EX-99.1 2 exhibit991q42018.htm EXHIBIT 99.1 Exhibit

nrimpra06.jpg
Contact:
Joe Schierhorn, President, CEO, and COO
 
(907) 261-3308
 
Jed Ballard, Chief Financial Officer
 
(907) 261-3539
NEWS RELEASE

Northrim BanCorp Earns $20.0 Million, or $2.86 per Diluted Share, in 2018
Reflects Expanding Net Interest Margin, Improving Credit Quality, and Lower Taxes

ANCHORAGE, Alaska - January 28, 2019 - Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported earnings of $20.0 million, or $2.86 per diluted share, for 2018 and $4.8 million, or $0.69 per diluted share, for the fourth quarter of 2018. Northrim continues to benefit from rising interest rates with the short duration of both its loan and investment portfolios repricing into higher yields in both the fourth quarter and full year.

“With the four 25-basis-point rate hikes implemented in 2018, our yields on interest-earning assets expanded faster than our cost of funds. In addition, lower corporate tax rates and improved credit quality contributed to earnings growth in 2018,” said Joe Schierhorn, President and CEO.

In the fourth quarter and full year periods ending December 31, 2017, Northrim recognized a pre-tax gain of $4.4 million on the sale of its interest in Northrim Benefits Group and operating income from that business of $2.5 million, respectively, with no contribution from this divested subsidiary in 2018. These revenues were partially offset in 2017 by a provision for loan losses of $3.2 million, compared to a benefit of $500,000 in 2018 due to improvements in asset quality.

Fourth Quarter and Full Year 2018 Highlights:

•
Total revenue, which includes net interest income plus other operating income, decreased 3% to $23.9 million in the fourth quarter of 2018, compared to $24.5 million in the third quarter of 2018, and grew 5% from $22.6 million in the fourth quarter a year ago.
◦
Community Banking provided 79% of total revenues and 96% of earnings in the fourth quarter of 2018.
◦
Home Mortgage Lending provided 21% of total revenues and 4% of fourth quarter 2018 earnings.
•
Net interest income in the fourth quarter of 2018 increased 10% to $16.1 million from $14.7 million in the fourth quarter a year ago, mainly due to the higher yields on the loan and investment portfolios and was also up 2% compared to $15.8 million in the preceding quarter.
•
Pre-tax income increased to $5.8 million in the fourth quarter of 2018 compared to $4.3 million in the fourth quarter a year ago, but decreased from $6.4 million in the preceding quarter.
•
Net interest margin on a tax equivalent basis ("NIMTE”) * expanded to 4.76% in the fourth quarter of 2018, a 2-basis-point improvement, compared to the preceding quarter and a 45-basis-point improvement compared to the fourth quarter a year ago.
•
Return on average assets was 1.27% and return on average equity was 9.30% for the fourth quarter of 2018 and 1.34% and 9.95% for the full year.
•
The Company repurchased 15,468 shares of its common stock in the fourth quarter of 2018 at an average price of $31.90, leaving 153,433 shares available under the previously announced repurchase authorization.



Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
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Financial Highlights
Three Months Ended
(Dollars in thousands, except per share data)
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
Total assets

$1,502,988


$1,502,673


$1,470,440


$1,524,741


$1,518,596

Total portfolio loans

$984,346


$982,007


$967,702


$967,575


$954,953

Average portfolio loans

$981,407


$984,914


$963,724


$955,718


$980,351

Total deposits

$1,228,088


$1,233,268


$1,205,521


$1,260,790


$1,258,283

Average deposits

$1,233,479


$1,223,997


$1,217,903


$1,233,745


$1,254,566

Total shareholders' equity

$205,947


$203,242


$199,456


$194,973


$192,802

Net income attributable to Northrim BanCorp

$4,848


$5,264


$5,830


$4,062


$214

Diluted earnings per share

$0.69


$0.75


$0.84


$0.58


$0.03

Return on average assets
1.27
%
1.40
%
1.58
%
1.10
%
0.06
%
Return on average shareholders' equity
9.30
%
10.27
%
11.79
%
8.43
%
0.43
%
NIM
4.71
%
4.69
%
4.50
%
4.28
%
4.25
%
NIMTE*
4.76
%
4.74
%
4.56
%
4.33
%
4.31
%
Efficiency ratio
76.64
%
73.82
%
71.19
%
77.22
%
80.92
%
Total shareholders' equity/total assets
13.70
%
13.53
%
13.56
%
12.79
%
12.70
%
Tangible common equity/tangible assets*
12.76
%
12.58
%
12.60
%
11.85
%
11.75
%
Book value per share

$29.92


$29.52


$29.02


$28.37


$28.06

Tangible book value per share*

$27.57


$27.17


$26.66


$26.01


$25.70

Dividends per share

$0.27


$0.27


$0.24


$0.24


$0.22

* References to NIMTE, tangible book value per share, tangible common equity and tangible assets (all of which exclude intangible assets) represent non-GAAP financial measures. Management has presented these non-GAAP measurements in this earnings release, because it believes these measures are useful to investors. See the end of this release for reconciliations of these non-GAAP financial measures to GAAP financial measures.

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

According to the State Department of Labor, average monthly employment in Alaska through November of 2018 was lower by 1,300 jobs, or (-0.4%) compared to November of 2017. Health care continues to be the bright spot, adding 500 jobs up 1.3% (in this sector).  “The construction sector is often a leading indicator of future economic change,” stated Mark Edwards, Senior Vice President Credit Administration and Bank Economist.  November 2018 year-over-year figures show construction added 200 jobs, up +1.4%, ending a two-year decline.  Also significant was a positive increase of 100 jobs, or +1.1%, in the oil and gas sector, reversing a three-year decline.  This sector suffered the most during the recent recession and it consists of the highest paying jobs in the economy.

The Alaska Department of Labor highlighted military, oil & gas activity and tourism as the three primary drivers leading to forecasted job growth of 0.4% in 2019.  This is projected to end a three year period of job losses between 2016 and 2018.  Military job growth is expected to be the most significant driver due to the deployment of F-35 fighter jets at Eielson Air Force Base in Fairbanks.  The troops supporting two full squadrons are expected to arrive between 2020 and 2022, and positive economic impacts are already occurring.  According to Alaska Labor Economist Karinne Wiebold, “Preparations include a half-billion dollars in new construction to accommodate the jets and additional active duty and civilian support staff.”  This should also indirectly help other sectors throughout the state including numerous professional and business services. 

