Attached files
| file | filename |
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| 8-K - 8-K - NORTHRIM BANCORP INC | a8-kfor123114earningsrelea.htm |
Exhibit 99.1
Contact: | Joe Schierhorn, Chief Operating Officer |
(907) 261-3308 | |
Latosha Frye, Chief Financial Officer | |
(907) 261-8763 | |
NEWS RELEASE | ||||
Northrim BanCorp Earns $17.4 Million, or $2.54 Per Diluted Share, in 2014
2014 Highlights Include Two Acquisitions and Core Performance
ANCHORAGE, Alaska - January 27, 2015 - Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim”) today reported that performance of its core operations, augmented by two acquisitions during the year, generated increased profitability in 2014. Net profits in the full year of 2014 totaled $17.4 million, or $2.54 per diluted share, compared to $12.3 million, or $1.87 per diluted share, in 2013. Contributions from the second quarter acquisition of Alaska Pacific Bancshares, Inc. ("Alaska Pacific") and the fourth quarter acquisition of Residential Mortgage Holding Company, LLC ("Residential Mortgage"), the parent company of Residential Mortgage, LLC (“RML”) increased revenues and operating costs in 2014. For the fourth quarter of 2014, net income was $6.7 million, or $0.97 per diluted share, compared to $3.7 million, or $0.53 per diluted share, in the third quarter of 2014 and $2.7 million, or $0.40 per diluted share, in the fourth quarter a year ago. Fair value adjustments in connection with our step up in basis on our existing 23.5% equity in Residential Mortgage resulted in a non-operating gain of $3 million, or $0.43 per diluted share, in the fourth quarter.
“The acquisition of Alaska Pacific added four new locations in southeastern Alaska in the first half of the year and generated 10% earnings accretion, without transaction costs, and 3% accretion including transaction costs. In addition, the December 1 purchase of the remaining 76.5% of Residential Mortgage, one of the largest mortgage originators in Alaska, also contributed to earnings, and added to the performance of our core Northrim franchise in 2014,” said Marc Langland, Chairman. “Both of these new businesses are meeting our expectations with their contribution to operations, and we are excited about the potential for growth they represent for our business."
Financial Highlights (at or for the periods ended December 31, 2014, compared to September 30, 2014, and December 31, 2013)
• | Net income, excluding gains and expenses from the acquisitions of Alaska Pacific and Residential Mortgage, expanded 39% in the fourth quarter of 2014 compared to the fourth quarter of 2013, and 23% for the full year in 2014. Net income excluding gains and expenses from acquisitions and the $1.1 million gain on the sale of a branch location in the third quarter of 2014 grew 9% in the fourth quarter of 2014 as compared to the previous quarter, and grew 18% for the full year in 2014 as compared to 2013. |
• | Total revenues, which include net interest income plus other operating income, increased 25% in the quarter and 63% as compared to the fourth quarter of 2013. Fourth quarter 2014 revenues were $23.3 million. For the full year, revenues increased 29% to $73.4 million from $56.9 million. Excluding the gains from the acquisition of Residential Mortgage in the fourth quarter of 2014 and the sale of the branch in the third quarter of 2014, total revenues were $20.3 million in the fourth quarter of 2014, $17.5 million in the third quarter of 2014, and $69.3 million for the full year 2014. Excluding these adjustments, fourth quarter 2014 revenues increased 24% and 42%, respectively, as compared to the preceding quarter and the year ago quarter, and total 2014 revenues increased 22% as compared to the prior year. |
• | Net interest income grew 6% to $14.5 million in the fourth quarter of 2014, compared to $13.7 million in the third quarter of 2014 and increased 26% from $11.5 million in the fourth quarter a year ago. |
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
January 27, 2015
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• | Northrim paid a quarterly cash dividend of $0.18 per share in December of 2014, up from the $0.17 per share dividend paid a year ago. The dividend provides a yield of approximately 3.3% at current market share prices. |
• | Tangible book value1 was $20.48 per share at December 31, 2014, compared to $22.08 at September 30, 2014 and $20.86 per share a year ago, reflecting an increase in intangible assets attributable to the two major acquisitions completed in the year. |
• | Average portfolio loans increased 23% to $938.2 million for the fourth quarter of 2014 compared to the fourth quarter of 2013, reflecting the addition of the loans acquired from Alaska Pacific and organic growth in the portfolio that were offset by year-end payoffs of several large loans and the elimination of the RML warehouse line of credit following its consolidation into the balance sheet. |
• | Northrim remains well-capitalized with Tier 1 Capital to Risk Adjusted Assets of 13.06% at December 31, 2014, compared to 14.33% at September 30, 2014, and 15.35% a year ago. The decrease in Tier 1 Capital to Risk Adjusted Assets at December 31, 2014, compared to a year ago reflects the $47.6 million net increase in assets resulting from the acquisition of Residential Mortgage and the $167.2 million in assets acquired from Alaska Pacific. Northrim paid $18.2 million in cash and assigned life insurance policies valued at $3.9 million for the acquisition of Residential Mortgage in December 2014. Additionally, Northrim recorded a liability of $7.3 million which represents the net present value of earn-out payments that Northrim expects to make in conjunction with the purchase of Residential Mortgage over the next five years. Accordingly, the total estimated purchase price of Residential Mortgage is $29.4 million. Northrim paid $6.4 million in cash and issued 290,212 shares of common stock with a value of $7.4 million on April 1, 2014 for the acquisition of Alaska Pacific. |
• | Tangible common equity to tangible assets2 was 9.85% at December 31, 2014, compared to 10.69% at September 30, 2014, and 11.30% a year ago. |
Alaska Economic Update
“If oil prices stabilize at current low levels, it will be a serious concern for Alaska’s long-term economic growth,” said Joseph Beedle, President and CEO. “Fortunately, Alaska has $66 billion in reserves, of which $14 billion can be used to finance funding gaps. Also, many Alaskan business owners and government officials have experience dealing with swings in the energy markets and the effects that can have on our economy. Projects already underway on the North Slope should continue to be developed, but we remain cautious about the long-term outlook for future oil development and the resulting impact on state revenues. We estimate that approximately 8% of portfolio loans as of December 31, 2014, have direct exposure to the oil and gas industry in Alaska."
