Northrim BanCorp Second Quarter 2018 Net Income Grows 62% to $5.8 Million, or $0.84 per Diluted Share, Reflecting Net Interest Margin Expansion and Lower Tax Rates
ANCHORAGE, Alaska, July 30, 2018 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported profits grew 62% to $5.8 million, or $0.84 per diluted share, in the second quarter of 2018 compared to $3.6 million, or $0.51 per diluted share, in the second quarter of 2017, and increased 44% from $4.1 million, or $0.58 per diluted share in the first quarter of 2018. Rising short-term interest rates contributed to profitability with net interest margin ("NIM") expanding to 4.50% and on a tax equivalent basis* ("NIMTE") expanding to 4.56%, as short-term investments repriced or matured and were reinvested at higher interest rates during the second quarter. In addition, earnings reflect a benefit from lower tax rates effective for 2018. Pretax, pre-provision profits increased 22% to $6.7 million in the second quarter of 2018 from $5.5 million in the second quarter a year ago and grew 36% from $4.9 million in the preceding quarter.
Earnings for the first six months of 2018 increased 33% to $9.9 million, or $1.42 per diluted share, compared to $7.4 million, or $1.06 per diluted share, in the first six months of 2017. Pretax, pre-provision income was level at $11.6 million for both the first six months of 2018 and 2017. Improving political and economic conditions and improving loan portfolio quality provided for a $300,000 recovery of loan loss provisions in the first half of 2018 compared to a $700,000 charge in the first half a year ago.
“The benefits of rising short-term interest rates on yields of both our investment and loan portfolios contributed to strong second quarter and year-to-date profits. Significant movements by the Alaskan legislature and positive outcomes from the winter oil drilling season helped the Alaskan economy continue to demonstrate its resilience,” said Joe Schierhorn, Chairman, President and CEO.
As discussed in the first quarter earnings release, the Company has a large amount of investments maturing or repricing this year. NIMTE* has increased to 4.56% for the second quarter of 2018 from 4.26% for the second quarter of 2017. “Rates for new investment opportunities continue to rise and Northrim is seeing the benefit of those new investments. Going forward, we expect to continue to benefit from rising interest rates as our short-term investment portfolio continues to mature and reprice,” said Jed Ballard, Chief Financial Officer.
“Alaska’s housing market remains stable with both home values and affordability at healthy levels, while foreclosure and delinquency rates have remained lower than the national average for a decade,” noted Schierhorn. “The Northrim team continues to work with local business owners and consumers to provide a broad range of savings and lending options. While new loan originations were offset by payoffs and maturities in the second quarter, our pipeline of loans remains healthy. We continue to make investments in technology, recruit and retain business talent, and work to gain market share to generate growth in both loans and deposits in the current environment.”
Second Quarter 2018 Highlights:
- Total revenue, which includes net interest income plus other operating income, was $23.3 million in the second quarter of 2018, compared to $21.7 million in the first quarter of 2018, and $24.0 million in the second quarter a year ago.
- Community Banking provided 75% of total revenues and 88% of earnings in the second quarter of 2018.
- Home Mortgage Lending provided 25% of total revenues and 12% of earnings in the second quarter of 2018.
- Net interest income in the second quarter of 2018 increased 5% to $15.0 million from $14.2 million in the second quarter a year ago, mainly due to the higher yield on the loan and investment portfolios, and was also up 5% compared to $14.3 million in the preceding quarter.
- Operating net income* increased 44% to $5.8 million from $4.1 million in the preceding quarter and grew 47% from $4.0 million in the year ago quarter. Operating net income excludes one-time or non-operating items as detailed below.
- NIMTE* expanded to 4.56% in the second quarter of 2018, a 23-basis-point improvement, compared to the preceding quarter and a 30-basis-point improvement compared to the second quarter a year ago.
- Total portfolio loans were relatively unchanged in the second quarter of 2018 at $967.7 million compared to $967.6 million in the preceding quarter and contracted from $990.4 million a year ago. Growth in commercial loans, which account for 34% of the portfolio, and construction loans, which account for 9% of the portfolio, was offset by contraction in commercial real estate loans, of which 13% of the portfolio was owner occupied and 40% was non-owner occupied.
- Total deposits declined during the second quarter of 2018 and year-over-year with demand deposits comprising 33% of the portfolio, interest bearing transaction accounts totaling 59% of the portfolio and time deposits comprising 8% of total deposits.
- Northrim paid a quarterly cash dividend of $0.24 per share in June 2018, up from the $0.21 per share dividend paid in June 2017. The dividend provides an annual yield of approximately 2.40% at current market share prices.
- Book value per share increased 5% to $29.02 at the end of the second quarter of 2018 from $27.75 a year ago, while tangible book value per share* increased 5% to $26.66 at the end of the second quarter of 2018 from $25.40 a year ago.
- At quarter end, total non-performing assets, net of government guarantees, decreased to $24.0 million, or 1.63% of assets compared to $26.1 million, or 1.71% of assets, at March 31, 2018, and from $25.8 million, or 1.73% of assets a year ago. Total adversely classified loans also declined to $33.2 million at quarter end, compared to $34.9 million at March 31, 2018, and increased from $32.4 million a year ago.
- Following net charge-offs of $41,000 in the second quarter of 2018, the allowance for loan losses to portfolio loans grew to 2.08% at June 30, 2018, compared to 2.03% a year ago.
- Northrim remains well-capitalized with Tier 1 Capital to Risk Adjusted Assets of 15.10%, total shareholders' equity to total assets of 13.56%, and tangible common equity to tangible assets* of 12.60% at June 30, 2018.
| Financial Highlights | Three Months Ended | ||||||||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||
| Total assets | $ | 1,470,440 | $ | 1,524,741 | $ | 1,518,596 | $ | 1,522,784 | $ | 1,492,603 | |||||
| Total portfolio loans | $ | 967,702 | $ | 967,575 | $ | 954,953 | $ | 988,490 | $ | 990,380 | |||||
| Average portfolio loans | $ | 963,724 | $ | 955,718 | $ | 980,351 | $ | 1,003,751 | $ | 969,051 | |||||
| Total deposits | $ | 1,205,521 | $ | 1,260,790 | $ | 1,258,283 | $ | 1,258,317 | $ | 1,234,310 | |||||
| Average deposits | $ | 1,217,903 | $ | 1,233,745 | $ | 1,254,566 | $ | 1,262,808 | $ | 1,244,583 | |||||
| Total shareholders' equity | $ | 199,456 | $ | 194,973 | $ | 192,802 | $ | 194,427 | $ | 191,777 | |||||
| Net income attributable to Northrim BanCorp | $ | 5,830 | $ | 4,062 | $ | 214 | $ | 5,523 | $ | 3,589 | |||||
| Operating net income* | $ | 5,830 | $ | 4,062 | $ | 3,181 | $ | 3,100 | $ | 3,962 | |||||
| Diluted earnings per share | $ | 0.84 | $ | 0.58 | $ | 0.03 | $ | 0.79 | $ | 0.51 | |||||
| Operating diluted earnings per share* | $ | 0.84 | $ | 0.58 | $ | 0.46 | $ | 0.45 | $ | 0.57 | |||||
| Return on average assets | 1.58 | % | 1.10 | % | 0.06 | % | 1.44 | % | 0.96 | % | |||||
| Operating return on average assets* | 1.58 | % | 1.10 | % | 0.83 | % | 0.81 | % | 1.05 | % | |||||
| Return on average shareholders' equity | 11.79 | % | 8.43 | % | 0.43 | % | 11.25 | % | 7.43 | % | |||||
| Operating return on average shareholders' equity* | 11.79 | % | 8.43 | % | 6.40 | % | 6.32 | % | 8.21 | % | |||||
| NIM | 4.50 | % | 4.28 | % | 4.25 | % | 4.28 | % | 4.20 | % | |||||
| NIMTE* | 4.56 | % | 4.33 | % | 4.31 | % | 4.34 | % | 4.26 | % | |||||
| Efficiency ratio | 71.19 | % | 77.22 | % | 80.92 | % | 61.40 | % | 76.99 | % | |||||
| Operating efficiency ratio* | 71.19 | % | 77.22 | % | 78.74 | % | 71.26 | % | 74.36 | % | |||||
| Total shareholders' equity/total assets | 13.56 | % | 12.79 | % | 12.70 | % | 12.77 | % | 12.85 | % | |||||
| Tangible common equity/tangible assets* | 12.60 | % | 11.85 | % | 11.75 | % | 11.83 | % | 11.89 | % | |||||
| Book value per share | $ | 29.02 | $ | 28.37 | $ | 28.06 | $ | 28.37 | $ | 27.75 | |||||
| Tangible book value per share* | $ | 26.66 | $ | 26.01 | $ | 25.70 | $ | 26.00 | $ | 25.40 | |||||
| Dividends per share | $ | 0.24 | $ | 0.24 | $ | 0.22 | $ | 0.22 | $ | 0.21 | |||||
* References to operating net income, operating diluted earnings per share, operating return on average assets, operating return on average shareholders' equity, NIMTE, operating efficiency ratio, tangible book value per share, tangible common equity and tangible assets (all of which exclude intangible assets) represent non-GAAP financial measures. Management has presented these non-GAAP measurements in this earnings release, because it believes these measures are useful to investors. See the end of this release for reconciliations of these non-GAAP financial measures to GAAP financial measures.
“For the first half of 2018, the number and dollar amounts of unusual gains and charges have declined significantly from those booked in 2017,” said Ballard. “The second quarter of 2018 was the second consecutive period in seven quarters where there were no one-time or non-operating items on the income statement.” Those items that impacted prior quarterly comparisons are summarized in the following table for the periods presented.
| Three Months Ended | |||||||||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||
| Net income attributable to Northrim BanCorp | $ | 5,830 | $ | 4,062 | $ | 214 | $ | 5,523 | $ | 3,589 | |||||
| Impact of one-time and other non-operating items: | |||||||||||||||
| Gain on sale of Northrim Benefits Group | — | — | (2 | ) | (4,443 | ) | — | ||||||||
| Core conversion costs | — | — | — | 179 | 633 | ||||||||||
| Writedown minority interest in equity method investment | — | — | 686 | — | — | ||||||||||
| Compensation expense, net RML acquisition payments | — | — | (193 | ) | 149 | — | |||||||||
| Provision for income taxes related to above one-time items | — | — | (202 | ) | 1,692 | (260 | ) | ||||||||
| Provision for income taxes, change in DTA valuation | — | — | 2,678 | — | — | ||||||||||
| Operating net income* | $ | 5,830 | $ | 4,062 | $ | 3,181 | $ | 3,100 | $ | 3,962 | |||||
| Average diluted shares | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||
| Operating diluted earnings per share* | $ | 0.84 | $ | 0.58 | $ | 0.46 | $ | 0.45 | $ | 0.57 | |||||
| Year-to-date | ||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 | June 30, 2017 | One Year % Change | |||||
| Net income attributable to Northrim BanCorp | $ | 9,892 | $ | 7,414 | 33 | % | ||
| Impact of one-time and other non-operating items: | ||||||||
| Core conversion costs | — | 764 | NM | |||||
| Compensation expense, net RML acquisition payments | — | 174 | NM | |||||
| Provision for income taxes related to above items | — | (385 | ) | NM | ||||
| Operating net income* | $ | 9,892 | $ | 7,967 | 24 | % | ||
| Average diluted shares | 6,972,744 | 6,996,160 | — | % | ||||
| Operating diluted earnings per share* | $ | 1.42 | $ | 1.14 | 25 | % | ||
Alaska Economic Update
(Note: sources for information included in this section are included on page 13.)
