SPOKANE, Wash., April 18, 2018 (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 March 31, 2018.
Net income for the first quarter of 2018 was $2.15 million, compared to $1.15 million for the previous quarter and $0.97 million for the first quarter of 2017. Earnings per diluted share were $0.29, up $0.14 or 93.3% from the previous quarter, and up the same amount over the first quarter of 2017.
Russell Lee, the Company’s President and CEO, commented, “We are pleased to see that the hard work of all INB employees to build our Company is now being reflected in our financial results. The Company has been involved in a multi-year strategic plan, which has significantly increased the size of our balance sheet and increased the capacity of our Company to accommodate growth. For the first time in several quarters, our financial results are not impacted in a significant way by either infrastructure investment or acquisition-related costs. We believe the earnings achieved for the first quarter are a good indication of the value that this growth will bring to our shareholders.”
Balance sheet
As of March 31, 2018, the Company had total assets of $826.8 million, compared to $826.8 million on December 31, 2017 and $641.7 million on March 31, 2017. While asset growth was slow during the first quarter of 2018, total assets are up $185.2 million, or 28.9%, year over year, of which $154.8 million was related to the acquisition of CenterPointe Community Bank (“CenterPointe”) in July 2017.
The investment portfolio was $43.2 million as of March 31, 2018, down $2.4 million, or 5.3%, from $45.6 million at December 31, 2017. Securities available for sale were in a net unrealized loss position of $390 thousand as of March 31, 2018, compared to a net unrealized gain position of $160 thousand as of December 31, 2017.
The net loan portfolio was $661.5 million on March 31, 2018, representing a decrease of $20.7 million, or 3.0%, during the first quarter of 2018. This decrease stemmed primarily from expected seasonality in our agriculture portfolio, but was also impacted by some unexpected paydowns in our commercial real estate portfolio. Year over year, the net loan portfolio increased $167.3 million, or 33.8%, which consisted of organic loan growth of $71.5 million, or 14.5%, combined with $95.8 million acquired from CenterPointe.
Deposits at March 31, 2018 were $721.0 million, a decrease of $1.6 million, or 0.2%, compared to December 31, 2017 and an increase of $169.0 million, or 30.6%, compared to March 31, 2017. The year over year increase in deposits includes $31.1 million, or 5.6%, in organic growth while the CenterPointe acquisition added $137.9 million to total deposits. Noninterest bearing deposits represented 33.1% of total deposits as of March 31, 2018, compared to 34.5% at December 31, 2017, and to 29.4% at March 31, 2017.
Asset quality, provision and allowance for loan losses
As of March 31, 2018, the Company’s nonperforming assets (“NPAs”) were $3.1 million, representing 0.37% of total assets. NPAs are defined as loans on which the Bank has stopped accruing interest and includes other real estate owned. NPAs at the end of last quarter were $2.7 million, representing 0.33% of total assets, and at March 31, 2017, NPAs were $1.7 million, representing 0.26% of total assets.
The Company had net loan recoveries of $34 thousand, representing 0.02% of average loans, for the three-month period ending on March 31, 2018, compared to net loan charge-offs of $95 thousand, or 0.23% of average loans, for the comparable period in 2017. The provision for loan losses was $211 thousand for the three-month period ending on March 31, 2018, compared to $294 thousand for the previous quarter and $203 thousand for the first quarter of 2017. As of March 31, 2018, the allowance for loan losses was $7.5 million, or 1.12% of gross loans, compared to 1.05% for the previous quarter and 1.27% as of March 31, 2017. Gross loans include those loans acquired through acquisitions of other banks (“purchased loans”), which are recorded at fair value, net of credit-related discounts. The allowance for loan losses as a percent of gross loans, excluding purchased loans, was 1.34% as of March 31, 2018, compared to 1.28% for the previous quarter and 1.37% as of March 31, 2017.
