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Northwest Bancorporation, Inc. Reports Second Quarter 2017 Financial Results

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SPOKANE, Wash., July 20, 2017 (GLOBE NEWSWIRE) -- Northwest Bancorporation, Inc. (OTC:NBCT) (the "Company"), the holding company of Inland Northwest Bank (the "Bank" or "INB"), today reported financial results for the quarter ended June 30, 2017.

Net income for the second quarter of 2017 was $1.05 million, compared to $970 thousand for the previous quarter and $1.27 million for the second quarter of 2016.  Earnings per diluted share increased 6.7%, from $0.15 for the first quarter of 2017, to $0.16 for the second quarter of 2017, but are down $0.04 from the second quarter of last year.  Excluding nonrecurring acquisition expenses, quarterly earnings were down $132 thousand and $0.03 per diluted share compared to the second quarter of last year.

For the six months ended June 30, 2017, net income was $2.02 million, compared to $2.11 million for the corresponding period in 2016, representing a decrease of $90 thousand, or 4.3%.  Earnings per diluted share decreased 3.1% year over year, from $0.32 for the first six months of 2016 to $0.31 for the first six months of 2017, but are up $0.01 from the previous quarter.  Excluding nonrecurring acquisition expenses, year over year earnings for the first half of the year were down $240 thousand and $0.04 per diluted share.

Company President and CEO, Russell Lee, commented, "We are very pleased to see the strong loan growth which has been added to our balance sheet in the second quarter of 2017.  Our de novo efforts in the Tri Cities market have exceeded our expectations and, combined with the growth in our more established Spokane and North Idaho markets, we have gained some momentum on the balance sheet after a somewhat slow start in the first quarter of 2017.  While we stayed on our financial targets for the first half of 2017, we have also continued to invest in our franchise infrastructure and are in a good position to begin to integrate our second acquisition, CenterPointe Community Bank which closed late last week."

Balance sheet

As of June 30, 2017, the Company had total assets of $639.7 million, compared to $641.7 million on March 31, 2017 and $594.0 million on June 30, 2016.  This represents a decrease of $2.0 million, or 0.3% from the previous quarter and an increase of $45.7 million, or 7.7%, year over year.

The investment portfolio was $25.4 million as of June 30, 2017, down $2.1 million, or 7.5%, from $27.4 million at March 31, 2017.  The net unrealized gain in the portfolio was $391 thousand, 15.3% higher than the $339 thousand net unrealized gain at March 31, 2017.

The net loan portfolio was $530.2 million on June 30, 2017.  This represents an increase of $36.0 million, or 7.3%, from last quarter.  Year over year, the net loan portfolio was up $51.1 million, or 10.7%.

Deposits at June 30, 2017 were $549.6 million, a decrease of $2.5 million, or 0.4%, compared to March 31, 2017 and an increase of $42.3 million, or 8.3%, compared to June 30, 2016.  Noninterest bearing deposits were $166.0 million at quarter end, representing 30.2% of total deposits.  This compares to noninterest bearing deposits of $162.3 million, or 29.4% of total deposits, at March 31, 2017, and to $141.4 million, or 27.9% of total deposits, at June 30, 2016.

Asset quality, provision and allowance for loan losses

The Bank's nonperforming assets ("NPAs") were $1.7 million at quarter end, representing 0.26% 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 $1.7 million, representing 0.26% of total assets, and at June 30, 2016, NPAs were $1.6 million, representing 0.27% of total assets.

The Bank had net loan charge-offs of $14 thousand and $109 thousand for the three and six-month periods ending on June 30, 2017, compared to net loan charge-offs of $62 thousand and $103 thousand for the comparable periods in 2016.  The provision for loan losses was $253 thousand and $456 thousand for the three and six-month periods ending on June 30, 2017, compared to $121 thousand and $303 thousand for the comparable periods in 2016.  As of June 30, 2017, the allowance for loan losses was $6.6 million, or 1.23% of gross loans; this was slightly higher than on March 31, 2017 when it was $6.4 million and represented 1.27% of the loan portfolio.