Alaska has generated three consecutive quarters of Gross State Product growth, due in large part to the recent increases in the price of oil. Alaska is still losing ground on wages, but the losses are getting smaller. In the fourth quarter of 2017, wages contracted by 0.5%. In addition, the State of Alaska Department of Labor estimates that employment decreased by 0.5% in June of this year compared to June of 2017.
“The rising price of oil and news from successful exploratory wells on the North Slope by ConocoPhillips are bright spots for the Alaska economy, as expanded drilling activity is expected to bring jobs, increase tax revenues and generate opportunities for service providers throughout the state,” Schierhorn noted.
A recent article by the Alaska Journal of Commerce noted that ConocoPhillips leaders said July 16 that four more wells drilled into Willow early this year indicate the field could hold between 500 million and 1.1 billion barrels of gross resources that will cost between $4 billion and $6 billion to fully develop, with first oil potentially in the 2024-25 timeframe. It was also noted that roughly 75 percent of ConocoPhillips' prospective acreage in the area is yet to be drilled.
“We are also encouraged by recent progress on resolving Alaska’s budget shortfall,” said Schierhorn. In June, the legislature passed and the governor signed a budget plan that significantly reduces the state budget deficit. For the first time since the Alaska Permanent Fund was established in 1976, the legislature authorized the state to allocate a portion of the earnings from the $65 billion Fund to cover operating expenses for the state.
“This resolution addresses a critical deficiency in the state’s budget and provides certainty for businesses planning to invest in Alaska,” Schierhorn noted.
Northrim Bank sponsors the Alaskanomics blog to provide news, analysis, and commentary on Alaska’s economy. Join the conversation at Alaskanomics.com, or for more information on the Alaska economy, visit: www.northrim.com and click on the “Business Banking” link and then click “Learn.” Information from our website is not incorporated into, and does not form a part of this press release.
Review of Income Statement
Consolidated Income Statement
In the second quarter of 2018, Northrim generated a return on average assets ("ROAA") of 1.58% and a return on average equity ("ROAE") of 11.79%, compared to 0.96% and 7.43%, respectively in the second quarter of 2017. These results were above the averages posted by the 148 banks that make up the SNL U.S. Bank Index with assets between $1 billion and $5 billion as of March 31, 20181.
Net Interest Income/Net Interest Margin
Net interest income grew 5% to $15.0 million in the second quarter of 2018 compared to $14.2 million in the second quarter of 2017 and $14.3 million in the first quarter of 2018. For the first six months of 2018, net interest income increased 4% to $29.3 million from $28.1 million in the first six months of 2017.
NIMTE* was 4.56% in the second quarter of 2018 compared to 4.33% in the preceding quarter and 4.26% from the same quarter a year ago. Higher total interest income, coupled with lower total interest expense, contributed to the increases in net interest income and NIMTE* in the second quarter of 2018 compared to the second quarter of 2017. Net interest income and NIMTE* increased in the second quarter of 2018, compared to the first quarter of 2018, reflecting the deployment of lower yielding cash and investments into more productive loans. The yield on interest earning assets improved to 4.74%, up 25 basis points in the second quarter of 2018 and 29 basis points year-over-year. The cost of funds was relatively stable in the second quarter of 2018 at 28 basis points, up 3 basis points from the preceding quarter and down 1 basis point compared to the same quarter last year. For the first six months of 2018, NIMTE* improved 20 basis points to 4.44%.
- In August 2017, Northrim redeemed $8.0 million in junior subordinated debt held at Northrim Capital Trust 1. This liability bore interest at a floating rate of 90-day LIBOR plus 3.15%, or 4.33% at the time it was redeemed, and had a final maturity of May 15, 2033. Interest expense on this debt in 2017, through the date of redemption on August 15, 2017, averaged $84,800 per quarter. This redemption decreased Tier 1 Capital to Risk Adjusted Assets and Total Capital to Risk Adjusted Assets by 62 basis points each.
- An interest rate swap executed in September 2017 effectively converted the floating rate of interest on the remaining $10.0 million in outstanding junior subordinated debt from 90-day LIBOR plus 1.37%, or 3.71% as of June 30, 2018, to a fixed rate of 3.72% through the junior subordinated debt's final maturity date of March 15, 2036.
“The repayment of one of our higher-cost floating rate liabilities, completed in August of 2017, is benefiting the Company as expected by reducing second quarter interest expense on borrowings by 19% year over year, and provided further benefits to the net interest margin,” said Ballard.
“As we discussed during the first quarter, NIM has benefited from our short duration investment portfolio and our variable interest rate loans, and we expect to continue to see those benefits throughout 2018," Ballard continued.
1As of March 31, 2018, the SNL US Bank Index tracked 148 banks with assets between $1 billion and $5 billion with averages for the following ratios: NIMTE* 3.63%, loan loss reserves to gross loans of 0.92%, ROAA 1.13%, and ROAE 10.40%.
The components of the change in NIMTE* are detailed in the table below:
| 2Q18 vs. 1Q18 | 2Q18 vs. 2Q17 | |||
| Nonaccrual interest adjustments | 0.01 | % | — | % |
| Interest rates and loan fees | 0.18 | % | 0.24 | % |
| Volume and mix of interest-earning assets | 0.04 | % | 0.06 | % |
| Change in NIMTE* | 0.23 | % | 0.30 | % |
| YTD18 vs. YTD17 | ||
| Nonaccrual interest adjustments | — | % |
| Interest rates and loan fees | 0.18 | % |
| Volume and mix of interest-earning assets | 0.02 | % |
| Change in NIMTE* | 0.20 | % |
Provision for Loan Losses
In the second quarter and first half of 2018, Northrim recorded a recovery of loan loss provision of $300,000, reflecting improvements in qualitative metrics on its loan portfolio. In addition, non-performing loans declined to $16.3 million at June 30, 2018, from $18.6 million at March 31, 2018, and $21.5 million at June 30, 2017. The allowance for loan losses was 123% of nonperforming loans, net of government guarantees, at June 30, 2018, up from 110% at the end of the first quarter of 2018 and 93% a year ago.
Other Operating Income
In addition to home mortgage lending, Northrim has interests in other businesses that complement its core community banking activities. It provides financial services to businesses and individuals through these interests, including purchased receivables financing and wealth management. Other operating income contributed $8.3 million, or 36% of total second quarter revenues, as compared to $7.5 million, or 34% of revenues in the first quarter of 2018, and $9.8 million, or 41% of revenues in the second quarter of 2017. In the first six months of 2018, other operating income totaled $15.8 million, or 35% of revenues, compared to $18.7 million, or 40% of revenues in 2017. The primary driver of other operating income is variability in the mortgage market given the elimination of employee benefits plan income following the sale of the Company's interest in Northrim Benefits Group in August of 2017.
Other Operating Expenses
Operating expenses were $16.6 million in the second quarter 2018, compared to $16.8 million in the first quarter of 2018 and $18.5 million in the second quarter of 2017. In the second quarter of 2017, the Company incurred $633,000 related to core conversion costs, which the Company did not incur in 2018. Occupancy expense in the second quarter of 2018 declined from prior periods, reflecting a one-time technical correction for depreciation of approximately$670,000. Also impacting the first half of 2018 were enhancements to the profit sharing program and increases to the 401(k) matching program, which improves Northrim's competitive position in the market for skilled banking professionals, and align our benefits to incentivize profitable growth, without materially increasing overhead. In the first six months of 2018, operating expenses declined 5% to $33.4 million from $35.1 million, reflecting lower compensation costs for the mortgage banking operations, no core conversion costs, and lower occupancy expenses as explained above.
Income Tax Provision
For the second quarter of 2018, Northrim recorded $1.2 million in state and federal income tax expense for an effective tax rate of 16.7% compared to an effective tax rate of 28% in the second quarter of 2017, reflecting the new lower federal corporate income tax rate. For the first half of 2018, Northrim recorded $2.0 million in state and federal income tax expense, for an effective tax rate of 17.0% compared to $3.3 million and 30% for the same period in 2017.
Community Banking
“Our Alaska franchise continues to provide long-term opportunities in the market,” said Schierhorn. “The new loan production office in Soldotna on the Kenai Peninsula is starting to gain traction in this market, and we continue to work to implement future branch enhancements.”
Net interest income in the Community Banking segment increased 5% to $14.6 million in the second quarter of 2018 from $14.0 million in the second quarter of 2017.
