Net Income (Loss) February ($2,604,000) ($2,791,000) $ 187,000 Net Income (Loss) Year to Date $8,463,000 $7,001,000 $ 1,462,000

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1 th Ave. NE Kirkland, WA March 19, 2018 Dear Board Member, Greetings from the campus in Kirkland. Spring break is over and students are back on campus. It is hard to believe that there are only 7 weeks left in this semester. I want to thank you for your service, prayers and support for, our students, faculty and staff. Reba and I are very appreciative of the support you have expressed in s regarding the fraudulent activity we fell victim to, thank you for that, it has meant a lot. I will keep you informed as we work with our insurance companies, their lawyers, their IT forensic experts and law enforcement officials. Net Income Summary Actual Budget Variance Net Operating Income (Loss) February ($2,211,000) ($2,791,000) $ 580,000 Net Operating Income (Loss) Year to Date $7,699,000 $6,961,000 $ 738,000 Net Income (Loss) February ($2,604,000) ($2,791,000) $ 187,000 Net Income (Loss) Year to Date $8,463,000 $7,001,000 $ 1,462,000 We separately reflect capital contributions, investment market gains (losses), and the swap adjustment gain (loss). These are the differences between net operating income and net income. February investments experienced market losses of $391,000 due to market corrections. We no longer have swap gains or losses due to the refinancing that closed at the end of August. Tuition Summary Year to Date FY 18 Budget Variance Year to Date Tuition Revenue $37,993,000 $39,305,000 ($1,312,000) Graduate ($ 113,000) Adult Evening ($ 384,000) Northwest (Church) Partnership Program ($ 97,000) Online ($ 220,000) International ($ 352,000) Salem ($ 85,000) Sacramento ($ 39,000) All other programs ($ 22,000) Tuition Summary February FY 18 Budget Variance Tuition Revenue $304,000 $317,000 ($ 13,000) Kirkland Undergrad ($ 23,000) Graduate $ 37,000 Adult Evening ($ 60,000) Online $ 47,000 All other programs ($ 14,000) February is one of our lowest tuition revenue months of the year. The only program with a start is the Adult Evening program, and the budget for that program in February represents less than 1% of our annual tuition revenue. Fee revenue for February was $166,000 worse than budget, primarily due to international trip revenue that was not recognized as the related expenses were not incurred. Year to date fee revenue is $92,000 worse than budget, with most of this related to the international trip revenue as well. Phone:

2 2 Discounts for February were $394,000 better than budget. As we have analyzed discounts for January to May, it appears that more of the spring institutional aid was recorded in January and less will be recorded in the next four months. February discounts were better than budget as we had anticipated. We will continue to monitor this on a monthly basis to see if we can recover most of the January worse than budget performance by the end of the fiscal year. Year to date discounts are still $202,000 worse than budget through February. The undergrad discount rate for fall & spring semester is currently at 47.1% versus a budget of 46.6%. The annual budget is 47.0%. All other sources of revenue for the month of February are $72,000 better than budget. Year to date all other sources of revenue are $417,000 better than budget. The year to date better than budget variance is led by contribution revenue which is $138,000 better than budget, auxiliary revenue which is $118,000 better than budget, and other revenue which is $116,000 better than budget. Year to Date Operating Contribution Detail Actual Budget Variance Opportunity Fund (General Giving) $ 300,000 $287,000 $ 13,000 Other Giving (Mission Trips, Choralons, Banquets, etc.) $ 626,000 $503,000 $ 123,000 Grant Contributions (Murdock, Lilly) $ 99,000 $ 97,000 $ 2,000 Total $1,025,000 $887,000 $ 138,000 Operating Expense Detail February Monthly Year to Date Variance Primary Variance Factor Variance Total $293,000 $1,927,000 Presidents Department ($ 10,000) ($ 67,000) Additional staff and chess club expenses Jim Heugel Departments $296,000 $1,268,000 Savings in International, College of Education, NPP, Online, College of Arts & Sciences, College of Business and School of Nursing, overspent in Athletics, combination of temporary and permanent differences Ken Cornell Departments $ 81,000 $ 286,000 Slower spending in all departments, combination of temporary and permanent differences Phil Rasmussen Departments ($ 31,000) ($ 22,000) Various expenses, combination of temporary and permanent differences John Jordan Departments ($ 88,000) $ 239,000 Insurance, interest, management services, professional services and software licensing, combination of temporary and timing differences Contingency Department $ 45,000 $ 223,000 General contingency against revenue shortfalls

