<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 4/1/98 to 6/30/98.
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 No X
The registrant has a single class of common stock, of which there are 592,714
shares issued and outstanding as of June 30, 1998.
<PAGE>
Table of Contents
Page
Part I Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition - June 30, 1998
and December 31, 1997.......................................
Consolidated Statements of Income - Three Months and
year-to-date ended June 30, 1998 and 1997...................
Consolidated Statements of Cash Flow - year-to-date ended
June 30, 1998 and 1997......................................
Consolidated Statements of Stockholders' Equity as of
June 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 4. Submission of Matters to a Vote of Security Holders.........
Item 6. Exhibits and Reports on Form 8-K............................
Signatures.................................................................
<PAGE>
Part I Financial Information
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
June 30, 1998 and December 31, 1997
($ in thousands)
June 30 December 31
1998 1997
Assets
Cash and due from banks $7,289 $7,405
Federal funds sold 20,375 7,947
Securities held-to-maturity (Note 2) 819 1,572
Securities available-for-sale (Note 2) 24,435 22,434
Federal Home Loan Bank stock, at cost 368 309
Loans, net of allowance for loan losses of
$1,284 in 1998 and $1,085 in 1997 (Notes 3 & 4) 87,767 76,524
Accrued interest receivable 875 701
Premises and equipment, net 2,802 2,435
Foreclosed real estate, net of
allowance of $6 in 1998 and $86 in 1997 221 567
Other assets 1,681 459
-------- --------
TOTAL ASSETS $146,632 $120,353
======== ========
Liabilities
Noninterest bearing demand deposits 25,665 24,316
Money Market accounts 25,918 24,598
NOW accounts 8,188 6,117
Savings accounts 2,713 2,727
Time Certificates of Deposit,
$100,000 and over 15,100 12,618
Time Certificates of Deposit, under $100,000 47,178 31,335
-------- --------
TOTAL DEPOSITS $124,763 $101,711
Securities sold under agreement to repurchase 8,520 8,434
Borrowed funds, Federal Home Loan Bank (Note 5) 1,950 63
Borrowed funds, other banks (Note 5) 500 0
Accrued interest payable and other liabilities 1,031 685
-------- --------
TOTAL LIABILITIES $ 12,001 $ 9,182
Stockholders' Equity
Common stock, no par, 1,000,000 shares
authorized; issued and outstanding
592,714 in 1998 and 535,398 in 1997 9,721 8,064
Retained earnings (42) 1,235
Accumulated other comprehensive income
income, net of tax of $102 for
1998 and $87 for 1997 189 161
-------- --------
TOTAL STOCKHOLDERS' EQUITY $9,868 $9,460
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $146,632 $120,353
======== ========
<PAGE>
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months and year-to-date ended June 30, 1998 and 1997
($ in thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended Year-to-date
6/30/98 6/30/97 1998 1997
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $2,242 $1,835 $4,282 $3,521
Interest on securities 444 315 898 610
Interest on federal funds sold 249 97 353 175
------ ------ ------ ------
TOTAL INTEREST INCOME $2,935 $2,246 $5,532 $4,306
Interest Expense
Interest on deposits 1,214 801 2,219 1,583
Interest on securities sold under 107 126 201 230
agreement to repurchase
Interest on borrowed funds 10 0 10 0
------ ------ ------ ------
TOTAL INTEREST EXPENSE $1,331 $927 $2,431 $1,813
NET INTEREST INCOME 1,604 1,319 3,102 2,493
Provision for loan losses 130 75 220 150
------ ------ ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES $1,474 $1,244 $2,882 $2,343
Noninterest Income
Fees and service charges 135 119 259 233
Fees and charges on mortgage loan origination 128 0 155 0
Other noninterest income 72 49 129 92
------ ------ ------ ------
TOTAL NONINTEREST INCOME $335 $168 $543 $325
Noninterest Expense
Salaries and employee benefits 827 529 1,603 1,061
Occupancy expense 121 70 225 133
Furniture, fixtures and equipment expense 23 17 57 42
Depreciation and amortization expense 94 69 182 139
Other operating expense 492 344 847 630
------ ------ ------ ------
TOTAL NONINTEREST EXPENSE $1,557 $1,029 $2,914 $2,006
