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Northwest Bancorporation, Inc. Reports Fourth Quarter and Year End 2016 Financial Results

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SPOKANE, Wash., Jan. 26, 2017 (GLOBE NEWSWIRE) -- Northwest Bancorporation, Inc. (OTC Pink: NBCT) (the "Company"), the holding company of Inland Northwest Bank (the "Bank" or "INB"), today reported financial results for the quarter ended December 31, 2016.

Net income for the fourth quarter of 2016 was $1.41 million, compared to $1.55 million for the previous quarter and $726 thousand for the fourth quarter of 2015.  Earnings per diluted share decreased 12.5%, from $0.24 for the third quarter of 2016, to $0.21 for the fourth quarter of 2016, but are up $0.10, from the fourth quarter of last year.

For the year ended December 31, 2016, net income was $5.07 million, compared to $3.06 million for the corresponding period in 2015, representing an increase of $2.01 million, or 65.7%.  Earnings per diluted share increased 27.9%, from $0.61 in 2015, to $0.78 in 2016.  Operating results for 2016 include a full year of contribution from the former Bank of Fairfield, whose parent company was acquired in October 2015.

Company President and CEO, Russell Lee, commented, "It is gratifying to see that the hard work of the entire INB Team has been positively reflected in the Company's 2016 financial results.  We have been focused on executing our long-term plan of strategic growth, and the benefits to our shareholders of this plan are becoming evident."

Balance sheet

As of December 31, 2016, the Company had total assets of $636.5 million, compared to $647.9 million on September 30, 2016 and $610.8 million on December 31, 2015.  The decrease in assets of $11.4 million, or 1.8%, during the fourth quarter was primarily related to an expected decrease in deposits from a single customer.  Year over year, assets are up $25.7 million, or 4.2%.

The investment portfolio was $30.0 million as of December 31, 2016, down $1.9 million, or 6.1%, from $31.9 million at September 30, 2016.  The net unrealized gain in the portfolio was $370 thousand, 57.2% lower than the $865 thousand net unrealized gain at September 30, 2016.

The net loan portfolio was $490.8 million on December 31, 2016.  This represents an increase of $20.1 million, or 4.3%, from last quarter; loan growth during the fourth quarter of 2016 is primarily related to INB's new loan production office in Richland, Washington.  Year over year, the net loan portfolio was up $13.5 million, or 2.8%.

Deposits at December 31, 2016 were $548.4 million, a decrease of $11.7 million, or 2.1%, compared to September 30, 2016 and an increase of $22.5 million, or 4.3%, compared to December 31, 2015.  The decrease during the fourth quarter was partially related to a short-term $16 million deposit from one customer on the last day of the third quarter; without this temporary deposit, total deposits would have increased $4.3 million during the fourth quarter.  Noninterest bearing deposits were $164.0 million at year end, representing 29.9% of total deposits.  This compares to noninterest bearing deposits of $176.9 million, or 31.6% of total deposits, at September 30, 2016, and to $158.6 million, or 30.2% of total deposits, at December 31, 2015.

Asset quality, provision and allowance for loan losses

The Bank's nonperforming assets ("NPAs") were $1.5 million at year end, representing 0.23% 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 last quarter were $1.6 million, representing 0.24% of total assets, and at December 31, 2015, NPAs were $1.6 million, representing 0.25% of total assets.

The Bank had net loan recoveries of $29 thousand and net loan charge-offs of $79 thousand for the three and twelve-month periods ending on December 31, 2016, compared to net loan recoveries of $4 thousand and $76 thousand for the comparable periods in 2015.  The provision for loan losses was $0 and $363 thousand for the three and twelve-month periods ending on December 31, 2016, compared to $40 thousand and $220 thousand for the comparable periods in 2015.  As of December 31, 2016, the allowance for loan losses was $6.3 million, or 1.26% of gross loans; this was slightly higher than on December 31, 2015 when it was $6.0 million and represented 1.25% of the loan portfolio.

Capital

Shareholders' equity increased $5.2 million, or 8.5%, during 2016, which was mostly related to earnings retention.  Tangible book value of the Company's common stock was $9.13 per share on December 31, 2016, up $0.78, or 9.3%, over the $8.35 per share on December 31, 2015.

