NORTHRIM BANCORP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 27, 2015

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EXHIBIT 99.1

Contact:
Joe Schierhorn, Chief Operating Officer and President of Northrim Bank
 
(907) 261-3308
 
Latosha Frye, Chief Financial Officer
 
(907) 261-8763
NEWS RELEASE

Northrim BanCorp Reports 3Q15 Profit Growth of 12% in Quarter and 44% Compared to 3Q14
Resulting in Earnings of $5.3 Million, or $0.77 Per Diluted Share in 3Q15

ANCHORAGE, Alaska - October 27, 2015 - Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported that continued demand for home mortgages from new purchasers and portfolio loan and deposit growth generated a 44% increase in third quarter profits and a 27% increase in profits year-to-date compared to the same periods a year ago. Net income in the third quarter of 2015 was $5.3 million, or $0.77 per diluted share, compared to $4.8 million, or $0.69 per diluted share, in the second quarter of 2015, and $3.7 million, or $0.53 per diluted share, in the third quarter of 2014. For the first nine months of 2015, net income was $13.7 million, or $1.97 per diluted share, compared to $10.7 million, or $1.57 per diluted share in the first nine months of 2014.

“The acquisitions we made in 2014 continue to contribute to profitability and have added value to our franchise,” said Joseph Beedle, President and CEO. “The expansion to southeast Alaska into three communities early last year through the acquisition of Alaska Pacific Bank is generating diversification not only in our geographic footprint, but also in our loan and deposit portfolio. Our mortgage origination business contributed $8.4 million to pre-tax revenues in the third quarter and $0.24 in diluted earnings per share.”
 
Financial Highlights (at or for the periods ended September 30, 2015, compared to June 30, 2015, and September 30, 2014)
•
Year-to-date 2015 profits increased 27% to $13.7 million, or $1.97 per diluted share.
•
Total revenues, which include net interest income, plus other operating income, increased 5% to $27.1 million in the third quarter of 2015 from $25.8 million in the previous quarter and grew 45% from $18.7 million in the same period a year ago.
•
Net interest income grew 3% in the third quarter of 2015 compared to the prior quarter and increased 7% from the third quarter of 2014, primarily reflecting increased loan volumes.
•
Return on average assets was 1.42% and return on average equity was 12.37% in the third quarter of 2015.
•
Average portfolio loans increased 5% to $982.3 million for the third quarter of 2015 from the same period a year ago and increased 2% from the preceding quarter, reflecting organic growth and steady demand in the market.
•
Tax equivalent net interest margin* decreased slightly to 4.38% in the third quarter of 2015 compared to 4.44% in the second quarter of 2015 and 4.43% in the third quarter a year ago, reflecting higher cash balances held during the quarter.
•
Northrim paid a quarterly cash dividend of $0.19 per share in September 2015, up from the $0.18 per share dividend paid in the third quarter a year ago. The dividend provides an annual yield of approximately 2.7% at current market share prices.
•
Tangible book value* increased to $22.09 per share at September 30, 2015, compared to $21.47 at June 30, 2015 and $22.08 per share a year ago. Tangible common equity to tangible assets* was 10.00% at September 30, 2015, compared to 9.97% June 30, 2015, and 10.69% a year ago. Tangible book value and tangible common equity to tangible assets decreased in 2014 mainly due to an increase in intangible assets from the two acquisitions completed in 2014.


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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•
Northrim remains well-capitalized with Tier 1 Capital to Risk Adjusted Assets of 13.00% at September 30, 2015, compared to 12.67% at June 30, 2015, and 14.33% a year ago.


Financial Highlights
Three Months Ended
(Dollars in thousands, except per share data)
September 30, 2015
June 30, 2015
March 31, 2015
December 31, 2014
September 30, 2014
 
 
 
 
 
 
Total assets

$1,539,253


$1,500,331


$1,447,984


$1,449,349


$1,420,665

Total portfolio loans

$973,680


$974,849


$960,564


$924,504


$936,659

Total deposits

$1,264,919


$1,238,717


$1,191,013


$1,179,747


$1,192,367

Total shareholders' equity

$175,336


$171,082


$167,384


$164,441


$159,271

Net income attributable to Northrim BanCorp

$5,335


$4,781


$3,561


$6,674


$3,707

Operating net income*

$5,390


$4,932


$4,350


$3,297


$3,586

Diluted earnings per share

$0.77


$0.69


$0.51


$0.97


$0.53

Operating diluted earnings per share*

$0.78


$0.71


$0.63


$0.47


$0.52

Return on average assets
1.42
%
1.33
%
1.01
%
1.84
%
1.07
%
Return on average shareholders' equity
12.37
%
11.46
%
8.65
%
16.40
%
9.29
%
Tax equivalent net interest margin*
4.38
%
4.44
%
4.39
%
4.31
%
4.43
%
Efficiency ratio*
66.93
%
68.64
%
76.09
%
58.35
%
68.05
%
Tangible common equity/tangible assets*
10.00
%
9.97
%
10.07
%
9.85
%
10.69
%
Tangible book value per share*

$22.09


$21.47


$20.92


$20.48


$22.08

Dividends per share

$0.19


$0.18


$0.18


$0.18


$0.18


* References to tangible book value per share, tangible common equity and tangible assets (all of which exclude intangible assets), operating net income and operating diluted earnings per share (which exclude certain non-operating income and expense items), tax equivalent net interest margin, and the efficiency ratio (exclusive of intangible asset amortization) represent non-GAAP financial measures. Management has presented these non-GAAP measurements in this earnings release because they believe these measures are useful to investors. See page 19 of this release for reconciliations of these measures to GAAP financial measures.

Alaska Economic Update

"Although there is uncertainty about the future of Alaska's economy, it is currently stable and showing resilience in the face of the on-going low-price energy marketplace,” said Beedle. “While Shell Oil’s decision to cease exploratory drilling operations in the Chuckchi Sea was a disappointment to many of us, we believe that activity on the North Slope continues to reflect the long-term commitments of the oil industry to the region.”
 
