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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,  D.C. 20549 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
 
October 29, 2018
Northrim BanCorp, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
Alaska 
0-33501
92-0175752
________________________
(State or other jurisdiction
_____________
(Commission
_________________
(I.R.S. Employer
of incorporation)
File Number)
Identification No.)
  
 
 
3111 C Street,  Anchorage,  Alaska 
 
99503
___________________________________
(Address of principal executive offices)
 
___________
(Zip Code)
Registrant’s telephone number, including area code:
 
907-562-0062
Not Applicable
___________________________________________________
Former name or former address, if changed since last report
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company     ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ¨







Item 2.02 Results from Operations and Financial Condition.

On October 29, 2018, Northrim BanCorp, Inc. announced by press release its earnings for the third quarter ended October 29, 2018.

A copy of the press release is attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

(a) Financial statements – not applicable
(b) Proforma financial information – not applicable
(c) Shell company transactions – not applicable
(d) Exhibit No.
 
Description
 
 
 
99.1
 
Press Release dated October 29, 2018










SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Northrim BanCorp, Inc.
  
 
 
 
 
October 29, 2018
 
By:
 
/s/ Jed W. Ballard
 
 
 
 
Name: Jed W. Ballard
 
 
 
 
Title: EVP, Chief Financial Officer







Exhibit Index

 
 
 
Exhibit No.
 
Description
 
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1


395526859_nrimpra06.jpg
Contact:
Joe Schierhorn, President, CEO, and COO
 
(907) 261-3308
 
Jed Ballard, Chief Financial Officer
 
(907) 261-3539
NEWS RELEASE

Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share, in 3Q18
Reflects Solid Contribution from Its Core Community Banking Franchise

ANCHORAGE, Alaska - October 29, 2018 - Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported earnings of $5.3 million, or $0.75 per diluted share, for the third quarter of 2018 and $15.2 million, or $2.17 per diluted share, for the first nine months of 2018. Strong contributions from the community banking franchise, with slightly decreased volumes in its mortgage banking division, contributed to solid third quarter and year-to-date profits.

“We continue to benefit from the rising interest rate environment, lower corporate tax rates and the planned expansion of the Alaska natural resources infrastructure,” said Joe Schierhorn, President, CEO and COO. Earlier this month ConocoPhillips announced that “oil is flowing at the Greater Mooses Tooth No. 1 drill site, part of the National Petroleum Reserve-Alaska.” According to a recent article in Petroleum News, “the project constitutes one of a chain of developments that ConocoPhillips is undertaking, progressively stepping out west into the northeastern part of the NPR-A from the Colville River delta.”

In the third quarter and nine-month period ending September 30, 2017, Northrim recognized a pre-tax gain of $4.4 million on the sale of its interest in Northrim Benefits Group and operating income from that business of $2.5 million, respectively, with no contribution from this divested subsidiary in 2018. These revenues were partially offset in the first nine months of 2017 by a provision for loan losses of $3.2 million.

Third Quarter 2018 Highlights:

Total revenue, which includes net interest income plus other operating income, was $24.5 million in the third quarter of 2018, compared to $23.3 million in the second quarter of 2018, and $28.8 million in the third quarter a year ago.
Community Banking provided 74% of total revenues and 94% of earnings in the third quarter of 2018.
Home Mortgage Lending provided 26% of total revenues and 6% of third quarter earnings.
Net interest income in the third quarter of 2018 increased 6% to $15.8 million from $14.9 million in the third quarter a year ago, mainly due to the higher yields on the loan and investment portfolios and was also up 5.5% compared to $15.0 million in the preceding quarter.
Net interest margin on a tax equivalent basis ("NIMTE")* expanded to 4.74% in the third quarter of 2018, an 18-basis-point improvement, compared to the preceding quarter and a 40-basis-point improvement compared to the third quarter a year ago.
Return on average assets was 1.40% and return on average equity was 10.27% for the third quarter of 2018.





Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
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Financial Highlights
Three Months Ended
(Dollars in thousands, except per share data)
September 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
September 30, 2017
Total assets

$1,502,673


$1,470,440


$1,524,741


$1,518,596


$1,522,784

Total portfolio loans

$982,007


$967,702


$967,575


$954,953


$988,490

Average portfolio loans

$984,914


$963,724


$955,718


$980,351


$1,003,751

Total deposits

$1,233,268


$1,205,521


$1,260,790


$1,258,283


$1,258,317

Average deposits

$1,223,997


$1,217,903


$1,233,745


$1,254,566


$1,262,808

Total shareholders' equity

$203,242


$199,456


$194,973


$192,802


$194,427

Net income attributable to Northrim BanCorp

$5,264


$5,830


$4,062


$214


$5,523

Diluted earnings per share

$0.75


$0.84


$0.58


$0.03


$0.79

Return on average assets
1.40
%
1.58
%
1.10
%
0.06
%
1.44
%
Return on average shareholders' equity
10.27
%
11.79
%
8.43
%
0.43
%
11.25
%
NIM
4.69
%
4.50
%
4.28
%
4.25
%
4.28
%
NIMTE*
4.74
%
4.56
%
4.33
%
4.31
%
4.34
%
Efficiency ratio
73.82
%
71.19
%
77.22
%
80.92
%
61.40
%
Total shareholders' equity/total assets
13.53
%
13.56
%
12.79
%
12.70
%
12.77
%
Tangible common equity/tangible assets*
12.58
%
12.60
%
11.85
%
11.75
%
11.83
%
Book value per share

$29.52


$29.02


$28.37


$28.06


$28.37

Tangible book value per share*

$27.17


$26.66


$26.01


$25.70


$26.00

Dividends per share

$0.27


$0.24


$0.24


$0.22


$0.22


* References to NIMTE, 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.