The following table provides highlights of the Community Banking segment of Northrim, and detail significant one-time and other non-operating items impacting the periods presented:
| Three Months Ended | |||||||||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||
| Net interest income | $ | 14,614 | $ | 14,036 | $ | 14,381 | $ | 14,566 | $ | 13,952 | |||||
| (Benefit) provision for loan losses | (300 | ) | — | — | 2,500 | 300 | |||||||||
| Other operating income | 2,836 | 2,518 | 2,685 | 7,635 | 3,412 | ||||||||||
| Compensation expense, net RML acquisition payments | — | — | (193 | ) | 149 | — | |||||||||
| Other operating expense | 11,748 | 12,367 | 13,113 | 12,252 | 13,284 | ||||||||||
| Income before provision for income taxes | 6,002 | 4,187 | 4,146 | 7,300 | 3,780 | ||||||||||
| Provision for income taxes | 882 | 659 | 4,754 | 2,452 | 871 | ||||||||||
| Net income (loss) | 5,120 | 3,528 | (608 | ) | 4,848 | 2,909 | |||||||||
| Less: net income attributable to the noncontrolling interest | — | — | — | 78 | 152 | ||||||||||
| Net income (loss) attributable to Northrim BanCorp | $ | 5,120 | $ | 3,528 | ($ | 608 | ) | $ | 4,770 | $ | 2,757 | ||||
| Average diluted shares | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||
| Diluted earnings (loss) per share | $ | 0.74 | $ | 0.50 | ($ | 0.09 | ) | $ | 0.69 | $ | 0.39 | ||||
| Three Months Ended | |||||||||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||
| Net income (loss) attributable to Northrim BanCorp | $ | 5,120 | $ | 3,528 | ($ | 608 | ) | $ | 4,770 | $ | 2,757 | ||||
| Impact of one-time and other non-operating items: | |||||||||||||||
| Gain on sale of Northrim Benefits Group | — | — | (2 | ) | (4,443 | ) | — | ||||||||
| Core conversion costs | — | — | — | 179 | 633 | ||||||||||
| Compensation expense, net RML acquisition payments | — | — | (193 | ) | 149 | — | |||||||||
| Provision for income taxes related to above items | — | — | 80 | 1,692 | (260 | ) | |||||||||
| Provision for income taxes, change in DTA valuation | — | — | 3,411 | — | — | ||||||||||
| Operating net income* | $ | 5,120 | $ | 3,528 | $ | 2,688 | $ | 2,347 | $ | 3,130 | |||||
| Average diluted shares | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||
| Operating diluted earnings per share* | $ | 0.74 | $ | 0.50 | $ | 0.39 | $ | 0.34 | $ | 0.45 | |||||
| Year-to-date | |||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 |
June 30, 2017 |
|||||||
| Net interest income | $ | 28,650 | $ | 27,501 | |||||
| (Benefit) provision for loan losses | (300 | ) | 700 | ||||||
| Other operating income | 5,354 | 6,814 | |||||||
| Compensation expense, net RML acquisition payments | — | 174 | |||||||
| Other operating expense | 24,115 | 24,853 | |||||||
| Income before provision for income taxes | 10,189 | 8,588 | |||||||
| Provision for income taxes | 1,541 | 2,293 | |||||||
| Net income | 8,648 | 6,295 | |||||||
| Less: net income attributable to the noncontrolling interest | — | 249 | |||||||
| Net income attributable to Northrim BanCorp | $ | 8,648 | $ | 6,046 | |||||
| Average diluted shares | 6,972,744 | 6,996,160 | |||||||
| Diluted earnings per share | $ | 1.24 | $ | 0.86 | |||||
| Year-to-date | |||||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 |
June 30, 2017 |
One Year % Change | ||||||||
| Net income attributable to Northrim BanCorp | $ | 8,648 | $ | 6,046 | 43 | % | |||||
| Impact of one-time and other non-operating items: | |||||||||||
| Core conversion costs | — | 764 | NM | ||||||||
| Compensation expense - RML acquisition payments | — | 174 | NM | ||||||||
| Provision for income taxes related to above items | — | (385 | ) | NM | |||||||
| Operating net income* | $ | 8,648 | $ | 6,599 | 31 | % | |||||
| Average diluted shares | 6,972,744 | 6,996,160 | — | % | |||||||
| Operating diluted earnings per share* | $ | 1.24 | $ | 0.94 | 32 | % | |||||
Home Mortgage Lending
“The mortgage market continues to be a profitable segment in our business, and activity picked up in the second quarter reflecting the seasonality of this segment,” said Ballard. “Loans funded in the second quarter of 2018 were $148.2 million, of which 92% were for new home purchases. Mortgage activity fluctuates from one quarter to another based on seasonal factors, interest rates, housing supply, wage and employment conditions and other economic factors. We actively and carefully control operating expenses for this segment of our business to be as efficient and profitable as feasible.”
“Our mortgage servicing business, which was initiated in the fourth quarter of 2015 to service loans for the Alaska Housing Finance Corporation, continues to grow,” Ballard continued. “As of June 30, 2018, Northrim services 1,891 loans in its $472.2 million home mortgage servicing portfolio, which is a 42% increase from the $332.5 million serviced a year ago.” Mortgage servicing revenue contributed $1.3 million to second quarter of 2018 and $838,000 to the second quarter of 2017 revenues. Total mortgage servicing income fluctuates based on the amount of mortgage servicing rights originated during the period, and also based on changes in the fair value of mortgage servicing rights, which are driven by interest rate volatility and fluctuations in estimated prepayment speeds, which are based on published industry metrics.
The following table provides highlights of the Home Mortgage Lending segment of Northrim:
| Three Months Ended | |||||||||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||
| Mortgage commitments | $ | 84,092 | $ | 64,819 | $ | 43,602 | $ | 68,601 | $ | 80,068 | |||||
| Mortgage loans funded for sale | $ | 148,183 | $ | 109,069 | $ | 132,606 | $ | 162,470 | $ | 143,944 | |||||
| Mortgage loan refinances to total fundings | 8 | % | 18 | % | 17 | % | 12 | % | 12 | % | |||||
| Mortgage loans serviced for others | $ | 472,190 | $ | 439,561 | $ | 406,291 | $ | 362,983 | $ | 332,485 | |||||
| Net realized gains on mortgage loans sold | $ | 4,052 | $ | 3,346 | $ | 4,084 | $ | 5,218 | $ | 4,990 | |||||
| Change in fair value of mortgage loan commitments, net | 32 | 316 | (551 | ) | (23 | ) | 299 | ||||||||
| Total production revenue | 4,084 | 3,662 | 3,533 | 5,195 | 5,289 | ||||||||||
| Mortgage servicing revenue | 1,254 | 1,183 | 1,450 | 997 | 838 | ||||||||||
| Change in fair value of mortgage servicing rights, net2 | (118 | ) | (26 | ) | 64 | (296 | ) | (48 | ) | ||||||
| Total mortgage servicing revenue, net | 1,136 | 1,157 | 1,514 | 701 | 790 | ||||||||||
| Other mortgage banking revenue | 258 | 125 | 220 | 323 | 272 | ||||||||||
| Total mortgage banking income | $ | 5,478 | $ | 4,944 | $ | 5,267 | $ | 6,219 | $ | 6,351 | |||||
| Net interest income | $ | 375 | $ | 227 | $ | 303 | $ | 352 | $ | 291 | |||||
| Provision for loan losses | — | — | — | — | — | ||||||||||
| Mortgage banking income | 5,478 | 4,944 | 5,267 | 6,219 | 6,351 | ||||||||||
| Other operating expense | 4,858 | 4,428 | 5,417 | 5,290 | 5,226 | ||||||||||
| Income before provision for income taxes | 995 | 743 | 153 | 1,281 | 1,416 | ||||||||||
| Provision for income taxes | 285 | 209 | (669 | ) | 528 | 584 | |||||||||
| Net income attributable to Northrim BanCorp | $ | 710 | $ | 534 | $ | 822 | $ | 753 | $ | 832 | |||||
| Average diluted shares | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||
| Diluted earnings per share | $ | 0.10 | $ | 0.08 | $ | 0.12 | $ | 0.11 | $ | 0.12 | |||||
2Principally reflects changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates, net of collection/realization of expected cash flows over time.
| Three Months Ended | |||||||||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||
| Net income attributable to Northrim BanCorp | $ | 710 | $ | 534 | $ | 822 | $ | 753 | $ | 832 | |||||
| Impact of one-time and other non-operating items: | |||||||||||||||
| Writedown minority interest in equity method investment | — | — | 686 | — | — | ||||||||||
| Provision for income taxes related to above items | — | — | (282 | ) | — | — | |||||||||
| Provision for income taxes, change in DTA valuation | — | — | (733 | ) | — | — | |||||||||
| Operating net income* | $ | 710 | $ | 534 | $ | 493 | $ | 753 | $ | 832 | |||||
| Average diluted shares | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||
| Operating diluted earnings per share* | $ | 0.10 | $ | 0.08 | $ | 0.07 | $ | 0.11 | $ | 0.12 | |||||
| Year-to-date | |||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 |
June 30, 2017 |
|||||||
| Mortgage loans funded for sale | $ | 257,252 | $ | 259,002 | |||||
| Mortgage loan refinances to total fundings | 12 | % | 18 | % | |||||
| Net realized gains on mortgage loans sold | $ | 7,398 | $ | 8,711 | |||||
| Change in fair value of mortgage loan commitments, net | 348 | 427 | |||||||
| Total production revenue | 7,746 | 9,138 | |||||||
| Mortgage servicing revenue | 2,438 | 1,991 | |||||||
| Change in fair value of mortgage servicing rights, net1 | (144 | ) | 234 | ||||||
| Total mortgage servicing revenue, net | 2,294 | 2,225 | |||||||
| Other mortgage banking revenue | 382 | 438 | |||||||
| Total mortgage banking income | $ | 10,422 | $ | 11,801 | |||||
| Net interest income | $ | 602 | $ | 575 | |||||
| Mortgage banking income | 10,422 | 11,801 | |||||||
| Other operating expense | 9,286 | 10,045 | |||||||
| Income before provision for income taxes | 1,738 | 2,331 | |||||||
| Provision for income taxes | 494 | 963 | |||||||
| Net income attributable to Northrim BanCorp | $ | 1,244 | $ | 1,368 | |||||
| Average diluted shares | 6,972,744 | 6,996,160 | |||||||
| Diluted earnings per share | $ | 0.18 | $ | 0.20 | |||||
2Principally reflects changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates, net of collection/realization of expected cash flows over time.
| Year-to-date | |||||||||
| (Dollars in thousands, except per share data) | June 30, 2018 |
June 30, 2017 |
|||||||
| Net income attributable to Northrim BanCorp | $ | 1,244 | $ | 1,368 | |||||
| Impact of one-time and other non-operating items: | |||||||||
| Writedown minority interest in equity method investment | — | — | |||||||
| Provision for income taxes related to above items | — | — | |||||||
| Provision for income taxes, change in DTA valuation | — | — | |||||||
| Operating net income* | $ | 1,244 | $ | 1,368 | |||||
| Average diluted shares | 6,972,744 | 6,996,160 | |||||||
| Operating diluted earnings per share* | $ | 0.18 | $ | 0.20 | |||||
Balance Sheet Review
Northrim’s total assets were $1.47 billion at June 30, 2018, down 4% from the preceding quarter and 1% from a year ago. “A number of factors contributed to the contraction in the balance sheet including normal seasonality in the first half of the year, timing of repayments and loan funding and asset/liability balancing,” said Schierhorn. Northrim’s loan to deposit ratio was 80.3% at June 30, 2018, compared to 76.7% at March 31, 2018, and 80.2% at June 30, 2017.
