Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the “Company”)
today reported net income of $4.8 million, or $0.84 per diluted
share, in the first quarter of 2023, compared to $8.6 million, or
$1.48 per diluted share, in the fourth quarter of 2022, and $7.2
million, or $1.20 per diluted share, in the first quarter a year
ago. The decrease in first quarter 2023 profitability as compared
to the prior quarter was primarily the result of lower net interest
income largely due to higher interest expense on deposits, as well
as lower mortgage banking income and commercial servicing revenue
and higher salaries and personnel expense. These changes were
partially offset by a lower provision for credit losses compared to
the preceding quarter. The decrease in profitability in the first
quarter of 2023 compared to the same period a year ago was
primarily due to a decrease in mortgage banking income as well as
an increase in salaries and personnel expense. The first quarter of
2022 also included $2.0 million in keyman insurance proceeds. This
non-recurring item represents 64% of the $3.1 million decrease in
pretax income in the first quarter of 2023 compared to the first
quarter of 2022.
Dividends per share increased to $0.60 in the
first quarter of 2023 compared to $0.50 in the fourth quarter of
2022 and increased from $0.41 per share in the first quarter of
2022.
“First quarter results were impacted by
increasing deposit costs and continued pressure on our mortgage
banking business,” said Joe Schierhorn, President and Chief
Executive Officer Northrim BanCorp, Inc. “We proactively adjusted
pricing to retain deposits in the first quarter and we are
cautiously optimistic that the pace of deposit yields will moderate
in coming quarters. Mortgage originations continued to lag in the
first quarter but we remain committed to the business as it has
been profitable over the long term. Credit quality remains strong,
and we believe that our lending standards and the diversity of our
loan portfolio will enable our loans to continue to perform well if
we do encounter an economic slowdown.”
First Quarter 2023
Highlights:
- Net interest income in the first
quarter of 2023 decreased 8% to $25.0 million compared to $27.3
million in the fourth quarter of 2022 and increased 30% compared to
$19.3 million in the first quarter of 2022.
- Net interest margin on a tax
equivalent basis (“NIMTE”)* was 4.30% for the first quarter of
2023, an 6-basis point decrease from the fourth quarter of 2022 and
a 110-basis point increase compared to the first quarter of 2022
due primarily to the increased yields on loans, investments, and
cash.
- The weighted average interest rate
for new loans booked in the first quarter of 2023 was 6.35%
compared to 6.25% in the fourth quarter of 2022 and 4.48% in the
first quarter a year ago.
- Return on average assets (“ROAA”)
was 0.76% and return on average equity ("ROAE") was 8.73% for the
first quarter of 2023.
- Portfolio loans were $1.54 billion
at March 31, 2023, up 2% from the preceding quarter and up 11% from
a year ago, primarily due to growth in core loans (excluding
Paycheck Protection Program (“PPP”) loans). 71% of portfolio loans
are variable and 16% of earning assets are subject to rate
increases immediately when prime or other indices increase.
- Total deposits were $2.30 billion
at March 31, 2023, down 4% from the preceding quarter, and down 2%
from $2.34 billion a year ago. Demand deposits decreased 6%
year-over-year to $767.8 million at March 31, 2023 and currently
represent 34% of total deposits.
- The average cost of
interest-bearing deposits was 1.20% at March 31, 2023, up from
0.56% at December 31, 2022 and 0.15% at March 31, 2022.
- Total liquid assets and investments
and loans maturing within one year were $502.0 million and our
funds available for borrowing under our existing lines of credit
were $1.2 billion at March 31, 2023.
Financial Highlights |
Three Months Ended |
(Dollars in thousands, except per share data) |
March 31, 2023 |
December 31, 2022 |
September 30, 2022 |
June 30, 2022 |
March 31, 2022 |
Total assets |
$2,580,037 |
|
$2,674,318 |
|
$2,717,514 |
|
$2,611,154 |
|
$2,626,160 |
|
Total portfolio loans |
$1,535,187 |
|
$1,501,785 |
|
$1,407,266 |
|
$1,405,709 |
|
$1,377,387 |
|
Total portfolio loans (excluding PPP loans) |
$1,531,007 |
|
$1,494,675 |
|
$1,395,932 |
|
$1,373,837 |
|
$1,313,114 |
|
Total deposits |
$2,296,273 |
|
$2,387,211 |
|
$2,439,335 |
|
$2,335,390 |
|
$2,343,066 |
|
Total shareholders’ equity |
$224,425 |
|
$218,629 |
|
$210,699 |
|
$215,289 |
|
$225,832 |
|
Net income |
$4,830 |
|
$8,595 |
|
$10,125 |
|
$4,795 |
|
$7,226 |
|
Diluted earnings per share |
$0.84 |
|
$1.48 |
|
$1.76 |
|
$0.83 |
|
$1.20 |
|
Return on average assets |
0.76 |
% |
1.26 |
% |
1.52 |
% |
0.74 |
% |
1.12 |
% |
Return on average shareholders’ equity |
8.73 |
% |
15.71 |
% |
18.18 |
% |
8.58 |
% |
12.36 |
% |
NIM |
4.22 |
% |
4.31 |
% |
4.22 |
% |
3.67 |
% |
3.18 |
% |
NIMTE* |
4.30 |
% |
4.36 |
% |
4.27 |
% |
3.70 |
% |
3.20 |
% |
Efficiency ratio |
78.51 |
% |
65.23 |
% |
63.69 |
% |
77.39 |
% |
70.02 |
% |
Total shareholders’ equity/total assets |
8.70 |
% |
8.18 |
% |
7.75 |
% |
8.24 |
% |
8.60 |
% |
Tangible common equity/tangible assets* |
8.13 |
% |
7.62 |
% |
7.21 |
% |
7.68 |
% |
8.04 |
% |
Book value per share |
$39.56 |
|
$38.35 |
|
$37.09 |
|
$37.90 |
|
$38.40 |
|
Tangible book value per share* |
$36.74 |
|
$35.55 |
|
$34.27 |
|
$35.08 |
|
$35.67 |
|
Dividends per share |
$0.60 |
|
$0.50 |
|
$0.50 |
|
$0.41 |
|
$0.41 |
|
Common stock outstanding |
5,672,841 |
|
5,700,728 |
|
5,681,089 |
|
5,681,089 |
|
5,881,708 |
|
|
* References to NIMTE, tangible book value per
share, tangible common equity to tangible assets, and tangible
common equity to tangible assets, excluding the fair value of the
available for sale securities portfolio (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 11.)
The Alaska Department of Labor ("DOL") has
released preliminary data through February of 2023. The DOL
reported Alaska’s seasonally adjusted unemployment rate for
February of 2023 was 3.8% compared to 3.6% for the U.S. The DOL
reports total payroll jobs in Alaska increased 2.5% or 7,700 jobs
compared to February of 2022. All major sectors showed year over
year growth in jobs with the exception of Manufacturing, which
declined 100 jobs, or 0.9% over the last 12 months.
According to the DOL, Transportations,
Warehousing and Utilities had the largest growth of 11.5% year over
year in February, adding 2,300 jobs. The Leisure and Hospitality
sector had strong growth of 7.2% over the same 12 month period,
adding 2,100 jobs. The Oil and Gas sector has benefited from higher
energy prices and new exploration activity, resulting in an
increase of 300 jobs or 4.3% since February of 2022.
Other Services grew 3.8%; Professional and Business Services added
2.7%; Construction grew 2.2%; and Information increased 2.1%
compared to February of 2022. The Retail sector has fully recovered
from pre-COVID levels and now has 900 more jobs than February of
2020.
Alaska’s Gross State Product (“GSP”) was
estimated to be $64.1 billion in current dollars at the end of
2022, according to the Federal Bureau of Economic Analysis ("BEA").
Alaska’s inflation adjusted “real” GSP declined 2.4% in
2022. However, the decrease in “real” GSP was
predominantly in the first half of the year and Alaska’s GSP grew
at annualized rates of 8.7% in the third quarter and 4.1% in the
fourth quarter of 2022. Alaska’s real GSP improvement in the second
half of 2022 was primarily due to gains in the Oil and Gas sector,
Transportation and Warehousing, Retail Trade and State & Local
Government.
