Northrim BanCorp, Inc. Reports Strong Loan and Deposit Growth in Second Quarter 2005; Net Income of $2.7 Million
ANCHORAGE, AK—July 20, 2005—Northrim BanCorp, Inc. (the “company”) (Nasdaq: NRIM) reported today that total portfolio loans, which exclude loans for sale, grew 13% to $700 million, compared to $617 million at June 30, 2004. Commercial loans continued to be the major component of loan growth, increasing $64 million to $303 million, or 26%, from $239 million at June 30, 2004.
At June 30, 2005, the allowance for loan losses was $10.9 million, or 1.56% of portfolio loans and 160% of non-performing loans. A year ago, the allowance for loan losses was $10.3 million, or 1.67% of portfolio loans and 115% of non-performing loans. The provision for loan losses for the quarter and six month period ended June 30, 2005, decreased 77% and 88%, respectively, to $100,000 for each period, from $429,000 and $858,000, respectively for the quarter and six month period ended June 30, 2004 due to net loan recoveries and a reduction of non-performing loans.
Net loan recoveries for the second quarter of 2005 were $49,000, versus net loan charge-offs of $365,000 for the second quarter of 2004. For the first six months of 2005, net loan recoveries were $18,000, compared to net loan charge-offs of $751,000 for the same period in 2004. Non-performing assets totaled $6.8 million, or .81% of total assets, at June 30, 2005, as compared to non-performing assets of $9 million, or 1.21% of assets, at June 30, 2004.
Total assets at June 30, 2005, were $837 million, up 13% from $739 million a year ago. Total average assets for the period ended June 30, 2005, were $818 million, up 10% from $743 million for the period ended June 30, 2004.
Total deposits increased 14% to $732 million, up from $643 million a year ago. Total average deposits for the period ended June 30, 2005, were $709 million, up 10% from $644 million for the period ended June 30, 2004. The Alaska CD, a variable-rate savings account, again led deposit growth, increasing 87% to $159 million, from $85 million at June 30, 2004.
Net income for the second quarter of 2005 decreased 4% to $2.7 million, from $2.8 million for the same period last year, which benefited from a tax rate of 35.7% as compared to a tax rate of 37.8% for the same period ending June 30, 2005. Diluted earnings per share were $0.42 at June 30, 2005, a 5% decrease from $0.44 per share in the period ended June 30, 2004. For the six-month period ended June 30, 2005, the company’s net income was $5.2 million, up 2% from $5.1 million for the same period in 2004. Diluted earnings per share for the first six months of 2005 were $0.83, a 1% increase from $0.82 per share in the first six months of 2004.
Net interest income, before the provision for loan losses, increased 4% to $10.7 million for the second quarter of 2005, from $10.3 million for the second quarter of 2004. Net interest income, as a percentage of average earning assets on a tax equivalent basis (net interest margin), for the second quarter of 2005 equaled 5.67%, which was a decrease from the 6.03% margin in the second quarter of 2004. “Short-term interest rates paid on deposits have risen rapidly in the past twelve months,” said Joe Schierhorn, executive vice president and chief financial officer. “This has put pressure on our net interest margin, as we cannot re-price our loans at the same pace.”
Total other operating income increased 12% to $1.1 million in the second quarter of 2005. “Income from our new Northrim Funding Services division in Washington and our Business Manager product in Alaska, both of which are used to purchase accounts receivable from customers, accounted for a majority of the increase in other operating income,” Schierhorn explained.
Total other operating expense was $7.4 million in the second quarter of 2005, an increase of 13% from the $6.5 million expense in the same period in 2004. Salaries and personnel expenses were up 10%, to $4.4 million, and occupancy costs increased 16% to $574,000, due in part to new rental costs for Northrim Funding Services division, based in the state of Washington, expansion into additional square footage in our Anchorage headquarters building, and increased amortization of leasehold improvements at other facilities. Other expenses were up 24% to $1.9 million. Approximately 50% of this increase can be attributed to costs of our new High Performance Checking program, which is a turnkey approach to restructure and market Northrim’s demand deposit accounts. “The High Performance Checking Program is designed to broaden and diversify Northrim’s deposit base, reducing our deposit costs, and generating more internal funds to meet our strong commercial loan demand,” said Marc Langland, chairman and CEO. “The transition to these new accounts will reduce fee income in the short term, but we expect the program to result in higher fee income over time.”
In the second quarter of 2005, the company’s return on average assets (ROA) was 1.30%, compared to 1.50% in the same quarter a year ago. Return on average equity was 12.36% in the quarter, compared to 14.23% in 2004.
