SPOKANE, Wash., Jan. 29, 2014 (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 and year ended December 31, 2013.
Net income for the fourth quarter of 2013 was $572 thousand, compared to $351 thousand for the corresponding period in 2012. For the year ended December 31, 2013, net income was $3.3 million, compared to $1.4 million for the corresponding period in 2012.
After preferred stock dividends and related accretion adjustments, net income available to common shareholders was $406 thousand, or $0.12 per diluted share, for the fourth quarter of 2013, compared to $182 thousand, or $0.06 per diluted share, for the corresponding period in 2012. Net income available for common shareholders was $2.6 million, or $0.81 per diluted share, for the year ended December 31, 2013, compared to $687 thousand, or $0.22 per diluted share, for the corresponding period in 2012.
Financial highlights
- Successful completion of $12.5 million capital raise in the fourth quarter.
- Full redemption of $11 million of preferred stock issued on February 2009 under the US Treasury's Capital Purchase Program.
- Achieved eighth consecutive quarter of profitability, with net income of $572 thousand.
- 2013 was the most profitable year in the twenty-four year history of the Bank.
- 2013 was the ninth consecutive year of increasing revenue.
- Nonperforming assets decreased 58% year over year.
- Increased total noninterest bearing deposits to 25.9% of total deposits.
- Loans grew by $30.9 million, or 11.6%, year over year.
Balance sheet
As of December 31, 2013, the Company had total assets of $394.2 million, compared to $398.9 million on December 31, 2012. This represents a decrease of $4.7 million, or 1.2%.
The investment portfolio was $54.4 million as of December 31, 2013, down $22.3 million, or 29.1%, from $76.7 million at December 31, 2012. The decrease reflects a shift in the deployment of capital from investments to loans. The net unrealized gain in the portfolio was $929 thousand at December 31, 2013, which was 66% less than the $2.8 million net unrealized gain at year end 2012. The Bank reported $197 thousand in realized gains for the year ended December 31, 2013, compared to $380 thousand in realized gains for the comparable period of 2012.
The net loan portfolio was $296.9 million on December 31, 2013, up $30.9 million, or 11.6%, from December 31, 2012 when the loan portfolio was $266.0 million. The increase primarily reflects increased commercial lending activity. Randall Fewel, President and CEO of both the Company and the Bank, said, "I'm very proud of the job our commercial lenders did in 2013 of working and expanding their relationships to grow the loan portfolio with high quality, in-market commercial loans."
Deposits at December 31, 2013 were $320.6 million, a decrease of $12.5 million, or 3.7%, compared to December 31, 2012, primarily reflecting a continued run-off of higher cost time deposits. Core deposits (all deposits except time deposits) ended the year at $255.8 million, which is 79.8% of total deposits. This represents an increase in core deposits of $2.1 million, or 0.8%, during the year.
Noninterest bearing deposits, a subset of core deposits, were $83.1 million at December 31, 2013, representing 25.9% of total deposits. This compares to noninterest bearing deposits of $77.9 million, or 23.4% of total deposits, at year end 2012. The level of noninterest bearing deposits grew $5.2 million, or 6.7%, during 2013.
During the fourth quarter of 2013, the Company issued $6.0 million of 7.5% fixed-rate, nine-year unsecured subordinated notes, accompanied by warrants to purchase 200,000 shares of common stock at $7.25. The subordinated debt is recorded as a liability on the Company's balance sheet, but counts as Tier 2 capital for regulatory reporting purposes. Proceeds of the subordinated debt were used to redeem the Company's outstanding preferred stock during the fourth quarter of 2013.
Asset quality, provision and allowance for loan losses
The Bank's nonperforming assets ("NPAs") decreased $7.2 million, or 57.6%, during 2013 ending the year at $5.3 million, representing 1.34% 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. "The Bank's Chief Credit Officer, Scott Southwick, did a terrific job reducing our NPAs in 2013," Fewel said. "His goal was to get NPAs below $8 million by year end and he far exceeded that. They are now at their lowest level since 2007."