In the September 2015 issue of Alaska Economic Trends, Caroline Schultz, an economist with the State of Alaska Department of Labor, examined the economic differences and similarities between the state’s economy today and in the 1980’s when low oil prices significantly impacted the Alaska economy. Highlights from the article are quoted below:

“When crude oil prices slid precipitously in late 2014, many began to draw parallels between Alaska’s current budget shortfall and the deep recession of the mid-1980s, questioning whether we’re headed for another meltdown. …



Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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"The fiscal similarity between the two eras is clear: state general fund revenue is just as dependent on the value of oil now as it was then, and Alaska still relies heavily on federal spending. The relative importance of these two economic drivers hasn’t diminished even as the rest of the economy has grown. …

“In general, the foundation of Alaska’s economy has not changed, except to get larger. But other things have changed considerably since the ‘80s, which was a period of extreme and unprecedented growth. In some ways, today’s Alaska is barely recognizable. We have a much bigger and older population, many with deeper roots in the state. We also have larger amounts saved in budget reserve accounts, but face declining oil production. These differences complicate the question of whether current low oil prices could push Alaska into a similar recession. A larger, more mature economy makes a repeat of the massive 1980s bust less likely, but it doesn’t guarantee a soft landing. The future will largely depend on policy decisions and how resilient today’s economy is compared to the 1980s. …

“Fast-forward to 2015 and Alaska has a much more staid housing market. Residential construction has been steady and modest since the large national recession of the late 2000s, which largely bypassed Alaska. Between 2010 and 2014, 11,000 housing units went up statewide, including multi-family units. Prices have been level through the period, and even with record low interest rates, mortgage lending has been stable. …

“In the most recent six-year period, total employment increased at an annual rate of close to 1%. Growth has been consistent. Alaska added jobs in 26 out of the past 27 years, albeit slowly - a clear change from the heady themes of the early 1980s. Between 2009 and 2014, Alaska grew by 5%, almost entirely through natural increase. Migration to and from Alaska have essentially canceled each other out. All regions have gained residents. …

“Still, nearly 30 years after the big bust, Alaska has accrued large budget reserves. Based on varying estimates of future spending and oil prices, state government (including the university system and a healthy slice of local governments’ budgets) can fund itself on savings for a couple of years.”

For a copy of the complete article, please visit http://labor.alaska.gov/trends/sep15.pdf

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 “About Northrim” link and then click "Alaska's Economy". Information from our website is not incorporated into, and does not form a part of this press release.

Review of Income Statement

Community Banking

Net income attributable to Northrim Bancorp for the community banking segment increased 8% in the third quarter of 2015 to $3.7 million from $3.4 million in the second quarter and increased 6% from $3.5 million in the same quarter in 2014. Operating net income* for the community banking segment increased 5% in the third quarter of 2015 to $3.7 million from $3.6 million in the preceding quarter and increased 11% from $3.4 million in the same quarter in 2014. Increases in net interest income and other operating income were only partially offset by increases in the provision for loan losses and other operating expenses in the third quarter of 2015 compared to the preceding quarter. Net interest income, other operating income, and the provision for loan losses also increased in the third quarter compared to the same quarter in 2014. However, other operating expenses (excluding items such as the merger related costs) decreased as compared to the same quarter in 2014. The following table provides highlights of Northrim’s community banking segment:




Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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Community Banking
 
Three Months Ended
(Dollars in thousands, except per share data)
September 30, 2015
 June 30, 2015
 March 31, 2015
December 31, 2014
September 30, 2014
 
 
 
 
 
 
Net interest income

$14,425


$13,984


$13,516


$13,893


$13,725

Provision (benefit) for loan losses
676

376

326

500

—

Other operating income
4,294

3,724

3,252

6,764

4,550

Other operating expense
12,633

12,017

13,324

11,798

12,779

   Income before provision for income taxes
5,410

5,315

3,118

8,359

5,496

Provision for income taxes
1,523

1,730

813

2,008

1,824

   Net income
3,887

3,585

2,305

6,351

3,672

     Less: net income attributable to the noncontrolling interest
197

162

72

130

191

       Net income attributable to Northrim BanCorp

$3,690


$3,423


$2,233


$6,221


$3,481

 
 
 
 
 
 
Average diluted shares
6,952,209

6,941,671

6,930,873

6,943,553

6,919,993

Diluted earnings per share

$0.53


$0.49


$0.32


$0.90


$0.50

Operating net income*

$3,745


$3,574


$3,022


$2,844


$3,360

Operating diluted earnings per share*

$0.54


$0.51


$0.44


$0.41


$0.49


Net Interest Margin

“The weighted average duration of our investment portfolio is two years as of the end of the third quarter. While we sacrifice some yield because of it, we believe the short maturity of this portfolio limits the downside risk for these assets should interest rates rise. We believe that this strategy has served us well over the past few years” said Joe Schierhorn, Northrim Bank’s President and Chief Operating Officer. "In addition, 67% of our loan portfolio is made up of variable rate loans as of the end of the third quarter.” Northrim's tax equivalent net interest margin ("NIM"), which is primarily comprised of activities in the community banking segment, remained well above national averages1 in the third quarter of 2015 at 4.38%, compared to 4.44% in the preceding quarter and 4.43% in the third quarter a year ago. For the first nine months of 2015, NIM was 4.40% compared to 4.38% for the same period 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, health insurance plans, and wealth management.

Other operating income for the community banking segment increased 15% to $4.3 million in the third quarter of 2015 from $3.7 million in the preceding quarter and was down 6% from $4.6 million in the third quarter of 2014. Included in other operating income was other income of $1.4 million for the third quarter of 2015, compared to $947,000 in the preceding quarter and $750,000 in the third quarter of 2014. In the third quarter of 2015, other income included $683,000 in gains from loans acquired and marked to fair value in the Alaska Pacific Bancshares, Inc. ("Alaska Pacific") merger. Other income for the second quarter of 2015 included $179,000 in gains from loans acquired and marked to fair value in the Alaska Pacific merger, and $89,000 in gains from the sale of Elliott Cove Capital Management and Insurance operations. The third quarter of 2014 included a $1.1 million gain on the sale of a branch location. Additionally, employee benefit plan income in the second quarter of 2015 included a one-time catch-up payment of
1As of June 30, 2015, the NIM for the SNL US Bank Index was 2.76% and the NIM for SNL US Banks with assets between $1 billion and $5 billion was 3.68%.


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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$119,000. “Our employee benefit plan programs remain profitable and broaden the financial services we offer to our business customers,” said Latosha Frye, Chief Financial Officer.

Other Operating Expenses

Operating expenses for the community banking segment increased 5% to $12.6 million in the third quarter of 2015 compared to $12.0 million in the second quarter of 2015. Approximately half of this increase was due to increased routine operating expenses for the community banking segment, the largest of which was a $401,000 increase in salaries and benefits expense mainly due to an increase in medical claims costs and a slight increase in full time equivalent employees. This increase was partially offset by a $129,000 decrease in marketing expenses. The rest of the increase in other operating expenses was the result of increases in non-routine operating expenses including the increase in fair value of the earn-out liability associated with our acquisition of Residential Mortgage Holding Company, LLC ("RML") and other real estate owned ("OREO") expenses, net of rental income and gains on sales.

Operating expenses for the community banking segment decreased 1% from $12.8 million in the third quarter a year ago. Approximately two thirds of this decrease was the result of decreased non-routine operating expenses and merger and acquisition expenses in the third quarter of 2015 which was partially offset by the increase in fair value of the RML earn-out liability. Additionally, the reserve for purchased receivables decreased in the third quarter of 2015 as compared to the same quarter a year ago.

