Bank of the Northwest Announces Record Earnings, Up 52%, and Continued Strong Credit Quality.Business Editors Bank of the Northwest For names and places containing the slightly longer word 'northwestern' (or variants), see . Northwest or north west is the ordinal direction halfway between north and west on a compass. It is the opposite of southeast. (Nasdaq:BKNW) announced record financial results for the second quarter of 2002. Net income of $1,054,000 exceeded the $1 million mark for the first time in the Bank's six year history, and represented an increase of 52% over the previous year's second quarter. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $.29 for the quarter, an increase of 38% over the second quarter of 2001. The $.29 per share compares favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. with consensus analyst estimates of $.27 per share. Return on average equity measured 16.0% for the second quarter of 2002. All per share data has been adjusted for the 5 for 4 stock split effected in the second quarter. "The second quarter was another outstanding period for Bank of the Northwest," noted Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Dan Durkin. "Virtually all of our financial measures continued their steady improvement, as we stayed focused on earnings growth, return on shareholder equity, and growing and strengthening our balance sheet." Highlights of the recently completed quarter include: -- Outstanding credit quality measures. The Bank continues to report credit quality measures that significantly exceed national and regional peer averages. As of June 30, 2002, the loan portfolio included one non-performing loan of $250 thousand, which is the remaining balance of the $1.2 million non-performing loan reported at the end of the previous quarter. Net charge-offs for the second quarter of $86 thousand were related to the one non-performing loan, and management expects this loan to return to performing status during the 2002 third quarter with no additional writedowns. -- The loan loss reserve represents 1,297% of non-performing loans and 1.37% of total loans at June 30, 2002. Management believes that its underwriting standards and conservative credit administration policies and oversight will continue to result in outstanding credit quality performance relative to peers. -- Continued strong balance sheet growth. Loans increased to $236.8 million at June 30, 2002, a 21% rise over the same date of the prior year. Period end deposits rose to $262.8 million, a 19% increase over the prior year. On an average quarterly basis, deposits grew 23% over the prior year second quarter, while non-interest bearing demand deposits increased 26%. Christian Rasmussen, President, noted, "New loan volume was very strong during the quarter, although the net totals were offset somewhat by larger than normal payoffs. Based on the amount and type of new account activity, both in loans and deposits, we are very optimistic about our future ability to continue our strong growth." Total assets ended the quarter at $354.4 million, up 21% from the previous year. -- Non-interest income growth of 91%. Non-interest income was $437,000 in the second quarter, an increase of 91% from the second quarter of 2001. The Bank continued to experience strong fee growth through its merchant card services and cash management products. Non-interest income as a percentage of revenue continued to increase, up from 7% in the second quarter of 2001 to 11% in the most recent quarter. -- Further improvement in the efficiency and return on assets ratios. The Bank's efficiency ratio, which measures the relationship of non-interest expense to revenue, was a record 56.1% in the 2002 second quarter, an improvement from 62.0% in the second quarter of 2001. Management has targeted lowering the efficiency ratio to 55%. The improvement stems primarily from strong revenue growth of 25% compared to moderating expense growth of 14%. The revenue growth also contributed significantly to a large improvement in the bank's return on average assets, which increased to 1.25% from 1.03% one year ago. -- Continued stability in net interest margin. The Bank's net interest margin was 4.58% in the second quarter of 2002, down