SPOKANE, Wash., Oct. 30, 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 September 30, 2013.
Net income for the third quarter of 2013 was $878 thousand, compared to $399 thousand for the corresponding period in 2012. For the nine months ended September 30, 2013, net income was $2.7 million, compared to $1.0 million for the corresponding period in 2012. The Company's results for the quarter ended September 30, 2013, include $769 thousand in additional interest income recognized upon the early payoff of a loan which had been previously purchased at a discount.
After preferred stock dividends and related accretion adjustments, net income available to common shareholders was $708 thousand, or $0.22 per diluted share, for the third quarter of 2013, compared to $229 thousand, or $0.07 per diluted share, for the corresponding period in 2012. Net income available for common shareholders was $2.2 million, or $0.70 per diluted share, for the nine months ended September 30, 2013, compared to $505 thousand, or $0.16 per diluted share, for the corresponding period in 2012.
Financial highlights
- Achieved seventh consecutive quarter of profitability, with net income of $878 thousand.
- Nonperforming assets decreased 48% year over year.
- Increased total noninterest bearing deposits to 26.0% of total deposits.
- The number of checking and savings accounts increased by 5% year over year.
- Loans grew by $13.4 million, or 4.5%, during the third quarter.
- Book value of Company stock increased 5.8% year over year to $9.16 per share.
Balance sheet
As of September 30, 2013, the Company had total assets of $393.5 million, compared to $398.9 million on December 31, 2012. This represents a decrease of $5.4 million, or 1.4%.
The investment portfolio was $56.7 million as of September 30, 2013, down $20.0 million, or 26.1%, 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 $1.1 million, which was 62% less than the $2.8 million net unrealized gain at year end 2012. The Bank has also taken $195 thousand in realized gains for the nine-month period ended September 30, 2013 compared to $380 thousand in realized gains for the comparable period of 2012.
The net loan portfolio was $291.4 million on September 30, 2013. This was up $25.3 million, or 9.5%, from year end and was up $32.3 million, or 12.5%, from September 30, 2012, when the loan portfolio was $259.1 million. The increase from prior periods primarily reflects increased commercial lending activity. Randall Fewel, President and CEO of both the Company and the Bank, said, "We were fortunate to hire a three-person lending team early in the year and they have been successful in building their loan portfolio at INB. In addition, under the leadership of our Chief Lending Officer, Mark Dresback, the other members of our commercial lending team have also been successful at building a pipeline of quality commercial credits."
Deposits at September 30, 2013 were $330.3 million, a decrease of $2.8 million, or 0.8%, compared to December 31, 2012, and a decrease of $10.3 million, or 3.0%, compared to September 30, 2012.
Core deposits (all deposits except time deposits) ended the quarter at $260.2 million, which is 78.8% of total deposits. This represents an increase of $6.5 million, or 2.6%, since the beginning of the year and an increase of $8.0 million, or 3.2%, over the $252.2 million level on September 30, 2012.
Noninterest bearing deposits, a subset of core deposits, were $85.9 million at quarter end, representing 26.0% of total deposits. This compares to noninterest bearing deposits of $78.9 million, or 23.1% of total deposits, at September 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 $7.0 million, or 8.9%, compared to September 30, 2012.
"We continue to focus on growing core deposits," Fewel said, "and have allowed the more expensive time deposits to run off in order to lower our overall cost of funds. This has resulted in a significant improvement in the Bank's mix of deposits and less dependence on high cost certificates of deposit."
Asset quality, provision and allowance for loan losses
The Bank's nonperforming assets ("NPAs") were $7.8 million at quarter end, representing 1.99% 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 2012 were $12.5 million, representing 3.13% of total assets, and at September 30, 2012, NPAs were $15.0 million, representing 3.81% of total assets. "One of our main goals this year," Fewel commented, "was to get NPAs below $8 million and below 2% of total assets. I am very pleased that we achieved that goal by the end of the third quarter and I expect NPAs to be further reduced by year end."
