SPOKANE, Wash., Jan. 29, 2015 (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, 2014.
Net income for the fourth quarter of 2014 was $938 thousand, compared to $572 thousand for the corresponding period in 2013. Net income was $3.3 million for both years ending December 31, 2014 and 2013. However, the results for 2013 reflect that the Company recorded a tax benefit of $742 thousand during the year to reverse its deferred tax valuation allowance.
After preferred stock dividends and related accretion adjustments, net income available to common shareholders was $938 thousand, or $0.22 per diluted share, for the fourth quarter of 2014, compared to $406 thousand, or $0.12 per diluted share, for the corresponding period in 2013. Net income available for common shareholders was $3.3 million, or $0.77 per diluted share, for the year ended December 31, 2014, compared to $2.6 million, or $0.81 per diluted share, for the corresponding period in 2013.
Financial highlights
- Net income available for common shareholders increased 25%, or $661 thousand, year over year.
- Net income available for common shareholders of $3.3 million is a new record for the Company.
- Achieved twelfth consecutive quarter of profitability, with net income of $938 thousand.
- Nonperforming assets decreased 73% year over year.
- Noninterest bearing deposits increased 16% year over year.
- Loans grew by $39 million, or 13%, year over year.
- Book value of the Company's stock increased 9.7% over the course of the year, to $9.31 per share.
- The market price of the Company's stock increased $1.16 per share, or 15.5%, year over year, ending 2014 at $8.65.
- Market capitalization for the Company increased by $5.1 million in 2014, ending the year at $36 million.
Balance sheet
As of December 31, 2014, the Company had total assets of $421.8 million, compared to $394.2 million on December 31, 2013. This represents an increase of $27.6 million, or 7.0%. "Total assets of $422 million is a new record for our Company," President and CEO, Randall Fewel said. "With a new high water mark for total assets and a new record in profitability, I would say the Company has now recovered from the ill effects of the Great Recession."
The investment portfolio was $42.2 million as of December 31, 2014, down $12.1 million, or 22.3%, 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 $1.2 million, which was 31% higher than the $929 thousand net unrealized gain at year-end 2013.
The net loan portfolio was $336.4 million on December 31, 2014, up $39.5 million, or 13.3%, from December 31, 2013 when the loan portfolio was $296.9 million. The increase from prior periods primarily reflects increased commercial lending activity.
Deposits at December 31, 2014 were $358.7 million, an increase of $38.1 million, or 11.9%, compared to December 31, 2013. Core deposits (all deposits except time deposits) ended the year at $275.4 million, which is 76.8% of total deposits. This represents an increase of $19.6 million, or 7.7%, during the year.
Noninterest bearing deposits, a subset of core deposits, were $96.3 million at December 31, 2014, representing 26.9% of total deposits. This compares to noninterest bearing deposits of $83.1 million, or 25.9% of total deposits, at year end 2013. The level of noninterest bearing deposits grew $13.3 million, or 16%, during 2014. "It is important that deposit growth keeps pace with our loan growth, so it was very gratifying to see a $38 million increase in total deposits, with over a third of that coming in the form of the best deposits of all: noninterest bearing deposits," Fewel remarked.
Asset quality, provision and allowance for loan losses
The Bank's nonperforming assets ("NPAs") decreased $3.9 million, or 73.5%, during 2014 ending the year at $1.4 million, representing 0.33% 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. Fewel commented, "We are extremely proud of our accomplishments in the area of improving asset quality. Under the leadership of our Chief Credit Officer, Scott Southwick, INB's asset quality is now among the best in the state. For example, as of September 30, 2014, all the banks in the State of Washington averaged 1.10% nonperforming assets to total assets. INB's nonperforming asset ratio was 0.38% on that date and is now down to 0.33%."
Net charge-offs were $(41) thousand and $341 thousand for the three and twelve-month periods ending on December 31, 2014, respectively, compared to $213 thousand and $957 thousand for the comparable periods in 2013. The Bank recorded a recovery of $200 thousand on loan losses for the fourth quarter of 2014, compared to a provision for loan losses of $646 thousand for the fourth quarter of 2013. The provision for loan losses totaled $267 thousand in 2014, compared to $1.5 million in 2013. As of December 31, 2014, the allowance for loan losses was $5.7 million, or 1.67% of gross loans. This is slightly lower than on December 31, 2013, when it was $5.8 million and represented 1.91% of the loan portfolio.