Capital

Shareholders' equity increased $1.2 million, or 1.8%, during the second quarter of 2017, which was mostly related to earnings retention, partially offset by equity compensation expense.  Tangible book value of the Company's common stock was $9.49 per share on June 30, 2017, up $0.19, or 2.0%, over the $9.30 per share on March 31, 2017; year over year, tangible book value is up $0.76 per share, or 8.7%.

The Bank continues to maintain capital levels in excess of the requirements to be categorized as "well-capitalized" under regulatory standards.  As of June 30, 2017, the Bank's Tier 1 leverage capital to average assets ratio was 11.3%, its common equity Tier 1 ("CET1") capital ratio was 11.4%, and its total capital to risk-weighted assets ratio was 12.5%.  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 $7.7 million for the second quarter of 2017, representing an increase of $621 thousand, or 8.7%, from the previous quarter, and representing a increase of $349 thousand, or 4.7%, over the comparable quarter in 2016.  Total revenue was $14.9 million for the first six months of 2017, compared to $14.5 million for the same period in 2016, representing an increase of $333 thousand, or 2.3%.  Total revenue is defined as net interest income plus noninterest income.

Net interest income

Net interest income was $6.4 million for the quarter ended June 30, 2017, an increase of $341 thousand, or 5.6%, from the previous quarter and an increase of $154 thousand, or 2.5%, from the second quarter of 2016.  Net interest income was $12.4 million for the six months ended June 30, 2017, an increase of $118 thousand, or 1.0%, from the comparable period in 2016.  The net interest margin (interest income minus interest expense, divided by average earning assets) improved from 4.13% in the first quarter of 2017 to 4.37% in the second quarter of 2017.  Year to date, the NIM was 4.25% compared to 4.44% last year through June; excluding net purchased loan discount accretion, the net interest margin was 4.15% and 4.27%, respectively.

Noninterest income

Noninterest income was $1.4 million during the second quarter of 2017, up $280 thousand, or 26.0%, from the previous quarter; this increase was related to higher revenues from sales of residential mortgage loans, higher debit and credit card interchange income and a $90 thousand recovery on an acquired written off loan.  Noninterest income for the first six months of 2017 was $2.4 million, an increase of $215 thousand, or 9.7%, over the same period in 2016.  This year over year increase in noninterest income was related to the same items discussed above.

Noninterest expense

Noninterest expense totaled $5.9 million for the second quarter of 2017, up $391 thousand, or 7.2%, from the previous quarter.  Included in noninterest expense during the quarter were nonrecurring acquisition-related costs totaling $237 thousand as well as higher occupancy costs and higher loan related costs.  Noninterest expense for the first six months of 2017 was $11.3 million, an increase of $195 thousand, or 1.8%, over the same period in 2016.  While we experienced increases in employee and occupancy related costs, those were partially offset by decreases in FDIC assessments, acquisition related costs and other miscellaneous expenses.

Key ratios

Return on average assets ("ROA") for second quarter 2017 was 0.66%, compared to 0.61% in the previous quarter and 0.85% in the second quarter last year.  For the six-month periods ended June 30, 2017 and 2016, ROA was 0.64% and 0.70%, respectively.  Excluding nonrecurring acquisition expenses, ROA would have been 0.76% and 0.69% for the three and six-month periods ended June 30, 2017, and 0.90% and 0.80% for the same periods in 2016.  Return on average equity ("ROE") was 6.23% for second quarter 2017, compared to 4.53% in the previous quarter and 4.93% for the second quarter last year.  For the six-month periods ended June 30, 2017 and 2016, ROE was 6.03% and 6.82%, respectively.  Excluding nonrecurring acquisition expenses, ROE would have been 7.15% and 6.49% for the three and six-month periods ended June 30, 2017 and 8.58% and 7.80% for the same periods in 2016.

CenterPointe Community Bank Acquisition

On July 14, 2017, the Company announced the closing of the acquisition of CenterPointe Community Bank, which was headquartered in Hood River, Oregon, and operated 4 branches.  The combined Company has approximately $800 million in total assets.  Barry Featherstone, former director with CenterPointe Community Bank, was appointed to the boards of directors of the Company and INB effective July 18, 2017.

