SPOKANE, Wash., Oct. 16, 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 ended September 30, 2014.
Net income for the third quarter of 2014 was $976 thousand, compared to $878 thousand for the corresponding period in 2013. For the nine months ended September 30, 2014, net income was $2.3 million, compared to $2.7 million for the corresponding period in 2013. The Company's results for the nine months ended September 30, 2013, included nonrecurring income of $742 thousand resulting from the benefit recognized from recapturing its deferred tax asset valuation allowance.
After preferred stock dividends and related accretion adjustments, net income available to common shareholders was $976 thousand, or $0.23 per diluted share, for the third quarter of 2014, compared to $708 thousand, or $0.22 per diluted share, for the corresponding period in 2013. Net income available for common shareholders was $2.3 million, or $0.55 per diluted share, for the nine months ended September 30, 2014, compared to $2.2 million, or $0.70 per diluted share, for the corresponding period in 2013. Without the nonrecurring income in 2013, net income available to common shareholders would have been approximately $1.5 million, or $0.46 per diluted share.
Financial highlights
- Achieved eleventh consecutive quarter of profitability, with net income of $976 thousand.
- Nonperforming assets decreased 80% year over year.
- Noninterest bearing deposits increased 11% year over year.
- The number of checking and savings accounts increased by 4% year over year.
- Loans grew by $24 million, or 8%, during the first nine months of 2014 and are up by $31 million year over year.
- Book value of the Company's stock increased 7.7% during the third quarter, to $9.14 per share.
Balance sheet
As of September 30, 2014, the Company had total assets of $421.3 million, compared to $394.2 million on December 31, 2013 and $393.5 million on September 30, 2013. This represents an increase of $27.1 million, or 6.9%, over year end and an increase of $27.8 million, or 7.1%, year over year. "Total assets of $421 million is a new record for our Company," President and CEO, Randall Fewel said. "We are very pleased to be setting a new record for total assets at the same time as we are celebrating the 25-year anniversary of the founding of Inland Northwest Bank on October 2, 1989."
The investment portfolio was $44.4 million as of September 30, 2014, down $10.0 million, or 18.3%, from $54.4 million at December 31, 2013. The decrease reflects a shift in the deployment of capital from investments to loans. The net unrealized gain in the portfolio was $1.3 million, which was 40% higher than the $929 thousand net unrealized gain at year-end 2013.
The net loan portfolio was $321.0 million on September 30, 2014. This was up $24.1 million, or 8.1%, from year end and was up $29.6 million, or 10.2%, from September 30, 2013, when the loan portfolio was $291.4 million. The increase from prior periods primarily reflects increased commercial lending activity.
Deposits at September 30, 2014 were $358.8 million, an increase of $38.2 million, or 11.9%, compared to December 31, 2013, and an increase of $28.5 million, or 8.6%, compared to September 30, 2013. Core deposits (all deposits except time deposits) ended the quarter at $273.2 million, which is 76.1% of total deposits. This represents an increase of $17.4 million, or 6.8%, since the beginning of the year and an increase of $12.9 million, or 5.0%, over the $260.2 million level on September 30, 2013.
Noninterest bearing deposits, a subset of core deposits, were $95.2 million at quarter end, representing 26.5% of total deposits. This compares to noninterest bearing deposits of $85.9 million, or 26.0% of total deposits, at September 30, 2013, and to $83.1 million, or 25.9% of total deposits, at the end of 2013. The level of noninterest bearing deposits at quarter end represented growth of $9.3 million, or 10.8%, compared to September 30, 2013. "Noninterest bearing deposits are important to our long-term success," Fewel commented, "and it is very gratifying to see continued steady growth in this significant component of our balance sheet."
Asset quality, provision and allowance for loan losses
The Bank's nonperforming assets ("NPAs") were $1.6 million at quarter end, representing 0.38% 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 2013 were $5.3 million, representing 1.34% of total assets, and at September 30, 2013, NPAs were $7.8 million, representing 1.99% of total assets.
Net charge-offs were $168 thousand and $383 thousand for the three and nine-month periods ending on September 30, 2014, respectively, compared to $480 thousand and $744 thousand for the comparable periods in 2013. The provision for loan losses was $50 thousand and $467 thousand for the three and nine-month periods ending on September 30, 2014, compared to $366 thousand and $854 thousand for the comparable periods in 2013. As of September 30, 2014, the allowance for loan losses ("ALLL") was $5.9 million, or 1.80% of gross loans. This is slightly higher than on December 31, 2013, when it was $5.8 million and represented 1.91% of the loan portfolio, and is $516 thousand higher than a year ago when the ALLL was $5.4 million and represented 1.81% of gross loans.