Net charge-offs were $213 thousand and $957 thousand for the three and twelve-month periods ending on December 31, 2013, respectively, compared to $446 thousand and $3.2 million for the comparable periods in 2012. The provision for loan losses was $646 thousand and $1.5 million for the three and twelve-month periods ending on December 31, 2013, respectively, compared to $0 and $1.6 million for the comparable periods in 2012. As of December 31, 2013, the allowance for loan losses was $5.8 million, or 1.92% of gross loans. This is $543 thousand 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 decreased $3.0 million during 2013. The decrease is primarily a result of the Company's redemption of all $11.0 million of its outstanding preferred stock and payment of accrued dividends on the preferred stock of $569 thousand, as well as a decrease in other comprehensive income of $1.2 million. These reductions in equity were partially offset by net proceeds from the issuance of common stock totaling $6.1 million and earnings retention of $3.3 million. The book value of the Company's common stock decreased 2.9% from $8.74 per share on December 31, 2012, to $8.49 per share on December 31, 2013. "We worked hard to find a way to redeem the preferred stock without causing excessive dilution to the book value of our common stock," Fewel said, "and we believe we were able to accomplish that." He went on to say, "It was gratifying to have our common stock private placement be oversubscribed by about 23%. We could have raised over $8 million in the common stock offering, but the Board chose to limit it to $6.5 million to minimize the book value dilution."
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 December 31, 2013 was 11.0%, compared to 10.5% on December 31, 2012; the regulatory minimum to be considered well-capitalized is 5.0%. The Bank's total capital to risk-weighted assets ratio at December 31, 2013 was 13.4% compared to 13.7% on December 31, 2012; the regulatory threshold for this ratio for a bank to be considered well-capitalized is 10.0%.
Total revenue
Total revenue is defined as net interest income plus noninterest income. The Company's total revenue for the fourth quarter of 2013 was $4.5 million, compared to $4.8 million for the fourth quarter of 2012, representing a decrease of $214 thousand, or 4.5%. Total revenue for the Company increased to $19.8 million for the year ending December 31, 2013, an increase of $51 thousand, or 0.3%, compared to 2012. This marks the ninth consecutive year of increasing revenue.
Net interest income
Net interest income was $3.6 million for the quarter ended December 31, 2013, compared to $3.5 million for the comparable period in 2012, representing an increase of $99 thousand, or 2.8%. The net interest margin (interest income minus interest expense, divided by average earning assets) grew from 3.94% in the fourth quarter of 2012 to 4.01% in the fourth quarter of 2013.
Net interest income was $15.4 million for the year ended December 31, 2013, compared to $14.2 million for the comparable period in 2012, representing an increase of $1.2 million, or 8.3%. The net interest margin improved from 4.00% for the year ended December 31, 2012, to 4.28% in 2013. The year-over-year improvement in net interest income is largely related to nonrecurring income. "It is a real battle," Fewel said, "to maintain our net interest margin in this protracted extremely low interest rate environment. So to have actually improved it by twenty-eight basis points in 2013 we believe is quite an accomplishment, even if some of that income is not expected to reoccur in 2014."
Noninterest income
Noninterest income decreased by $313 thousand, or 25.5%, from $1.2 million in the fourth quarter of 2012, to $915 thousand in the fourth of 2013. Noninterest income was $4.4 million during 2013, compared to $5.6 million in 2012, representing a decrease of $1.1 million, or 20.2%. Noninterest income was 1.13% of average assets in 2013, compared to 1.42% in 2012. The decrease in noninterest income 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 $197 thousand and $380 thousand for the years ending December 31, 2013 and 2012, respectively.
"While the decline in noninterest income was disappointing," Fewel said, "it was not a surprise. We had $801 thousand in income in 2012 from a foreclosed motel we owned for about fourteen months that was sold in January 2013. But the 10% decline in our residential mortgage business was more than expected. Gains from sale of mortgage loans dropped 42% in the fourth quarter compared to the previous year and we are not optimistic that we will see any improvement in this area in 2014."
Noninterest expense
Noninterest expense decreased by $1.2 million, or 27.7%, from $4.3 million in the fourth quarter of 2012 to $3.1 million in the fourth quarter of 2013. Noninterest expense was $14.7 million during 2013, compared to $16.4 million in 2012, representing a decrease of $1.7 million, or 10.4%. Noninterest expense was 3.74% of average assets in 2013, compared to 4.20% in 2012. The single biggest variance in noninterest expense was the net loss on foreclosed real estate, which was $197 thousand in 2013, compared to $1.2 million in 2012. Other noninterest expense was down as a result of lower costs related to operating, maintaining or selling foreclosed real estate properties.
Fewel commented that, "Our goal for 2013 was to reduce noninterest expense by $1.6 million and we were able to do a little better than that. That resulted in a nice offset to the decline in noninterest income."
Income taxes
During the fourth quarter of 2013, the Company recognized tax expense of $218 thousand, compared to $110 thousand in the fourth quarter of 2012. Tax expense totaled $318 thousand and $371 thousand for the years ended December 31, 2013 and 2012, respectively. During the second quarter of 2013, the Company recorded a tax benefit of $742 thousand to reverse its deferred tax asset valuation allowance.