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 “About Northrim” link and then click "Alaska's economy". Information from our website is not incorporated into, and does not form a part of this press release.
Review of Operations:
Revenue and Net Interest Income
Total revenues, which include net interest income plus other operating income, were $23.3 million in the fourth quarter of 2014, up from $18.7 million in the third quarter of 2014 and $14.3 million in the fourth quarter of 2013. Total revenues increased 29% in 2014 to $73.4 million from $56.9 million in 2013, reflecting the addition of the Alaska Pacific franchise for the last three quarters of the year and the addition of the remaining 76.5% of Residential Mortgage operating results during December of 2014.
1Tangible book value per share is a non-GAAP measure defined as shareholders’ equity, less intangible assets, divided by shares outstanding. See the last page of this release for a reconciliation to shareholders’ equity.
2Tangible common equity to tangible assets is a non-GAAP measure defined as total equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. See the last page of this release for more information on this non-GAAP measure.
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
January 27, 2015
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In the fourth quarter of 2014, net interest income increased 6% to $14.5 million, compared to $13.7 million in the immediate prior quarter and was up 26% from $11.5 million in the fourth quarter of 2013. “Growth from our core
franchise, boosted by the addition of the Southeast Alaska network acquired earlier in the year, provided increased top-line performance during 2014,” said Beedle.
“Our net interest margin remained well above national averages in both the fourth quarter and full year in 2014,” said Joe Schierhorn, Chief Operating Officer. In the fourth quarter of 2014, Northrim’s net interest
margin (NIM) was 4.49%, compared to 4.43% in the preceding quarter and 4.24% in the fourth quarter a year ago. NIM
increased to 4.41% in the year ended 2014 from 4.29% in 2013. These increases in NIM were the result of growth in core portfolio loans and contributions from both of the acquisitions that occurred in 2014.
Provision for Loan Losses
The provision for loan losses totaled $500,000 in the fourth quarter of 2014, compared to zero for both the preceding and year ago quarters. This increase is the result of an increase in non-performing loans during the period and the Company's assessment of current economic conditions in our market. In both 2014 and 2013, provisions for loan losses were negative due to recoveries of previous loan charge offs, totaling $636,000 and $635,000 respectively.
Other Operating Income
Northrim has interests in complementary businesses that provide financial services to businesses and individuals, including mortgage origination, purchased receivables financing, health insurance plans, and wealth management. In the fourth quarter of 2014, total other operating income was $8.8 million which included a $3.0 million gain on the Residential Mortgage acquisition, compared to $4.9 million in the preceding quarter, which included a $1.1 million gain on the sale of a branch location, and $2.8 million in the fourth quarter of 2013. In the full year of 2014, other operating income was $20.5 million, up from $12.9 million a year ago.
Earnings from Residential Mortgage were recorded in several items on the income statement. The equity in earnings from the 23.5% of Residential Mortgage that Northrim has owned for many years generated $286,000 in the fourth quarter and $894,000 for the full year of 2014. In addition, following the close of the purchase of the remaining 76.5% of Residential Mortgage in December, the mortgage business generated income of $1.6 million on a fully consolidated basis, before operating costs, and a gain on the purchase contributed another $3.0 million to fourth quarter 2014 revenues. Going forward the majority of other operating income from this segment will be recorded as mortgage banking income. In 2014, RML originated $651 million in mortgage loans, of which approximately 87% were for purchase transactions, compared to $792 million in originations, of which 79% were for purchase transactions in 2013. “Our mortgage business is subject to both seasonal and cyclical factors, so we anticipate the first quarter contribution from RML will reflect normal seasonal slowing,” said Latosha Frye, Chief Financial Officer.
“Employee benefit plan income is generated from sales of health insurance to small business owners, and through Enroll Alaska provides health insurance plans to individuals under the Affordable Care Act. Enroll Alaska revenues are influenced significantly by enrollment periods that are open during limited periods of time each year and revenues generated from new customers generally lag the enrollment periods. Enrollment periods were open in the fourth quarters of 2014 and 2013,” Frye noted. “The current enrollment period closes on February 15, 2015, and Enroll Alaska employees have been working with both existing and new individual enrollees for several weeks. We expect to have information about total 2015 enrollments for Enroll Alaska by the end of the first quarter of 2015.”
Employee benefit plan income decreased to $844,000 in the fourth quarter of 2014, compared to $899,000 in the preceding quarter and increased from $599,000 in the fourth quarter of 2013, primarily due to revenue contributions from Enroll Alaska. For 2014, employee benefit plan income increased 49% to $3.5 million from $2.3 million in 2013. Approximately 47% of the increase in employee benefit plan income in 2014 resulted from an increase in revenues from Enroll Alaska.
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
January 27, 2015
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In the fourth quarter of 2014, electronic banking income contributed $662,000 to other operating income, compared to $590,000 in the third quarter of 2014 and $544,000 in the fourth quarter of 2013. In the fourth quarter of this year, service charges were $473,000, down from $582,000 in the preceding quarter and $503,000 in the fourth quarter a year ago. For 2014, electronic banking income grew 10% to $2.4 million and service charges increased 2% to $2.2 million from 2013.