The BEA also calculated Alaska’s seasonally
adjusted personal income at $50.6 billion at the end of 2022, an
improvement of 4.8% for the year. The national average was an
increase of 2.4% for the same period. “Alaskans’ personal income
from wages, dividends, interest and rents was relatively similar to
the US growth rates”, explains Mark Edwards, EVP Chief Credit
Officer and Bank Economist. “However, Alaska was the only state in
the country to have higher levels of government transfer payments
in 2022 compared to 2021. The prior year was driven by large COVID
relief payments, while the 2022 increase for Alaska was primarily
due to the significantly larger Alaska Permanent Fund dividend
payments of $3,284 per person compared to $1,114 in 2021. For about
650,000 qualified Alaskans that equates to an increase of $1.41
billion in government payments from the prior year. The
Permanent Fund has grown to a value of $75.5 billion.
The Permanent Fund is scheduled to transfer $3.4 billion to the
State’s General Fund in fiscal year 2023. It will be divided
between dividends to Alaskan citizens and funds for state
government services.”
The price of Alaska North Slope (“ANS”) crude
oil averaged $91.41 per barrel in Alaska’s fiscal year, which ended
June 30, 2022. The Alaska Department of Revenue (“DOR”) forecasts
ANS oil to average $85.25 per barrel in Alaska fiscal year 2023 and
$73 in 2024. The DOR calculated ANS crude oil production was 486
thousand barrels per day in Alaska’s fiscal year ending June 30,
2022. The DOR has forecast production to increase to
501 thousand barrels per day in Alaska’s fiscal year 2023 and 512
thousand barrels per day in 2024. This is primarily a result of new
production coming on line in the NPR-A region west of Prudhoe
Bay.
According to the Mortgage Bankers Association,
Alaska’s home mortgage delinquency rate in the fourth quarter of
2022 was 2.9% compared to 4.1% in the fourth quarter of
2021. Alaska’s delinquency rate of 2.9% compares to the
national average rate of 3.9% for the fourth quarter of 2022. The
Mortgage Bankers Association survey reported that the mortgage
foreclosure inventory in Alaska in the fourth quarter of 2022 was
0.54% and the national average was 0.57%.
According to the Alaska Multiple Listing
Services, the average sales price of a single family home in
Anchorage rose 7.6% in 2022 to $456,509. This was the
fifth consecutive year of price increases, following growth of 6.9%
in 2021 and 5.8% in 2020. Average sales prices in the Matanuska
Susitna Borough rose 9.9% in 2022 to $382,504, continuing a trend
of average price increases for more than a decade. Average home
prices in the Matanuska Susitna Borough increased 15.6% in 2021 and
9.9% in 2020. These two markets represent where the vast majority
of Northrim Bank’s residential lending activity occurs.
The number of housing units sold in Anchorage
did slow in 2022 by 21.2% compared to 2021, as reported by the
Alaska Multiple Listing Services. This was following sales growth
of 11.2% in 2021 compared to 2020. “A lack of inventory due to
a reduction in the supply of new homes being
constructed and a lower churn of existing homes being listed on the
market are the primary reasons for the decline in sales”, according
to Mr. Edwards. The Matanuska Susitna Borough also experienced a
lower volume of home sales, down 11.9% in 2022 compared to the
prior year. The number of units sold in the Matanuska Susitna
Borough had been increasing for the prior four years and grew by
11.7% in 2021 as compared to 2020.
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 first quarter of 2023, Northrim generated
a ROAA of 0.76% and a ROAE of 8.73%, compared to 1.26% and 15.71%,
respectively, in the fourth quarter of 2022 and 1.12% and 12.36%,
respectively, in the first quarter a year ago.
Net Interest Income/Net Interest Margin
Net interest income decreased 8% to
$25.0 million in the first quarter of 2023 compared to
$27.3 million in the fourth quarter of 2022 and increased 30%
compared to $19.3 million in the first quarter of
2022. Interest expense on deposits increased 104% in
the first quarter of 2023 to $4.6 million compared to $2.2 million
in the fourth quarter of 2022 and increased 697% compared to
$575,000 in the first quarter of 2022.
NIMTE* was 4.30% in the first quarter of 2023
compared to 4.36% in the preceding quarter and 3.20% in the first
quarter a year ago. NIMTE* decreased 6 basis points in
the first quarter of 2023 compared to the prior quarter mostly due
to an increase in expense on interest-bearing deposits and
increased 110 basis points compared to the first quarter of 2022
primarily due to higher yields on portfolio loans, investments, and
interest bearing deposits in other banks. This increase in NIMTE*
in the first quarter of 2023 compared to the first quarter of 2022
was only partially offset by higher rates on interest-bearing
deposits. The weighted average interest rate for new loans booked
in the first quarter of 2023 was 6.35% compared to 6.25% in the
fourth quarter of 2022 and 4.48% in the first quarter a year ago.
Additionally, the Company purchased long-term investments in the
first quarter of 2023 with a weighted average yield of 7.21%
compared to 5.64% in the fourth quarter of 2022 and 1.93% in the
first quarter a year ago. “We expect our net interest margin to
remain relatively stable as estimated increases in earning-asset
yields are likely to be offset by increases in deposit rates, as
the deposit market remains competitive in this rising interest rate
environment,” said Jed Ballard, Chief Financial Officer. Northrim’s
NIMTE* continues to remain above the peer average posted by the
S&P U.S. Small Cap Bank Index with total market capitalization
between $250 million and $1 billion as of December 31, 20221.
Provision for Credit Losses
Northrim recorded a provision for credit losses
of $360,000 in the first quarter of 2023, which includes a $101,000
provision for credit losses on unfunded commitments and a provision
for credit losses on loans of $259,000. This compares to a
provision for credit losses of $1.9 million in the fourth
quarter of 2022, and a benefit to the provision for credit losses
of $150,000 in the first quarter a year ago. The $259,000 provision
for credit losses on loans in the first quarter of 2023 accounts
for loan growth and a decrease in management's assumptions for
prepayment and curtailment speeds. These changes are only partially
offset by improvement in management's forecasted economic
factors.
Nonperforming loans, net of government
guarantees, decreased during the quarter to $6.1 million at
March 31, 2023, compared to $6.4 million at December 31,
2022, and decreased compared to $8.7 million at March 31,
2022.
The allowance for credit losses was 233% of
nonperforming loans, net of government guarantees, at the end of
the first quarter of 2023, compared to 215% three months earlier
and 130% a year ago.
1As of December 31, 2022, the S&P U.S. Small
Cap Bank Index tracked 242 banks with total common market
capitalization between $250 million to $1B for the following ratio:
NIMTE* of 3.51%.
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
$4.9 million, or 16% of total first quarter 2023 revenues, as
compared to $6.8 million, or 20% of revenues in the
fourth quarter of 2022, and $10.8 million, or 36% of revenues
in the first quarter of 2022. The decrease in other operating
income in the first quarter of 2023 as compared to the preceding
quarter is primarily the result of a decrease in commercial
servicing revenue, as well as a decrease in mortgage banking income
due to lower volume of mortgage activity and a decrease in the fair
value of mortgage servicing rights. The decrease in other operating
income in the first quarter of 2023 as compared to the first
quarter a year ago was due primarily to lower volume of mortgage
activity. See further discussion regarding mortgage activity during
the first quarter below. The Company also recognized $2.0 million
in life insurance proceeds received in connection with the death of
the Company's former Executive Vice President, General Counsel and
Corporate Secretary in the first quarter of 2022. The change in
fair market value of marketable securities also decreased to a loss
of $223,000 in the first quarter of 2023 compared to a gain of
$81,000 in the fourth quarter of 2022 and increased compared to a
loss of $422,000 in the first quarter of 2022.
Other Operating Expenses
Operating expenses were $23.5 million in the
first quarter of 2023, compared to $22.2 million in the fourth
quarter of 2022, and $21.1 million in the first quarter of
2022. The increase in other operating expenses in the
first quarter of 2023 compared to the fourth quarter of 2022 and
the first quarter of 2022 is primarily due to increased salaries
and other personnel expense, as a result of branch expansion and
salary increases. The Company opened its 18th branch in Nome in the
fourth quarter of 2022 and its 19th branch in Kodiak in the first
quarter of 2023.
Income Tax Provision
In the first quarter of 2023, Northrim recorded
$1.2 million in state and federal income tax expense for an
effective tax rate of 20.4%, compared to $1.4 million, or
13.6% in the fourth quarter of 2022 and $1.9 million, or 21.3%
in the first quarter a year ago. The increase in the tax rate in
the first quarter of 2023 as compared to the fourth quarter of 2022
is primarily the result of a decrease in tax benefits related to
the Company's investment in low income housing tax credits.
