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Northwest Bancorporation, Inc. Reports Fourth Quarter and Year End 2016 Financial Results

SPOKANE, Wash., Jan. 26, 2017 (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 December 31, 2016.

Net income for the fourth quarter of 2016 was $1.41 million, compared to $1.55 million for the previous quarter and $726 thousand for the fourth quarter of 2015. Earnings per diluted share decreased 12.5%, from $0.24 for the third quarter of 2016, to $0.21 for the fourth quarter of 2016, but are up $0.10, from the fourth quarter of last year.

For the year ended December 31, 2016, net income was $5.07 million, compared to $3.06 million for the corresponding period in 2015, representing an increase of $2.01 million, or 65.7%. Earnings per diluted share increased 27.9%, from $0.61 in 2015, to $0.78 in 2016. Operating results for 2016 include a full year of contribution from the former Bank of Fairfield, whose parent company was acquired in October 2015.

Company President and CEO, Russell Lee, commented, “It is gratifying to see that the hard work of the entire INB Team has been positively reflected in the Company’s 2016 financial results. We have been focused on executing our long-term plan of strategic growth, and the benefits to our shareholders of this plan are becoming evident.”

Balance sheet

As of December 31, 2016, the Company had total assets of $636.5 million, compared to $647.9 million on September 30, 2016 and $610.8 million on December 31, 2015. The decrease in assets of $11.4 million, or 1.8%, during the fourth quarter was primarily related to an expected decrease in deposits from a single customer. Year over year, assets are up $25.7 million, or 4.2%.

The investment portfolio was $30.0 million as of December 31, 2016, down $1.9 million, or 6.1%, from $31.9 million at September 30, 2016. The net unrealized gain in the portfolio was $370 thousand, 57.2% lower than the $865 thousand net unrealized gain at September 30, 2016.

The net loan portfolio was $490.8 million on December 31, 2016. This represents an increase of $20.1 million, or 4.3%, from last quarter; loan growth during the fourth quarter of 2016 is primarily related to INB’s new loan production office in Richland, Washington. Year over year, the net loan portfolio was up $13.5 million, or 2.8%.

Deposits at December 31, 2016 were $548.4 million, a decrease of $11.7 million, or 2.1%, compared to September 30, 2016 and an increase of $22.5 million, or 4.3%, compared to December 31, 2015. The decrease during the fourth quarter was partially related to a short-term $16 million deposit from one customer on the last day of the third quarter; without this temporary deposit, total deposits would have increased $4.3 million during the fourth quarter. Noninterest bearing deposits were $164.0 million at year end, representing 29.9% of total deposits. This compares to noninterest bearing deposits of $176.9 million, or 31.6% of total deposits, at September 30, 2016, and to $158.6 million, or 30.2% of total deposits, at December 31, 2015.

Asset quality, provision and allowance for loan losses

The Bank’s nonperforming assets (“NPAs”) were $1.5 million at year end, representing 0.23% 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 $1.6 million, representing 0.24% of total assets, and at December 31, 2015, NPAs were $1.6 million, representing 0.25% of total assets.

The Bank had net loan recoveries of $29 thousand and net loan charge-offs of $79 thousand for the three and twelve-month periods ending on December 31, 2016, compared to net loan recoveries of $4 thousand and $76 thousand for the comparable periods in 2015. The provision for loan losses was $0 and $363 thousand for the three and twelve-month periods ending on December 31, 2016, compared to $40 thousand and $220 thousand for the comparable periods in 2015. As of December 31, 2016, the allowance for loan losses was $6.3 million, or 1.26% 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 $5.2 million, or 8.5%, during 2016, which was mostly related to earnings retention. Tangible book value of the Company’s common stock was $9.13 per share on December 31, 2016, up $0.78, or 9.3%, over the $8.35 per share on December 31, 2015.

The Bank continues to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under regulatory standards. As of December 31, 2016, the Bank’s Tier 1 leverage capital to average assets ratio was 10.8%, its common equity Tier 1 (“CET1”) capital ratio was 11.8%, and its total capital to risk-weighted assets ratio was 13.0%. 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 $7.5 million for the fourth quarter of 2016, representing a decrease of $227 thousand, or 3.0%, from the previous quarter, and representing an increase of $509 thousand, or 7.3%, over the comparable quarter in 2015. Total revenue was $29.7 million and $22.8 million for the years ended December 31, 2016 and 2015, respectively, which represents an increase of $6.9 million, or 30.0%. 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 December 31, 2016, a decrease of $233 thousand, or 3.6%, from the previous quarter and an increase of $264 thousand, or 4.4%, from the fourth quarter of 2015. The decrease is net interest income during the fourth quarter is largely due to declining levels of purchased loan discount accretion. Net interest income was $24.9 million for year ended December 31, 2016, compared to $18.8 million for the comparable period in 2015.