Purchased receivable income was $527,000 in the fourth quarter of 2014 as compared to $599,000 in the third quarter of 2014, and $570,000 in the fourth quarter a year ago, reflecting the normal volatility in this business lending niche. For 2014, purchased receivable income declined 26% to $2.1 million from $2.8 million in 2013.
Gain on sale of securities did not contribute materially to revenues in either the fourth or third quarters of 2014 or the fourth quarter a year ago. For 2014, gain on sale of securities generated $461,000 in revenues compared to $333,000 in 2013.
Other income totaled $1.4 million for the fourth quarter of 2014, compared to $750,000 in the third quarter of 2014 and $460,000 in the fourth quarter of 2013. The increase in the fourth quarter of 2014 compared to the preceding and year ago quarters is the result of $691,000 in recoveries from loans acquired and marked to fair value in the Alaska Pacific merger. Additionally, there was a $54,000 increase in income from Pacific Wealth Advisors, LLC, Northrim's wealth management affiliate, and a $94,000 increase in rental income in the fourth quarter of 2014 as compared to the fourth quarter of 2013. Northrim completed a significant portion of its ongoing renovation project on its headquarters facility and began leasing space in the third quarter of 2014. For 2014, other income was $3.4 million compared to $1.9 million a year ago. In 2014, in addition to the $691,000 in recoveries from loans acquired, the acquisition of Alaska Pacific also added $203,000 in mortgage loan servicing income and $170,000 in a one-time bargain purchase gain. Income from Pacific Wealth Advisors, LLC and rental income also increased $175,000 and $152,000, respectively, in 2014 compared to the same period in the prior year.
Other Operating Expenses
Overhead costs increased 7% to $14.0 million in the fourth quarter of 2014, as compared to $13.1 million in the third quarter of 2014, reflecting costs related to the consolidation of 100% of the other operating expenses of RML, which totaled $1.9 million, for December 2014. In the fourth quarter a year ago overhead costs were $10.7 million. For 2014, other operating expenses increased 24% to $49.4 million from $39.9 million in 2013. Fourth quarter 2014 compensation costs grew 11% to $7.9 million from $7.1 million in the third quarter of 2014, and increased 24% from the fourth quarter a year ago, reflecting the addition of the staff of Alaska Pacific and Residential Mortgage to the Northrim team.
Balance Sheet Review
Northrim’s assets increased 19% to $1.45 billion at December 31, 2014, compared to $1.22 billion a year ago reflecting the $167.2 million in acquired assets from Alaska Pacific, and increased 2% from $1.42 billion at September 30, 2014, reflecting the $47.6 million net increase in assets from the Residential Mortgage purchase.
Investment securities totaled $287.3 million at December 31, 2014, compared to $243.2 million at September 30, 2014, and $252.8 million a year ago. At December 31, 2014, the investment portfolio was comprised of 73% U.S. Agency securities (primarily Federal Home Loan Bank and Federal Farm Credit Bank debt), 15% corporate securities, 5% Alaskan municipality, utility, or state agency securities, 5% U.S. treasury securities, 1% stock in the Federal Home Loan Bank of Seattle, and 1% in mortgage backed securities. At December 31, 2014, the average estimated duration of the investment portfolio was two years. The investment portfolio generated an average net tax equivalent yield of 1.48% for the fourth quarter of 2014.
Loans held for sale were $43.9 million at the end of the fourth quarter of 2014, compared to $10.3 million at September 30, 2014 and $11.3 million a year ago, reflecting the acquisition of Residential Mortgage. The average balance for the quarter for loans held for sale was $18.6 million for the fourth quarter of 2014 as the Residential Mortgage acquisition was completed only one month before the end of the quarter. The average balance for loans held for sale was $8.8 million
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
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in the third quarter of 2014 and $8.6 million a year ago. RML will continue to sell mortgage loans into the secondary market consistent with their existing business model.
Portfolio loans grew 20% to $924.5 million at December 31, 2014, as compared to $770.0 million a year ago, but declined 1% from $936.7 million at September 30, 2014. The acquisition of the $138.4 million in loans from Alaska Pacific contributed to year-over-year loan growth, while the acquisition of Residential Mortgage reduced commercial loans by $16 million, because the warehouse facility that Northrim provided to them as a customer was consolidated following the closing of the merger. Portfolio loans in the recently acquired Southeast Alaska market have decreased during this period of integration of personnel and systems. Southeast portfolio loans decreased to $127.1 million from $132.9 million, or 4%, at December 31, 2014 from September 30, 2014. The following table provides details on the acquired loan portfolio after fair value adjustments as of December 31, 2014, including new loans originated in our new Southeast Alaska markets since we acquired Alaska Pacific:
31-Dec-14 | 30-Sept-14 | 31-Dec-13 | |||||||||||||||||||||
NRIM Legacy | Southeast Alaska | NRIM | NRIM Legacy | Southeast Alaska | NRIM | NRIM | |||||||||||||||||
Portfolio loans | |||||||||||||||||||||||
Commercial loans | $270,967 | $35,576 | $306,543 | $280,574 | $36,741 | $317,315 | $300,338 | ||||||||||||||||
Commercial real estate | 379,973 | 53,009 | 432,982 | 395,150 | 56,671 | 451,821 | 376,398 | ||||||||||||||||
Construction loans | 118,691 | 7,346 | 126,037 | 99,287 | 7,048 | 106,335 | 62,760 | ||||||||||||||||
Consumer loans | 32,303 | 31,190 | 63,493 | 33,379 | 32,457 | 65,836 | 34,541 | ||||||||||||||||
Unearned loan fees, net | — | — | (4,551 | ) | — | — | (4,648 | ) | (4,021 | ) | |||||||||||||
Total portfolio loans | $801,934 | $127,121 | $924,504 | $808,390 | $132,917 | $936,659 | $770,016 | ||||||||||||||||
“We generated organic loan growth in our core franchise, although the numbers on both the balance sheet and income statement are affected by the accounting associated with the acquisitions,” Schierhorn noted. “The $16 million for the warehouse facility for RML that was consolidated due to the acquisition was the primary driver for the quarter-over-quarter drop in commercial loans, which were down 3% in the period but up 2% year-over year. We also had a $13 million commercial real estate loan pay off at the end of the year, reducing growth in this category.” Commercial loans totaled $306.5 million and accounted for 33% of portfolio loans at December 31, 2014. Commercial real estate loans totaled $433.0 million and accounted for 46% of portfolio loans at December 31, 2014. Construction and land development loans increased 19% in the fourth quarter of 2014 as compared to the third quarter of 2014 and 101% year-over-year to $126.0 million and accounted for 14% of portfolio loans at December 31, 2014. Consumer loans totaled $63.5 million and accounted for 7% of portfolio loans at year end.
