FBNW Firstbank NW

Highlights for the Second Fiscal Quarter 2007: CLARKSTON, Wash., Nov. 6 /PRNewswire-FirstCall/ -- FirstBank NW Corp. (the Company) (NASDAQ:FBNW) today announced another quarter of strong financial results. On June 5, 2006, FirstBank NW Corp. announced the signing of a definitive agreement in connection with the proposed merger of FirstBank NW Corp. and Sterling Financial Corporation. Merger related expenses of $145,000, tax effected, are reflected in the Statement of Income for the quarter ended September 30, 2006. For the quarter ended September 30, 2006, diluted earnings per share increased 29.7% to $0.48 compared to $0.37 for the same quarter last year. Net income for the quarter increased 31.7% to $3.0 million compared to $2.3 million for the same quarter a year ago. At September 30, 2006, net average loans receivable was 12.2% higher than a year ago, and grew at a 14.6% linked-quarter pace (annualized) during the second fiscal quarter of 2007. Similarly, average deposit balances as of September 30, 2006 were 11.4% higher than the quarter ended September 30, 2005 and increased at a 29.6% linked-quarter pace (annualized) during the second fiscal quarter of 2007. For the second fiscal quarter of 2007, the Company's return on average tangible equity was 18.64% compared to 16.06% for the quarter ended September 30, 2005, while the return on average assets was 1.35% for the current quarter compared to 1.07% for same quarter one year ago. Pro forma return on average tangible equity was 19.55% and pro forma return on average assets was 1.41% for the quarter ended September 30, 2006, which reflects performance before merger related expenses (tax effected) incurred during the quarter. The net interest margin was higher for the quarter ended September 30, 2006, at 4.78% compared to 4.58% for the quarter ended September 30, 2005. In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. FirstBank believes that providing non-GAAP financial measures provides investors with information useful in understanding our financial performance. FirstBank provides measures based on "Pro forma net income," which exclude merger related expenses. Pro forma net income per basic and diluted share is calculated by dividing pro forma net income by the same basic and diluted share total used in determining basic and diluted earnings per share. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the following financial table or where the non-GAAP measure is presented. Three Months Three Months Ended Ended September 30, September 30, 2006 2005 (Dollars in thousands, except per share data) Net income $2,964 $2,250 Add back: Merger related expenses, net of tax 145 0 Pro forma net income $3,109 $2,250 Earnings per share - basic: Net income $0.50 $0.38 Pro forma net income $0.52 $0.38 Earnings per share - diluted: Net income $0.48 $0.37 Pro forma net income $0.51 $0.37 LOAN GROWTH AND CREDIT QUALITY: At September 30, 2006, net loans receivable totaled $671.2 million, up $75.5 million, or 12.7%, from $595.7 million a year ago and up $38.7 million from $632.5 million at our fiscal year ended March 31, 2006. Non-performing assets totaled $1.6 million, or 0.18% of total assets, at September 30, 2006 compared to $2.1 million, or 0.26% of total assets, at September 30, 2005, and $1.2 million, or 0.14% of total assets, at our fiscal year ended March 31, 2006. Net loan charge-offs for the second fiscal quarter were $67,000 compared to the same quarter a year ago of $57,000, and $618,000 for the quarter ended March 31, 2006. The reserve for losses on loans and loan commitments to total loans decreased to 1.28% of net loans at September 30, 2006 from 1.37% at September 30, 2005, and was essentially unchanged from 1.29% at March 31, 2006. The decrease in the percentage reserve for losses on loans and loan commitments to total loans was primarily the result of the charge off of a larger agricultural loan during the fourth quarter of fiscal 2006 and the growth in our loan portfolio, partially offset by additions to the reserve. Loan loss provision expense was $165,000 for the quarter ended September 30, 2006, $272,000 for the quarter ended September 30, 2005, and $237,000 for the quarter ended March 31, 2006. Management believes the reserve is at an appropriate level considering the credit quality demonstrated, loan loss histories, and prevailing economic conditions. FUNDING: Deposit balances as of September 30, 2006 increased $72.0 million, or 12.8%, to $633.4 million from $561.4 million at September 30, 2005. At September 30, 2006, total branch deposits were $587.6 million, consisting of $354.6 million, or 60.3% in core deposits and $233.0 million, or 39.7% in time deposits. At September 30, 2005, there were $519.3 million in total branch deposits, which consisted of $321.1 million, or 61.8% in core deposits and $198.2 million, or 38.2% in time