Home Mortgage Lending Operations

On December 1, 2014, RML became a wholly owned subsidiary of Northrim Bank. RML's gross revenues and expenses are now reported on a consolidated basis throughout the various sections of Northrim's income statement. The following table provides highlights of Northrim’s home mortgage lending segment:


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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Home Mortgage Lending
 
Three Months Ended
(Dollars in thousands, except per share data)
September 30, 2015
 June 30, 2015
March 31, 2015
December 31, 2014
September 30, 2014
 
 
 
 
 
 
Net interest income

$257


$211


$116


$31


$—

Provision (benefit) for loan losses
—

—

—

—

—

Other operating income
8,113

7,839

7,283

2,612

384

Other operating expense
5,570

5,736

5,137

1,873

—

   Income before provision for income taxes
2,800

2,314

2,262

770

384

Provision for income taxes
1,155

956

934

317

158

   Net income attributable to Northrim BanCorp

$1,645


$1,358


$1,328


$453


$226

 
 
 
 
 
 
Average diluted shares
6,952,209

6,941,671

6,930,873

6,943,553

6,919,993

Diluted earnings per share

$0.24


$0.20


$0.19


$0.07


$0.03

 
 
 
 
 
 
Mortgage commitments

$74,637


$87,460


$81,214


$39,567

NA
Mortgage loans funded for sale

$201,402


$216,450


$176,373


$62,652

NA
Mortgage loan refinances to total fundings
10
%
20
%
39
%
24%

NA
 
 
 
 
 
 
Net realized gains on mortgage loans sold

$7,779


$7,542


$6,154


$2,234

NA
Change in fair value of mortgage loan commitments, net
(5
)
(140
)
818

12

 NA
Total production revenue
7,774

7,402

6,972

2,246

 NA
Other mortgage banking revenue
339

437

311

366

384

   Total mortgage banking income

$8,113


$7,839


$7,283


$2,612


$384


Information included in the table above for the Home Mortgage Lending segment in periods before December 1, 2014 includes earnings from Northrim's 23.5% equity interest in RML. As of December 1, 2014, operations of RML are consolidated into Northrim's results. The data included in the table above for the quarter ended December 31, 2014 includes Northrim's 23.5% share in earnings for the first two months of the quarter and includes 100% of the earnings of RML for the one month period ending December 31, 2014. Additionally, mortgage commitments, loans funded for sale, and the percentage of refinances to total funding represents the activity for the one month period from December 1 through December 31, 2014 that occurred in the quarter ended December 31, 2014.

“New home purchases represented the majority of mortgage volumes during the third quarter, accounting for 90% of the originations, which we believe reflects the stable real estate market in our footprint,” said Schierhorn. "The second and third quarters have historically been the highest quarters for mortgage lending in Alaska. We are pleased with the contribution that this segment has made to our results in 2015."

Balance Sheet Review

Northrim’s assets increased 8% to $1.54 billion at September 30, 2015, compared to $1.41 billion a year ago, which mainly reflects continued loan growth during the year and the purchase of the remaining equity interest in RML at the end of 2014.



Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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Cash and interest bearing deposits in other banks increased at the end of the third quarter to $144.6 million up 39% from the preceding quarter and up 12% from a year ago, primarily as a result of strong growth in deposits during the quarter.

Investment securities increased 3% from the preceding quarter and decreased 3% from a year ago. The investment portfolio generated an average net tax equivalent yield of 1.58% for the third quarter of 2015 and the average estimated duration of the investment portfolio was 2 years at September 30, 2015.

Loans held for sale were $66.6 million at the end of the third quarter of 2015 and average loans held for sale were $56.4 million for the third quarter of 2015, which represents a decrease from the seasonal high reached in the second quarter but a substantial increase from the same period a year ago primarily as a result of the integration of RML into Northrim’s business in late 2014 and 2015. “Demand for new home mortgages in the Alaska marketplace remains strong,” noted Frye.

Portfolio loans were flat compared to the previous quarter end and grew 4% year-over-year to $973.7 million. Average portfolio loans increased 2% in the third quarter and 5% year over year. “Construction and land development loans contributed the majority of the year-over-year growth in the loan portfolio with commercial real estate projects and tax-advantaged low-income housing projects accounting for the bulk of these loans. Residential housing construction loans remain consistent at approximately 5% of portfolio loans during the past year,” Schierhorn noted.

Northrim’s deposit base continues to be 100% Alaska-based, and is primarily made up of low-cost transaction accounts. Balances in transaction accounts at September 30, 2015, represented 89% of total deposits compared to 91% a year ago. At September 30, 2015, total deposits were $1.26 billion, up 6% from $1.19 billion a year ago and up 2% from the immediate prior quarter. Year-over-year, average non-interest bearing deposits grew 11% and average interest-bearing deposits increased 10% in the third quarter of 2015.

Other borrowings decreased to $12.5 million at September 30, 2015 from $22.3 million at June 30, 2015 and increased from $2.2 million at September 30, 2014. The increase in other borrowings as compared to the same period in the prior year was the result of the inclusion of RML's short term borrowings in Northrim's consolidated balance sheet.

Shareholders’ equity increased 10% to $175.3 million, or $25.56 per share, at September 30, 2015, compared to $159.3 million, or $23.31 per share, a year ago. Tangible book value per share* was $22.09 at September 30, 2015, compared to $22.08 per share a year ago and $21.47 per share at June 30, 2015. Northrim remains well-capitalized with Tier 1 Capital to Risk Adjusted Assets of 13.00% at September 30, 2015.

Asset Quality

At September 30, 2015, nonperforming assets decreased to 0.47% of total assets from 0.52% at the end of the preceding quarter, and non-performing loans decreased to 0.38% of portfolio loans from 0.52% at June 30, 2015. However, the allowance for loan losses increased to 1.83% of portfolio loans at September 30, 2015 from 1.79% at the end of the second quarter of 2015. The primary reason for this increase was an increase in adversely classified loans to 3.4% of portfolio loans from 2.3% at June 30, 2015. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss. The increase in adversely classified loans in the third quarter of 2015 was mainly the result of the downgrade of one commercial real estate construction project. There have been no downgrades in the last year related to the recent decrease in oil prices. Northrim estimates that approximately 8% of portfolio loans as of September 30, 2015 have direct exposure to the oil and gas industry in Alaska.

OREO declined to $3.5 million at the end of the third quarter of 2015, compared to $4.7 million a year ago and increased from $2.8 million in the preceding quarter following the transfer of one commercial real estate property into OREO from nonaccrual loans during the quarter.