The net interest margin (interest income minus interest expense, divided by average earning assets) decreased from 4.44% in the fourth quarter of 2015 to 4.21% in the fourth quarter of 2016. For the year, the net interest margin was 4.41% in 2016 compared to 4.22% in 2015; excluding net purchased loan discount accretion, the net interest margin was 4.21% and 4.19%, respectively.

Noninterest income

Noninterest income was $1.3 million for the fourth quarter of 2016, up $245 thousand, or 24.2%, compared to the fourth quarter of 2015; this increase was largely related to higher revenues from sales of residential mortgage loans. Noninterest income ended 2016 at $4.7 million, an increase of $737 thousand, or 18.5%, over the same period in 2015. This year over year increase in noninterest income was partially due to higher revenues from sales of residential mortgage loans and partially due to increased revenues related to the Fairfield acquisition.

Noninterest expense

Noninterest expense totaled $5.4 million for the fourth quarter of 2016, down $471 thousand, or 8.0%, compared to the fourth quarter of 2015; excluding nonrecurring acquisition-related costs, noninterest expense would have increased $170 thousand, or 3.2%. Noninterest expense ended 2016 at $21.8 million, an increase of $3.7 million, or 20.6%, over 2015; excluding nonrecurring acquisition-related costs, noninterest expense would have increased $4.3 million, or 25.1%. This year over year increase in noninterest expense was primarily due to increased operating expenses related to the Fairfield acquisition.

Key ratios

Return on average assets (“ROA”) for fourth quarter 2016 was 0.88%, compared to 1.01% in the previous quarter and 0.49% in the fourth quarter last year. For the year ended December 31, 2016, ROA was 0.82%, compared to 0.63% for 2015. Excluding nonrecurring acquisition-related costs, ROA would have been 0.87% for the three and twelve-month periods ending December 31, 2016, compared to 0.76% and 0.77% for the three and twelve-month periods ending December 31, 2015, respectively.

Return on average equity (“ROE”) was 8.59% for fourth quarter 2016, compared to 9.69% in the previous quarter and 4.80% for the fourth quarter last year. For the year ended December 31, 2016, ROE was 8.00%, compared to 6.39% for 2015. Excluding nonrecurring acquisition-related costs, ROE would have been 8.50% and 8.47% for the three and twelve-month periods ending December 31, 2016, respectively, compared to 7.50% and 7.78% for the three and twelve-month periods ending December 31, 2015, respectively.

Yield on earning assets was 4.82% and 4.71% for the years ended December 31, 2016 and 2015, respectively, and the cost of funds was 0.59% and 0.67%, 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)
Dec. 31, Sep. 30, Dec. 31,
(dollars in thousands) 2016 2016 2015
Assets:
Cash and due from banks$22,183 $23,183 $21,253
Interest bearing deposits 53,259 82,132 24,781
Time deposits held for investment 4,640 2,000 14,946
Securities available for sale 25,328 29,904 34,242
Federal Home Loan Bank stock, at cost 1,033 1,047 1,041
Loans receivable, net 490,816 470,725 477,336
Loans held for sale 3,824 3,084 1,971
Premises and equipment, net 14,061 14,032 14,080
Bank-owned life insurance 7,054 7,028 6,924
Accrued interest receivable 2,642 3,217 2,706
Goodwill 6,206 6,206 6,206
Core deposit intangible 1,262 1,320 1,494
Foreclosed real estate 745 524 308
Other assets 3,475 3,495 3,513
Total assets$636,528 $647,897 $610,801
Liabilities:
Deposits:
Noninterest bearing deposits$164,027 $176,877 $158,576
Interest bearing transaction and savings deposits 261,432 259,282 248,442
Time deposits 122,962 123,923 118,867
548,421 560,082 525,885
Accrued interest payable 151 122 131
Borrowed funds 18,567 18,912 19,947
Other liabilities 3,334 3,963 3,962
Total liabilities 570,473 583,079 549,925
Shareholders' equity:
Common stock 52,733 52,575 52,294
Retained earnings 13,078 11,672 8,007
Accumulated other comprehensive income 244 571 575
Total shareholders' equity 66,055 64,818 60,876
Total liabilities and shareholders' equity$636,528 $647,897 $610,801