Average interest-earning assets were $1.34 billion in the second quarter, down 1.3% from the first quarter of 2018 and 1.9% from the second quarter a year ago. The average yield on interest-earning assets was 4.74% in the second quarter of 2018, up from 4.49% in the preceding quarter and 4.45% in the like quarter a year ago. For the first six months of 2018, average interest-earning assets declined slightly to $1.34 billion from $1.36 billion in the first half of 2017. Average yields were 4.61% in the first six months of 2018, compared to 4.43% in the first half of 2017.
Average investment securities totaled $287.0 million, a decrease of 12% in the second quarter of 2018 compared to the year ago quarter and down 9% from the first quarter of 2018. The investment portfolio generated an average net tax equivalent yield of 2.09% for the second quarter of 2018, up from 1.85% in the preceding quarter and 1.65% a year ago. The average estimated duration of the investment portfolio was 25 months, at June 30, 2018, which is expected to generate improvement in yields as securities reprice in this rising interest rate environment. For the first six months of 2018, average investment securities declined to $300.5 million with an average yield of 1.96% compared to $324.6 million and an average yield of 1.62% for the first six months of 2017.
Loans held for sale increased 32% to $54.3 million in the second quarter of 2018 compared to the preceding quarter and were flat from a year ago, primarily reflecting the seasonality of the mortgage business and the volatility of demand for home loans in the Alaska marketplace.
Portfolio loans were $967.7 million at the end of the second quarter of 2018 unchanged from the preceding quarter and down 2% from a year ago. Average portfolio loans in the second quarter of 2018 were $963.7 million virtually unchanged from both the year ago and preceding quarters. Yields on average portfolio loans in the second quarter of 2018 improved to 5.65% from 5.52% in the first quarter of 2018 and 5.51% in the second quarter of 2017. Average portfolio loans in the first half of 2018 were down 1% to $959.7 million with a yield of 5.59% compared to $969.8 million and a yield of 5.47% for the first half of 2017.
Alaskans account for substantially all of Northrim’s deposit base, which is primarily made up of low-cost transaction accounts. Balances in transaction accounts at June 30, 2018, represented 92% of total deposits. At June 30, 2018, total deposits were $1.21 billion, down from $1.26 billion at March 31, 2018, and $1.23 billion a year ago. Average interest-bearing deposits were down 1.3% to $818.6 million with an average cost of 0.22% in the second quarter of 2018, compared to $829.5 million and 0.18% in the first quarter of 2018, and down 2.1% from $836.1 million and 0.22% in the second quarter of 2017. Average interest-bearing deposits were stable in the first six months of 2018 at $824.0 million and 0.20% compared to $825.2 million and 0.22% in the first six months of 2017.
Shareholders’ equity increased 4% to $199.5 million, or $29.02 per share, at June 30, 2018, compared to $191.8 million, or $27.75 per share, a year ago. Tangible book value per share* was $26.66 at June 30, 2018, compared to $25.40 per share a year ago. Northrim continues to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under the Basel III and Dodd Frank regulatory standards with Tier 1 Capital to Risk Adjusted Assets of 15.10% at June 30, 2018.
Asset Quality
Asset quality in the second quarter improved with both net nonperforming assets ("NPAs") and adversely classified loans declining. NPAs decreased to $24.0 million at June 30, 2018, compared to $26.1 million at the end of the preceding quarter, reflecting $1.9 million in payments, and declined from $25.8 million at June 30, 2017, primarily due to loan payments which exceeded NPA additions. Of the NPAs, $16.1 million or 97% are nonaccrual loans related to four commercial relationships. Two of these relationships, which totaled $8.7 million at the end of the second quarter of 2018, are businesses in the medical industry.
Net adversely classified loans were $33.2 million at the end of the second quarter of 2018 as compared to $34.9 million at the end of the first quarter of 2018 and $32.4 million one year ago. Net loan charge-offs in the second quarter of 2018 were $41,000 compared to $1.0 million in the preceding quarter and $132,000 in the year ago quarter. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. As of June 30, 2018, $27.9 million, or 84% of net adversely classified loans are attributable to seven relationships with three loans to commercial businesses, two loans to medical businesses, and two loans to oilfield services commercial businesses.
The following table details loan charge-offs, by industry:
| (Dollars in thousands) | Three Months Ended | ||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||
| Charge-offs: | |||||||||||||||
| Transportation and warehousing | $ | — | $ | — | $ | 24 | $ | 339 | $ | — | |||||
| Other services | 78 | — | 5 | 48 | — | ||||||||||
| Retail trade | — | — | — | — | 202 | ||||||||||
| News media | — | — | — | 731 | — | ||||||||||
| Health care and social assistance | — | 965 | — | — | — | ||||||||||
| Consumer | 22 | 139 | 26 | 85 | 5 | ||||||||||
| Total charge-offs | $ | 100 | $ | 1,104 | $ | 55 | $ | 1,203 | $ | 207 | |||||
Performing restructured loans that were not included in nonaccrual loans at the end of the second quarter of 2018 were $9.1 million, down slightly from $9.2 million in the preceding quarter and up from $5.7 million a year ago. The increase in the second quarter of 2018 compared to the year ago quarter is primarily due to the addition of two commercial relationships. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans. The Company presents restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.
Northrim estimates that $60.6 million, or approximately 6% of portfolio loans as of June 30, 2018, had direct exposure to the oil and gas industry in Alaska, and $6.1 million of these loans are adversely classified. As of June 30, 2018, Northrim has an additional $38.1 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and none of these unfunded commitments are considered to be adversely classified loans. “We continue to have no loans to oil producers or exploration companies,” added Ballard. “We define direct exposure to the oil and gas sector as loans to borrowers that provide oilfield services and other companies that we have identified as significantly reliant upon activity in Alaska related to the oil and gas industry, such as lodging, equipment rental, transportation and other logistics services specific to this industry.”
About Northrim BanCorp
Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 14 branches in Anchorage, the Matanuska Valley, Juneau, Fairbanks, Ketchikan, and Sitka serving 90% of Alaska’s population; and an asset based lending division in Washington; and a wholly-owned mortgage brokerage company, Residential Mortgage Holding Company, LLC. The Bank differentiates itself with its detailed knowledge of Alaska’s economy and its “Customer First Service” philosophy. Pacific Wealth Advisors, LLC is an affiliated company of Northrim BanCorp.
Forward-Looking Statement
This release may contain “forward-looking statements” as that term is defined for purposes of Section 21E of the Securities Exchange Act of 1934. These statements are, in effect, management’s attempt to predict future events, and thus are subject to various risks and uncertainties. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy and management’s plans and objectives for future operations are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend” and words or phrases of similar meaning, as they relate to Northrim and its management are intended to help identify forward-looking statements. Although we believe that management’s expectations as reflected in forward-looking statements are reasonable, we cannot assure readers that those expectations will prove to be correct. Forward looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: our ability to maintain strong asset quality and to maintain or expand our market share or net interest margins; and our ability to execute our business plan. Further, actual results may be affected by our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy as those factors relate to our cost of funds and return on assets. In addition, there are risks inherent in the banking industry relating to collectability of loans and changes in interest rates. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and from time to time are disclosed in our other filings with the Securities and Exchange Commission. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations. These forward-looking statements are made only as of the date of this release, and Northrim does not undertake any obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.