Oil prices continued to fluctuate in 2018, but trended higher on average during most of the year.  There are a number of near-term projects that have led the Alaska Department of Revenue Commissioner, Bruce Tangeman, to forecast oil production growth over the next two years.  Commissioner Tangeman stated in the December 2018 Revenue Sources Book, “For FY 2018, North Slope oil production averaged 518,400 barrels per day (bpd), a decline of 1.5% compared to FY 2017.  The Department of Revenue forecasts that new fields will help increase production to 526,800 bpd in FY 2019 and 533,200 bpd in FY 2020.”



Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
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According to the Alaska Department of Labor report, the third major economic driver is expected to be tourism and the Alaska Department of Labor projects 2019 will be a record year for visitors.  Economist Wiebold stated, “The projected number of cruise ship passengers is up 16% to 1.36 million.  As long as the U.S. economy remains strong and barring substantial disruptions globally, Alaska will continue to be an attractive tourist destination.”

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 fourth quarter of 2018, Northrim generated a return on average assets ("ROAA") of 1.27% and a return on average equity ("ROAE") of 9.30%, compared to 1.40% and 10.27%, respectively in the third quarter of 2018 and 0.06% and 0.43%, respectively, in the fourth quarter a year ago. In the full year of 2018, ROAA was 1.34% and ROAE was 9.95%, compared to 0.87% and 6.81%, respectively, in 2017. These results were above the averages posted by the 149 banks that make up the SNL Index of U.S. Banks with assets of $1 to $5 Billion as of September 30, 20181. Average ROAA was 0.85% and ROAE was 7.92% for the index in 2017.

Net Interest Income/Net Interest Margin

Net interest income, before the provision for loan losses, grew 10% to $16.1 million in the fourth quarter of 2018 compared to $14.7 million in the fourth quarter of 2017 and was up 2% from $15.8 million in the third quarter of 2018. For the full year in 2018, net interest income increased 6% to $61.2 million from $57.7 million in the full year in 2017.

NIMTE* was 4.76% in the fourth quarter of 2018 compared to 4.74% in the preceding quarter and 4.31% from the same quarter a year ago. Higher total interest income, coupled with lower growth in total interest expense, contributed to the increases in net interest income and NIMTE* in the fourth quarter of 2018 compared to prior quarters. The deployment of lower-yielding cash and investments into more productive loans and higher-yielding securities also supported the increases in net interest income and NIMTE*. The yield on interest earning assets in the fourth quarter improved to 5.08%, up 11 basis points from the third quarter of 2018 and 62 basis points year-over-year. The cost of funds increased in the fourth quarter of 2018 to 50 basis points, up 14 basis points from the preceding quarter and 25 basis points compared to the same quarter last year. For the full year in 2018, NIMTE* improved 32 basis points to 4.60%.

“We implemented several strategies over the past few years to protect our net interest margin, including deploying capital to reduce high-cost debt, executing an interest rate swap that locked in lower rates for the remaining balance of our floating rate debt, and maintaining short durations for both loans and deposits,” said Jed Ballard, Chief Financial Officer.

Provision for Loan Losses

In the fourth quarter of 2018, Northrim recorded a benefit for loan losses of $200,000, bringing the full year benefit to $500,000, reflecting continued improvement in credit quality of the loan portfolio. Non-performing loans, net of government guarantees, declined 11% in the quarter and 31% for the year to $14.7 million at December 31, 2018, compared to $16.6 million at September 30, 2018, and $21.4 million at December 31, 2017. The allowance for loan losses was 133% of nonperforming loans, net of government guarantees at year end.
1For the trailing 12 months ended of September 30, 2018, the SNL Index of US Banks with Assets of $1 to $5 Billion tracked 155 banks with averages for the following ratios: NIMTE* 3.68%, loan loss reserves to gross loans of 0.93%, ROAA 1.03%, and ROAE 9.48%.


Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
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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 $7.7 million, or 32% of total fourth quarter revenues, as compared to $8.7 million, or 35% of revenues in the third quarter of 2018, and $8.0 million, or 35% of revenues in the fourth quarter of 2017. For the full year in 2018, other operating income totaled $32.2 million, or 34% of revenues, compared to $40.5 million, or 41% of revenues in 2017. The primary drivers of other operating income are variability in the mortgage market, which is highly seasonal, the elimination of employee benefits plan income, and no gain on sale following the sale of the Company's interest in Northrim Benefits Group in August of 2017. In the fourth quarter of 2018, the Company recorded for the first time in other operating income the fair value of its commercial loan servicing portfolio of $1.0 million. Going forward only the changes in the fair value of the Company's commercial loan servicing portfolio will be reflected in other operating income and are not expected to be significant. In addition, the fair value mark-to-market of the securities portfolio reduced other income by $490,000 in the fourth quarter of 2018 and $625,000 for the full year.

Other Operating Expenses

Other operating expenses remained stable at $18.3 million in the fourth quarter of 2018, compared to $18.1 million in the third quarter of 2018 and $18.3 million in the fourth quarter of 2017. In the full year in 2018, other operating expenses were $69.8 million compared to $71.2 million in 2017. In the third quarter of 2018 and fourth quarter of 2017, there was an $804,000 and $686,000 write down, respectively, of the carrying value of the Company's minority interest in another mortgage origination business owned by Residential Mortgage Holding Company, LLC, the parent company of Residential Mortgage, LLC (collectively "RML").

Income Tax Provision

For the fourth quarter of 2018, Northrim recorded $907,000 in state and federal income tax expense for an effective tax rate of 16% compared to $4.1 million in the year-ago quarter. For the full year in 2018, Northrim recorded $4.1 million in state and federal income tax expense, compared to $10.3 million in 2017. The tax expense in 2017 included an additional $2.7 million tax expense, or $0.39 per diluted share, associated with the tax reforms enacted at the end of 2017.

Community Banking

“As Alaska begins to recover from the recent economic recession, we are seeing growth in the three major drivers of our economy: natural resources exploration and development, military spending, and tourism. We are optimistic about opportunities in the Alaska markets that we serve throughout the state,” said Schierhorn.