Alaska Economic Update
(Note: sources for information included in this section are included on page 10.)

Alaska’s Department of Labor and Workforce Development released employment numbers for August 2018. The employment rate is down 0.6% from August 2017 and the unemployment rate sits at 6.7%, down two-tenths of a point from July 2018. “While rising oil prices are supporting long-term investment in Alaska’s natural resources, Alaska’s economy is slowly emerging from the recession that began in late 2014,” noted Schierhorn.

The price for a single-family home in Alaska has remained stable during the recession. We believe that this is due to a few different factors. Low interest rates, migration patterns, measured selling and buying, and controlled building were likely part of the reasons for the stable prices.

“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.

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 earnings release.





Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
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Review of Income Statement

Consolidated Income Statement

In the third quarter of 2018, Northrim generated a return on average assets ("ROAA") of 1.40% and a return on average equity ("ROAE") of 10.27%, compared to 1.58% and 11.79%, respectively in the second quarter of 2018. These results were above the averages posted by the 131 banks that make up the SNL Small Cap U.S. Bank Index with total market capitalization between $250 million and $1 billion as of June 30, 20181.

Net Interest Income/Net Interest Margin

Net interest income grew 6% to $15.8 million in the third quarter of 2018 compared to $14.9 million in the third quarter of 2017 and $15.0 million in the second quarter of 2018. For the first nine months of 2018, net interest income increased 5% to $45.1 million from $43.0 million in the first nine months of 2017.

NIMTE* was 4.74% in the third quarter of 2018 compared to 4.56% in the preceding quarter and 4.34% from the same quarter a year ago. Higher total interest income, coupled with lower growth in total interest expense, contributed to the increases in net interest income and NIMTE* in the third quarter of 2018 compared to prior quarters. The deployment of lower-yielding cash and investments into more productive loans and higher-yielding securities also supported the increases in net interest income and NIMTE*. The yield on interest earning assets improved to 4.97%, up 23 basis points from the second quarter of 2018 and 46 basis points year-over-year. The cost of funds increased more slowly in the third quarter of 2018 at 36 basis points, up 8 basis points from the preceding quarter and 9 basis points compared to the same quarter last year. For the first nine months of 2018, NIMTE* improved 26 basis points to 4.54%.

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 3.70% as of September 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 last year, is mitigating the impact of rising interest rates on our cost of funds and provides benefits to the net interest margin,” said Jed Ballard, Chief Financial Officer.

“As we discussed in prior periods, NIM continues to benefit from our short duration investment portfolio and our variable interest rate loans,” Ballard continued.



1As of June 30, 2018, the SNL Small Cap US Bank Index tracked 131 banks with total common market capitalization between $250 million and $1 billion with averages for the following ratios: NIMTE* 3.57%, loan loss reserves to gross loans of 0.95%, ROAA 1.08%, and ROAE 10.07%.






Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
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Provision for Loan Losses

In the third quarter, Northrim did not record a provision for loan losses and in the first nine months of 2018 recorded a recovery of loan loss provision of $300,000, reflecting stable qualitative metrics on its loan portfolio. Non-performing loans, net of government guarantees, were $16.6 million at September 30, 2018, $16.3 million at June 30, 2018, and $22.7 million at September 30, 2017. The allowance for loan losses was 121% of nonperforming loans, net of government guarantees, at September 30, 2018, in line with 123% at the end of the second quarter of 2018 and higher than the 95% 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 $8.7 million, or 35% of total third quarter 2018 revenues, as compared to $8.3 million, or 36% of revenues in the second quarter of 2018, and $13.9 million, or 48% of revenues in the third quarter of 2017. In the first nine months of 2018, other operating income totaled $24.4 million, or 35% of revenues, compared to $32.5 million, or 43% of revenues in the first nine months of 2017. A significant part of other operating income in the prior year was the sale of the Company's interest in Northrim Benefits Group in August of 2017, which generated a $4.4 million pre-tax gain, or $2.6 million, or $0.38 per diluted share after-tax. The sale also eliminated employee benefits plan income going forward. In addition, the variability in the mortgage market also contributes to uneven results in other operating income, as this is where the Company's mortgage banking income is included. Mortgage banking income contributed $5.9 million to other operating income in the third quarter of 2018, as compared to $5.5 million in the second quarter of 2018 and $6.2 million a year ago.

Other Operating Expenses

Other operating expenses were $18.1 million in the third quarter 2018, compared to $16.6 million in the second quarter of 2018 and $17.7 million in the third quarter of 2017. In the third quarter of 2018, there was an $804,000 write down of the carrying value of the Company's minority interest in another mortgage origination business owned by Residential Mortgage Holding Company, LLC the parent company of Residential Mortgage, LLC (collectively "RML"). In addition, occupancy expense in the second quarter of 2018 declined by $670,000 due to a one-time technical correction of building depreciation. In the first nine months of 2018, other operating expenses were $51.5 million compared to $52.8 million in the like period of 2017.

Income Tax Provision

For the third quarter of 2018, Northrim recorded $1.1 million in state and federal income tax expense for an effective tax rate of 18% compared to $3.0 million with an effective tax rate of 35% in the third quarter of 2017, reflecting the new lower federal corporate income tax rate as a result of the Tax Cuts and Jobs Act of 2017. For the first nine months of 2018, Northrim recorded $3.2 million in state and federal income tax expense, for an effective tax rate of 17% compared to $6.2 million and 32% for the same period in 2017.