References:
http://www.conocophillips.com/news-media/story/conocophillips-announces-successful-results-of-2018-winter-exploration-and-appraisal-program-in-alaska/
http://www.conocophillips.com/news-media/
http://www.alaskanomics.com/housing/
http://labor.alaska.gov/trends/jul18.pdf
http://www.alaskajournal.com/2018-07-18/conocophillips-raises-reserve-totals-slope-discoveries#.W1XbJnkm7cs
| Income Statement | |||||||||||||
| (Dollars in thousands, except per share data) | Three Months Ended | ||||||||||||
| (Unaudited) | June 30, | March 31, | Three Month | June 30, | Year-Over-Year | ||||||||
| 2018 | 2018 | % Change | 2017 | % Change | |||||||||
| Interest Income: | |||||||||||||
| Interest and fees on loans | $ | 14,036 | $ | 13,263 | 6 | % | $ | 13,601 | 3 | % | |||
| Interest on portfolio investments | 1,400 | 1,348 | 4 | % | 1,227 | 14 | % | ||||||
| Interest on deposits in banks | 159 | 184 | -14 | % | 64 | 148 | % | ||||||
| Total interest income | 15,595 | 14,795 | 5 | % | 14,892 | 5 | % | ||||||
| Interest Expense: | |||||||||||||
| Interest expense on deposits | 446 | 372 | 20 | % | 451 | -1 | % | ||||||
| Interest expense on borrowings | 160 | 160 | — | % | 197 | -19 | % | ||||||
| Total interest expense | 606 | 532 | 14 | % | 648 | -6 | % | ||||||
| Net interest income | 14,989 | 14,263 | 5 | % | 14,244 | 5 | % | ||||||
| (Benefit) provision for loan losses | (300 | ) | — | -100 | % | 300 | -200 | % | |||||
| Net interest income after provision for loan losses | 15,289 | 14,263 | 7 | % | 13,944 | 10 | % | ||||||
| Other Operating Income: | |||||||||||||
| Mortgage banking income | 5,478 | 4,944 | 11 | % | 6,351 | -14 | % | ||||||
| Purchased receivable income | 867 | 840 | 3 | % | 776 | 12 | % | ||||||
| Bankcard fees | 707 | 625 | 13 | % | 658 | 7 | % | ||||||
| Service charges on deposit accounts | 376 | 354 | 6 | % | 409 | -8 | % | ||||||
| Employee benefit plan income | — | — | — | % | 961 | -100 | % | ||||||
| Other income | 886 | 699 | 27 | % | 607 | 46 | % | ||||||
| Total other operating income | 8,314 | 7,462 | 11 | % | 9,762 | -15 | % | ||||||
| Other Operating Expense: | |||||||||||||
| Salaries and other personnel expense | 11,362 | 10,585 | 7 | % | 11,793 | -4 | % | ||||||
| Data processing expense | 1,323 | 1,548 | -15 | % | 1,453 | -9 | % | ||||||
| Occupancy expense | 1,020 | 1,700 | -40 | % | 1,664 | -39 | % | ||||||
| Professional and outside services | 554 | 499 | 11 | % | 612 | -9 | % | ||||||
| Marketing expense | 462 | 632 | -27 | % | 891 | -48 | % | ||||||
| Insurance expense | 178 | 296 | -40 | % | 194 | -8 | % | ||||||
| Intangible asset amortization expense | 17 | 18 | -6 | % | 27 | -37 | % | ||||||
| OREO expense, net rental income and gains on sale | 11 | 103 | -89 | % | 83 | -87 | % | ||||||
| Other operating expense | 1,679 | 1,414 | 19 | % | 1,793 | -6 | % | ||||||
| Total other operating expense | 16,606 | 16,795 | -1 | % | 18,510 | -10 | % | ||||||
| Income before provision for income taxes | 6,997 | 4,930 | 42 | % | 5,196 | 35 | % | ||||||
| Provision for income taxes | 1,167 | 868 | 34 | % | 1,455 | -20 | % | ||||||
| Net income | 5,830 | 4,062 | 44 | % | 3,741 | 56 | % | ||||||
| Less: Net income attributable to the noncontrolling interest | — | — | — | % | 152 | -100 | % | ||||||
| Net income attributable to Northrim BanCorp | $ | 5,830 | $ | 4,062 | 44 | % | $ | 3,589 | 62 | % | |||
| Basic EPS | $ | 0.85 | $ | 0.59 | 44 | % | $ | 0.52 | 63 | % | |||
| Diluted EPS | $ | 0.84 | $ | 0.58 | 45 | % | $ | 0.51 | 65 | % | |||
| Average basic shares | 6,872,371 | 6,871,963 | 0 | % | 6,910,679 | -1 | % | ||||||
| Average diluted shares | 6,976,985 | 6,968,082 | 0 | % | 6,997,727 | 0 | % | ||||||
| Income Statement | ||||||||
| (Dollars in thousands, except per share data) | Six months ended June 30, | |||||||
| (Unaudited) | Year-Over-Year | |||||||
| 2018 | 2017 | % Change | ||||||
| Interest Income: | ||||||||
| Interest and fees on loans | $ | 27,299 | $ | 26,839 | 2 | % | ||
| Interest on portfolio investments | 2,748 | 2,406 | 14 | % | ||||
| Interest on deposits in banks | 343 | 112 | 206 | % | ||||
| Total interest income | 30,390 | 29,357 | 4 | % | ||||
| Interest Expense: | ||||||||
| Interest expense on deposits | 818 | 896 | -9 | % | ||||
| Interest expense on borrowings | 320 | 384 | -17 | % | ||||
| Total interest expense | 1,138 | 1,280 | -11 | % | ||||
| Net interest income | 29,252 | 28,077 | 4 | % | ||||
| (Benefit) provision for loan losses | (300 | ) | 700 | -143 | % | |||
| Net interest income after provision for loan losses | 29,552 | 27,377 | 8 | % | ||||
| Other Operating Income: | ||||||||
| Mortgage banking income | 10,422 | 11,801 | -12 | % | ||||
| Purchased receivable income | 1,707 | 1,465 | 17 | % | ||||
| Bankcard fees | 1,332 | 1,239 | 8 | % | ||||
| Service charges on deposit accounts | 730 | 848 | -14 | % | ||||
| Gain (loss) on sale of securities | — | 14 | -100 | % | ||||
| Employee benefit plan income | — | 1,897 | -100 | % | ||||
| Other income | 1,585 | 1,403 | 13 | % | ||||
| Total other operating income | 15,776 | 18,667 | -15 | % | ||||
| Other Operating Expense: | ||||||||
| Salaries and other personnel expense | 21,947 | 22,635 | -3 | % | ||||
| Data processing expense | 2,871 | 2,700 | 6 | % | ||||
| Occupancy expense | 2,720 | 3,285 | -17 | % | ||||
| Marketing expense | 1,094 | 1,401 | -22 | % | ||||
| Professional and outside services | 1,053 | 1,234 | -15 | % | ||||
| Insurance expense | 474 | 447 | 6 | % | ||||
| OREO expense, net rental income and gains on sale | 114 | 260 | -56 | % | ||||
| Intangible asset amortization expense | 35 | 53 | -34 | % | ||||
| Compensation expense - RML acquisition payments | — | 174 | -100 | % | ||||
| Other operating expense | 3,093 | 2,936 | 5 | % | ||||
| Total other operating expense | 33,401 | 35,125 | -5 | % | ||||
| Income before provision for income taxes | 11,927 | 10,919 | 9 | % | ||||
| Provision for income taxes | 2,035 | 3,256 | -38 | % | ||||
| Net income | 9,892 | 7,663 | 29 | % | ||||
| Less: Net income attributable to the noncontrolling interest | — | 249 | -100 | % | ||||
| Net income attributable to Northrim BanCorp | $ | 9,892 | $ | 7,414 | 33 | % | ||
| Basic EPS | $ | 1.44 | $ | 1.07 | 35 | % | ||
| Diluted EPS | $ | 1.42 | $ | 1.06 | 34 | % | ||
| Average basic shares | 6,872,167 | 6,910,230 | -1 | % | ||||
| Average diluted shares | 6,972,744 | 6,996,160 | 0 | % | ||||
| Balance Sheet | |||||||||||||
| (Dollars in thousands) | |||||||||||||
| (Unaudited) | June 30, | March 31, | Three Month | June 30, | One Year | ||||||||
| 2018 | 2018 | % Change | 2017 | % Change | |||||||||
| Assets: | |||||||||||||
| Cash and due from banks | $ | 26,355 | $ | 15,170 | 74 | % | $ | 25,187 | 5 | % | |||
| Interest bearing deposits in other banks | 9,775 | 68,792 | -86 | % | 606 | 1,513 | % | ||||||
| Investment securities available for sale | 264,124 | 297,573 | -11 | % | 291,579 | -9 | % | ||||||
| Investment securities held to maturity | — | — | — | % | 898 | -100 | % | ||||||
| Marketable securities | 6,006 | 5,527 | 9 | % | 5,643 | 6 | % | ||||||
| Investment in Federal Home Loan Bank stock | 2,104 | 2,105 | 0 | % | 1,993 | 6 | % | ||||||
| Loans held for sale | 54,306 | 41,216 | 32 | % | 54,090 | 0 | % | ||||||
| Portfolio loans | 967,702 | 967,575 | 0 | % | 990,380 | -2 | % | ||||||
| Allowance for loan losses | (20,108 | ) | (20,449 | ) | -2 | % | (20,061 | ) | 0 | % | |||
| Net portfolio loans | 947,594 | 947,126 | 0 | % | 970,319 | -2 | % | ||||||
| Purchased receivables, net | 20,323 | 19,412 | 5 | % | 19,835 | 2 | % | ||||||
| Mortgage servicing rights | 8,733 | 8,039 | 9 | % | 5,828 | 50 | % | ||||||
| Other real estate owned, net | 8,959 | 8,815 | 2 | % | 4,315 | 108 | % | ||||||
| Premises and equipment, net | 38,113 | 37,331 | 2 | % | 39,997 | -5 | % | ||||||
| Goodwill and intangible assets | 16,189 | 16,207 | 0 | % | 16,271 | -1 | % | ||||||
| Other assets | 67,859 | 57,428 | 18 | % | 56,042 | 21 | % | ||||||
| Total assets | $ | 1,470,440 | $ | 1,524,741 | -4 | % | $ | 1,492,603 | -1 | % | |||
| Liabilities: | |||||||||||||
| Demand deposits | $ | 401,925 | $ | 433,046 | -7 | % | $ | 395,310 | 2 | % | |||
| Interest-bearing demand | 246,628 | 244,601 | 1 | % | 231,073 | 7 | % | ||||||
| Savings deposits | 237,978 | 246,981 | -4 | % | 249,275 | -5 | % | ||||||
| Money market deposits | 223,189 | 239,242 | -7 | % | 231,780 | -4 | % | ||||||
| Time deposits | 95,801 | 96,920 | -1 | % | 126,872 | -24 | % | ||||||
| Total deposits | 1,205,521 | 1,260,790 | -4 | % | 1,234,310 | -2 | % | ||||||
| Securities sold under repurchase agreements | 27,695 | 31,018 | -11 | % | 24,392 | 14 | % | ||||||
| Other borrowings | 7,312 | 7,338 | 0 | % | 4,314 | 69 | % | ||||||