There were $1.9 million in restructured loans included in nonaccrual loans at the end of the third quarter of 2015, as compared to $1.7 million at September 30, 2014. Northrim held $3.2 million in performing restructured loans that


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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were not included in nonaccrual loans at the end of the third quarter of 2015. “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,” said Frye. “We present restructured loans that are performing separately from those that are in nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.”

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. Affiliated companies include Northrim Benefits Group, LLC; and Pacific Wealth Advisors, LLC.

www.northrim.com


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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Forward-Looking Statement
This release may contain “forward-looking statements” as that term is defined for purposes of Section 21D of the Securities and Exchange Act. 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 may 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; our ability to implement our marketing and growth strategies; our expected cost savings, synergies, and other financial benefits from the recently completed merger of Northrim with Alaska Pacific Bancshares, Inc. might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; our expected cost savings, synergies and other financial benefits from the acquisition of Residential Mortgage Holding Company, LLC might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; 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, 2014, and from time to time are disclosed in our other filings with the SEC.  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.

http://labor.alaska.gov/trends/sep15.pdf





Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
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Income Statement
 
 
 
 
 
(Dollars in thousands, except per share data)
Three Months Ended
(Unaudited)
September 30,
June 30,
Three Month
September 30,
One Year
 
2015
2015
% Change
2014
% Change
Interest Income:
 
 
 
 
 
     Interest and fees on loans

$14,484


$14,135

2
 %

$13,437

8
 %
     Interest on portfolio investments
857

784

9
 %
720

19
 %
     Interest on deposits in banks
47

24

96
 %
55

-15
 %
          Total interest income
15,388

14,943

3
 %
14,212

8
 %
Interest Expense:
 
 
 
 
 
     Interest expense on deposits
490

493

-1
 %
352

39
 %
     Interest expense on borrowings
216

255

-15
 %
135

60
 %
          Total interest expense
706

748

-6
 %
487

45
 %
          Net interest income
14,682

14,195

3
 %
13,725

7
 %
 
 
 
 
 
 
Provision (benefit) for loan losses
676

376

80
 %
—

NM

          Net interest income after provision (benefit) for loan losses
14,006

13,819

1
 %
13,725

2
 %
 
 
 
 
 
 
Other Operating Income:
 
 
 
 
 
     Mortgage banking income
8,113

7,839

3
 %
—

NM

     Employee benefit plan income
1,004

931

8
 %
899

12
 %
     Electronic banking income
721

700

3
 %
590

22
 %
     Purchased receivable income
587

562

4
 %
582

1
 %
     Service charges on deposit accounts
559

568

-2
 %
599

-7
 %
     Gain on sale of securities
4

16

-75
 %
15

-73
 %
     Gain on sale of premises and equipment
—

—

NM

1,115

NM

     Equity in earnings from RML
—

—

NM

384

NM

     Other income
1,419

947

50
 %
750

89
 %
          Total other operating income
12,407

11,563

7
 %
4,934

151
 %
 
 
 
 
 
 
Other Operating Expense:
 
 
 
 
 
     Salaries and other personnel expense
11,440

11,125

3
 %
7,107

61
 %
     Occupancy expense
1,522

1,594

-5
 %
1,041

46
 %
     Change in fair value, RML earn-out liability
780

587

33
 %
—

NM

     Professional and outside services
642

791

-19
 %
323

99
 %
     Marketing expense
565

642

-12
 %
417

35
 %
     Insurance expense
406

345

18
 %
319

27
 %
     Equipment expense
387

428

-10
 %
405

-4
 %
     OREO (income) expense, net rental income and gains on sale
152

(121
)
-226
 %
(68
)
NM

     Intangible asset amortization expense
73

72

1
 %
81

-10
 %
     Merger and acquisition expense
—

—

NM

1,031

NM

     Reserve for (recovery from) purchased receivables
(23
)
(18
)
28
 %
241

-110
 %
     Other operating expense
2,259

2,308

-2
 %
1,882

20
 %
          Total other operating expense
18,203

17,753

3
 %
12,779

42
 %
 
 
 
 
 
 
          Income before provision for income taxes
8,210

7,629

8
 %
5,880

40
 %
     Provision for income taxes
2,678

2,686

—
 %
1,982

35
 %
          Net income
5,532

4,943

12
 %
3,898

42
 %
               Less: Net income attributable to the noncontrolling interest
197

162

22
 %
191

3
 %
                     Net income attributable to Northrim BanCorp

$5,335


$4,781

12
 %

$3,707

44
 %
 
 
 
 
 
 
          Basic EPS

$0.78


$0.70

11
 %

$0.54

44
 %
          Diluted EPS

$0.77


$0.69

12
 %

$0.53

45
 %
          Average basic shares
6,856,059

6,854,338

—
 %
6,831,976

—
 %
          Average diluted shares
6,952,209

6,941,671

—
 %
6,919,993

—
 %




Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
11 of 22


Income Statement
 
(Dollars in thousands, except per share data)
Nine months ended September 30,
(Unaudited)
 
 
One Year
 
2015
2014
% Change
Interest Income:
 
 
 
     Interest and fees on loans

$42,086


$37,390

13
 %
     Interest on portfolio investments
2,549

2,245

14
 %
     Interest on deposits in banks
82

145

-43
 %
          Total interest income
44,717

39,780

12
 %
Interest Expense:
 
 
 
     Interest expense on deposits
1,460

986

48
 %
     Interest expense on borrowings
748

425

76
 %
          Total interest expense
2,208

1,411

56
 %
          Net interest income
42,509

38,369

11
 %
 
 
 
 
Provision (benefit) for loan losses
1,378

(1,136
)
221
 %
          Net interest income after provision (benefit) for loan losses
41,131

39,505

4
 %
 
 
 
 
Other Operating Income:
 
 
 
   Mortgage banking income
23,235

—

NM

   Employee benefit plan income
2,712

2,653

2
 %
   Electronic banking income
2,043

1,694

21
 %
   Purchased receivable income
1,738

1,547

12
 %
   Service charges on deposit accounts
1,617

1,682

-4
 %
   Gain on sale of securities
134

461

-71
 %
   Gain on sale of premises and equipment
—

1,115

NM

   Equity in earnings from RML
—

608

NM

   Other income
3,026

2,014

50
 %
          Total other operating income
34,505

11,774

193
 %
 
 
 
 
Other Operating Expense:
 
 
 
   Salaries and other personnel expense
33,115

19,866

67
 %
   Occupancy expense
4,720

3,030

56
 %
   Change in fair value, RML earn-out liability
2,869

—

NM

   Professional and outside services
2,184

947

131
 %
   Marketing expense
1,824

1,425

28
 %
   Equipment expense
1,249

1,062

18
 %
   Insurance expense
1,075

788

36
 %
   OREO (income) expense, net rental income and gains on sale
328

(315
)
204
 %
   Intangible asset amortization expense
218

214

2
 %
   Merger and acquisition expense
—

1,736

NM

   Reserve for (recovery from) purchased receivables
(95
)
447

-121
 %
   Other operating expense
6,931

5,168

34
 %
          Total other operating expense
54,418

34,368

58
 %
 
 
 
