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<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark One)
( ) Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended __________________________.
( X ) Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from 7/1/98 to 9/30/98.
Commission file number 0-24151
INLAND NORTHWEST BANCORPORATION, INC.
(Exact name of small business issuer as specified in its charter)
Washington 91-1574174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
421 West Riverside, Suite 113, Spokane, WA 99201-0403
(Address of principal executive offices)
(509) 456-8888
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
The registrant has a single class of common stock, of which there are 592,881
shares issued and outstanding as of September 30, 1998.
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition - September 30, 1998
and December 31, 1997 . . . . . . . .
Consolidated Statements of Income - Three Months and year-to-date Ended
September 30, 1998 and 1997 . . . . . . . .
Consolidated Statements of Cash Flow - year-to-date ended
September 30, 1998 and 1997 . . . . . . . . .
Consolidated Statements of Stockholders' Equity as of
September 30, 1998 and 1997. . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . .
Item 2. Management's Discussion and Analysis or Plan of Operation . . . .
Part II Other Information
Item 2. Changes in Securities . . . . . . . .
Item 6. Exhibits and Reports on Form 8-K . . . . . . .
Signatures . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE>
Part I Financial Information
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
September 30, 1998 and December 31, 1997
($ in thousands)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
<S> <C> <C>
Assets
Cash and due from banks $9,259 $7,405
Federal funds sold 14,712 7,947
Securities held-to-maturity (Note 2) 818 970
Securities available-for-sale (Note 2) 26,424 23,035
Federal Home Loan Bank stock, at cost 375 309
Loans, net of allowance for loan losses of $1,292 in 1998 and $1,085 in 1997 (Notes 3 & 4) 89,917 76,524
Accrued interest receivable 844 701
Premises and equipment, net 2,928 2,435
Foreclosed real estate, net of allowance of $6 in 1998 and $86 in 1997 348 567
Other assets 1,898 460
-------- --------
TOTAL ASSETS $147,524 $120,353
======== ========
Liabilities
Noninterest bearing demand deposits 28,018 24,316
Money Market accounts 26,563 24,598
NOW accounts 7,494 6,117
Savings accounts 2,895 2,727
Time Certificates of Deposit, $100,000 and over 12,329 12,618
Time Certificates of Deposit, under $100,000 46,578 31,335
-------- --------
TOTAL DEPOSITS $123,877 $101,711
Securities sold under agreement to repurchase 9,409 8,434
Borrowed funds, Federal Home Loan Bank (Note 5) 2,047 63
Borrowed funds, other banks (Note 5) 500 0
Accrued interest payable and other liabilities 1,354 685
-------- --------
TOTAL LIABILITIES $13,309 $9,182
Stockholders' Equity
Common stock, no par, 1,000,000 shares authorized; issued and outstanding
592,881 in 1998 and 535,398 in 1997 9,734 8,064
Retained earnings 192 1,235
Accumulated other comprehensive income, net of tax of $222 for 1998 and $87 for 1997 412 161
-------- --------
TOTAL STOCKHOLDERS' EQUITY $10,338 $9,460
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $147,524 $120,353
======== ========
</TABLE>
<PAGE>
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months and year-to-date ended September 30, 1998 and 1997
($ in thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended Year-to-date
09/30/98 09/30/97 1998 1997
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 2,444 $ 1,990 $ 6,724 $ 5,511
Interest on securities 431 329 1,329 939
Interest on federal funds sold 234 93 587 268
-------- -------- -------- --------
TOTAL INTEREST INCOME $ 3,109 $ 2,412 $ 8,640 $ 6,718
Interest Expense
Interest on deposits 1,196 862 3,415 2,445
Interest on securities sold under agreement to repurchase 106 126 307 356
Interest on borrowed funds 41 0 63 0
-------- -------- -------- --------
TOTAL INTEREST EXPENSE $ 1,343 $ 988 $ 3,785 $ 2,801
NET INTEREST INCOME 1,766 1,424 4,855 3,917
Provision for loan losses 135 75 355 225
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES $ 1,631 $ 1,349 $ 4,500 $ 3,692
Noninterest Income
Fees and service charges 138 125 397 358
Fees and charges on mortgage loan origination 219 0 375 0
Other noninterest income 99 62 228 154
-------- -------- -------- --------
TOTAL NONINTEREST INCOME $ 456 $ 187 $ 999 $ 512
Noninterest Expense
Salaries and employee benefits 931 578 2,534 1,639
Occupancy expense 112 72 336 205
Furniture, fixtures and equipment expense 34 27 91 69