Capital
Shareholders' equity has increased $3.8 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 increased $0.82, or 9.7%, from $8.49 per share on December 31, 2013 to $9.31 per share on December 31, 2014.
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, 2014 was 11.2%, compared to 11.0% on December 31, 2014; the regulatory minimum to be considered well-capitalized is 5.0%. The Bank's total capital to risk-weighted assets ratio was 13.4% at both December 31, 2014 and 2013; for a bank to be considered well-capitalized, the regulatory threshold for this ratio is 10.0%.
Total revenue
Total revenue was $5.0 million for the fourth quarter of 2014, compared to $4.5 million for the same period in 2013. Total revenue was $19.0 million and $19.8 million for the years ended December 31, 2014 and 2013, respectively. Total revenue is defined as net interest income plus noninterest income. "The decline in total revenue this year was largely due to a drop off in mortgage refinance activity," Fewel commented. "Our gains from the sale of mortgage loans dropped from $1.4 million in 2013 to $839 thousand in 2014 – a decline of $565 thousand, or 40%. I was pleased, however, to see revenue bounce back to $5.0 million in the fourth quarter, and I am optimistic that we will see revenues start increasing again in 2015," Fewel concluded.
Net interest income
Net interest income was $4.1 million for the quarter ended December 31, 2014, compared to $3.6 million for the comparable period in 2013, representing an increase of $451 thousand, or 12.4%. Net interest income was $15.5 million for the year ended December 31, 2014, compared to $15.4 million for the comparable period in 2013, representing an increase of $127 thousand, or 0.8%.
The net interest margin (the "NIM," defined as interest income minus interest expense, divided by average earning assets) increased from 4.01% in the fourth quarter of 2013 to 4.14% in the fourth quarter of 2014. This compares to a net interest margin of 4.10% for the year ended December 31, 2014 and 4.28% for the year ended December 31, 2013. "Since the NIM in the fourth quarter was slightly higher than the NIM for the entire year, we are hopeful the margin compression has slowed," Fewel said.
Noninterest income
Noninterest income increased by $38 thousand, or 4.2%, from $915 thousand in the fourth quarter last year, to $953 thousand in the fourth quarter this year. Noninterest income was $3.5 million during 2014, compared to $4.4 million in 2013, representing a decrease of $924 thousand, or 20.8%. Noninterest income was 0.86% of average assets in 2014, compared to 1.13% in 2013. This decrease in noninterest income was primarily related to lower service charges on deposits and lower gains from sales of residential mortgage loans. Net gains on sales of investment securities were $65 thousand and $197 thousand for the years ended December 31, 2014 and 2013, respectively.
Noninterest expense
Noninterest expense increased by $777 thousand, or 25.0%, from $3.1 million in the fourth quarter of 2013 to $3.9 million in the fourth quarter of 2014. Noninterest expense was $14.1 million during 2014, compared to $14.7 million in 2013, representing a decrease of $659 thousand, or 4.5%. The primary contributors to the reduction in noninterest expenses were lower FDIC assessments and lower costs related to operating, maintaining or selling foreclosed real estate properties.
"We were very pleased with our ability to decrease overhead expense in 2014," Fewel commented. "However, to help gain core deposits and drive revenue in 2015, we started adding several sales positions in the fourth quarter, which will increase the overhead expense this year."
Income Taxes
Tax expense totaled $1.4 million and $318 thousand for the years ended December 31, 2014 and 2013, respectively. During 2013, the Company recorded a tax benefit of $742 thousand to reverse its deferred tax valuation allowance.
Summary
Fewel summarized the annual results by saying, "We are extremely proud of achieving a 0.80% return on average assets and 8.9% return on average equity during the year. These results compare very favorably to last year when our return on average assets was 0.66% and the return on average equity was 6.9%."
"2014 was a record year for the Company in terms of profitability and total assets," Fewel said, "and we are entering 2015 with a record loan pipeline in excess of $100 million in commercial loans, so we have every reason to be optimistic about the coming year."
In a final comment, Fewel said, "GO SEAHAWKS!"
