SPOKANE, Wash., July 31, 2013 (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 June 30, 2013.
Net income for the second quarter of 2013 was $1.2 million, compared to $289 thousand for the corresponding period in 2012. For the six months ended June 30, 2013, net income was $1.8 million, compared to $614 thousand for the corresponding period in 2012. The Company's results for the quarter ended June 30, 2013, include a $742 thousand benefit recognized from the recapture of its deferred tax asset valuation allowance, reflecting the Company's profitability trends and expectation of sustainable profitability in future periods.
After preferred stock dividends and related accretion adjustments, net income available to common shareholders was $1.0 million, or $0.33 per diluted share, for the second quarter of 2013, compared to $120 thousand, or $0.04 per diluted share, for the corresponding period in 2012. Net income available for common shareholders was $1.5 million, or $0.47 per diluted share, for the six months ended June 30, 2013, compared to $276 thousand, or $0.09 per diluted share, for the corresponding period in 2012.
Financial highlights
- Achieved sixth consecutive quarter of profitability, with net income of $1.2 million.
- Nonperforming assets decreased 43% year over year to the lowest balance of nonperforming assets since 2008.
- Residential mortgage revenue increased 25% year over year.
- Increased total noninterest bearing deposits to 23.5% of total deposits.
- The number of checking and savings accounts increased by 5% year over year.
- Loans grew by $13.6 million or 5.1% during the second quarter.
- Book value of Company stock increased 4.4% year over year to $8.95 per share.
- Deferred tax asset valuation allowance of $742 thousand was recaptured and reported as a tax benefit in the second quarter of 2013.
Balance sheet
As of June 30, 2013, the Company had total assets of $391.2 million, compared to $398.9 million on December 31, 2012. This represents a decrease of $7.7 million, or 1.9%.
The investment portfolio stood at $68.7 million as of June 30, 2013, down $8.0 million, or 10.4%, from $76.7 million at December 31, 2012. The decrease reflects a shift from investments to loans. The net unrealized gain in the portfolio was $1.4 million, which was 50% less than the $2.8 million net unrealized gain at year end 2012.
The net loan portfolio was $277.8 million on June 30, 2013. This was up $11.7 million, or 4.4%, from year end and was up $27.2 million, or 10.8%, from June 30, 2012, when the loan portfolio was $250.6 million. The increase from prior periods primarily reflects increased commercial lending activity. "Commercial lending is an area where we are focused on making improvements," Fewel commented. "Commercial loan demand was still fairly tepid in the second quarter, but the Bank recently hired two commercial loan officers bringing our total in Spokane and Coeur d'Alene to eight. They are working hard to build a pipeline of quality commercial loans, and we are starting to see that effort pay off."
Deposits at June 30, 2013 were $324.1 million, a decrease of $9.0 million, or 2.7%, compared to December 31, 2012, and a decrease of $10.2 million, or 3.1%, compared to June 30, 2012. Fewel commented, "We worked hard to reduce our interest expense in 2012, and we were very successful in doing that, but it also resulted in a slight decline in total deposits as higher cost time deposits were allowed to run off. Our core deposits continue to show modest growth, and we continue to see excellent gains in the number of checking and savings accounts we have, which increased 5% in the past year."
Core deposits (all deposits except time deposits) ended the quarter at $247.9 million, which is 76.5% of total deposits. This represents a decrease of $5.8 million, or 2.3%, since the beginning of the year and an increase of $4.4 million, or 1.8%, over the $243.5 million level on June 30, 2012.
Noninterest bearing deposits, a subset of core deposits, were $76.0 million at quarter end, representing 23.5% of total deposits. This compares to noninterest bearing deposits of $74.6 million, or 22.3% of total deposits, at June 30, 2012, and to $77.9 million, or 23.4% of total deposits, at year end 2012. The level of noninterest bearing deposits at quarter end represented growth of $1.5 million, or 2.0%, compared to June 30, 2012.
Asset quality, provision and allowance for loan losses
The Bank's nonperforming assets ("NPAs") were $8.9 million at quarter end, representing 2.28% of total assets. NPAs are defined as loans on which the Bank has stopped accruing interest and foreclosed real estate. NPAs at the end of 2012 were $12.5 million, representing 3.13% of total assets, and at June 30, 2012, NPAs were $15.5 million, representing 3.99% of total assets. "The trend in NPAs continues to be headed in the right direction," Fewel commented. "We anticipate NPAs will be below 2.0% of assets by year end."