Capital
Shareholders’ equity increased $1.9 million, or 2.3%, during the first quarter of 2018. The increase primarily reflects earnings retention during the quarter but was partially offset by a decrease in accumulated other comprehensive income related to the unrealized loss on securities available for sale. Book value of the Company’s common stock was $11.25 per share on March 31, 2018, up $0.21 per share, or 1.9% over the $11.04 per share on December 31, 2017 and up $0.80 per share, or 7.7%, over March 31, 2017. Tangible book value (non-GAAP) of the Company’s common stock was $9.59 per share on March 31, 2018, up $0.24 per share, or 2.6% over the $9.35 per share on December 31, 2017 and up $0.29 per share, or 3.1%, over March 31, 2017.
The Bank continues to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under regulatory standards. As of March 31, 2017, the Bank’s Tier 1 leverage capital to average assets ratio was 9.8%, its common equity Tier 1 (“CET1”) capital ratio was 10.6%, and its total capital to risk-weighted assets ratio was 11.7%. 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 $10.1 million for the first quarter of 2018, representing a decrease of $432 thousand, or 4.1%, from the previous quarter, and representing an increase of $3.0 million, or 42.3%, over the comparable quarter in 2017. Total revenue is defined as net interest income plus noninterest income.
Net interest income
Net interest income was $8.9 million for the quarter ended March 31, 2018, a decrease of $349 thousand, or 3.8%, from the previous quarter and an increase of $2.8 million, or 46.6%, from the first quarter of 2017. The decrease in net interest income during the first quarter is primarily due to a decrease in average loans outstanding as well as declining levels of purchase loan discount accretion, lower loan yields, and two less days during the quarter. The net interest margin (interest income minus interest expense, divided by average earning assets) was 4.60% for the first quarter of 2018, compared to 4.85% for the previous quarter; excluding net purchased loan discount accretion, the net interest margin was 4.52% and 4.72%, respectively.
Noninterest income
Noninterest income was $1.3 million for the quarter ended March 31, 2018, a decrease of $83 thousand, or 6.1%, from the previous quarter and an increase of $199 thousand, or 18.5%, from the first quarter of 2017. The decrease in noninterest income during the first quarter of 2018 was largely related to lower NSF income and lower revenues from sales of residential mortgage loans, which is normal for the first quarter of the year. The year over year increase in noninterest income was related to higher revenues from sales of residential mortgage loans as well as additional revenues related to the CenterPointe acquisition.
Noninterest expense
Noninterest expense totaled $7.2 million for the first quarter of 2018, down $692 thousand, or 8.7%, from the previous quarter, but up $1.2 million compared to the first quarter of 2017. There were $1.0 million in nonrecurring expenses in the fourth quarter related to acquisitions, technology, fixed asset write-downs and a special bonus for non-executive employees that accounts for the quarter over quarter decrease. The year over year increase is primarily related to the acquisition of CenterPointe which added four additional locations to our branch network as well as additional personnel.
Also contributing to the improvement in net income over the previous quarter and the first quarter of 2017 is the reduction in the federal corporate tax rate to 21% from the previous maximum rate of 35%, which was enacted by the Tax Cut and Jobs Act signed into law in December 2017. As a result of the tax rate change, the fourth quarter of 2017 included nonrecurring income tax expense of $418 thousand to revalue the Company’s deferred tax asset.
Key ratios
Return on average assets (“ROA”) for first quarter 2018 was 1.04%, compared to 0.55% in the previous quarter and 0.61% in the first quarter last year. Core ROA (non-GAAP), which excludes certain nonrecurring expenses, was 1.05% for the first quarter of 2018, compared to 0.99% in the previous quarter and 0.61% in the first quarter last year.
Return on average equity (“ROE”) was 10.64% for first quarter 2018, compared to 5.78% in the previous quarter and 5.83% for the first quarter last year. Core ROE (non-GAAP) was 10.72% for the first quarter of 2018, compared to 10.35% in the previous quarter and 5.83% for the first quarter last year.
Non-GAAP Financial Measures
This news release contains certain financial measures that are not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”). Management believes these non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance. Non-GAAP financial measures should not be viewed as substitutes for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures appear under the caption “Reconciliation of Non-GAAP Measures” in the accompanying financial tables.
The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends. Core earnings excludes nonrecurring items from net income which the Company does not view as related to its normal operations. These items are presented net of tax and include such items as acquisition-related costs, systems conversion costs, and tax expense associated with the enactment of the Tax Act. Acquisition-related costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs and professional fees. The Company uses the non-GAAP measure of tangible book value, which excludes intangible assets from book value as it improves our comparability to other banking organizations that have not engaged in acquisitions that have resulted in the accumulation of goodwill and other intangible assets.