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) | ||
| Dec. 31, | Dec. 31, | |
| (dollars in thousands) | 2014 | 2013 |
| Assets: | ||
| Cash and due from banks | $ 14,398 | $ 13,951 |
| Interest bearing deposits | 3,384 | 2,129 |
| Time deposits held for investment | 1,935 | 2,655 |
| Securities available for sale | 40,287 | 51,706 |
| Federal Home Loan Bank stock, at cost | 1,148 | 1,194 |
| Loans receivable, net | 336,421 | 296,938 |
| Loans held for sale | 740 | 1,139 |
| Premises and equipment, net | 14,888 | 15,614 |
| Accrued interest receivable | 1,322 | 1,261 |
| Foreclosed real estate | 1,050 | 1,675 |
| Bank-owned life insurance | 4,201 | 4,160 |
| Other assets | 2,033 | 1,781 |
| Total assets | $ 421,807 | $ 394,203 |
| Liabilities: | ||
| Deposits: | ||
| Noninterest bearing deposits | $ 96,386 | $ 83,063 |
| Interest bearing transaction and savings deposits | 179,016 | 172,754 |
| Time deposits | 83,278 | 64,807 |
| 358,680 | 320,624 | |
| Accrued interest payable | 124 | 131 |
| Federal funds purchased | -- | 12,170 |
| Borrowed funds | 21,327 | 23,256 |
| Other liabilities | 2,963 | 3,065 |
| Total liabilities | 383,094 | 359,246 |
| Shareholders' equity: | ||
| Preferred stock | -- | -- |
| Common stock | 32,960 | 32,657 |
| Retained earnings | 4,947 | 1,687 |
| Accumulated other comprehensive income | 806 | 613 |
| Total shareholders' equity | 38,713 | 34,957 |
| Total liabilities and shareholders' equity | $ 421,807 | $ 394,203 |
| 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) | 2014 | 2014 | 2013 | 2014 | 2013 |
| Interest and dividend income: | |||||
| Loans receivable | $ 4,274 | $ 4,147 | $ 3,750 | $ 16,212 | $ 15,763 |
| Investment securities | 321 | 345 | 378 | 1,406 | 1,632 |
| Other | 16 | 13 | 14 | 48 | 53 |
| Total interest and dividend income | 4,611 | 4,505 | 4,142 | 17,666 | 17,448 |
| Interest expense: | |||||
| Deposits | 340 | 358 | 348 | 1,393 | 1,618 |
| Borrowed funds | 189 | 190 | 163 | 769 | 453 |
| Total interest expense | 529 | 548 | 511 | 2,162 | 2,071 |
| Net interest income | 4,082 | 3,957 | 3,631 | 15,504 | 15,377 |
| Provision for (recovery of) loan losses | (200) | 50 | 646 | 267 | 1,500 |
| Noninterest income: | |||||
| Service charges on deposits | 235 | 238 | 265 | 945 | 1,075 |
| Gains from sale of loans, net | 255 | 248 | 237 | 839 | 1,404 |
| Gain on investment securities, net | -- | -- | 2 | 65 | 197 |
| Other noninterest income | 463 | 427 | 411 | 1,667 | 1,764 |
| Total noninterest income | 953 | 913 | 915 | 3,516 | 4,440 |
| Noninterest expense: | |||||
| Salaries and employee benefits | 1,874 | 1,740 | 1,729 | 7,116 | 7,091 |
| Occupancy and equipment | 333 | 325 | 310 | 1,331 | 1,300 |
| Depreciation and amortization | 277 | 284 | 296 | 1,144 | 1,221 |
| Advertising and promotion | 131 | 114 | 91 | 463 | 373 |
| FDIC assessments | 64 | 69 | 38 | 271 | 419 |
| Loss (gain) on foreclosed real estate, net | 200 | -- | (330) | 50 | 197 |
| Other noninterest expense | 1,008 | 862 | 976 | 3,692 | 4,125 |
| Total noninterest expense | 3,887 | 3,394 | 3,110 | 14,067 | 14,726 |
| Income before income taxes | 1,348 | 1,426 | 790 | 4,686 | 3,591 |
| Income tax expense | 410 | 450 | 218 | 1,426 | 318 |
| NET INCOME | $ 938 | $ 976 | $ 572 | $ 3,260 | $ 3,273 |