Net charge-offs were $36 thousand and $215 thousand for the three and six-month periods ending on June 30, 2013, respectively, compared to $1.2 million and $1.3 million for the comparable periods in 2012. The provision for loan losses was $244 thousand and $488 thousand for the three and six-month periods ending on June 30, 2013, respectively, compared to $400 thousand and $1.0 million for the comparable periods in 2012. As of June 30, 2013, the allowance for loan losses was $5.5 million, or 1.95% of gross loans. This is slightly higher than the level on December 31, 2012, when it was $5.3 million and represented 1.94% of the loan portfolio.
Capital
Shareholders' equity has increased $708 thousand during 2013. The increase is from earnings retention, offset by a decrease in accumulated other comprehensive income. Fewel pointed out that, "The book value of the Company's common stock stood at $8.95 per share on June 30, 2013, up $0.38, or 4.4%, over the $8.57 per share book value on June 30, 2012. The stock's book value at the end of 2012 was $8.74 per share."
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 June 30, 2013 was 11.1%, compared to 10.3% on June 30, 2012; the regulatory minimum to be considered well-capitalized is 5.0%. The Bank's total capital to risk-weighted assets ratio was 14.1% at June 30, 2013 and 2012; the regulatory threshold for this ratio for a bank to be considered well-capitalized is 10.0%.
Total revenue
Total revenue for the Company was $4.7 million for the second quarter of 2013, compared to $5.0 million for the second quarter of 2012, representing a decrease of $297 thousand, or 5.9%. Total revenue is defined as net interest income plus noninterest income. Net interest income was up $4 thousand and noninterest income was down $301 thousand year over year. Net interest income increased because the Bank was able to lower interest expense by $180 thousand year over year while interest income declined by $176 thousand.
Net interest income
Net interest income remained stable at $3.6 million in the second quarter of both 2012 and 2013. The net interest margin (interest income minus interest expense, divided by average earning assets) declined from 4.06% in the second quarter of 2012 to 4.03% in the second quarter of 2013, a decrease of 0.7%. This compares to a net interest margin of 4.00% for all of 2012. "We're working hard to maintain our net interest margin," Fewel commented. "Shifting over eight million in lower yielding investments to higher yielding loans helped quite a bit."
Noninterest income
Noninterest income decreased by $301 thousand, or 21.6%, from $1.4 million in the second quarter last year, to $1.1 million in the second quarter this year. Noninterest income was 1.11% of average assets in the second quarter this year, compared to 1.43% last year. 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 $106 thousand for the three and six-month periods ending on June 30, 2013, respectively, compared to $99 thousand and $119 thousand for the comparable periods in 2012. "Noninterest income was distorted somewhat last year," Fewel said, "because the Bank owned an operating motel, and the income and expense from the motel was included in the Bank's numbers. Income from the motel during the second quarter last year was $176 thousand and for the first six months last year it was $289 thousand. We sold the motel in January of this year."
Noninterest expense
Noninterest expense for the second quarter decreased by $469 thousand, or 11.0%, from $4.3 million last year to $3.8 million this year. As a percentage of average assets, noninterest expense decreased from 4.35% in the second quarter of 2012 to 3.85% for the comparable period in 2013. The single biggest variance in noninterest expense was a net loss on the sale of foreclosed real estate, which was $231 thousand in the second quarter of 2013, compared to $470 thousand in the same quarter last year. Noninterest expense was down as a result of lower costs related to operating, maintaining or selling foreclosed real estate properties. For example, operating expense for the motel the Bank owned in 2012 was $174 thousand in the second quarter 2012 and was $331 thousand for the first six months last year.