Community Banking
Northrim opened its 19th branch in Kodiak,
Alaska in the first quarter of 2023. “We are pleased to continue
our expansion throughout Alaska with our 19th branch. We have been
a part of the Kodiak community for the past few years with our loan
production office and we are eager to meet the needs of the
community through our new full service branch,” said Mike Huston,
Northrim Bank President.
Net interest income in the Community Banking
segment totaled $24.8 million in the first quarter of 2023,
compared to $26.7 million in the fourth quarter of 2022 and
$18.9 million in the first quarter of 2022. Net interest
income decreased in the first quarter of 2023 as compared to the
fourth quarter of 2022 mostly due to increased interest expense on
interest-bearing deposits and lower average earning assets and
increased as compared to the first quarter a year ago due to higher
yields on interest-earning assets which were only partially offset
by higher costs on interest-bearing liabilities.
In the most recent deposit market share data
from the FDIC for the period from June 30, 2021, to June 30, 2022,
Northrim’s deposit market share in Alaska increased to $2.4
billion, or 13.95% of Alaska's total deposits as of June 30, 2022
from $2.2 billion, or 13.00% of Alaska's total deposits as of June
30, 2021. This represents 9% growth for Northrim during
that period while, according to the FDIC, the total deposits in
Alaska were up only 1% during the same period. See further
discussion regarding the Company's deposit movement for the quarter
below.
The following table provides highlights of the
Community Banking segment of Northrim:
|
Three Months Ended |
(Dollars in thousands, except per share data) |
March 31, 2023 |
December 31, 2022 |
September 30, 2022 |
June 30, 2022 |
March 31, 2022 |
Net interest income |
$24,752 |
$26,741 |
$25,668 |
|
$21,603 |
$18,909 |
|
Provision (benefit) for credit losses |
360 |
1,886 |
(353 |
) |
463 |
(150 |
) |
Other operating income |
2,900 |
3,819 |
2,938 |
|
1,907 |
3,841 |
|
Other operating expense |
17,417 |
16,678 |
15,977 |
|
16,415 |
14,831 |
|
Income before provision for income taxes |
9,875 |
11,996 |
12,982 |
|
6,632 |
8,069 |
|
Provision for income taxes |
2,315 |
1,884 |
2,911 |
|
1,605 |
1,641 |
|
Net income |
$7,560 |
$10,112 |
$10,071 |
|
$5,027 |
$6,428 |
|
Weighted average shares outstanding, diluted |
5,757,458 |
5,769,415 |
5,740,494 |
|
5,805,870 |
5,997,351 |
|
Diluted earnings per share |
$1.31 |
$1.74 |
$1.75 |
|
$0.87 |
$1.07 |
|
Home Mortgage Lending
During the first quarter of 2023, mortgage loans
funded for sale decreased to $50.7 million, of which 95% was
for home purchases, compared to $82.1 million and 89% of loans
funded for home purchases in the fourth quarter of 2022, and
decreased as compared to $143.6 million, of which 76% was for
home purchases in the first quarter of 2022. The rising interest
rate environment has caused the housing market to slow down and
also resulted in fewer refinances compared to 2022.
The Company has developed mortgage products
including adjustable rate mortgages, a second home product, and
extended locks which appeal to customers given the current interest
rate environment. During the first quarter of 2023, Residential
Mortgage originated $42.0 million in home mortgages that
Northrim Bank purchased and booked as consumer loans, up from
$34.6 million in the fourth quarter of 2022. Total mortgage
production for the first quarter of 2023 was down 21% compared to
the fourth quarter of 2022 and down 35% compared to the first
quarter a year ago. Given the seasonality of the mortgage
operations, the Company usually sees an increase in production in
the second quarter. Additionally, management anticipates that the
volume of mortgages that Northrim Bank will purchase from
Residential Mortgage to decrease, as they look to sell a larger
percentage of production on the secondary market.
The net change in fair value of mortgage
servicing rights decreased mortgage banking income by $795,000
during the first quarter of 2023 compared to a decrease of $318,000
for the fourth quarter of 2022 and an increase of $711,000 for the
first quarter of 2022. Mortgage servicing rights were $18.3
million, or 2.01% of serviced loans compared to $18.6 million, or
2.07% of serviced loans at December 31, 2022. The decrease in
mortgage servicing rights as a percentage of serviced loans at
March 31, 2023 compared to December 31, 2022 is primarily due to
the fact that new mortgage servicing rights booked during the first
quarter were recorded at a lower value resulting from general
market conditions than the runoff of mortgage servicing rights
during the first quarter resulting from normal principal reductions
and payoffs.
Mortgage servicing revenue decreased to
$1.4 million in the first quarter of 2023 from
$2.1 million in the fourth quarter of 2022 and
$1.8 million in the first quarter of 2022 due to lower
production of Alaska Housing Finance Corporation (AHFC) mortgages
which contribute to servicing revenues at origination. In the first
quarter of 2023, the Company added $21 million in new loans to the
servicing portfolio as compared to $43 million in the fourth
quarter of 2022 and $36 million in the first quarter of 2022.
Other operating expense increased to $6.1
million in the first quarter of 2023, compared to $5.5 million in
the fourth quarter of 2022, and decreased slightly compared to $6.3
million in the first quarter of 2022. The increase in
other operating expenses in the first quarter of 2023 compared to
the fourth quarter of 2022 is primarily due to increased salaries
and other personnel expense. Despite lower mortgage loan production
volumes, salaries and other personnel expense increased as a result
of branch expansion in new markets in late 2022 and early 2023.
As of March 31, 2023, Northrim serviced
3,496 loans in its $911.1 million home-mortgage-servicing
portfolio, a 1% increase compared to the $898.8 million
serviced for the fourth quarter of 2022, and a 15% increase from
the $789.4 million serviced a year ago. Delinquencies in the
loan servicing portfolio totaled 2.0% at March 31, 2023,
compared to 2.6% at March 31, 2022.
The following table provides highlights of the
Home Mortgage Lending segment of Northrim:
|
Three Months Ended |
(Dollars in thousands, except per share data) |
March 31, 2023 |
December 31, 2022 |
September 30, 2022 |
June 30, 2022 |
March 31, 2022 |
Mortgage commitments |
$41,050 |
|
$29,065 |
|
$74,731 |
|
$116,167 |
|
$130,208 |
|
Mortgage loans funded for sale |
$50,725 |
|
$82,149 |
|
$168,786 |
|
$191,023 |
|
$143,575 |
|
Mortgage loans funded for investment |
$41,964 |
|
$34,622 |
|
$— |
|
$— |
|
$— |
|
Total mortgage loans funded |
$92,689 |
|
$116,771 |
|
$168,786 |
|
$191,023 |
|
$143,575 |
|
Mortgage loan refinances to total fundings |
5 |
% |
11 |
% |
7 |
% |
10 |
% |
24 |
% |
Mortgage loans serviced for others |
$911,065 |
|
$898,840 |
|
$859,288 |
|
$818,266 |
|
$789,382 |
|
|
|
|
|
|
|
Net realized gains on mortgage loans sold |
$1,305 |
|
$1,567 |
|
$3,736 |
|
$4,649 |
|
$3,921 |
|
Change in fair value of mortgage loan commitments, net |
125 |
|
(446 |
) |
(395 |
) |
(603 |
) |
409 |
|
Total production revenue |
1,430 |
|
1,121 |
|
3,341 |
|
4,046 |
|
4,330 |
|
Mortgage servicing revenue |
1,368 |
|
2,120 |
|
2,121 |
|
1,932 |
|
1,771 |
|
Change in fair value of mortgage servicing rights: |
|
|
|
|
|
Due to changes in model inputs of assumptions1 |
(212 |
) |
93 |
|
555 |
|
(225 |
) |
1,192 |
|
Other2 |
(583 |
) |
(411 |
) |
(410 |
) |
(25 |
) |
(481 |
) |
Total mortgage servicing revenue, net |
573 |
|
1,802 |
|
2,266 |
|
1,682 |
|
2,482 |
|
Other mortgage banking revenue |
5 |
|
33 |
|
127 |
|
172 |
|
170 |
|
Total mortgage banking income |
$2,008 |
|
$2,956 |
|
$5,734 |
|
$5,900 |
|
$6,982 |
|
|
|
|
|
|
|
Net interest income |
$280 |
|
$546 |
|
$643 |
|
$609 |
|
$395 |
|
Mortgage banking income |
2,008 |
|
2,956 |
|
5,734 |
|
5,900 |
|
6,982 |
|
Other operating expense |
6,092 |
|
5,548 |
|
6,309 |
|
6,823 |
|
6,270 |
|
(Loss) income before provision for income taxes |
(3,804 |
) |
(2,046 |
) |
68 |
|
(314 |
) |
1,107 |
|
(Benefit) provision for income taxes |
(1,074 |
) |
(529 |
) |
14 |
|
(82 |
) |
309 |
|
Net (loss) income |
($2,730 |
) |
($1,517 |
) |
$54 |
|
($232 |
) |
$798 |
|
|
|
|
|
|
|
Weighted average shares outstanding, diluted |
5,757,458 |
|
5,769,415 |
|
5,740,494 |
|
5,805,870 |
|
5,997,351 |
|
Diluted earnings per share |
($0.47 |
) |
($0.26 |
) |
$0.01 |
|
($0.04 |
) |
$0.13 |
|
1Principally reflects changes in discount rates
and prepayment speed assumptions, which are primarily affected by
changes in interest rates.2Represents changes due to
collection/realization of expected cash flows over time.
