Northwest Bancorporation, Inc. Reports Third Quarter 2017 Financial Results

SPOKANE, Wash., Oct. 20, 2017 (GLOBE NEWSWIRE) — Northwest Bancorporation, Inc. (OTC:NBCT) (the “Company”), the holding company of Inland Northwest Bank (the “Bank” or “INB”), today reported financial results for the quarter ended September 30, 2017.

On July 14, 2017, the Company completed its acquisition of CenterPointe Community Bank (“CenterPointe”).  Company President and CEO, Russell Lee, commented, “We are very happy to have completed the acquisition of CenterPointe Community Bank in the third quarter of this year and welcome the customers and staff of this very successful company to INB.  INB brings a bigger product offering and larger ability to meet customers’ needs in the Hood River and The Dalles markets where CenterPointe was a market leader.  Additionally, this partnership gives INB a foothold in the Portland Metro area which, due to recent bank consolidation, is not served by a mid-sized community bank such as INB.  In addition to the balance sheet growth that came from this acquisition, INB has had significant organic growth over the same period in 2016 with organic loan growth accounting for more growth over this period than that from the acquisition.”

Prior to adjustments for one-time acquisition costs, net income for the third quarter of 2017 was $960 thousand, compared to $1.05 million for the previous quarter and $1.55 million for the third quarter of 2016.  Earnings per diluted share decreased from $0.16 for the second quarter of 2017, to $0.13 for the third quarter of 2017, and are down $0.11 from the third quarter of last year.  Excluding acquisition costs, net of tax, quarterly core earnings were up $669 thousand and $0.07 per diluted share compared to the previous quarter and up $319 thousand and $0.02 per diluted share compared to the third quarter of last year.

For the nine months ended September 30, 2017, net income was $2.98 million, compared to $3.67 million for the corresponding period in 2016, representing a decrease of $682 thousand, or 18.6%.  Earnings per diluted share decreased 21.4% year over year, from $0.56 for the first nine months of 2016 to $0.44 for the first nine months of 2017.  Year over year core earnings for the first nine months of the year were up $153 thousand, but earnings per diluted share were down $0.01 due to additional shares of the Company’s common stock issued in connection with the acquisition of CenterPointe.

Balance sheet

As of September 30, 2017, the Company had total assets of $827.7 million, compared to $639.7 million on June 30, 2017 and $647.9 million on September 30, 2016.  Total assets increased $188.1 million, or 29.4%, during the third quarter, of which $150.6 million is related to the acquisition of CenterPointe.  Year over year, assets are up $179.9 million, or 27.8%.

The investment portfolio doubled in size during the third quarter with the acquisition of CenterPointe.  As of September 30, 2017, the investment portfolio totaled $51.0 million, up $25.7 million from the previous quarter end.

The net loan portfolio was $677.5 million on September 30, 2017, representing an increase of $147.4 million, or 27.8%, during the third quarter of 2017.  The quarter included organic loan growth of $51.6 million, or 9.7%, combined with $95.8 million acquired from CenterPointe.  Year over year, the net loan portfolio was up $206.8 million, which includes organic growth of $111.0 million, or 23.6%.

Deposits were $721.7 million at September 30, 2017, compared to $549.6 million on June 30, 2017 and $560.1 million on September 30, 2016.  During the third quarter, organic deposit growth totaled $34.2 million, or 6.2%, while the CenterPointe acquisition added $137.9 million to total deposits.  Year over year, deposits increased $161.6 million, which includes organic growth of $23.7 million, or 4.2%.  Noninterest bearing deposits represented 33.3% of total deposits as of September 30, 2017, compared to 30.2% at June 30, 2017, and to 31.6% at September 30, 2016.

Asset quality, provision and allowance for loan losses

The Bank’s nonperforming assets (“NPAs”) were $1.9 million at quarter 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 $1.7 million, representing 0.26% of total assets, and at September 30, 2016, NPAs were $1.6 million, representing 0.24% of total assets.