Income taxes
In the second quarter of 2013, the Company recognized a tax benefit of $542 thousand. This benefit primarily resulted from the reversal of the Company's $742 thousand deferred tax asset valuation allowance and was offset by a provision for income taxes related to interim periods. The deferred tax asset valuation allowance was established in 2009 due to reported net losses and uncertainty of the Company's ability to generate future taxable income sufficient to realize all of the benefits of its deferred tax assets. Fewel commented that, "The Company has reported six consecutive quarters of profitability, improved asset quality, strong net interest margins, decreasing cost of funds, and an adequately funded allowance for loan losses. These factors, along with reasonable expectations of continued profitability, caused management to conclude that the deferred tax assets would more likely than not be recovered through future taxable income and that maintaining the valuation allowance was no longer necessary."
Regulatory matters
In October 2012, the Bank executed an informal agreement called a memorandum of understanding (the "Bank MOU") with the Federal Deposit Insurance Corporation (the "FDIC") and the Washington State Department of Financial Institutions (the "DFI") that updated and revised a Bank MOU entered into in April 2010. On June 24, 2013, the Bank received notification from the FDIC and the DFI that the Bank MOU was terminated. As a result, the Bank is no longer subject to terms of the Bank MOU, which was described in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. Fewel commented, "We believe the termination of the MOU indicates an acknowledgment by our regulators of the marked improvement in the Bank's financial condition."
As previously reported, the Company filed a notice of termination of registration on Form 15 with the Securities and Exchange Commission (the "SEC"), to deregister its shares and suspend public reporting obligations under the Securities and Exchange Act of 1934. The deregistration became effective on July 25, 2013. The Company's stock is expected to continue trading on the OTCQB Marketplace under the symbol NBCT. The Company will continue to file required reports with its regulators and intends to make audited annual financial statements and summary quarterly financial information available to shareholders on a timely basis on the Bank's website at www.inb.com.
Summary
Fewel summarized the quarterly results by saying, "We are proud of our second quarter results and of the fact we now have six consecutive quarters of profitability. We are encouraged by the continued decline in problem assets, the strong performance of our mortgage banking area, a new level of activity from the commercial lenders and a steadily increasing base of checking and savings accounts. We believe all of this bodes well for the remainder of 2013 and beyond, despite the continued pressure on our net interest margin and the increased burdens in the regulatory environment."
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 listed on the OTC Markets, 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. These forward-looking statements are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the results discussed in these forward-looking statements because of numerous possible risks and uncertainties. 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 that may result in lower interest rate margins; shifts in the demand for the Company's loan and other products; 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) |
June 30, 2013 |
Dec. 31, 2012 |
June 30, 2012 |
|||
| Assets: | ||||||
| Cash and due from banks | $ 13,235 | $ 19,984 | $ 13,542 | |||
| Interest bearing deposits | 235 | 5 | 15,497 | |||