Depreciation and amortization expense 96 74 278 213
Other operating expense 462 353 1,296 983
-------- -------- -------- --------
TOTAL NONINTEREST EXPENSE $ 1,634 $ 1,103 $ 4,535 $ 3,109
INCOME BEFORE TAXES 453 432 964 1,095
Federal income tax expense 206 165 439 419
-------- -------- -------- --------
NET INCOME $ 247 $ 267 $ 525 $ 676
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended Year-to-date Year-to-date
09/30/98 09/30/97 09/30/98 09/30/97
<S> <C> <C> <C> <C>
Weighted average shares outstanding 592,751 556,105 564,471 491,551
Basic earnings per share $ 0.42 $ 0.48 $ 0.93 $ 1.38
-------- -------- -------- --------
Weighted average shares outstanding 592,751 556,105 564,471 491,551
Effect of dilutive securities 127,912 115,468 127,912 104,971
Weighted average shares outstanding, adjusted for dilutive securities 720,663 671,573 692,383 596,522
Earnings per share assuming full dilution $ 0.34 $ 0.40 $ 0.76 $ 1.13
-------- -------- -------- -------
</TABLE>
<PAGE>
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Year-to-date ended September 30, 1998 and 1997
($ in thousands)
<TABLE>
<CAPTION>
Year-to-date
1998 1997
<S> <C> <C>
Net income $ 525 $ 676
Adjustments to reconcile net income to cash provided by operating activities:
Provision for loan losses 355 225
Depreciation and amortization 278 213
Increase/decrease in assets and liabilities:
Accrued interest receivable (143) (108)
Other assets (1,517) (973)
Accrued interest payable & other liabilities 669 227
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 167 $ 260
Cash flows from investing activities:
Net (increase)/decrease in federal funds sold (6,765) (47)
Net (increase)/decrease in investment securities (2,917) (1,119)
Net (increase)/decrease in loans (13,748) (11,950)
Purchase of premises and equipment net of gain or loss on asset disposal (761) (239)
Foreclosed real estate activity 219 (505)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES ($23,972) ($13,860)
Cash flows from financing activities:
Net increase in deposits 22,166 7,803
Net increase/(decrease) in securities sold under agreement to repurchase 975 3,043
Net proceeds/(payments) from borrowed funds 2,484 63
Cash received from stock sales 35 1,951
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 25,660 $ 12,860
Net increase/(decrease) in cash and cash equivalents $ 1,854 ($ 740)
Cash and cash equivalents, beginning of year $ 7,405 $ 7,615
CASH AND CASH EQUIVALENTS, END OF QUARTER $ 9,259 $ 6,875
Supplemental noncash financing activities:
Goodwill recognized in association with stock issued for acquisition of mortgage subsidiary ($ 66) $ 0
Issuance of common stock for acquisition of mortgage subsidiary $ 66 $ 0
</TABLE>
<PAGE>
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
As of September 30, 1997
<TABLE>
<CAPTION>
Accumulated
Common Retained Comprehensive Comprehensive
Total Stock Earnings Income Income
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $5,963,187 $5,440,010 $ 493,879 $ 29,298
Net income 1996 567,998 567,998 $567,998
Unrealized gains (losses) (2,766) (2,766) (2,766)
-------- ---------
Comprehensive income $565,232
Proceeds from sale of stock 20,000 20,000
Other (160) (160)
Transfers 0 653,276 (653,276)
---------- ---------- ---------- --------
Balance December 31, 1996 $6,548,259 $6,113,286 $ 408,441 $ 26,532
Net income, 1997, year-to-date 675,641 675,641 $675,641
Unrealized gains (losses) 172,510 172,510 172,510
--------
Comprehensive income $848,151
Proceeds from sale of stock 1,950,995 1,950,995
Fractional shares, issued in cash (3,083) (3,083)
Transfers 0
---------- ---------- ---------- --------
Balance, end-of-quarter, September 30, 1997 $9,344,322 $8,064,281 $1,080,999 $199,042
---------- ---------- ---------- --------
Disclosure of 1997 reclassification amount:
Unrealized holding gains/(losses) during period $ 172,510
Less reclassification adjustment for gains/(losses)
reported in net income 0
----------
Net unrealized gains/(losses) on securities $ 172,510
----------
</TABLE>
<PAGE>
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
As of September 30, 1998
<TABLE>
<CAPTION>
Accumulated
Common Retained Comprehensive Comprehensive
Total Stock Earnings Income Income
<S> <C> <C> <C>
Balance, December 31, 1996 $ 6,548,259 $ 6,113,286 $ 408,441 $ 26,532
Net income 1997 829,404 829,404 $ 829,404
Unrealized gains (losses) 134,647 134,647 134,647
---------
Comprehensive income $ 964,051
Proceeds from sale of stock 1,950,995 1,950,995
Fractional shares, issued in cash (3,083) (3,083)
Transfers 0
------------ ----------- ----------- ---------
Balance December 31, 1997 $ 9,460,222 $ 8,064,281 $ 1,234,762 $ 161,179
