NORTHRIM BANCORP INC - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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 September 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		92-0175752
(State or other jurisdiction of incorporation or organization)		(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 October 24, 2003 was
6,015,708.

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
	ITEM ONE
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM TWO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM THREE QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM FOUR CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM SIX EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

NORTHRIM BANCORP, INC.
TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets
	- September 30, 2003 (unaudited)	3
	- December 31, 2002	3
	- September 30, 2002 (unaudited)	3
	Consolidated Statements of Income (unaudited)
	- Three and nine months ended September 30, 2003 and 2002	4
	Consolidated Statements of Comprehensive Income (unaudited)
	- Three and nine months ended September 30, 2003 and 2002	5
	Consolidated Statements of Cash Flows (unaudited)
	- Nine months ended September 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 6.	Exhibits and Reports on Form 8-K	25
SIGNATURES		26

-2-

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

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


					September 30,			December 31,			September 30,
					2003			2002			2002

					(unaudited)						(unaudited)
					(In Thousands, Except Per Share Data)
ASSETS
	Cash and due from banks				$	27,675		$	28,078		$	31,348
	Money market investments					32,222			37,502			59,918
	Investment securities held to maturity					1,080			1,281			1,281
	Investment securities available for sale					60,276			78,224			78,279
	Investment in Federal Home Loan Bank stock					1,526			1,774			1,744
	Real estate loans for sale					2,566			7,437			4,782
	Portfolio loans					583,233			527,553			511,887
	Allowance for loan losses					(9,915	)		(8,476	)		(8,254	)

		Net loans				575,884			526,514			508,415
	Premises and equipment, net					11,154			10,481			6,408
	Accrued interest receivable					3,353			3,192			3,263
	Intangible assets					7,094			7,370			7,462
	Other assets					15,795			9,833			10,633

				Total Assets	$	736,059		$	704,249		$	708,751

LIABILITIES
	Deposits:
		Demand			$	178,850		$	151,780		$	139,931
		Interest-bearing demand				55,980			53,365			51,589
		Savings				100,160			104,568			103,754
		Money market				144,993			154,232			170,446
		Certificates of deposit less than $100,000				68,267			75,053			77,480
		Certificates of deposit greater than $100,000				95,921			87,417			90,455

			Total deposits			644,171			626,415			633,655

	Borrowings					5,646			6,365			5,271
	Trust perferred securities					8,000			0			0
	Other liabilities					5,744			3,096			3,437

			Total Liabilities			663,561			635,876			642,363

SHAREHOLDERS’ EQUITY
	Common stock, $1 par value, 10,000,000 shares authorized, 5,984,318; 6,094,536 and 6,092,812 shares issued and outstanding at September 30, 2003, December 31, 2002, and September 30, 2002, respectively					5,984			6,095			6,093
	Additional paid-in capital					44,747			46,614			46,739
	Retained earnings					20,921			14,460			12,425
	Accumulated other comprehensive income - unrealized gain (loss) on securities, net					846			1,204			1,131

			Total shareholders’ equity			72,498			68,373			66,388

				Total Liabilities and Shareholders’ Equity	$	736,059		$	704,249		$	708,751

See notes to the consolidated financial statements

-3-

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


				Three Months Ended:					Nine Months Ended:
				September 30,					September 30,

				2003			2002		2003			2002

				(unaudited)					(unaudited)
				(In Thousands, Except Per Share Data)
Interest Income
	Interest and fees on loans			$	10,908		$	10,660	$	32,056		$	30,098
	Interest on investment securities:
		Assets available for sale			635			807		2,078			2,711
		Assets held to maturity			33			55		112			173
	Interest on money market investments				26			65		87			145

			Total Interest Income		11,602			11,587		34,333			33,127
Interest Expense
	Interest expense on deposits and borrowings				1,613			2,528		5,125			7,885

			Net Interest Income		9,989			9,059		29,208			25,242
Provision for loan losses					1,373			980		2,738			1,855

			Net Interest Income After Provision for Loan Losses		8,616			8,079		26,470			23,387
Other Operating Income
	Service charges on deposit accounts				460			444		1,384			1,258
	Equity in earnings from RML				1,018			502		2,368			1,055
	Equity in loss from Elliott Cove				(105	)		0		(430	)		0
	Other income				552			490		1,543			1,328

			Total Other Operating Income		1,925			1,436		4,865			3,641
Other Operating Expense
	Salaries and other personnel expense				3,726			3,292		10,469			9,511
	Occupancy, net				502			513		1,480			1,460
	Equipment expense				361			322		1,109			1,068
	Marketing expense				312			312		941			934
	Intangible asset amortization expense				92			92		276			276
	Other operating expense				1,157			1,353		4,239			3,885

			Total Other Operating Expense		6,150			5,884		18,514			17,134

			Income Before Income Taxes		4,391			3,631		12,821			9,894
	Provision for income taxes				1,672			1,404		4,922			3,692

			Net Income	$	2,719		$	2,227	$	7,899		$	6,202

	Earnings Per Share, Basic			$	0.46		$	0.36	$	1.32		$	1.01
	Earnings Per Share, Diluted			$	0.44		$	0.35	$	1.27		$	0.98
	Weighted Average Shares Outstanding, Basic				5,962,366			6,122,323		5,986,253			6,177,452
	Weighted Average Shares Outstanding, Diluted				6,218,140			6,290,699		6,206,154			6,331,329

See notes to the consolidated financial statements

-4-

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


		Three Months Ended:					Nine Months Ended:
		September 30,					September 30,

		2003			2002		2003			2002

		(unaudited)			(unaudited)		(unaudited)			(unaudited)
		(In Thousands)					(In Thousands)
Net income		$	2,719		$	2,227	$	7,899		$	6,202
Other comprehensive income, net of tax:
	Unrealized holding gains (losses) arising during period		(227	)		363		(183	)		677
	Less: reclassification adjustment for gains included in net income		93			34		175			67

Comprehensive Income		$	2,399		$	2,556	$	7,541		$	6,813

See notes to the consolidated financial statements

-5-

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


					Nine Months Ended:
					September 30,

					2003			2002

					(unaudited)			(unaudited)
					(In Thousands)
Operating Activities
	Net income				$	7,899		$	6,202
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
	Security (gains) losses					(292	)		(113	)
	Depreciation and amortization of premises and equipment					915			824
	Amortization of software					338			289
	Intangible asset amortization					276			276
	Deferred tax expense (benefit)					(1,346	)		(507	)
	Deferral of loan fees and costs, net					43			670
	Provision for loan losses					2,738			1,855
	Equity in earnings from RML					(2,368	)		(1,055	)
	Equity in loss from Elliott Cove					430			0
	(Increase) decrease in accrued interest receivable					(161	)		207
	(Increase) decrease in other assets					(3,944	)		(2,566	)
	Amortization of investment security premium, net of discount accretion					218			114
	Increase (decrease) of other liabilities					2,648			(1	)

				Net Cash Provided by Operating Activities		7,394			6,195

Investing Activities
	Investment in securities:
		Purchases of investment securities:
			Available-for-sale			(37,169	)		(74,200	)
			Held-to-maturity			(71	)		(120	)
		Proceeds from sales / maturities of securities:
			Available-for-sale			54,835			70,642
			Held-to-maturity			519			1,587
	Investments in loans:
		Sales of loans and loan participations				142,994			72,983
		Loans made, net of repayments				(195,145	)

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