| Preferred stock dividends and discount accretion, net | -- | -- | 166 | -- | 674 |
| Net income available to common shares | $ 938 | $ 976 | $ 406 | $ 3,260 | $ 2,599 |
| Earnings per common share - basic | $ 0.23 | $ 0.24 | $ 0.12 | $ 0.79 | $ 0.82 |
| Earnings per common share - diluted | $ 0.22 | $ 0.23 | $ 0.12 | $ 0.78 | $ 0.81 |
| Weighted average common shares outstanding - basic | 4,134,865 | 4,121,071 | 3,336,652 | 4,122,863 | 3,152,160 |
| Weighted average common shares outstanding - diluted | 4,224,144 | 4,199,334 | 3,398,990 | 4,199,018 | 3,208,917 |
| 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) | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||
| PERFORMANCE RATIOS (annualized) | ||||||||||||||||
| Return on average assets | 0.88% | 0.94% | 0.41% | 0.80% | 0.66% | |||||||||||
| Return on average equity | 9.92% | 10.61% | 4.37% | 8.91% | 6.87% | |||||||||||
| Yield on earning assets | 4.67% | 4.71% | 4.57% | 4.67% | 4.85% | |||||||||||
| Cost of funds | 0.74% | 0.80% | 0.77% | 0.78% | 0.76% | |||||||||||
| Net interest margin | 4.14% | 4.13% | 4.01% | 4.10% | 4.28% | |||||||||||
| Noninterest income to average assets | 0.89% | 0.88% | 0.92% | 0.86% | 1.13% | |||||||||||
| Noninterest expense to average assets | 3.64% | 3.28% | 3.14% | 3.44% | 3.74% | |||||||||||
| Provision expense to average assets | -0.19% | 0.05% | 0.65% | 0.07% | 0.38% | |||||||||||
| Efficiency ratio(1) | 77.2% | 69.7% | 68.4% | 74.0% | 74.3% | |||||||||||
| Dec. 31, | Dec. 31, | |||||||||||||||
| 2014 | 2013 | |||||||||||||||
| ASSET QUALITY RATIOS AND DATA | ||||||||||||||||
| Nonaccrual loans | $354 | $3,614 | ||||||||||||||
| Foreclosed real estate | $1,050 | $1,675 | ||||||||||||||
| Nonperforming assets | $1,404 | $5,289 | ||||||||||||||
| Loans 30-89 days past due and on accrual | $3,421 | $1,279 | ||||||||||||||
| Restructured loans | $5,023 | $8,375 | ||||||||||||||
| Allowance for loan losses | $5,728 | $5,803 | ||||||||||||||
| Nonperforming assets to total assets | 0.33% | 1.34% | ||||||||||||||
| Allowance for loan losses to total loans | 1.67% | 1.91% | ||||||||||||||
| Allowance for loan losses to nonaccrual loans | 1618.08% | 160.57% | ||||||||||||||
| Net charge-offs | ($41) | (2) | $213 | (2) | $341 | (3) | $957 | (3) | ||||||||
| Net charge-offs to average loans (annualized) | -0.05% | (2) | 0.29% | (2) | 0.11% | (3) | 0.33% | (3) | ||||||||
| CAPITAL RATIOS AND DATA | ||||||||||||||||
| Common shares outstanding at period end | 4,157,632 | 4,117,673 | ||||||||||||||
| Book value per common share | $9.31 | $8.49 | ||||||||||||||
| Tangible common equity | $38,713 | $34,957 | ||||||||||||||
| Shareholders' equity to total assets | 9.2% | 8.9% | ||||||||||||||
| Total capital to risk-weighted assets (3) | 13.4% | 13.4% | ||||||||||||||
| Tier 1 capital to risk-weighted assets (3) | 12.2% | 12.1% | ||||||||||||||
| Tier 1 leverage capital ratio (3) | 11.1% | 11.0% | ||||||||||||||
| DEPOSIT RATIOS AND DATA | ||||||||||||||||
| Core deposits (4) | $275,402 | $255,817 | ||||||||||||||
| Core deposits to total deposits | 76.8% | 79.8% | ||||||||||||||
| Noninterest bearing deposits to total deposits | 26.9% | 25.9% | ||||||||||||||
| Net loan to deposit ratio | 93.8% | 92.6% | ||||||||||||||
| 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. | ||||||||||||||||