The Bank continues to maintain capital levels in excess of the requirements to be categorized as "well-capitalized" under regulatory standards.  As of December 31, 2016, the Bank's Tier 1 leverage capital to average assets ratio was 10.8%, its common equity Tier 1 ("CET1") capital ratio was 11.8%, and its total capital to risk-weighted assets ratio was 13.0%.  The regulatory requirements to be considered "well-capitalized" for these three ratios are 5.0%, 6.5%, and 10.0%, respectively.

Total revenue

Total revenue was $7.5 million for the fourth quarter of 2016, representing a decrease of $227 thousand, or 3.0%, from the previous quarter, and representing an increase of $509 thousand, or 7.3%, over the comparable quarter in 2015.  Total revenue was $29.7 million and $22.8 million for the years ended December 31, 2016 and 2015, respectively, which represents an increase of $6.9 million, or 30.0%.  Total revenue is defined as net interest income plus noninterest income.

Net interest income

Net interest income was $6.2 million for the quarter ended December 31, 2016, a decrease of $233 thousand, or 3.6%, from the previous quarter and an increase of $264 thousand, or 4.4%, from the fourth quarter of 2015.  The decrease is net interest income during the fourth quarter is largely due to declining levels of purchased loan discount accretion.  Net interest income was $24.9 million for year ended December 31, 2016, compared to $18.8 million for the comparable period in 2015.

The net interest margin (interest income minus interest expense, divided by average earning assets) decreased from 4.44% in the fourth quarter of 2015 to 4.21% in the fourth quarter of 2016.  For the year, the net interest margin was 4.41% in 2016 compared to 4.22% in 2015; excluding net purchased loan discount accretion, the net interest margin was 4.21% and 4.19%, respectively.

Noninterest income

Noninterest income was $1.3 million for the fourth quarter of 2016, up $245 thousand, or 24.2%, compared to the fourth quarter of 2015; this increase was largely related to higher revenues from sales of residential mortgage loans.  Noninterest income ended 2016 at $4.7 million, an increase of $737 thousand, or 18.5%, over the same period in 2015.  This year over year increase in noninterest income was partially due to higher revenues from sales of residential mortgage loans and partially due to increased revenues related to the Fairfield acquisition.

Noninterest expense

Noninterest expense totaled $5.4 million for the fourth quarter of 2016, down $471 thousand, or 8.0%, compared to the fourth quarter of 2015; excluding nonrecurring acquisition-related costs, noninterest expense would have increased $170 thousand, or 3.2%.  Noninterest expense ended 2016 at $21.8 million, an increase of $3.7 million, or 20.6%, over 2015; excluding nonrecurring acquisition-related costs, noninterest expense would have increased $4.3 million, or 25.1%.  This year over year increase in noninterest expense was primarily due to increased operating expenses related to the Fairfield acquisition.

Key ratios

Return on average assets ("ROA") for fourth quarter 2016 was 0.88%, compared to 1.01% in the previous quarter and 0.49% in the fourth quarter last year.  For the year ended December 31, 2016, ROA was 0.82%, compared to 0.63% for 2015.  Excluding nonrecurring acquisition-related costs, ROA would have been 0.87% for the three and twelve-month periods ending December 31, 2016, compared to 0.76% and 0.77% for the three and twelve-month periods ending December 31, 2015, respectively.

Return on average equity ("ROE") was 8.59% for fourth quarter 2016, compared to 9.69% in the previous quarter and 4.80% for the fourth quarter last year.  For the year ended December 31, 2016, ROE was 8.00%, compared to 6.39% for 2015.  Excluding nonrecurring acquisition-related costs, ROE would have been 8.50% and 8.47% for the three and twelve-month periods ending December 31, 2016, respectively, compared to 7.50% and 7.78% for the three and twelve-month periods ending December 31, 2015, respectively.

Yield on earning assets was 4.82% and 4.71% for the years ended December 31, 2016 and 2015, respectively, and the cost of funds was 0.59% and 0.67%, respectively.

About Northwest Bancorporation, Inc.