3 3 Balance sheet items to note as of February 28 include the following: Major Balance Sheet Year to Date Variance from Primary Variance Factor for Year to Date Variance Categories Variance Last Year Unrestricted cash $3,675,000 $2,595,000 Net income variance and faster collection of student and other receivables than budgeted Student & other ($2,679,000) ($2,187,000) Receivables being collected faster than budget receivables, net Investments $ 965,000 $1,584,000 Market gains, interest earnings Notes and bonds payable, current portion and long term portion ($ 322,000) ($ 43,000) Combined, the current portion and long term portion of our debt is fairly close to budget, individually they both have a variance over $1,000,000 as we made an error in the budgeting and forgot to budget the current portion of our new debt Unrestricted net assets $1,461,000 $2,048,000 Net income variance from the income statement Please continue to pray for the following items: Enrollment for online programs. We are seeing some encouraging results from some of our new efforts regarding leads and students, but need to find an effective way to generate more new students on a consistent basis. Future enrollment, please pray that as we start concentrating our efforts on next fall that we will develop relationships with potential students who want to attend Northwest. Right now the numbers of students who have submitted an application, been approved and made a deposit for fall 2018, are ahead of last year for the Kirkland undergrad population. Please pray that all of our other programs will also have strong enrollment numbers in the fall. Please pray for the master plan process. We have had a meeting with the city and we are waiting for the city to draft the final traffic mitigation report. Once that is done, Dr. Castleberry and I will review it, and if it falls within the parameters set by the Board, we will approve it. The city will then issue their staff reports and SEPA report. Once those are issued the public hearing date will be set. The budget process for FY 19. We have two more weeks of budget meetings and then begins the process of consolidating and balancing the budget to our net income target. Once that is done the budget is wrapped up and presented to different bodies within the university and then to the Board in May. Should you have any questions regarding this report or the financial statements, please feel free to contact me. Thank you for your service and partnership with. Sincerely, John Jordan Chief Financial Officer

4 Year to Date Financial Results Through February 2018 (9 months) (In Thousands) Current Month Year to Date Variance Variance Annual Actual Budget Good (Bad) Last Year Actual Budget Good (Bad) Budget Revenue: $ (23) $ $ (23) Kirkland Undergrad Tuition Revenue $ 25,197 $ 26,440 $ 26,479 $ (39) $ 26, Grad Tuition Revenue 4,563 5,196 5,309 (113) 6, (69) CAPS Tuition Revenue (less Online) 3,297 3,499 3,980 (481) 4, Online Programs 1,590 1,352 1,572 (220) 2,035 (2) (2) Salem (85) Sacramento (39) 406 (5) (5) International ,113 (352) 1,113 Summer & Other (13) Total Tuition 36,351 37,993 39,305 (1,312) 41, (166) Fee Revenue 1,035 1,007 1,099 (92) 1,370 (77) (471) 394 Discounts (12,227) (12,787) (12,585) (202) (12,806) Net Tuition & Fees 25,159 26,213 27,819 (1,606) 29, Contribution Revenue 946 1, , Auxiliary Revenue 5,410 5,663 5, , Other Revenue Interest/Dividend Revenue Total Operating Revenue 32,572 33,962 35,151 (1,189) 37,851 Expense: (10) Castleberry Departments (67) 475 1,470 1, Heugel Departments 13,478 13,592 14,860 1,268 19, Cornell Departments 2,296 2,874 3, , (31) Rasmussen Departments (22) 1,182 1, (88) Jordan Departments 8,545 8,449 8, , Contingency ,992 3, Total Operating Expense 25,535 26,263 28,190 1,927 37,494 (2,211) (2,791) 580 Net Operating Income (Loss) 7,037 7,699 6, (2) (2) Capital Contributions (391) (391) Investment Market gain (loss) Swap Adjustment gain (loss) 1, $ (2,604) $ (2,791) $ 187 Net Income (Loss) $ 9,239 $ 8,463 $ 7,001 $ 1,462 $ 397

5 Balance Sheet For the period ending February 28, 2018 In thousands Prior Current Budget Variance Year Year to Budget Assets: Unrestricted cash $ 7,712 $ 10,307 $ 6,632 $ 3,675 Donor restricted cash Restricted cash (47) Student receivables, net 2,662 2,381 2,631 (250) Other receivables 2,979 1,073 3,502 (2,429) Other current assets Total Current Assets 14,784 14,631 13,550 1,081 Investments 15,578 17,162 16, Notes receivable (7) Planned giving assets 4,091 4,164 4,237 (73) Fixed assets, net 46,231 45,339 45,396 (57) Other assets Total Assets $ 81,113 $ 82,057 $ 79,754 $ 2,303 Liabilities & Net Assets Accounts payable & accrued expenses $ 2,888 $ 3,048 $ 3,437 $ (389) Student deposits (58) Deferred revenue 1,181 1, Current portion of notes & bonds payable 2,058 2, ,341 Total Current Liabilities 6,471 6,882 5,353 1,529 Interest rate swap agreement 2,405 Planned giving liabilities 2,940 2,915 2,923 (8) Student loan program Notes & bonds payable 29,295 29,048 30,711 (1,663) Other liabilities Total Liabilities 41,797 39,533 39,674 (141) Unrestricted net assets 32,687 34,735 33,274 1,461 Temporarily restricted net assets 2,266 3,037 2, Permanently restricted net assets 4,363 4,752 4, Total Net Assets 39,316 42,524 40,080 2,444 Total Liabilities & Net Assets $ 81,113 $ 82,057 $ 79,754 $ 2,303