Community Banking

“We continue to see solid long-term opportunities in the Alaska markets that we serve,” said Schierhorn. “The expansion to Soldotna on the Kenai Peninsula earlier this year opens a new market for our lending products to businesses, consumers and homeowners.”

Net interest income in the Community Banking segment increased 5% to $15.4 million in the third quarter of 2018 from $14.6 million in the third quarter of 2017.





Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
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The following table provides highlights of the Community Banking segment of Northrim:
 
Three Months Ended
(Dollars in thousands, except per share data)
September 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
September 30, 2017
Net interest income

$15,358


$14,614


$14,036


$14,381


$14,565

(Benefit) provision for loan losses

(300
)


2,500

Other operating income
2,770

2,836

2,518

2,685

7,636

Compensation expense, net RML acquisition payments



(193
)
149

Other operating expense
12,204

11,748

12,367

13,113

12,252

   Income before provision for income taxes
5,924

6,002

4,187

4,146

7,300

Provision for income taxes
996

882

659

4,754

2,452

   Net income (loss)
4,928

5,120

3,528

(608
)
4,848

     Less: net income attributable to the noncontrolling interest




78

       Net income (loss) attributable to Northrim BanCorp

$4,928


$5,120


$3,528


($608
)

$4,770

Average diluted shares
6,990,633

6,976,985

6,968,082

6,963,125

6,959,035

Diluted earnings (loss) per share

$0.70


$0.74


$0.50


($0.09
)

$0.69


 
Year-to-date
(Dollars in thousands, except per share data)
September 30, 2018
 
 
 
September 30, 2017
Net interest income

$44,008

 
 
 

$42,067

(Benefit) provision for loan losses
(300
)
 
 
 
3,200

Other operating income
8,124

 
 
 
14,502

Compensation expense, net RML acquisition payments

 
 
 
323

Other operating expense
36,319

 
 
 
37,158

   Income before provision for income taxes
16,113

 
 
 
15,888

Provision for income taxes
2,537

 
 
 
4,745

   Net income
13,576

 
 
 
11,143

     Less: net income attributable to the noncontrolling interest

 
 
 
327

       Net income attributable to Northrim BanCorp

$13,576

 
 
 

$10,816

Average diluted shares
6,978,679

 
 
 
6,983,778

Diluted earnings per share

$1.94

 
 
 

$1.55




Home Mortgage Lending

“With the housing market in Alaska continuing to be stable, demand for mortgage loans is steady. We continue to see normal seasonality in the mortgage market with higher demand in the spring and summer and lower demand in autumn and winter,” said Ballard. “Loans funded in the third quarter of 2018 were $156.3 million, of which 91% were for new home purchases. Fluctuation in mortgage activity is expected based on a number of variable factors. We continue to closely monitor operating expenses for this segment of our business to ensure that we are as efficient and profitable, as possible.

“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 September 30, 2018, Northrim serviced 2,053 loans in its $516.0 million home mortgage servicing portfolio, which is a 42% increase from the $363.0 million serviced a year ago. Mortgage servicing revenue contributed $1.5 million to third quarter of 2018 and $701,000 to the third 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



Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
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driven by interest rate volatility and fluctuations in estimated prepayment speeds, which are based on published industry metrics.

Lastly, the $804,000 pre-tax write down of the carrying value of the Company's minority ownership interest in another mortgage origination business owned by RML discussed above is recorded in the Home Mortgage Lending segment.

The following table provides highlights of the Home Mortgage Lending segment of Northrim:

 
Three Months Ended
(Dollars in thousands, except per share data)
September 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
September 30, 2017
Mortgage commitments

$69,026


$84,092


$64,819


$43,602


$68,601

Mortgage loans funded for sale

$156,301


$148,183


$109,069


$132,606


$162,470

Mortgage loan refinances to total fundings
9
%
8
%
18
%
17
%
12
%
Mortgage loans serviced for others

$516,008


$472,190


$439,561


$406,291


$362,983

 
 
 
 
 
 
Net realized gains on mortgage loans sold

$4,268


$4,052


$3,346


$4,084


$5,218

Change in fair value of mortgage loan commitments, net
(66
)
32

316

(551
)
(23
)
Total production revenue
4,202

4,084

3,662

3,533

5,195

Mortgage servicing revenue
1,578

1,254

1,183

1,450

997

Change in fair value of mortgage servicing rights, net2
(128
)
(118
)
(26
)
64

(296
)
Total mortgage servicing revenue, net
1,450

1,136

1,157

1,514

701

Other mortgage banking revenue
251

258

125

220

323

   Total mortgage banking income

$5,903


$5,478


$4,944


$5,267


$6,219

 
 
 
 
 
 
Net interest income

$461


$375


$227


$303


$352

Mortgage banking income
5,903

5,478

4,944

5,267

6,219

Other operating expense
5,895

4,858

4,428

5,417

5,290

   Income before provision for income taxes
469

995

743

153

1,281

Provision for income taxes
133

285

209

(669
)
528

   Net income attributable to Northrim BanCorp

$336


$710


$534


$822


$753

 
 
 
 
 
 
Average diluted shares
6,990,633

6,976,985

6,968,082

6,963,125

6,959,035

Diluted earnings per share

$0.05


$0.10


$0.08


$0.12


$0.11

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.






Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
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Year-to-date
(Dollars in thousands, except per share data)
September 30, 2018
 
 
 
September 30, 2017
Mortgage loans funded for sale

$413,552

 
 
 

$421,472

Mortgage loan refinances to total fundings
11
%
 
 
 
15
%
 
 
 
 
 
 
Net realized gains on mortgage loans sold

$11,666

 
 
 

$13,929

Change in fair value of mortgage loan commitments, net
282

 
 
 
404

Total production revenue
11,948

 
 
 
14,333

Mortgage servicing revenue
4,015

 
 
 
2,988

Change in fair value of mortgage servicing rights, net1
(272
)
 
 
 
(62
)
Total mortgage servicing revenue, net
3,743

 
 
 
2,926

Other mortgage banking revenue
634

 
 
 
761

   Total mortgage banking income

$16,325

 
 
 

$18,020

 
 
 
 
 
 
Net interest income

$1,063

 
 
 

$927

Mortgage banking income
16,325

 
 
 
18,020

Other operating expense
15,181

 
 
 
15,335

   Income before provision for income taxes
2,207

 
 
 
3,612

Provision for income taxes
627

 
 
 
1,491

   Net income attributable to Northrim BanCorp

$1,580

 
 
 

$2,121

 
 
 
 
 
 
Average diluted shares
6,978,679

 
 
 
6,983,778

Diluted earnings per share

$0.23

 
 
 

$0.30

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.


Balance Sheet Review

Northrim’s total assets were $1.50 billion at September 30, 2018, up 2% from the preceding quarter and down 1% from a year ago. “A number of factors contributed to the change 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 remains consistent at 80% at September 30, 2018, compared to 80% at June 30, 2018, and 79% at September 30, 2017.

Average interest-earning assets were $1.33 billion in the third quarter of 2018, relatively unchanged from the second quarter of 2018 and down 3% from the third quarter a year ago. The average yield on interest-earning assets was 4.97% in the third quarter of 2018, up from 4.74% in the preceding quarter and 4.51% in the like quarter a year ago. For the first nine months of 2018, average interest-earning assets declined slightly to $1.34 billion from $1.37 billion in the first nine months of 2017. Average yields were 4.73% in the first nine months of 2018, compared to 4.46% in the first nine months of 2017.

Average investment securities totaled $264.4 million, a decrease of 8% from the second quarter of 2018, and down 7% in the third quarter of 2018 compared to the year ago quarter. The investment portfolio generated an average net tax equivalent yield of 2.29% for the third quarter of 2018, up from 2.09% in the preceding quarter and 1.63% a year ago. The average estimated duration of the investment portfolio was 24 months, at September 30, 2018, which is expected to generate improvement in yields as securities reprice in this rising interest rate environment. For the first nine months of 2018, average investment securities declined to $288.3 million with an average yield of 2.07% compared to $311.2 million and an average yield of 1.63% for the first nine months of 2017.





Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
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Portfolio loans were $982.0 million at the end of the third quarter of 2018 up 1% from the preceding quarter and down less than 1% from the third quarter a year ago. Average portfolio loans in the third quarter of 2018 were $984.9 million up 2% from the preceding quarter and down 2% from a year ago. Yields on average portfolio loans in the third quarter of 2018 improved to 5.81% from 5.65% in the second quarter of 2018 and 5.49% in the third quarter of 2017. Average portfolio loans in the first nine months of 2018 were down 1% to $968.2 million with a yield of 5.66% compared to $981.2 million and a yield of 5.48% for the first nine months 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 September 30, 2018, represented 92% of total deposits. At September 30, 2018, total deposits were $1.23 billion, up from $1.21 billion at June 30, 2018, and down from $1.26 billion a year ago. Average interest-bearing deposits were down 3% to $795.3 million with an average cost of 0.30% in the third quarter of 2018, compared to $818.6 million and 0.22% in the second quarter of 2018, and down 5% from $839.7 million and 0.20% in the third quarter of 2017. Average interest-bearing deposits were down 2% in the first nine months of 2018 at $814.3 million and with an average cost of 0.23% compared to $830.1 million and 0.21% in the first nine months of 2017. “Our cost of deposits is rising more slowly than our loan yields, reflecting the rational nature of the competition in our market,” said Ballard.

Shareholders’ equity increased 5% to $203.2 million, or $29.52 per share, at September 30, 2018, compared to $194.4 million, or $28.37 per share, a year ago. Tangible book value per share* was $27.17 at September 30, 2018, compared to $26.00 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 16.58% at September 30, 2018.

Asset Quality

Asset quality in the third quarter of 2018 was stable. Nonperforming assets ("NPAs"), net of government guarantees were $24.1 million at September 30, 2018, relatively unchanged from the end of the preceding quarter, and declined from $26.2 million at September 30, 2017, primarily due to loan payments which exceeded NPA additions. Of the NPAs, $16.0 million or 67% are nonaccrual loans related to five commercial relationships. Two of these relationships, which totaled $8.3 million at the end of the third quarter of 2018, are businesses in the medical industry.

Net adversely classified loans were $29.7 million at the end of the third quarter of 2018 as compared to $33.2 million at the end of the second quarter of 2018 and $33.8 million one year ago. Net loan recoveries in the third quarter of 2018 were $52,000 compared to net charge-offs of $41,000 in the preceding quarter and $1.1 million 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 September 30, 2018, $27.9 million, or 94% of net adversely classified loans are attributable to seven relationships with four loans to commercial businesses, two loans to medical businesses, and one loan to an oilfield services commercial business.

