UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2003
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 000-33501
NORTHRIM BANCORP, INC.
| Alaska (State or other jurisdiction of incorporation or organization) |
92-0175752 (I.R.S. Employer Identification Number) |
| 3111 C Street Anchorage, Alaska (Address of principal executive offices) |
99503 (Zip Code) |
(907) 562-0062
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).
Yes [X] No [ ]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section
13 of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the issuer’s Common Stock outstanding at May 9, 2003 was 5,956,496.
TABLE OF CONTENTS
| PART I | FINANCIAL INFORMATION |
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Item 1. Consolidated Financial Statements (unaudited) |
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Consolidated Balance Sheets |
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- March 31, 2003 (unaudited) |
3 | ||||
- December 31, 2002 |
3 | ||||
- March 31, 2002 (unaudited) |
3 | ||||
Consolidated Statements of Income (unaudited) |
|||||
- Three months ended March 31, 2003 and 2002 |
4 | ||||
Consolidated Statements of Comprehensive Income (unaudited) |
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- Three months ended March 31, 2003 and 2002 |
5 | ||||
Consolidated Statements of Cash Flows (unaudited) |
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- Three months ended March 31, 2003 and 2002 |
6 | ||||
Notes to the Consolidated Financial Statements |
7 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
10 | |||
| Item 3. | Quantitative
and Qualitative Disclosures About
Market Risk |
20 | |||
| Item 4. | Controls and Procedures |
21 | |||
| PART II | OTHER INFORMATION |
||||
| Item 6. | Exhibits and Report on Form 8-K |
22 | |||
SIGNATURES |
22 | ||||
-2-
NORTHRIM BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM ONE
NORTHRIM BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2003, 2002 and December 31, 2002
(in thousands, except share data)
| March 31, | December 31, | March 31, | ||||||||||||||
| 2003 | 2002 | 2002 | ||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
ASSETS |
||||||||||||||||
Cash and due from banks |
$ | 22,251 | $ | 28,078 | $ | 21,585 | ||||||||||
Money market investments |
22,065 | 37,502 | 12,842 | |||||||||||||
Investment securities held to maturity |
1,281 | 1,281 | 1,832 | |||||||||||||
Investment securities available for sale |
66,696 | 78,224 | 70,897 | |||||||||||||
Investment in Federal Home Loan Bank stock |
1,765 | 1,774 | 2,699 | |||||||||||||
Real estate loans for sale |
6,629 | 7,437 | 4,297 | |||||||||||||
Loans |
530,925 | 527,553 | 473,918 | |||||||||||||
Allowance for loan losses |
(8,828 | ) | (8,476 | ) | (7,537 | ) | ||||||||||
Net loans |
528,726 | 526,514 | 470,678 | |||||||||||||
Premises and equipment, net |
11,219 | 10,481 | 5,855 | |||||||||||||
Accrued interest receivable |
3,311 | 3,192 | 3,389 | |||||||||||||
Intangible assets |
7,278 | 7,370 | 7,646 | |||||||||||||
Other assets |
10,983 | 9,833 | 8,531 | |||||||||||||
Total Assets |
$ | 675,575 | $ | 704,249 | $ | 605,954 | ||||||||||
LIABILITIES |
||||||||||||||||
Deposits: |
||||||||||||||||
Demand |
$ | 141,639 | $ | 151,780 | $ | 120,656 | ||||||||||
Interest-bearing demand |
54,226 | 53,365 | 50,337 | |||||||||||||
Savings |
106,293 | 104,568 | 60,933 | |||||||||||||
Money market |
121,893 | 154,232 | 118,969 | |||||||||||||
Certificates of deposit less than $100,000 |
74,038 | 75,053 | 82,477 | |||||||||||||
Certificates of deposit greater than $100,000 |
99,935 | 87,417 | 101,966 | |||||||||||||
Total deposits |
598,024 | 626,415 | 535,338 | |||||||||||||
Borrowings |
4,649 | 6,365 | 4,355 | |||||||||||||
Other liabilities |
4,803 | 3,096 | 4,282 | |||||||||||||
Total liabilities |
607,476 | 635,876 | 543,975 | |||||||||||||
SHAREHOLDERS’ EQUITY |
||||||||||||||||
Common stock, $1 par value, 10,000,000 shares authorized,
5,965,946; 6,094,536 and 6,110,966 shares issued and
outstanding at March 31, 2003, December 31, 2002, and
