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CST: 10/12/2019 20:34:08   

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

316 Days ago

ANCHORAGE, Alaska, Jan. 28, 2019 (GLOBE NEWSWIRE) -- 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.

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.”

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%.
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.

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 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.

  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.

“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 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


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

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  


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  
       

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    


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   %


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  


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 %


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 %

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   %


*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.

(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 %


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

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