from 4.67% in the second quarter of 2001. For the six months ended June 30, 2002, the net interest margin was 4.68%, unchanged from the same period of 2001. During the remainder of 2002, the Bank expects its net interest margin to stay within its historical range of 4.4% to 4.7%. The Bank is slightly asset sensitive, and expects its margin to be closer to the upper end of its historical range should short term rates rise. -- Lower effective tax rate. The Bank's effective tax rate was 34.5% in the 2002 second quarter, down from 37.5% in the first quarter of 2002. For the first six months of 2002, the effective tax rate was 36.0%. The Bank expects its effective tax rate for 2002 to be at or slightly below 36.0%, compared to 36.9% for 2001. The decrease is due primarily to a larger volume of tax-exempt assets. Bank of the Northwest is a locally owned and managed full-service full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. commercial bank serving four distinct markets: Commercial Banking, Private Banking, Professional Banking, and Real Estate Banking. Opening in October October: see month. 1996, the Bank is headquartered in downtown Portland Downtown Portland is located on the west bank of the Willamette River in Portland, Oregon. It is in the northeastern corner of the southwest section of the city and is where most of its high-rise buildings are found. and serves the needs of both businesses and individuals throughout the Portland metropolitan area The Portland-Vancouver, Oregon-Washington, Metropolitan Statistical Area, also known as the Portland metropolitan area or Greater Portland, is an urban area in the U.S. states of Oregon and Washington centered around the city of Portland, Oregon. . Bank of the Northwest has five banking offices located in downtown Portland in the Pioneer Tower Building; northwest Portland Portland, town, England Portland, town (1991 pop. 12,945), Dorset, S England. It is on the Isle of Portland, a small rocky peninsula. Portland stone has been used in St. Paul's Cathedral and other important London buildings. Lobsters and crabs are harvested. at 21st and Burnside; Raleigh Raleigh (rôl`ē, räl`ē), city (1990 pop. 207,951), state capital, and seat of Wake co., central N.C.; the site was selected for the capital in 1788, and the city was laid out and inc. 1792. Hills; Lake Oswego Lake Os·we·go A city of northwest Oregon, a residential suburb of Portland. Population: 35,800. in the Lake Grove Lake Grove is the name of several towns in the United States:
An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors BKNW and its web site can be found at www.bknw.com. This press release contains statements regarding Bank of the Northwest's plans and future activities, which are subject to various risks and uncertainties. The Bank's actual results may differ, perhaps materially, from those stated or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by statements in this release. Factors that could cause or contribute to such differences include, but are not limited to, the following: delays or other problems in implementing the Bank's growth strategy; weak economic conditions that could result in increased loan losses; competitive factors and pricing pressures; an inability to attract new deposits and loans; interest rate fluctuations; changes in technology; and other factors described in the Bank's reports, including the Bank's 2001 Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. .
BANK OF THE NORTHWEST - FINANCIAL HIGHLIGHTS
(All amounts in 000's, except per share data)
(unaudited)
EARNINGS AND PER SHARE DATA
For the Three Months Ended June 30
%
2002 2001 Change Change
-----------------------------------------
Interest income $5,098 $5,234 $(136) -2.6%
Interest expense 1,479 2,222 (743) -33.4%
-----------------------------------------
Net interest income 3,619 3,012 607 20.2%
Provision for possible loan
losses 125 120 5 4.2%
Non-interest income 437 229 208 90.8%
Non-interest expense 2,322 2,030 292 14.4%
-----------------------------------------
Pre-tax income 1,609 1,091 518 47.5%
Provision for income taxes 555 396 159 40.2%
-----------------------------------------
Net income $1,054 $695 $359 51.7%
-----------------------------------------
