.2%, compared to March 31, 2016 and an increase of $122.7 million, or 31.9%, compared to June 30, 2015. The decrease during the second quarter was primarily related to seasonal deposit outflow from our agricultural customers. Noninterest bearing deposits were $141.4 million at quarter end, representing 27.9% of total deposits. This compares to noninterest bearing deposits of $143.3 million, or 27.6% of total deposits, at March 31, 2016, and to $94.6 million, or 24.6% of total deposits, at June 30, 2015.

Asset quality, provision and allowance for loan losses

The Bank’s nonperforming assets (“NPAs”) were $1.6 million at quarter end, representing 0.27% 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 last quarter were $2.2 million, representing 0.36% of total assets, and at June 30, 2015, NPAs were $0.5 million, representing 0.12% of total assets.

The Bank had net loan charge offs of $62 thousand and $103 thousand for the three and six-month periods ending on June 30, 2016, compared to net loan recoveries of $56 thousand and $62 thousand for the comparable periods in 2015. The provision for loan losses was $121 thousand and $303 thousand for the three and six-month periods ending on June 30, 2016, compared to $60 thousand and $120 thousand for the comparable periods in 2015. As of June 30, 2016, the allowance for loan losses was $6.2 million, or 1.28% of gross loans; this was slightly higher than on December 31, 2015 when it was $6.0 million and represented 1.25% of the loan portfolio.

Capital

Shareholders’ equity increased $1.4 million, or 2.3%, during the second quarter of 2016, which was mostly related to earnings retention. Tangible book value of the Company’s common stock was $8.73 per share on June 30, 2016, up $0.23, or 2.7%, over the $8.50 per share on March 31, 2016.

The Bank continues to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under regulatory standards. As of June 30, 2016, the Bank’s Tier 1 leverage capital to average assets ratio was 11.0%, its common equity Tier 1 (“CET1”) capital ratio was 11.5%, and its total capital to risk-weighted assets ratio was 12.6%. The regulatory requirements to be considered “well-capitalized” for these three ratios are 5.0%, 6.5%, and 10.0%, respectively.

Total revenue

Total revenue was $7.4 million for the second quarter of 2016, representing an increase of $256 thousand, or 3.6%, from the previous quarter, and representing an increase of $2.1 million, or 38.9%, over the comparable quarter in 2015. Total revenue was $14.5 million for the first six months of 2016, compared to $10.3 million for the same period in 2015, representing an increase of $4.2 million, or 40.8%. Total revenue is defined as net interest income plus noninterest income.

Net interest income

Net interest income was $6.2 million for the quarter ended June 30, 2016, an increase of $151 thousand, or 2.5%, from the previous quarter and an increase of $2.0 million, or 45.8%, from the second quarter of 2015. Net interest income was $12.3 million for the six months ended June 30, 2016, an increase of $3.9 million, or 46.1%, from the comparable period in 2015. The net interest margin (interest income minus interest expense, divided by average earning assets) improved from 4.36% in the first quarter of 2016 to 4.52% in the second quarter of 2016. Year to date, the NIM was 4.44% compared to 4.04% last year through June; excluding net purchased loan discount accretion, the year-to-date NIM was 4.27%.

Noninterest income

Noninterest income was $1.2 million during the second quarter of 2016, up $105 thousand, or 9.9%, from the previous quarter; this increase was largely related to higher revenues from sales of residential mortgage loans. Noninterest income for the first six months of 2016 was $2.2 million, an increase of $322 thousand, or 17.0%, over the same period in 2015. This year over year increase in noninterest income was primarily due to increased revenues from the Fairfield acquisition, as well as an increase in debit card interchange income related to a conversion from Visa to MasterCard.

Noninterest expense

Noninterest expense totaled $5.4 million during the second quarter of 2016, down $372 thousand, or 6.5%, from the previous quarter. Included in noninterest expense during the quarter were nonrecurring acquisition costs totaling $102 thousand, which were down from $361 thousand in the first quarter of 2016. Without these acquisition costs, noninterest expense would have decreased $113 thousand, or 2.1% over the previous quarter primarily due to savings realized in salaries and occupancy related costs. Noninterest expense for the first six months of 2016 was $11.1 million, an increase of $3.3 million, or 41.5%, over the same period in 2015. This year over year increase in noninterest expense was primarily due to increased operating expenses related to the Fairfield acquisition, higher advertising costs, lower gains on sales of foreclosed real estate and higher nonrecurring acquisition-related costs.