Performing restructured loans that were not included in nonaccrual loans at the end of the third quarter of 2018 were $3.3 million, down from $9.1 million in the preceding quarter and from $7.7 million a year ago. The decrease in the third quarter of 2018 compared to the year ago quarter is primarily due to the repayment 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 $55.7 million, or approximately 6% of portfolio loans as of September 30, 2018, had direct exposure to the oil and gas industry in Alaska, and $1.9 million of these loans are adversely classified. As of September 30, 2018, Northrim has an additional $38.5 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



Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
9 of 20


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.

www.northrim.com



Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
10 of 20


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, as amended. 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:

https://www.adn.com/business-economy/2018/10/09/first-crude-flows-from-federal-leases-in-arctic-alaska-petroleum-reserve/
http://www.petroleumnews.com/pntruncate/757137768.shtml






Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
11 of 20


Income Statement
 
 
 
 
 
 
(Dollars in thousands, except per share data)
Three Months Ended
 
Year-to-date
(Unaudited)
September 30,
June 30,
September 30,
 
September 30,
September 30,
 
2018
2018
2017
 
2018
2017
Interest Income:
 
 
 
 
 
 
     Interest and fees on loans

$14,992


$14,036


$14,341

 

$42,291


$41,180

     Interest on portfolio investments
1,419

1,400

1,060

 
4,167

3,466

     Interest on deposits in banks
169

159

118

 
512

230

          Total interest income
16,580

15,595

15,519

 
46,970

44,876

Interest Expense:
 
 
 
 
 
 
     Interest expense on deposits
595

446

429

 
1,413

1,325

     Interest expense on borrowings
166

160

173

 
486

557

          Total interest expense
761

606

602

 
1,899

1,882

          Net interest income
15,819

14,989

14,917

 
45,071

42,994

 
 
 
 
 
 
 
(Benefit) provision for loan losses

(300
)
2,500

 
(300
)
3,200

          Net interest income after provision for loan losses
15,819

15,289

12,417

 
45,371

39,794

 
 
 
 
 
 
 
Other Operating Income:
 
 
 
 
 
 
     Mortgage banking income
5,903

5,478

6,219

 
16,325

18,020

     Purchased receivable income
767

867

752

 
2,474

2,217

     Bankcard fees
724

707

664

 
2,056

1,903

     Service charges on deposit accounts
407

376

406

 
1,137

1,254

     (Loss) gain on sale of securities


(3
)
 

11

     Gain on sale of Northrim Benefits Group


4,443

 

4,443

     Employee benefit plan income


609

 

2,506

     Other income
872

886

765

 
2,457

2,168

          Total other operating income
8,673

8,314

13,855

 
24,449

32,522

 
 
 
 
 
 
 
Other Operating Expense:
 
 
 
 
 
 
     Salaries and other personnel expense
11,261

11,362

11,115

 
33,208

33,750

     Occupancy expense
1,687

1,020

1,706

 
4,407

4,991

     Data processing expense
1,503

1,323

1,509

 
4,374

4,209

     Impairment of equity method investment
804



 
804


     Professional and outside services
727

554

674

 
1,780

1,908

     Marketing expense
367

462

332

 
1,461

1,733

     Insurance expense
171

178

475

 
645

922

     OREO expense, net rental income and gains on sale
43

11

(44
)
 
157

216

     Intangible asset amortization expense
18

17

26

 
53

79

     Compensation expense, net RML acquisition payments


149

 

323

     Other operating expense
1,518

1,679

1,749

 
4,611

4,685

          Total other operating expense
18,099

16,606

17,691

 
51,500

52,816

 
 
 
 
 
 
 
          Income before provision for income taxes
6,393

6,997

8,581

 
18,320

19,500

     Provision for income taxes
1,129

1,167

2,980

 
3,164

6,236

          Net income
5,264

5,830

5,601

 
15,156

13,264

               Less: Net income attributable to the noncontrolling interest


78

 

327

                     Net income attributable to Northrim BanCorp

$5,264


$5,830


$5,523

 

$15,156


$12,937

 
 
 
 
 
 
 
          Basic EPS

$0.77


$0.85


$0.80

 

$2.21


$1.88

          Diluted EPS

$0.75


$0.84


$0.79

 

$2.17


$1.85

          Average basic shares
6,877,194

6,872,371

6,872,273

 
6,873,843

6,897,577

          Average diluted shares
6,990,633

6,976,985

6,959,035

 
6,978,679

6,983,778









Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
12 of 20




Balance Sheet
 
 
 
(Dollars in thousands)
 
 
 
(Unaudited)
September 30,
June 30,
September 30,
 
2018
2018
2017
 
 
 
 
Assets:
 
 
 
     Cash and due from banks

$37,651


$26,355


$13,960

     Interest bearing deposits in other banks
32,528

9,775

73,309

     Investment securities available for sale
264,193

264,124

264,550

     Investment securities held to maturity


897

     Marketable equity securities
6,035

6,006

5,801

     Investment in Federal Home Loan Bank stock
2,103

2,104

2,116

 
 
 
 
     Loans held for sale
56,636

54,306

59,420

 
 
 
 
     Portfolio loans
982,007

967,702

988,490

     Allowance for loan losses
(20,160
)
(20,108
)
(21,464
)
          Net portfolio loans
961,847

947,594

967,026

     Purchased receivables, net
12,706

20,323

12,930

     Mortgage servicing rights
9,695

8,733

6,181

     Other real estate owned, net
8,707

8,959

3,505

     Premises and equipment, net
38,637

38,113

40,046

     Goodwill and intangible assets
16,171

16,189

16,245

     Other assets
55,764

67,859

56,798

          Total assets
$1,502,673
$1,470,440
$1,522,784
 
 
 