Balance Sheet Review
Northrim’s total assets were $2.58 billion
at March 31, 2023, down 4% from the preceding quarter and 2%
from a year ago. Northrim’s loan-to-deposit ratio was 67% at
March 31, 2023, up from 63% at December 31, 2022, and 59% at
March 31, 2022.
Liquidity levels decreased with interest-bearing
deposits in other banks at $110.2 million, representing 5% of
interest-earning assets as of March 31, 2023, compared to 21%
at March 31, 2022. The Company has other available sources of
liquidity to fund unforeseen liquidity needs, including borrowings
available through our correspondent banking relationships and our
credit lines with the Federal Reserve Bank and the FHLB. At
March 31, 2023, our liquid assets and investments and loans
maturing within one year were $502.0 million and our funds
available for borrowing under our existing lines of credit were
$1.2 billion. Given these sources of liquidity and our expectations
for customer demands for cash and for our operating cash needs, we
believe our sources of liquidity to be sufficient for the
foreseeable future.
Average interest-earning assets were
$2.40 billion in the first quarter of 2023, down 4% from
$2.51 billion in the fourth quarter of 2022 and down 2% from
$2.46 billion in the first quarter a year ago. The average
yield on interest-earning assets was 5.10% in the first quarter of
2023, up from 4.74% in the preceding quarter and 3.33% in the first
quarter a year ago.
Average investment securities increased to
$727.6 million in the first quarter of 2023, compared to
$712.8 million in the fourth quarter of 2022 and
$491.0 million in the first quarter a year ago. The average
net tax equivalent yield on the securities portfolio was 2.40% for
the first quarter of 2023, up from 2.30% in the preceding quarter
and up from 1.23% in the year ago quarter. The average estimated
duration of the investment portfolio at March 31, 2023, was
approximately three-years compared to approximately four-years at
March 31, 2022. As of March 31, 2023, $29.6 million available for
sale securities are scheduled to mature in the next six months,
$76.9 million are scheduled to mature in six months to one year,
and $151.8 million are scheduled to mature in the following year, a
total of $258.3 million or 11% of earning assets at March 31,
2023.
Total unrealized losses, net of tax, on
available for sale securities decreased by $5.8 million in the
first quarter of 2023 resulting in total unrealized loss, net of
tax, of $24.3 million due largely to decreasing interest rates,
compared to $30.1 million at December 31, 2022, and $14.4 million a
year ago. Total unrealized losses on held to maturity securities
were $4.2 million at March 31, 2023, compared to $4.1 million at
December 31, 2022, and $1.9 million a year ago.
“Portfolio loans increased $33.4 million during
the first quarter of 2023 as compared to the fourth quarter of
2022, primarily as a result of increased mortgages purchased from
Residential Mortgage,” said Mike Huston, Northrim Bank President.
Mr. Huston added that “Core loan production is typically slower in
the first quarter of the year, however, we continue to see a strong
loan pipeline.” Portfolio loans were $1.54 billion at
March 31, 2023, up 2% from the preceding quarter and up 11%
from a year ago. Average portfolio loans in the first quarter of
2023 were $1.52 billion, which was up 4% from the preceding
quarter and up 10% from a year ago. Yields on average portfolio
loans in the first quarter of 2023 increased to 6.28% from 5.98% in
the fourth quarter of 2022 and increased from 5.27% in the first
quarter of 2022. The increase in the yield on portfolio loans in
the first quarter of 2023 compared to the fourth quarter of 2022
and the first quarter a year ago is primarily due to loan repricing
due to the increases in interest rates and new loans booked at
higher rates due to changes in the interest rate environment. 27%
of loans mature or reprice in the next three months, 15% of loans
mature or reprice in three to twelve months, and 17% of loans
mature or reprice in one to two years.
Alaskans continue to account for substantially
all of Northrim’s deposit base, which is primarily made up of
low-cost transaction accounts. Total deposits were
$2.30 billion at March 31, 2023, down 4% from
$2.39 billion at December 31, 2022, and down 2% from
$2.34 billion a year ago. At March 31, 2023, 68% of total
deposits were held in business accounts and 32% of deposit balances
were held in consumer accounts. Northrim had approximately 33,000
deposit customers with an average balance of $69,000 as of
March 31, 2023. Northrim had 16 customers with balances over
$10 million as of March 31, 2023, which accounted for $346.9
million, or 15%, of total deposits. Of these $346.9 million of
deposits, approximately one-third are insured using ICS or CDARS
and approximately one-fourth are with long-term customers with whom
Northrim has significant lending relationships. ICS and CDARS
deposits are divided into amounts under the FDIC insurance maximum
and allocated among member banks, making the large deposit eligible
for FDIC insurance. Demand deposits decreased by 4% from the prior
quarter and decreased 6% year-over-year to $767.8 million at
March 31, 2023. Demand deposits remained consistent at 34% of
total deposits at March 31, 2023 and December 31, 2022 and 35% of
total deposits at March 31, 2022. Average interest-bearing deposits
were down 2% to $1.54 billion with an average cost of 1.20% in
the first quarter of 2023, compared to $1.58 billion and an
average cost of 0.56% in the fourth quarter of 2022, and up 1%
compared to $1.53 billion and an average cost of 0.15% in the
first quarter of 2022. Uninsured deposits totaled $981.3 million or
43% of total deposits as of March 31, 2023 compared to $1.1
billion or 46% of total deposits as of December 31,
2022. As interest rates continued to increase in the
first quarter of 2023, Northrim began a proactive, targeted
approach to increase deposit rates. There was no unusual deposit
activity during the first quarter of 2023.
Shareholders’ equity was $224.4 million, or
$39.56 book value per share, at March 31, 2023, compared to
$218.6 million, or $38.35 book value per share, at December
31, 2022 and $225.8 million, or $38.40 book value per share, a
year ago. Tangible book value per share* was $36.74 at
March 31, 2023, compared to $35.55 at December 31, 2022, and
$35.67 per share a year ago. The increase in shareholders’ equity
in the first quarter of 2023 as compared to the fourth quarter of
2022 was largely the result of the increase in the fair value of
the available for sale securities portfolio, which increased $5.8
million, net of tax, as well as earnings of $4.8 million, which was
only partially offset by dividends paid of $3.4 million and
repurchases of common stock of $1.3 million. The Company purchased
27,887 shares of common stock in the first quarter of 2023 and has
257,113 shares remaining under the current share repurchase
program. Tangible common equity to tangible assets* was 8.13% as of
March 31, 2023. Tangible common equity to tangible common assets,
excluding the impact of the fair value of the available for sale
securities portfolio*, was 8.99% as of March 31, 2023, compared to
8.67% as of December 31, 2022. Northrim continues to maintain
capital levels in excess of the requirements to be categorized as
“well-capitalized” with Tier 1 Capital to Risk Adjusted Assets of
12.75% at March 31, 2023, compared to 12.81% at December 31,
2022, and 13.76% at March 31, 2022.
Asset Quality
Northrim believes it has a consistent lending
approach throughout the economic cycles, which supports appropriate
loan-to-value ratios, adequate debt coverage ratios, and competent
management.
Nonperforming assets (“NPAs”) net of government
guarantees were stable at $6.4 million at March 31, 2023
and at December 31, 2022 and down from $13.1 million a year
ago. Of the NPAs at March 31, 2023, $4.5 million, or 71% are
nonaccrual loans related to four commercial relationships.
Net adversely classified loans were
$7.2 million at March 31, 2023, as compared to
$7.6 million at December 31, 2022, and $11.7 million a
year ago. Adversely classified loans are loans that Northrim has
classified as substandard, doubtful, and loss, net of government
guarantees. Net loan recoveries were $60,000 in the first quarter
of 2023, compared to net loan recoveries of $87,000 in the fourth
quarter of 2022, and net loan charge-offs of $262,000 in the first
quarter of 2022.