The Bank had net loan recoveries of $16 thousand and net loan charge-offs of $93 thousand for the three and nine-month periods ending on September 30, 2017, compared to net loan recoveries of $23 thousand and net loan charge-offs of $79 thousand for the comparable periods in 2016.  The provision for loan losses was $386 thousand and $842 thousand for the three and nine-month periods ending on September 30, 2017, compared to $60 thousand and $363 thousand for the comparable periods in 2016.  As of September 30, 2017, the allowance for loan losses was $7.0 million, or 1.29% of nonacquired gross loans, compared to 1.32% for the previous quarter and 1.49% for the comparable period in 2016.

Capital

Shareholders’ equity increased $10.5 million, or 15.3%, during the third quarter of 2017.  The increase primarily reflects issuance of 783,142 shares of the Company’s common stock as partial consideration for the acquisition of CenterPointe.  Tangible book value of the Company’s common stock was $9.21 per share on September 30, 2017, down $0.28, or 3.0%, from the $9.49 per share on June 30, 2017; year over year, tangible book value is up $0.25 per share, or 2.8%.  The quarterly decrease in tangible book value per share reflects the combined result of the increase in shareholders’ equity, net of intangible assets resulting from the CenterPointe acquisition, and the increase in number of shares outstanding.

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, 2017, the Bank’s Tier 1 leverage capital to average assets ratio was 10.1%, its common equity Tier 1 (“CET1”) capital ratio was 10.1%, and its total capital to risk-weighted assets ratio was 11.0%.  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 $9.9 million for the third quarter of 2017, representing an increase of $2.2 million, or 28.2%, from the previous quarter, and representing an increase of $2.2 million, or 29.1%, over the comparable quarter in 2016.  Total revenue was $24.8 million for the first nine months of 2017, compared to $22.2 million for the same period in 2016, representing an increase of $2.6 million, or 11.6%.  Total revenue is defined as net interest income plus noninterest income.

Net interest income

Net interest income was $8.6 million for the quarter ended September 30, 2017, an increase of $2.2 million, or 34.6%, from the previous quarter and an increase of $2.2 million, or 33.6%, from the third quarter of 2016.  Net interest income was $21.0 million for the nine months ended September 30, 2017, an increase of $2.3 million, or 12.2%, from the comparable period in 2016.  The net interest margin (interest income minus interest expense, divided by average earning assets) was 4.82% for the third quarter of 2017, compared to 4.37% the previous quarter; excluding net purchased loan discount accretion, the net interest margin was 4.66% and 4.30%, respectively.  Year to date, the net interest margin was 4.46% compared to 4.48% last year through September; excluding net purchased loan discount accretion, the net interest margin was 4.34% and 4.28%, respectively.

Noninterest income

Noninterest income was $1.3 million during the third quarter of 2017, down $30 thousand, or 2.2%, from the previous quarter; this decrease was primarily related to lower revenues from sales of residential mortgage loans and was partially offset by increases in services charges on deposits arising from the CenterPointe acquisition.  Noninterest income for the first nine months of 2017 was $3.8 million, an increase of $292 thousand, or 8.4%, over the same period in 2016.  This year over year increase in noninterest income was related to higher NSF income, higher debit and credit card interchange income, higher rental income and a $90 thousand recovery on an acquired written off loan, as well as additional revenues related to the CenterPointe acquisition.

Noninterest expense

Noninterest expense totaled $8.0 million for the third quarter of 2017, up $2.1 million, or 36.5%, from the previous quarter.  Included in noninterest expense during the quarter were nonrecurring acquisition-related costs totaling $1.3 million, as well as higher operating costs related to the CenterPointe acquisition.  CenterPointe added four additional locations to our branch network as well as additional personnel.  Noninterest expense for the first nine months of 2017 was $19.3 million, an increase of $2.9 million, or 17.4%, over the same period in 2016.  Year-to-date noninterest expense included $1.5 million in nonrecurring acquisition-related costs, compared to $476 thousand for the same period in 2016; excluding the acquisition-related costs, noninterest expenses are up $1.8 million, or 11.3%, year over year reflecting the Company’s investment in its human capital and technology infrastructures.