INCOME BEFORE TAXES 252 383 511 663
Federal income tax expense 125 147 233 254
------ ------ ------ ------
NET INCOME $127 $236 $278 $409
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended Year-to-date Year-to-date
6/30/98 6/30/97 6/30/98 6/30/97
<S> <C> <C> <C> <C>
Weighted average shares outstanding 563,739 496,309 550,069 495,943
Basic earnings per share $0.23 $0.48 $0.51 $0.82
------ ------ ------ ------
Weighted average shares outstanding 563,739 496,309 550,069 495,943
Effect of dilutive securities 129,538 95,428 128,208 95,957
Weighted average shares outstanding,
adjusted for dilutive securities 693,277 591,737 633,291 513,014
Earnings per share assuming full dilution $0.18 $0.40 $0.44 $0.80
------ ------ ------ ------
</TABLE>
<PAGE>
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Year-to-date ended June 30, 1998 and 1997
($ in thousands)
Year-to-date
1998 1997
Net income $278 $409
Adjustments to reconcile net income to cash
provided by operating activities:
Provision for loan losses 220 150
Depreciation and amortization 182 139
Increase/decrease in assets and liabilities:
Accrued interest receivable (174) 46
Other assets (1,176) (396)
Accrued interest payable 346 122
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ($323) $470
Cash flows from investing activities:
Net (increase)/decrease in federal
funds sold (12,428) (4,964)
Net (increase)/decrease in
investment securities (1,265) 859
Net (increase)/decrease in loans (11,463) (6,271)
Purchase of premises and equipment net
of gain or loss on asset disposal (544) (135)
Foreclosed real estate activity 346 (428)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES ($25,353) ($10,939)
Cash flows from financing activities:
Net increase in deposits 23,052 1,082
Net increase/(decrease) in securities
sold under agreement to repurchase 86 6,160
Net proceeds/(payments) from borrowed funds 2,387 0
Cash received from stock sales 35 1,583
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES $25,560 $8,825
Net increase/(decrease) in cash
and cash equivalents ($116) ($1,644)
Cash and cash equivalents,
beginning of year $7,405 $7,615
CASH AND CASH EQUIVALENTS, END OF QUARTER $7,289 $5,971
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
<PAGE>
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
As of June 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 409,109 409,109 $409,109
Unrealized gains (losses) (108,242) (108,242) (108,242)
--------
Comprehensive income $300,867
Proceeds from sale of stock 57,000 57,000
Fractional shares, issued in cash 3,075 3,075
Transfers 0
---------- ---------- -------- --------
Balance, end-of-quarter,
June 30, 1997 $6,909,201 $6,173,361 $817,550 ($81,710)
---------- ---------- -------- --------
Disclosure of 1997 reclassification
amount:
Unrealized holding gains/(losses)
during period ($108,242)
Less reclassification adjustment
for gains/(losses) reported in
net income 0
Net unrealized gains/(losses) on
securities
----------
($108,242)
----------
</TABLE>
<PAGE>
INLAND NORTHWEST BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
As of June 30, 1998
<TABLE>
<CAPTION>
Accumulated
Common Retained Comprehensive Comprehensive
Total Stock Earnings Income Income
<S> <C> <C> <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 278,197 278,197 $278,197
Unrealized gains (losses) 27,985 27,985 27,985
--------
Comprehensive income $306,182
Stock issued for acquisition of
mortgage subsidiary (Note 6) 66,780 66,780
Proceeds from sale of stock 34,800 34,800
Fractional shares, issued in cash 0
Transfers 0 1,554,719 (1,554,719)
---------- ---------- ---------- --------
Balance, end-of-quarter,
June 30, 1998 $9,867,984 $9,720,580 ($41,760) $189,164
---------- ---------- ---------- --------
Disclosure of 1998 reclassification
amount:
Unrealized holding gains during
period $27,985
Less reclassification adjustment
for gains reported in net income 0
Net unrealized gains on securities
----------
$27,985
----------
</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 June 30, 1998, December 31, 1997, and June 30, 1997 and the
results of operations and the changes in financial position for the three month
and six month periods ended June 30, 1998 and 1997.