Tangible book value per share was $13.11 at June 30, 2005, which was an increase of 12% when compared to a tangible book value per share of $11.73 one year ago. Shareholders’ equity increased 10% to $86 million at June 30, 2005 compared to $78 million at June 30, 2004, and book value per share increased to $14.17 at June 30, 2005, from $12.85 at June 30, 2004.
In September of 2002, the company instituted a stock repurchase program. The company repurchased 33,140 shares of stock in the three month period ending June 30, 2005 under this program, which leaves a remaining balance of 352,715 shares available for repurchase by the company in the future.
Northrim BanCorp, Inc. is the parent company of Northrim Bank. Northrim Bank is a full-service commercial bank that provides a full range of personal and business banking services. With locations in Anchorage, Eagle River, Wasilla and Fairbanks, Alaska, Northrim Bank differentiates itself with a “Customer First Service” philosophy.
www.northrim.com
This release may contain “forward-looking statements” that are subject to 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 or management, are intended to help identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 or expand our market share or net interest margins, and to implement our marketing and growth strategies. 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 collectibility 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 our other filings with the SEC and the FDIC. 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.
1
2
Balance Sheet
(Dollars in thousands, except per share data)
June 30,
December 31,
June 30,
Annual
2005
2004
2004
% Change
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Assets:
Cash and due from banks
$
29,168
$
18,936
$
24,564
19
%
Overnight investments
8,392
12,157
6,917
21
%
Portfolio investments
61,849
61,475
60,970
1
%
Loans for sale
—
—
—
n/a
Portfolio loans
699,663
678,269
617,151
13
%
Allowance for loan losses
(10,882
)
(10,764
)
(10,293
)
6
%
Net loans
688,781
667,505
606,858
13
%
Premises and equipment, net
10,950
10,583
11,002
0
%
Purchased receivables
8,661
2,191
1,365
535
%
Intangible assets
6,450
6,634
6,818
-5
%
Other assets
22,314
21,245
20,775
7
%
Total assets
$
836,565
$
800,726
$
739,269
13
%
Liabilities and Shareholders’ Equity:
Demand deposits
$
191,953
$
183,959
$
184,775
4
%
Interest-bearing demand
66,288
59,933
57,991
14
%
Savings deposits
48,452
47,406
46,246
5
%
Alaska CDs
158,627
123,223
85,040
87
%
Money market deposits
124,441
142,181
117,697
6
%
Time deposits
142,012
142,359
150,784
-6
%
Total deposits
731,773
699,061
642,533
14
%
Borrowings
5,761
6,478
5,327
8
%
Trust preferred securities
8,000
8,000
8,000
0
%
Other liabilities
5,009
3,829
5,220
-4
%
Total liabilities
750,543
717,368
661,080
14
%
Shareholders' equity
86,022
83,358
78,189
10
%
Total liabilities and equity
$
836,565
$
800,726
$
739,269
13
%
Average Quarter Balances — unaudited
Loans
$
691,815
$
664,978
$
621,466
11
%
Total earning assets
758,493
740,256
688,765
10
%
Total assets
818,493
796,697
742,609
10
%
Non-interest bearing deposits
176,679
191,863
175,559
1
%
Interest bearing deposits
532,116
503,697
468,367
14
%
Total deposits
708,795
695,560
643,926
10
%
Shareholders' equity
86,193
82,693
78,049
10
%
Average Year-to-date Balances — unaudited
Loans
$
687,413
$
628,830
$
611,539
12
%
Total earning assets
753,735
704,471
681,528
11
%
Total assets
811,526
759,259
734,929
10
%
Non-interest bearing deposits
176,320
181,731
171,231
3
%
Interest bearing deposits
523,997
478,951
466,024
12
%
Total deposits
700,317
660,682
637,255
10
%
Shareholders' equity
85,269
79,278
77,264
10
%
3
Income Statement
(Dollars in thousands, except per share data)
Quarter Ended June 30:
2005
2004
% Change
(unaudited)
(unaudited)
(unaudited)
Interest Income:
Interest and fees on loans
$
13,501
$
11,236
20
%
Interest on portfolio investments
544
614
-11
%
Interest on overnight investments
33
9
267
%
Total interest income
14,078
11,859
19
%
Interest Expense:
Interest expense on deposits
3,183
1,438
121
%
Interest expense on borrowings
220
142
55
%
