NORTHRIM BANCORP INC - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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 June 30, 2003

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from________to________

Commission File Number 000-33501

NORTHRIM BANCORP, INC.

(Exact name of registrant as specified in its charter)


Alaska (State or other jurisdiction of incorporation or organization)		92-0175752 (I.R.S. Employer Identification Number)

3111 C Street
Anchorage Alaska		99503
(Address of principal executive offices)		(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 August 8, 2003 was
5,943,246.

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TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
	ITEM 1.
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II – OTHER INFORMATION
	ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets
	- - June 30, 2003 (unaudited)	3
	- - December 31, 2002	3
	- - June 30, 2002 (unaudited)	3
	Consolidated Statements of Income (unaudited)
	- - Three and six months ended June 30, 2003 and 2002	4
	Consolidated Statements of Comprehensive Income (unaudited)
	- - Three and six months ended June 30, 2003 and 2002	5
	Consolidated Statements of Cash Flows (unaudited)
	- - Six months ended June 30, 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	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
PART II	OTHER INFORMATION
Item 5.	Submission of Matters to a Vote of Security Holders	25
Item 6.	Exhibits and Reports on Form 8-K	26
SIGNATURES		27

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NORTHRIM BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM ONE

NORTHRIM BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2003, 2002 and December 31, 2002


				June 30,			December 31,			June 30,
				2003			2002			2002

				(unaudited)						(unaudited)
				(In Thousands, Except Per Share Data)
ASSETS
	Cash and due from banks			$	18,295		$	28,078		$	21,676
	Money market investments				10,692			37,502			3,094
	Investment securities held to maturity				1,080			1,281			1,281
	Investment securities available for sale				68,474			78,224			73,440
	Investment in Federal Home Loan Bank stock				1,706			1,774			2,740
	Real estate loans for sale				39,703			7,437			290
	Loans				551,098			527,553			504,169
	Allowance for loan losses				(9,384	)		(8,476	)		(7,545	)

		Net loans			581,417			526,514			496,914
	Premises and equipment, net				11,394			10,481			6,434
	Accrued interest receivable				3,362			3,192			3,577
	Intangible assets				7,186			7,370			7,554
	Other assets				11,341			9,833			9,484

			Total Assets	$	714,947		$	704,249		$	626,194

LIABILITIES
	Deposits:
		Demand		$	163,971		$	151,780		$	134,066
		Interest-bearing demand			54,719			53,365			49,680
		Savings			102,939			104,568			81,667
		Money market			138,174			154,232			117,628
		Certificates of deposit less than $100,000			70,553			75,053			79,115
		Certificates of deposit greater than $100,000			97,554			87,417			91,019

			Total deposits		627,910			626,415			553,175

	Borrowings				5,423			6,365			6,164
	Trust perferred securities				8,000			0			0
	Other liabilities				3,475			3,096			2,595

			Total Liabilities		644,808			635,876			561,934

SHAREHOLDERS’ EQUITY
	Common stock, $1 par value, 10,000,000 shares authorized, 5,957,046; 6,094,536 and 6,127,445 shares issued and outstanding at June 30, 2003, December 31, 2002, and June 30, 2002, respectively				5,957			6,095			6,127
	Additional paid-in capital				44,814			46,614			47,133
	Retained earnings				18,202			14,460			10,197
	Accumulated other comprehensive income - unrealized gain (loss) on securities, net				1,166			1,204			803

			Total shareholders’ equity		70,139			68,373			64,260

			Total Liabilities and Shareholders’ Equity	$	714,947		$	704,249		$	626,194

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002


				Three Months Ended:					Six Months Ended:
				June 30,					June 30,

				2003			2002		2003			2002

				(unaudited)					(unaudited)
				(In Thousands, Except Per Share Data)
Interest Income
	Interest and fees on loans			$	10,652		$	9,812	$	21,148		$	19,440
	Interest on investment securities:
		Assets available for sale			665			906		1,443			1,903
		Assets held to maturity			35			58		79			118
	Interest on money market investments				45			47		61			80