deposits. Brokered deposits at September 30, 2006 totaled $45.8 million as compared to $42.1 million a year ago, an increase of $3.7 million. Federal Home Loan Bank (FHLB) and other borrowings at September 30, 2006 totaled $151.2 million compared to $160.6 million a year ago, a decrease of $9.4 million. NET INTEREST MARGIN AND INTEREST RATE RISK: The Company's net interest margin was 4.78% for the second fiscal quarter of 2007 compared to 4.58% for the quarter ended September 30, 2005. The flattening of the yield curve continues to pressure the net interest margin, however, the Company's asset sensitivity continues to accommodate timely market pricing as the cost of deposits and borrowed funds continues to increase. Yields on earning assets increased by 95 basis points to 8.06% compared to 7.11% for the quarter ended September 30, 2005. Meanwhile, the average rate paid on total deposits and borrowed funds increased 87 basis points to 3.39% compared to 2.52% for the quarter ended September 30, 2005. NON-INTEREST INCOME AND EXPENSE: Non-interest income for the quarter ended September 30, 2006 was $1.7 million compared to $1.8 million for the quarter ended September 30, 2005. Non-interest income is primarily the result of gain on sale of loans and transaction account fees. Non-interest expense for the quarter ended September 30, 2006 compared to the quarter ended September 30, 2005 remained unchanged at $6.4 million. Total non-interest expense related to merger activities was $239,000, or $145,000 tax effected, for the quarter ended September 30, 2006. CAPITAL: At September 30, 2006, the Tier 1 capital of FirstBank Northwest, FirstBank's wholly-owned subsidiary, was $63.1 million, or 7.4% leverage ratio based on average assets, and total risk-based capital was $74.3 million, or 11.3% risk-based capital ratio based on risk-weighted assets. PROPOSED MERGER: FirstBank NW Corp. and Sterling Financial Corporation announced on June 5, 2006 that they have entered into a definitive agreement to merge FirstBank NW Corp. into Sterling Financial Corporation. The transaction is expected to close in the last calendar quarter of 2006 (pending FirstBank shareholder and regulatory approval and the satisfaction of certain other conditions). Under the terms of the Merger Agreement, which was unanimously approved by the Boards of Directors of both companies, each share of FirstBank common stock will be converted into the right to receive 0.789 shares of Sterling common stock and $2.55 in cash, subject to certain conditions. CASH DIVIDEND: On September 13, 2006, FirstBank NW Corp. announced that its Board of Directors declared a quarterly cash dividend of $0.10 per share. The dividend was paid on October 11, 2006 to shareholders of record as of the close of business on September 27, 2006. BUSINESS STRATEGY: FirstBank NW Corp. (headquartered in Clarkston, Washington) is the holding company for FirstBank Northwest, a Washington state chartered savings bank founded in 1920, and has a track record of consistent above-average growth and improving profitability, operating in the rural markets of eastern Oregon, eastern Washington and central Idaho, in addition to the larger and growing markets of Boise and Coeur d'Alene, Idaho and Spokane, Washington. FirstBank Northwest is focused on each community served, striving to deliver competitive financial products and services through exceptional customer service standards, local expertise and leadership. FirstBank Northwest operates 20 branch locations in Idaho, eastern Washington and eastern Oregon, in addition to loan centers in Lewiston, Coeur d'Alene, Boise and Nampa, Idaho, Spokane, Washington, and Baker City, Oregon. FirstBank Northwest is known as the local community bank, offering its customers highly personalized service in the many communities it serves. ADDITIONAL INFORMATION AND WHERE TO FIND IT Sterling has filed with the Securities and Exchange Commission a registration statement on Form S-4, and FirstBank has mailed a proxy statement/prospectus to its security holders, containing information about the proposed merger transaction. Investors and security holders of Sterling and FirstBank are urged to read the proxy statement/prospectus and other relevant materials because they contain important information about Sterling, FirstBank and the proposed merger. In addition to the registration statement that was filed by Sterling and the proxy statement/prospectus that was mailed to the security holders of FirstBank, Sterling and FirstBank file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Investors and security holders may obtain a free copy of the proxy statement/prospectus and other relevant documents (when they become available) and any other documents filed with the Securities and Exchange Commission at its website at http://www.sec.gov/. The documents filed by Sterling may also be obtained