Special mention loans increased to $15.5 million
at March 31, 2023 from $4.8 million at December 31, 2022 due
to specific concerns about two commercial credits. Northrim is
actively working with the customers to improve the credit risk
profile of the loans.
The Company adopted Accounting Standards Update
2022-02, Financial Instruments - Credit Losses (Topic 326):
Troubled Debt Restructurings and Vintage Disclosures ("ASU
2022-02") on January 1, 2023. The amendments in ASU 2022-02
eliminate the accounting guidance for troubled debt restructurings
by creditors while enhancing disclosure requirements for certain
loan refinancings and restructurings by creditors when a borrower
is experiencing financial difficulty. Northrim had no such loan
modifications in the first quarter of 2023.
Northrim had $126.7 million, or 8% of portfolio
loans, in the Healthcare sector, $99.9 million, or 6% of portfolio
loans, in the Tourism sector, $69.5 million, or 5% of portfolio
loans, in the Fishing sector, $68.7 million, or 4% of portfolio
loans, in the Accommodations sector, $54.2 million, or 4% of
portfolio loans, in the Retail sector, $50.3 million, or 3% of
portfolio loans, in the Aviation (non-tourism) sector, and $47.3
million, or 3% in the Restaurants and Breweries sector as of
March 31, 2023.
Northrim estimates that $79.0 million, or
approximately 5% of portfolio loans, had direct exposure to the oil
and gas industry in Alaska, as of March 31, 2023, and $3.4
million of these loans are adversely classified. As of
March 31, 2023, Northrim has an additional $54.8 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. Northrim defines
direct exposure to the oil and gas sector as loans to borrowers
that provide oilfield services and other companies that have been
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.
About Northrim BanCorp
Northrim BanCorp, Inc. is the parent company of
Northrim Bank, an Alaska-based community bank with 19 branches in
Anchorage, the Matanuska Valley, Soldotna, Juneau, Fairbanks,
Ketchikan, Sitka, Kodiak, and Nome, 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. Northrim 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 StatementThis
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, 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: the effect of the novel coronavirus
(“COVID-19”) pandemic and other infection illness outbreaks that
may arise in the future and the resulting governmental or societal
responses; impact of the results of government initiatives on the
regulatory landscape, natural resource extraction industries, and
capital markets; the impact of declines in the commercial and
residential real estate markets, high unemployment rates,
inflationary pressures and slowdowns in economic growth; potential
further increases in interest rates, inflation, supply-chain
constraints, and potential geopolitical instability, including the
war in Ukraine; financial stress on borrowers (consumers and
businesses) as a result of higher rates or an uncertain economic
environment; the general condition of, and changes in, the Alaska
economy; our ability to maintain or expand our market share or net
interest margin; the sufficiency of our provision for credit losses
and the accuracy of the assumptions or estimates used in preparing
our financial statements, including those related to current
expected credit losses accounting guidance; the value of securities
held in our investment portfolio; our ability to maintain asset
quality; our ability to implement our marketing and growth
strategies; our ability to identify and address cyber-security
risks, including security breaches, “denial of service attacks,”
“hacking,” and identity theft; and our ability to execute our
business plan. Further, actual results may be affected by
competition 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. 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, 2022, 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:
www.sba.gov/ak
https://www.bea.gov/
http://almis.labor.state.ak.us/
http://www.tax.alaska.gov/programs/oil/prevailing/ans.aspx
http://www.tax.state.ak.us/
www.mba.org
https://www.alaskarealestate.com/MLSMember/RealEstateStatistics.aspx
https://tax.alaska.gov/programs/programs/reports/RSB.aspx?Year=2023&Type=Spring
https://www.capitaliq.spglobal.com/web/client?auth=inherit&overridecdc=1&#markets/indexFinancials
Income Statement |
(Dollars in thousands, except per share data) |
Three Months Ended |
(Unaudited) |
March 31, |
December 31, |
March 31, |
|
2023 |
|
2022 |
2022 |
|
Interest Income: |
|
|
|
Interest and fees on loans |
$23,694 |
|
$22,580 |
$18,268 |
|
Interest on portfolio investments |
4,612 |
|
4,380 |
1,548 |
|
Interest on deposits in banks |
1,489 |
|
2,758 |
242 |
|
Total interest income |
29,795 |
|
29,718 |
20,058 |
|
Interest Expense: |
|
|
|
Interest expense on deposits |
4,583 |
|
2,247 |
575 |
|
Interest expense on borrowings |
180 |
|
184 |
179 |
|
Total interest expense |
4,763 |
|
2,431 |
754 |
|
Net interest income |
25,032 |
|
27,287 |
19,304 |
|
|
|
|
|
Provision (benefit) for credit losses |
360 |
|
1,886 |
(150 |
) |
Net interest income after provision (benefit) for credit
losses |
24,672 |
|
25,401 |
19,454 |
|
|
|
|
|
Other Operating Income: |
|
|
|
Mortgage banking income |
2,008 |
|
2,956 |
6,982 |
|
Bankcard fees |
908 |
|
974 |
804 |
|
Purchased receivable income |
977 |
|
473 |
402 |
|
Service charges on deposit accounts |
457 |
|
403 |
374 |
|
Commercial servicing revenue |
166 |
|
1,186 |
137 |
|
Unrealized gain (loss) on marketable equity securities |
(223 |
) |
81 |
(422 |
) |
Keyman insurance proceeds |
— |
|
— |
2,002 |
|
Other income |
615 |
|
702 |
544 |
|
Total other operating income |
4,908 |
|
6,775 |
10,823 |
|
|
|
|
|
Other Operating Expense: |
|
|
|
Salaries and other personnel expense |
15,484 |
|
14,155 |
14,106 |
|
Data processing expense |
2,355 |
|
2,309 |
1,992 |
|
Occupancy expense |
1,943 |
|
1,731 |
1,726 |
|
Professional and outside services |
722 |
|
669 |
722 |
|
Insurance expense |
557 |
|
427 |
566 |
|
Marketing expense |
564 |
|
984 |
425 |
|
OREO expense, net rental income and gains on sale |
26 |
|
384 |
(12 |
) |
Intangible asset amortization expense |
4 |
|
6 |
6 |
|
Other operating expense |
1,854 |
|
1,561 |
1,570 |
|
Total other operating expense |
23,509 |
|
22,226 |
21,101 |
|
|
|
|
|
Income before provision for income taxes |
6,071 |
|
9,950 |
9,176 |
|
Provision for income taxes |
1,241 |
|
1,355 |
1,950 |
|
Net income |
$4,830 |
|
$8,595 |
$7,226 |
|
|
|
|
|
Basic EPS |
$0.85 |
|
$1.51 |
$1.22 |
|
Diluted EPS |
$0.84 |
|
$1.48 |
$1.20 |
|
Weighted average shares outstanding, basic |
5,691,432 |
|
5,690,354 |
5,938,037 |
|
Weighted average shares outstanding, diluted |
5,757,458 |
|
5,769,415 |
5,997,351 |