Northrim’s deposit base continues to be 100% Alaska-based, and is primarily made up of low-cost transaction accounts. In the fourth quarter, we launched a campaign to attract time deposits, particularly in the southeastern markets to maintain market share and to build customer loyalty,” said Beedle. Balances in transaction accounts at December 31, 2014, represented 88.0% of total deposits compared to 91.4% a year ago. At December 31, 2014, total deposits were $1.18 billion, up 18% from $1.00 billion a year ago and down 1% from the prior quarter. On April 1, 2014, Northrim acquired $151.4 million in deposits from Alaska Pacific and recorded a $623,000 core deposit intangible as part of the purchase. The following table provides details on the deposits acquired from Alaska Pacific as of December 31, 2014 after fair value adjustments, including new deposits generated in our new Southeast Alaska markets since we acquired Alaska Pacific:
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
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31-Dec-14 | 30-Sept-14 | 31-Dec-13 | |||||||||||||||||||||
NRIM Legacy | Southeast Alaska | NRIM | NRIM Legacy | Southeast Alaska | NRIM | NRIM | |||||||||||||||||
Demand deposits | $367,151 | $36,372 | $403,523 | $401,549 | $37,256 | $438,805 | $363,969 | ||||||||||||||||
Interest-bearing demand | 148,828 | 36,286 | 185,114 | 139,418 | 36,612 | 176,030 | 143,703 | ||||||||||||||||
Savings deposits | 97,925 | 24,663 | 122,588 | 94,215 | 24,787 | 119,002 | 94,518 | ||||||||||||||||
Alaska CDs | 99,736 | — | 99,736 | 112,667 | — | 112,667 | 112,702 | ||||||||||||||||
Money market deposits | 199,134 | 27,440 | 226,574 | 208,010 | 29,225 | 237,235 | 202,606 | ||||||||||||||||
Time deposits | 109,619 | 32,593 | 142,212 | 82,168 | 26,460 | 108,628 | 86,225 | ||||||||||||||||
Total deposits | $1,022,393 | $157,354 | $1,179,747 | $1,038,027 | $154,340 | $1,192,367 | $1,003,723 | ||||||||||||||||
At December 31, 2014, noninterest-bearing demand deposits accounted for 34% of total deposits, interest-bearing demand accounts were 16%, savings deposits were 10%, money market balances accounted for 19%, the Alaska CD accounted for 9%, and time certificates were 12% of total deposits.
Other borrowings increased to $26.3 million at December 31, 2014 from $2.2 million at September 30, 2014 and $6.5 million at December 31, 2013. These increases are the result of the inclusion of Residential Mortgage's short term borrowings in Northrim's consolidated balance sheet since they are a wholly owned subsidiary of Northrim at December 31, 2014.
Shareholders’ equity increased 14% to $164.4 million, or $23.99 per share, at December 31, 2014, compared to $144.3 million, or $22.07 per share, a year ago. At September 30, 2014, shareholders’ equity was $159.3 million, or $23.31 per share. Tangible book value per share was $20.48 at December 31, 2014, compared to $20.86 per share a year ago and $22.08 per share at September 30, 2014. Northrim remains well-capitalized with Tier 1 Capital to Risk Adjusted Assets of 13.06 % at December 31, 2014.
Asset Quality
Nonperforming loans were $4.7 million at December 31, 2014, compared to $2.8 million for the preceding quarter and $1.8 million at December 31, 2013. Non-performing assets ("NPAs") were $9.3 million at December 31, 2014, up from $7.8 million at September 30, 2014, due to the addition of two nonaccrual loans related to one borrower in the fourth quarter of 2014. NPAs increased from $4.2 million at December 31, 2013, primarily as a result of the acquisition of the Alaska Pacific loan portfolio. The acquired loan portfolio was recorded at its estimated fair value as of April 1, 2014, and the total fair value adjustment was a net discount of $3.0 million. The ratio of NPAs to total assets was 0.64% at December 31, 2014, compared to 0.55% three months earlier and 0.35% a year ago.
Nonperforming loans ("NPLs") were 0.51% of portfolio loans at December 31, 2014 compared to 0.29% in the preceding quarter and 0.24% a year ago. Other real estate owned (OREO) was $4.6 million at the end of the fourth quarter of 2014, compared to $4.7 million in the preceding quarter and $2.4 million at the end of the fourth quarter of 2013. Nonperforming purchased receivables were zero at December 31, 2014 and December 31, 2013, and were $243,000 at September 30, 2014. As of December 31, 2014, 22% of NPAs, or $2.1 million were guaranteed by agencies of the United States government.
Loans measured for impairment totaled $11.3 million at December 31, 2014, compared to $10.6 million at September 30, 2014, and $8.8 million in the fourth quarter a year ago.