Net income, 1998, year-to-date 524,774 524,774 $ 524,774
Unrealized gains (losses) 251,274 251,274 251,274
---------
Comprehensive income $ 776,048
Stock issued for acquisition of mortgage subsidiary
(Note 6) 66,780 66,780
Proceeds from sale of stock 39,643 39,643
Fractional shares, issued in cash (4,843) (4,843)
Transfers 0 1,563,042 (1,563,042)
------------ ----------- ----------- ---------
Balance, end-of-quarter, September 30, 1998 $ 10,337,850 $ 9,733,746 $ 191,651 $ 412,453
------------ ----------- ----------- ---------
Disclosure of 1998 reclassification amount:
Unrealized holding gains during period $ 251,274
Less reclassification adjustment for gains reported
in net income 0
------------
Net unrealized gains on securities $ 251,274
------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
NOTE 1. Management Statement
In the opinion of the Company, the accompanying audited and unaudited
Consolidated Financial Statements present fairly the financial position of the
Company as of September 30, 1998, December 31, 1997, and September 30, 1997 and
the results of operations and the changes in financial position for the three
month and nine month periods ended September 30, 1998 and 1997.
Certain reclassifications of September 30, 1997 balances have been made to
conform with the September 30, 1998 and December 31, 1997 presentation; there
was no impact on net income or stockholders' equity. Shares outstanding and
calculation of earnings per share have been restated for the quarter and
year-to-date periods ending September 30, 1997 to reflect the effect of a ten
percent stock dividend issued to shareholders of record as of May 19, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 2. Securities
Most of the securities are classified as available-for-sale and are stated at
fair value, and unrealized holding gains and losses, net of related deferred
taxes, are reported as a separate component of stockholders' equity. Gains or
losses on available-for-sale securities sales are reported as part of
noninterest income based on the net proceeds and the adjusted carrying amount of
the securities sold, using the specific identification method. Carrying amount
and fair values at September 30, 1998 and December 31, 1997 were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1998 December 31,1997
Amortized Fair Amortized Fair
Cost Value Cost Value
<S> <C> <C> <C> <C>
Securities available-for-sale:
US Treasury securities $ 5,028 $ 5,259 $ 5,055 $ 5,158
Obligations of federal government agencies 19,761 20,139 16,068 16,191
Mortgage backed securities 750 775 908 930
Corporate debt obligations 251 251 756 756
------- ------- ------- -------
TOTAL $25,790 $26,424 $22,787 $23,035
======= ======= ======= =======
Securities held-to-maturity:
Obligations of states, municipalities and political subdivisions $ 818 $ 832 $ 970 $ 980
======= ======= ======= =======
</TABLE>
<PAGE>
NOTE 3. Loans
Loan detail by category as of September 30, 1998 and December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
<S> <C> <C>
Commercial loans $ 56,324 $ 48,289
Real estate loans 26,372 21,112
Installment loans 4,125 3,852
Consumer and other loans 4,650 4,623
-------- --------
TOTAL LOANS $ 91,471 $ 77,876
-------- --------
Allowance for loan losses (1,292) (1,085)
Deferred loan fees, net of deferred costs (262) (267)
-------- --------
NET LOANS $ 89,917 $ 76,524
======== ========
</TABLE>
NOTE 4. Allowance for Loan Losses
The allowance for loan loss is maintained at levels considered adequate by
management to provide for possible loan losses. The allowance is based on
management's assessment of various factors affecting the loan portfolio,
including problem loans, business conditions and loss experience, and an
overall evaluation of the quality of underlying collateral. Changes in the
allowance for loan loss during the three month and nine month year-to-date
periods ended September 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Year-to-date
09/30/98 09/30/97 1998 1997
<S> <C> <C> <C> <C>
Balance, beginning of period $ 1,284 $ 1,029 $ 1,085 $ 908
Provision for loan losses 135 75 355 225
Loan Charge-offs 127 20 148 50
Loan Recoveries 0 14 0 15
- -- - --
Balance, end of period $ 1,292 $ 1,098 $ 1,292 $ 1,098
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTE 5. Borrowed Funds
Borrowed funds include a non-revolving $500,000 line of credit payable from the
Company to Key Bank of Washington with a balance outstanding of $500,000 on
September 30, 1998. The note originated in February 1998, consequently there
was no corresponding balance on either December 31, 1997 or September 30, 1997.
