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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):
 
July 29, 2019
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.     ¨

Securities registered pursuant to Section 12(b) of the Act: None
TITLE OF EACH CLASS
TRADING SYMBOL
NAME OF EXCHANGE
 
 
 








Item 2.02 Results from Operations and Financial Condition.

On July 29, 2019, Northrim BanCorp, Inc. announced by press release its earnings for the second quarter ended June 30, 2019.

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 July 29, 2019










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.
  
 
 
 
 
July 29, 2019
 
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


398941273_nrimpra07.jpg
Contact:
Joe Schierhorn, President, CEO, and COO
 
(907) 261-3308
 
Jed Ballard, Chief Financial Officer
 
(907) 261-3539
NEWS RELEASE

Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share, in 2Q19
Fueled by Solid Loan Growth, Improved Asset Quality, and Strong Net Interest Margin

ANCHORAGE, Alaska - July 29, 2019 - Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported net income was $4.3 million, or $0.62 per diluted share, in the second quarter of 2019, in line with first quarter 2019, and down from $5.8 million, or $0.84 per diluted share, in the second quarter of 2018. The year-over year decline in net income reflects higher second quarter 2019 costs for medical and other employee benefits, and additional expenses related to the new branches opened in Soldotna on the Kenai peninsula and in East Anchorage over the past year, as well as the impact from non-core increases in net income in the second quarter of 2018.

Portfolio loans increased 5% to $1.02 billion at the end of the second quarter compared to $967.7 million a year ago. Net interest margin ("NIM") improved 21 basis points to 4.71% in the second quarter of 2019 from a year ago and compressed 12 basis points from the first quarter of 2019. Generally rising interest rates in the last year contributed to the year-over-year margin expansion, while the inversion of the yield curve for 3-to 5- year maturities reduced yields on loans with these durations during the second quarter of 2019.

Net income for the first six months of 2019 were $8.6 million, or $1.24 per diluted share, compared to $9.9 million, or $1.42 per diluted share, in the first six months of 2018. In the first half of 2019, operating results include increased operating expenses of $36.9 million, up from $33.4 million in the first half of 2018 primarily due to increased salaries and wages and medical costs. The provision for loan losses also increased to $1.1 million, compared to a $300,000 recovery of loan loss provisions in the first half of 2018.

“Our loan pipeline, for both home mortgages and business loans, continues to be robust and supports our ability to build shareholder value,” said Joe Schierhorn, President and CEO.

Second Quarter 2019 Highlights:

Total revenue, which includes net interest income plus other operating income, increased 10% to $25.5 million in the second quarter of 2019, compared to $23.3 million in the first quarter of 2019 and in the second quarter a year ago.
Community Banking provided 75% of total revenues and 91% of earnings in the second quarter of 2019.
Home Mortgage Lending began its normal seasonal improvement in demand for new home loans with commitments increasing 62% in the quarter and 28% year-over-year. Loans funded for sale grew 83% in the quarter and 14% year-over-year. Interest rate decreases impacted earnings in the segment with fair value decreases in servicing rights and improvements in refinancing activity.
Net interest income in the second quarter of 2019 increased 6% to $16.0 million from $15.0 million in the second quarter a year ago, mainly due to the higher yields on the loan and investment portfolios.
Net interest margin on a tax equivalent basis (“NIMTE”)* was 4.77% in the second quarter, a 21 basis point improvement compared to the second quarter a year ago, and a 12 basis point contraction compared to the preceding quarter.



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Other operating income benefited from $734,000 in income from an interest rate swap to fix interest costs for a customer.
Return on average assets was 1.12% and return on average equity was 8.13% for the second quarter of 2019.
The Company repurchased 149,373 shares of its common stock in the second quarter of 2019 at an average price of $34.79, leaving 192,193 shares available under the previously announced repurchase authorization.


Financial Highlights
Three Months Ended
(Dollars in thousands, except per share data)
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
Total assets

$1,552,770


$1,520,051


$1,502,988


$1,502,673


$1,470,440

Total portfolio loans

$1,015,704


$982,341


$984,346


$982,007


$967,702

Average portfolio loans

$1,003,019


$988,920


$981,407


$984,914


$963,724

Total deposits

$1,288,178


$1,228,018


$1,228,088


$1,233,268


$1,205,521

Average deposits

$1,239,354


$1,194,512


$1,233,479


$1,223,997


$1,217,903

Total shareholders' equity

$206,338


$208,838


$205,947


$203,242


$199,456

Net income

$4,261


$4,312


$4,848


$5,264


$5,830

Diluted earnings per share

$0.62


$0.62


$0.69


$0.75


$0.84

Return on average assets
1.12
%
1.18
%
1.27
%
1.40
%
1.58
%
Return on average shareholders' equity
8.13
%
8.36
%
9.30
%
10.27
%
11.79
%
NIM
4.71
%
4.83
%
4.71
%
4.69
%
4.50
%
NIMTE*
4.77
%
4.89
%
4.76
%
4.74
%
4.56
%
Efficiency ratio
77.58
%
73.23
%
76.64
%
73.82
%
71.19
%
Total shareholders' equity/total assets
13.29
%
13.74
%
13.70
%
13.53
%
13.56
%
Tangible common equity/tangible assets*
12.38
%
12.81
%
12.76
%
12.58
%
12.60
%
Book value per share

$30.66


$30.36


$29.92


$29.52


$29.02

Tangible book value per share*

$28.27


$28.01


$27.57


$27.17


$26.66

Dividends per share

$0.30


$0.30


$0.27


$0.27


$0.24


* 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 economic indicators continue to show signs of improvement. There have been modest job gains, growing personal income and wages, and rising gross state product ("GSP"). According to the State Department of Labor, Alaska has registered year-over-year job gains for eight consecutive months after losing jobs for the prior 36 months. Job growth in 2019 has been led by construction, oil & gas, health care and the leisure & hospitality sectors. Somewhat offsetting this growth has been declines year-over-year in seafood processing, financial activities and the information sectors. The seasonally adjusted unemployment rate in Alaska was 6.4% in May 2019 after finishing nine consecutive months at 6.5%. “While job growth is modest, improving employment indicates Alaska began to recover from its three-year long mild recession in October 2018. In addition, per capita income and GSP figures showed positive improvement in 2018,” stated Mark Edwards, Chief Credit Officer and Bank Economist.