About Northwest Bancorporation, Inc.

Northwest Bancorporation, Inc. is the parent company of Inland Northwest Bank, a state-chartered community bank which currently operates 21 offices across Washington, Idaho and Oregon.  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)
           
           
  Jun. 30,   Mar. 31,   Jun. 30,
(dollars in thousands)  2017    2017    2016
           
Assets:          
Cash and due from banks $   23,887   $   21,715   $   19,458
Interest bearing deposits     21,812       61,160       24,715
Time deposits held for investment     3,920       4,640       2,862
Securities available for sale     21,464       22,796       29,764
Federal Home Loan Bank stock, at cost     1,036       1,050       1,061
Loans receivable, net     530,169       494,210       479,098
Loans held for sale     1,682       1,391       1,636
Premises and equipment, net     14,690       13,967       14,108
Bank-owned life insurance     7,113       7,084       6,999
Accrued interest receivable     2,765       2,366       2,742
Goodwill     6,206       6,206       6,290
Core deposit intangible     1,167       1,214       1,378
Foreclosed real estate     652       652       308
Other assets     3,134       3,204       3,551
Total assets $   639,697   $   641,655   $   593,970
           
Liabilities:          
Deposits:          
Noninterest bearing deposits $   166,023   $   162,251   $   141,408
Interest bearing transaction and savings deposits     271,385       275,953       249,226
Time deposits     112,204       113,860       116,699
      549,612       552,064       507,333
Accrued interest payable     149       126       140
Borrowed funds     17,877       18,222       19,257
Other liabilities     3,740       4,123       3,945
Total liabilities     571,378       574,535       530,675
           
Shareholders' equity:          
Common stock     52,959       52,849       52,494
Retained earnings     15,102       14,047       10,121
Accumulated other comprehensive income     258       224       680
Total shareholders' equity     68,319       67,120       63,295
Total liabilities and shareholders' equity $   639,697   $   641,655   $   593,970
           


Northwest Bancorporation, Inc.  
Consolidated Statements of Operations  
(Unaudited)  
                     
                     
  Three Months Ended   Six Months Ended  
  Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,  
(dollars in thousands, except per share data)  2017    2017    2016    2017    2016  
                     
Interest and dividend income:                    
Loans receivable $   6,654     $   6,337     $   6,514   $   12,991     $   12,836  
Investment securities     193         164         229       357         481  
Other     119         125         53       244         115  
Total interest and dividend income     6,966         6,626         6,796       13,592         13,432  
                     
Interest expense:                    
Deposits     394         401         377       795         750  
Borrowed funds     187         181         188       368         371  
Total interest expense     581         582         565       1,163         1,121  
                     
Net interest income     6,385         6,044         6,231       12,429         12,311  
                     
Provision for loan losses     253         203         121       456         303  
                     
Noninterest income:                    
Service charges on deposits     224         219         210       443         422  
Gains from sale of loans, net     387         277         335       664         560  
Other noninterest income     747         582         618       1,329         1,239  
Total noninterest income     1,358         1,078         1,163       2,436         2,221  
                     
Noninterest expense:                    
Salaries and employee benefits     3,111         3,143         2,809       6,254         5,671  
Occupancy and equipment     520         432         409       952         850  
Depreciation and amortization     311         304         303       615         605  
Advertising and promotion     261         272         263       533         500  
FDIC assessments     59         45         91       104         194  
Gain on foreclosed real estate, net     (9 )       (20 )       -        (29 )       -   
Acquisition-related costs     237         -          102       237         463  
Other noninterest expense     1,363         1,286         1,397       2,649         2,837  
Total noninterest expense     5,853         5,462         5,374       11,315         11,120  
                     
Income before income taxes     1,637         1,457         1,899       3,094         3,109  
Income tax expense     583         487         624       1,070         995  
                     