Net interest income in the Community Banking segment increased 9% to $15.7 million in the fourth quarter of 2018 from $14.4 million in the fourth quarter of 2017.



Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
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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)
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
Net interest income

$15,719


$15,358


$14,614


$14,036


$14,381

(Benefit) provision for loan losses
(200
)
—

(300
)
—

—

Other operating income
3,199

2,770

2,836

2,518

2,685

Compensation expense, net RML acquisition payments
—

—

—

—

(193
)
Other operating expense
13,637

12,204

11,748

12,367

13,113

   Income before provision for income taxes
5,481

5,924

6,002

4,187

4,146

Provision for income taxes
824

996

882

659

4,754

   Net income (loss)

$4,657


$4,928


$5,120


$3,528


($608
)
Average diluted shares
6,990,319

6,990,633

6,976,985

6,968,082

6,963,125

Diluted earnings (loss) per share

$0.66


$0.70


$0.74


$0.50


($0.09
)

 
Year-to-date
(Dollars in thousands, except per share data)
December 31, 2018
December 31, 2017
Net interest income

$59,727


$56,448

(Benefit) provision for loan losses
(500
)
3,200

Other operating income
11,323

17,187

Compensation expense, net RML acquisition payments
—

130

Other operating expense
49,956

50,271

   Income before provision for income taxes
21,594

20,034

Provision for income taxes
3,361

9,499

   Net income
18,233

10,535

     Less: net income attributable to the noncontrolling interest
—

327

       Net income attributable to Northrim BanCorp

$18,233


$10,208

Average diluted shares
6,981,557

6,977,910

Diluted earnings per share

$2.60


$1.46



Home Mortgage Lending

“A number of factors impacted the housing market in Alaska this quarter, including normal seasonality, the moderate impacts from the earthquake that shook the greater Anchorage area on November 30, and the effects of the government shut-down on non-military federal workers, which make up approximately 5% of the Alaska workforce,” noted Ballard. “Fortunately, no lives were lost in the earthquake and property damage was remarkably contained compared to damage from other earthquakes of this magnitude. In addition, our housing market continues to show price stability throughout the state, although loan fundings have been trending down due to a variety of factors including rising interest rates and low housing inventory levels.” Loans funded in the fourth quarter of 2018 were $114.0 million, of which 90% were for new home purchases, compared to $132.6 million of which 83% were for new home purchases in the fourth quarter of 2017.

“Our mortgage servicing business, which was initiated in the fourth quarter of 2015 to service loans for the Alaska Housing Finance Corporation, continues to grow,” Ballard continued. As of December 31, 2018, Northrim serviced 2,220 loans in its $557.6 million home-mortgage-servicing portfolio, which is a 37% increase from the $406.3 million serviced a year ago. Mortgage servicing revenue was steady at $1.5 million in the fourth quarters of both


Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
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2018 and 2017. 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 following table provides highlights of the Home Mortgage Lending segment of Northrim:

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

$44,999


$69,026


$84,092


$64,819


$43,602

Mortgage loans funded for sale

$113,963


$156,301


$148,183


$109,069


$132,606

Mortgage loan refinances to total fundings
10
%
9
%
8
%
18
%
17
%
Mortgage loans serviced for others

$557,583


$516,008


$472,190


$439,561


$406,291

 
 
 
 
 
 
Net realized gains on mortgage loans sold

$3,156


$4,268


$4,052


$3,346


$4,084

Change in fair value of mortgage loan commitments, net
(442
)
(66
)
32

316

(551
)
Total production revenue
2,714

4,202

4,084

3,662

3,533

Mortgage servicing revenue
1,526

1,578

1,254

1,183

1,450

Change in fair value of mortgage servicing rights, net2
145

(128
)
(118
)
(26
)
64

Total mortgage servicing revenue, net
1,671

1,450

1,136

1,157

1,514

Other mortgage banking revenue
134

251

258

125

220

   Total mortgage banking income

$4,519


$5,903


$5,478


$4,944


$5,267

 
 
 
 
 
 
Net interest income

$418


$461


$375


$227


$303

Mortgage banking income
4,519

5,903

5,478

4,944

5,267

Other operating expense
4,663

5,895

4,858

4,428

5,417

   Income before provision for income taxes
274

469

995

743

153

Provision (benefit) for income taxes
83

133

285

209

(669
)
   Net income attributable to Northrim BanCorp

$191


$336


$710


$534


$822

 
 
 
 
 
 
Average diluted shares
6,990,319

6,990,633

6,976,985

6,968,082

6,963,125

Diluted earnings per share

$0.03


$0.05


$0.10


$0.08


$0.12

2Principally reflects changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates, net of collection/realization of expected cash flows over time.





Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
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Year-to-date
(Dollars in thousands, except per share data)
December 31, 2018
December 31, 2017
Mortgage loans funded for sale

$527,516


$554,077

Mortgage loan refinances to total fundings
11
%
16
%
 
 
 
Net realized gains on mortgage loans sold

$14,822


$18,013

Change in fair value of mortgage loan commitments, net
(160
)
(147
)
Total production revenue
14,662

17,866

Mortgage servicing revenue
5,541

4,438

Change in fair value of mortgage servicing rights, net2
(127
)
2

Total mortgage servicing revenue, net
5,414

4,440

Other mortgage banking revenue
768

981

   Total mortgage banking income

$20,844


$23,287

 
 
 
Net interest income

$1,481


$1,230

Mortgage banking income
20,844

23,287

Other operating expense
19,844

20,752

   Income before provision for income taxes
2,481

3,765

Provision for income taxes
710

822

   Net income attributable to Northrim BanCorp

$1,771


$2,943

 
 
 
Average diluted shares
6,981,557

6,977,910

Diluted earnings per share

$0.26


$0.42

2Principally reflects changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates, net of collection/realization of expected cash flows over time.


Balance Sheet Review

Northrim’s total assets were $1.50 billion at December 31, 2018, unchanged from the preceding quarter and down 1% from a year ago. “Although the duration of our loan portfolio remains short, we produced moderate loan growth,” said Schierhorn. Northrim’s loan-to-deposit ratio remains at 80% at December 31, 2018, unchanged from September 30, 2018, and up from 76% at December 31, 2017. Schierhorn added that “with the rising interest rate environment the Bank has been working hard to maintain our strong deposit base.”