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
(Dollars in thousands) |
|
|
|
(Unaudited) |
March 31, |
December 31, |
March 31, |
|
2023 |
|
2022 |
|
2022 |
|
|
|
|
|
Assets: |
|
|
|
Cash and due from banks |
$28,976 |
|
$27,747 |
|
$19,326 |
|
Interest bearing deposits in other banks |
110,235 |
|
231,603 |
|
513,482 |
|
Investment securities available for sale, at fair value |
677,734 |
|
677,029 |
|
488,347 |
|
Investment securities held to maturity |
36,750 |
|
36,750 |
|
24,750 |
|
Marketable equity securities, at fair value |
10,515 |
|
10,740 |
|
7,997 |
|
Investment in Federal Home Loan Bank stock |
3,752 |
|
3,816 |
|
3,828 |
|
Loans held for sale |
23,985 |
|
27,538 |
|
49,980 |
|
|
|
|
|
Portfolio loans |
1,535,187 |
|
1,501,785 |
|
1,377,387 |
|
Allowance for credit losses, loans |
(14,157 |
) |
(13,838 |
) |
(11,310 |
) |
Net portfolio loans |
1,521,030 |
|
1,487,947 |
|
1,366,077 |
|
Purchased receivables, net |
21,190 |
|
19,994 |
|
8,552 |
|
Mortgage servicing rights, at fair value |
18,303 |
|
18,635 |
|
15,422 |
|
Other real estate owned, net |
273 |
|
— |
|
5,638 |
|
Premises and equipment, net |
38,163 |
|
37,821 |
|
37,416 |
|
Lease right of use asset |
9,469 |
|
9,868 |
|
10,432 |
|
Goodwill and intangible assets |
15,980 |
|
15,984 |
|
16,003 |
|
Other assets |
63,682 |
|
68,846 |
|
58,910 |
|
Total assets |
$2,580,037 |
|
$2,674,318 |
|
$2,626,160 |
|
|
|
|
|
Liabilities: |
|
|
|
Demand deposits |
$767,772 |
|
$797,434 |
|
$812,545 |
|
Interest-bearing demand |
717,910 |
|
767,686 |
|
674,393 |
|
Savings deposits |
292,857 |
|
320,917 |
|
351,681 |
|
Money market deposits |
262,478 |
|
308,317 |
|
329,261 |
|
Time deposits |
255,256 |
|
192,857 |
|
175,186 |
|
Total deposits |
2,296,273 |
|
2,387,211 |
|
2,343,066 |
|
Other borrowings |
13,991 |
|
14,095 |
|
14,404 |
|
Junior subordinated debentures |
10,310 |
|
10,310 |
|
10,310 |
|
Lease liability |
9,466 |
|
9,865 |
|
10,402 |
|
Other liabilities |
25,572 |
|
34,208 |
|
22,146 |
|
Total liabilities |
2,355,612 |
|
2,455,689 |
|
2,400,328 |
|
|
|
|
|
Shareholders’ Equity: |
|
|
|
Total shareholders’ equity |
224,425 |
|
218,629 |
|
225,832 |
|
Total liabilities and shareholders’ equity |
$2,580,037 |
|
$2,674,318 |
|
$2,626,160 |
|
|
|
|
|
Additional Financial Information |
(Dollars in thousands) |
(Unaudited) |
|
Composition of Portfolio Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
|
Balance |
% of total |
|
Balance |
% of total |
|
Balance |
% of total |
|
Balance |
% of total |
|
Balance |
% of total |
Commercial loans |
$608,499 |
|
39 |
% |
|
$600,292 |
|
41 |
% |
|
$584,533 |
|
41 |
% |
|
$547,495 |
|
39 |
% |
|
$529,331 |
|
37 |
% |
SBA Paycheck Protection Program loans |
4,375 |
|
— |
% |
|
7,331 |
|
— |
% |
|
11,724 |
|
1 |
% |
|
32,948 |
|
2 |
% |
|
66,680 |
|
5 |
% |
CRE owner occupied loans |
254,911 |
|
17 |
% |
|
255,470 |
|
17 |
% |
|
231,404 |
|
16 |
% |
|
241,575 |
|
17 |
% |
|
230,350 |
|
17 |
% |
CRE nonowner occupied loans |
432,679 |
|
28 |
% |
|
438,680 |
|
29 |
% |
|
418,845 |
|
30 |
% |
|
416,285 |
|
30 |
% |
|
397,212 |
|
29 |
% |
Construction loans |
119,641 |
|
8 |
% |
|
125,739 |
|
8 |
% |
|
118,452 |
|
8 |
% |
|
131,850 |
|
9 |
% |
|
126,679 |
|
9 |
% |
Consumer loans |
123,707 |
|
8 |
% |
|
82,883 |
|
5 |
% |
|
50,281 |
|
4 |
% |
|
43,852 |
|
3 |
% |
|
36,516 |
|
3 |
% |
Subtotal |
1,543,812 |
|
|
|
1,510,395 |
|
|
|
1,415,239 |
|
|
|
1,414,005 |
|
|
|
1,386,768 |
|
|
Unearned loan fees, net |
(8,625 |
) |
|
|
(8,610 |
) |
|
|
(7,973 |
) |
|
|
(8,296 |
) |
|
|
(9,381 |
) |
|
Total portfolio loans |
$1,535,187 |
|
|
|
$1,501,785 |
|
|
|
$1,407,266 |
|
|
|
$1,405,709 |
|
|
|
$1,377,387 |
|
|
Composition of Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
|
Balance |
% of total |
|
Balance |
% of total |
|
Balance |
% of total |
|
Balance |
% of total |
|
Balance |
% of total |
Demand deposits |
$767,772 |
34 |
% |
|
$797,434 |
34 |
% |
|
$861,378 |
35 |
% |
|
$830,156 |
35 |
% |
|
$812,545 |
35 |
% |
Interest-bearing demand |
717,910 |
31 |
% |
|
767,686 |
32 |
% |
|
757,422 |
31 |
% |
|
666,283 |
29 |
% |
|
674,393 |
29 |
% |
Savings deposits |
292,857 |
13 |
% |
|
320,917 |
13 |
% |
|
344,975 |
14 |
% |
|
349,208 |
15 |
% |
|
351,681 |
15 |
% |
Money market deposits |
262,478 |
11 |
% |
|
308,317 |
13 |
% |
|
309,690 |
13 |
% |
|
319,843 |
14 |
% |
|
329,261 |
14 |
% |
Time deposits |
255,256 |
11 |
% |
|
192,857 |
8 |
% |
|
165,870 |
7 |
% |
|
169,900 |
7 |
% |
|
175,186 |
7 |
% |
Total deposits |
$2,296,273 |
|
|
$2,387,211 |
|
|
$2,439,335 |
|
|
$2,335,390 |
|
|
$2,343,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Financial Information |
(Dollars in thousands) |
(Unaudited) |
|
Asset Quality |
March 31, |
|
December 31, |
|
March 31, |
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
|
Nonaccrual loans |
$8,775 |
|
|
$7,076 |
|
|
$9,609 |
|
|
Loans 90 days past due and accruing |
— |
|
|
— |
|
|
— |
|
|
Total nonperforming loans |
8,775 |
|
|
7,076 |
|
|
9,609 |
|
|
Nonperforming loans guaranteed by government |
(2,692 |
) |
|
(646 |
) |
|
(907 |
) |
|
Net nonperforming loans |
6,083 |
|
|
6,430 |
|
|
8,702 |
|
|
Other real estate owned |
273 |
|
|
— |
|
|
5,638 |
|
|
Other real estate owned guaranteed by government |
— |
|
|
— |
|
|
(1,279 |
) |
|
Net nonperforming assets |
$6,356 |
|
|
$6,430 |
|
|
$13,061 |
|
|
Nonperforming loans, net of government guarantees / portfolio
loans |
0.40 |
|
% |
0.43 |
|
% |
0.63 |
|
% |
Nonperforming loans, net of government guarantees / portfolio
loans, |
|
|
|
|
|
|
net of government guarantees |
0.43 |
|
% |
0.46 |
|
% |
0.70 |
|
% |
Nonperforming assets, net of government guarantees / total
assets |
0.25 |
|
% |
0.24 |
|
% |
0.50 |
|
% |
Nonperforming assets, net of government guarantees / total
assets |
|
|
|
|
|
|
net of government guarantees |
0.26 |
|
% |
0.25 |
|
% |
0.53 |
|
% |
|
|
|
|
|
|
|
Adversely classified loans, net of government guarantees |
$7,221 |
|
|
$7,581 |
|
|
$11,652 |
|
|
Special mention loans, net of government guarantees |
$15,547 |
|
|
$4,760 |
|
|
$4,211 |
|
|
Loans 30-89 days past due and accruing, net of government
guarantees / |
|
|
|
|
|
|
portfolio loans |
0.06 |
|
% |
0.01 |
|
% |
0.03 |
|
% |
Loans 30-89 days past due and accruing, net of government
guarantees / |
|
|
|
|
|
|
portfolio loans, net of government guarantees |
0.06 |
|
% |
0.01 |
|
% |
0.03 |
|
% |
|
|
|
|
|
|
|
Allowance for credit losses / portfolio loans |
0.92 |
|
% |
0.92 |
|
% |
0.82 |
|
% |
Allowance for credit losses / portfolio loans, net of government
guarantees |
0.99 |
|
% |
0.99 |
|
% |
0.92 |
|
% |
Allowance for credit losses / nonperforming loans, net of
government |
|
|
|
|
|
|
guarantees |
233 |
|
% |
215 |
|
% |
130 |
|
% |
|
|
|
|
|
|
|
Gross loan charge-offs for the quarter |
$14 |
|
|
$— |
|
|
$295 |
|
|