| Junior subordinated debentures | 10,310 | 10,310 | — | % | 18,558 | -44 | % | ||||||
| Other liabilities | 20,146 | 20,312 | -1 | % | 19,252 | 5 | % | ||||||
| Total liabilities | 1,270,984 | 1,329,768 | -4 | % | 1,300,826 | -2 | % | ||||||
| Shareholders' Equity: | |||||||||||||
| Northrim BanCorp shareholders' equity | 199,456 | 194,973 | 2 | % | 191,644 | 4 | % | ||||||
| Noncontrolling interest | — | — | — | % | 133 | -100 | % | ||||||
| Total shareholders' equity | 199,456 | 194,973 | 2 | % | 191,777 | 4 | % | ||||||
| Total liabilities and shareholders' equity | $ | 1,470,440 | $ | 1,524,741 | -4 | % | $ | 1,492,603 | -1 | % | |||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Composition of Portfolio Investments | |||||||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 | |||||||||||||||
| Balance | % of total | Balance | % of total | Balance | % of total | ||||||||||||
| U.S. Treasury securities | $ | 39,534 | 14.6 | % | $ | 49,603 | 16.4 | % | $ | 30,039 | 10.1 | % | |||||
| U.S. Agency securities | 169,158 | 62.7 | % | 193,715 | 63.9 | % | 206,042 | 69.1 | % | ||||||||
| U.S. Agency mortgage-backed securities | — | 0.0 | % | — | 0.0 | % | 1 | — | % | ||||||||
| Corporate securities | 43,496 | 16.1 | % | 39,996 | 13.2 | % | 40,698 | 13.7 | % | ||||||||
| Collateralized loan obligations | 6,007 | 2.2 | % | 6,010 | 2.0 | % | 3,000 | 1.0 | % | ||||||||
| Alaska municipality, utility, or state bonds | 7,348 | 2.7 | % | 9,160 | 3.0 | % | 13,553 | 4.5 | % | ||||||||
| Other municipality, utility, or state bonds | 4,587 | 1.7 | % | 4,616 | 1.5 | % | 4,787 | 1.6 | % | ||||||||
| Total portfolio investments | $ | 270,130 | $ | 303,100 | $ | 298,120 | |||||||||||
| Composition of Portfolio Loans | |||||||||||||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||||||||||||
| Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | ||||||||||||||||||||
| Commercial loans | $ | 327,733 | 34 | % | $ | 316,081 | 33 | % | $ | 313,514 | 33 | % | $ | 315,226 | 32 | % | $ | 309,177 | 31 | % | |||||||||
| CRE owner occupied loans | 127,384 | 13 | % | 132,589 | 14 | % | 132,041 | 14 | % | 134,994 | 14 | % | 139,414 | 14 | % | ||||||||||||||
| CRE nonowner occupied loans | 385,648 | 40 | % | 395,915 | 41 | % | 359,725 | 38 | % | 386,137 | 38 | % | 401,493 | 40 | % | ||||||||||||||
| Construction loans | 89,433 | 9 | % | 85,257 | 9 | % | 111,294 | 12 | % | 111,427 | 11 | % | 98,713 | 10 | % | ||||||||||||||
| Consumer loans | 41,711 | 4 | % | 41,841 | 3 | % | 42,535 | 3 | % | 44,681 | 5 | % | 45,727 | 5 | % | ||||||||||||||
| Subtotal | 971,909 | 971,683 | 959,109 | 992,465 | 994,524 | ||||||||||||||||||||||||
| Unearned loan fees, net | (4,207 | ) | (4,108 | ) | (4,156 | ) | (3,975 | ) | (4,144 | ) | |||||||||||||||||||
| Total portfolio loans | $ | 967,702 | $ | 967,575 | $ | 954,953 | $ | 988,490 | $ | 990,380 | |||||||||||||||||||
| Composition of Deposits | |||||||||||||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||||||||||||
| Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | ||||||||||||||||||||
| Demand deposits | $ | 401,925 | 33 | % | $ | 433,046 | 34 | % | $ | 414,686 | 33 | % | $ | 426,946 | 34 | % | $ | 395,310 | 32 | % | |||||||||
| Interest-bearing demand | 246,628 | 20 | % | 244,601 | 19 | % | 252,009 | 20 | % | 240,274 | 19 | % | 231,073 | 19 | % | ||||||||||||||
| Savings deposits | 237,978 | 20 | % | 246,981 | 20 | % | 247,458 | 20 | % | 251,266 | 20 | % | 249,275 | 20 | % | ||||||||||||||
| Money market deposits | 223,189 | 19 | % | 239,242 | 19 | % | 243,603 | 19 | % | 233,768 | 19 | % | 231,780 | 19 | % | ||||||||||||||
| Time deposits | 95,801 | 8 | % | 96,920 | 8 | % | 100,527 | 8 | % | 106,063 | 8 | % | 126,872 | 10 | % | ||||||||||||||
| Total deposits | $ | 1,205,521 | $ | 1,260,790 | $ | 1,258,283 | $ | 1,258,317 | $ | 1,234,310 | |||||||||||||||||||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Asset Quality | ||||||||||||
| June 30, | March 31, | June 30, | ||||||||||
| 2018 | 2018 | 2017 | ||||||||||
| Nonaccrual loans | $ | 16,635 | $ | 18,895 | $ | 22,899 | ||||||
| Loans 90 days past due and accruing | — | 84 | 468 | |||||||||
| Total nonperforming loans | 16,635 | 18,979 | 23,367 | |||||||||
| Nonperforming loans guaranteed by government | (327 | ) | (412 | ) | (1,849 | ) | ||||||
| Net nonperforming loans | 16,308 | 18,567 | 21,518 | |||||||||
| Other real estate owned | 8,959 | 8,815 | 4,315 | |||||||||
| Other real estate owned guaranteed by government | (1,280 | ) | (1,280 | ) | — | |||||||
| Net nonperforming assets | $ | 23,987 | $ | 26,102 | $ | 25,833 | ||||||
| Nonperforming loans / portfolio loans, net of government guarantees | 1.69 | % | 1.92 | % | 2.17 | % | ||||||
| Nonperforming assets / total assets, net of government guarantees | 1.63 | % | 1.71 | % | 1.73 | % | ||||||
| Performing restructured loans | $ | 9,096 | $ | 9,162 | $ | 5,678 | ||||||
| Nonperforming loans plus performing restructured loans, net of government | ||||||||||||
| guarantees | $ | 25,404 | $ | 27,729 | $ | 27,196 | ||||||
| Nonperforming loans plus performing restructured loans / portfolio loans, net of | ||||||||||||
| government guarantees | 2.63 | % | 2.87 | % | 2.75 | % | ||||||
| Nonperforming assets plus performing restructured loans / total assets, net of | ||||||||||||
| government guarantees | 2.25 | % | 2.31 | % | 2.11 | % | ||||||
| Adversely classified loans, net of government guarantees | $ | 33,178 | $ | 34,934 | $ | 32,440 | ||||||
| Loans 30-89 days past due and accruing, net of government guarantees / | ||||||||||||
| portfolio loans | 0.18 | % | 0.92 | % | 0.14 | % | ||||||
| Allowance for loan losses / portfolio loans | 2.08 | % | 2.11 | % | 2.03 | % | ||||||
| Allowance for loan losses / nonperforming loans, net of government guarantees | 123 | % | 110 | % | 93 | % | ||||||
| Gross loan charge-offs for the quarter | $ | 100 | $ | 1,104 | $ | 207 | ||||||
| Gross loan recoveries for the quarter | $ | (59 | ) | $ | (92 | ) | $ | (75 | ) | |||
| Net loan charge-offs for the quarter | $ | 41 | $ | 1,012 | $ | 132 | ||||||
| Net loan charge-offs year-to-date | $ | 1,053 | $ | 1,012 | $ | 336 | ||||||
| Net loan charge-offs for the quarter / average loans, for the quarter | 0.00 | % | 0.11 | % | 0.01 | % | ||||||
| Net loan charge-offs year-to-date / average loans, | ||||||||||||
| year-to-date annualized | 0.22 | % | 0.42 | % | 0.07 | % | ||||||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Nonperforming Assets Rollforward | ||||||||||||||||||||||||
| Balance at | Additions | Payments | Writedowns | Transfers to | Transfers to | Sales | Balance at | |||||||||||||||||
| March 31, 2018 |
this quarter |
this quarter |
/Charge-offs this quarter |
OREO | Performing Status this quarter |
this quarter |
June 30, 2018 |
|||||||||||||||||
| Commercial loans | $ | 17,268 | $ | — | $ | (1,890 | ) | $ | (77 | ) | $ | — | $ | (67 | ) | $ | — | $ | 15,234 | |||||
| Commercial real estate | 1,331 | — | — | — | — | — | — | 1,331 | ||||||||||||||||
| Construction loans | — | — | — | — | — | — | — | — | ||||||||||||||||
| Consumer loans | 380 | 80 | (85 | ) | (22 | ) | (283 | ) | — | — | 70 | |||||||||||||
| Non-performing loans guaranteed by government | (412 | ) | — | 85 | — | — | — | — | (327 | ) | ||||||||||||||
| Total non-performing loans | 18,567 | 80 | (1,890 | ) | (99 | ) | (283 | ) | (67 | ) | — | 16,308 | ||||||||||||
| Other real estate owned | 8,815 | 300 | — | — | — | — | (156 | ) | 8,959 | |||||||||||||||
| Other real estate owned guaranteed | ||||||||||||||||||||||||
| by government | (1,280 | ) | — | — | — | — | — | — | (1,280 | ) | ||||||||||||||
| Total non-performing assets, | ||||||||||||||||||||||||
| net of government guarantees | $ | 26,102 | $ | 380 | $ | (1,890 | ) | $ | (99 | ) | $ | (283 | ) | $ | (67 | ) | $ | (156 | ) | $ | 23,987 | |||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Average Balances, Yields, and Rates | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 | |||||||||||||||
| Average | Average | Average | |||||||||||||||
| Average | Tax Equivalent |
Average | Tax Equivalent |
Average | Tax Equivalent |
||||||||||||
| Balance | Yield/Rate | Balance | Yield/Rate | Balance | Yield/Rate | ||||||||||||
| Assets | |||||||||||||||||
| Interest bearing deposits in other banks | $ | 35,846 | 1.75 | % | $ | 48,177 | 1.53 | % | $ | 25,489 | 1.00 | % | |||||
| Portfolio investments | 287,003 | 2.09 | % | 314,099 | 1.85 | % | 325,515 | 1.65 | % | ||||||||
| Loans held for sale | 48,608 | 4.32 | % | 34,503 | 3.73 | % | 40,906 | 3.88 | % | ||||||||
| Portfolio loans | 963,724 | 5.65 | % | 955,718 | 5.52 | % | 969,051 | 5.51 | % | ||||||||
| Total interest-earning assets | 1,335,181 | 4.74 | % | 1,352,497 | 4.49 | % | 1,360,961 | 4.45 | % | ||||||||
| Nonearning assets | 145,520 | 141,588 | 145,859 | ||||||||||||||