Key ratios

Return on average assets (“ROA”) for third quarter 2017 was 0.49%, compared to 0.66% in the previous quarter and 1.01% in the third quarter last year.  For the nine-month periods ended September 30, 2017 and 2016, ROA was 0.58% and 0.80%, respectively.  Core ROA (ROA excluding nonrecurring acquisition expenses) were 0.96% and 0.81% for the three and nine-month periods ended September 30, 2017, and 1.01% and 0.87% for the same periods in 2016.  Return on average equity (“ROE”) was 5.22% for third quarter 2017, compared to 6.23% in the previous quarter and 9.69% for the third quarter last year.  For the nine-month periods ended September 30, 2017 and 2016, ROE was 5.68% and 7.79%, respectively.  Core ROE (ROE excluding nonrecurring acquisition expenses) were 10.22% and 7.87% for the three and nine-month periods ended September 30, 2017 and 9.75% and 8.46% for the same periods in 2016.

About Northwest Bancorporation, Inc.

Northwest Bancorporation, Inc. is the parent company of Inland Northwest Bank, a state-chartered community bank which currently operates 21 offices across Washington, Idaho and Oregon.  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)   2017     2017     2016
               
Assets:          
  Cash and due from banks $ 39,704   $ 23,887   $ 23,183
  Interest bearing deposits   9,477     21,812     82,132
  Time deposits held for investment   5,895     3,920     2,000
  Securities available for sale   45,146     21,464     29,904
  Federal Home Loan Bank stock, at cost   1,379     1,036     1,047
  Loans receivable, net   677,524     530,169     470,725
  Loans held for sale   2,142     1,682     3,084
  Premises and equipment, net   15,604     14,690     14,032
  Bank-owned life insurance   9,385     7,113     7,028
  Accrued interest receivable   4,188     2,765     3,217
  Goodwill   9,483     6,206     6,206
  Core deposit intangible   2,811     1,167     1,320
  Foreclosed real estate   702     652     524
  Other assets   4,309     3,134     3,495
Total assets $ 827,749   $ 639,697   $ 647,897
               
Liabilities:          
  Deposits:          
    Noninterest bearing deposits $ 240,410   $ 166,023   $ 176,877
    Interest bearing transaction and savings deposits   368,602     271,385     259,282
    Time deposits   112,711     112,204     123,923
        721,723     549,612     560,082
  Accrued interest payable   139     149     122
  Borrowed funds   22,421     17,877     18,912
  Other liabilities   4,685     3,740     3,963
    Total liabilities   748,968     571,378     583,079
               
Shareholders’ equity:          
  Common stock   62,387     52,959     52,575
  Retained earnings   16,062     15,102     11,672
  Accumulated other comprehensive income   332     258     571
    Total shareholders’ equity   78,781     68,319     64,818
Total liabilities and shareholders’ equity $ 827,749   $ 639,697   $ 647,897
               

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)   2017     2017       2016       2017       2016  
                       
Interest and dividend income:                  
  Loans receivable $ 8,856   $ 6,654     $ 6,733     $ 21,847     $ 19,569  
  Investment securities   310     193       230       667       711  
  Other   68     119       59       312       174  
    Total interest and dividend income   9,234     6,966       7,022       22,826       20,454  
                       
Interest expense:                  
  Deposits   436     394       401       1,231       1,151  
  Borrowed funds   202     187       186       570       557  
    Total interest expense   638     581       587       1,801       1,708  
                       
Net interest income   8,596     6,385       6,435       21,025       18,746  
                       
Provision for loan losses   386     253       60       842       363  
                       
Noninterest income:                  
  Service charges on deposits   267     224       214       710       636  
  Gains from sale of loans, net   339     387       436       1,003       996  
  Other noninterest income   722     747       601       2,051       1,840  
    Total noninterest income   1,328     1,358       1,251       3,764       3,472  
                       
Noninterest expense:                  
  Salaries and employee benefits   3,761     3,111       2,912       10,015       8,583  
  Occupancy and equipment   480     520       400       1,432       1,250  
  Depreciation and amortization   410     311       300       1,025       905  
  Advertising and promotion   265     261       201       798       701  
  FDIC assessments   70     59       85       174       279  
  Gain on foreclosed real estate, net       (9 )     (1 )     (29 )     (1 )
  Acquisition-related costs   1,288     237       13       1,525       476  
  Other noninterest expense   1,714     1,363       1,418       4,363       4,255  
    Total noninterest expense   7,988     5,853       5,328       19,303       16,448  
                       
