Northwest Bancorporation, Inc. Reports Third Quarter 2016 Financial Results

SPOKANE, Wash., Oct. 14, 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 September 30, 2016.

Net income for the third quarter of 2016 was $1.55 million, compared to $1.27 million for the previous quarter and $735 thousand for the third quarter of 2015.  Earnings per diluted share increased 20.0%, from $0.20 for the second quarter of 2016, to $0.24 for the third quarter of 2016, and are up $0.09 from the third quarter of last year partially due to a 29% increase in the number of weighted average shares outstanding resulting from the Company’s capital raise during the third quarter of 2015.

For the nine months ended September 30, 2016, net income was $3.67 million, compared to $2.33 million for the corresponding period in 2015, representing an increase of $1.33 million, or 57.1%.  Earnings per diluted share increased 7.7%, from $0.52 for the first nine months of 2015, to $0.56 for the first nine months of 2016.  Excluding nonrecurring acquisition expenses of $314 thousand, net of tax, earnings for the first nine months of 2016 would have been $3.98 million and earnings per diluted share would have been $0.61 for the first nine months of 2016.

Company President and CEO, Russell Lee, commented, “Our Company’s third quarter results continue to show the value to our shareholders from our combination with the former Bank of Fairfield.  We have continued to show quarterly EPS growth as the acquisition process has moved forward.  In addition, loan growth from the acquired loan portfolio has allowed us to remain selective in what has proved to be a very competitive 2016 commercial loan environment.”

Balance sheet

As of September 30, 2016, the Company had total assets of $647.9 million, compared to $594.0 million on June 30, 2016 and $468.7 million on September 30, 2015.  The increase in assets of $53.9 million, or 9.1%, during the third quarter was primarily related to an increase in deposits.  Year over year, assets are up $179.2 million, or 38.2%; $133.8 million of this increase was attributable to the acquisition of Fairfield Financial Holdings Corp. (“Fairfield”) during the fourth quarter of 2015.

The investment portfolio was $31.9 million as of September 30, 2016, down $722 thousand, or 2.2%, from $32.6 million at June 30, 2016.  The net unrealized gain in the portfolio was $865 thousand, 15.9% lower than the $1.0 million net unrealized gain at June 30, 2016.

The net loan portfolio was $470.7 million on September 30, 2016.  This represents a decrease of $8.4 million, or 1.7%, from last quarter.  Year over year, the net loan portfolio was up $108.3 million, or 29.9%.

Deposits at September 30, 2016 were $560.1 million, an increase of $52.7 million, or 10.4%, compared to June 30, 2016 and an increase of $175.6 million, or 45.7%, compared to September 30, 2015.  The increase during the third quarter was partially related to seasonal deposit inflow replacing the outflow from the second quarter, as well as a short-term $16 million deposit from one customer on the last day of the quarter.  Noninterest bearing deposits were $176.9 million at quarter end, representing 31.6% of total deposits.  This compares to noninterest bearing deposits of $141.4 million, or 27.9% of total deposits, at June 30, 2016, and to $100.6 million, or 26.2% of total deposits, at September 30, 2015.

Asset quality, provision and allowance for loan losses

The Bank’s nonperforming assets (“NPAs”) were $1.6 million at quarter end, representing 0.24% 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 0.27% of total assets, and at September 30, 2015, NPAs were $1.3 million, representing 0.27% of total assets.

The Bank had net loan recoveries of $23 thousand and net loan charge-offs of $79 thousand for the three and nine-month periods ending on September 30, 2016, compared to net loan recoveries of $10 thousand and $72 thousand for the comparable periods in 2015.  The provision for loan losses was $60 thousand and $363 thousand for the three and nine-month periods ending on September 30, 2016, compared to $60 thousand and $180 thousand for the comparable periods in 2015.  As of September 30, 2016, the allowance for loan losses was $6.3 million, or 1.32% 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 $1.5 million, or 2.4%, during the third quarter of 2016, which was mostly related to earnings retention.  Tangible book value of the Company’s common stock was $8.96 per share on September 30, 2016, up $0.23, or 2.6%, over the $8.73 per share on June 30, 2016.

The Bank continues to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under regulatory standards.  As of September 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 11.9%, 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 $7.7 million for the third quarter of 2016, representing an increase of $292 thousand, or 3.9%, from the previous quarter, and representing an increase of $2.1 million, or 38.6%, over the comparable quarter in 2015.  Total revenue was $22.2 million for the first nine months of 2016, compared to $15.9 million for the same period in 2015, representing an increase of $6.3 million, or 40.0%.  Total revenue is defined as net interest income plus noninterest income.

Net interest income

Net interest income was $6.4 million for the quarter ended September 30, 2016, an increase of $204 thousand, or 3.3%, from the previous quarter and an increase of $2.0 million, or 44.1%, from the third quarter of 2015.  Net interest income was $18.7 million for the nine months ended September 30, 2016, an increase of $5.9 million, or 45.4%, from the comparable period in 2015.  The net interest margin (interest income minus interest expense, divided by average earning assets) improved from 4.52% in the second quarter of 2016 to 4.55% in the third quarter of 2016.  Year to date, the NIM was 4.48% compared to 4.12% last year through September; excluding net purchased loan discount accretion, the year-to-date NIM was 4.28%.