| Total assets | $ | 1,480,701 | $ | 1,494,085 | $ | 1,506,820 | |||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||
| Interest-bearing deposits | $ | 818,592 | 0.22 | % | $ | 829,545 | 0.18 | % | $ | 836,117 | 0.22 | % | |||||
| Borrowings | 44,897 | 1.40 | % | 46,263 | 1.38 | % | 51,976 | 1.49 | % | ||||||||
| Total interest-bearing liabilities | 863,489 | 0.28 | % | 875,808 | 0.25 | % | 888,093 | 0.29 | % | ||||||||
| Noninterest-bearing demand deposits | 399,311 | 404,200 | 408,466 | ||||||||||||||
| Other liabilities | 19,626 | 18,581 | 16,605 | ||||||||||||||
| Shareholders' equity | 198,275 | 195,496 | 193,656 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,480,701 | $ | 1,494,085 | $ | 1,506,820 | |||||||||||
| Net spread | 4.46 | % | 4.24 | % | 4.16 | % | |||||||||||
| NIM | 4.50 | % | 4.28 | % | 4.20 | % | |||||||||||
| NIMTE* | 4.56 | % | 4.33 | % | 4.26 | % | |||||||||||
| Average portfolio loans to average | |||||||||||||||||
| interest-earning assets | 72.18 | % | 70.66 | % | 71.20 | % | |||||||||||
| Average portfolio loans to average total deposits | 79.13 | % | 77.46 | % | 77.86 | % | |||||||||||
| Average non-interest deposits to average | |||||||||||||||||
| total deposits | 32.79 | % | 32.76 | % | 32.82 | % | |||||||||||
| Average interest-earning assets to average | |||||||||||||||||
| interest-bearing liabilities | 154.63 | % | 154.43 | % | 153.25 | % | |||||||||||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Average Balances, Yields, and Rates | |||||||||||
| Year-to-date | |||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||
| Average | Average | ||||||||||
| Average | Tax Equivalent | Average | Tax Equivalent | ||||||||
| Balance | Yield/Rate | Balance | Yield/Rate | ||||||||
| Assets | |||||||||||
| Interest bearing deposits in other banks | $ | 41,977 | 1.63 | % | $ | 24,495 | 0.91 | % | |||
| Portfolio investments | 300,476 | 1.96 | % | 324,639 | 1.62 | % | |||||
| Loans held for sale | 41,594 | 4.07 | % | 37,688 | 3.91 | % | |||||
| Portfolio loans | 959,743 | 5.59 | % | 969,768 | 5.47 | % | |||||
| Total interest-earning assets | 1,343,790 | 4.61 | % | 1,356,590 | 4.43 | % | |||||
| Nonearning assets | 143,565 | 142,650 | |||||||||
| Total assets | $ | 1,487,355 | $ | 1,499,240 | |||||||
| Liabilities and Shareholders' Equity | |||||||||||
| Interest-bearing deposits | $ | 824,038 | 0.20 | % | $ | 825,235 | 0.22 | % | |||
| Borrowings | 45,577 | 1.39 | % | 52,275 | 1.45 | % | |||||
| Total interest-bearing liabilities | 869,615 | 0.26 | % | 877,510 | 0.29 | % | |||||
| Noninterest-bearing demand deposits | 401,742 | 412,568 | |||||||||
| Other liabilities | 19,105 | 18,835 | |||||||||
| Shareholders' equity | 196,893 | 190,327 | |||||||||
| Total liabilities and shareholders' equity | $ | 1,487,355 | $ | 1,499,240 | |||||||
| Net spread | 4.35 | % | 4.14 | % | |||||||
| NIM | 4.39 | % | 4.17 | % | |||||||
| NIMTE* | 4.44 | % | 4.24 | % | |||||||
| Average portfolio loans to average interest-earning assets | 71.42 | % | 71.49 | % | |||||||
| Average portfolio loans to average total deposits | 78.30 | % | 78.35 | % | |||||||
| Average non-interest deposits to average total deposits | 32.77 | % | 33.33 | % | |||||||
| Average interest-earning assets to average interest-bearing liabilities | 154.53 | % | 154.60 | % | |||||||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Capital Data (At quarter end) | ||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 | ||||||||||
| Book value per share | $ | 29.02 | $ | 28.37 | $ | 27.75 | ||||||
| Tangible book value per share* | $ | 26.66 | $ | 26.01 | $ | 25.40 | ||||||
| Total shareholders' equity/total assets | 13.56 | % | 12.79 | % | 12.85 | % | ||||||
| Tangible Common Equity/Tangible Assets* | 12.60 | % | 11.85 | % | 11.89 | % | ||||||
| Tier 1 Capital / Risk Adjusted Assets | 15.10 | % | 14.88 | % | 14.98 | % | ||||||
| Total Capital / Risk Adjusted Assets | 16.35 | % | 16.14 | % | 16.23 | % | ||||||
| Tier 1 Capital / Average Assets | 13.23 | % | 12.82 | % | 12.97 | % | ||||||
| Shares outstanding | 6,872,959 | 6,871,963 | 6,910,679 | |||||||||
| Unrealized loss on AFS debt securities, net of income taxes | $ | (1,506 | ) | $ | (1,530 | ) | $ | 28 | ||||
| Unrealized gain on derivatives and hedging activities | $ | 805 | $ | 651 | $ | — | ||||||
| Profitability Ratios | |||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||
| For the quarter: | |||||||||||||||
| NIM | 4.50 | % | 4.28 | % | 4.25 | % | 4.28 | % | 4.20 | % | |||||
| NIMTE* | 4.56 | % | 4.33 | % | 4.31 | % | 4.34 | % | 4.26 | % | |||||
| Efficiency ratio | 71.19 | % | 77.22 | % | 80.92 | % | 61.40 | % | 76.99 | % | |||||
| Return on average assets | 1.58 | % | 1.10 | % | 0.06 | % | 1.44 | % | 0.96 | % | |||||
| Return on average equity | 11.79 | % | 8.43 | % | 0.43 | % | 11.25 | % | 7.43 | % | |||||
| June 30, 2018 | June 30, 2017 | |||||||||||
| Year-to-date: | ||||||||||||
| NIM | 4.39 | % | 4.17 | % | ||||||||
| NIMTE* | 4.44 | % | 4.24 | % | ||||||||
| Efficiency ratio | 74.10 | % | 75.03 | % | ||||||||
| Return on average assets | 1.34 | % | 1.00 | % | ||||||||
| Return on average equity | 10.13 | % | 7.86 | % | ||||||||
*Non-GAAP Financial Measures
(Dollars and shares in thousands, except per share data)
(Unaudited)
NIMTE
NIMTE is a non-GAAP performance measurement in which interest income on non-taxable investments and loans is presented on a tax equivalent basis using a combined federal and state statutory rate of 28.43% in 2018 and 41.11% in 2017. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of NIMTE to net interest margin.
| Three Months Ended | |||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Net interest income | $ | 14,989 | $ | 14,263 | $ | 14,684 | $ | 14,917 | $ | 14,244 | |||||||||
| Divided by average interest-bearing assets | 1,335,181 | 1,352,497 | 1,372,033 | 1,383,252 | 1,360,961 | ||||||||||||||
| Net interest margin ("NIM")3 | 4.50 | % | 4.28 | % | 4.25 | % | 4.28 | % | 4.20 | % | |||||||||
| Net interest income | $ | 14,989 | $ | 14,263 | $ | 14,684 | $ | 14,917 | $ | 14,244 | |||||||||
| Plus: reduction in tax expense related to | |||||||||||||||||||
| tax-exempt interest income | 175 | 173 | 204 | 220 | 224 | ||||||||||||||
| $ | 15,164 | $ | 14,436 | $ | 14,888 | $ | 15,137 | $ | 14,468 | ||||||||||
| Divided by average interest-bearing assets | 1,335,181 | 1,352,497 | 1,372,033 | 1,383,252 | 1,360,961 | ||||||||||||||
| NIMTE3 | 4.56 | % | 4.33 | % | 4.31 | % | 4.34 | % | 4.26 | % | |||||||||
| Year-to-date | |||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Net interest income | $ | 29,252 | $ | 28,077 | |||||||||
| Divided by average interest-bearing assets | 1,343,790 | 1,356,590 | |||||||||||
| Net interest margin ("NIM")4 | 4.39 | % | 4.17 | % | |||||||||
| Net interest income | $ | 29,252 | $ | 28,077 | |||||||||
| Plus: reduction in tax expense related to | |||||||||||||
| tax-exempt interest income | 348 | 442 | |||||||||||
| $ | 29,600 | $ | 28,519 | ||||||||||
| Divided by average interest-bearing assets | 1,343,790 | 1,356,590 | |||||||||||
| NIMTE4 | 4.44 | % | 4.24 | % | |||||||||
3Calculated using actual days in the quarter divided by 365 for quarters ended in 2018 and 2017.
4Calculated using actual days in the year divided by 365 for year-to-date periods in 2018 and 2017.
(Dollars and shares in thousands, except per share data)
(Unaudited)
Tangible Book Value
Tangible book value is a non-GAAP measure defined as shareholders' equity, less intangible assets, divided by shares outstanding. The following table sets forth the reconciliation of tangible book value per share and book value per share.
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Total shareholders' equity | $ | 199,456 | $ | 194,973 | $ | 192,802 | $ | 194,427 | $ | 191,777 | |||||||||
| Divided by shares outstanding | 6,873 | 6,872 | 6,872 | 6,852 | 6,911 | ||||||||||||||
| Book value per share | $ | 29.02 | $ | 28.37 | $ | 28.06 | $ | 28.37 | $ | 27.75 | |||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Total shareholders' equity | $ | 199,456 | $ | 194,973 | $ | 192,802 | $ | 194,427 | $ | 191,777 | |||||||||
| Less: goodwill and intangible assets | 16,189 | 16,207 | 16,224 | 16,245 | 16,271 | ||||||||||||||
| $ | 183,267 | $ | 178,766 | $ | 176,578 | $ | 178,182 | $ | 175,506 | ||||||||||
| Divided by shares outstanding | 6,873 | 6,872 | 6,872 | 6,852 | 6,911 | ||||||||||||||
| Tangible book value per share | $ | 26.66 | $ | 26.01 | $ | 25.70 | $ | 26.00 | $ | 25.40 | |||||||||
Tangible Common Equity to Tangible Assets
Tangible common equity to tangible assets is a non-GAAP ratio that represents total equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. This ratio has received more attention over the past several years from stock analysts and regulators. The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets.