March 31, 2002, respectively |
5,966 | 6,095 | 6,111 | |||||||||||||
Additional paid-in capital |
44,943 | 46,614 | 47,053 | |||||||||||||
Retained earnings |
16,133 | 14,460 | 8,825 | |||||||||||||
Accumulated other comprehensive income - unrealized
gain (loss) on securities, net |
1,057 | 1,204 | (10 | ) | ||||||||||||
Total shareholders’ equity |
68,099 | 68,373 | 61,979 | |||||||||||||
Total Liabilities and Shareholders’ Equity |
$ | 675,575 | $ | 704,249 | $ | 605,954 | ||||||||||
See notes to the consolidated financial statements
-3-
NORTHRIM BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(in thousands, except per share data)
| Three Months Ended: | |||||||||||
| March 31, | |||||||||||
| 2003 | 2002 | ||||||||||
| (unaudited) | |||||||||||
Interest Income |
|||||||||||
Interest and fees on loans |
$ | 10,496 | $ | 9,627 | |||||||
Interest on investment securities: |
|||||||||||
Assets available for sale |
778 | 997 | |||||||||
Assets held to maturity |
44 | 60 | |||||||||
Interest on money market investments |
16 | 33 | |||||||||
Total Interest Income |
11,334 | 10,717 | |||||||||
Interest Expense |
|||||||||||
Interest expense on deposits and borrowings |
1,784 | 2,691 | |||||||||
Net Interest Income |
9,550 | 8,026 | |||||||||
Provision for loan losses |
429 | 360 | |||||||||
Net Interest Income After Provision for
Loan Losses |
9,121 | 7,666 | |||||||||
Other Operating Income |
|||||||||||
Service charges on deposit accounts |
446 | 389 | |||||||||
Equity in earnings from RML |
464 | 167 | |||||||||
Equity in loss from Elliott Cove |
(209 | ) | 0 | ||||||||
Other income |
462 | 435 | |||||||||
Total Other Operating Income |
1,163 | 991 | |||||||||
Other Operating Expense |
|||||||||||
Salaries and other personnel expense |
3,317 | 3,111 | |||||||||
Occupancy, net |
489 | 476 | |||||||||
Equipment expense |
380 | 370 | |||||||||
Marketing expense |
317 | 311 | |||||||||
Intangible asset amortization expense |
92 | 92 | |||||||||
Other operating expense |
1,584 | 1,220 | |||||||||
Total Other Operating Expense |
6,179 | 5,580 | |||||||||
Income Before Income Taxes |
4,105 | 3,077 | |||||||||
Provision for income taxes |
1,561 | 1,087 | |||||||||
Net Income |
$ | 2,544 | $ | 1,990 | |||||||
Earnings Per Share, Basic |
$ | 0.42 | $ | 0.33 | |||||||
Earnings Per Share, Diluted |
$ | 0.41 | $ | 0.31 | |||||||
Weighted Average Shares Outstanding, Basic |
6,035,583 | 6,108,250 | |||||||||
Weighted Average Shares Outstanding, Diluted |
6,215,121 | 6,335,078 | |||||||||
See notes to the consolidated financial statements
-4-
NORTHRIM BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(in thousands)
| Three Months Ended: | |||||||||
| March 31, | |||||||||
| 2003 | 2002 | ||||||||
| (unaudited) | (unaudited) | ||||||||
Net income |
$ | 2,544 | $ | 1,990 | |||||
Other comprehensive income, net of tax: |
|||||||||
Unrealized gains (losses) on securities: |
|||||||||
Unrealized holding gains (losses) arising during period |
(94 | ) | (500 | ) | |||||
Less: reclassification adjustment for gains
included in net income |
53 | 31 | |||||||
Comprehensive income |
$ | 2,397 | $ | 1,459 | |||||
See notes to the consolidated financial statements
-5-
NORTHRIM BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(in thousands)
| Three Months Ended: | ||||||||||||
| March 31, | ||||||||||||
| 2003 | 2002 | |||||||||||
| (unaudited) | (unaudited) | |||||||||||
Operating Activities |
||||||||||||
Net income |
$ | 2,544 | $ | 1,990 | ||||||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities |
||||||||||||
Security (gains) losses |
(88 | ) | (52 | ) | ||||||||
Depreciation and amortization of premises and equipment |
292 | 273 | ||||||||||
Amortization of software |
90 | 87 | ||||||||||
Intangible asset amortization |
92 | 92 | ||||||||||
Deferred tax expense (benefit) |
(249 | ) | (742 | ) | ||||||||
Deferral of loan fees and costs, net |
(275 | ) | 120 | |||||||||
Provision for loan losses |
429 | 360 | ||||||||||
(Increase) decrease in accrued interest receivable |
(119 | ) | 81 | |||||||||