Summary
Fewel summarized the annual results by saying, "2013 was really an outstanding year for our company with lots of positives. We enjoyed record profits. We dramatically reduced our nonperforming assets, while at the same time generating excellent growth in the loan portfolio. We also conducted a successful capital raise that enabled us to retire all outstanding preferred stock. We believe our company is well positioned to build on these successes in 2014."
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; unforeseen increases in costs and expenses; 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, | Dec. 31, | ||
| (dollars in thousands) | 2013 | 2012 | |
| Assets: | |||
| Cash and due from banks | $ 13,951 | $ 19,984 | |
| Interest bearing deposits | 2,129 | 5 | |
| Time deposits held for investment | 2,655 | 3,140 | |
| Securities available for sale | 51,706 | 73,556 | |
| Federal Home Loan Bank stock, at cost | 1,194 | 1,239 | |
| Loans receivable, net | 296,938 | 266,078 | |
| Loans held for sale | 1,139 | 6,484 | |
| Premises and equipment, net | 15,614 | 16,455 | |
| Accrued interest receivable | 1,261 | 1,420 | |
| Foreclosed real estate | 1,675 | 4,430 | |
| Bank-owned life insurance | 4,160 | 4,039 | |
| Other assets | 1,781 | 2,039 | |
| Total assets | $ 394,203 | $ 398,869 | |
| Liabilities: | |||
| Deposits: | |||
| Noninterest bearing deposits | $ 83,063 | $ 77,853 | |
| Interest bearing transaction and savings deposits | 172,754 | 175,912 | |
| Time deposits | 64,807 | 79,339 | |
| 320,624 | 333,104 | ||
| Accrued interest payable | 131 | 640 | |
| Federal funds purchased | 12,170 | 1,255 | |
| Borrowed funds | 23,256 | 13,055 | |
| Other liabilities | 3,065 | 12,899 | |
| Total liabilities | 359,246 | 360,953 | |
| Shareholders' equity: | |||
| Preferred stock | -- | 10,907 | |
| Common stock | 32,657 | 26,096 | |
| Retained earnings (accumulated deficit) | 1,687 | (912) | |
| Accumulated other comprehensive income | 613 | 1,825 | |
| Total shareholders' equity | 34,957 | 37,916 | |
| Total liabilities and shareholders' equity | $ 394,203 | $ 398,869 | |
| Northwest Bancorporation, Inc. | |||||
| Consolidated Statements of Operations | |||||
| (Unaudited) | |||||
| Three Months Ended | Year Ended | ||||
| Dec. 31, | Sept. 30, | Dec. 31, | Dec. 31, | Dec. 31, | |
| (dollars in thousands, except per share data) | 2013 | 2013 | 2012 | 2013 | 2012 |
| Interest and dividend income: | |||||
| Loans receivable | $ 3,750 | $ 4,519 | $ 3,698 | $ 15,763 | $ 14,911 |
| Investment securities | 378 | 404 | 428 | 1,632 | 1,997 |
| Other | 14 | 11 | 13 | 53 | 41 |
| Total interest and dividend income | 4,142 | 4,934 | 4,139 | 17,448 | 16,949 |
| Interest expense: | |||||
| Deposits | 348 | 394 | 517 | 1,618 | 2,367 |
| Borrowed funds | 163 | 107 | 90 | 453 | 382 |
| Total interest expense | 511 | 501 | 607 | 2,071 | 2,749 |
| Net interest income | 3,631 | 4,433 | 3,532 | 15,377 | 14,200 |
| Provision for loan losses | 646 | 366 | -- | 1,500 | 1,600 |
| Noninterest income: | |||||
| Service charges on deposits | 265 | 292 | 296 | 1,075 | 1,276 |
| Gains from sale of loans, net | 237 | 298 | 408 | 1,404 | 1,568 |
| Gain on investment securities, net | 2 | 89 | -- | 197 | 380 |
| Other noninterest income | 411 | 464 | 524 | 1,764 | 2,342 |
| Total noninterest income | 915 | 1,143 | 1,228 | 4,440 | 5,566 |
| Noninterest expense: | |||||
| Salaries and employee benefits | 1,729 | 1,795 | 1,592 | 7,091 | 6,781 |
| Occupancy and equipment | 310 | 311 | 285 | 1,300 | 1,303 |
| Depreciation and amortization | 296 | 306 | 287 | 1,221 | 1,178 |