 
          Income before provision for income taxes
21,218

16,911

25
 %
     Provision for income taxes
7,111

5,848

22
 %
          Net income
14,107

11,063

28
 %
               Less: Net income attributable to the noncontrolling interest
431

329

31
 %
                     Net income attributable to Northrim BanCorp

$13,676


$10,734

27
 %
 
 
 
 
          Basic EPS

$2.00


$1.59

26
 %
          Diluted EPS

$1.97


$1.57

25
 %
          Average basic shares
6,854,862

6,733,175

2
 %
          Average diluted shares
6,941,861

6,822,288

2
 %


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
12 of 22



Balance Sheet
 
 
 
 
 
(Dollars in thousands)
 
 
 
 
 
(Unaudited)
September 30,
June 30,
Three Month
September 30,
One Year
 
2015
2015
% Change
2014
% Change
 
 
 
 
 
 
Assets:
 
 
 
 
 
     Cash and due from banks

$42,257


$44,017

-4
 %

$44,312

-5
 %
     Interest bearing deposits in other banks
102,309

60,054

70
 %
85,029

20
 %
     Portfolio investments
236,993

229,882

3
 %
243,204

-3
 %
 
 
 
 
 
 
     Loans held for sale
66,597

73,593

-10
 %
10,325

545
 %
 
 
 
 
 
 
     Portfolio loans
973,680

974,849

—
 %
936,659

4
 %
     Allowance for loan losses
(17,848
)
(17,418
)
2
 %
(16,243
)
10
 %
          Net portfolio loans
955,832

957,431

—
 %
920,416

4
 %
     Purchased receivables, net
13,732

14,048

-2
 %
14,328

-4
 %
     Other real estate owned, net
3,511

2,807

25
 %
4,732

-26
 %
     Premises and equipment, net
39,434

37,942

4
 %
34,720

14
 %
     Goodwill and intangible assets
23,817

23,889

—
 %
8,349

185
 %
     Other assets
54,771

56,668

-3
 %
55,250

-1
 %
          Total assets
$1,539,253
$1,500,331
3
 %
$1,420,665
8
 %
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
     Demand deposits

$485,304


$455,358

7
 %

$438,805

11
 %
     Interest-bearing demand
179,080

173,952

3
 %
176,030

2
 %
     Savings deposits
221,205

227,530

-3
 %
231,669

-5
 %
     Money market deposits
236,488

232,877

2
 %
237,235

—
 %
     Time deposits
142,842

149,000

-4
 %
108,628

31
 %
          Total deposits
1,264,919

1,238,717

2
 %
1,192,367

6
 %
     Securities sold under repurchase agreements
33,413

17,895

87
 %
19,931

68
 %
     Other borrowings
12,458

22,309

-44
 %
2,175

473
 %
     Junior subordinated debentures
18,558

18,558

—
 %
18,558

—
 %
     Other liabilities
34,569

31,770

9
 %
28,363

22
 %
          Total liabilities
1,363,917

1,329,249

3
 %
1,261,394

8
 %
 
 
 
 
 
 
Shareholders' Equity:
 
 
 
 
 
     Northrim BanCorp shareholders' equity
175,189

170,805

3
 %
159,116

10
 %
     Noncontrolling interest
147

277

-47
 %
155

-5
 %
          Total shareholders' equity
175,336

171,082

2
 %
159,271

10
 %
          Total liabilities and shareholders' equity

$1,539,253


$1,500,331

3
 %

$1,420,665

8
 %
 
 
 
 
 
 


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
13 of 22


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Composition of Portfolio Investments
 
 
 
 
 
 
 
 
September 30, 2015
 
June 30, 2015
 
September 30, 2014
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
U.S. Treasury securities

$15,166

6.4
%
 

$15,150

6.6
%
 

$15,509

6.4
%
U.S. Agency securities
167,608

70.6
%
 
158,093

68.8
%
 
163,193

67.1
%
U.S. Agency mortgage-backed securities
874

0.4
%
 
926

0.4
%
 
1,094

0.4
%
Corporate bonds
39,535

16.7
%
 
40,326

17.5
%
 
42,543

17.5
%
Alaska municipality, utility, or state bonds
11,390

4.8
%
 
12,965

5.6
%
 
16,539

6.8
%
Other municipality, utility, or state bonds
603

0.3
%
 
605

0.3
%
 
886

0.4
%
FHLB Stock
1,816

0.8
%
 
1,817

0.8
%
 
3,440

1.4
%
   Total portfolio investments

$236,992

 
 

$229,882

 
 

$243,204

 
 
 
 
 
 
 
 
 
 

Composition of Portfolio Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
Commercial loans

$325,092

33
%
 

$334,181

34
%
 

$324,433

34
%
 

$306,543

33
%
 

$317,315

34
%
CRE owner occupied loans
112,527

12
%
 
111,245

11
%
 
109,967

11
%
 
109,472

12
%
 
118,563

13
%
CRE nonowner occupied loans
327,556

33
%
 
334,124

35
%
 
335,732

35
%
 
323,510

34
%
 
333,258

35
%
Construction loans
155,920

16
%
 
139,916

14
%
 
133,654

14
%
 
126,037

14
%
 
106,335

11
%
Consumer loans
56,933

6
%
 
59,842

6
%
 
61,240

6
%
 
63,493

7
%
 
65,836

7
%
   Subtotal
978,028

 
 
979,308

 
 
965,026

 
 
929,055

 
 
941,307

 
Unearned loan fees, net
(4,348
)
 
 
(4,459
)
 
 
(4,462
)
 
 
(4,551
)
 
 
(4,648
)
 
     Total portfolio loans

$973,680

 
 

$974,849

 
 

$960,564

 
 

$924,504

 
 

$936,659

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Composition of Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
Demand deposits

$485,304

39
%
 

$455,358

37
%
 

$410,464

35
%
 

$403,523

34
%
 

$438,805

37
%
Interest-bearing demand
179,080

14
%
 
173,952

14
%
 
179,124

15
%
 
185,114

16
%
 
176,030

15
%
Savings deposits
221,205

17
%
 
227,530

18
%
 
226,828

19
%
 
222,324

19
%
 
231,669

19
%
Money market deposits
236,488

19
%
 
232,877

19
%
 
227,345

19
%
 
226,574

19
%
 
237,235

20
%
Time deposits
142,842

11
%
 
149,000

12
%
 
147,252

12
%
 
142,212

12
%
 
108,628

9
%
   Total deposits

$1,264,919

 
 