Proceeds were used to fund the purchase and capitalization of INB Mortgage
Company.
The Company's subsidiary, Inland Northwest Bank, has unsecured operating lines
of credit with Key Bank of Washington for $2,250,000, US Bank for $1,500,000,
and Federal Home Loan Bank(FHLB) for approximately $7,350,000 (5.0% of bank
assets.) There were no outstanding balances on September 30, 1998, December 31,
1997 or September 30, 1997. The bank also has access to long-term funding
through the FHLB and has taken advances to fund Community Investment Program and
other loans utilizing these funds. Notes payable to the FHLB were $2,046,611 on
September 30, 1998, $63,213 on December 31, 1997 and $-0- on September 30, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 6. Acquisition of Mortgage Subsidiary
As previously disclosed, the Company acquired a mortgage subsidiary on February
27, 1998. Results presented in the Consolidated Statements of Condition,
Income, Cash Flow, and Stockholders' Equity for the period ending September 30,
1998 reflect the acquisition and mortgage company operating results for a seven
month period. Through the seven month period, the mortgage company has
incurred operating losses of $137,918. As of September 30, 1998, however, the
mortgage company was operating at about a break-even level; and management
anticipates that the mortgage company will contribute positively to earnings
during 1999.
- --------------------------------------------------------------------------------
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The Registrant relied upon Alternative 2 in its registration statement
filed on Form 10-SB; there is no information to provide in response to Item
6(a)(3)(i) to Model B of Form 1-A.
Part II Other Information
Item 2. Changes in Securities.
The Company's policy is not to issue fractional shares of common stock.
Consequently, the Company accumulated fractional shares resulting from the 10
percent stock dividend declared June 26, 1998. Whole shares then were offered
to all interested employees on a prorata basis at $29.00 per share. 167 shares
were issued on August 10, 1998 in amounts ranging from 2 to 10 shares per
employee. The Company believes that the issuance of these shares was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-A
(a) Exhibits
Ex 27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
INLAND NORTHWEST BANCORPORATION, INC.
Date: November 12, 1998
By /s/ Frederick M. Schunter
---------------------------
Frederick M. Schunter, President and
Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE FINANCIAL STATEMENTS OF INLAND NORTHWEST BANCORPORATION, INC. AS OF AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,259
<INT-BEARING-DEPOSITS> 65
<FED-FUNDS-SOLD> 14,712
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,424
<INVESTMENTS-CARRYING> 818
<INVESTMENTS-MARKET> 832
<LOANS> 91,471
<ALLOWANCE> 1,292
<TOTAL-ASSETS> 147,524
<DEPOSITS> 123,877
<SHORT-TERM> 9,409
<LIABILITIES-OTHER> 1,354
<LONG-TERM> 2,547
0
0
<COMMON> 9,734
<OTHER-SE> 604
<TOTAL-LIABILITIES-AND-EQUITY> 10,338
<INTEREST-LOAN> 6,724
<INTEREST-INVEST> 1,329
<INTEREST-OTHER> 587
<INTEREST-TOTAL> 8,640
<INTEREST-DEPOSIT> 3,415
<INTEREST-EXPENSE> 3,785
<INTEREST-INCOME-NET> 4,855
<LOAN-LOSSES> 355
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,535
<INCOME-PRETAX> 964
<INCOME-PRE-EXTRAORDINARY> 964
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 525
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.76
<YIELD-ACTUAL> 5.30
<LOANS-NON> 492
<LOANS-PAST> 195
<LOANS-TROUBLED> 34
<LOANS-PROBLEM> 1,796
<ALLOWANCE-OPEN> 1,085
<CHARGE-OFFS> 148
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,292
<ALLOWANCE-DOMESTIC> 1,292
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
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