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.
For more information contact:
Russell A. Lee, President and CEO
Holly Poquette, Chief Financial Officer
509.456.8888
nbct@inb.com
| Northwest Bancorporation, Inc. | ||||||||||||
| Consolidated Statements of Financial Condition | ||||||||||||
| (Unaudited) | ||||||||||||
| Mar. 31, | Dec. 31, | Mar. 31, | ||||||||||
| (dollars in thousands) | 2018 | 2017 | 2017 | |||||||||
| Assets: | ||||||||||||
| Cash and due from banks | $ | 16,632 | $ | 37,850 | $ | 21,715 | ||||||
| Interest bearing deposits | 59,263 | 13,917 | 61,160 | |||||||||
| Time deposits held for investment | 3,929 | 4,174 | 4,640 | |||||||||
| Securities available for sale | 39,297 | 41,458 | 22,796 | |||||||||
| Federal Home Loan Bank stock, at cost | 1,310 | 1,262 | 1,050 | |||||||||
| Loans receivable, net | 661,474 | 682,220 | 494,210 | |||||||||
| Loans held for sale | 313 | 1,366 | 1,391 | |||||||||
| Premises and equipment, net | 14,887 | 14,800 | 13,967 | |||||||||
| Bank-owned life insurance | 9,458 | 9,417 | 7,084 | |||||||||
| Accrued interest receivable | 3,327 | 3,454 | 2,366 | |||||||||
| Goodwill | 9,477 | 9,477 | 6,206 | |||||||||
| Core deposit intangible | 2,581 | 2,694 | 1,214 | |||||||||
| Other real estate owned | 1,242 | 1,242 | 652 | |||||||||
| Other assets | 3,646 | 3,443 | 3,204 | |||||||||
| Total assets | $ | 826,836 | $ | 826,774 | $ | 641,655 | ||||||
| Liabilities: | ||||||||||||
| Deposits: | ||||||||||||
| Noninterest bearing deposits | $ | 238,343 | $ | 249,541 | $ | 162,251 | ||||||
| Interest bearing transaction and savings deposits | 375,283 | 361,851 | 275,953 | |||||||||
| Time deposits | 107,412 | 111,230 | 113,860 | |||||||||
| 721,038 | 722,622 | 552,064 | ||||||||||
| Accrued interest payable | 132 | 174 | 126 | |||||||||
| Borrowed funds | 19,019 | 19,597 | 18,222 | |||||||||
| Other liabilities | 4,922 | 4,516 | 4,123 | |||||||||
| Total liabilities | 745,111 | 746,909 | 574,535 | |||||||||
| Shareholders' equity: | ||||||||||||
| Common stock | 62,693 | 62,553 | 52,849 | |||||||||
| Retained earnings | 19,336 | 17,188 | 14,047 | |||||||||
| Accumulated other comprehensive income (loss) | (304 | ) | 124 | 224 | ||||||||
| Total shareholders' equity | 81,725 | 79,865 | 67,120 | |||||||||
| Total liabilities and shareholders' equity | $ | 826,836 | $ | 826,774 | $ | 641,655 | ||||||
| Northwest Bancorporation, Inc. | ||||||||||||
| Consolidated Statements of Operations | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| Mar. 31, | Dec. 31, | Mar. 31, | ||||||||||
| (dollars in thousands, except per share data) | 2018 | 2017 | 2017 | |||||||||
| Interest and dividend income: | ||||||||||||
| Loans receivable | $ | 8,993 | $ | 9,498 | $ | 6,337 | ||||||
| Investment securities | 304 | 320 | 164 | |||||||||
| Other | 216 | 78 | 125 | |||||||||
| Total interest and dividend income | 9,513 | 9,896 | 6,626 | |||||||||
| Interest expense: | ||||||||||||
| Deposits | 450 | 480 | 401 | |||||||||
| Borrowed funds | 202 | 206 | 181 | |||||||||
| Total interest expense | 652 | 686 | 582 | |||||||||