Capital
Shareholders' equity has increased $2.7 million during 2014. The increase reflects earnings retention and an increase in accumulated other comprehensive income and equity-based compensation costs. The book value of the Company's common stock was $9.14 per share on September 30, 2014, up $0.65, or 7.7%, over the $8.49 per share book value on December 31, 2013.
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, 2014 was 11.2%, compared to 11.3% on September 30, 2013; the regulatory minimum to be considered well-capitalized is 5.0%. The Bank's total capital to risk-weighted assets ratio at September 30, 2014 was 13.4% compared to 13.9% on September 30, 2013; for a bank to be considered well-capitalized, the regulatory threshold for this ratio is 10.0%.
Total revenue
Total revenue was $4.9 million for the third quarter of 2014, compared to $5.6 million for the same period in 2013. Total revenue was $14.0 million and $15.3 million for the nine months ended September 30, 2014 and 2013, respectively. Total revenue is defined as net interest income plus noninterest income. "The decline in total revenue year over year was largely due to a drop off in mortgage refinance activity," Fewel commented. "Our gains from the sale of mortgage loans dropped from $1.2 million for the first nine months of last year to $584 thousand this year – a decline of $583 thousand, or 50%."
Net interest income
Net interest income was $4.0 million for the quarter ended September 30, 2014, compared to $4.4 million for the comparable period in 2013, representing a decrease of $476 thousand, or 10.7%. Net interest income was $11.4 million for the nine months ended September 30, 2014, compared to $11.7 million for the comparable period in 2013, representing a decrease of $324 thousand, or 2.8%.
The net interest margin (interest income minus interest expense, divided by average earning assets) decreased from 4.93% in the third quarter of 2013 to 4.13% in the third quarter of 2014. This compares to a net interest margin of 4.09% year-to-date and 4.36% last year through September. "The pressure on every bank's net interest margin today is enormous," Fewel said, "and INB is no different. As loans in the portfolio pay off or hit their repricing triggers, they are either getting replaced with loans at a lower rate or they reprice at a lower rate. We are offsetting some of this by increasing the size of the loan portfolio and reducing the lower yielding bond portfolio. Our third quarter net interest margin of 4.13% actually improved by two basis points over our second quarter net interest margin of 4.11%. So we believe that the margin compression may be easing," Fewel concluded.
Noninterest income
Noninterest income decreased by $230 thousand, or 20.1%, from $1.1 million in the third quarter last year, to $913 thousand in the third quarter this year. Noninterest income for the first nine months of 2014 was $2.6 million, compared to $3.5 million for the same period in 2013. This represents a decline in noninterest income for the nine months of the year of $962 thousand, or 27.3%. 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 $65 thousand for the three and nine-month periods ending on September 30, 2014, respectively, compared to $89 thousand and $195 thousand for the comparable periods in 2013.
Noninterest expense
Noninterest expense for the third quarter decreased by $537 thousand, or 13.7%, from $3.9 million last year to $3.4 million this year. Noninterest expense for the nine months ending September 30, 2014, was $10.2 million, compared to $11.6 million for the same period in 2013. This represents a decline in noninterest expense of $1.4 million, or 12.4%. Nearly all categories of noninterest expenses were down year over year, with the most significant reductions resulting from lower costs related to operating, maintaining or selling foreclosed real estate properties.
"The continued decline in the level of foreclosed assets and nonperforming loans helps us in so many ways," Fewel commented. "Reduced carrying costs, legal and collection expenses, recaptured interest income, and reduced provision expense are all benefits of having fewer nonperforming assets."
Summary
Fewel summarized the quarterly results by saying, "We are extremely proud of achieving a 0.94% return on average assets and 10.6% return on average equity in the third quarter. These compare very favorably to the third quarter last year when our return on average assets was 0.72% and the return on average equity was 7.3%."