Average interest-earning assets were $1.36 billion in the fourth quarter of 2018, up 2% from $1.34 billion at the end of the third quarter of 2018 and down less than 1% from the fourth quarter a year ago. The average yield on interest-earning assets was 5.08% in the fourth quarter of 2018, up from 4.97% in the preceding quarter and 4.46% in the like quarter a year ago. For the full year in 2018, average interest-earning assets declined 2% to $1.35 billion from $1.37 billion in the full year in 2017. Average yields were 4.82% in the full year in 2018, compared to 4.46% in the full year in 2017.

Average investment securities totaled $280.8 million at December 31, 2018, an increase of 6% from the third quarter of 2018, and down 2% from the fourth quarter of 2018. The average net tax equivalent yield on the securities portfolio improved to 2.51% for the fourth quarter of 2018, from 2.29% in the preceding quarter and 1.77% a year ago. The average estimated duration of the investment portfolio was 27 months, at December 31, 2018, which is expected to generate improvement in yields as securities reprice in this rising interest rate environment. For the full year in 2018, average investment securities declined to $286.4 million with an average yield of 2.17% compared to $305.2 million and an average yield of 1.66% for the full year in 2017.


Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
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“In 2018, loan originations more than offset the relatively rapid repayments that result from the short duration of the loan portfolio. In addition, a majority of the loan portfolio is adjustable rate, which has benefited yields as interest rates rise,” said Schierhorn. Portfolio loans were $984.3 million at the end of the fourth quarter of 2018 up slightly from the preceding quarter and up 3% from the fourth quarter a year ago. Average portfolio loans in the fourth quarter of 2018 were $981.4 million down slightly from the preceding quarter and relatively unchanged from a year ago. Yields on average portfolio loans in the fourth quarter of 2018 improved to 5.98% from 5.81% in the third quarter of 2018 and 5.45% in the fourth quarter of 2017. Average portfolio loans in the full year in 2018 were down 1% to $971.5 million with a yield of 5.74%, compared to $981.0 million and a yield of 5.47% for the full year in 2017.

Alaskans account for substantially all of Northrim’s deposit base, which is primarily made up of low-cost transaction accounts. Balances in transaction accounts at December 31, 2018, represented 91% of total deposits. At December 31, 2018, total deposits were $1.23 billion, level with balances at September 30, 2018, and down from $1.26 billion a year ago. Average interest-bearing deposits were up slightly to $796.4 million with an average cost of 0.45% in the fourth quarter of 2018, compared to $795.3 million and an average cost of 0.30% in the third quarter of 2018, and down 4% from $829.3 million and an average cost of 0.18% in the fourth quarter of 2017. Average interest-bearing deposits were down 2% in the full year in 2018 at $809.8 million with an average cost of 0.28%, compared to $829.9 million and an average cost of 0.21% in the full year in 2017.

Shareholders’ equity increased 7% to $205.9 million, or $29.92 per share, at December 31, 2018, compared to $192.8 million, or $28.06 per share, a year ago. Tangible book value per share* was $27.57 at December 31, 2018, up from $25.70 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 15.47% at December 31, 2018.

Asset Quality

Asset quality in the fourth quarter of 2018 improved with nonperforming assets ("NPAs") net of government guarantees declining to $22.6 million at December 31, 2018, compared to $24.1 million at the end of the preceding quarter, and $28.7 million at December 31, 2017, primarily due to loan payments which exceeded NPA additions. Of the NPAs, $13.6 million or 60% are nonaccrual loans related to five commercial relationships. Two of these relationships, which totaled $7.0 million at the end of the fourth quarter of 2018, are businesses in the medical industry.

Net adversely classified loans were $27.2 million at the end of the fourth quarter of 2018 as compared to $29.7 million at the end of the third quarter of 2018 and $33.8 million one year ago. Net loan charge-offs in the fourth quarter of 2018 were $441,000 compared to net recoveries of $52,000 in the preceding quarter and $2,000 in charge-offs in the year ago quarter. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. As of December 31, 2018, $20.1 million, or 74% of net adversely classified loans are attributable to seven relationships with four loans to commercial businesses, two loans to medical businesses, and one loan to an oilfield services commercial business.

Performing restructured loans that were not included in nonaccrual loans at the end of the fourth quarter of 2018 were $3.4 million, up slightly from $3.3 million in the preceding quarter and down from $7.7 million a year ago. The decrease in the fourth quarter of 2018 compared to the year ago quarter is primarily due to the repayment of two commercial relationships. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans. The Company presents restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.

Northrim estimates that $62.3 million, or approximately 6% of portfolio loans as of December 31, 2018, had direct exposure to the oil and gas industry in Alaska, and $1.7 million of these loans are adversely classified. As of December 31, 2018, Northrim has an additional $32.5 million in unfunded commitments to companies with direct exposure to


Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
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the oil and gas industry in Alaska, and none of these unfunded commitments are considered to be adversely classified loans. “We define direct exposure to the oil and gas sector as loans to borrowers that provide oilfield services and other companies that we have identified as significantly reliant upon activity in Alaska related to the oil and gas industry, such as lodging, equipment rental, transportation and other logistics services specific to this industry,” added Ballard.

About Northrim BanCorp

Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 15 branches in Anchorage, the Matanuska Valley, Juneau, Fairbanks, Ketchikan, and Sitka serving 90% of Alaska’s population; and an asset based lending division in Washington; and a wholly-owned mortgage brokerage company, Residential Mortgage Holding Company, LLC. The Bank differentiates itself with its detailed knowledge of Alaska’s economy and its “Customer First Service” philosophy. Pacific Wealth Advisors, LLC is an affiliated company of Northrim BanCorp.

www.northrim.com


Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 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, 2017, and from time to time are disclosed in our other filings with the Securities and Exchange Commission.  However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations. These forward-looking statements are made only as of the date of this release, and Northrim does not undertake any obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.