| Time deposits held for investment | 2,895 | 3,140 | 1,920 | |||
| Securities available for sale | 65,837 | 73,556 | 74,236 | |||
| Federal Home Loan Bank stock, at cost | 1,216 | 1,239 | 1,261 | |||
| Loans receivable, net | 277,800 | 266,078 | 250,613 | |||
| Loans held for sale | 3,422 | 6,484 | 3,007 | |||
| Premises and equipment, net | 16,221 | 16,455 | 16,144 | |||
| Accrued interest receivable | 1,385 | 1,420 | 1,476 | |||
| Foreclosed real estate | 3,370 | 4,430 | 4,557 | |||
| Bank-owned life insurance | 4,099 | 4,039 | 3,977 | |||
| Other assets | 1,463 | 2,039 | 2,486 | |||
| Total assets | $ 391,178 | $ 398,869 | $ 388,716 | |||
| Liabilities: | ||||||
| Deposits: | ||||||
| Noninterest bearing deposits | $ 76,062 | $ 77,853 | $ 74,597 | |||
| Interest bearing transaction and savings deposits | 171,877 | 175,912 | 168,930 | |||
| Time deposits | 76,136 | 79,339 | 90,792 | |||
| 324,075 | 333,104 | 334,319 | ||||
| Accrued interest payable | 734 | 640 | 554 | |||
| Federal funds purchased | 9,980 | 1,255 | -- | |||
| Borrowed funds | 12,848 | 13,055 | 12,315 | |||
| Other liabilities | 4,917 | 12,899 | 4,283 | |||
| Total liabilities | 352,554 | 360,953 | 351,471 | |||
| Shareholders' equity: | ||||||
| Preferred stock | 10,959 | 10,907 | 10,854 | |||
| Common stock | 26,155 | 26,096 | 26,025 | |||
| Retained earnings (accumulated deficit) | 572 | (912) | (1,323) | |||
| Accumulated other comprehensive income | 938 | 1,825 | 1,689 | |||
| Total shareholders' equity | 38,624 | 37,916 | 37,245 | |||
| Total liabilities and shareholders' equity | $ 391,178 | $ 398,869 | $ 388,716 | |||
| Northwest Bancorporation, Inc. | |||||
| Consolidated Statements of Operations | |||||
| (Unaudited) | |||||
| Three Months Ended | Six Months Ended | ||||
| (dollars in thousands, except per share data) |
June 30, 2013 |
March 31, 2013 |
June 30, 2012 |
June 30, 2013 |
June 30, 2012 |
| Interest and dividend income: | |||||
| Loans receivable | $ 3,707 | $ 3,787 | $ 3,757 | $ 7,494 | $ 7,591 |
| Investment securities | 416 | 434 | 545 | 850 | 1,088 |
| Other | 12 | 16 | 9 | 28 | 15 |
| Total interest and dividend income | 4,135 | 4,237 | 4,311 | 8,372 | 8,694 |
| Interest expense: | |||||
| Deposits | 428 | 448 | 607 | 876 | 1,288 |
| Borrowed funds | 95 | 88 | 96 | 183 | 196 |
| Total interest expense | 523 | 536 | 703 | 1,059 | 1,484 |
| Net interest income | 3,612 | 3,701 | 3,608 | 7,313 | 7,210 |
| Provision for loan losses | 244 | 244 | 400 | 488 | 1,000 |
| Noninterest income: | |||||
| Service charges on deposits | 262 | 256 | 327 | 518 | 652 |
| Gains from sale of loans, net | 365 | 504 | 417 | 869 | 693 |
| Gain on investment securities, net | -- | 106 | 99 | 106 | 119 |
| Other noninterest income | 467 | 422 | 552 | 889 | 1,034 |
| Total noninterest income | 1,094 | 1,288 | 1,395 | 2,382 | 2,498 |
| Noninterest expense: | |||||
| Salaries and employee benefits | 1,729 | 1,838 | 1,757 | 3,567 | 3,528 |
| Occupancy and equipment | 326 | 353 | 348 | 679 | 677 |
| Depreciation and amortization | 311 | 308 | 297 | 619 | 601 |
| Advertising and promotion | 95 | 84 | 91 | 179 | 156 |
| FDIC assessments | 129 | 128 | 126 | 257 | 245 |
| Loss on foreclosed real estate | 231 | 81 | 470 | 312 | 470 |
| Other noninterest expense | 965 | 1,107 | 1,166 | 2,072 | 2,236 |
| Total noninterest expense | 3,786 | 3,899 | 4,255 | 7,685 | 7,913 |
| Income before income taxes | 676 | 846 | 348 | 1,522 | 795 |
| Income tax (benefit) expense | (542) | 241 | 59 | (301) | 181 |
| NET INCOME | $ 1,218 | $ 605 | $ 289 | $ 1,823 | $ 614 |
| Preferred stock dividends and discount accretion, net | 169 | 169 | 169 | 338 | 338 |
| Net income available to common shares | $ 1,049 | $ 436 | $ 120 | $ 1,485 | $ 276 |
| Earnings per common share - basic | $ 0.34 | $ 0.14 | $ 0.04 | $ 0.48 | $ 0.09 |