Alaska’s seasonally adjusted GSP in real terms was $54.9 billion in the fourth quarter of 2018, according to the U.S. Bureau of Economic Analysis (“BEA”) in a report released on May 1, 2019. Alaska’s real GSP declined by 5.7% annualized in the first quarter of 2018, but then grew by 1.7%, 2.9% and 4.9% in the second, third and fourth quarters, respectively.

The BEA also reported that Alaska’s per capita income in 2018 was $59,687. That is a 4.4% increase from $57,163 in 2017. Alaska ranked 10th highest in per capita income in the country in both years. Total income in 2018 in Alaska



Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
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was $44 billion, up from $42.3 billion in 2017, despite a small population loss. The improvement in total income consisted of $801 million from wage earnings, $264 million from investments and rents, and $649 million from increased government transfer payments.

“An important risk factor that is impacting the current economic recovery is the uncertainty surrounding the State's budget and the long term fiscal plan for the State,” said Schierhorn.
 
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.


Review of Income Statement

Consolidated Income Statement
In the second quarter of 2019, Northrim generated a return on average assets ("ROAA") of 1.12% and a return on average equity ("ROAE") of 8.13%, compared to 1.18% and 8.36%, respectively in the first quarter of 2019 and 1.58% and 11.79%, respectively, in the second quarter a year ago.

Net Interest Income/Net Interest Margin

Net interest income grew 6% to $16.0 million in the second quarter of 2019 compared to $15.0 million in the second quarter of 2018 and increased modestly compared to $15.8 million in the first quarter of 2019. For the first six months of 2019, net interest income increased 8% to $31.7 million from $29.2 million in the first six months of 2018.
NIMTE* was 4.77% in the second quarter of 2019 compared to 4.89% in the preceding quarter and 4.56% in the second quarter a year ago. The growth in the loan portfolio more than offset increased cost of interest-bearing deposits and borrowings in both the second quarter and first half of 2019 compared to the year ago periods. The yield on interest earning assets in the second quarter was 5.17%, down 6 basis points from the first quarter of 2019 and up 43 basis points year-over-year. The cost of funds increased in the second quarter of 2019 to 63 basis points, up 10 basis points from the preceding quarter and up 35 basis points compared to the second quarter a year ago.
We continue to believe maintaining a relatively short duration for our loan and investment portfolios is a prudent capital management strategy,” said Jed Ballard, Chief Financial Officer. “The current differential in yields between short- and long-term investments does not warrant the added interest rate risks inherent in extending maturities for our investments or duration of our loan portfolio.”


Provision for Loan Losses

Northrim recorded a $300,000 provision for loan losses in the second quarter of 2019, compared to a $750,000 provision in the first quarter of 2019. In the second quarter a year ago, Northrim recorded a benefit for loan losses of $300,000. Nonperforming loans, net of government guarantees, decreased during the quarter to $16.9 million at June 30, 2019, compared to $18.5 million at March 31, 2019, and increased slightly from $16.3 million at June 30, 2018. The allowance for loan losses was 121% of nonperforming loans, net of government guarantees at June 30, 2019. “While asset quality improved in the quarter, growth in the loan portfolio prompted the increases in reserves,” said Ballard.




Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
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Other Operating Income

In addition to home mortgage lending, Northrim has interests in other businesses that complement its core community banking activities, including purchased receivables financing and wealth management. Other operating income contributed $9.6 million, or 37% of total second quarter 2019 revenues, as compared to $7.5 million, or 32% of revenues in the first quarter of 2019, and $8.3 million, or 36% of revenues in the second quarter of 2018. In the first six months of 2019, other operating income totaled $17.1 million, or 35% of revenues, compared to $15.8 million, or 35% of revenues in 2018. The primary drivers of changes in other operating income are variability in the mortgage market, which is seasonal and cyclical, and gains or losses from the fair value changes of marketable equity securities. The fair value mark-to-market of the marketable equity securities portfolio increased other income by $118,000 in the second quarter of 2019, compared to a $534,000 increase in the first quarter of 2019. Additionally, $734,000 in interest rate swap income was earned in 2019 on the execution of three new interest rate swaps related to the Company's commercial lending operations.

Other Operating Expenses

Operating expenses were $19.8 million in the second quarter of 2019, compared to $17.1 million in the first quarter of 2019 and $16.6 million in the second quarter of 2018. Impacting salaries and other personnel expenses during the second quarter was a significant increase in medical costs associated with Northrim’s self-insured medical plan, costs associated with the two new branch locations in Soldotna and East Anchorage, and higher compensation costs for the mortgage banking operations due to increased loan originations. In the first six months of 2019, operating expenses were $36.9 million, up from $33.4 million in the first six months of 2018, reflecting higher medical expenses, higher compensation costs for the mortgage banking operations and an increase in occupancy expenses, as explained above. “In addition, we continue to invest in technology, which increased data processing costs, to introduce new products and services and enhance our competitive position in Alaska,” said Schierhorn.