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 quoted on the OTC Market's OTCQB 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; 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) |
Sept. 30, 2014 |
Dec. 31, 2013 |
Sept. 30, 2013 |
| Assets: | |||
| Cash and due from banks | $ 13,895 | $ 13,951 | $ 16,737 |
| Interest bearing deposits | 15,593 | 2,129 | 140 |
| Time deposits held for investment | 1,935 | 2,655 | 2,655 |
| Securities available for sale | 42,468 | 51,706 | 54,017 |
| Federal Home Loan Bank stock, at cost | 1,160 | 1,194 | 1,205 |
| Loans receivable, net | 321,006 | 296,938 | 291,392 |
| Loans held for sale | 1,463 | 1,139 | 1,595 |
| Premises and equipment, net | 15,025 | 15,614 | 15,897 |
| Accrued interest receivable | 1,363 | 1,261 | 1,363 |
| Foreclosed real estate | 1,250 | 1,675 | 3,074 |
| Bank-owned life insurance | 4,250 | 4,160 | 4,129 |
| Other assets | 1,923 | 1,781 | 1,281 |
| Total assets | $ 421,331 | $ 394,203 | $ 393,485 |
| Liabilities: | |||
| Deposits: | |||
| Noninterest bearing deposits | $ 95,182 | $ 83,063 | $ 85,895 |
| Interest bearing transaction and savings deposits | 177,997 | 172,754 | 174,346 |
| Time deposits | 85,671 | 64,807 | 70,060 |
| 358,850 | 320,624 | 330,301 | |
| Accrued interest payable | 130 | 131 | 341 |
| Federal funds purchased | -- | 12,170 | 750 |
| Borrowed funds | 21,672 | 23,256 | 17,744 |
| Other liabilities | 2,981 | 3,065 | 5,060 |
| Total liabilities | 383,633 | 359,246 | 354,196 |
| Shareholders' equity: | |||
| Preferred stock | -- | -- | 10,986 |
| Common stock | 32,831 | 32,657 | 26,324 |
| Retained earnings | 4,009 | 1,687 | 1,281 |
| Accumulated other comprehensive income | 858 | 613 | 698 |
| Total shareholders' equity | 37,698 | 34,957 | 39,289 |
| Total liabilities and shareholders' equity | $ 421,331 | $ 394,203 | $ 393,485 |
| Northwest Bancorporation, Inc. | |||||
| Consolidated Statements of Operations | |||||
| (Unaudited) | |||||
| Three Months Ended | Nine Months Ended | ||||
| (dollars in thousands, except per share data) |
Sept. 30, 2014 |
June 30, 2014 |
Sept. 30, 2013 |
Sept. 30, 2014 |
Sept. 30, 2013 |
| Interest and dividend income: | |||||
| Loans receivable | $ 4,147 | $ 3,999 | $ 4,519 | $ 11,938 | $ 12,013 |
| Investment securities | 345 | 347 | 404 | 1,085 | 1,254 |
| Other | 13 | 9 | 11 | 32 | 39 |
| Total interest and dividend income | 4,505 | 4,355 | 4,934 | 13,055 | 13,306 |
| Interest expense: | |||||
| Deposits | 358 | 352 | 394 | 1,053 | 1,270 |
| Borrowed funds | 190 | 192 | 107 | 580 | 290 |
| Total interest expense | 548 | 544 | 501 | 1,633 | 1,560 |
| Net interest income | 3,957 | 3,811 | 4,433 | 11,422 | 11,746 |
| Provision for loan losses | 50 | 167 | 366 | 467 | 854 |
| Noninterest income: | |||||
| Service charges on deposits | 238 | 246 | 292 | 710 | 810 |
| Gains from sale of loans, net | 248 | 177 | 298 | 584 | 1,167 |
| Gain on investment securities, net | -- | 44 | 89 | 65 | 195 |
| Other noninterest income | 427 | 403 | 464 | 1,204 | 1,353 |
| Total noninterest income | 913 | 870 | 1,143 | 2,563 | 3,525 |
| Noninterest expense: | |||||
| Salaries and employee benefits | 1,740 | 1,720 | 1,795 | 5,242 | 5,362 |
| Occupancy and equipment | 325 | 332 | 311 | 998 | 990 |
| Depreciation and amortization | 284 | 290 | 306 | 867 | 925 |
| Advertising and promotion | 114 | 116 | 103 | 332 | 282 |
| FDIC assessments | 69 | 72 | 124 | 207 | 381 |
| Loss (gain) on foreclosed real estate, net | -- | (87) | 215 | (150) | 527 |
| Other noninterest expense | 862 | 958 | 1,077 | 2,684 | 3,149 |
| Total noninterest expense | 3,394 | 3,401 | 3,931 | 10,180 | 11,616 |