Net charge-offs were $480 thousand and $744 thousand for the three and nine-month periods ending on September 30, 2013, respectively, compared to $1.4 million and $2.7 million for the comparable periods in 2012. The provision for loan losses was $366 thousand and $854 thousand for the three and nine-month periods ending on September 30, 2013, respectively, compared to $600 thousand and $1.6 million for the comparable periods in 2012. As of September 30, 2013, the allowance for loan losses was $5.4 million, or 1.81% 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 $1.4 million during 2013. The increase is from earnings retention, offset by accrued preferred stock dividends and a decrease in accumulated other comprehensive income. Fewel pointed out that, "The book value of the Company was $9.16 per share of common stock on September 30, 2013, up $0.50, or 5.8%, over the $8.66 per share book value on September 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 September 30, 2013 was 11.3%, compared to 10.4% on September 30, 2012; the regulatory minimum to be considered well-capitalized is 5.0%. The Bank's total capital to risk-weighted assets ratio at September 30, 2013 was 13.9% compared to 14.0% on September 30, 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 $5.6 million for the third quarter of 2013 (3Q13), compared to $5.3 million for the third quarter of 2012 (3Q12), representing an increase of $278 thousand, or 5.2%. Total revenue is defined as net interest income plus noninterest income. Net interest income was up $1.1 million and noninterest income was down $697 thousand in 3Q13 compared to 3Q12. Net interest income increased primarily because the Bank was able to lower interest expense by $582 thousand year over year and interest income improved by $496 thousand largely because of the increase in loan totals.
Total revenue for the Company for the nine months ending September 30, 2013 was $15.3 million, compared to $15.0 million for the first nine months last year. This represents an increase of $265 thousand, or 1.8%, year over year.
Net interest income
Net interest income was $4.4 million for the quarter ended September 30, 2013, compared to $3.5 million for the comparable period in 2012, representing an increase of $975 thousand, or 28.2%. Included in third quarter 2013 is $769 thousand in additional interest income recognized upon the early payoff of a loan which had been previously purchased at a discount. The net interest margin (interest income minus interest expense, divided by average earning assets) grew from 3.87% in the third quarter of 2012 to 4.93% in the third quarter of 2013, an increase of 1.06%. This compares to a net interest margin of 4.36% year-to-date and 4.00% for all of 2012.
Noninterest income
Noninterest income decreased by $697 thousand, or 37.9%, from $1.8 million in the third quarter last year, to $1.1 million in the third quarter this year. Noninterest income was 1.16% of average assets in the third quarter this year, compared to 1.88% 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 $89 thousand and $195 thousand for the three and nine-month periods ending on September 30, 2013, respectively, compared to $261 thousand and $380 thousand for the comparable periods in 2012. "We saw a significant drop in residential mortgage refinancing activity in the third quarter which caused income from sale of loans to drop by 36% compared to the third quarter last year," Fewel remarked. "Through the first two quarters this year, revenue from the mortgage area had been running 25% ahead of last year. Now it's basically even with last year. A significant pickup in residential construction activity offset some of the reduction in refinancing activity, but, overall, the increased regulatory requirements have had a major negative impact on the time and expense required to close a residential mortgage. We expect this will only get worse next year when additional provisions of the Dodd-Frank Act take effect."
Noninterest expense
Noninterest expense for the third quarter decreased by $288 thousand, or 6.8%, from $4.2 million last year to $3.9 million this year. As a percentage of average assets, noninterest expense decreased from 4.30% in the third quarter of 2012 to 4.00% for the comparable period in 2013. The single biggest variance in noninterest expense was the net loss on foreclosed real estate, which was $215 thousand in the third quarter of 2013, compared to $509 thousand in the same quarter last year. Other 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 $268 thousand in the third quarter 2012 and was $600 thousand for the first nine months last year.
Income taxes
In the third quarter of 2013, the Company recognized tax expense of $401 thousand, compared to $80 thousand in the third quarter last year. Tax expense for the first nine months of 2013 was $100 thousand, which includes a tax benefit of $742 thousand as a result of the Company's reversal of its deferred tax asset valuation allowance during the second quarter of 2013. Tax expense for the first nine months of 2012 was $261 thousand.
Regulatory matters
In March 2010, the Company executed an informal agreement called a memorandum of understanding (the "Company MOU") with the Federal Reserve Bank (the "FRB"). In August 2013, the Company received notification from the FRB that the MOU was terminated. As a result, the Company is no longer subject to terms of the Company MOU, which was described in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.
Summary
Fewel summarized the quarterly results by saying, "We are proud of our third quarter and year-to-date results and the fact we now have seven consecutive quarters of profitability. We are encouraged by the continued decline in problem assets and a healthy increase in commercial loan activity. However, there are still significant headwinds to deal with, including continued pressure on our net interest margin and the increased burdens in the regulatory environment, which are negatively impacting both noninterest income and noninterest expense."