Income Tax Provision

For the second quarter of 2019, Northrim recorded $1.1 million in state and federal income tax expense for an effective tax rate of 21.2% compared to $1.2 million, or 16.7% in the second quarter a year ago. For the first half of 2019, Northrim recorded $2.3 million in state and federal income tax expense, for an effective tax rate of 21.2% compared to $2.0 million and 17.1% for the same period in 2018.

Community Banking

“Our Alaska franchise continues to provide long-term opportunities in the market, and our recent branch expansions are bringing in new customers and expanding relationships with the customers and communities we serve,” said Schierhorn.
Net interest income in the Community Banking segment increased 7% to $15.6 million in the second quarter of 2019 from $14.6 million in the second quarter of 2018.




Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
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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)
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
Net interest income

$15,633


$15,488


$15,719


$15,358


$14,614

Provision (benefit) for loan losses
300

750

(200
)

(300
)
Other operating income
3,619

3,235

3,199

2,770

2,836

Other operating expense
14,111

12,518

13,637

12,204

11,748

   Income before provision for income taxes
4,841

5,455

5,481

5,924

6,002

Provision for income taxes
984

1,155

824

996

882

   Net income

$3,857


$4,300


$4,657


$4,928


$5,120

Average diluted shares
6,896,687

6,981,951

6,990,319

6,990,633

6,976,985

Diluted earnings per share

$0.56


$0.62


$0.66


$0.70


$0.74


 
Year-to-date
(Dollars in thousands, except per share data)
June 30, 2019
June 30, 2018
Net interest income

$31,121


$28,650

(Benefit) provision for loan losses
1,050

(300
)
Other operating income
6,854

5,354

Other operating expense
26,629

24,115

   Income before provision for income taxes
10,296

10,189

Provision for income taxes
2,139

1,541

   Net income

$8,157


$8,648

 
 
 
Average diluted shares
6,939,338

6,972,744

Diluted earnings per share

$1.18


$1.24




Home Mortgage Lending

“Warm spring weather, continued stability in middle-market home prices, and improved affordability for mortgages contributed to support growth in our home mortgage lending business. This year, again, we saw normal seasonality in the mortgage market with higher demand in the spring and summer and lower demand in autumn and winter,” said Ballard. “Loan fundings increased during the quarter and year-over-year driven by increased refinance activity as a result of lower interest rates. Second quarter of 2019 volume increased to $169.0 million, of which 82% were for new home purchases, compared to $92.4 million and 84% of loans funded in the first quarter of 2019 and $148.2 million of which 92% were for new home purchases in the second quarter of 2018.
“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 noted. As of June 30, 2019, Northrim serviced 2,397 loans in its $598.4 million home-mortgage-servicing portfolio, which is a 27% increase from the $472.2 million serviced a year ago. Mortgage servicing revenue contributed $1.1 million to revenues in the second quarter of 2019 compared to $1.3 million in the second quarter of 2018. Total mortgage servicing income fluctuates based on the amount of mortgage servicing rights originated during the period and changes in the fair value of mortgage servicing rights, which are driven by interest rate volatility and fluctuations in estimated prepayment speeds based on published industry metrics. The change in the fair value of mortgage servicing rights was a decrease of $950,000 for the second quarter of 2019 compared to a decrease of $674,000 for the first quarter of 2019 and a decrease of $118,000 for the second



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quarter of 2018. In the first six months of 2019 the change in fair value of mortgage servicing rights was a decrease of $1.6 million as compared to a decrease of $144,000 for the first six months of 2018.

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, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
Mortgage commitments

$107,330


$66,319


$44,999


$69,026


$84,092

Mortgage loans funded for sale

$168,953


$92,447


$113,963


$156,301


$148,183

Mortgage loan refinances to total fundings
18
%
16
%
10
%
9
%
8
%
Mortgage loans serviced for others

$598,415


$586,595


$557,583


$516,008


$472,190

 
 
 
 
 
 
Net realized gains on mortgage loans sold

$4,903


$2,927


$3,156


$4,268


$4,052

Change in fair value of mortgage loan commitments, net
655

356

(442
)
(66
)
32

Total production revenue
5,558

3,283

2,714

4,202

4,084

Mortgage servicing revenue
1,119

1,668

1,526

1,578

1,254

Change in fair value of mortgage servicing rights, net1
(950
)
(674
)
145

(128
)
(118
)
Total mortgage servicing revenue, net
169

994

1,671

1,450

1,136

Other mortgage banking revenue
223

21

134

251

258

   Total mortgage banking income

$5,950


$4,298


$4,519


$5,903


$5,478

 
 
 
 
 
 
Net interest income

$324


$281


$418


$461


$375

Mortgage banking income
5,950

4,298

4,519

5,903

5,478

Other operating expense
5,708

4,562

4,663

5,895

4,858

   Income before provision for income taxes
566

17

274

469

995

Provision for income taxes
162

5

83

133

285

   Net income

$404


$12


$191


$336


$710

 
 
 
 
 
 
Average diluted shares
6,896,687

6,981,951

6,990,319

6,990,633

6,976,985

Diluted earnings per share

$0.06


$—


$0.03


$0.05


$0.10

1Principally 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.