Certain reclassifications of June 30, 1997 balances have been made to conform
with the June 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 June 30, 1997 to reflect the effect of a ten percent stock dividend
issued to shareholders of record as of May 18, 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 June 30, 1998 and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
June 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 $5,037 $5,159 $5,055 $5,158
Obligations of federal 17,775 17,920 16,068 16,191
government agencies
Mortgage backed securities 829 853 908 930
Corporate debt obligations 503 503 756 756
------- ------- ------- -------
TOTAL $24,144 $24,435 $22,787 $23,035
======= ======= ======= =======
Securities held-to-maturity:
Obligations of states,
municipalities and political
subdivisions $819 $828 $970 $980
======= ======= ======= ======
</TABLE>
<PAGE>
NOTE 3. Loans
Loan detail by category as of June 30, 1998 and December 31, 1997 were as
follows:
June 30 December 31
1998 1997
Commercial loans $55,925 $48,289
Real estate loans 25,110 21,112
Installment loans 3,933 3,852
Consumer and other loans 4,380 4,623
------- -------
TOTAL LOANS $89,348 $77,876
------- -------
Allowance for loan losses (1,284) (1,085)
Deferred loan fees, net of deferred costs (297) (267)
------- -------
NET LOANS $87,767 $76,524
======= =======
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 periods ended June 30, 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended Year-to-date
6/30/98 6/30/97 1998 1997
<S> <C> <C> <C> <C>
Balance, beginning of period $1,163 $976 $1,085 $908
Provision for loan losses 130 75 220 150
Loan Charge-offs 9 23 21 30
Loan Recoveries 0 1 0 1
- - - -
Balance, end of period $1,284 $1,029 $1,284 $1,029
</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 June
30, 1998. The note originated in February 1998, consequently there was no
corresponding balance on either December 31, 1997 or June 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 $2,000,000, US Bank for $1,200,000,
and Federal Home Loan Bank (FHLB) for $4,976,500. There were no outstanding
balances on June 30, 1998, December 31, 1997 or June 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 $1,949,514 on June 30, 1998, $62,684 on December 31,
1997 and $-0- on June 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 June 30, 1998 reflect
the acquisition and mortgage company operating results for a four month period.
<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 declared a 10 percent stock dividend, payable June 26, 1998, to
all holders of record on May 18, 1998; 53,611 shares of its common stock were
issued on June 26, 1998. The Company also issued 100 shares to each non-employee
director, pursuant to the compensation arrangement for directors that provides
for the issuance of 100 shares following the annual shareholders meeting to each
director completing a period of 12 months service prior to that meeting. An
additional 120 shares also were issued to those directors as a result of the
stock dividend declaration. The Company believes that the issuance of its shares
in these transactions either did not involve the sale of a security or were
exempt from registration in accordance with the provisions of Section 4(2) of
the Securities Act of 1933.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on Monday, May
18, 1998. Directors reelected at that meeting for a term of 3 years with the
votes cast in favor of their reelection are as follows:
Clark H. Gemmill (470,453)
Phillip L. Sandberg (470,292)
Frederick M. Schunter (470,453)
William E. Shelby (470,453)
James R. Walker (470,453)
Pursuant to the provision for staggered terms in the bylaws of the Company,
Jimmie T.G. Coulson, Harlan D. Douglass, Freeman B. Duncan, Donald A. Ellingsen,
Bryan S. Norby, Richard H. Peterson, Hubert F. Randall, and Dwight B. Aden, Jr.
continue as directors of the Company until subsequent shareholder meetings. The
shareholders also ratified the selection of McFarland & Alton, P.S. as
independent public accountants for the Company for the fiscal year ending
December 31, 1998. 463,452 shares were voted in favor of this matter.
Item 6. Exhibits and Reports on Form 8-A
(a) Exhibits
Ex 27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INLAND NORTHWEST BANCORPORATION, INC.
Date: August 12, 1998 By /s/ Frederick M. Schunter
-----------------------------
Frederick M. Schunter, President
and Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INLAND NORTHWEST BANCORPORATION, INC. AS OF AND FOR THE
SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,289
<INT-BEARING-DEPOSITS> 120
<FED-FUNDS-SOLD> 20,375
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,435
<INVESTMENTS-CARRYING> 819
<INVESTMENTS-MARKET> 828
<LOANS> 89,348
<ALLOWANCE> 1,284
<TOTAL-ASSETS> 146,632
<DEPOSITS> 124,763
<SHORT-TERM> 8,520
<LIABILITIES-OTHER> 1,031
<LONG-TERM> 2,450
0
0
<COMMON> 9,721
<OTHER-SE> 147
<TOTAL-LIABILITIES-AND-EQUITY> 9,868
<INTEREST-LOAN> 4,282
<INTEREST-INVEST> 898
<INTEREST-OTHER> 353
<INTEREST-TOTAL> 5,532
<INTEREST-DEPOSIT> 2,219
<INTEREST-EXPENSE> 2,431
<INTEREST-INCOME-NET> 3,102
<LOAN-LOSSES> 220
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,914
<INCOME-PRETAX> 511
<INCOME-PRE-EXTRAORDINARY> 511
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 278
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.44
<YIELD-ACTUAL> 4.43
<LOANS-NON> 624
<LOANS-PAST> 195
<LOANS-TROUBLED> 34
<LOANS-PROBLEM> 1,796
<ALLOWANCE-OPEN> 1,085
<CHARGE-OFFS> 21
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,284
<ALLOWANCE-DOMESTIC> 1,284
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