Noninterest income

Noninterest income was $1.3 million during the third quarter of 2016, up $88 thousand, or 7.6%, from the previous quarter; this increase was largely related to higher revenues from sales of residential mortgage loans.  Noninterest income for the first nine months of 2016 was $3.5 million, an increase of $492 thousand, or 16.5%, 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 $5.3 million during the third quarter of 2016, down $46 thousand, or 0.9%, from the previous quarter.  Included in noninterest expense during the quarter were nonrecurring acquisition costs totaling $13 thousand, which were down from $102 thousand in the second quarter of 2016.  Without these acquisition costs, noninterest expense would have increased $43 thousand, or 0.8% over the previous quarter.  Noninterest expense for the first nine months of 2016 was $16.4 million, an increase of $4.2 million, or 34.3%, 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 third quarter in 2016 was 1.01%, compared to 0.85% in the previous quarter and 0.63% in the third quarter last year.  Return on average equity (“ROE”) was 9.69% for the third quarter in 2016, compared to 8.15% in the previous quarter and 5.86% for the third quarter last year.  Excluding the nonrecurring acquisition expenses, ROA would have been 1.01% and 0.87% for the three and nine-month periods ended September 30, 2016, and ROE would have been 9.75% and 8.46% for the same periods, respectively.  Yield on earning assets was 4.97% and 4.60% for the quarters ended September 30, 2016 and 2015, respectively, and the cost of funds was 0.59% and 0.68%, 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)
               
               
      Sep. 30,   Jun. 30,   Sep. 30,
(dollars in thousands)   2016       2016       2015  
               
Assets:          
  Cash and due from banks $ 23,183     $ 19,458     $ 15,803  
  Interest bearing deposits   82,132       24,715       29,361  
  Time deposits held for investment   2,000       2,862       2,185  
  Securities available for sale   29,904       29,764       34,033  
  Federal Home Loan Bank stock, at cost   1,047       1,061       876  
  Loans receivable, net   470,725       479,098       362,461  
  Loans held for sale   3,084       1,636       1,883  
  Premises and equipment, net   14,032       14,108       14,317  
  Bank-owned life insurance   7,028       6,999       4,289  
  Accrued interest receivable   3,217       2,742       1,451  
  Goodwill   6,206       6,290        
  Core deposit intangible   1,320       1,378        
  Foreclosed real estate   524       308       200  
  Other assets   3,495       3,551       1,824  
Total assets $ 647,897     $ 593,970     $ 468,683  
               
Liabilities:          
  Deposits:          
    Noninterest bearing deposits $ 176,877     $ 141,408     $ 100,625  
    Interest bearing transaction and savings deposits     259,282       249,226       197,394  
    Time deposits   123,923       116,699       86,477  
        560,082       507,333       384,496  
  Accrued interest payable   122       140       102  
  Borrowed funds   18,912       19,257       20,292  
  Other liabilities   3,963       3,945       3,690  
    Total liabilities   583,079       530,675       408,580  
               
Shareholders’ equity:          
  Common stock   52,575       52,494       52,093  
  Retained earnings   11,672       10,121       7,281  
  Accumulated other comprehensive income   571       680       729  
    Total shareholders’ equity   64,818       63,295       60,103  
Total liabilities and shareholders’ equity $ 647,897     $ 593,970     $ 468,683  
               

 

Northwest Bancorporation, Inc.
Consolidated Statements of Operations
(Unaudited)
                   
                       
      Three Months Ended   Nine Months Ended
      Sep. 30,   Jun. 30,   Sep. 30,   Sep. 30,   Sep. 30,
(dollars in thousands, except per share data)   2016       2016       2015       2016       2015  
                       
Interest and dividend income:                  
  Loans receivable $ 6,733     $ 6,514     $ 4,708     $ 19,569     $ 13,616  
  Investment securities   230       229       259       711       831  
  Other   59       53       24       174       52  
    Total interest and dividend income   7,022       6,796       4,991       20,454       14,499  
                       
Interest expense:                  
  Deposits   401       377       339       1,151       1,052  
  Borrowed funds   186       188       186       557       556  
    Total interest expense   587       565       525       1,708       1,608  
                       
Net interest income   6,435       6,231       4,466       18,746       12,891  
                       
Provision for loan losses   60       121       60       363       180  
                       
Noninterest income:                  
  Service charges on deposits   214       210       217       636       663  
  Gains from sale of loans, net   436       335       381       996       1,000  
  Other noninterest income   601       618       483       1,840       1,317  
    Total noninterest income   1,251       1,163       1,081       3,472       2,980  
                       