Gross loan recoveries for the quarter |
($74 |
) |
|
($87 |
) |
|
($33 |
) |
|
Net loan (recoveries) charge-offs for the quarter |
($60 |
) |
|
($87 |
) |
|
$262 |
|
|
Net loan charge-offs (recoveries) for the quarter / average loans,
for the quarter |
0.00 |
|
% |
(0.01 |
) |
% |
0.02 |
|
% |
|
|
|
|
|
|
|
|
|
|
Additional Financial Information |
(Dollars in thousands) |
(Unaudited) |
|
Nonperforming Assets Rollforward |
|
|
|
|
|
|
|
|
|
|
|
Writedowns |
Transfers to |
Transfers to |
|
|
|
Balance at December 31, 2022 |
Additions this quarter |
Payments this quarter |
/Charge-offsthis quarter |
OREO/ REPO |
Performing Statusthis quarter |
Sales this quarter |
Balance at March 31, 2023 |
Commercial loans |
$4,349 |
|
$2,822 |
|
($796 |
) |
$— |
|
$— |
|
$— |
$— |
$6,375 |
|
Commercial real estate |
2,413 |
|
— |
|
(45 |
) |
— |
|
(273 |
) |
— |
— |
2,095 |
|
Construction loans |
109 |
|
— |
|
— |
|
— |
|
— |
|
— |
— |
109 |
|
Consumer loans |
205 |
|
14 |
|
(9 |
) |
(14 |
) |
— |
|
— |
— |
196 |
|
Non-performing loans guaranteed by government |
(646 |
) |
(2,540 |
) |
494 |
|
— |
|
— |
|
— |
— |
(2,692 |
) |
Total non-performing loans |
6,430 |
|
296 |
|
(356 |
) |
(14 |
) |
(273 |
) |
— |
— |
6,083 |
|
Other real estate owned |
— |
|
273 |
|
— |
|
— |
|
— |
|
— |
— |
273 |
|
Other real estate owned guaranteed |
|
|
|
|
|
|
|
|
by government |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
— |
— |
|
Total non-performing assets, |
|
|
|
|
|
|
|
|
net of government guarantees |
$6,430 |
|
$569 |
|
($356 |
) |
($14 |
) |
($273 |
) |
$— |
$— |
$6,356 |
|
The following table details loan charge-offs, by
industry:
Loan Charge-offs by Industry |
|
|
|
|
|
Three Months Ended |
|
March 31, 2023 |
December 31, 2022 |
September 30, 2022 |
June 30, 2022 |
March 31, 2022 |
Charge-offs: |
|
|
|
|
|
Architectural services |
$— |
$— |
$20 |
$— |
$— |
Land subdivision |
— |
— |
— |
166 |
— |
Assisted living facility |
— |
— |
— |
— |
19 |
Restaurants |
— |
— |
25 |
— |
— |
Consumer |
14 |
— |
3 |
— |
— |
Site preparation contractors |
— |
— |
— |
— |
276 |
Total charge-offs |
$14 |
$— |
$48 |
$166 |
$295 |
|
|
|
|
|
|
Additional Financial Information |
(Dollars in thousands) |
(Unaudited) |
|
Average Balances, Yields, and Rates |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
|
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 |
$130,929 |
|
4.55 |
% |
|
$294,267 |
|
3.67 |
% |
|
$538,537 |
|
0.18 |
% |
Portfolio investments |
727,610 |
|
2.40 |
% |
|
712,842 |
|
2.30 |
% |
|
491,029 |
|
1.23 |
% |
Loans held for sale |
20,901 |
|
5.54 |
% |
|
40,186 |
|
5.52 |
% |
|
52,630 |
|
3.08 |
% |
Portfolio loans |
1,524,130 |
|
6.28 |
% |
|
1,466,567 |
|
5.98 |
% |
|
1,379,850 |
|
5.27 |
% |
Total interest-earning assets |
2,403,570 |
|
5.10 |
% |
|
2,513,862 |
|
4.74 |
% |
|
2,462,046 |
|
3.33 |
% |
Nonearning assets |
185,755 |
|
|
|
182,884 |
|
|
|
156,482 |
|
|
Total assets |
$2,589,325 |
|
|
|
$2,696,746 |
|
|
|
$2,618,528 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Interest-bearing deposits |
$1,543,437 |
|
1.20 |
% |
|
$1,579,845 |
|
0.56 |
% |
|
$1,526,100 |
|
0.15 |
% |
Borrowings |
24,366 |
|
2.92 |
% |
|
24,470 |
|
2.92 |
% |
|
24,777 |
|
2.91 |
% |
Total interest-bearing liabilities |
1,567,803 |
|
1.23 |
% |
|
1,604,315 |
|
0.60 |
% |
|
1,550,877 |
|
0.20 |
% |
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits |
756,088 |
|
|
|
831,841 |
|
|
|
794,702 |
|
|
Other liabilities |
41,067 |
|
|
|
43,500 |
|
|
|
35,835 |
|
|
Shareholders’ equity |
224,367 |
|
|
|
217,090 |
|
|
|
237,114 |
|
|
Total liabilities and shareholders’ equity |
$2,589,325 |
|
|
|
$2,696,746 |
|
|
|
$2,618,528 |
|
|
Net spread |
|
3.87 |
% |
|
|
4.14 |
% |
|
|
3.13 |
% |
NIM |
|
4.22 |
% |
|
|
4.31 |
% |
|
|
3.18 |
% |
NIMTE* |
|
4.30 |
% |
|
|
4.36 |
% |
|
|
3.20 |
% |
Cost of funds |
|
0.83 |
% |
|
|
0.40 |
% |
|
|
0.13 |
% |
Average portfolio loans to average |
|
|
|
|
|
|
|
|
interest-earning assets |
63.41 |
% |
|
|
58.34 |
% |
|
|
56.04 |
% |
|
Average portfolio loans to average total deposits |
66.28 |
% |
|
|
60.81 |
% |
|
|
59.46 |
% |
|
Average non-interest deposits to average |
|
|
|
|
|
|
|
|
total deposits |
32.88 |
% |
|
|
34.49 |
% |
|
|
34.24 |
% |
|
Average interest-earning assets to average |
|
|
|
|
|
|
|
|
interest-bearing liabilities |
153.31 |
% |
|
|
156.69 |
% |
|
|
158.75 |
% |
|
The components of the change in NIMTE* are detailed
in the table below:
|
1Q23 vs. 4Q22 |
1Q23 vs. 1Q22 |
Nonaccrual interest adjustments |
—% |
0.02% |
Impact of SBA Paycheck Protection Program loans |
(0.01)% |
(0.28)% |
Interest rates on loans and liabilities and loan fees, all other
loans |
(0.08)% |
1.34% |
Volume and mix of other interest-earning assets and
liabilities |
0.03% |
0.02% |
Change in NIMTE* |
(0.06)% |
1.10% |
|
|
|
Additional Financial Information |
(Dollars in thousands, except per share data) |
(Unaudited) |
|
Capital Data (At quarter end) |
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|
Book value per share |
$39.56 |
|
|
$38.35 |
|
|
$38.40 |
|
|
Tangible book value per share* |
$36.74 |
|
|
$35.55 |
|
|
$35.67 |
|
|
Total shareholders’ equity/total assets |
8.70 |
|
% |
8.18 |
|
% |
8.60 |
|
% |
Tangible Common Equity/Tangible Assets* |
8.13 |
|
% |
7.62 |
|
% |
8.04 |
|
% |
Tier 1 Capital / Risk Adjusted Assets |
12.75 |
|
% |
12.81 |
|
% |
13.76 |
|
% |
Total Capital / Risk Adjusted Assets |
13.60 |
|
% |
13.64 |
|
% |
14.49 |
|
% |
Tier 1 Capital / Average Assets |
9.40 |
|
% |
9.01 |
|
% |
9.00 |
|
% |
Shares outstanding |
5,672,841 |
|
|
5,700,728 |
|
|
5,881,708 |
|
|
Total unrealized loss on AFS debt securities, net of income
taxes |
($24,311 |
) |
|
($30,121 |
) |
|
($14,390 |
) |
|
Total unrealized gain (loss) on derivatives and hedging activities,
net of income taxes |
$827 |
|
|
$1,040 |
|
|
($20 |
) |
|
Profitability Ratios |
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
|
For the quarter: |
|
|
|
|
|
|
|
|
|
|
NIM |
4.22 |
% |
4.31 |
% |
4.22 |
% |
3.67 |
% |
3.18 |
% |
NIMTE* |
4.30 |
% |
4.36 |
% |
4.27 |
% |
3.70 |
% |
3.20 |
% |
Efficiency ratio |
78.51 |
% |
65.23 |
% |
63.69 |
% |
77.39 |
% |
70.02 |
% |
Return on average assets |
0.76 |
% |
1.26 |
% |
1.52 |
% |
0.74 |
% |
1.12 |
% |
Return on average equity |
8.73 |
% |
15.71 |
% |
18.18 |
% |
8.58 |
% |
12.36 |
% |
|
|
|
|
|
|
|
|
|
|
|
*Non-GAAP Financial Measures
(Dollars and shares in thousands, except per share
data)(Unaudited)
Non-GAAP financial measures have inherent
limitations, are not required to be uniformly applied, and are not
audited. Although we believe these non-GAAP financial measures are
frequently used by stakeholders in the evaluation of the Company,
they have limitations as analytical tools and should not be
considered in isolation or as a substitute for analysis of results
as reported under GAAP.