There were $2.3 million in restructured loans included in nonaccrual loans at the end of the fourth quarter of 2014, as compared to $1.7 million at September 30, 2014, and $1.3 million at December 31, 2013. Northrim held $5.4 million in performing restructured loans that were not included in nonaccrual loans at the end of the fourth quarter of 2014, $6.7 million at the end of the third quarter of 2014, and $6.6 million at the end of the fourth quarter of 2013.
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
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“Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans,” said Frye. “We present restructured loans that are performing separately from those that are in nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.”
The coverage ratio of the allowance for loan losses to nonperforming loans was 358% at December 31, 2014, compared to 588% three months earlier, and 897% a year ago. The allowance for loan losses increased to $16.7 million at December 31, 2014, compared to $16.2 million at the end of the preceding quarter and $16.3 million a year ago.
About Northrim BanCorp
Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 14 branches in Anchorage, the Matanuska Valley, Juneau, Fairbanks, Ketchikan, and Sitka serving 75% of Alaska’s population; and an asset based lending division in Washington. The Bank differentiates itself with its detailed knowledge of Alaska’s economy and its “Customer First Service” philosophy. Affiliated companies include Elliott Cove Insurance Agency, LLC; Elliott Cove Capital Management, LLC; Residential Mortgage, LLC; Northrim Benefits Group, LLC; and Pacific Wealth Advisors, LLC.
www.northrim.com
Forward-Looking Statement
This release may contain “forward-looking statements” as that term is defined for purposes of Section 21D of the Securities and Exchange Act. 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 and management’s plans and objectives for future operations are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend” and words or phrases of similar meaning, as they relate to Northrim 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 may differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: our ability to maintain strong asset quality and to maintain or expand our market share or net interest margins; our ability to implement our marketing and growth strategies; our expected cost savings, synergies, and other financial benefits from the recently completed merger of Northrim with Alaska Pacific might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; our expected cost savings, synergies and other financial benefits from the acquisition of Residential Mortgage Holding Company, LLC might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; and our ability to execute our business plan. Further, actual results may be affected by our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy as those factors relate to our cost of funds and return on assets. In addition, there are risks inherent in the banking industry relating to 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, 2013, and from time to time are disclosed in our other filings with the SEC. 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.
Source: http://treasury.dor.alaska.gov/DebtManagement/ReserveBalances.aspx
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
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Income Statement | |||||||||||||
(Dollars in thousands, except per share data) | Three Months Ended | ||||||||||||
(Unaudited) | December 31, | September 30, | Three Month | December 31, | One Year | ||||||||
2014 | 2014 | % Change | 2013 | % Change | |||||||||
Interest Income: | |||||||||||||
Interest and fees on loans | $14,237 | $13,437 | 6 | % | $11,258 | 26 | % | ||||||
Interest on portfolio investments | 888 | 720 | 23 | % | 702 | 26 | % | ||||||
Interest on deposits in banks | 53 | 55 | -4 | % | 58 | -9 | % | ||||||
Total interest income | 15,178 | 14,212 | 7 | % | 12,018 | 26 | % | ||||||
Interest Expense: | |||||||||||||
Interest expense on deposits | 433 | 352 | 23 | % | 295 | 47 | % | ||||||
Interest expense on borrowings | 209 | 135 | 55 | % | 202 | 3 | % | ||||||
Total interest expense | 642 | 487 | 32 | % | 497 | 29 | % | ||||||
Net interest income | 14,536 | 13,725 | 6 | % | 11,521 | 26 | % | ||||||
Provision (benefit) for loan losses | 500 | — | NM | — | NM | ||||||||
Net interest income after provision (benefit) for loan losses | 14,036 | 13,725 | 2 | % | 11,521 | 22 | % | ||||||
Other Operating Income: | |||||||||||||
Gain on purchase of mortgage affiliate | 3,001 | — | NM | — | NM | ||||||||
Mortgage banking income | 1,620 | — | NM | — | NM | ||||||||
Employee benefit plan income | 844 | 899 | -6 | % | 599 | 41 | % | ||||||
Electronic banking income | 662 | 590 | 12 | % | 544 | 22 | % | ||||||
Purchased receivable income | 527 | 599 | -12 | % | 570 | -8 | % | ||||||