(Increase) decrease in other assets |
(992 | ) | (281 | ) | ||||||||
Amortization of investment security premium, net of discount accretion |
69 | 36 | ||||||||||
Increase (decrease) of other liabilities |
1,707 | 844 | ||||||||||
Net Cash Provided by Operating Activities |
3,500 | 2,808 | ||||||||||
Investing Activities |
||||||||||||
Investment in securities: |
||||||||||||
Purchases of investment securities: |
||||||||||||
Available-for-sale |
(8,359 | ) | (23,089 | ) | ||||||||
Held-to-maturity |
0 | 0 | ||||||||||
Proceeds from sales / maturities of securities: |
||||||||||||
Available-for-sale |
19,731 | 25,750 | ||||||||||
Held-to-maturity |
38 | 0 | ||||||||||
Investments in loans: |
||||||||||||
Sales of loans and loan participations |
21,406 | 43,780 | ||||||||||
Loans made, net of repayments |
(23,772 | ) | (39,576 | ) | ||||||||
Purchases of premises and equipment |
(1,030 | ) | (251 | ) | ||||||||
Net Cash Provided (Used) by Investing Activities |
8,014 | 6,614 | ||||||||||
Financing Activities |
||||||||||||
Increase (decrease) in deposits |
(28,391 | ) | (15,269 | ) | ||||||||
Increase (decrease) in borrowings |
(1,716 | ) | (1,327 | ) | ||||||||
Net proceeds from issuance of common stock |
28 | 34 | ||||||||||
Repurchase of common stock |
(1,828 | ) | 0 | |||||||||
Cash dividends paid |
(871 | ) | (305 | ) | ||||||||
Net Cash Provided (Used) by Financing Activities |
(32,778 | ) | (16,867 | ) | ||||||||
Net Increase (Decrease) in Cash and Cash Equivalents |
(21,264 | ) | (7,445 | ) | ||||||||
Cash and cash equivalents at beginning of period |
65,580 | 41,872 | ||||||||||
Cash and cash equivalents at end of period |
$ | 44,316 | $ | 34,427 | ||||||||
Supplemental Information |
||||||||||||
Income taxes paid |
$ | 50 | $ | 175 | ||||||||
Interest paid |
$ | 1,825 | $ | 2,777 | ||||||||
See notes to the consolidated financial statements
-6-
NORTHRIM BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 2003 and 2002
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by Northrim BanCorp, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with instructions to Form 10-Q under the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2003, are not necessarily indicative of the results anticipated for the year ending December 31, 2003. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.
2. STOCK REPURCHASE
In September of last year, the Board of Directors of the Company approved a plan whereby the Company would periodically repurchase for cash up to approximately 5%, or 306,372, of its shares of stock in the open market. The Company purchased 201,000 shares of its stock under this program through March 31, 2003, at a total cost of $2.7 million, with 132,000 of those shares repurchased in the first quarter of 2003 at a cost of $1.8 million. The Company intends to continue to repurchase its stock from time to time depending upon market conditions.
3. ACCOUNTING PRONOUNCEMENTS
In April 2003, the Financial Accounting Standards Board (“FASB”) issued Statement No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities. Statement No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133. The Standard has multiple effective date provisions depending on the nature of the amendment to Statement No. 133. The Company believes the adoption of Statement No. 149 will have no impact on its financial statements.
4. LENDING ACTIVITIES
The following table sets forth the Company’s loan portfolio composition by loan type for the dates indicated:
| March 31, 2003 | December 31, 2002 | March 31, 2002 | |||||||||||||||||||||||
| Dollar | Percent | Dollar | Percent | Dollar | Percent | ||||||||||||||||||||
| Amount | of Total | Amount | of Total | Amount | of Total | ||||||||||||||||||||
| (Dollars in Thousands) | |||||||||||||||||||||||||
Commercial |
$ | 187,952 | 35 | % | $ | 187,312 | 35 | % | $ | 167,719 | 35 | % | |||||||||||||
Construction/development |
80,093 | 15 | % | 82,739 | 15 | % | 64,805 | 14 | % | ||||||||||||||||
Commercial real estate |
219,605 | 41 | % | ||||||||||||||||||||||