Northwest Bancorporation, Inc. is the parent company of Inland Northwest Bank, a state-chartered community bank which currently operates eleven branches in Eastern Washington, and four branches in Northern Idaho.  INB specializes in meeting the financial needs of individuals and small to medium-sized businesses, including professional corporations and agriculture-related operations, by providing a full line of commercial, retail, agricultural, and 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 Pink 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; lower-than-expected revenue or cost savings in connection with acquisitions; 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,   Sep. 30,   Dec. 31,  
(dollars in thousands)   2016     2016     2015  
                 
Assets:            
  Cash and due from banks $ 22,183   $ 23,183   $ 21,253  
  Interest bearing deposits   53,259     82,132     24,781  
  Time deposits held for investment   4,640     2,000     14,946  
  Securities available for sale   25,328     29,904     34,242  
  Federal Home Loan Bank stock, at cost   1,033     1,047     1,041  
  Loans receivable, net   490,816     470,725     477,336  
  Loans held for sale   3,824     3,084     1,971  
  Premises and equipment, net   14,061     14,032     14,080  
  Bank-owned life insurance   7,054     7,028     6,924  
  Accrued interest receivable   2,642     3,217     2,706  
  Goodwill   6,206     6,206     6,206  
  Core deposit intangible   1,262     1,320     1,494  
  Foreclosed real estate   745     524     308  
  Other assets   3,475     3,495     3,513  
Total assets $ 636,528   $ 647,897   $ 610,801  
                 
Liabilities:            
  Deposits:            
    Noninterest bearing deposits $ 164,027   $ 176,877   $ 158,576  
    Interest bearing transaction and savings deposits   261,432     259,282     248,442  
    Time deposits   122,962     123,923     118,867  
        548,421     560,082     525,885  
  Accrued interest payable   151     122     131  
  Borrowed funds   18,567     18,912     19,947  
  Other liabilities   3,334     3,963     3,962  
    Total liabilities   570,473     583,079     549,925  
                 
Shareholders' equity:            
  Common stock   52,733     52,575     52,294  
  Retained earnings   13,078     11,672     8,007  
  Accumulated other comprehensive income   244     571     575  
    Total shareholders' equity   66,055     64,818     60,876  
Total liabilities and shareholders' equity $ 636,528   $ 647,897   $ 610,801  
                 

 

   
Northwest Bancorporation, Inc.  
Consolidated Statements of Operations  
(Unaudited)  
                         
                         
      Three Months Ended   Year Ended  
      Dec. 31,   Sep. 30,   Dec. 31,   Dec. 31,   Dec. 31,  
(dollars in thousands, except per share data)   2016       2016       2015     2016       2015    
                         
Interest and dividend income:                    
  Loans receivable $ 6,477     $ 6,733     $ 6,177   $ 26,046     $ 19,793    
  Investment securities   230       230       274     941       1,105    
  Other   104       59       41     278       93    
    Total interest and dividend income   6,811       7,022       6,492     27,265       20,991    
                         
Interest expense:                    
  Deposits   419       401       369     1,570       1,421    
  Borrowed funds   190       186       185     747       741    
    Total interest expense   609       587       554     2,317       2,162    
                         
Net interest income   6,202       6,435       5,938     24,948       18,829    
                         
Provision for loan losses   -       60       40     363       220    
                         
Noninterest income:                    
  Service charges on deposits   216       214       234     852       897    
  Gains from sale of loans, net   451       436       259     1,447       1,259    
  Other noninterest income   590       601       519     2,430       1,836    
    Total noninterest income   1,257       1,251       1,012     4,729       3,992    
                         
Noninterest expense:                    
  Salaries and employee benefits   3,037       2,912       2,912     11,620       9,380    
  Occupancy and equipment   411       400       387     1,661       1,411    
  Depreciation and amortization   310       300       299     1,215       1,130    
  Advertising and promotion   216       201       177     917       649    
  FDIC assessments   9       85       79     288       266    
  Gain on foreclosed real estate, net   (53 )     (1 )     -     (54 )     (142 )  
  Acquisition-related costs   (23 )     13       618     453       1,014    
  Other noninterest expense   1,475       1,418       1,381     5,730       4,393    
    Total noninterest expense   5,382       5,328       5,853     21,830       18,101    
                         
Income before income taxes   2,077       2,298       1,057     7,484       4,500    
Income tax expense   672       746       331     2,413       1,440    
                         