References:


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

http://labor.alaska.gov/news/2018/news18-47.htm

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

https://www.adn.com/politics/2018/12/22/alaska-holiday-flights-mail-and-cabin-stays-should-continue-through-government-shutdown/

https://www.nytimes.com/2018/12/01/us/anchorage-alaska-earthquake.html






Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
11 of 20


Income Statement
 
 
 
 
 
 
(Dollars in thousands, except per share data)
Three Months Ended
 
Twelve Months
(Unaudited)
December 31,
September 30,
December 31,
 
December 31,
December 31,
 
2018
2018
2017
 
2018
2017
Interest Income:
 
 
 
 
 
 
     Interest and fees on loans

$15,251


$14,992


$13,861

 

$57,542


$55,041

     Interest on portfolio investments
1,662

1,419

1,168

 
5,829

4,634

     Interest on deposits in banks
294

169

203

 
806

433

          Total interest income
17,207

16,580

15,232

 
64,177

60,108

Interest Expense:
 
 
 
 
 
 
     Interest expense on deposits
894

595

382

 
2,307

1,707

     Interest expense on borrowings
176

166

166

 
662

723

          Total interest expense
1,070

761

548

 
2,969

2,430

          Net interest income
16,137

15,819

14,684

 
61,208

57,678

 
 
 
 
 
 
 
(Benefit) provision for loan losses
(200
)
—

—

 
(500
)
3,200

          Net interest income after provision for loan losses
16,337

15,819

14,684

 
61,708

54,478

 
 
 
 
 
 
 
Other Operating Income:
 
 
 
 
 
 
     Mortgage banking income
4,519

5,903

5,267

 
20,844

23,287

     Gain on commercial servicing rights
1,030

—

—

 
1,030

—

     Purchased receivable income
781

767

758

 
3,255

2,975

     Bankcard fees
755

724

694

 
2,811

2,597

     Service charges on deposit accounts
371

407

360

 
1,508

1,614

     Gain on sale of securities
—

—

—

 
—

11

     Gain on sale of Northrim Benefits Group
—

—

2

 
—

4,445

     Employee benefit plan income
—

—

—

 
—

2,506

     (Loss) gain on marketable equity securities
(490
)
37

—

 
(625
)
—

     Other income
752

835

871

 
3,344

3,039

          Total other operating income
7,718

8,673

7,952

 
32,167

40,474

 
 
 
 
 
 
 
Other Operating Expense:
 
 
 
 
 
 
     Salaries and other personnel expense
11,442

11,261

10,971

 
44,650

44,721

     Occupancy expense
1,729

1,687

1,761

 
6,136

6,752

     Data processing expense
1,661

1,503

1,340

 
6,035

5,549

     Marketing expense
857

367

833

 
2,318

2,566

     Professional and outside services
673

727

457

 
2,453

2,365

     Insurance expense
217

171

239

 
862

1,161

     OREO expense, net rental income and gains on sale
101

43

621

 
258

837

     Intangible asset amortization expense
17

18

21

 
70

100

     Impairment of equity method investment
—

804

686

 
804

686

     Compensation expense, net RML acquisition payments
—

—

(193
)
 
—

130

     Other operating expense
1,603

1,518

1,601

 
6,214

6,286

          Total other operating expense
18,300

18,099

18,337

 
69,800

71,153

 
 
 
 
 
 
 
          Income before provision for income taxes
5,755

6,393

4,299

 
24,075

23,799

     Provision for income taxes
907

1,129

4,085

 
4,071

10,321

          Net income
4,848

5,264

214

 
20,004

13,478

               Less: Net income attributable to the noncontrolling interest
—

—

—

 
—

327

                     Net income attributable to Northrim BanCorp

$4,848


$5,264


$214

 

$20,004


$13,151

 
 
 
 
 
 
 
          Basic EPS

$0.70


$0.77


$0.03

 

$2.91


$1.91

          Diluted EPS

$0.69


$0.75


$0.03

 

$2.86


$1.88

          Average basic shares
6,888,762

6,877,194

6,865,753

 
6,877,573

6,889,621

          Average diluted shares
6,990,319

6,990,633

6,963,125

 
6,981,557

6,977,910






Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
12 of 20






Balance Sheet
 
 
 
(Dollars in thousands)
 
 
 
(Unaudited)
December 31,
September 30,
December 31,
 
2018
2018
2017
 
 
 
 
Assets:
 
 
 
     Cash and due from banks

$26,771


$37,651


$25,016

     Interest bearing deposits in other banks
50,767

32,528

52,825

     Investment securities available for sale
271,610

264,193

307,019

     Marketable equity securities
7,265

6,035

5,731

     Investment in Federal Home Loan Bank stock
2,101

2,103

2,115

 
 
 
 
     Loans held for sale
34,710

56,636

43,979

 
 
 
 
     Portfolio loans
984,346

982,007

954,953

     Allowance for loan losses
(19,519
)
(20,160
)
(21,461
)
          Net portfolio loans
964,827

961,847

933,492

     Purchased receivables, net
14,406

12,706

22,231

     Mortgage servicing rights
10,821

9,695

7,305

     Other real estate owned, net
7,962

8,707

8,651

     Premises and equipment, net
39,090

38,637

37,867

     Goodwill and intangible assets
16,154

16,171

16,224

     Other assets
56,504

55,764

56,141

          Total assets
$1,502,988
$1,502,673
$1,518,596
 
 
 
 
Liabilities:
 
 
 
     Demand deposits

$420,988


$450,409


$414,686

     Interest-bearing demand
248,056

240,974

252,009

     Savings deposits
239,054

233,611

247,458

     Money market deposits
206,717

208,614

243,603

     Time deposits
113,273

99,660

100,527

          Total deposits
1,228,088

1,233,268

1,258,283

     Securities sold under repurchase agreements
34,278

32,429

27,746

     Other borrowings
7,241

7,282

7,362

     Junior subordinated debentures
10,310

10,310

10,310

     Other liabilities
17,124

16,142

22,093

          Total liabilities
1,297,041

1,299,431

1,325,794

 
 
 
 
          Total shareholders' equity
205,947

203,242

192,802

          Total liabilities and shareholders' equity

$1,502,988


$1,502,673


$1,518,596

 
 
 
 


Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
13 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Composition of Portfolio Investments
 
 
 
 
 
 
 