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Year-to-date
(Dollars in thousands, except per share data)
June 30, 2019
June 30, 2018
Mortgage loans funded for sale

$261,400


$257,252

Mortgage loan refinances to total fundings
17
%
12
%
 
 
 
Net realized gains on mortgage loans sold

$7,830


$7,398

Change in fair value of mortgage loan commitments, net
1,011

348

Total production revenue
8,841

7,746

Mortgage servicing revenue
2,787

2,438

Change in fair value of mortgage servicing rights, net1
(1,624
)
(144
)
Total mortgage servicing revenue, net
1,163

2,294

Other mortgage banking revenue
244

382

   Total mortgage banking income

$10,248


$10,422

 
 
 
Net interest income

$605


$602

Mortgage banking income
10,248

10,422

Other operating expense
10,270

9,286

   Income before provision for income taxes
583

1,738

Provision for income taxes
167

494

   Net income

$416


$1,244

 
 
 
Average diluted shares
6,939,338

6,972,744

Diluted earnings per share

$0.06


$0.18

1Principally 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 $1.55 billion at June 30, 2019, up 2% from the preceding quarter and up 6% from a year ago. Northrim’s loan-to-deposit ratio was 79% at June 30, 2019, down from 80% at both March 31, 2019 and June 30, 2018.
Average interest-earning assets were $1.36 billion in the second quarter of 2019, up 3% from $1.32 billion in the first quarter of 2019 and up 2% from $1.34 billion in the second quarter a year ago. The average yield on interest-earning assets was 5.17% in the second quarter of 2019, down from 5.23% in the preceding quarter and up from 4.74% in the second quarter a year ago.
Average investment securities increased slightly to $281.5 million at June 30, 2019, compared to $280.4 million in the first quarter of 2019 and decreased 2% from $287.0 million in the second quarter a year ago. The average net tax equivalent yield on the securities portfolio improved to 2.71% for the second quarter of 2019, from 2.65% in the preceding quarter and 2.09% a year ago*. The average estimated duration of the investment portfolio was 19 months, at June 30, 2019.
“During the second quarter of 2019, loan originations more than offset the rate of repayments that results from the short duration of the loan portfolio. Commercial loans increased to 38% of total loans, offsetting small reductions in commercial real estate and construction loans in the second quarter of 2019. Portfolio loans were $1.02 billion at June 30, 2019, up 3% from the preceding quarter and up 5% from a year ago. Average portfolio loans in the second quarter of 2019 were $1.00 billion, up slightly from the preceding quarter and up 4% from a year ago. Yields on average portfolio loans in the second quarter of 2019 declined to 5.96% from 6.04% in the first quarter of 2019 and improved compared to 5.65% in the second quarter of 2018.



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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, 2019, represented 90% of total deposits. At June 30, 2019, total deposits were $1.29 billion, up 5% from $1.23 billion at March 31, 2019, and up 7% from $1.21 billion a year ago. Average interest-bearing deposits were up 2% to $818.1 million with an average cost of 0.58% in the second quarter of 2019, compared to $800.5 million and an average cost of 0.48% in the first quarter of 2019, and down slightly from $818.6 million and an average cost of 0.22% in the second quarter of 2018.
“In the second quarter, we introduced improved commercial sweep accounts with enhanced services for our business customers,” said Schierhorn. “This expansion of our deposit products and services improves our competitive position in the Alaska market.”
Shareholders’ equity was $206.3 million, or $30.66 per share, at June 30, 2019, compared to $208.8 million, or $30.36 per share, at March 31, 2019 and $199.5 million, or $29.02 per share, a year ago. Tangible book value per share* was $28.27 at June 30, 2019, up from $26.66 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 15.03% at June 30, 2019. Investments in share repurchases accounted for the modest decline in shareholder equity in the second quarter of 2019 compared to the preceding quarter.

Asset Quality

Nonperforming assets ("NPAs") net of government guarantees improved to $23.9 million at June 30, 2019, compared to $25.5 million at March 31, 2019, and $24.0 million at June 30, 2018. Of the NPAs, $13.3 million, or 56% are nonaccrual loans related to six commercial relationships. Two of these relationships, which totaled $6.3 million at the end of the second quarter of 2019, are businesses in the medical industry.
Net adversely classified loans improved to $25.0 million at the end of the second quarter of 2019 as compared to $27.1 million at the end of the first quarter of 2019, and $33.2 million one year ago. Loan recoveries were greater than loan charge-offs in the second quarter by $9,000, compared to $60,000 in net loan charge-offs in the first quarter of 2019 and $41,000 in net loan charge-offs in the year ago quarter. Year to date, net loan charge-offs were $51,000, compared to $1.1 million in the first six months of 2018. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. As of June 30, 2019, $18.8 million, or 75% of net adversely classified loans are attributable to eight relationships with four loans to commercial businesses, two loans to medical businesses, and two loans to oilfield services commercial businesses.
Performing restructured loans that were not included in nonaccrual loans at the end of the second quarter of 2019 were $1.6 million, down from $3.4 million in the preceding quarter and from $9.1 million a year ago. The decrease in the second quarter of 2019 compared to the year ago quarter is primarily due to the repayment of one commercial relationship. 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 $64.4 million, or approximately 6% of portfolio loans as of June 30, 2019, had direct exposure to the oil and gas industry in Alaska, and $2.7 million of these loans are adversely classified. As of June 30, 2019, Northrim has an additional $32.0 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 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,” added Ballard.



Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
9 of 20



About Northrim BanCorp

Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 16 branches in Anchorage, the Matanuska Valley, Soldotna, 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 $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
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, 2018, 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.alaskanomics.com/alaskas-economy/

http://labor.alaska.gov/trends/jul19.pdf

http://live.laborstats.alaska.gov/qcew/

https://www.bls.gov/eag/eag.ak.htm

https://pubs.iseralaska.org/media/1ef3a5d2-2efe-4f83-9ab5-c719d0202edd/2019_07_08-VetoEconomicImpacts.pdf

https://www.bea.gov/data/income-saving/personal-income-by-state

https://www.bea.gov/data/gdp/gdp-state

http://almis.labor.state.ak.us/












Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
11 of 20


Income Statement
 
 
 
 
 
 
(Dollars in thousands, except per share data)
Three Months Ended
 
Year-to-date
(Unaudited)
June 30,
March 31,
June 30,
 
June 30,
June 30,
 
2019
2019
2018
 
2019
2018
Interest Income:
 
 
 
 
 
 
     Interest and fees on loans

$15,353


$14,977


$14,036

 

$30,330


$27,299

     Interest on portfolio investments
1,818

1,758

1,400

 
3,576

2,748

     Interest on deposits in banks
135

143

159

 
278

343

          Total interest income
17,306

16,878

15,595

 
34,184

30,390

Interest Expense:
 
 
 
 
 
 
     Interest expense on deposits
1,174

938

446

 
2,112

818

     Interest expense on borrowings
175

171

160

 
346

320

          Total interest expense
1,349

1,109

606

 
2,458

1,138

          Net interest income
15,957

15,769

14,989

 
31,726

29,252

 
 
 
 
 
 
 
Provision (benefit) for loan losses
300

750

(300
)
 
1,050

(300
)
          Net interest income after provision for loan losses
15,657

15,019

15,289

 
30,676

29,552

 
 
 
 
 
 
 
Other Operating Income:
 
 
 
 
 
 
     Mortgage banking income
5,950

4,298

5,478

 
10,248

10,422

     Purchased receivable income
837

809

867

 
1,646

1,707

     Bankcard fees
744

650

707

 
1,394

1,332

     Interest rate swap income
734



 
734


     Service charges on deposit accounts
413

413

376

 
826

730

     Gain (loss) on marketable equity securities
118

534

(173
)
 
652

(173
)
     Gain on sale of securities

23


 
23


     Other income
773

806

1,059

 
1,579

1,758

          Total other operating income
9,569

7,533

8,314

 
17,102

15,776

 
 
 
 
 
 
 
Other Operating Expense:
 
 
 
 
 
 
     Salaries and other personnel expense
12,945

11,302

11,362

 
24,247

21,947

     Data processing expense
1,796

1,679

1,323

 
3,475

2,871

     Occupancy expense
1,642

1,771

1,020

 
3,413

2,720

     Marketing expense
833

419

462

 
1,252

1,094

     Professional and outside services
684

556

554

 
1,240

1,053

     Insurance expense
232

258

178

 
490

474

     Intangible asset amortization expense
15

15

17

 
30

35

     OREO expense, net rental income and gains on sale
165

(320
)
11

 
(155
)
114

     Other operating expense
1,507

1,400

1,679

 
2,907

3,093

          Total other operating expense
19,819

17,080

16,606

 
36,899

33,401

 
 
 
 
 
 
 
          Income before provision for income taxes
5,407

5,472

6,997

 
10,879

11,927

     Provision for income taxes
1,146

1,160

1,167

 
2,306

2,035

          Net income

$4,261


$4,312


$5,830

 

$8,573


$9,892

 
 
 
 
 
 
 
          Basic EPS

$0.62


$0.63


$0.85

 

$1.25


$1.44

          Diluted EPS

$0.62


$0.62


$0.84

 

$1.24


$1.42

          Average basic shares
6,798,352

6,879,619

6,872,371

 
6,838,986

6,872,167

          Average diluted shares
6,896,687

6,981,951

6,976,985

 
6,939,338

6,972,744











Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
12 of 20


Balance Sheet
 
 
 
(Dollars in thousands)
 
 
 
(Unaudited)
June 30,
March 31,
June 30,
 
2019
2019
2018
 
 
 
 
Assets:
 
 
 
     Cash and due from banks

$25,377


$30,266


$26,355

     Interest bearing deposits in other banks
45,454

48,667

9,775

     Investment securities available for sale
249,986

274,441

264,124

     Marketable equity securities
7,916

7,798

6,006

     Investment in Federal Home Loan Bank stock
2,069

2,071

2,104

     Loans held for sale
61,531

30,211

54,306

     Portfolio loans
1,015,704

982,341

967,702

     Allowance for loan losses
(20,518
)
(20,209
)
(20,108
)
          Net portfolio loans
995,186

962,132

947,594

     Purchased receivables, net
13,114

21,286

20,323

     Mortgage servicing rights
10,836

11,254

8,733

     Other real estate owned, net
7,043

7,043

8,959

     Premises and equipment, net
39,155

38,978

38,113

     Lease right of use asset
14,924

15,485


     Goodwill and intangible assets
16,124

16,139

16,189

     Other assets
64,055

54,280

67,859

          Total assets
$1,552,770
$1,520,051
$1,470,440
 
 
 
 
Liabilities:
 
 
 
     Demand deposits

$435,425


$417,068


$401,925

     Interest-bearing demand
285,664

247,630

246,628

     Savings deposits
232,190

237,510

237,978

     Money market deposits
204,151

204,567

223,189

     Time deposits
130,748

121,243

95,801

          Total deposits
1,288,178

1,228,018

1,205,521

     Securities sold under repurchase agreements
864

34,621

27,695

     Other borrowings
7,158

7,200

7,312

     Junior subordinated debentures
10,310

10,310

10,310

     Lease liability
14,807

15,358


     Other liabilities
25,115

15,706

20,146

          Total liabilities
1,346,432

1,311,213

1,270,984

 
 