| Net interest income | 8,861 | 9,210 | 6,044 | |||||||||
| Provision for loan losses | 211 | 294 | 203 | |||||||||
| Noninterest income: | ||||||||||||
| Service charges on deposits | 231 | 267 | 219 | |||||||||
| Gains from sale of loans, net | 320 | 393 | 277 | |||||||||
| Other noninterest income | 726 | 700 | 582 | |||||||||
| Total noninterest income | 1,277 | 1,360 | 1,078 | |||||||||
| Noninterest expense: | ||||||||||||
| Salaries and employee benefits | 4,054 | 3,871 | 3,143 | |||||||||
| Occupancy and equipment | 583 | 889 | 432 | |||||||||
| Depreciation and amortization | 352 | 414 | 304 | |||||||||
| Advertising and promotion | 325 | 349 | 272 | |||||||||
| FDIC assessments | 108 | 131 | 45 | |||||||||
| Gain on other real estate owned, net | - | - | (20 | ) | ||||||||
| Acquisition-related costs | 19 | 392 | - | |||||||||
| Other noninterest expense | 1,790 | 1,877 | 1,286 | |||||||||
| Total noninterest expense | 7,231 | 7,923 | 5,462 | |||||||||
| Income before income taxes | 2,696 | 2,353 | 1,457 | |||||||||
| Income tax expense | 548 | 1,208 | 487 | |||||||||
| NET INCOME | $ | 2,148 | $ | 1,145 | $ | 970 | ||||||
| Earnings per common share - basic | $ | 0.30 | $ | 0.16 | $ | 0.15 | ||||||
| Earnings per common share - diluted | $ | 0.29 | $ | 0.15 | $ | 0.15 | ||||||
| Weighted average common shares outstanding - basic | 7,254,079 | 7,227,769 | 6,420,161 | |||||||||
| Weighted average common shares outstanding - diluted | 7,446,454 | 7,428,169 | 6,594,681 | |||||||||
| Northwest Bancorporation, Inc. | ||||||||||||||||||
| Key Financial Ratios and Data | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||
| Mar. 31, | Dec. 31, | Mar. 31, | ||||||||||||||||
| (dollars in thousands, except per share data) | 2018 | 2017 | 2017 | |||||||||||||||
| PERFORMANCE RATIOS (annualized) | ||||||||||||||||||
| Return on average assets | 1.04 | % | 0.55 | % | 0.61 | % | ||||||||||||
| Return on average equity | 10.64 | % | 5.78 | % | 5.83 | % | ||||||||||||
| Yield on earning assets | 4.94 | % | 5.21 | % | 4.53 | % | ||||||||||||
| Cost of funds | 0.53 | % | 0.55 | % | 0.58 | % | ||||||||||||
| Net interest margin | 4.60 | % | 4.85 | % | 4.13 | % | ||||||||||||
| Noninterest income to average assets | 0.62 | % | 0.65 | % | 0.68 | % | ||||||||||||
| Noninterest expense to average assets | 3.51 | % | 3.80 | % | 3.44 | % | ||||||||||||
| Provision expense to average assets | 0.10 | % | 0.14 | % | 0.13 | % | ||||||||||||
| Efficiency ratio (1) | 71.3 | % | 75.0 | % | 76.7 | % | ||||||||||||
| Mar. 31, | Dec. 31, | Mar. 31, | ||||||||||||||||
| 2018 | 2017 | 2017 | ||||||||||||||||
| ASSET QUALITY RATIOS AND DATA | ||||||||||||||||||
| Nonaccrual loans | $ | 1,838 | $ | 1,451 | $ | 1,004 | ||||||||||||
| Other real estate owned | $ | 1,242 | $ | 1,242 | $ | 652 | ||||||||||||
| Nonperforming assets | $ | 3,080 | $ | 2,693 | $ | 1,656 | ||||||||||||
| Loans 30-89 days past due and on accrual | $ | 589 | $ | 925 | $ | 469 | ||||||||||||
| Accruing restructured loans | $ | 2,242 | $ | 2,283 | $ | 3,203 | ||||||||||||
| Allowance for loan losses | $ | 7,519 | $ | 7,274 | $ | 6,372 | ||||||||||||