NET INCOME $   1,054     $   970     $   1,275   $   2,024     $   2,114  
                     
Earnings per common share - basic $   0.16     $   0.15     $   0.20   $   0.32     $   0.33  
Earnings per common share - diluted $   0.16     $   0.15     $   0.20   $   0.31     $   0.32  
Weighted average common shares outstanding - basic     6,423,845         6,420,161         6,369,282       6,422,013         6,369,040  
Weighted average common shares outstanding - diluted     6,618,430         6,594,681         6,509,374       6,606,317         6,505,918  
                     


Northwest Bancorporation, Inc.  
Key Financial Ratios and Data  
(Unaudited)  
                       
                       
  Three Months Ended   Six Months Ended    
  Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,    
(dollars in thousands, except per share data)  2017    2017    2016    2017    2016    
                       
PERFORMANCE RATIOS (annualized)                      
Return on average assets   0.66 %     0.61 %     0.85 %     0.64 %     0.70 %    
Return on average equity   6.23 %     5.83 %     8.15 %     6.03 %     6.82 %    
Yield on earning assets   4.77 %     4.53 %     4.93 %     4.65 %     4.84 %    
Cost of funds   0.58 %     0.58 %     0.58 %     0.58 %     0.58 %    
Net interest margin   4.37 %     4.13 %     4.52 %     4.25 %     4.44 %    
Noninterest income to average assets   0.86 %     0.68 %     0.78 %     0.77 %     0.74 %    
Noninterest expense to average assets   3.69 %     3.44 %     3.59 %     3.56 %     3.69 %    
Provision expense to average assets   0.16 %     0.13 %     0.08 %     0.14 %     0.10 %    
Efficiency ratio (1)   75.6 %     76.7 %     72.7 %     76.1 %     76.5 %    
                       
                       
  Jun. 30,   Mar. 31,   Jun. 30,            
   2017    2017    2016            
ASSET QUALITY RATIOS AND DATA                      
Nonaccrual loans $ 1,002     $ 1,004     $ 1,278              
Foreclosed real estate $ 652     $ 652     $ 308              
Nonperforming assets $ 1,654     $ 1,656     $ 1,586              
Loans 30-89 days past due and on accrual $ 1,838     $ 469     $ 186              
Restructured loans $ 2,342     $ 3,203     $ 4,837              
Allowance for loan losses $ 6,611     $ 6,372     $ 6,224              
Nonperforming assets to total assets   0.26 %     0.26 %     0.27 %            
Allowance for loan losses to total loans   1.23 %     1.27 %     1.28 %            
Allowance for loan losses to nonaccrual loans   659.8 %     634.7 %     487.0 %            
Net charge-offs $ 14   (2 ) $ 95   (2 ) $ 62   (2 ) $ 109   (3 ) $ 103   (3 )  
Net charge-offs to average loans (annualized)   0.03 % (2 )   0.23 % (2 )   0.15 % (2 )   0.02 % (3 )   0.02 % (3 )  
                       
                       
CAPITAL RATIOS AND DATA                      
Common shares outstanding at period end     6,425,361         6,421,361         6,370,798              
Tangible common equity $ 60,946     $ 59,700     $ 55,627              
Tangible book value per common share $ 9.49     $ 9.30     $ 8.73              
Shareholders' equity to total assets   10.7 %     10.5 %     10.7 %            
Total capital to risk-weighted assets (3)   12.5 %     13.0 %     12.6 %            
Tier 1 capital to risk-weighted assets (3)   11.4 %     11.8 %     11.5 %            
Tier 1 common equity ratio (3)   11.4 %     11.8 %     11.5 %            
Tier 1 leverage capital ratio (3)   11.3 %     11.1 %     11.0 %            
                       
                       
DEPOSIT RATIOS AND DATA                      
Core deposits (4) $ 437,408     $ 438,204     $ 390,634              
Core deposits to total deposits   79.6 %     79.4 %     77.0 %            
Noninterest bearing deposits to total deposits   30.2 %     29.4 %     27.9 %            
Net loan to deposit ratio   96.5 %     89.5 %     94.4 %            
                       
                       
                       
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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