| Earnings per common share - diluted | $ 0.33 | $ 0.14 | $ 0.04 | $ 0.47 | $ 0.09 |
| Weighted average common shares outstanding - basic | 3,089,957 | 3,089,957 | 3,084,548 | 3,089,957 | 3,084,548 |
| Weighted average common shares outstanding - diluted | 3,149,379 | 3,141,777 | 3,137,471 | 3,145,900 | 3,174,993 |
| Northwest Bancorporation, Inc. | ||||||||||||||||||||
| Key Financial Ratios and Data | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| (dollars in thousands, except per share data) |
June 30, 2013 |
March 31, 2013 |
June 30, 2012 |
June 30, 2013 |
June 30, 2012 |
|||||||||||||||
| PERFORMANCE RATIOS (annualized) | ||||||||||||||||||||
| Return on average assets | 1.07% | 0.44% | 0.12% | 0.76% | 0.14% | |||||||||||||||
| Return on average equity | 10.90% | 4.57% | 1.30% | 7.75% | 1.50% | |||||||||||||||
| Yield on earning assets | 4.61% | 4.70% | 4.85% | 4.69% | 4.93% | |||||||||||||||
| Cost of funds | 0.78% | 0.80% | 1.02% | 0.80% | 1.07% | |||||||||||||||
| Net interest margin | 4.03% | 4.11% | 4.06% | 4.10% | 4.08% | |||||||||||||||
| Noninterest income to average assets | 1.11% | 1.30% | 1.43% | 1.22% | 1.29% | |||||||||||||||
| Noninterest expense to average assets | 3.85% | 3.94% | 4.35% | 3.92% | 4.07% | |||||||||||||||
| Provision expense to average assets | 0.25% | 0.25% | 0.41% | 0.25% | 0.51% | |||||||||||||||
| Efficiency ratio(1) | 80.5% | 78.2% | 85.1% | 79.3% | 81.5% | |||||||||||||||
|
June 30, 2013 |
Dec. 31, 2012 |
June 30, 2012 |
||||||||||||||||||
| ASSET QUALITY RATIOS AND DATA | ||||||||||||||||||||
| Nonaccrual loans | $5,539 | $8,044 | $10,963 | |||||||||||||||||
| Foreclosed real estate | $3,370 | $4,430 | $4,557 | |||||||||||||||||
| Nonperforming assets | $8,909 | $12,474 | $15,520 | |||||||||||||||||
| Loans 30-89 days past due and on accrual | $1,162 | $3,350 | $3,535 | |||||||||||||||||
| Restructured loans | $10,135 | $8,647 | $15,032 | |||||||||||||||||
| Allowance for loan losses | $5,533 | $5,260 | $6,495 | |||||||||||||||||
| Nonperforming assets to total assets | 2.28% | 3.13% | 3.99% | |||||||||||||||||
| Allowance for loan losses to total loans | 1.95% | 1.94% | 2.53% | |||||||||||||||||
| Allowance for loan losses to nonaccrual loans | 99.89% | 65.39% | 59.24% | |||||||||||||||||
| Net charge-offs | $36 | (2) | $1,243 | (2) | $215 | (3) | $1,322 | (3) | ||||||||||||
| Net charge-offs to average loans (annualized) | 0.05% | (2) | 1.85% | (2) | 0.15% | (3) | 0.98% | (3) | ||||||||||||
| CAPITAL RATIOS AND DATA | ||||||||||||||||||||
| Common shares outstanding at period end | 3,089,957 | 3,089,957 | 3,084,548 | |||||||||||||||||
| Book value per common share | $8.95 | $8.74 | $8.57 | |||||||||||||||||
| Tangible common equity | $27,665 | $27,009 | $26,391 | |||||||||||||||||
| Shareholders' equity to total assets | 9.9% | 9.5% | 9.6% | |||||||||||||||||
| Total capital to risk-weighted assets (4) | 14.1% | 13.7% | 14.1% | |||||||||||||||||
| Tier 1 capital to risk-weighted assets (4) | 12.8% | 12.4% | 12.9% | |||||||||||||||||
| Tier 1 leverage capital ratio (4) | 11.1% | 10.5% | 10.3% | |||||||||||||||||
| DEPOSIT RATIOS AND DATA | ||||||||||||||||||||
| Core deposits (5) | $247,939 | $253,765 | $243,527 | |||||||||||||||||
| Core deposits to total deposits | 76.5% | 76.2% | 72.8% | |||||||||||||||||
| Noninterest bearing deposits to total deposits | 23.5% | 23.4% | 22.3% | |||||||||||||||||
| Net loan to deposit ratio | 85.7% | 79.9% | 75.0% | |||||||||||||||||
| 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) Net charge-offs year to date. | ||||||||||||||||||||
| (4) Regulatory capital ratios are reported for Inland Northwest Bank. | ||||||||||||||||||||
| (5) Core deposits include all deposits except time deposits. | ||||||||||||||||||||