Total interest expense
3,403
1,580
115
%
Net interest income
10,675
10,279
4
%
Provision for loan losses
100
429
-77
%
Net interest income after provision for loan losses
10,575
9,850
7
%
Other Operating Income:
Service charges on deposit accounts
450
443
2
%
Earning from mortgage affiliate
82
123
-33
%
Purchased receivable income
186
45
313
%
Other income
347
344
1
%
Total other operating income
1,065
955
12
%
Other Operating Expense:
Salaries and other personnel expense
4,426
4,031
10
%
Occupancy, net
574
495
16
%
Equipment expense
349
327
7
%
Intangible asset amortization expense
92
92
0
%
Other expense
1,932
1,562
24
%
Total other operating expense
7,373
6,507
13
%
Income before income taxes
4,267
4,298
-1
%
Provision for income taxes
1,611
1,536
5
%
Net income
$
2,656
$
2,762
-4
%
Basic EPS
$
0.44
$
0.45
-2
%
Diluted EPS
$
0.42
$
0.44
-5
%
Average basic shares
6,095,922
6,081,658
0
%
Average diluted shares
6,278,673
6,260,985
0
%
4
Income Statement
(Dollars in thousands, except per share data)
Six Months Ended June 30:
2005
2004
% Change
Interest Income:
(unaudited)
(unaudited)
(unaudited)
Interest and fees on loans
$
26,226
$
21,918
20
%
Interest on portfolio investments
1,106
1,296
-15
%
Interest on overnight investments
59
20
195
%
Total interest income
27,391
23,234
18
%
Interest Expense:
Interest expense on deposits
5,790
2,782
108
%
Interest expense on borrowings
443
281
58
%
Total interest expense
6,233
3,063
103
%
Net interest income
21,158
20,171
5
%
Provision for loan losses
100
858
-88
%
Net interest income after provision for loan losses
21,058
19,313
9
%
Other Operating Income:
Service charges on deposit accounts
851
874
-3
%
Earnings from mortgage affiliate
61
166
-63
%
Purchased receivable income
347
80
334
%
Other income
654
671
-3
%
Total other operating income
1,913
1,791
7
%
Other Operating Expense:
Salaries and other personnel expense
8,784
7,871
12
%
Occupancy, net
1,141
1,023
12
%
Equipment expense
693
691
0
%
Intangible asset amortization expense
184
184
0
%
Other expense
3,701
3,371
10
%
Total other operating expense
14,503
13,140
10
%
Income before income taxes
8,468
7,964
6
%
Provision for income taxes
3,232
2,829
14
%
Net income
$
5,236
$
5,135
2
%
Basic EPS
$
0.86
$
0.85
1
%
Diluted EPS
$
0.83
$
0.82
1
%
Average basic shares
6,097,797
6,069,816
0
%
Average diluted shares
6,285,520
6,273,931
0
%
5
Other Data
(Dollars in thousands, except per share data)
June 30,
December 31,
June 30,
2005
2004
2004
(unaudited)
(unaudited)
(unaudited)
Asset Quality:
Non accrual loans
$
5,706
$
5,876
$
5,988
Loans 90 days past due
1,095
290
2,541
Restructured loans
—
424
453
Total non-performing loans
6,801
6,590
8,982
Other real estate owned
—
—
—
Total non-performing assets
$
6,801
$
6,590
$
8,982
Non-performing loans / portfolio loans
0.97
%
0.97
%
1.46
%
Non-performing assets / assets
0.81
%
0.82
%
1.21
%
Allowance for loan losses / portfolio loans
1.56
%
1.59
%
1.67
%
Allowance / non-performing loans
160.01
%
163.34
%
114.60
%
Loan charge-offs, net for the quarter
$
(49
)
$
529
$
365
Loan charge-offs, net year-to-date
$
(18
)
$
1,024
$
751
Net loan charge-offs / average loans, annualized
-0.01
%
0.16
%
0.25
%
Other Data (At quarter end):
Book value per share
$
14.17
$
13.69
$
12.85
Tangible book value per share
$
13.11
$
12.60
$
11.73
Tier 1 / Risk Adjusted Assets
11.65
%
11.62
%
11.85
%
Total Capital / Risk Adjusted Assets
12.90
%
12.87
%
13.10
%
Tier 1 /Average Assets
10.80
%
10.72
%
10.79
%
Shares outstanding
6,071,237
6,089,120
6,085,657
Unrealized gain (loss) on AFS securities,
net of income taxes
$
(150
)
$
4
$
(62
)
Other Data (For the quarter):
Net interest margin (tax equivalent)
5.67
%
5.87
%
6.03
%
Efficiency ratio*
62.02
%
56.24
%
57.10
%
Return on average assets
1.30
%
1.43
%
1.50
%
Return on average equity
12.36
%
13.79
%
14.23
%
Other Data (Year-to-date):
Net interest margin (tax equivalent)
5.68
%
5.88
%
5.97
%
Efficiency ratio*
62.06
%
58.07
%
58.99
%
Return on average assets
1.30
%
1.41
%
1.41
%
Return on average equity
12.38
%
13.50
%
13.44
%
*excludes intangible asset amortization expense
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