Service charges on deposit accounts | 473 | 582 | -19 | % | 503 | -6 | % | ||||||
Equity in earnings from RML | 286 | 384 | -26 | % | 111 | 158 | % | ||||||
Gain on sale of premises and equipment | — | 1,115 | NM | — | NM | ||||||||
Gain on sale of securities | — | 15 | NM | 15 | NM | ||||||||
Other income | 1,351 | 750 | 80 | % | 460 | 194 | % | ||||||
Total other operating income | 8,764 | 4,934 | 78 | % | 2,802 | 213 | % | ||||||
Other Operating Expense: | |||||||||||||
Salaries and other personnel expense | 7,892 | 7,107 | 11 | % | 6,367 | 24 | % | ||||||
Occupancy expense | 1,330 | 1,041 | 28 | % | 867 | 53 | % | ||||||
Marketing expense | 634 | 417 | 52 | % | 488 | 30 | % | ||||||
Professional and outside services | 490 | 323 | 52 | % | 248 | 98 | % | ||||||
Equipment expense | 403 | 405 | — | % | 339 | 19 | % | ||||||
Reserve for purchased receivables | 257 | 241 | 7 | % | 131 | 96 | % | ||||||
Insurance expense | 243 | 319 | -24 | % | 211 | 15 | % | ||||||
Merger and acquisition expense | 226 | 1,031 | -78 | % | 376 | -40 | % | ||||||
Intangible asset amortization expense | 75 | 81 | -7 | % | 53 | 42 | % | ||||||
OREO (income) expense, net rental income and gains on sale | (101 | ) | (68 | ) | 49 | % | (48 | ) | 110 | % | |||
Other operating expense | 2,556 | 2,213 | 15 | % | 1,670 | 53 | % | ||||||
Total other operating expense | 14,005 | 13,110 | 7 | % | 10,702 | 31 | % | ||||||
Income before provision for income taxes | 8,795 | 5,549 | 58 | % | 3,621 | 143 | % | ||||||
Provision for income taxes | 1,991 | 1,651 | 21 | % | 1,042 | 91 | % | ||||||
Net income | 6,804 | 3,898 | 75 | % | 2,579 | 164 | % | ||||||
Less: Net income attributable to the noncontrolling interest | 130 | 191 | 32 | % | (102 | ) | -227 | % | |||||
Net income attributable to Northrim BanCorp | $6,674 | $3,707 | 80 | % | $2,681 | 149 | % | ||||||
Basic EPS | $0.98 | $0.54 | 81 | % | $0.41 | 139 | % | ||||||
Diluted EPS | $0.97 | $0.53 | 83 | % | $0.40 | 143 | % | ||||||
Average basic shares | 6,845,786 | 6,831,976 | — | % | 6,531,762 | 5 | % | ||||||
Average diluted shares | 6,943,553 | 6,919,993 | — | % | 6,630,352 | 5 | % | ||||||
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
January 27, 2015
Page 9 of 13
Income Statement | ||||||||
(Dollars in thousands, except per share data) | Twelve months ended December 31, | |||||||
(Unaudited) | One Year | |||||||
2014 | 2013 | % Change | ||||||
Interest Income: | ||||||||
Interest and fees on loans | $51,627 | $43,137 | 20 | % | ||||
Interest on portfolio investments | 3,133 | 2,714 | 15 | % | ||||
Interest on deposits in banks | 198 | 223 | -11 | % | ||||
Total interest income | 54,958 | 46,074 | 19 | % | ||||
Interest Expense: | ||||||||
Interest expense on deposits | 1,419 | 1,241 | 14 | % | ||||
Interest expense on borrowings | 634 | 799 | -21 | % | ||||
Total interest expense | 2,053 | 2,040 | 1 | % | ||||
Net interest income | 52,905 | 44,034 | 20 | % | ||||
Provision (benefit) for loan losses | (636 | ) | (635 | ) | — | % | ||
Net interest income after provision (benefit) for loan losses | 53,541 | 44,669 | 20 | % | ||||
Other Operating Income: | ||||||||
Employee benefit plan income | 3,497 | 2,341 | 49 | % | ||||
Gain on purchase of mortgage affiliate | 3,001 | — | NM | |||||
Electronic banking income | 2,356 | 2,151 | 10 | % | ||||
Service charges on deposit accounts | 2,155 | 2,116 | 2 | % | ||||
Purchased receivable income | 2,074 | 2,797 | -26 | % | ||||
Mortgage banking income | 1,620 | — | NM | |||||
Gain on sale of premises and equipment | 1,115 | — | NM | |||||
Equity in earnings from RML | 894 | 1,227 | -27 | % | ||||
Gain on sale of securities | 461 | 333 | 38 | % | ||||
Other income | 3,364 | 1,921 | 75 | % | ||||
Total Other Operating Income | 20,537 | 12,886 | 59 | % | ||||
Other Operating Expense: | ||||||||
Salaries and other personnel expense | 27,758 | 23,796 | 17 | % | ||||
Occupancy expense | 4,360 | 3,464 | 26 | % | ||||
Marketing expense | 2,059 | 1,853 | 11 | % | ||||
Merger and acquisition expense | 1,962 | 536 | 266 | % | ||||
Equipment expense | 1,465 | 1,239 | 18 | % | ||||
Professional and outside services | 1,437 | 1,268 | 13 | % | ||||
Insurance expense | 1,031 | 821 | 26 | % | ||||
Reserve for purchased receivables | 704 | 100 | 604 | % | ||||
Intangible asset amortization expense | 289 | 228 | 27 | % | ||||
OREO (income) expense, net rental income and gains on sale | (416 | ) | (60 | ) | 593 | % | ||
Other operating expense | 8,726 | 6,621 | 32 | % | ||||
Total other operating expense | 49,375 | 39,866 | 24 | % | ||||
Income before provision for income taxes | 24,703 | 17,689 | 40 | % | ||||
Provision for income taxes | 6,836 | 5,277 | 30 | % | ||||
Net income | 17,867 | 12,412 | 44 | % | ||||
Less: Net income attributable to the noncontrolling interest | 459 | 87 | 428 | % | ||||
Net income attributable to Northrim BanCorp | $17,408 | $12,325 | 41 | % | ||||
Basic EPS | $2.57 | $1.89 | 36 | % | ||||