Key ratios

Return on average assets (“ROA”) for the second quarter in 2016 was 0.85%, compared to 0.55% in the previous quarter and 0.82% in the second quarter last year. Return on average equity (“ROE”) was 8.15% for the second quarter in 2016, compared to 5.47% in the previous quarter and 9.04% for the second quarter last year. Excluding the nonrecurring acquisition expenses, ROA would have been 0.90% and 0.80% for the three and six-month periods ended June 30, 2016, and ROE would have been 8.58% and 7.80% for the same periods, respectively. Yield on earning assets was 4.93% and 4.72% for the quarters ended June 30, 2016 and 2015, respectively, and the cost of funds was 0.58% and 0.74%, respectively.

About Northwest Bancorporation, Inc.

Northwest Bancorporation, Inc. is the parent company of Inland Northwest Bank, a state-chartered community bank which currently operates eleven branches in Eastern Washington, and four branches in Northern Idaho. INB specializes in meeting the financial needs of individuals and small to medium-sized businesses, including professional corporations and agriculture-related operations, by providing a full line of commercial, retail, agricultural, and 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 Pink 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; lower-than-expected revenue or cost savings in connection with acquisitions; 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)
Jun. 30, Mar. 31, Jun. 30,
(dollars in thousands) 2016 2016 2015
Assets:
Cash and due from banks$19,458 $19,717 $13,502
Interest bearing deposits 24,715 33,885 9,972
Time deposits held for investment 2,862 4,797 2,185
Securities available for sale 29,764 32,337 35,996
Federal Home Loan Bank stock, at cost 1,061 1,075 890
Loans receivable, net 479,098 476,481 363,039
Loans held for sale 1,636 683 1,256
Premises and equipment, net 14,108 14,256 14,609
Bank-owned life insurance 6,999 6,971 4,255
Accrued interest receivable 2,742 2,517 1,375
Goodwill 6,290 6,290 -
Core deposit intangible 1,378 1,435 -
Foreclosed real estate 308 308 200
Other assets 3,551 3,567 1,872
Total assets$593,970 $604,319 $449,151
Liabilities:
Deposits:
Noninterest bearing deposits$141,408 $143,312 $94,584
Interest bearing transaction and savings deposits 249,226 258,207 196,173
Time deposits 116,699 117,162 93,850
507,333 518,681 384,607
Accrued interest payable 140 120 128
Borrowed funds 19,257 19,600 20,637
Other liabilities 3,945 4,049 3,500
Total liabilities 530,675 542,450 408,872
Shareholders' equity:
Common stock 52,494 52,391 33,048
Retained earnings 10,121 8,846 6,546
Accumulated other comprehensive income 680 632 685
Total shareholders' equity 63,295 61,869 40,279
Total liabilities and shareholders' equity$593,970 $604,319 $449,151