 
 
Shareholders' Equity:
 
 
 
          Total shareholders' equity
206,338

208,838

199,456

          Total liabilities and shareholders' equity

$1,552,770


$1,520,051


$1,470,440

 
 
 
 



Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
13 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Composition of Portfolio Investments
 
 
 
 
 
 
 
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
U.S. Treasury securities

$55,349

21.5
%
 

$55,037

19.5
%
 

$39,534

14.6
%
U.S. Agency securities
127,417

49.4
%
 
157,260

55.7
%
 
169,158

62.7
%
Corporate securities
40,400

15.7
%
 
40,337

14.3
%
 
37,490

13.9
%
Marketable equity securities
7,916

3.1
%
 
7,798

2.8
%
 
6,006

2.2
%
Collateralized loan obligations
22,931

8.9
%
 
17,909

6.3
%
 
6,007

2.2
%
Alaska municipality, utility, or state bonds
3,739

1.4
%
 
3,748

1.3
%
 
7,348

2.7
%
Other municipality, utility, or state bonds
150

0.1
%
 
150

0.1
%
 
4,587

1.7
%
   Total portfolio investments

$257,902

 
 

$282,239

 
 

$270,130

 
 
 
 
 
 
 
 
 
 

Composition of Portfolio Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
Commercial loans

$387,257

38
%
 

$344,164

35
%
 

$342,420

35
%
 

$333,132

34
%
 

$327,733

34
%
CRE owner occupied loans
126,991

12
%
 
130,141

13
%
 
126,414

13
%
 
130,166

13
%
 
127,384

13
%
CRE nonowner occupied loans
367,703

36
%
 
360,071

37
%
 
367,759

37
%
 
382,313

39
%
 
385,648

40
%
Construction loans
97,837

10
%
 
109,404

11
%
 
109,367

11
%
 
97,976

10
%
 
89,433

9
%
Consumer loans
40,234

4
%
 
42,861

4
%
 
42,873

4
%
 
42,775

4
%
 
41,711

4
%
   Subtotal
1,020,022

 
 
986,641

 
 
988,833

 
 
986,362

 
 
971,909

 
Unearned loan fees, net
(4,318
)
 
 
(4,300
)
 
 
(4,487
)
 
 
(4,355
)
 
 
(4,207
)
 
     Total portfolio loans

$1,015,704

 
 

$982,341

 
 

$984,346

 
 

$982,007

 
 

$967,702

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Composition of Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
Demand deposits

$435,425

34
%
 

$417,068

34
%
 

$420,988

35
%
 

$450,409

36
%
 

$401,925

33
%
Interest-bearing demand
285,664

22
%
 
247,630

20
%
 
248,056

20
%
 
240,974

20
%
 
246,628

20
%
Savings deposits
232,190

18
%
 
237,510

19
%
 
239,054

19
%
 
233,611

19
%
 
237,978

20
%
Money market deposits
204,151

16
%
 
204,567

17
%
 
206,717

17
%
 
208,614

17
%
 
223,189

19
%
Time deposits
130,748

10
%
 
121,243

10
%
 
113,273

9
%
 
99,660

8
%
 
95,801

8
%
   Total deposits

$1,288,178

 
 

$1,228,018

 
 

$1,228,088

 
 

$1,233,268

 
 

$1,205,521

 



Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
14 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Asset Quality
 
 
 
 
 
 
 
June 30,
 
March 31,
 
June 30,
 
 
2019
 
2019
 
2018
 
     Nonaccrual loans

$18,080

 

$19,516

 

$16,635

 
     Loans 90 days past due and accruing

 

 

 
          Total nonperforming loans
18,080

 
19,516

 
16,635

 
             Nonperforming loans guaranteed by government
(1,139
)
 
(1,038
)
 
(327
)
 
                Net nonperforming loans
16,941

 
18,478

 
16,308

 
     Other real estate owned
7,043

 
7,043

 
8,959

 
     Repossessed assets
1,182

 
1,242

 

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

$23,887

 

$25,484

 

$23,987

 
     Nonperforming loans / portfolio loans, net of government guarantees
1.67

%
1.88

%
1.69

%
     Nonperforming assets / total assets, net of government guarantees
1.54

%
1.68

%
1.63

%
 
 
 
 
 
 
 
     Performing restructured loans

$1,645

 

$3,368

 

$9,096

 
     Nonperforming loans plus performing restructured loans, net of government
 
 
 
 
 
 
     guarantees

$18,586

 

$21,846

 

$25,404

 
     Nonperforming loans plus performing restructured loans / portfolio loans, net of
 
 
 
 
 
 
     government guarantees
1.83

%
2.22

%
2.63

%
     Nonperforming assets plus performing restructured loans / total assets, net of
 
 
 
 
 
 
     government guarantees
1.64

%
1.90

%
2.25

%
 
 
 
 
 
 
 
     Adversely classified loans, net of government guarantees

$25,016

 

$27,080

 

$33,178

 
     Loans 30-89 days past due and accruing, net of government guarantees /
 
 
 
 
 
 
     portfolio loans
0.70

%
0.36

%
0.18

%
 
 
 
 
 
 
 
     Allowance for loan losses / portfolio loans
2.02

%
2.06

%
2.08

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

%
109

%
123

%
 
 
 
 
 
 
 
     Gross loan charge-offs for the quarter

$68

 

$109

 

$100

 
     Gross loan recoveries for the quarter

($77
)
 

($49
)
 

($59
)
 
     Net loan (recoveries) charge-offs for the quarter

($9
)
 