Diluted EPS | $2.54 | $1.87 | 36 | % | ||||
Average basic shares | 6,761,328 | 6,518,772 | 4 | % | ||||
Average diluted shares | 6,852,267 | 6,609,950 | 4 | % | ||||
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
January 27, 2015
Page 10 of 13
Balance Sheet | |||||||||||||
(Dollars in thousands) | |||||||||||||
(Unaudited) | December 31, | September 30, | Three Month | December 31, | One Year | ||||||||
2014 | 2014 | % Change | 2013 | % Change | |||||||||
Assets: | |||||||||||||
Cash and due from banks | $36,036 | $44,312 | -19 | % | $33,112 | 9 | % | ||||||
Interest bearing deposits in other banks | 36,020 | 85,029 | -58 | % | 65,979 | -45 | % | ||||||
Portfolio investments | 287,335 | 243,204 | 18 | % | 252,792 | 14 | % | ||||||
Loans: | |||||||||||||
Loans held for sale | 43,866 | 10,325 | 325 | % | 11,301 | 288 | % | ||||||
Portfolio loans | |||||||||||||
Commercial loans | 306,543 | 317,315 | -3 | % | 300,338 | 2 | % | ||||||
Commercial real estate | 432,982 | 451,821 | -4 | % | 376,398 | 15 | % | ||||||
Construction loans | 126,037 | 106,335 | 19 | % | 62,760 | 101 | % | ||||||
Consumer loans | 63,493 | 65,836 | -4 | % | 34,541 | 84 | % | ||||||
Unearned loan fees, net | (4,551 | ) | (4,648 | ) | -2 | % | (4,021 | ) | 13 | % | |||
Total portfolio loans | 924,504 | 936,659 | -1 | % | 770,016 | 20 | % | ||||||
Total loans | 968,370 | 946,984 | 2 | % | 781,317 | 24 | % | ||||||
Allowance for loan losses | (16,723 | ) | (16,243 | ) | 3 | % | (16,282 | ) | 3 | % | |||
Net loans | 951,647 | 930,741 | 2 | % | 765,035 | 24 | % | ||||||
Purchased receivables, net | 15,254 | 14,328 | 6 | % | 16,025 | -5 | % | ||||||
Other real estate owned, net | 4,607 | 4,732 | -3 | % | 2,402 | 92 | % | ||||||
Premises and equipment, net | 35,643 | 34,720 | 3 | % | 28,324 | 26 | % | ||||||
Goodwill and intangible assets | 24,035 | 8,349 | 188 | % | 7,942 | 203 | % | ||||||
Other assets | 58,772 | 55,250 | 6 | % | 43,395 | 35 | % | ||||||
Total assets | $1,449,349 | $1,420,665 | 2 | % | $1,215,006 | 19 | % | ||||||
Liabilities: | |||||||||||||
Demand deposits | $403,523 | $438,805 | -8 | % | $363,969 | 11 | % | ||||||
Interest-bearing demand | 185,114 | 176,030 | 5 | % | 143,703 | 29 | % | ||||||
Savings deposits | 122,588 | 119,002 | 3 | % | 94,518 | 30 | % | ||||||
Alaska CDs | 99,736 | 112,667 | -11 | % | 112,702 | -12 | % | ||||||
Money market deposits | 226,574 | 237,235 | -4 | % | 202,606 | 12 | % | ||||||
Time deposits | 142,212 | 108,628 | 31 | % | 86,225 | 65 | % | ||||||
Total deposits | 1,179,747 | 1,192,367 | -1 | % | 1,003,723 | 18 | % | ||||||
Securities sold under repurchase agreements | 19,843 | 19,931 | — | % | 21,143 | -6 | % | ||||||
Other borrowings | 26,304 | 2,175 | 1,109 | % | 6,527 | 303 | % | ||||||
Junior subordinated debentures | 18,558 | 18,558 | — | % | 18,558 | — | % | ||||||
Other liabilities | 40,456 | 28,363 | 43 | % | 20,737 | 95 | % | ||||||
Total liabilities | 1,284,908 | 1,261,394 | 2 | % | 1,070,688 | 20 | % | ||||||
Shareholders' Equity: | |||||||||||||
Northrim BanCorp shareholders' equity | 164,323 | 159,116 | 3 | % | 144,151 | 14 | % | ||||||
Noncontrolling interest | 118 | 155 | NM | 167 | -29 | % | |||||||
Total shareholders' equity | 164,441 | 159,271 | 3 | % | 144,318 | 14 | % | ||||||
Total liabilities and shareholders' equity | $1,449,349 | $1,420,665 | 2 | % | $1,215,006 | 19 | % | ||||||
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
January 27, 2015
Page 11 of 13
Financial Ratios and Other Data | ||||||||||||
(Dollars in thousands) | ||||||||||||
(Unaudited) | December 31, | September 30, | December 31, | |||||||||
2014 | 2014 | 2013 | ||||||||||
Asset Quality: | ||||||||||||
Nonaccrual loans | $4,674 | $2,750 | $1,815 | |||||||||
Loans 90 days past due | — | 11 | — | |||||||||
Total nonperforming loans | 4,674 | 2,761 | 1,815 | |||||||||
Other real estate owned | 4,607 | 4,732 | 2,402 | |||||||||
Repossessed assets | 19 | 19 | — | |||||||||
Nonperforming purchased receivables | — | 243 | — | |||||||||
Total nonperforming assets | $9,300 | $7,755 | $4,217 | |||||||||
Government guarantees on nonperforming assets1 | $2,070 | $909 | $— | |||||||||
Performing restructured loans | $5,353 | $6,653 | $6,635 | |||||||||
Nonperforming loans / portfolio loans | 0.51 | % | 0.29 | % | 0.24 | % | ||||||
Nonperforming assets / total assets | 0.64 | % | 0.55 | % | 0.35 | % | ||||||
Allowance for loan losses / portfolio loans | 1.81 | % | 1.73 | % | 2.11 | % | ||||||
Allowance for loan losses / nonperforming loans | 358 | % | 588 | % | 897 | % | ||||||
Gross loan charge-offs for the quarter | $179 | $54 | $427 | |||||||||
Gross loan (recoveries) for the quarter | ($159 | ) | ($265 | ) | ($181 | ) | ||||||
Net loan charge-offs (recoveries) for the quarter | $20 | ($211 | ) | $246 | ||||||||
Net loan charge-offs (recoveries) year-to-date | ($1,076 | ) | ($1,097 | ) | ($508 | ) | ||||||
Net loan charge-offs (recoveries) for the quarter / average loans, for the quarter | — | % | (0.02 | ) | % | 0.03 | % | |||||