			Total Interest Income		11,397			10,823		22,731			21,541
Interest Expense
	Interest expense on deposits and borrowings				1,728			2,666		3,512			5,357

			Net Interest Income		9,669			8,157		19,219			16,184
Provision for loan losses					936			515		1,365			875

			Net Interest Income After Provision for Loan Losses		8,733			7,642		17,854			15,309
Other Operating Income
	Service charges on deposit accounts				478			425		924			814
	Equity in earnings from RML				886			387		1,350			554
	Equity in loss from Elliott Cove				(116	)		0		(325	)		0
	Other income				529			402		991			837

			Total Other Operating Income		1,777			1,214		2,940			2,205
Other Operating Expense
	Salaries and other personnel expense				3,426			3,108		6,743			6,219
	Occupancy, net				488			471		977			948
	Equipment expense				369			376		748			746
	Marketing expense				312			310		629			622
	Intangible asset amortization expense				92			92		184			184
	Other operating expense				1,499			1,314		3,084			2,532

			Total Other Operating Expense		6,186			5,671		12,365			11,251

			Income Before Income Taxes		4,324			3,185		8,429			6,263
	Provision for income taxes				1,688			1,200		3,250			2,288

			Net Income	$	2,636		$	1,985	$	5,179		$	3,975

	Earnings Per Share, Basic			$	0.44		$	0.32	$	0.86		$	0.65
	Earnings Per Share, Diluted			$	0.43		$	0.31	$	0.84		$	0.63
	Weighted Average Shares Outstanding, Basic				5,959,974			6,122,012		5,998,078			6,115,078
	Weighted Average Shares Outstanding, Diluted				6,184,656			6,368,437		6,200,095			6,351,709

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002


		Three Months Ended:				Six Months Ended:
		June 30,				June 30,

		2003		2002		2003		2002

		(unaudited)		(unaudited)		(unaudited)		(unaudited)
		(In Thousands)				(In Thousands)
Net income		$	2,636	$	1,985	$	5,179	$	3,975
Other comprehensive income, net of tax:
	Unrealized gains (losses) on securities:
	Unrealized holding gains (losses) arising during period		138		855		44		315
	Less: reclassification adjustment for gains included in net income		29		31		82		33

Comprehensive Income		$	2,745	$	2,809	$	5,141	$	4,257

See notes to the consolidated financial statements

-5-

NORTHRIM BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002


					Six Months Ended:
					June 30,

					2003			2002

					(unaudited)			(unaudited)
					(In Thousands)
Operating Activities
	Net income				$	5,179		$	3,975
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
	Security (gains) losses					(137	)		(52	)
	Depreciation and amortization of premises and equipment					609			544
	Amortization of software					227			181
	Intangible asset amortization					184			184
	Deferred tax expense (benefit)					(418	)		(351	)
	Deferral of loan fees and costs, net					(36	)		500
	Provision for loan losses					1,365			875
	Equity in earnings from RML					(1,350	)		(554	)
	Equity in loss from Elliott Cove					325			0
	(Increase) decrease in accrued interest receivable					(170	)		(107	)
	(Increase) decrease in other assets					(825	)		(1,981	)
	Amortization of investment security premium, net of discount accretion					154			74
	Increase (decrease) of other liabilities					343			(843	)

				Net Cash Provided by Operating Activities		5,450			2,445

Investing Activities
	Investment in securities:
		Purchases of investment securities:
			Available-for-sale			(28,486	)		(37,799	)
			Held-to-maturity
		Proceeds from sales / maturities of securities:
			Available-for-sale			38,488			39,202
			Held-to-maturity
	Investments in loans:
			Sales of loans and loan participations			94,117			54,392
			Loans made, net of repayments			(150,349	)

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