free of charge from Sterling by requesting them in writing at Sterling Financial Corporation, 111 North Wall Street, Spokane, WA 99201, or by telephone at (509) 227-5389. In addition, investors and security holders may access copies of the documents filed with the Securities and Exchange Commission by Sterling on its website at http://www.sterlingfinancialcorporation-spokane.com/ . The documents filed by FirstBank may also be obtained by requesting them in writing at FirstBank NW Corp., 1300 16th Avenue, Clarkston, WA 99403 or by telephone at 509-295-5100. In addition, investors and security holders may access copies of the documents filed with the Securities and Exchange Commission by FirstBank on its website at http://www.fbnw.com/. Sterling, FirstBank and their respective officers and directors may be deemed to be participants in the solicitation of proxies from the security holders of FirstBank with respect to the transactions contemplated by the proposed merger. Information regarding Sterling's officers and directors is included in Sterling's proxy statement for its 2006 annual meeting of shareholders filed with the Securities and Exchange Commission on March 24, 2006. Information regarding FirstBank's officers and directors is included in FirstBank's proxy statement for its 2006 annual meeting of shareholders. A description of the interests of the directors and executive officers of Sterling and FirstBank in the merger is set forth in FirstBank's proxy statement/prospectus and other relevant documents filed with the Securities and Exchange Commission. FORWARD LOOKING STATEMENTS: Certain matters in this News Release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to, among others, expectations of the business environment in which the Company operates, projections of future performance, including operating efficiencies, perceived opportunities in the market, potential future credit experience and statements regarding the Company's mission and vision. These forward-looking statements are based upon current management' expectations, and may, therefore, involve risks and uncertainties. The Company's actual results, performance, and achievements may differ materially from those suggested, expressed or implied by forward-looking statements due to a wide range of factors including, but not limited to, the general business environment, interest rates, the real estate market in Washington, Idaho and Oregon, the demand for mortgage loans, competitive conditions between banks and non-bank financial service providers, regulatory changes, costs of implementing additional securities requirements, requirements of the Sarbanes Oxley Act of 2002, the risk that the proposed merger with Sterling may not be approved by shareholders of FirstBank or the necessary regulatory approvals are not obtained, the risk that other closing conditions of the proposed merger are not satisfied, and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended March 31, 2006. Forward-looking statements are effective only as of the date they are made and the Company assumes no obligation to update this information. FIRSTBANK NW CORP (unaudited) (dollars in thousands except per share data) FINANCIAL HIGHLIGHTS Three Months Ended Six Months Ended September 30, September 30, 2006 2005 2006 2005 Interest Income $16,004 $12,998 $31,088 $25,138 Interest Expense 6,696 4,765 12,835 9,093 Provision for Loan Losses 165 272 537 1,140 Net Interest Income After Provision for Loan Losses 9,143 7,961 17,716 14,905 Non-Interest Income Gain on Sale of Loans (1) 264 448 671 786 Service Fees and Charges 1,384 1,266 2,599 2,483 Commission and Other 70 52 112 154 Total Non-Interest Income 1,718 1,766 3,382 3,423 Non-Interest Expense Compensation and Related Expenses 3,737 3,729 7,891 7,368 Occupancy 718 763 1,450 1,469 Other 1,906 1,944 4,352 3,549 Total Non-Interest Expense 6,361 6,436 13,693 12,386 Income Tax Expense 1,536 1,041 2,440 1,840 Net Income $2,964 $2,250 $4,965 $4,102 Basic Earnings per Share (2)(6) $0.50 $0.38 $0.84 $0.70 Diluted Earnings per Share (2)(6) $0.48 $0.37 $0.81 $0.68 Weighted Average Shares Outstanding- Basic (2)(6) 5,943,579 5,867,066 5,939,604 5,862,414 Weighted Average Shares Outstanding- Diluted (2)(6) 6,126,446 5,999,644 6,113,303 5,990,800 Actual Shares Issued (6) 6,062,186 6,007,294 6,062,186 6,007,294 FINANCIAL STATISTICS (ratios annualized) At September 30, 2006 At September 30, 2005 Total Assets $884,167 $812,983 Cash and Cash Equivalents $26,965 $24,140 Loans Receivable, net $671,157 $595,743 Loans Held for Sale $4,337 $6,776 Mortgage-Backed Securities $50,155 $56,152 Investment Securities $47,869 $48,057 Equity Securities, at cost $12,789 $12,789 Deposits $633,418 $561,403 FHLB Advances & Other Borrowings $151,202 $160,554 Stockholders' Equity $82,764 $75,712 Tangible Book Value per Share (2)(6) $10.82 $9.62 Tangible Equity/Total Tangible