Net interest margin on a tax equivalent
basis
Net interest margin on a tax equivalent basis
(“NIMTE”) is a non-GAAP performance measurement in which interest
income on non-taxable investments and loans is presented on a tax
equivalent basis using a combined federal and state statutory rate
of 28.43% in both 2023 and 2022. 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 |
|
March 31, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
Net interest income |
$25,032 |
|
|
$27,287 |
|
|
$26,311 |
|
|
$22,212 |
|
|
$19,304 |
|
Divided by average interest-bearing assets |
2,403,570 |
|
|
2,513,862 |
|
|
2,471,640 |
|
|
2,429,394 |
|
|
2,462,046 |
|
Net interest margin (“NIM”)2 |
4.22 |
% |
|
4.31 |
% |
|
4.22 |
% |
|
3.67 |
% |
|
3.18 |
% |
|
|
|
|
|
|
|
|
|
|
Net interest income |
$25,032 |
|
|
$27,287 |
|
|
$26,311 |
|
|
$22,212 |
|
|
$19,304 |
|
Plus: reduction in tax expense related to |
|
|
|
|
|
|
|
|
|
tax-exempt interest income |
429 |
|
|
325 |
|
|
284 |
|
|
193 |
|
|
137 |
|
|
$25,461 |
|
|
$27,612 |
|
|
$26,595 |
|
|
$22,405 |
|
|
$19,441 |
|
Divided by average interest-bearing assets |
2,403,570 |
|
|
2,513,862 |
|
|
2,471,640 |
|
|
2,429,394 |
|
|
2,462,046 |
|
NIMTE2 |
4.30 |
% |
|
4.36 |
% |
|
4.27 |
% |
|
3.70 |
% |
|
3.20 |
% |
2Calculated using actual days in the quarter
divided by 365 for the quarters ended in 2023 and 2022,
respectively.
Tangible Book Value
Tangible book value is a non-GAAP measure defined
as shareholders’ equity, less intangible assets, divided by shares
outstanding. The most comparable GAAP measure is book value per
share and the following table sets forth the reconciliation of
tangible book value per share and book value per share.
|
March 31, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
$224,425 |
|
$218,629 |
|
$210,699 |
|
$215,289 |
|
$225,832 |
Divided by shares outstanding |
5,673 |
|
5,701 |
|
5,681 |
|
5,681 |
|
5,882 |
Book value per share |
$39.56 |
|
$38.35 |
|
$37.09 |
|
$37.90 |
|
$38.39 |
|
March 31, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
$224,425 |
|
$218,629 |
|
$210,699 |
|
$215,289 |
|
$225,832 |
Less: goodwill and intangible assets |
15,980 |
|
15,984 |
|
15,990 |
|
15,997 |
|
16,003 |
|
$208,445 |
|
$202,645 |
|
$194,709 |
|
$199,292 |
|
$209,829 |
Divided by shares outstanding |
5,673 |
|
5,701 |
|
5,681 |
|
5,681 |
|
5,882 |
Tangible book value per share |
$36.74 |
|
$35.55 |
|
$34.27 |
|
$35.08 |
|
$35.67 |
|
|
|
|
|
|
|
|
|
|
*Non-GAAP Financial Measures
(Dollars and shares in thousands, except per share
data)(Unaudited)
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. The most comparable GAAP measure of
shareholders’ equity to total assets is calculated by dividing
total shareholders’ equity by total assets and the following table
sets forth the reconciliation of tangible common equity to tangible
assets and shareholders’ equity to total assets.
Northrim BanCorp, Inc. |
March 31, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
$224,425 |
|
|
$218,629 |
|
|
$210,699 |
|
|
$215,289 |
|
|
$225,832 |
|
Total assets |
2,580,037 |
|
|
2,674,318 |
|
|
2,717,514 |
|
|
2,611,154 |
|
|
2,626,160 |
|
Total shareholders’ equity to total assets |
8.70 |
% |
|
8.18 |
% |
|
7.75 |
% |
|
8.24 |
% |
|
8.60 |
% |
Northrim BanCorp, Inc. |
March 31, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
Total shareholders’ equity |
$224,425 |
|
|
$218,629 |
|
|
$210,699 |
|
|
$215,289 |
|
|
$225,832 |
|
Less: goodwill and other intangible assets, net |
15,980 |
|
|
15,984 |
|
|
15,990 |
|
|
15,997 |
|
|
16,003 |
|
Tangible common shareholders’ equity |
$208,445 |
|
|
$202,645 |
|
|
$194,709 |
|
|
$199,292 |
|
|
$209,829 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$2,580,037 |
|
|
$2,674,318 |
|
|
$2,717,514 |
|
|
$2,611,154 |
|
|
$2,626,160 |
|
Less: goodwill and other intangible assets, net |
15,980 |
|
|
15,984 |
|
|
15,990 |
|
|
15,997 |
|
|
16,003 |
|
Tangible assets |
$2,564,057 |
|
|
$2,658,334 |
|
|
$2,701,524 |
|
|
$2,595,157 |
|
|
$2,610,157 |
|
Tangible common equity ratio |
8.13 |
% |
|
7.62 |
% |
|
7.21 |
% |
|
7.68 |
% |
|
8.04 |
% |
Tangible Common Equity to Tangible Assets,
excluding the fair value of the available for sale securities
portfolio
Tangible common equity to tangible assets,
excluding the fair value of the available for sale securities
portfolio, is a non-GAAP ratio that represents total equity less
goodwill and intangible assets and the unrealized gain (loss) on
available for sale securities, net of income taxes divided by total
assets less goodwill and intangible assets and the unrealized gain
(loss) on available for sale securities, net of income taxes. The
most comparable GAAP measure of shareholders' equity to total
assets is calculated by dividing total shareholders' equity by
total assets and the following table sets forth the reconciliation
of tangible common equity to tangible assets, excluding the fair
value of the available for sale securities portfolio, and
shareholders' equity to total assets.
Northrim BanCorp, Inc. |
March 31, 2023 |
|
December 31, 2022 |
|
|
|
|
Total shareholders' equity |
$224,425 |
|
|
$218,629 |
|
Total assets |
2,580,037 |
|
|
2,672,041 |
|
Total shareholders' equity to total assets |
8.70 |
% |
|
8.18 |
% |
|
|
|
|
|
|
Northrim BanCorp, Inc. |
March 31, 2023 |
|
December 31, 2022 |
|
|
|
|
Total shareholders' equity |
$224,425 |
|
|
$218,629 |
|
Less: goodwill and other intangible assets, net |
15,980 |
|
|
15,984 |
|
Less: unrealized gain (loss) on available for sale securities, net
income taxes |
(24,311 |
) |
|
(30,121 |
) |
Tangible common shareholders' equity, excluding the fair value of
the available for sale securities portfolio |
$232,756 |
|
|
$232,766 |
|
|
|
|
|
Total assets |
$2,580,037 |
|
|
$2,672,041 |
|
Less: goodwill and other intangible assets, net |
15,980 |
|
|
15,984 |
|
Less: unrealized gain (loss) on available for sale securities, net
income taxes |
(24,311 |
) |
|
(30,121 |
) |
Tangible assets, excluding the fair value of the available for sale
securities portfolio |
$2,588,368 |
|
|
$2,686,178 |
|
Tangible common equity ratio, excluding the fair value of the
available for sale securities portfolio |
8.99 |
% |
|
8.67 |
% |
|
|
|
|
|
|
Note Transmitted on GlobeNewswire on April 27,
2023, at 12:15 pm Alaska Standard Time.
Contact: |
Joe Schierhorn, President, CEO, and COO |
|
(907) 261-3308 |
|
Jed Ballard, Chief Financial Officer |
|
(907) 261-3539 |
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