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) | |||
| Sept. 30, | Dec. 31, | Sept. 30, | |
| (dollars in thousands) | 2013 | 2012 | 2012 |
| Assets: | |||
| Cash and due from banks | $ 16,737 | $ 19,984 | $ 17,665 |
| Interest bearing deposits | 140 | 5 | 3,969 |
| Time deposits held for investment | 2,655 | 3,140 | 2,895 |
| Securities available for sale | 54,017 | 73,556 | 75,960 |
| Federal Home Loan Bank stock, at cost | 1,205 | 1,239 | 1,250 |
| Loans receivable, net | 291,392 | 266,078 | 259,113 |
| Loans held for sale | 1,595 | 6,484 | 4,728 |
| Premises and equipment, net | 15,897 | 16,455 | 16,405 |
| Accrued interest receivable | 1,363 | 1,420 | 1,592 |
| Foreclosed real estate | 3,074 | 4,430 | 5,059 |
| Bank-owned life insurance | 4,129 | 4,039 | 4,008 |
| Other assets | 1,281 | 2,039 | 2,330 |
| Total assets | $ 393,485 | $ 398,869 | $ 394,974 |
| Liabilities: | |||
| Deposits: | |||
| Noninterest bearing deposits | $ 85,895 | $ 77,853 | $ 78,852 |
| Interest bearing transaction and savings deposits | 174,346 | 175,912 | 173,356 |
| Time deposits | 70,060 | 79,339 | 88,440 |
| 330,301 | 333,104 | 340,648 | |
| Accrued interest payable | 341 | 640 | 597 |
| Federal funds purchased | 750 | 1,255 | -- |
| Borrowed funds | 17,744 | 13,055 | 11,867 |
| Other liabilities | 5,060 | 12,899 | 4,266 |
| Total liabilities | 354,196 | 360,953 | 357,378 |
| Shareholders' equity: | |||
| Preferred stock | 10,986 | 10,907 | 10,881 |
| Common stock | 26,324 | 26,096 | 26,045 |
| Retained earnings (accumulated deficit) | 1,281 | (912) | (1,094) |
| Accumulated other comprehensive income | 698 | 1,825 | 1,764 |
| Total shareholders' equity | 39,289 | 37,916 | 37,596 |
| Total liabilities and shareholders' equity | $ 393,485 | $ 398,869 | $ 394,974 |
| Northwest Bancorporation, Inc. | |||||
| Consolidated Statements of Operations | |||||
| (Unaudited) | |||||
| Three Months Ended | Nine Months Ended | ||||
| Sept. 30, | June 30, | Sept. 30, | Sept. 30, | Sept. 30, | |
| (dollars in thousands, except per share data) | 2013 | 2013 | 2012 | 2013 | 2012 |
| Interest and dividend income: | |||||
| Loans receivable | $ 4,519 | $ 3,707 | $ 3,622 | $ 12,013 | $ 11,213 |
| Investment securities | 404 | 416 | 481 | 1,254 | 1,569 |
| Other | 11 | 12 | 13 | 39 | 28 |
| Total interest and dividend income | 4,934 | 4,135 | 4,116 | 13,306 | 12,810 |
| Interest expense: | |||||
| Deposits | 394 | 428 | 562 | 1,270 | 1,850 |
| Borrowed funds | 107 | 95 | 96 | 290 | 292 |
| Total interest expense | 501 | 523 | 658 | 1,560 | 2,142 |
| Net interest income | 4,433 | 3,612 | 3,458 | 11,746 | 10,668 |
| Provision for loan losses | 366 | 244 | 600 | 854 | 1,600 |
| Noninterest income: | |||||
| Service charges on deposits | 292 | 262 | 328 | 810 | 980 |
| Gains from sale of loans, net | 298 | 365 | 467 | 1,167 | 1,160 |
| Gain on investment securities, net | 89 | -- | 261 | 195 | 380 |
| Other noninterest income | 464 | 467 | 784 | 1,353 | 1,818 |
| Total noninterest income | 1,143 | 1,094 | 1,840 | 3,525 | 4,338 |
| Noninterest expense: | |||||
| Salaries and employee benefits | 1,795 | 1,729 | 1,661 | 5,362 | 5,189 |
| Occupancy and equipment | 311 | 326 | 341 | 990 | 1,018 |
| Depreciation and amortization | 306 | 311 | 290 | 925 | 891 |
| Advertising and promotion | 103 | 95 | 76 | 282 | 232 |
| FDIC assessments | 124 | 129 | 126 | 381 | 979 |
| Loss on foreclosed real estate | 215 | 231 | 509 | 527 | 371 |
| Other noninterest expense | 1,077 | 965 | 1,216 | 3,149 | 3,452 |