$1,238,717

 
 

$1,191,013

 
 

$1,179,747

 
 

$1,192,367

 


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
14 of 22


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Asset Quality
 
 
 
 
 
 
 
September 30,
 
June 30,
 
September 30,
 
 
2015
 
2015
 
2014
 
     Nonaccrual loans

$3,735

 

$5,040

 

$2,750

 
     Loans 90 days past due
—

 
—

 
11

 
          Total nonperforming loans
3,735

 
5,040

 
2,761

 
     Other real estate owned
3,511

 
2,807

 
4,732

 
     Nonperforming purchased receivables
—

 
—

 
243

 
          Total nonperforming assets

$7,246

 

$7,847

 

$7,755

 
     Government guarantees on nonperforming assets2

$1,596

 

$1,628

 

$909

 
     Performing restructured loans

$3,203

 

$5,736

 

$6,653

 
     Nonperforming loans / portfolio loans
0.38

%
0.52

%
0.29

%
     Nonperforming assets / total assets
0.47

%
0.52

%
0.55

%
     Loans measured for impairment

$34,986

 

$26,345

 

$10,591

 
     Allowance for loan losses / portfolio loans
1.83

%
1.79

%
1.73

%
     Allowance for loan losses / nonperforming loans
478

%
346

%
588

%
     Gross loan charge-offs for the quarter

$400

 

$—

 

$54

 
     Gross loan recoveries for the quarter

($153
)
 

($96
)
 

($265
)
 
     Net loan charge-offs (recoveries) for the quarter

$247

 

($96
)
 

($211
)
 
     Net loan charge-offs (recoveries) year-to-date

$253

 

$6

 

($1,097
)
 
     Net loan charge-offs (recoveries) for the quarter / average loans, for the quarter
0.03

%
(0.01
)
%
(0.02
)
%
     Net loan charge-offs (recoveries) year-to-date / average loans,
 
 
 
 
 
 
          year-to-date annualized
0.03

%
—

%
(0.16
)
%

2Represents the portion of nonperforming assets that are guaranteed by governmental agencies including the Small Business Administration, the United States Department of Agriculture, the Bureau of Indian Affairs, and the Alaska Industrial Development and Export Authority.



Nonperforming Assets Rollforward
 
 
 
 
 
 
 
Balance at
Additions
Payments
Writedowns/Charge-offs
Transfers to
Sales
Balance at
 
June 30, 2015
this quarter
this quarter
this quarter
OREO
this quarter
September 30, 2015
Commercial loans

$3,049


$520


($186
)

($342
)

$—


$—


$3,041

Commercial real estate
1,679

—

(580
)
—

(796
)
—

303

Construction loans
—

—

—

—

—

—

—

Consumer loans
312

89

(10
)
—

—

—

391

   Total non-performing loans
5,040

609

(776
)
(342
)
(796
)
—

3,735

Other real estate owned
2,807

796

—

(92
)
—

—

3,511

   Total non-performing assets

$7,847


$1,405


($776
)

($434
)

($796
)

$—


$7,246




Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
15 of 22


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Average Balances, Yields, and Rates
 
 
 
 
 
 
 
 
 
Three Months Ended
 
September 30, 2015
 
June 30, 2015
 
September 30, 2014
 
 
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

$74,895

0.25
%
 

$39,229

0.25
%
 

$72,844

0.29
%
Portfolio investments
233,255

1.58
%
 
229,485

1.50
%
 
224,898

1.43
%
Loans held for sale
56,379

3.90
%
 
66,074

3.56
%
 
8,787

3.90
%
Portfolio loans
982,301

5.67
%
 
966,952

5.67
%
 
936,415

5.68
%
   Total interest-earning assets
1,346,830

4.58
%
 
1,301,740

4.67
%
 
1,242,944

4.58
%
Nonearning assets
145,747

 
 
143,404

 
 
133,829

 
   Total assets

$1,492,577

 
 

$1,445,144

 
 

$1,376,773

 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
 
Interest-bearing deposits

$783,721

0.25
%
 

$784,972

0.25
%
 

$744,631

0.19
%
Borrowings
57,916

1.45
%
 
54,644

1.85
%
 
41,594

1.25
%
   Total interest-bearing liabilities
841,637

0.33
%
 
839,616

0.36
%
 
786,225

0.24
%
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand deposits
446,522

 
 
408,390

 
 
405,723

 
Other liabilities
33,321

 
 
29,840

 
 
26,503

 
Shareholders' equity
171,097

 
 
167,298

 
 
158,322

 
   Total liabilities and shareholders' equity

$1,492,577

 
 

$1,445,144

 
 

$1,376,773

 
   Net spread
 
4.25
%
 
 
4.31
%
 
 
4.34
%
   Net tax equivalent margin*
 
4.38
%
 
 
4.44
%
 
 
4.43
%
   Average portfolio loans to average
 
 
 
 
 
 
 
 
        interest-earning assets
72.93
%
 
 
74.28
%
 
 
75.34
%
 
   Average portfolio loans to average total deposits
79.85
%
 
 
81.03
%
 
 
81.40
%
 
   Average non-interest deposits to average
 
 
 
 
 
 
 
 
         total deposits
36.30
%
 
 
34.22
%
 
 
35.27
%
 
   Average interest-earning assets to average
 
 
 
 
 
 
 
 
         interest-bearing liabilities
160.03
%
 
 
155.04
%
 
 
158.09
%
 



Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
16 of 22


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Average Balances, Yields, and Rates
 
 
 
 
 
 
Year-to-date
 
September 30, 2015
 
September 30, 2014
 
 
Average
 
 
Average
 
Average
Tax Equivalent
 
Average
Tax Equivalent
 
Balance
Yield/Rate
 
Balance
Yield/Rate
Assets
 
 
 
 
 
Interest bearing deposits in other banks

$43,122

0.25
%
 

$59,870

0.32
%
Portfolio investments
244,357

1.52
%
 
237,033

1.40
%
Loans held for sale
55,319

3.72
%
 
8,747

4.01
%
Portfolio loans
965,241

5.66
%
 
877,800

5.68
%
   Total interest-earning assets
1,308,039

4.62
%
 
1,183,450

4.54
%
Nonearning assets
147,830

 
 
117,397

 
   Total assets

$1,455,869

 
 

$1,300,847

 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
Interest-bearing deposits

$781,320

0.25
%
 

$709,877

0.19
%
Borrowings
57,177

1.71
%
 
42,362

1.31
%
   Total interest-bearing liabilities
838,497

0.35
%
 
752,239

0.25
%
 
 
 
 
 
 
Noninterest-bearing demand deposits
413,966

 
 