Net loan charge-offs (recoveries) year-to-date / average loans, | ||||||||||||
year-to-date annualized | (0.12 | ) | % | (0.16 | ) | % | (0.07 | ) | % | |||
Capital Data (At quarter end): | ||||||||||||
Book value per share | $23.99 | $23.31 | $22.07 | |||||||||
Tangible book value per share2 | $20.48 | $22.08 | $20.86 | |||||||||
Tangible Common Equity/Tangible Assets3 | 9.85 | % | 10.69 | % | 11.30 | % | ||||||
Tier 1 Capital / Risk Adjusted Assets | 13.06 | % | 14.33 | % | 15.35 | % | ||||||
Total Capital / Risk Adjusted Assets | 14.31 | % | 15.58 | % | 16.61 | % | ||||||
Tier 1 Capital / Average Assets | 11.21 | % | 12.44 | % | 13.06 | % | ||||||
Shares outstanding | 6,854,189 | 6,834,101 | 6,537,652 | |||||||||
Unrealized gain on AFS securities, net of income taxes | $247 | $646 | $669 | |||||||||
Profitability Ratios (For the quarter): | ||||||||||||
Net interest margin (tax equivalent)4 | 4.49 | % | 4.43 | % | 4.24 | % | ||||||
Efficiency ratio5 | 59.79 | % | 69.83 | % | 74.35 | % | ||||||
Return on average assets | 1.84 | % | 1.07 | % | 0.89 | % | ||||||
Return on average equity | 16.40 | % | 9.29 | % | 7.36 | % | ||||||
Profitability Ratios (Year-to-date): | ||||||||||||
Net interest margin (tax equivalent)4 | 4.41 | % | 4.38 | % | 4.29 | % | ||||||
Efficiency ratio5 | 66.84 | % | 70.11 | % | 69.64 | % | ||||||
Return on average assets | 1.30 | % | 1.10 | % | 1.07 | % | ||||||
Return on average equity | 11.19 | % | 9.34 | % | 8.75 | % | ||||||
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
January 27, 2015
Page 12 of 13
Average Balances | |||||||||||||
(Dollars in thousands) | |||||||||||||
(Unaudited) | |||||||||||||
December 31, | September 30, | Three Month | December 31, | One Year | |||||||||
2014 | 2014 | % Change | 2013 | % Change | |||||||||
Average Quarter Balances | |||||||||||||
Loans held for sale | $18,606 | $8,787 | 112 | % | $8,642 | 115 | % | ||||||
Portfolio loans | 938,229 | 936,415 | — | % | 763,402 | 23 | % | ||||||
Total loans | 956,835 | 945,202 | 1 | % | 772,044 | 24 | % | ||||||
Total earning assets | 1,297,877 | 1,242,944 | 4 | % | 1,090,757 | 19 | % | ||||||
Total assets | 1,440,032 | 1,376,773 | 5 | % | 1,199,006 | 20 | % | ||||||
Noninterest-bearing deposits | 422,941 | 405,722 | 4 | % | 360,562 | 17 | % | ||||||
Interest-bearing deposits | 778,121 | 744,631 | 4 | % | 626,675 | 24 | % | ||||||
Total deposits | 1,201,062 | 1,150,353 | 4 | % | 987,237 | 22 | % | ||||||
Shareholders' equity | 161,421 | 158,322 | 2 | % | 144,481 | 12 | % | ||||||
Average Year-to-date Balances | |||||||||||||
Loans held for sale | $11,232 | $8,747 | 28 | % | $11,401 | -1 | % | ||||||
Portfolio loans | 893,031 | 877,800 | 2 | % | 734,427 | 22 | % | ||||||
Total loans | 904,263 | 886,547 | 2 | % | 745,828 | 21 | % | ||||||
Total earning assets | 1,212,291 | 1,183,449 | 2 | % | 1,041,268 | 16 | % | ||||||
Total assets | 1,335,929 | 1,300,847 | 3 | % | 1,156,500 | 16 | % | ||||||
Noninterest-bearing deposits | 384,516 | 371,566 | 3 | % | 340,180 | 13 | % | ||||||
Interest-bearing deposits | 727,078 | 709,877 | 2 | % | 613,745 | 18 | % | ||||||
Total deposits | 1,111,594 | 1,081,443 | 3 | % | 953,925 | 17 | % | ||||||
Shareholders' equity | 155,591 | 153,627 | 1 | % | 140,924 | 10 | % | ||||||
Northrim BanCorp Earns $17.4 Million, or $2.54 per Diluted Share, in 2014
January 27, 2015
Page 13 of 13
1 Represents the portion of nonperforming assets that are guaranteed by governmental agencies including the Small Business Administration, the United States Department of Agriculture, the Bureau of Indian Affairs, and the Alaska Industrial Development and Export Authority.
2 Tangible book value is a non-GAAP measure defined as shareholders' equity, less intangible assets, divided by shares outstanding.
Book value per share | Tangible book value per share | ||||||||
Total shareholder's equity | $164,441 | $164,441 | |||||||
Less: goodwill and intangible assets | N/A | (24,035 | ) | ||||||
$164,441 | $140,406 | ||||||||
Divided by shares outstanding | 6,854 | 6,854 | |||||||
$23.99 | $20.48 | ||||||||
3 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. This ratio has received more attention over the past several years from stock analysts and regulators. The GAAP measure of common equity to assets would be total equity to total assets. Total equity to total assets was 11.35% at December 31, 2014 as compared to 11.21% at September 30, 2014 and 11.88% at December 31, 2013.
4 Tax-equivalent net interest margin 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 41.11% in both 2014 and 2013.
5 The efficiency ratio is a non-GAAP ratio that is calculated by dividing other operating expense, exclusive of intangible asset amortization, by the sum of net interest income and other operating income.
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Note Transmitted on GlobeNewswire on January 27, 2015, at 12:00 pm Alaska Standard Time.