Northwest Bancorporation, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
(dollars in thousands, except per share data) 2016 2016 2015 2016 2015
Interest and dividend income:
Loans receivable$6,514 $6,322 $4,544 $12,836 $8,908
Investment securities 229 252 275 481 572
Other 53 62 16 115 28
Total interest and dividend income 6,796 6,636 4,835 13,432 9,508
Interest expense:
Deposits 377 373 374 750 713
Borrowed funds 188 183 186 371 370
Total interest expense 565 556 560 1,121 1,083
Net interest income 6,231 6,080 4,275 12,311 8,425
Provision for loan losses 121 182 60 303 120
Noninterest income:
Service charges on deposits 210 212 229 422 446
Gains from sale of loans, net 335 225 375 560 619
Other noninterest income 618 621 445 1,239 834
Total noninterest income 1,163 1,058 1,049 2,221 1,899
Noninterest expense:
Salaries and employee benefits 2,809 2,862 2,159 5,671 4,245
Occupancy and equipment 409 441 347 850 663
Depreciation and amortization 303 302 279 605 556
Advertising and promotion 263 237 171 500 287
FDIC assessments 91 103 64 194 125
Gain on foreclosed real estate, net - - (142) - (142)
Acquisition-related costs 102 361 - 463 -
Other noninterest expense 1,397 1,440 1,099 2,837 2,125
Total noninterest expense 5,374 5,746 3,977 11,120 7,859
Income before income taxes 1,899 1,210 1,287 3,109 2,345
Income tax expense 624 371 385 995 746
NET INCOME$1,275 $839 $902 $2,114 $1,599
Earnings per common share - basic$0.20 $0.13 $0.22 $0.33 $0.38
Earnings per common share - diluted$0.20 $0.13 $0.21 $0.32 $0.38
Weighted average common shares outstanding - basic 6,369,282 6,368,798 4,157,632 6,369,040 4,157,632
Weighted average common shares outstanding - diluted 6,509,374 6,432,280 4,255,889 6,505,918 4,251,179

Northwest Bancorporation, Inc.
Key Financial Ratios and Data
(Unaudited)
Three Months Ended Six Months Ended
Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
(dollars in thousands, except per share data) 2016 2016 2015 2016 2015
PERFORMANCE RATIOS (annualized)
Return on average assets 0.85% 0.55% 0.82% 0.70% 0.72%
Return on average equity 8.15% 5.47% 9.04% 6.82% 8.09%
Yield on earning assets 4.93% 4.76% 4.72% 4.84% 4.55%
Cost of funds 0.58% 0.57% 0.74% 0.58% 0.70%
Net interest margin 4.52% 4.36% 4.18% 4.44% 4.04%
Noninterest income to average assets 0.78% 0.70% 0.96% 0.74% 0.85%
Noninterest expense to average assets 3.59% 3.79% 3.62% 3.69% 3.52%
Provision expense to average assets 0.08% 0.12% 0.05% 0.10% 0.05%
Efficiency ratio (1) 72.7% 80.5% 74.7% 76.5% 76.2%
Jun. 30, Mar. 31, Jun. 30,
2016 2016 2015
ASSET QUALITY RATIOS AND DATA
Nonaccrual loans$1,278 $1,884 $333
Foreclosed real estate$308 $308 $200
Nonperforming assets$1,586 $2,192 $533
Loans 30-89 days past due and on accrual$186 $2,180 $2,369
Restructured loans$4,837 $5,453 $5,791
Allowance for loan losses$6,224 $6,165 $5,910
Nonperforming assets to total assets 0.27% 0.36% 0.12%
Allowance for loan losses to total loans 1.28% 1.27% 1.60%
Allowance for loan losses to nonaccrual loans 487.0% 327.2% 1774.8%
Net charge-offs$62 (2)$41 (2)$(56) (2)$103 (3)$(62) (3)
Net charge-offs to average loans (annualized) 0.15% (2) 0.10% (2) -0.06% (2) 0.02% (3) -0.03% (3)
CAPITAL RATIOS AND DATA
Common shares outstanding at period end 6,370,798 6,368,798 4,157,632
Tangible common equity$55,627 $54,144 $40,279
Tangible book value per common share$8.73 $8.50 $9.69
Shareholders' equity to total assets 10.7% 10.2% 9.0%
Total capital to risk-weighted assets (3) 12.6% 12.5% 12.8%
Tier 1 capital to risk-weighted assets (3) 11.5% 11.3% 11.6%
Tier 1 common equity ratio (3) 11.5% 11.3% 11.6%
Tier 1 leverage capital ratio (3) 11.0% 10.7% 11.0%
DEPOSIT RATIOS AND DATA
Core deposits (4)$390,634 $401,519 $290,757
Core deposits to total deposits 77.0% 77.4% 75.6%
Noninterest bearing deposits to total deposits 27.9% 27.6% 24.6%
Net loan to deposit ratio 94.4% 91.9% 94.4%
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.

For more information contact: Russell A. Lee, President and CEO Holly Poquette, Chief Financial Officer 509.456.8888 nbct@inb.com

Source:Northwest Bancorporation, Inc.