371,566

 
Other liabilities
34,951

 
 
23,415

 
Shareholders' equity
168,455

 
 
153,627

 
   Total liabilities and shareholders' equity

$1,455,869

 
 

$1,300,847

 
   Net spread
 
4.27
%
 
 
4.29
%
   Net tax equivalent margin*
 
4.40
%
 
 
4.38
%
   Average portfolio loans to average interest-earning assets
73.79
%
 
 
74.17
%
 
   Average portfolio loans to average total deposits
77.07
%
 
 
78.11
%
 
   Average non-interest deposits to average total deposits
33.05
%
 
 
33.06
%
 
   Average interest-earning assets to average interest-bearing liabilities
156.00
%
 
 
157.32
%
 






Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
17 of 22


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Capital Data (At quarter end)
 
 
 
 
 
 
 
September 30, 2015
 
June 30, 2015
 
September 30, 2014
 
Book value per share

$25.56

 

$24.96

 

$23.31

 
Tangible book value per share*

$22.09

 

$21.47

 

$22.08

 
Tangible Common Equity/Tangible Assets*
10.00

%
9.97

%
10.69

%
Tier 1 Capital / Risk Adjusted Assets
13.00

%
12.67

%
14.33

%
Total Capital / Risk Adjusted Assets
14.25

%
13.92

%
15.58

%
Tier 1 Capital / Average Assets
10.21

%
10.25

%
12.44

%
Shares outstanding
6,859,351

 
6,854,413

 
6,834,101

 
Unrealized gain on AFS securities, net of income taxes

$784

 

$643

 

$646

 

Profitability Ratios
 
 
 
 
 
 
 
September 30, 2015
 
June 30, 2015
 
September 30, 2014
 
For the quarter:
 
 
 
 
 
 
     Net tax equivalent margin*
4.38
%
4.44
%
4.43
%
     Efficiency ratio*
66.93
%
68.64
%
68.05
%
     Return on average assets
1.42
%
1.33
%
1.07
%
     Return on average equity
12.37
%
11.46
%
9.29
%


Year-to-date:
September 30, 2015
 
 
 
September 30, 2014
 
     Net tax equivalent margin* 
4.40
%
 
 
4.38
%
     Efficiency ratio*
70.38
%
 
 
68.11
%
     Return on average assets
1.26
%
 
 
1.10
%
     Return on average equity
10.85
%
 
 
9.34
%















Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
18 of 22


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

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.
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
 
 
 
 
 
 
 
 
 
 
Total shareholder's equity

$175,336

 

$171,082

 

$167,384

 

$164,441

 

$159,271

Less: goodwill and intangible assets
N/A

 
N/A

 
N/A

 
N/A

 
N/A

 

$175,336

 

$171,082

 

$167,384

 

$164,441

 

$159,271

Divided by shares outstanding
6,859

 
6,854

 
6,854

 
6,854

 
6,834

Book value per share

$25.56

 

$24.96

 

$24.42

 

$23.99

 
$23.31

 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
 
 
 
 
 
 
 
 
 
 
Total shareholder's equity

$175,336

 

$171,082

 

$167,384

 

$164,441

 

$159,271

Less: goodwill and intangible assets
23,817

 
23,889

 
23,962

 
24,035

 
8,349

 

$151,519

 

$147,193

 

$143,422

 

$140,406

 

$150,922

Divided by shares outstanding
6,859

 
6,854

 
6,854

 
6,854

 
6,834

Tangible book value per share

$22.09

 

$21.47

 

$20.92

 

$20.48

 
$22.08

Tangible common equity to tangible assets is a non-GAAP ratio that represents total equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. This ratio has received more attention over the past several years from stock analysts and regulators. The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets. Total shareholders' equity to total assets was 11.39% at September 30, 2015 as compared to 11.40% at June 30, 2015, 11.56% at March 31, 2015, 11.35% at December 31, 2014 and 11.21% at September 30, 2014.
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
Total shareholders' equity

$175,336

 

$171,082

 

$167,384

 

$164,441

 

$159,271

Less: goodwill and other intangible assets, net
23,817

 
23,889

 
23,962

 
24,035

 
8,349

Tangible common shareholders' equity

$151,519

 

$147,193

 

$143,422

 

$140,406

 

$150,922

 
 
 
 
 
 
 
 
 
 
Total assets

$1,539,253

 

$1,500,331

 

$1,447,984

 

$1,449,349

 

$1,420,665

Less: goodwill and other intangible assets, net
23,817

 
23,889

 
23,692

 
24,035

 
8,349

Tangible assets

$1,515,436

 

$1,476,442

 

$1,424,292

 

$1,425,314

 

$1,412,316

Tangible common equity ratio
10.00
%
 
9.97
%
 
10.07
%
 
9.85
%
 
10.69
%



Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
19 of 22


(Dollars in thousands, except per share data)
(Unaudited)


Tax-equivalent net interest margin 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 41.11% in both 2015 and 2014. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of tax-equivalent net interest margin to net interest margin.
 
Three Months Ended
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
Net interest income

$14,682

 

$14,195

 

$13,632

 

$13,924

 

$13,725

Divided by average interest-bearing assets
1,346,830

 
1,301,740

 
1,274,758

 
1,297,877

 
1,242,944

Net interest margin3
4.32
%
 
4.37
%
 
4.34
%
 
4.26
%
 
4.38
%
 
 
 
 
 
 
 
 
 
 
Net interest income

$14,682

 

$14,195

 

$13,632

 

$13,924

 

$13,725

Plus: reduction in tax expense related to
 

 
 

 
 
 
 
 
 

     tax-exempt interest income
185

 
199

 
152

 
165

 
139

 

$14,867

 

$14,394

 

$13,784

 

$14,089

 

$13,864

Divided by average interest-bearing assets
1,346,830

 
1,301,740

 
1,274,758

 
1,297,877

 
1,242,944

Tax-equivalent net interest margin3
4.38
%
 
4.44
%
 
4.39
%
 
4.31
%
 
4.43
%

 
Year-to-date
 
September 30, 2015
 
 
 
 
 
 
 
September 30, 2014
Net interest income

$42,509

 
 
 
 
 
 
 

$38,369

Divided by average interest-bearing assets
1,308,039

 
 
 
 
 
 
 
1,183,450

Net interest margin3
4.35
%
 
 
 
 
 
 
 
4.33
%
 
 
 
 
 
 
 
 
 
 
Net interest income

$42,509

 
 
 
 
 
 
 

$38,369

Plus: reduction in tax expense related to
 
 
 
 
 
 
 
 
 
     tax-exempt interest income
536

 
 
 
 
 
 
 
428

 

$43,045

 
 
 
 
 
 
 

$38,797

Divided by average interest-bearing assets
1,308,039

 
 
 
 
 
 
 
1,183,450

Tax-equivalent net interest margin3
4.40
%
 
 
 
 
 
 
 
4.38
%

3Calculated using actual days in the quarter divided by 365.


Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
20 of 22


(Dollars in thousands, except per share data)
(Unaudited)

The efficiency ratio is a non-GAAP ratio that is calculated by dividing other operating expense, exclusive of intangible asset amortization, by the sum of net interest income and other operating income. The following tables set forth the calculation of the efficiency ratio:
 
Three Months Ended
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
Other operating expense

$18,203

 

$17,753

 

$18,461

 

$13,671

 

$12,779

Less: intangible asset amortization
73

 
72

 
73

 
75

 
81

 

$18,130

 

$17,681

 

$18,388

 

$13,596

 

$12,698

Net interest income

$14,682

 

$14,195

 

$13,632

 

$13,924

 

$13,725

Plus: other operating income
12,407

 
11,563

 
10,535

 
9,375

 
4,934

 

$27,089

 

$25,758

 

$24,167

 

$23,299

 

$18,659

     Efficiency ratio
66.93
%
 
68.64
%
 
76.09
%
 
58.35
%
 
68.05
%

 
Year-to-date
 
September 30, 2015
 
 
 
 
 
 
 
September 30, 2014
Other operating expense

$54,418

 
 
 
 
 
 
 

$34,368

Less: intangible asset amortization
218

 
 
 
 
 
 
 
214

 

$54,200

 
 
 
 
 
 
 

$34,154

Net interest income

$42,509

 
 
 
 
 
 
 

$38,369

Plus: other operating income
34,505

 
 
 
 
 
 
 
11,774

 

$77,014

 
 
 
 
 
 
 

$50,143

     Efficiency ratio
70.38
%
 
 
 
 
 
 
 
68.11
%



Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
21 of 22


(Dollars in thousands, except per share data)
(Unaudited)

Operating net income is a non-GAAP measure and represents net income attributable to the Company which excludes gains and losses on the sale of securities and fixed assets, gain on the purchase of RML, gain on the sale of other real estate owned, gain on loans acquired, changes in the fair value of the earn-out liability related to the purchase of RML, and merger and acquisition expenses, net of tax. The most comparable GAAP measure is net income attributable to Northrim. The following table provides a reconciliation of operating net income to net income attributable to Northrim for both Northrim as a whole and for the community banking segment:
Northrim BanCorp, Inc.
Three Months Ended
 
September 30, 2015
June 30, 2015
March 31, 2015
December 31, 2014
September 30, 2014
Net income attributable to Northrim BanCorp

$5,335


$4,781


$3,561


$6,674


$3,707

 
 
 
 
 
 
Gain on sale of securities
(4
)
(16
)
(114
)
—

(15
)
Gain on sale of fixed assets
—

—

—

—

(1,115
)
Gain on purchase of RML
—

—

—

(3,001
)
—

Gain on sale of other real estate owned
—

(135
)
—

(173
)
(102
)
Gain on loans acquired
(683
)
(179
)
(48
)
(691
)
(4
)
Change in fair value, RML earn-out liability
780

587

1,502

—

—

Merger and acquisition expense
—

—

—

226

1,031

     Total adjustment to net income
93

257

1,340

(3,639
)
(205
)
Provision for income taxes
38

106

551

(262
)
(84
)
          Operating net income

$5,390


$4,932


$4,350


$3,297


$3,586


Community Banking Segment
Three Months Ended
 
September 30, 2015
June 30, 2015
March 31, 2015
December 31, 2014
September 30, 2014
Net income attributable to Northrim BanCorp

$3,690


$3,423


$2,233


$6,221


$3,481

 
 
 
 
 
 
Gain on sale of securities
(4
)
(16
)
(114
)
—

(15
)
Gain on sale of fixed assets
—

—

—

—

(1,115
)
Gain on purchase of RML
—

—

—

(3,001
)
—

Gain on sale of other real estate owned
—

(135
)
—

(173
)
(102
)
Gain on loans acquired
(683
)
(179
)
(48
)
(691
)
(4
)
Change in fair value, RML earn-out liability
780

587

1,502

—

—

Merger and acquisition expense
—

—

—

226

1,031

     Total adjustment to net income
93

257

1,340

(3,639
)
(205
)
Provision for income taxes
38

106

551

(262
)
(84
)
          Operating net income

$3,745


$3,574


$3,022


$2,844


$3,360




Northrim BanCorp Reports 3Q15 Earnings of $5.3 Million, or $0.77 Per Diluted Share
October 27, 2015
22 of 22


(Dollars in thousands, except per share data)
(Unaudited)

Operating diluted earnings per share is a non-GAAP ratio that represents operating net income divided by average diluted shares. The most comparable GAAP measure is diluted earnings per share. The following table provides a reconciliation of operating diluted earnings per share with diluted earnings per share:

Northrim BanCorp, Inc.
Three Months Ended
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
Net income

$5,335

 

$4,781

 

$3,561

 

$6,674

 

$3,707

Divided by weighted-average diluted shares outstanding
6,952,209

 
6,941,671

 
6,930,873

 
6,943,553

 
6,919,993

Diluted earnings per share
$0.77
 
$0.69
 
$0.51
 
$0.97
 
$0.53

Northrim BanCorp, Inc.
Three Months Ended
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
Operating net income*

$5,390

 

$4,932

 

$4,350

 

$3,297

 

$3,586

Divided by weighted-average diluted shares outstanding
6,952,209

 
6,941,671

 
6,930,873

 
6,943,553

 
6,919,993

Operating diluted earnings per share
$0.78
 
$0.71
 
$0.63
 
$0.47
 
$0.52

Community Banking Segment
Three Months Ended
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
Net income

$3,690

 

$3,423

 

$2,233

 

$6,221

 

$3,481

Divided by weighted-average diluted shares outstanding
6,952,209

 
6,941,671

 
6,930,873

 
6,943,553

 
6,919,993

Diluted earnings per share
$0.53
 
$0.49
 
$0.32
 
$0.90
 
$0.50

Community Banking Segment
Three Months Ended
 
September 30, 2015
 
June 30, 2015
 
March 31, 2015
 
December 31, 2014
 
September 30, 2014
Operating net income*

$3,745

 

$3,574

 

$3,022

 

$2,844

 

$3,360

Divided by weighted-average diluted shares outstanding
6,952,209

 
6,941,671

 
6,930,873

 
6,943,553

 
6,919,993

Operating diluted earnings per share
$0.54
 
$0.51
 
$0.44
 
$0.41
 
$0.49





-0-
Note Transmitted on GlobeNewswire on October 27, 2015, at 12:00 pm Alaska Standard Time.



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NORTHRIM BANCORP INC Reports