 
Liabilities:
 
 
 
     Demand deposits

$450,409


$401,925


$426,946

     Interest-bearing demand
240,974

246,628

240,274

     Savings deposits
233,611

237,978

251,266

     Money market deposits
208,614

223,189

233,768

     Time deposits
99,660

95,801

106,063

          Total deposits
1,233,268

1,205,521

1,258,317

     Securities sold under repurchase agreements
32,429

27,695

31,084

     Other borrowings
7,282

7,312

7,387

     Junior subordinated debentures
10,310

10,310

10,310

     Other liabilities
16,142

20,146

21,259

          Total liabilities
1,299,431

1,270,984

1,328,357

 
 
 
 
          Total shareholders' equity
203,242

199,456

194,427

          Total liabilities and shareholders' equity

$1,502,673


$1,470,440


$1,522,784

 
 
 
 



Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
13 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Composition of Portfolio Investments
 
 
 
 
 
 
 
 
September 30, 2018
 
June 30, 2018
 
September 30, 2017
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
U.S. Treasury securities

$54,452

20.2
%
 

$39,534

14.6
%
 

$30,012

11.1
%
U.S. Agency securities
151,380

56.0
%
 
169,158

62.7
%
 
179,088

66.0
%
Corporate securities
40,516

15.0
%
 
37,490

13.9
%
 
35,082

12.9
%
Marketable equity securities
6,035

2.2
%
 
6,006

2.2
%
 
5,801

2.1
%
Collateralized loan obligations
6,002

2.2
%
 
6,007

2.2
%
 
3,002

1.1
%
Alaska municipality, utility, or state bonds
7,307

2.7
%
 
7,348

2.7
%
 
13,502

5.0
%
Other municipality, utility, or state bonds
4,536

1.7
%
 
4,587

1.7
%
 
4,761

1.8
%
   Total portfolio investments

$270,228

 
 

$270,130

 
 

$271,248

 
 
 
 
 
 
 
 
 
 

Composition of Portfolio Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
Commercial loans

$333,132

34
%
 

$327,733

34
%
 

$316,081

33
%
 

$313,514

33
%
 

$315,226

32
%
CRE owner occupied loans
130,166

13
%
 
127,384

13
%
 
132,589

14
%
 
132,041

14
%
 
134,994

14
%
CRE nonowner occupied loans
382,313

39
%
 
385,648

40
%
 
395,915

41
%
 
359,725

38
%
 
386,137

38
%
Construction loans
97,976

10
%
 
89,433

9
%
 
85,257

9
%
 
111,294

12
%
 
111,427

11
%
Consumer loans
42,775

4
%
 
41,711

4
%
 
41,841

3
%
 
42,535

3
%
 
44,681

5
%
   Subtotal
986,362

 
 
971,909

 
 
971,683

 
 
959,109

 
 
992,465

 
Unearned loan fees, net
(4,355
)
 
 
(4,207
)
 
 
(4,108
)
 
 
(4,156
)
 
 
(3,975
)
 
     Total portfolio loans

$982,007

 
 

$967,702

 
 

$967,575

 
 

$954,953

 
 

$988,490

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Composition of Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
Demand deposits

$450,409

36
%
 

$401,925

33
%
 

$433,046

34
%
 

$414,686

33
%
 

$426,946

34
%
Interest-bearing demand
240,974

20
%
 
246,628

20
%
 
244,601

19
%
 
252,009

20
%
 
240,274

19
%
Savings deposits
233,611

19
%
 
237,978

20
%
 
246,981

20
%
 
247,458

20
%
 
251,266

20
%
Money market deposits
208,614

17
%
 
223,189

19
%
 
239,242

19
%
 
243,603

19
%
 
233,768

19
%
Time deposits
99,660

8
%
 
95,801

8
%
 
96,920

8
%
 
100,527

8
%
 
106,063

8
%
   Total deposits

$1,233,268

 
 

$1,205,521

 
 

$1,260,790

 
 

$1,258,283

 
 

$1,258,317

 



Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
14 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Asset Quality
 
 
 
 
 
 
 
September 30,
 
June 30,
 
September 30,
 
 
2018
 
2018
 
2017
 
     Nonaccrual loans

$16,728

 

$16,635

 

$24,317

 
     Loans 90 days past due and accruing
152

 

 
214

 
          Total nonperforming loans
16,880

 
16,635

 
24,531

 
             Nonperforming loans guaranteed by government
(279
)
 
(327
)
 
(1,846
)
 
                Net nonperforming loans
16,601

 
16,308

 
22,685

 
     Other real estate owned
8,707

 
8,959

 
3,505

 
     Repossessed assets
29

 

 

 
             Other real estate owned guaranteed by government
(1,279
)
 
(1,280
)
 

 
                Net nonperforming assets

$24,058

 

$23,987

 

$26,190

 
     Nonperforming loans / portfolio loans, net of government guarantees
1.69

%
1.69

%
2.29

%
     Nonperforming assets / total assets, net of government guarantees
1.60

%
1.63

%
1.72

%
 
 
 
 
 
 
 
     Performing restructured loans

$3,252

 

$9,096

 

$7,687

 
     Nonperforming loans plus performing restructured loans, net of government
 
 
 
 
 
 
     guarantees

$19,853

 

$25,404

 

$30,372

 
     Nonperforming loans plus performing restructured loans / portfolio loans, net of
 
 
 