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
 
Balance
% of total
 
Balance
% of total
 
Balance
% of total
U.S. Treasury securities

$54,863

19.7
%
 

$54,452

20.2
%
 

$49,877

15.9
%
U.S. Agency securities
153,997

55.1
%
 
151,380

56.0
%
 
199,583

63.9
%
Corporate securities
39,780

14.3
%
 
40,516

15.0
%
 
37,132

11.9
%
Marketable equity securities
7,265

2.6
%
 
6,035

2.2
%
 
5,731

1.8
%
Collateralized loan obligations
13,886

5.0
%
 
6,002

2.2
%
 
6,005

1.9
%
Alaska municipality, utility, or state bonds
4,710

1.7
%
 
7,307

2.7
%
 
9,752

3.1
%
Other municipality, utility, or state bonds
4,374

1.6
%
 
4,536

1.7
%
 
4,670

1.5
%
   Total portfolio investments

$278,875

 
 

$270,228

 
 

$312,750

 
 
 
 
 
 
 
 
 
 

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

$342,420

35
%
 

$333,132

34
%
 

$327,733

34
%
 

$316,081

33
%
 

$313,514

33
%
CRE owner occupied loans
126,414

13
%
 
130,166

13
%
 
127,384

13
%
 
132,589

14
%
 
132,041

14
%
CRE nonowner occupied loans
367,759

37
%
 
382,313

39
%
 
385,648

40
%
 
395,915

40
%
 
359,725

38
%
Construction loans
109,367

11
%
 
97,976

10
%
 
89,433

9
%
 
85,257

9
%
 
111,294

12
%
Consumer loans
42,873

4
%
 
42,775

4
%
 
41,711

4
%
 
41,841

4
%
 
42,535

3
%
   Subtotal
988,833

 
 
986,362

 
 
971,909

 
 
971,683

 
 
959,109

 
Unearned loan fees, net
(4,487
)
 
 
(4,355
)
 
 
(4,207
)
 
 
(4,108
)
 
 
(4,156
)
 
     Total portfolio loans

$984,346

 
 

$982,007

 
 

$967,702

 
 

$967,575

 
 

$954,953

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

$420,988

35
%
 

$450,409

36
%
 

$401,925

33
%
 

$433,046

34
%
 

$414,686

33
%
Interest-bearing demand
248,056

20
%
 
240,974

20
%
 
246,628

20
%
 
244,601

19
%
 
252,009

20
%
Savings deposits
239,054

19
%
 
233,611

19
%
 
237,978

20
%
 
246,981

20
%
 
247,458

20
%
Money market deposits
206,717

17
%
 
208,614

17
%
 
223,189

19
%
 
239,242

19
%
 
243,603

19
%
Time deposits
113,273

9
%
 
99,660

8
%
 
95,801

8
%
 
96,920

8
%
 
100,527

8
%
   Total deposits

$1,228,088

 
 

$1,233,268

 
 

$1,205,521

 
 

$1,260,790

 
 

$1,258,283

 


Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
14 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Asset Quality
 
 
 
 
 
 
 
December 31,
 
September 30,
 
December 31,
 
 
2018
 
2018
 
2017
 
     Nonaccrual loans

$15,210

 

$16,728

 

$21,626

 
     Loans 90 days past due and accruing
—

 
152

 
252

 
          Total nonperforming loans
15,210

 
16,880

 
21,878

 
             Nonperforming loans guaranteed by government
(516
)
 
(279
)
 
(467
)
 
                Net nonperforming loans
14,694

 
16,601

 
21,411

 
     Other real estate owned
7,962

 
8,707

 
8,651

 
     Repossessed assets
1,242

 
29

 
—

 
             Other real estate owned guaranteed by government
(1,279
)
 
(1,279
)
 
(1,333
)
 
                Net nonperforming assets

$22,619

 

$24,058

 

$28,729

 
     Nonperforming loans / portfolio loans, net of government guarantees
1.49

%
1.69

%
2.24

%
     Nonperforming assets / total assets, net of government guarantees
1.50

%
1.60

%
1.89

%
 
 
 
 
 
 
 
     Performing restructured loans

$3,413

 

$3,252

 

$7,668

 
     Nonperforming loans plus performing restructured loans, net of government
 
 
 
 
 
 
     guarantees

$18,107

 

$19,853

 

$29,079

 
     Nonperforming loans plus performing restructured loans / portfolio loans, net of
 
 
 
 
 
 
     government guarantees
1.84

%
2.02

%
3.05

%
     Nonperforming assets plus performing restructured loans / total assets, net of
 
 
 
 
 
 
     government guarantees
1.73

%
1.82

%
2.40

%
 
 
 
 
 
 
 
     Adversely classified loans, net of government guarantees

$27,217

 

$29,730

 

$33,845

 
     Loans 30-89 days past due and accruing, net of government guarantees /
 
 
 
 
 
 
     portfolio loans
0.36

%
0.26

%
0.22

%
 
 
 
 
 
 
 
     Allowance for loan losses / portfolio loans
1.98

%
2.05

%
2.25

%
     Allowance for loan losses / nonperforming loans, net of government guarantees
133

%
121

%
100

%
 
 
 
 
 
 
 
     Gross loan charge-offs for the quarter

$713

 

$9

 

$55

 
     Gross loan recoveries for the quarter

($272
)
 

($61
)
 

($53
)
 
     Net loan charge-offs (recoveries) for the quarter

$441

 

($52
)
 

$2

 
     Net loan charge-offs year-to-date

$1,442

 

$1,001

 

$1,435

 
     Net loan (recoveries) charge-offs for the quarter / average loans, for the quarter
0.04

%
(0.01
)
%
—

%
     Net loan charge-offs year-to-date / average loans,
 
 
 
 
 
 
          year-to-date annualized
0.15

%
0.14

%
0.15

%



Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
15 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Nonperforming Assets Rollforward
 
 
 
 
 
 
 
 
Balance at
Additions
Payments
Writedowns
Transfers to
Transfers to
Sales
Balance at
 
September 30, 2018
this quarter
this quarter
/Charge-offs
 this quarter
OREO/REPO
Performing Status
this quarter
this quarter
December 31, 2018
Commercial loans

$14,734


$2,787


($2,986
)

($682
)

($1,182
)