| Income before income taxes | 1,426 | 1,113 | 1,279 | 3,338 | 2,801 |
| Income tax expense | 450 | 355 | 401 | 1,016 | 100 |
| NET INCOME | $ 976 | $ 758 | $ 878 | $ 2,322 | $ 2,701 |
| Preferred stock dividends and discount accretion, net | -- | -- | 170 | -- | 508 |
| Net income available to common shares | $ 976 | $ 758 | $ 708 | $ 2,322 | $ 2,193 |
| Earnings per common share - basic | $ 0.24 | $ 0.18 | $ 0.23 | $ 0.56 | $ 0.71 |
| Earnings per common share - diluted | $ 0.23 | $ 0.18 | $ 0.22 | $ 0.55 | $ 0.70 |
| Weighted average common shares outstanding - basic | 4,121,071 | 4,117,673 | 3,089,957 | 4,118,818 | 3,089,986 |
| Weighted average common shares outstanding - diluted | 4,199,334 | 4,195,568 | 3,149,379 | 4,190,688 | 3,144,667 |
| Northwest Bancorporation, Inc. | ||||||||||
| Key Financial Ratios and Data | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended | Nine Months Ended | |||||||||
| (dollars in thousands, except per share data) |
Sept. 30, 2014 |
June 30, 2014 |
Sept. 30, 2013 |
Sept. 30, 2014 |
Sept. 30, 2013 |
|||||
| PERFORMANCE RATIOS (annualized) | ||||||||||
| Return on average assets | 0.94% | 0.76% | 0.72% | 0.77% | 0.74% | |||||
| Return on average equity | 10.61% | 8.37% | 7.27% | 8.58% | 7.58% | |||||
| Yield on earning assets | 4.71% | 4.70% | 5.49% | 4.68% | 4.94% | |||||
| Cost of funds | 0.80% | 0.80% | 0.75% | 0.81% | 0.78% | |||||
| Net interest margin | 4.13% | 4.11% | 4.93% | 4.09% | 4.36% | |||||
| Noninterest income to average assets | 0.88% | 0.87% | 1.16% | 0.85% | 1.19% | |||||
| Noninterest expense to average assets | 3.28% | 3.40% | 4.00% | 3.37% | 3.94% | |||||
| Provision expense to average assets | 0.05% | 0.17% | 0.37% | 0.15% | 0.29% | |||||
| Efficiency ratio(1) | 69.7% | 72.7% | 70.5% | 72.8% | 76.1% | |||||
|
Sept. 30, 2014 |
Dec. 31, 2013 |
Sept. 30, 2013 |
||||||||
| ASSET QUALITY RATIOS AND DATA | ||||||||||
| Nonaccrual loans | $348 | $3,614 | $4,741 | |||||||
| Foreclosed real estate | $1,250 | $1,675 | $3,074 | |||||||
| Nonperforming assets | $1,598 | $5,289 | $7,815 | |||||||
| Loans 30-89 days past due and on accrual | $2,627 | $1,279 | $328 | |||||||
| Restructured loans | $5,050 | $8,375 | $9,547 | |||||||
| Allowance for loan losses | $5,887 | $5,803 | $5,371 | |||||||
| Nonperforming assets to total assets | 0.38% | 1.34% | 1.99% | |||||||
| Allowance for loan losses to total loans | 1.80% | 1.91% | 1.81% | |||||||
| Allowance for loan losses to nonaccrual loans | 1691.67% | 160.57% | 113.29% | |||||||
| Net charge-offs | $168 | (2) | $480 | (2) | $383 | (3) | $744 | (3) | ||
| Net charge-offs to average loans (annualized) | 0.21% | (2) | 0.66% | (2) | 0.16% | (3) | 0.35% | (3) | ||
| CAPITAL RATIOS AND DATA | ||||||||||
| Common shares outstanding at period end | 4,124,325 | 4,117,673 | 3,090,340 | |||||||
| Book value per common share | $9.14 | $8.49 | $9.16 | |||||||
| Tangible common equity | $37,698 | $34,957 | $28,303 | |||||||
| Shareholders' equity to total assets | 8.9% | 8.9% | 10.0% | |||||||
| Total capital to risk-weighted assets (3) | 13.4% | 13.4% | 13.9% | |||||||
| Tier 1 capital to risk-weighted assets (3) | 12.2% | 12.1% | 12.7% | |||||||
| Tier 1 leverage capital ratio (3) | 11.2% | 11.0% | 11.3% | |||||||
| DEPOSIT RATIOS AND DATA | ||||||||||
| Core deposits (4) | $273,179 | $255,817 | $260,241 | |||||||
| Core deposits to total deposits | 76.1% | 79.8% | 78.8% | |||||||
| Noninterest bearing deposits to total deposits | 26.5% | 25.9% | 26.0% | |||||||
| Net loan to deposit ratio | 89.5% | 92.6% | 88.2% | |||||||
| 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. | ||||||||||