| Total noninterest expense | 3,931 | 3,786 | 4,219 | 11,616 | 12,132 |
| Income before income taxes | 1,279 | 676 | 479 | 2,801 | 1,274 |
| Income tax (benefit) expense | 401 | (542) | 80 | 100 | 261 |
| NET INCOME | $ 878 | $ 1,218 | $ 399 | $ 2,701 | $ 1,013 |
| Preferred stock dividends and discount accretion, net | 170 | 169 | 170 | 508 | 508 |
| Net income available to common shares | $ 708 | $ 1,049 | $ 229 | $ 2,193 | $ 505 |
| Earnings per common share - basic | $ 0.23 | $ 0.34 | $ 0.07 | $ 0.71 | $ 0.16 |
| Earnings per common share - diluted | $ 0.22 | $ 0.33 | $ 0.07 | $ 0.70 | $ 0.16 |
| Weighted average common shares outstanding - basic | 3,090,044 | 3,089,957 | 3,084,548 | 3,089,986 | 3,084,548 |
| Weighted average common shares outstanding - diluted | 3,149,079 | 3,149,379 | 3,138,930 | 3,144,667 | 3,133,759 |
| Northwest Bancorporation, Inc. | |||||
| Key Financial Ratios and Data | |||||
| (Unaudited) | |||||
| Three Months Ended | Nine Months Ended | ||||
| Sept. 30, | June 30, | Sept. 30, | Sept. 30, | Sept. 30, | |
| (dollars in thousands, except per share data) | 2013 | 2013 | 2012 | 2013 | 2012 |
| PERFORMANCE RATIOS (annualized) | |||||
| Return on average assets | 0.72% | 1.07% | 0.23% | 0.74% | 0.17% |
| Return on average equity | 7.27% | 10.90% | 2.45% | 7.58% | 1.82% |
| Yield on earning assets | 5.49% | 4.61% | 4.61% | 4.94% | 4.82% |
| Cost of funds | 0.75% | 0.78% | 0.96% | 0.78% | 1.04% |
| Net interest margin | 4.93% | 4.03% | 3.87% | 4.36% | 4.01% |
| Noninterest income to average assets | 1.16% | 1.11% | 1.88% | 1.19% | 1.48% |
| Noninterest expense to average assets | 4.00% | 3.85% | 4.30% | 3.94% | 4.15% |
| Provision expense to average assets | 0.37% | 0.25% | 0.61% | 0.29% | 0.82% |
| Efficiency ratio(1) | 70.5% | 80.5% | 79.6% | 76.1% | 80.9% |
| Sept. 30, | Dec. 31, | Sept. 30, | |||
| 2013 | 2012 | 2012 | |||
| ASSET QUALITY RATIOS AND DATA | |||||
| Nonaccrual loans | $4,741 | $8,044 | $9,971 | ||
| Foreclosed real estate | $3,074 | $4,430 | $5,059 | ||
| Nonperforming assets | $7,815 | $12,474 | $15,030 | ||
| Loans 30-89 days past due and on accrual | $328 | $3,350 | $3,466 | ||
| Restructured loans | $9,547 | $8,647 | $10,660 | ||
| Allowance for loan losses | $5,371 | $5,260 | $5,707 | ||
| Nonperforming assets to total assets | 1.99% | 3.13% | 3.81% | ||
| Allowance for loan losses to total loans | 1.81% | 1.94% | 2.16% | ||
| Allowance for loan losses to nonaccrual loans | 113.29% | 65.39% | 57.24% | ||
| Net charge-offs | $480 (2) | $1,390 (2) | $744 (3) | $2,709 (3) | |
| Net charge-offs to average loans (annualized) | 0.66% (2) | 2.08% (2) | 0.35% (3) | 1.34% (3) | |
| CAPITAL RATIOS AND DATA | |||||
| Common shares outstanding at period end | 3,090,340 | 3,089,957 | 3,084,548 | ||
| Book value per common share | $9.16 | $8.74 | $8.66 | ||
| Tangible common equity | $28,303 | $27,009 | $26,715 | ||
| Shareholders' equity to total assets | 10.0% | 9.5% | 9.5% | ||
| Total capital to risk-weighted assets (4) | 13.9% | 13.7% | 14.0% | ||
| Tier 1 capital to risk-weighted assets (4) | 12.7% | 12.4% | 12.7% | ||
| Tier 1 leverage capital ratio (4) | 11.3% | 10.5% | 10.4% | ||
| DEPOSIT RATIOS AND DATA | |||||
| Core deposits (5) | $260,241 | $253,765 | $252,208 | ||
| Core deposits to total deposits | 78.8% | 76.2% | 74.0% | ||
| Noninterest bearing deposits to total deposits | 26.0% | 23.4% | 23.1% | ||
| Net loan to deposit ratio | 88.2% | 79.9% | 76.1% | ||
| 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. | |||||