| Advertising and promotion | 91 | 103 | 83 | 373 | 315 |
| FDIC assessments | 38 | 124 | 129 | 419 | 500 |
| Loss (gain) on foreclosed real estate, net | (330) | 215 | 269 | 197 | 1,248 |
| Other noninterest expense | 976 | 1,077 | 1,654 | 4,125 | 5,106 |
| Total noninterest expense | 3,110 | 3,931 | 4,299 | 14,726 | 16,431 |
| Income before income taxes | 790 | 1,279 | 461 | 3,591 | 1,735 |
| Income tax expense | 218 | 401 | 110 | 318 | 371 |
| NET INCOME | $ 572 | $ 878 | $ 351 | $ 3,273 | $ 1,364 |
| Preferred stock dividends and discount accretion, net | 166 | 170 | 169 | 674 | 677 |
| Net income available to common shares | $ 406 | $ 708 | $ 182 | $ 2,599 | $ 687 |
| Earnings per common share - basic | $ 0.12 | $ 0.23 | $ 0.06 | $ 0.82 | $ 0.22 |
| Earnings per common share - diluted | $ 0.12 | $ 0.22 | $ 0.06 | $ 0.81 | $ 0.22 |
| Weighted average common shares outstanding - basic | 3,336,652 | 3,090,044 | 3,085,371 | 3,152,160 | 3,084,755 |
| Weighted average common shares outstanding - diluted | 3,398,990 | 3,149,079 | 3,121,487 | 3,208,917 | 3,135,211 |
| Northwest Bancorporation, Inc. | |||||
| Key Financial Ratios and Data | |||||
| (Unaudited) | |||||
| Three Months Ended | Year Ended | ||||
| Dec. 31, | Sept. 30, | Dec. 31, | Dec. 31, | Dec. 31, | |
| (dollars in thousands, except per share data) | 2013 | 2013 | 2012 | 2013 | 2012 |
| PERFORMANCE RATIOS (annualized) | |||||
| Return on average assets | 0.41% | 0.72% | 0.18% | 0.66% | 0.18% |
| Return on average equity | 4.37% | 7.27% | 1.93% | 6.87% | 1.86% |
| Yield on earning assets | 4.57% | 5.49% | 4.62% | 4.85% | 4.77% |
| Cost of funds | 0.77% | 0.75% | 0.89% | 0.76% | 1.00% |
| Net interest margin | 4.01% | 4.93% | 3.94% | 4.28% | 4.00% |
| Noninterest income to average assets | 0.92% | 1.16% | 1.24% | 1.13% | 1.42% |
| Noninterest expense to average assets | 3.14% | 4.00% | 4.35% | 3.74% | 4.20% |
| Provision expense to average assets | 0.65% | 0.37% | 0.00% | 0.38% | 0.41% |
| Efficiency ratio(1) | 68.4% | 70.5% | 90.3% | 74.3% | 83.1% |
| Dec. 31, | Dec. 31, | ||||
| 2013 | 2012 | ||||
| ASSET QUALITY RATIOS AND DATA | |||||
| Nonaccrual loans | $3,614 | $8,044 | |||
| Foreclosed real estate | $1,675 | $4,430 | |||
| Nonperforming assets | $5,289 | $12,474 | |||
| Loans 30-89 days past due and on accrual | $1,279 | $3,350 | |||
| Restructured loans | $8,375 | $8,647 | |||
| Allowance for loan losses | $5,803 | $5,260 | |||
| Nonperforming assets to total assets | 1.34% | 3.13% | |||
| Allowance for loan losses to total loans | 1.92% | 1.94% | |||
| Allowance for loan losses to nonaccrual loans | 160.57% | 65.39% | |||
| Net charge-offs | $213 (2) | $446 (2) | $957 (3) | $3,156 (3) | |
| Net charge-offs to average loans (annualized) | 0.29% (2) | 0.65% (2) | 0.33% (3) | 1.17% (3) | |
| CAPITAL RATIOS AND DATA | |||||
| Common shares outstanding at period end | 4,117,673 | 3,089,957 | |||
| Book value per common share | $8.49 | $8.74 | |||
| Tangible common equity | $34,957 | $27,009 | |||
| Shareholders' equity to total assets | 8.9% | 9.5% | |||
| Total capital to risk-weighted assets (4) | 13.4% | 13.7% | |||
| Tier 1 capital to risk-weighted assets (4) | 12.1% | 12.4% | |||
| Tier 1 leverage capital ratio (4) | 11.0% | 10.5% | |||
| DEPOSIT RATIOS AND DATA | |||||
| Core deposits (5) | $255,817 | $253,765 | |||
| Core deposits to total deposits | 79.8% | 76.2% | |||
| Noninterest bearing deposits to total deposits | 25.9% | 23.4% | |||
| Net loan to deposit ratio | 92.6% | 79.9% | |||
| 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. | |||||