$—


$—


$12,671

Commercial real estate
1,694

584

—

(5
)
—

—

—

2,273

Construction loans
—

—

—

—

—

—

—

—

Consumer loans
452

—

(8
)
(26
)
(152
)
—

—

266

Non-performing loans guaranteed by government
(279
)
(237
)
—

—

—

—

—

(516
)
   Total non-performing loans
16,601

3,134

(2,994
)
(713
)
(1,334
)
—

—

14,694

Other real estate owned
8,707

295

—

—

—

—

(1,040
)
7,962

Repossessed assets
29

1,242

—

—

—

—

(29
)
1,242

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

—

—

—

—

—

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

$24,058


$4,671


($2,994
)

($713
)

($1,334
)

$—


($1,069
)

$22,619



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

$362


$—


$—


$—


$24

Other services
—

—

78

—

5

Excavation and construction
320

—

—

—

—

Health care and social assistance
—

—

—

965

—

Consumer
31

9

22

139

26

   Total charge-offs

$713


$9


$100


$1,104


$55







Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
16 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Average Balances, Yields, and Rates
 
 
 
 
 
 
 
 
 
Three Months Ended
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
 
 
Average
 
 
Average
 
 
Average
 
Average
Tax Equivalent
 
Average
Tax Equivalent
 
Average
Tax Equivalent
 
Balance
Yield/Rate
 
Balance
Yield/Rate
 
Balance
Yield/Rate
Assets
 
 
 
 
 
 
 
 
Interest bearing deposits in other banks

$51,441

2.23
%
 

$34,136

1.94
%
 

$61,030

1.30
%
Portfolio investments
280,831

2.51
%
 
264,377

2.29
%
 
287,393

1.77
%
Loans held for sale
46,230

4.59
%
 
54,792

4.64
%
 
43,259

4.28
%
Portfolio loans
981,407

5.98
%
 
984,914

5.81
%
 
980,351

5.45
%
   Total interest-earning assets
1,359,909

5.08
%
 
1,338,219

4.97
%
 
1,372,033

4.46
%
Nonearning assets
149,695

 
 
150,808

 
 
147,832

 
   Total assets

$1,509,604

 
 

$1,489,027

 
 

$1,519,865

 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
 
Interest-bearing deposits

$796,362

0.45
%
 

$795,256

0.30
%
 

$829,295

0.18
%
Borrowings
52,400

1.32
%
 
46,663

1.39
%
 
48,376

1.35
%
   Total interest-bearing liabilities
848,762

0.50
%
 
841,919

0.36
%
 
877,671

0.25
%
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand deposits
437,116

 
 
428,741

 
 
425,271

 
Other liabilities
16,886

 
 
15,039

 
 
19,857

 
Shareholders' equity
206,840

 
 
203,328

 
 
197,066

 
   Total liabilities and shareholders' equity

$1,509,604

 
 

$1,489,027

 
 

$1,519,865

 
   Net spread
 
4.58
%
 
 
4.61
%
 
 
4.21
%
   NIM
 
4.71
%
 
 
4.69
%
 
 
4.25
%
   NIMTE*
 
4.76
%
 
 
4.74
%
 
 
4.31
%
   Average portfolio loans to average
 
 
 
 
 
 
 
 
        interest-earning assets
72.17
%
 
 
73.60
%
 
 
71.45
%
 
   Average portfolio loans to average total deposits
79.56
%
 
 
80.47
%
 
 
78.14
%
 
   Average non-interest deposits to average
 
 
 
 
 
 
 
 
         total deposits
35.44
%
 
 
35.03
%
 
 
33.90
%
 
   Average interest-earning assets to average
 
 
 
 
 
 
 
 
         interest-bearing liabilities
160.22
%
 
 
158.95
%
 
 
156.33
%
 

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

 
4Q18 vs. 3Q18
4Q18 vs. 4Q17
Nonaccrual interest adjustments
0.04
 %
0.03
%
Interest rates and loan fees
0.04
 %
0.41
%
Volume and mix of interest-earning assets
(0.06
)%
0.01
%
Change in NIMTE*
0.02
 %
0.45
%



Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
17 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Average Balances, Yields, and Rates
 
 
 
 
 
 
Year-to-date
 
December 31, 2018
 
December 31, 2017
 
 
Average
 
 
Average
 
Average
Tax Equivalent
 
Average
Tax Equivalent
 
Balance
Yield/Rate
 
Balance
Yield/Rate
Assets
 
 
 
 
 
Interest bearing deposits in other banks

$42,386

1.88
%
 

$36,944

1.15
%
Portfolio investments
286,426

2.17
%
 
305,211

1.66
%
Loans held for sale
46,089

4.37
%
 
44,047

3.95
%
Portfolio loans
971,548

5.74
%
 
981,001

5.47
%
   Total interest-earning assets
1,346,449

4.82
%
 
1,367,203

4.46
%
Nonearning assets
146,936

 
 
143,849

 
   Total assets

$1,493,385

 
 

$1,511,052

 
 
 
 
 
 
 
Liabilities and Shareholders' Equity
 
 
 
 
 
Interest-bearing deposits

$809,808

0.28
%
 

$829,918

0.21
%
Borrowings
47,570

1.37
%
 
50,523

1.40
%
   Total interest-bearing liabilities
857,378

0.35
%
 
880,441

0.27
%
 
 
 
 
 
 
Noninterest-bearing demand deposits
417,464

 
 
418,415

 
Other liabilities
17,521

 
 
19,067

 
Shareholders' equity
201,022

 
 
193,129

 
   Total liabilities and shareholders' equity

$1,493,385

 
 

$1,511,052

 
   Net spread
 
4.47
%
 
 
4.19
%
   NIM
 
4.55
%
 
 
4.22
%
   NIMTE*
 
4.60
%
 
 
4.28
%
   Average portfolio loans to average interest-earning assets
72.16
%
 
 
71.75
%
 
   Average portfolio loans to average total deposits
79.16
%
 
 
78.58
%
 
   Average non-interest deposits to average total deposits
34.02
%
 
 
33.52
%
 
   Average interest-earning assets to average interest-bearing liabilities
157.04
%
 
 
155.29
%
 

The components of the change in NIMTE* are detailed in the table below:
 
YTD18 vs.YTD17
Nonaccrual interest adjustments
—
%
Interest rates and loan fees
0.31
%
Volume and mix of interest-earning assets
0.01
%
Change in NIMTE*
0.32
%




Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
18 of 20


Additional Financial Information
(Dollars in thousands)
(Unaudited)

Capital Data (At quarter end)
 