Northwest Bancorporation, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Year Ended
Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
(dollars in thousands, except per share data) 2016 2016 2015 2016 2015
Interest and dividend income:
Loans receivable$6,477 $6,733 $6,177 $26,046 $19,793
Investment securities 230 230 274 941 1,105
Other 104 59 41 278 93
Total interest and dividend income 6,811 7,022 6,492 27,265 20,991
Interest expense:
Deposits 419 401 369 1,570 1,421
Borrowed funds 190 186 185 747 741
Total interest expense 609 587 554 2,317 2,162
Net interest income 6,202 6,435 5,938 24,948 18,829
Provision for loan losses - 60 40 363 220
Noninterest income:
Service charges on deposits 216 214 234 852 897
Gains from sale of loans, net 451 436 259 1,447 1,259
Other noninterest income 590 601 519 2,430 1,836
Total noninterest income 1,257 1,251 1,012 4,729 3,992
Noninterest expense:
Salaries and employee benefits 3,037 2,912 2,912 11,620 9,380
Occupancy and equipment 411 400 387 1,661 1,411
Depreciation and amortization 310 300 299 1,215 1,130
Advertising and promotion 216 201 177 917 649
FDIC assessments 9 85 79 288 266
Gain on foreclosed real estate, net (53) (1) - (54) (142)
Acquisition-related costs (23) 13 618 453 1,014
Other noninterest expense 1,475 1,418 1,381 5,730 4,393
Total noninterest expense 5,382 5,328 5,853 21,830 18,101
Income before income taxes 2,077 2,298 1,057 7,484 4,500
Income tax expense 672 746 331 2,413 1,440
NET INCOME$1,405 $1,552 $726 $5,071 $3,060
Earnings per common share - basic$0.22 $0.24 $0.11 $0.79 $0.62
Earnings per common share - diluted$0.21 $0.24 $0.11 $0.78 $0.61
Weighted average common shares outstanding - basic 6,404,319 6,385,511 6,341,958 6,382,048 4,910,233
Weighted average common shares outstanding - diluted 6,544,481 6,527,075 6,426,076 6,511,253 4,999,185


Northwest Bancorporation, Inc.
Key Financial Ratios and Data
(Unaudited)
Three Months Ended Year Ended
Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
(dollars in thousands, except per share data) 2016 2016 2015 2016 2015
PERFORMANCE RATIOS (annualized)
Return on average assets 0.88% 1.01% 0.49% 0.82% 0.63%
Return on average equity 8.59% 9.69% 4.80% 8.00% 6.39%
Yield on earning assets 4.62% 4.97% 4.86% 4.82% 4.71%
Cost of funds 0.60% 0.59% 0.59% 0.59% 0.67%
Net interest margin 4.21% 4.55% 4.44% 4.41% 4.22%
Noninterest income to average assets 0.78% 0.81% 0.68% 0.77% 0.82%
Noninterest expense to average assets 3.35% 3.45% 3.94% 3.54% 3.74%
Provision expense to average assets 0.00% 0.04% 0.03% 0.06% 0.05%
Efficiency ratio (1) 72.2% 69.3% 84.2% 73.6% 79.3%
Dec. 31, Sep. 30, Dec. 31,
2016 2016 2015
ASSET QUALITY RATIOS AND DATA
Nonaccrual loans$740 $1,036 $1,242
Foreclosed real estate$745 $524 $308
Nonperforming assets$1,485 $1,560 $1,550
Loans 30-89 days past due and on accrual$1,598 $540 $630
Restructured loans$3,589 $3,929 $5,942
Allowance for loan losses$6,263 $6,308 $6,024
Nonperforming assets to total assets 0.23% 0.24% 0.25%
Allowance for loan losses to total loans 1.26% 1.32% 1.25%
Allowance for loan losses to nonaccrual loans 846.4% 608.9% 485.0%
Net charge-offs$(29)(2) $(23)(2) $(4)(2) $79 (3) $(76)(3)
Net charge-offs to average loans (annualized) -0.07%(2) -0.06%(2) -0.01%(2) 0.02%(3) -0.02%(3)
CAPITAL RATIOS AND DATA
Common shares outstanding at period end 6,419,861 6,393,244 6,368,798
Tangible common equity$58,587 $57,292 $53,176
Tangible book value per common share$9.13 $8.96 $8.35
Shareholders' equity to total assets 10.4% 10.0% 10.0%
Total capital to risk-weighted assets (3) 13.0% 13.0% 12.5%
Tier 1 capital to risk-weighted assets (3) 11.8% 11.9% 11.3%
Tier 1 common equity ratio (3) 11.8% 11.9% 11.3%
Tier 1 leverage capital ratio (3) 10.8% 11.0% 11.1%
DEPOSIT RATIOS AND DATA
Core deposits (4)$425,459 $436,159 $407,018
Core deposits to total deposits 77.6% 77.9% 77.4%
Noninterest bearing deposits to total deposits 29.9% 31.6% 30.2%
Net loan to deposit ratio 89.5% 84.0% 90.8%
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.