|
Northrim BanCorp, Inc. |
June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||||||
| Total shareholders' equity | $ | 199,456 | $ | 194,973 | $ | 192,802 | $ | 194,427 | $ | 191,777 | |||||||||
| Total assets | 1,470,440 | 1,524,741 | 1,518,596 | 1,522,784 | 1,492,603 | ||||||||||||||
| Total shareholders' equity to total assets | 13.56 | % | 12.79 | % | 12.70 | % | 12.77 | % | 12.85 | % | |||||||||
|
Northrim BanCorp, Inc. |
June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||||||
| Total shareholders' equity | $ | 199,456 | $ | 194,973 | $ | 192,802 | $ | 194,427 | $ | 191,777 | |||||||||
| Less: goodwill and other intangible assets, net | 16,189 | 16,207 | 16,224 | 16,245 | 16,271 | ||||||||||||||
| Tangible common shareholders' equity | $ | 183,267 | $ | 178,766 | $ | 176,578 | $ | 178,182 | $ | 175,506 | |||||||||
| Total assets | $ | 1,470,440 | $ | 1,524,741 | $ | 1,518,596 | $ | 1,522,784 | $ | 1,492,603 | |||||||||
| Less: goodwill and other intangible assets, net | 16,189 | 16,207 | 16,224 | 16,245 | 16,271 | ||||||||||||||
| Tangible assets | $ | 1,454,251 | $ | 1,508,534 | $ | 1,502,372 | $ | 1,506,539 | $ | 1,476,332 | |||||||||
| Tangible common equity ratio | 12.60 | % | 11.85 | % | 11.75 | % | 11.83 | % | 11.89 | % | |||||||||
(Dollars and shares in thousands, except per share data)
(Unaudited)
Operating diluted earnings per share
Operating diluted earnings per share is a non-GAAP ratio that represents operating net income divided by average diluted shares. The most comparable GAAP measure is diluted earnings per share. The following table provides a reconciliation of operating diluted earnings per share with diluted earnings per share (See page 3 of this earnings release for a reconciliation between net income and operating net income):
| Northrim BanCorp, Inc. | Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Net income | $ | 5,830 | $ | 4,062 | $ | 214 | $ | 5,523 | $ | 3,589 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||||||
| Diluted earnings per share | $ | 0.84 | $ | 0.58 | $ | 0.03 | $ | 0.79 | $ | 0.51 | |||||||||
| Northrim BanCorp, Inc. | Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Operating net income | $ | 5,830 | $ | 4,062 | $ | 3,181 | $ | 3,100 | $ | 3,962 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||||||
| Operating diluted earnings per share | $ | 0.84 | $ | 0.58 | $ | 0.46 | $ | 0.45 | $ | 0.57 | |||||||||
| Northrim BanCorp, Inc. | Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Net income | $ | 9,892 | $ | 7,414 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,972,744 | 6,996,160 | |||||||||||
| Diluted earnings per share | $ | 1.42 | $ | 1.06 | |||||||||
| Northrim BanCorp, Inc. | Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Operating net income | $ | 9,892 | $ | 7,967 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,972,744 | 6,996,160 | |||||||||||
| Operating diluted earnings per share | $ | 1.42 | $ | 1.14 | |||||||||
| Community Banking | Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Net income | $ | 5,120 | $ | 3,528 | $ | (608 | ) | $ | 4,770 | $ | 2,757 | ||||||||
| Divided by weighted-average diluted shares outstanding | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||||||
| Diluted earnings per share | $ | 0.74 | $ | 0.50 | -$ | 0.09 | $ | 0.69 | $ | 0.39 | |||||||||
| Community Banking | Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Operating net income | $ | 5,120 | $ | 3,528 | $ | 2,688 | $ | 2,347 | $ | 3,130 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||||||
| Operating diluted earnings per share | $ | 0.74 | $ | 0.50 | $ | 0.39 | $ | 0.34 | $ | 0.45 | |||||||||
(Dollars and shares in thousands, except per share data)
(Unaudited)
| Community Banking | Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Net income | $ | 8,648 | $ | 6,046 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,972,744 | 6,996,160 | |||||||||||
| Diluted earnings per share | $ | 1.24 | $ | 0.86 | |||||||||
| Community Banking | Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Operating net income | $ | 8,648 | $ | 6,599 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,972,744 | 6,996,160 | |||||||||||
| Operating diluted earnings per share | $ | 1.24 | $ | 0.94 | |||||||||
| Home Mortgage Lending | Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Net income | $ | 710 | $ | 534 | $ | 822 | $ | 753 | $ | 832 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||||||
| Diluted earnings per share | $ | 0.10 | $ | 0.08 | $ | 0.12 | $ | 0.11 | $ | 0.12 | |||||||||
| Home Mortgage Lending | Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Operating net income | $ | 710 | $ | 534 | $ | 493 | $ | 753 | $ | 832 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,976,985 | 6,968,082 | 6,963,125 | 6,959,035 | 6,997,727 | ||||||||||||||
| Operating diluted earnings per share | $ | 0.10 | $ | 0.08 | $ | 0.07 | $ | 0.11 | $ | 0.12 | |||||||||
| Home Mortgage Lending | Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Net income | $ | 1,244 | $ | 1,368 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,972,744 | 6,996,160 | |||||||||||
| Diluted earnings per share | $ | 0.18 | $ | 0.20 | |||||||||
| Home Mortgage Lending | Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Operating net income | $ | 1,244 | $ | 1,368 | |||||||||
| Divided by weighted-average diluted shares outstanding | 6,972,744 | 6,996,160 | |||||||||||
| Operating diluted earnings per share | $ | 0.18 | $ | 0.20 | |||||||||
(Dollars and shares in thousands, except per share data)
(Unaudited)
Operating efficiency ratio
The operating efficiency ratio is a non-GAAP ratio that is calculated by dividing operating other operating expense (which exclude certain non-operating expense items), exclusive of intangible asset amortization, by the sum of net interest income and operating other operating income (which exclude certain non-operating income items). The following tables set forth the calculation of the operating efficiency ratio:
|
Northrim BanCorp, Inc. |
Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Total other operating expense | $ | 16,606 | $ | 16,795 | $ | 18,337 | $ | 17,691 | $ | 18,510 | |||||||||
| Less: intangible asset amortization | 17 | 18 | 21 | 26 | 27 | ||||||||||||||
| $ | 16,589 | $ | 16,777 | $ | 18,316 | $ | 17,665 | $ | 18,483 | ||||||||||
| Other operating income | $ | 8,314 | $ | 7,462 | $ | 7,952 | $ | 13,855 | $ | 9,762 | |||||||||
| Plus: net interest income | 14,989 | 14,263 | 14,684 | 14,917 | 14,244 | ||||||||||||||
| $ | 23,303 | $ | 21,725 | $ | 22,636 | $ | 28,772 | $ | 24,006 | ||||||||||
| Efficiency ratio | 71.19 | % | 77.22 | % | 80.92 | % | 61.40 | % | 76.99 | % | |||||||||
|
Northrim BanCorp, Inc. |
Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Total other operating expense | $ | 16,606 | $ | 16,795 | $ | 18,337 | $ | 17,691 | $ | 18,510 | |||||||||
| Less: core conversion costs | — | — | — | 179 | 633 | ||||||||||||||
| Less: writedown minority interest in equity method investment | — | — | 686 | — | — | ||||||||||||||
| Less: compensation expense, net RML acquisition payments | — | — | (193 | ) | 149 | — | |||||||||||||
| Operating other operating expense | $ | 16,606 | $ | 16,795 | $ | 17,844 | $ | 17,363 | $ | 17,877 | |||||||||
| Less: intangible asset amortization | 17 | 18 | 21 | 26 | 27 | ||||||||||||||
| $ | 16,589 | $ | 16,777 | $ | 17,823 | $ | 17,337 | $ | 17,850 | ||||||||||
| Other operating income | $ | 8,314 | $ | 7,462 | $ | 7,952 | $ | 13,855 | $ | 9,762 | |||||||||
| Less: gain on sale of Northrim Benefits Group | — | — | 2 | 4,443 | — | ||||||||||||||
| Operating other operating income | $ | 8,314 | $ | 7,462 | $ | 7,950 | $ | 9,412 | $ | 9,762 | |||||||||
| Plus: net interest income | 14,989 | 14,263 | 14,684 | 14,917 | 14,244 | ||||||||||||||
| $ | 23,303 | $ | 21,725 | $ | 22,634 | $ | 24,329 | $ | 24,006 | ||||||||||
| Operating efficiency ratio | 71.19 | % | 77.22 | % | 78.74 | % | 71.26 | % | 74.36 | % | |||||||||
Operating return on average assets ratio
The operating return on average assets ratio is a non-GAAP ratio that is calculated by dividing operating net income (which exclude certain non-operating income and expense items) by average assets. The following tables set forth the calculation of the operating return on average assets ratio:
|
Northrim BanCorp, Inc. |
Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Net income | $ | 5,830 | $ | 4,062 | $ | 214 | $ | 5,523 | $ | 3,589 | |||||||||
| Divided by average assets | 1,480,701 | 1,494,085 | 1,519,865 | 1,525,478 | 1,506,820 | ||||||||||||||
| Return on average assets ratio | 1.58 | % | 1.10 | % | 0.06 | % | 1.44 | % | 0.96 | % | |||||||||
(Dollars and shares in thousands, except per share data)
(Unaudited)
|
Northrim BanCorp, Inc. |
Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Operating net income | $ | 5,830 | $ | 4,062 | $ | 3,181 | $ | 3,100 | $ | 3,962 | |||||||||
| Divided by average assets | 1,480,701 | 1,494,085 | 1,519,865 | 1,525,478 | 1,506,820 | ||||||||||||||
| Operating return on average assets ratio | 1.58 | % | 1.10 | % | 0.83 | % | 0.81 | % | 1.05 | % | |||||||||
|
Northrim BanCorp, Inc. |
Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Net income | $ | 9,892 | $ | 7,414 | |||||||||
| Divided by average assets | 1,487,355 | 1,499,240 | |||||||||||
| Return on average assets ratio | 1.34 | % | 1.00 | % | |||||||||
|
Northrim BanCorp, Inc. |
Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Operating net income | $ | 9,892 | $ | 7,967 | |||||||||
| Divided by average assets | 1,487,355 | 1,499,240 | |||||||||||
| Operating return on average assets ratio | 1.34 | % | 1.07 | % | |||||||||
Operating return on average shareholders' equity ratio
The operating return on average shareholders' equity ratio is a non-GAAP ratio that is calculated by dividing operating net income (which exclude certain non-operating income and expense items) by average shareholders' equity. The following tables set forth the calculation of the operating return on average equity ratio:
| Northrim BanCorp, Inc. | Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Net income | $ | 5,830 | $ | 4,062 | $ | 214 | $ | 5,523 | $ | 3,589 | |||||||||
| Divided by average shareholders' equity | 198,275 | 195,496 | 197,066 | 194,703 | 193,656 | ||||||||||||||
| Return on average shareholders' equity ratio | 11.79 | % | 8.43 | % | 0.43 | % | 11.25 | % | 7.43 | % | |||||||||
| Northrim BanCorp, Inc. | Three Months Ended | ||||||||||||||||||
| June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | |||||||||||||||
| Operating net income | $ | 5,830 | $ | 4,062 | $ | 3,181 | $ | 3,100 | $ | 3,962 | |||||||||
| Divided by average shareholders' equity | 198,275 | 195,496 | 197,066 | 194,703 | 193,656 | ||||||||||||||
| Operating return on average shareholders' equity ratio | 11.79 | % | 8.43 | % | 6.40 | % | 6.32 | % | 8.21 | % | |||||||||
| Northrim BanCorp, Inc. | Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Net income | $ | 9,892 | $ | 7,414 | |||||||||
| Divided by average shareholders' equity | 196,893 | 190,327 | |||||||||||
| Return on average equity ratio | 10.13 | % | 7.86 | % | |||||||||
(Dollars and shares in thousands, except per share data)
(Unaudited)
| Northrim BanCorp, Inc. | Year-to-date | ||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||
| Operating net income | $ | 9,892 | $ | 7,967 | |||||||||
| Divided by average shareholders' equity | 196,893 | 190,327 | |||||||||||
| Operating return on average equity ratio | 10.13 | % | 8.44 | % | |||||||||
| Contact: | Joe Schierhorn, President, CEO, and COO |
| (907) 261-3308 | |
| Jed Ballard, Chief Financial Officer | |
| (907) 261-3539 |