 
 
 
     government guarantees
2.02

%
2.63

%
3.07

%
     Nonperforming assets plus performing restructured loans / total assets, net of
 
 
 
 
 
 
     government guarantees
1.82

%
2.25

%
2.22

%
 
 
 
 
 
 
 
     Adversely classified loans, net of government guarantees

$29,730

 

$33,178

 

$33,789

 
     Loans 30-89 days past due and accruing, net of government guarantees /
 
 
 
 
 
 
     portfolio loans
0.26

%
0.18

%
0.70

%
 
 
 
 
 
 
 
     Allowance for loan losses / portfolio loans
2.05

%
2.08

%
2.17

%
     Allowance for loan losses / nonperforming loans, net of government guarantees
121

%
123

%
95

%
 
 
 
 
 
 
 
     Gross loan charge-offs for the quarter

$9

 

$100

 

$1,203

 
     Gross loan recoveries for the quarter

($61
)
 

($59
)
 

($106
)
 
     Net loan (recoveries) charge-offs for the quarter

($52
)
 

$41

 

$1,097

 
     Net loan charge-offs year-to-date

$1,001

 

$1,053

 

$1,433

 
     Net loan (recoveries) charge-offs for the quarter / average loans, for the quarter
(0.01
)
%
0.00

%
0.11

%
     Net loan charge-offs year-to-date / average loans,
 
 
 
 
 
 
          year-to-date annualized
0.14

%
0.22

%
0.19

%




Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
15 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Nonperforming Assets Rollforward
 
 
 
 
 
 
 
 
Balance at
Additions
Payments
Writedowns
Transfers to
Transfers to
Sales
Balance at
 
June 30, 2018
this quarter
this quarter
/Charge-offs
 this quarter
OREO/REPO
Performing Status
this quarter
this quarter
September 30, 2018
Commercial loans

$15,234


$1,179


($1,679
)

$—


$—


$—


$—


$14,734

Commercial real estate
1,331

363






1,694

Construction loans








Consumer loans
70

442

(22
)
(9
)
(29
)


452

Non-performing loans guaranteed by government
(327
)

48





(279
)
   Total non-performing loans
16,308

1,984

(1,653
)
(9
)
(29
)


16,601

Other real estate owned
8,959






(252
)
8,707

Repossessed assets

29






29

Other real estate owned guaranteed
 
 
 
 
 
 
 
 
by government
(1,280
)

1





(1,279
)
   Total non-performing assets,
 
 
 
 
 
 
 
 
   net of government guarantees

$23,987


$2,013


($1,652
)

($9
)

($29
)

$—


($252
)

$24,058



The following table details loan charge-offs, by industry:
Loan Charge-offs by Industry
 
 
 
 
 
Three Months Ended
 
September 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
September 30, 2017
Charge-offs:
 
 
 
 
 
Transportation and warehousing

$—


$—


$—


$24


$339

Other services

78


5

48

News media




731

Health care and social assistance


965



Consumer
9

22

139

26

85

   Total charge-offs

$9


$100


$1,104


$55


$1,203








Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
16 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Average Balances, Yields, and Rates
 
 
 
 
 
 
 
 
 
Three Months Ended
 
September 30, 2018
 
June 30, 2018
 
September 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

$34,136

1.94
%
 

$35,846

1.75
%
 

$37,349

1.24
%
Portfolio investments
264,377

2.29
%
 
287,003

2.09
%
 
284,806

1.63
%
Loans held for sale
54,792

4.64
%
 
48,608

4.32
%
 
57,346

3.74
%
Portfolio loans
984,914

5.81
%
 
963,724

5.65
%
 
1,003,751

5.49
%
   Total interest-earning assets
1,338,219

4.97
%
 
1,335,181

4.74
%
 
1,383,252

4.51
%
Nonearning assets
150,808

 
 
145,520

 
 
142,226

 
   Total assets

$1,489,027

 
 

$1,480,701

 
 

$1,525,478

 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
 
Interest-bearing deposits

$795,256

0.30
%
 

$818,592

0.22
%
 

$839,743

0.20
%
Borrowings
46,663

1.39
%
 
44,897

1.40
%
 
49,223

1.36
%
   Total interest-bearing liabilities
841,919

0.36
%
 
863,489

0.28
%
 
888,966

0.27
%
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand deposits
428,741

 
 
399,311

 
 
423,065

 
Other liabilities
15,039

 
 
19,626

 
 
18,744

 
Shareholders' equity
203,328

 
 
198,275

 
 
194,703

 
   Total liabilities and shareholders' equity

$1,489,027

 
 

$1,480,701

 
 

$1,525,478

 
   Net spread
 
4.61
%
 
 
4.46
%
 
 
4.24
%
   NIM
 
4.69
%
 
 
4.50
%
 
 
4.28
%
   NIMTE*
 
4.74
%
 
 
4.56
%
 
 
4.34
%
   Average portfolio loans to average
 
 
 
 
 
 
 
 
        interest-earning assets
73.60
%
 
 
72.18
%
 
 
72.56
%
 
   Average portfolio loans to average total deposits
80.47
%
 
 
79.13
%
 
 
79.49
%
 
   Average non-interest deposits to average
 
 
 
 
 
 
 
 
         total deposits
35.03
%
 
 
32.79
%
 
 
33.50
%
 
   Average interest-earning assets to average
 
 
 
 
 
 
 
 
         interest-bearing liabilities
158.95
%
 
 
154.63
%
 
 
155.60
%
 

The components of the change in NIMTE* are detailed in the table below:

 
3Q18 vs. 2Q18
3Q18 vs. 3Q17
Nonaccrual interest adjustments
(0.02
)%
%
Interest rates and loan fees
0.15
 %
0.39
%
Volume and mix of interest-earning assets
0.05
 %
0.01
%
Change in NIMTE*
0.18
 %
0.40
%




Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
17 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Average Balances, Yields, and Rates
 
 
 
 
 
 
Year-to-date
 
September 30, 2018
 
September 30, 2017
 
 
Average
 
 
Average
 
Average
Tax Equivalent
 
Average
Tax Equivalent
 
Balance
Yield/Rate
 
Balance
Yield/Rate
Assets
 
 
 
 
 
Interest bearing deposits in other banks

$39,335

1.72
%
 

$28,827

1.05
%
Portfolio investments
288,311

2.07
%
 
311,215

1.63
%
Loans held for sale
46,042

4.30
%
 
44,313

3.84
%
Portfolio loans
968,225

5.66
%
 
981,220

5.48
%
   Total interest-earning assets
1,341,913

4.73
%
 
1,365,575

4.46
%
Nonearning assets
146,006

 
 
142,507

 
   Total assets

$1,487,919

 
 

$1,508,082

 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
Interest-bearing deposits

$814,339

0.23
%
 

$830,128

0.21
%
Borrowings
45,943

1.39
%
 
51,247

1.42
%
   Total interest-bearing liabilities
860,282

0.29
%
 
881,375

0.28
%
 
 
 
 
 
 
Noninterest-bearing demand deposits
410,841

 
 
416,105

 
Other liabilities
17,734

 
 
18,800

 
Shareholders' equity
199,062

 
 
191,802

 
   Total liabilities and shareholders' equity

$1,487,919

 
 

$1,508,082

 
   Net spread
 
4.44
%
 
 
4.18
%
   NIM
 
4.49
%
 
 
4.21
%
   NIMTE*
 
4.54
%
 
 
4.28
%
   Average portfolio loans to average interest-earning assets
72.15
%
 
 
71.85
%
 
   Average portfolio loans to average total deposits
79.03
%
 
 
78.73
%
 
   Average non-interest deposits to average total deposits
33.53
%
 
 
33.39
%
 
   Average interest-earning assets to average interest-bearing liabilities
155.99
%
 
 
154.94
%
 

The components of the change in NIMTE* are detailed in the table below:
 
YTD18 vs.YTD17
Nonaccrual interest adjustments
(0.01
)%
Interest rates and loan fees
0.27
 %
Volume and mix of interest-earning assets
 %
Change in NIMTE*
0.26
 %





Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
18 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Capital Data (At quarter end)
 
 
 
 
 
 
 
September 30, 2018
 
June 30, 2018
 
September 30, 2017
 
Book value per share

$29.52

 

$29.02

 

$28.37

 
Tangible book value per share*

$27.17

 

$26.66

 

$26.00

 
Total shareholders' equity/total assets
13.53

%
13.56

%
12.77

%
Tangible Common Equity/Tangible Assets*
12.58

%
12.60

%
11.83

%
Tier 1 Capital / Risk Adjusted Assets
15.33

%
15.10

%
13.50

%
Total Capital / Risk Adjusted Assets
16.58

%
16.35

%
14.75

%
Tier 1 Capital / Average Assets
13.41

%
13.23

%
11.54

%
Shares outstanding
6,884,386

 
6,872,959

 
6,852,338

 
Unrealized loss on AFS debt securities, net of income taxes

($1,680
)
 

($1,506
)
 

$147

 
Unrealized gain on derivatives and hedging activities

$1,039

 

$805

 

$—

 

Profitability Ratios
 
 
 
 
 
 
 
 
 
 
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
For the quarter:
 
 
 
 
 
 
 
 
 
 
     NIM
4.69
%
4.50
%
4.28
%
4.25
%
4.28
%
     NIMTE*
4.74
%
4.56
%
4.33
%
4.31
%
4.34
%
     Efficiency ratio
73.82
%
71.19
%
77.22
%
80.92
%
61.40
%
     Return on average assets
1.40
%
1.58
%
1.10
%
0.06
%
1.44
%
     Return on average equity
10.27
%
11.79
%
8.43
%
0.43
%
11.25
%
 
September 30, 2018
 
 
 
 
 
 
 
September 30, 2017
 
Year-to-date:
 
 
 
 
 
 
 
 
 
 
     NIM
4.49
%
 
 
 
 
 
 
4.21
%
     NIMTE*
4.54
%
 
 
 
 
 
 
4.28
%
     Efficiency ratio
74.00
%
 
 
 
 
 
 
69.84
%
     Return on average assets
1.36
%
 
 
 
 
 
 
1.15
%
     Return on average equity
10.18
%
 
 
 
 
 
 
9.02
%





Northrim BanCorp Earns $5.3 Million, or $0.75 per Diluted Share in 3Q18
October 29, 2018
19 of 20


*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
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
Net interest income

$15,819

 

$14,989

 

$14,263

 

$14,684

 

$14,917

Divided by average interest-bearing assets
1,338,219

 
1,335,181

 
1,352,497

 
1,372,033

 
1,383,252

Net interest margin ("NIM")3
4.69
%
 
4.50
%
 
4.28
%
 
4.25
%
 
4.28
%
 
 
 
 
 
 
 
 
 
 
Net interest income

$15,819

 

$14,989

 

$14,263

 

$14,684

 

$14,917

Plus: reduction in tax expense related to
 

 
 

 
 

 
 

 
 

     tax-exempt interest income
182

 
175

 
173