 
 
 
 
 
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
 
Book value per share

$29.92

 

$29.52

 

$28.06

 
Tangible book value per share*

$27.57

 

$27.17

 

$25.70

 
Total shareholders' equity/total assets
13.70

%
13.53

%
12.70

%
Tangible Common Equity/Tangible Assets*
12.76

%
12.58

%
11.75

%
Tier 1 Capital / Risk Adjusted Assets
15.47

%
15.33

%
14.65

%
Total Capital / Risk Adjusted Assets
16.73

%
16.58

%
15.90

%
Tier 1 Capital / Average Assets
13.40

%
13.41

%
12.41

%
Shares outstanding
6,883,216

 
6,884,386

 
6,871,963

 
Unrealized loss on AFS debt securities, net of income taxes

($1,127
)
 

($1,680
)
 

($454
)
 
Unrealized gain on derivatives and hedging activities

$607

 

$1,039

 

$184

 

Profitability Ratios
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
For the quarter:
 
 
 
 
 
 
 
 
 
 
     NIM
4.71
%
4.69
%
4.50
%
4.28
%
4.25
%
     NIMTE*
4.76
%
4.74
%
4.56
%
4.33
%
4.31
%
     Efficiency ratio
76.64
%
73.82
%
71.19
%
77.22
%
80.92
%
     Return on average assets
1.27
%
1.40
%
1.58
%
1.10
%
0.06
%
     Return on average equity
9.30
%
10.27
%
11.79
%
8.43
%
0.43
%
 
December 31, 2018
 
December 31, 2017
 
Year-to-date:
 
 
 
 
     NIM
4.55
%
4.22
%
     NIMTE*
4.60
%
4.28
%
     Efficiency ratio
74.68
%
72.39
%
     Return on average assets
1.34
%
0.87
%
     Return on average equity
9.95
%
6.81
%




Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
19 of 20


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

NIMTE

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 2018 and 41.11% in 2017. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of NIMTE to net interest margin.

 
Three Months Ended
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
Net interest income

$16,137

 

$15,819

 

$14,989

 

$14,263

 

$14,684

Divided by average interest-bearing assets
1,359,909

 
1,338,219

 
1,335,181

 
1,352,497

 
1,372,033

Net interest margin ("NIM")3
4.71
%
 
4.69
%
 
4.50
%
 
4.28
%
 
4.25
%
 
 
 
 
 
 
 
 
 
 
Net interest income

$16,137

 

$15,819

 

$14,989

 

$14,263

 

$14,684

Plus: reduction in tax expense related to
 

 
 

 
 

 
 
 
 
     tax-exempt interest income
196

 
182

 
175

 
173

 
204

 

$16,333

 

$16,001

 

$15,164

 

$14,436

 

$14,888

Divided by average interest-bearing assets
1,359,909

 
1,338,219

 
1,335,181

 
1,352,497

 
1,372,033

NIMTE3
4.76
%
 
4.74
%
 
4.56
%
 
4.33
%
 
4.31
%

 
Year-to-date
 
December 31, 2018
 
December 31, 2017
Net interest income

$61,208

 

$57,678

Divided by average interest-bearing assets
1,346,449

 
1,367,203

Net interest margin ("NIM")4
4.55
%
 
4.22
%
 
 
 
 
Net interest income

$61,208

 

$57,678

Plus: reduction in tax expense related to
 

 
 
     tax-exempt interest income
726

 
872

 

$61,934

 

$58,550

Divided by average interest-bearing assets
1,346,449

 
1,367,203

NIMTE4
4.60
%
 
4.28
%

3Calculated using actual days in the quarter divided by 365 for quarters ended in 2018 and 2017.

4Calculated using actual days in the year divided by 365 for year-to-date periods in 2018 and 2017.




Northrim BanCorp Earns $4.8 Million, or $0.69 per Diluted Share in 4Q18
January 28, 2019
20 of 20


(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.
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity

$205,947

 

$203,242

 

$199,456

 

$194,973

 

$192,802

Divided by shares outstanding
6,883

 
6,884

 
6,873

 
6,872

 
6,872

Book value per share

$29.92

 

$29.52

 

$29.02

 

$28.37

 
$28.06

 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity

$205,947

 

$203,242

 

$199,456

 

$194,973

 

$192,802

Less: goodwill and intangible assets
16,154

 
16,171

 
16,189

 
16,207

 
16,224

 

$189,793

 

$187,071

 

$183,267

 

$178,766

 

$176,578

Divided by shares outstanding
6,883

 
6,884

 
6,873

 
6,872

 
6,872

Tangible book value per share

$27.57

 

$27.17

 

$26.66

 

$26.01

 
$25.70


Tangible Common Equity to Tangible Assets

Tangible common equity to tangible assets is a non-GAAP ratio that represents total equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. This ratio has received more attention over the past several years from stock analysts and regulators. The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets.

Northrim BanCorp, Inc.

December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
Total shareholders' equity

$205,947

 

$203,242

 

$199,456

 

$194,973

 

$192,802

Total assets
1,502,988

 
1,502,673

 
1,470,440

 
1,524,741

 
1,518,596

Total shareholders' equity to total assets
13.70
%
 
13.53
%
 
13.56
%
 
12.79
%
 
12.70
%

Northrim BanCorp, Inc.

December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
Total shareholders' equity

$205,947

 

$203,242

 

$199,456

 

$194,973

 

$192,802

Less: goodwill and other intangible assets, net
16,154

 
16,171

 
16,189

 
16,207

 
16,224

Tangible common shareholders' equity

$189,793

 

$187,071

 

$183,267

 

$178,766

 

$176,578

 
 
 
 
 
 
 
 
 
 
Total assets

$1,502,988

 

$1,502,673

 

$1,470,440

 

$1,524,741

 

$1,518,596

Less: goodwill and other intangible assets, net
16,154

 
16,171

 
16,189

 
16,207

 
16,224

Tangible assets

$1,486,834

 

$1,486,502

 

$1,454,251

 

$1,508,534

 

$1,502,372

Tangible common equity ratio
12.76
%
 
12.58
%
 
12.60
%
 
11.85
%
 
11.75
%


-0-
Note Transmitted on GlobeNewswire on January 28, 2019, at 12:15 pm Alaska Standard Time.