Noninterest expense:                  
  Salaries and employee benefits   2,912       2,809       2,223       8,583       6,468  
  Occupancy and equipment   400       409       361       1,250       1,024  
  Depreciation and amortization   300       303       275       905       831  
  Advertising and promotion   201       263       185       701       472  
  FDIC assessments   85       91       62       279       187  
  Gain on foreclosed real estate, net   (1 )                 (1 )     (142 )
  Acquisition-related costs   13       102             476        
  Other noninterest expense   1,418       1,397       1,283       4,255       3,408  
    Total noninterest expense   5,328       5,374       4,389       16,448       12,248  
                       
Income before income taxes   2,298       1,899       1,098       5,407       3,443  
Income tax expense   746       624       363       1,741       1,109  
                       
NET INCOME $ 1,552     $ 1,275     $ 735     $ 3,666     $ 2,334  
                       
Earnings per common share – basic $ 0.24     $ 0.20     $ 0.15     $ 0.58     $ 0.53  
Earnings per common share – diluted $ 0.24     $ 0.20     $ 0.15     $ 0.56     $ 0.52  
Weighted average common shares outstanding – basic   6,385,511       6,369,282       4,956,692       6,374,570       4,426,912  
Weighted average common shares outstanding – diluted     6,527,075       6,509,374       5,046,590       6,515,290       4,519,232  
                       

 

Northwest Bancorporation, Inc.
Key Financial Ratios and Data
(Unaudited)
                         
                         
      Three Months Ended   Nine Months Ended  
      Sep. 30,   Jun. 30,   Sep. 30,   Sep. 30,   Sep. 30,  
(dollars in thousands, except per share data)   2016       2016       2015       2016       2015    
                         
PERFORMANCE RATIOS (annualized)                    
  Return on average assets   1.01 %     0.85 %     0.63 %     0.80 %     0.70 %  
  Return on average equity   9.69 %     8.15 %     5.86 %     7.79 %     6.97 %  
  Yield on earning assets   4.97 %     4.93 %     4.60 %     4.89 %     4.63 %  
  Cost of funds   0.59 %     0.58 %     0.68 %     0.58 %     0.71 %  
  Net interest margin   4.55 %     4.52 %     4.12 %     4.48 %     4.12 %  
  Noninterest income to average assets   0.81 %     0.78 %     0.93 %     0.76 %     0.89 %  
  Noninterest expense to average assets   3.45 %     3.59 %     3.78 %     3.60 %     3.65 %  
  Provision expense to average assets   0.04 %     0.08 %     0.05 %     0.08 %     0.05 %  
  Efficiency ratio (1)   69.3 %     72.7 %     79.1 %     74.0 %     77.2 %  
                         
                         
      Sep. 30,   Jun. 30,   Sep. 30,          
        2016       2016       2015            
ASSET QUALITY RATIOS AND DATA                    
  Nonaccrual loans $ 1,036     $ 1,278     $ 1,052            
  Foreclosed real estate $ 524     $ 308     $ 200            
  Nonperforming assets $ 1,560     $ 1,586     $ 1,252            
  Loans 30-89 days past due and on accrual $ 540     $ 186     $ 733            
  Restructured loans $ 3,929     $ 4,837     $ 5,748            
  Allowance for loan losses $ 6,308     $ 6,224     $ 5,980            
  Nonperforming assets to total assets   0.24 %     0.27 %     0.27 %          
  Allowance for loan losses to total loans   1.32 %     1.28 %     1.62 %          
  Allowance for loan losses to nonaccrual loans       608.9 %     487.0 %     568.4 %          
  Net charge-offs $ (23 )   (2 ) $ 62     (2 ) $ (10 )   (2 ) $ 79     (3 ) $ (72 )   (3 )
  Net charge-offs to average loans (annualized)   -0.06 %   (2 )   0.15 %   (2 )   -0.01 %   (2 )   0.02 %   (3 )   -0.03 %   (3 )
                         
                         
CAPITAL RATIOS AND DATA                    
  Common shares outstanding at period end   6,393,244       6,370,798       6,319,794            
  Tangible common equity $ 57,292     $ 55,627     $ 60,103            
  Tangible book value per common share $ 8.96     $ 8.73     $ 9.51            
  Shareholders’ equity to total assets   10.0 %     10.7 %     12.8 %          
  Total capital to risk-weighted assets (3)   13.0 %     12.6 %     12.8 %          
  Tier 1 capital to risk-weighted assets (3)   11.9 %     11.5 %     11.5 %          
  Tier 1 common equity ratio (3)   11.9 %     11.5 %     11.5 %          
  Tier 1 leverage capital ratio (3)   11.0 %     11.0 %     10.7 %          
                         
                         
DEPOSIT RATIOS AND DATA                    
  Core deposits (4) $ 436,159     $ 390,634     $ 298,019            
  Core deposits to total deposits   77.9 %     77.0 %     77.5 %          
  Noninterest bearing deposits to total deposits   31.6 %     27.9 %     26.2 %          
  Net loan to deposit ratio   84.0 %     94.4 %     94.3 %          
                         
                         
                         
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: For more information contact:

Russell A. Lee, President and CEO
Holly Poquette, Chief Financial Officer
509.456.8888
nbct@inb.com
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