NET INCOME $ 1,405     $ 1,552     $ 726   $ 5,071     $ 3,060    
                         
Earnings per common share - basic $ 0.22     $ 0.24     $ 0.11   $ 0.79     $ 0.62    
Earnings per common share - diluted $ 0.21     $ 0.24     $ 0.11   $ 0.78     $ 0.61    
Weighted average common shares outstanding - basic   6,404,319       6,385,511       6,341,958     6,382,048       4,910,233    
Weighted average common shares outstanding - diluted   6,544,481       6,527,075       6,426,076     6,511,253       4,999,185    
                         


   
Northwest Bancorporation, Inc.  
Key Financial Ratios and Data  
(Unaudited)  
                           
                           
      Three Months Ended   Year Ended    
      Dec. 31,   Sep. 30,   Dec. 31,   Dec. 31,   Dec. 31,    
(dollars in thousands, except per share data)   2016       2016       2015       2016       2015      
                           
PERFORMANCE RATIOS (annualized)                      
  Return on average assets   0.88 %     1.01 %     0.49 %     0.82 %     0.63 %    
  Return on average equity   8.59 %     9.69 %     4.80 %     8.00 %     6.39 %    
  Yield on earning assets   4.62 %     4.97 %     4.86 %     4.82 %     4.71 %    
  Cost of funds   0.60 %     0.59 %     0.59 %     0.59 %     0.67 %    
  Net interest margin   4.21 %     4.55 %     4.44 %     4.41 %     4.22 %    
  Noninterest income to average assets   0.78 %     0.81 %     0.68 %     0.77 %     0.82 %    
  Noninterest expense to average assets   3.35 %     3.45 %     3.94 %     3.54 %     3.74 %    
  Provision expense to average assets   0.00 %     0.04 %     0.03 %     0.06 %     0.05 %    
  Efficiency ratio (1)   72.2 %     69.3 %     84.2 %     73.6 %     79.3 %    
                           
                           
      Dec. 31,   Sep. 30,   Dec. 31,            
        2016       2016       2015              
ASSET QUALITY RATIOS AND DATA                      
  Nonaccrual loans $ 740     $ 1,036     $ 1,242              
  Foreclosed real estate $ 745     $ 524     $ 308              
  Nonperforming assets $ 1,485     $ 1,560     $ 1,550              
  Loans 30-89 days past due and on accrual $ 1,598     $ 540     $ 630              
  Restructured loans $ 3,589     $ 3,929     $ 5,942              
  Allowance for loan losses $ 6,263     $ 6,308     $ 6,024              
  Nonperforming assets to total assets   0.23 %     0.24 %     0.25 %            
  Allowance for loan losses to total loans   1.26 %     1.32 %     1.25 %            
  Allowance for loan losses to nonaccrual loans   846.4 %     608.9 %     485.0 %            
  Net charge-offs $ (29 ) (2 )   $ (23 ) (2 )   $ (4 ) (2 )   $ 79   (3 )   $ (76 ) (3 )  
  Net charge-offs to average loans (annualized)   -0.07 % (2 )     -0.06 % (2 )     -0.01 % (2 )     0.02 % (3 )     -0.02 % (3 )  
                           
                           
CAPITAL RATIOS AND DATA                      
  Common shares outstanding at period end   6,419,861       6,393,244       6,368,798              
  Tangible common equity $ 58,587     $ 57,292     $ 53,176              
  Tangible book value per common share $ 9.13     $ 8.96     $ 8.35              
  Shareholders' equity to total assets   10.4 %     10.0 %     10.0 %            
  Total capital to risk-weighted assets (3)   13.0 %     13.0 %     12.5 %            
  Tier 1 capital to risk-weighted assets (3)   11.8 %     11.9 %     11.3 %            
  Tier 1 common equity ratio (3)   11.8 %     11.9 %     11.3 %            
  Tier 1 leverage capital ratio (3)   10.8 %     11.0 %     11.1 %            
                           
                           
DEPOSIT RATIOS AND DATA                      
  Core deposits (4) $ 425,459     $ 436,159     $ 407,018              
  Core deposits to total deposits   77.6 %     77.9 %     77.4 %            
  Noninterest bearing deposits to total deposits   29.9 %     31.6 %     30.2 %            
  Net loan to deposit ratio   89.5 %     84.0 %     90.8 %            
                           
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.                    
                           

For more information contact:
Russell A. Lee, President and CEO
Holly Poquette, Chief Financial Officer
509.456.8888
nbct@inb.com

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