$60

 

$41

 
     Net loan charge-offs year-to-date

$51

 

$60

 

$1,053

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

%
0.01

%

%
     Net loan charge-offs year-to-date / average loans,
 
 
 
 
 
 
          year-to-date annualized
0.01

%
0.02

%
0.22

%




Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
15 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Nonperforming Assets Rollforward
 
 
 
 
 
 
 
 
 
 
 
Writedowns
Transfers to
Transfers to
 
 
 
Balance at March 31, 2019
Additions this quarter
Payments this quarter
/Charge-offs
 this quarter
OREO/ REPO
Performing Status
this quarter
Sales this quarter
Balance at June 30, 2019
Commercial loans

$12,457


$405


($1,591
)

($64
)

$—


$—


$—


$11,207

Commercial real estate
4,230

1,087

(276
)




5,041

Construction loans
2,423


(931
)




1,492

Consumer loans
406

97

(159
)
(4
)



340

Non-performing loans guaranteed by government
(1,038
)
(101
)





(1,139
)
   Total non-performing loans
18,478

1,488

(2,957
)
(68
)



16,941

Other real estate owned
7,043







7,043

Repossessed assets
1,242






(60
)
1,182

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






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

$25,484


$1,488


($2,957
)

($68
)

$—


$—


($60
)

$23,887



The following table details loan charge-offs, by industry:
Loan Charge-offs by Industry
 
 
 
 
 
Three Months Ended
 
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
Charge-offs:
 
 
 
 
 
Remediation services

$—


$89


$—


$—


$—

Transportation and warehousing


362



Other services




78

Excavation and construction

20

320



Health care and social assistance
64





Consumer
4


31

9

22

   Total charge-offs

$68


$109


$713


$9


$100








Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
16 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Average Balances, Yields, and Rates
 
 
 
 
 
 
 
 
 
Three Months Ended
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
 
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

$22,850

2.34
%
 

$24,199

2.36
%
 

$35,846

1.75
%
Portfolio investments
281,450

2.71
%
 
280,419

2.65
%
 
287,003

2.09
%
Loans held for sale
51,280

4.13
%
 
31,203

4.52
%
 
48,608

4.32
%
Portfolio loans
1,003,019

5.96
%
 
988,920

6.04
%
 
963,724

5.65
%
   Total interest-earning assets
1,358,599

5.17
%
 
1,324,741

5.23
%
 
1,335,181

4.74
%
Nonearning assets
167,414

 
 
162,241

 
 
145,520

 
   Total assets

$1,526,013

 
 

$1,486,982

 
 

$1,480,701

 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
 
Interest-bearing deposits

$818,122

0.58
%
 

$800,488

0.48
%
 

$818,592

0.22
%
Borrowings
44,938

1.53
%
 
51,515

1.32
%
 
44,897

1.40
%
   Total interest-bearing liabilities
863,060

0.63
%
 
852,003

0.53
%
 
863,489

0.28
%
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand deposits
421,232

 
 
394,024

 
 
399,311

 
Other liabilities
31,391

 
 
31,710

 
 
19,626

 
Shareholders' equity
210,330

 
 
209,245

 
 
198,275

 
   Total liabilities and shareholders' equity

$1,526,013

 
 

$1,486,982

 
 

$1,480,701

 
   Net spread
 
4.54
%
 
 
4.70
%
 
 
4.46
%
   NIM
 
4.71
%
 
 
4.83
%
 
 
4.50
%
   NIMTE*
 
4.77
%
 
 
4.89
%
 
 
4.56
%
   Average portfolio loans to average
 
 
 
 
 
 
 
 
        interest-earning assets
73.83
%
 
 
74.65
%
 
 
72.18
%
 
   Average portfolio loans to average total deposits
80.93
%
 
 
82.79
%
 
 
79.13
%
 
   Average non-interest deposits to average
 
 
 
 
 
 
 
 
         total deposits
33.99
%
 
 
32.99
%
 
 
32.79
%
 
   Average interest-earning assets to average
 
 
 
 
 
 
 
 
         interest-bearing liabilities
157.42
%
 
 
155.49
%
 
 
154.63
%
 

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

 
2Q19 vs. 1Q19
2Q19 vs. 2Q18
Nonaccrual interest adjustments
0.01
 %
(0.01
)%
Interest rates and loan fees
(0.13
)%
0.15
 %
Volume and mix of interest-earning assets and liabilities
 %
0.07
 %
Change in NIMTE*
(0.12
)%
0.21
 %



Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
17 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Average Balances, Yields, and Rates
 
 
 
 
 
 
Year-to-date
 
June 30, 2019
 
June 30, 2018
 
 
Average
 
 
Average
 
Average
Tax Equivalent
 
Average
Tax Equivalent
 
Balance
Yield/Rate
 
Balance
Yield/Rate
Assets
 
 
 
 
 
Interest bearing deposits in other banks

$23,521

2.35
%
 

$41,977

1.63
%
Portfolio investments
280,937

2.68
%
 
300,476

1.96
%
Loans held for sale
41,297

4.28
%
 
41,594

4.07
%
Portfolio loans
996,009

6.00
%
 
959,743

5.59
%
   Total interest-earning assets
1,341,764

5.20
%
 
1,343,790

4.61
%
Nonearning assets
164,841

 
 
143,565

 
   Total assets

$1,506,605

 
 

$1,487,355

 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
Interest-bearing deposits

$809,354

0.53
%
 

$824,038

0.20
%
Borrowings
48,208

1.42
%
 
45,577

1.39
%
   Total interest-bearing liabilities
857,562

0.58
%
 
869,615

0.26
%
 
 
 