| Nonperforming assets to total assets | 0.37 | % | 0.33 | % | 0.26 | % | ||||||||||||
| Allowance for loan losses to total loans | 1.12 | % | 1.05 | % | 1.27 | % | ||||||||||||
| Allowance for loan losses to nonaccrual loans | 409.1 | % | 501.3 | % | 634.7 | % | ||||||||||||
| Net charge-offs | $ | (34 | ) | (2) | $ | 33 | (2) | $ | 95 | (2) | ||||||||
| Net charge-offs to average loans (annualized) | -0.02 | % | (2) | 0.02 | % | (2) | 0.23 | % | (2) | |||||||||
| CAPITAL RATIOS AND DATA | ||||||||||||||||||
| Common shares outstanding at period end | 7,262,001 | 7,237,251 | 6,421,361 | |||||||||||||||
| Book value per share | $ | 11.25 | $ | 11.04 | $ | 10.45 | ||||||||||||
| Tangible book value per share | $ | 9.59 | $ | 9.35 | $ | 9.30 | ||||||||||||
| Shareholders' equity to total assets | 9.9 | % | 9.7 | % | 10.5 | % | ||||||||||||
| Total capital to risk-weighted assets (3) | 11.7 | % | 11.1 | % | 13.0 | % | ||||||||||||
| Tier 1 capital to risk-weighted assets (3) | 10.6 | % | 10.1 | % | 11.8 | % | ||||||||||||
| Tier 1 common equity ratio (3) | 10.6 | % | 10.1 | % | 11.8 | % | ||||||||||||
| Tier 1 leverage capital ratio (3) | 9.8 | % | 9.5 | % | 11.1 | % | ||||||||||||
| DEPOSIT RATIOS AND DATA | ||||||||||||||||||
| Core deposits (4) | $ | 613,626 | $ | 611,392 | $ | 438,204 | ||||||||||||
| Core deposits to total deposits | 85.1 | % | 84.6 | % | 79.4 | % | ||||||||||||
| Noninterest bearing deposits to total deposits | 33.1 | % | 34.5 | % | 29.4 | % | ||||||||||||
| Net loan to deposit ratio | 91.7 | % | 94.4 | % | 89.5 | % | ||||||||||||
| 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. | ||||||||||||||||
| Northwest Bancorporation, Inc. | |||||||||||||
| Reconciliation of Non-GAAP Financial Measures | |||||||||||||
| (Unaudited) | |||||||||||||
| Three Months Ended | |||||||||||||
| Mar. 31, | Dec. 31, | Mar. 31, | |||||||||||
| (dollars in thousands, except per share data) | 2018 | 2017 | 2017 | ||||||||||
| Core Earnings: | |||||||||||||
| Net income | $ | 2,148 | $ | 1,145 | $ | 970 | |||||||
| Plus: | Acquisition-related costs, net of tax | 15 | 262 | - | |||||||||
| Income tax expense related to the Tax Act | - | 418 | - | ||||||||||
| Core conversion costs, net of tax | - | 225 | - | ||||||||||
| Core earnings | $ | 2,163 | $ | 2,050 | $ | 970 | |||||||
| Core earnings per diluted share | $ | 0.29 | $ | 0.28 | $ | 0.15 | |||||||
| Core return on average assets | 1.05 | % | 0.99 | % | 0.61 | % | |||||||
| Core return on average equity | 10.72 | % | 10.35 | % | 5.83 | % | |||||||
| Tangible Book Value Per Share: | |||||||||||||
| Total shareholders' equity | $ | 81,725 | $ | 79,865 | $ | 67,120 | |||||||
| Less: | Goodwill | (9,477 | ) | (9,477 | ) | (6,206 | ) | ||||||
| Core deposit intangible | (2,581 | ) | (2,694 | ) | (1,214 | ) | |||||||
| Tangible common equity | $ | 69,667 | $ | 67,694 | $ | 59,700 | |||||||
| Common shares outstanding | 7,262,001 | 7,237,251 | 6,421,361 | ||||||||||
| Book value per share | $ | 11.25 | $ | 11.04 | $ | 10.45 | |||||||
| Tangible book value per share | $ | 9.59 | $ | 9.35 | $ | 9.30 | |||||||