Assets 7.43% 7.12% Number of full-time equivalent Employees (3) 247 269 Three Months Ended Six Months Ended September 30, September 30, 2006 2005 2006 2005 Return on Average Assets 1.35% 1.07% 1.14% 0.99% Pro Forma Return on Average Assets (7) 1.41% 1.07% 1.26% 0.99% Return on Average Tangible Equity 18.64% 16.06% 15.83% 14.89% Pro Forma Return on Average Tangible Equity (7) 19.55% 16.06% 17.57% 14.89% Return on Average Equity 14.43% 11.94% 12.20% 11.01% Pro Forma Return on Average Equity (7) 15.14% 11.94% 13.55% 11.01% Average Equity/Average Assets 9.34% 8.98% 9.33% 8.96% Efficiency Ratio (4) 55.43% 61.73% 60.81% 60.95% Pro Forma Efficiency Ratio (7) 53.35% 61.73% 56.82% 60.95% Non-Interest Expenses/Average Assets 2.89% 3.07% 3.14% 2.98% Pro Forma Non-Interest Expenses/Average Assets (7) 2.78% 3.07% 2.93% 2.98% Net Interest Margin (5) 4.78% 4.58% 4.75% 4.53% LOANS At September 30, 2006 At September 30, 2005 LOAN PORTFOLIO ANALYSIS: Amount Percent Amount Percent Real Estate Loans: Residential $129,775 19.04% $116,292 19.18% Construction 113,859 16.71 92,486 15.26 Agricultural 19,193 2.82 20,824 3.43 Commercial 208,064 30.53 178,144 29.39 Total Real Estate Loans 470,891 69.10 407,746 67.26 Other Loans: Home Equity 42,996 6.31 40,901 6.75 Agricultural Operating 24,806 3.64 27,384 4.52 Commercial 104,972 15.40 88,258 14.56 Other Consumer 37,809 5.55 41,928 6.91 Total Other Loans 210,583 30.90 198,471 32.74 Total Loans Receivable $681,474 100.00% $606,217 100.00% ALLOWANCE FOR LOAN LOSSES Six Months Ended Six Months Ended September 30, 2006 September 30, 2005 Balance at Beginning of Period $8,138 $7,254 Provision for Loan Losses 537 1,140 Net Charge-Offs (114) (208) Balance at End of Period $8,561 $8,186 Loan Loss Allowance/Net Loans 1.28% 1.37% Loan Loss Allowance/Non- Performing Loans 1317.08% 713.69% NON-PERFORMING ASSETS At September 30, At September 30, 2006 2005 Accruing Loans - 90 Days Past Due $193 $0 Non-Accrual Loans 457 1,147 Total Non-Performing Loans 650 1,147 Restructured Loans on Accrual 888 970 Real Estate Owned (REO) 0 0 Repossessed Assets 76 7 Total Non-Performing Assets $1,614 $2,124 Total Non-Performing Assets/Total Assets 0.18% 0.26% Loan Loss Allowance as a Percentage of Non-Performing Assets 530.42% 385.40% AVERAGE BALANCES Six Months Ended Six Months Ended September 30, 2006 September 30, 2005 Total Average Interest Earning Assets $806,334 $746,643 Total Average Assets 872,114 831,934 Average Deposits and Other Borrowed Funds 783,930 749,263 Average Total Tangible Equity 62,719 55,107 (1) Gain on sale of loans includes recovery (impairment) of mortgage servicing rights of $0 and $(44) for the three months ended September 30, 2006 and 2005, respectively. Gain on sale of loans includes recovery (impairment) of mortgage servicing rights of $55 and $(25) for the six months ended September 30, 2006 and 2005, respectively. (2) Calculation excludes unallocated shares in the employee stock ownership plan (ESOP) September 30, 2006 -- 116,518 shares and September 30, 2005 -- 133,230 shares. (3) Number of full-time equivalent employees is the quarterly average. (4) Calculation is non-interest expense divided by tax equivalent non-interest income and tax equivalent net interest income. (5) Calculation is tax equivalent net interest income divided by average daily balance of total interest-earning assets. (6) The outstanding shares, weighted average shares outstanding, and earnings per share have been adjusted to reflect the two-for-one stock split in the form of a 100% per share stock dividend announced on January 4, 2006. (7) Non-GAAP Financial Measures: In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. FirstBank believes that providing non-GAAP financial measures provides investors with information useful in understanding our financial performance. FirstBank provides measures based on "Pro forma net income", which exclude merger related expenses. Pro forma net income per basic and diluted share is calculated by dividing pro forma net income by the same basic and diluted share total used in determining basic and diluted earnings per share. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the following financial table or where the non-GAAP measure is presented. Three Months Ended Six Months Ended September 30, September 30, 2006 2005 2006 2005 Net income $2,964 $2,250 $4,965 $4,102 Add back: Merger related expenses, net of tax 145 0 546 0 Pro forma net income 3,109 2,250 5,511 4,102 Earnings per share - basic: Net income $0.50 $0.38 $0.84 $0.70 Pro forma net income $0.52 $0.38 $0.93 $0.70 Earnings per share - diluted: Net income $0.48 $0.37 $0.81 $0.68 Pro forma net income $0.51 $0.37 $0.90 $0.68 DATASOURCE: FirstBank NW Corp. CONTACT: Larry Moxley, EVP & Chief Financial Officer of FirstBank NW Corp., +1-509-295-5100 Web site: http://www.fbnw.com/

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