 
 
 
Noninterest-bearing demand deposits
407,703

 
 
401,742

 
Other liabilities
31,550

 
 
19,105

 
Shareholders' equity
209,790

 
 
196,893

 
   Total liabilities and shareholders' equity

$1,506,605

 
 

$1,487,355

 
   Net spread
 
4.62
%
 
 
4.35
%
   NIM
 
4.77
%
 
 
4.39
%
   NIMTE*
 
4.83
%
 
 
4.44
%
   Average portfolio loans to average interest-earning assets
74.23
%
 
 
71.42
%
 
   Average portfolio loans to average total deposits
81.84
%
 
 
78.30
%
 
   Average non-interest deposits to average total deposits
33.50
%
 
 
32.77
%
 
   Average interest-earning assets to average interest-bearing liabilities
156.46
%
 
 
154.53
%
 

The components of the change in NIMTE* are detailed in the table below:
 
YTD19 vs.YTD18
Nonaccrual interest adjustments
(0.01
)%
Interest rates and loan fees
0.29
 %
Volume and mix of interest-earning assets and liabilities
0.11
 %
Change in NIMTE*
0.39
 %






Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
18 of 20


Additional Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Capital Data (At quarter end)
 
 
 
 
 
 
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
Book value per share

$30.66

 

$30.36

 

$29.02

 
Tangible book value per share*

$28.27

 

$28.01

 

$26.66

 
Total shareholders' equity/total assets
13.29

%
13.74

%
13.56

%
Tangible Common Equity/Tangible Assets*
12.38

%
12.81

%
12.60

%
Tier 1 Capital / Risk Adjusted Assets
15.03

%
15.60

%
15.10

%
Total Capital / Risk Adjusted Assets
16.28

%
16.86

%
16.35

%
Tier 1 Capital / Average Assets
13.22

%
13.86

%
13.23

%
Shares outstanding
6,729,456

 
6,878,829

 
6,872,959

 
Unrealized gain (loss) on AFS debt securities, net of income taxes

$871

 

($59
)
 

($1,506
)
 
Unrealized gain (loss) on derivatives and hedging activities

($374
)
 

$214

 

$805

 

Profitability Ratios
 
 
 
 
 
 
 
 
 
 
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
For the quarter:
 
 
 
 
 
 
 
 
 
 
     NIM
4.71
%
4.83
%
4.71
%
4.69
%
4.50
%
     NIMTE*
4.77
%
4.89
%
4.76
%
4.74
%
4.56
%
     Efficiency ratio
77.58
%
73.23
%
76.64
%
73.82
%
71.19
%
     Return on average assets
1.12
%
1.18
%
1.27
%
1.40
%
1.58
%
     Return on average equity
8.13
%
8.36
%
9.30
%
10.27
%
11.79
%

 
June 30, 2019
 
June 30, 2018
 
Year-to-date:
 
 
 
 
     NIM
4.77
%
4.39
%
     NIMTE*
4.83
%
4.44
%
     Efficiency ratio
75.51
%
74.10
%
     Return on average assets
1.15
%
1.34
%
     Return on average equity
8.24
%
10.13
%





Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
19 of 20


*Non-GAAP Financial Measures
(Dollars and shares in thousands, except per share data)
(Unaudited)

Net interest margin on a tax equivalent basis

Net interest margin on a tax equivalent basis ("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 2019 and 2018, respectively. 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, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
Net interest income

$15,957

 

$15,769

 

$16,137

 

$15,819

 

$14,989

Divided by average interest-bearing assets
1,358,599

 
1,324,741

 
1,359,909

 
1,338,219

 
1,335,181

Net interest margin ("NIM")2
4.71
%
 
4.83
%
 
4.71
%
 
4.69
%
 
4.50
%
 
 
 
 
 
 
 
 
 
 
Net interest income

$15,957

 

$15,769

 

$16,137

 

$15,819

 

$14,989

Plus: reduction in tax expense related to
 

 
 

 
 

 
 

 
 

     tax-exempt interest income
191

 
188

 
196

 
182

 
175

 

$16,148

 

$15,957

 

$16,333

 

$16,001

 

$15,164

Divided by average interest-bearing assets
1,358,599

 
1,324,741

 
1,359,909

 
1,338,219

 
1,335,181

NIMTE2
4.77
%
 
4.89
%
 
4.76
%
 
4.74
%
 
4.56
%

 
Year-to-date
 
June 30, 2019
 
June 30, 2018
Net interest income

$31,726

 

$29,252

Divided by average interest-bearing assets
1,341,764

 
1,343,790

Net interest margin ("NIM")3
4.77
%
 
4.39
%
 
 
 
 
Net interest income

$31,726

 

$29,252

Plus: reduction in tax expense related to
 

 
 
     tax-exempt interest income
379

 
348

 

$32,105

 

$29,600

Divided by average interest-bearing assets
1,341,764

 
1,343,790

NIMTE3
4.83
%
 
4.44
%

2Calculated using actual days in the quarter divided by 365 for quarters ended in 2019 and 2018.

3Calculated using actual days in the year divided by 365 for year-to-date periods in 2019 and 2018.




Northrim BanCorp Earns $4.3 Million, or $0.62 per Diluted Share in 2Q19
July 29, 2019
20 of 20


*Non-GAAP Financial Measures
(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, 2019
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity

$206,338

 

$208,838

 

$205,947

 

$203,242

 

$199,456

Divided by shares outstanding
6,729

 
6,879

 
6,883

 
6,884

 
6,873

Book value per share

$30.66