Income before income taxes   1,550     1,637       2,298       4,644       5,407  
Income tax expense   590     583       746       1,660       1,741  
                       
NET INCOME $ 960   $ 1,054     $ 1,552     $ 2,984     $ 3,666  
                       
Earnings per common share – basic $ 0.14   $ 0.16     $ 0.24     $ 0.45     $ 0.58  
Earnings per common share – diluted $ 0.13   $ 0.16     $ 0.24     $ 0.44     $ 0.56  
Weighted average common shares outstanding – basic   7,094,730     6,423,845       6,385,511       6,648,716       6,374,570  
Weighted average common shares outstanding – diluted   7,296,177     6,618,430       6,527,075       6,837,629       6,515,290  
                       

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)   2017       2017       2016       2017       2016    
                         
PERFORMANCE RATIOS (annualized)                    
  Return on average assets   0.49%       0.66%       1.01%       0.58%       0.80%    
  Return on average equity   5.22%       6.23%       9.69%       5.68%       7.79%    
  Yield on earning assets   5.18%       4.77%       4.97%       4.85%       4.89%    
  Cost of funds   0.53%       0.58%       0.59%       0.56%       0.58%    
  Net interest margin   4.82%       4.37%       4.55%       4.46%       4.48%    
  Noninterest income to average assets   0.68%       0.86%       0.81%       0.73%       0.76%    
  Noninterest expense to average assets   4.09%       3.69%       3.45%       3.76%       3.60%    
  Provision expense to average assets   0.20%       0.16%       0.04%       0.16%       0.08%    
  Efficiency ratio (1)   80.5%       75.6%       69.3%       77.9%       74.0%    
                         
                         
      Sep. 30,   Jun. 30,   Sep. 30,          
        2017       2017       2016            
ASSET QUALITY RATIOS AND DATA                    
  Nonaccrual loans $1,199     $1,002     $1,036            
  Foreclosed real estate $702     $652     $524            
  Nonperforming assets $1,901     $1,654     $1,560            
  Loans 30-89 days past due and on accrual $1,885     $1,838     $540            
  Restructured loans $2,329     $2,342     $3,929            
  Allowance for loan losses $7,013     $6,611     $6,308            
  Nonperforming assets to total assets   0.23%       0.26%       0.24%            
  Allowance for loan losses to total loans   1.02%       1.23%       1.32%            
  Allowance for loan losses to nonaccrual loans   584.9%       659.8%       608.9%            
  Net charge-offs ($16)   (2)   $14   (2)   ($23)   (2)   $93   (3)   $79   (3)  
  Net charge-offs to average loans (annualized)   -0.03%   (2)     0.03%   (2)     -0.06%   (2)     0.02%   (3)     0.02%   (3)  
                         
                         
CAPITAL RATIOS AND DATA                    
  Common shares outstanding at period end   7,218,241       6,425,361       6,393,244            
  Tangible common equity $66,487     $60,946     $57,292            
  Tangible book value per common share $9.21     $9.49     $8.96            
  Shareholders’ equity to total assets   9.5%       10.7%       10.0%            
  Total capital to risk-weighted assets (3)   11.0%       12.5%       13.0%            
  Tier 1 capital to risk-weighted assets (3)   10.1%       11.4%       11.9%            
  Tier 1 common equity ratio (3)   10.1%       11.4%       11.9%            
  Tier 1 leverage capital ratio (3)   10.0%       11.3%       11.0%            
                         
                         
DEPOSIT RATIOS AND DATA                    
  Core deposits (4) $609,012     $437,408     $436,159            
  Core deposits to total deposits   84.4%       79.6%       77.9%            
  Noninterest bearing deposits to total deposits   33.3%       30.2%       31.6%            
  Net loan to deposit ratio   93.9%       96.5%       84.0%            
                         
                         
Notes:                    
(1Efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).  
(2Net charge-offs for the three-month period.  
(3Regulatory capital ratios are reported for Inland Northwest Bank.  
(4Core 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