Basic earnings per share $0.32 $0.22 $0.10 45.5%
Diluted earnings per share $0.29 $0.21 $0.08 38.1%
Average shares
outstanding--basic 3,274,000 3,150,000 124,000 3.9%
Average shares
outstanding--diluted 3,631,000 3,341,000 290,000 8.7%
For the Six Months Ended June 30
%
2002 2001 Change Change
-----------------------------------------
Interest income $10,119 $10,428 $(309) -3.0%
Interest expense 2,914 4,630 (1,716) -37.1%
-----------------------------------------
Net interest income 7,205 5,798 1,407 24.3%
Provision for possible loan
losses 275 285 (10) -3.5%
Non-interest income 798 451 347 76.9%
Non-interest expense 4,601 3,937 664 16.9%
-----------------------------------------
Pre-tax income 3,127 2,027 1,100 54.3%
Provision for income taxes 1,125 742 383 51.6%
-----------------------------------------
Net income $2,002 $1,285 $717 55.8%
-----------------------------------------
Basic earnings per share $0.61 $0.44 $0.17 38.6%
Diluted earnings per share $0.55 $0.42 $0.13 31.0%
Average shares
outstanding--basic 3,269,000 2,899,000 370,000 12.8%
Average shares
outstanding--diluted 3,619,000 3,081,000 538,000 17.5%
BALANCE SHEET
At June 30
%
2002 2001 Change Change
-----------------------------------------
Fed funds sold and
investments $102,886 $85,611 $17,275 20%
Gross loans 236,752 195,795 40,957 21%
Reserve for loan losses (3,243) (2,660) (583) 22%
-----------------------------------------
Net loans 233,509 193,135 40,374 21%
Other assets 18,003 13,251 4,752 36%
-----------------------------------------
Total assets $354,398 $291,997 $62,401 21%
-----------------------------------------
Non-interest-bearing deposits $63,149 $55,799 $7,350 13%
Interest-bearing deposits 199,649 165,554 34,095 21%
-----------------------------------------
Total deposits 262,798 221,353 41,445 19%
Borrowings 62,168 45,956 16,212 35%
Other liabilities 2,026 1,606 420 26%
Stockholders' equity 27,406 23,082 4,324 19%
-----------------------------------------
Total liabilities and
stockholders' equity $354,398 $291,997 $62,401 21%
Period end shares
outstanding 3,280,081 3,251,855 28,226 1%
Book value per share $8.36 $7.10 $1.26 18%
Period end non-performing
assets $250 $112 $138 123%
Period end net charge-offs $86 $ - $86 n/a
AVERAGE BALANCE SHEET
For the Three Months Ended June 30
%
2002 2001 Change Change
-----------------------------------------
Average fed funds sold
and investments $94,611 $68,635 $25,976 38%
Average loans, gross 229,444 192,901 36,543 19%
Average total assets 338,924 271,282 67,642 25%
Average non-interest-bearing
deposits 55,406 44,104 11,302 26%
Average interest-bearing
deposits 195,986 160,627 35,359 22%
Average total deposits 251,392 204,731 46,661 23%
Average total borrowings 59,048 42,968 16,080 37%
Average stockholders equity 26,439 21,825 4,614 21%
For the Six Months Ended June 30
%
2002 2001 Change Change
-----------------------------------------
Average fed funds sold and
investments $92,145 $66,108 $26,037 39%
Average loans, gross 224,976 186,109 38,867 21%
Average total assets 331,418 261,462 69,956 27%
Average non-interest-bearing
deposits 54,779 40,721 14,058 35%
Average interest-bearing
deposits 184,666 158,530 26,136 16%
Average total deposits 239,445 199,251 40,194 20%
Average total borrowings 64,078 40,898 23,180 57%
Average stockholders equity 25,909 19,252 6,657 35%
FINANCIAL RATIOS
(annualized)
For the Three Months Ended June 30
2002 2001 Change
--------------------------------
Return on average equity 15.99% 12.77% 3.22%
Return on average assets 1.25% 1.03% 0.22%
Net interest margin 4.58% 4.67% -0.09%
Cost of funds 1.91% 3.60% -1.69%
Efficiency ratio 56.11% 61.97% -5.86%
Net charge-offs/average loans 0.04% 0.00% 0.04%
For the Six Months Ended June 30
2002 2001 Change
---------------------------------
Return on average equity 15.58% 13.46% 2.12%
Return on average assets 1.22% 0.99% 0.23%
Net interest margin 4.68% 4.68% 0.00%
Cost of funds 1.94% 3.89% -1.95%
Efficiency ratio 56.36% 62.42% -6.06%
Loan loss reserve/total loans 1.37% 1.36% 0.01%
Loan loss reserve/non-performing
assets 1297.04% 2364.76% -1067.72%
Non-performing assets/total assets 0.07% 0.04% 0.03%
Net charge-offs/average loans 0.04% 0.00% 0.04%
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