ANCHORAGE, Alaska, Oct. 24, 2007 (PRIME NEWSWIRE) -- Northrim BanCorp, Inc. (Nasdaq:NRIM) today reported third quarter profits fueled by solid core deposit growth, strong revenue contribution from its affiliates other than its mortgage affiliate, and the year-over-year increase in net interest margin. Third quarter 2007 net income increased 5% to $3.6 million, or $0.56 per diluted share, compared to $3.5 million, or $0.53 per diluted share, in the third quarter of 2006. For the first nine months of 2007, Northrim earned $9.5 million, or $1.46 per diluted share, compared to $9.3 million, or $1.43 per diluted share, in the like period a year ago. All per share results reflect the 5% stock dividend declared on September 6, 2007, and distributed to shareholders on October 5, 2007. In addition, these calculations reflect the fact that the Company repurchased 75,000 shares of its common stock during the third quarter ended September 30, 2007.
"Continuing high prices for energy and natural resources are providing a solid base to the Alaska economy and generating steady employment growth," said Marc Langland, Chairman, President and CEO. "Our housing market has been relatively more stable than other areas of the country because it did not have the rapid appreciation experienced in other markets. However, mortgage loan volumes are down as compared to last year. In addition, residential building permits are down 50% since last year."
"We completed the acquisition of Alaska First Bank & Trust last week, so it did not impact our third quarter results," Langland continued. "We are delighted to add this local bank to our system and expect it will begin contributing to our earnings in 2008."
FINANCIAL HIGHLIGHTS (at or for the three-month periods ended September 30, 2007, compared to September 30, 2006)
* Net interest margin was 5.81% up 2 basis points from the third quarter a year ago. * Revenues grew 7% to $15.2 million, boosted by a 26% rise in other operating income. * Book value per share grew 10% to $15.87. * Tangible book value grew 12% to $14.82 per share. * Core deposits grew 5%, with money market balances up 20%.
REVIEW OF OPERATIONS
Revenue (net interest income plus noninterest income) grew 7% to $15.2 million in the third quarter of 2007, compared to $14.1 million in the third quarter of 2006. Net interest income before the provision for loan losses grew 4% to $12.4 million in the third quarter of 2007 from $11.9 million in the same quarter a year ago. Year-to-date revenue increased 9% to $44.0 million from $40.3 million in the first nine months of 2006. Net interest income before provision for loan losses grew 6% to $36.9 million in the first nine months of 2007 from $34.8 million in the first nine months of last year.
"Our High Performance Checking program helped generate strong growth in core deposits, and is a solid foundation for our above-average margin," said Joe Schierhorn, CFO. "The recent cut in the Fed Funds rate, however, reduced our net interest margin slightly in the third quarter." Net interest margin (net interest income as a percentage of average earning assets on a tax equivalent basis) was 5.81% in the third quarter of 2007, compared to 5.79% in the third quarter a year ago. Net interest margin for the first nine months of 2007 was 5.93% compared to 5.81% in the first nine months of 2006.
"Our provision for loan losses was $725,000 in the third quarter, which brought the year-to-date totals to $2.5 million in the first nine months of the year," said Schierhorn. Third quarter 2007 net interest income after the provision for loan losses grew 5% to $11.7 million from $11.1 million for the third quarter a year ago. Year-to-date net interest income after provision for loan losses grew 4% to $34.4 million compared to $33.0 million in the like period of 2006.
Other operating income grew 26% in the third quarter of 2007 and 27% year-to-date reflecting the bank's initiatives to expand the financial services it offers, directly and through affiliates. Total other operating income increased in the third quarter of 2007 to $2.8 million compared to $2.2 million in the third quarter of 2006. Year-to-date other operating income rose to $7.1 million compared to $5.6 million in the same period of 2006. Deposit account service charge income increased 77% to $873,000 in the third quarter of 2007 as compared to $494,000 for the third quarter of 2006 and 55% to $2.3 million in the first nine months of 2007 from $1.5 million a year ago, reflecting the growth in new accounts and fees associated with new services. Purchased receivable income grew 28% to $744,000 in the third quarter as compared to $579,000 in the third quarter of 2006 and 35% to $1.8 million year-to-date as compared to $1.3 million a year ago. Income from the employee benefit plan services we provide grew 18% in the third quarter of 2007 to $319,000 as compared to $271,000 in the third quarter of 2006 and 7% to $890,000 year-to-date as compared to $829,000 a year ago. "Understandably, the mortgage affiliates' contribution declined in the third quarter by 36% to $202,000 and was down 17% year-to-date at $390,000," said Chris Knudson, Chief Operating Officer.
Other operating expenses rose 12% in both the third quarter and first nine months of 2007 with higher occupancy costs, compensation, and other expenses which include internet banking, training costs, and professional fees. In addition, the company incurred a $245,000 loss on one of its purchased receivable accounts in the first quarter ended March 31, 2007, that was included in other expenses. Other operating expense in the third quarter of 2007 was $8.6 million compared to $7.7 million in the third quarter a year ago. Other operating expense in the first nine months of 2007 was $26.1 million compared to $23.3 million a year ago.
"We expect our year-end operating costs to rise as we integrate the Alaska First system into ours, although we expect these cost to be quickly offset by anticipated synergies," said Knudson. The efficiency ratio during the third quarter of 2007 was 56.14% up from 53.32% a year ago. In the first nine months of the year, the efficiency ratio was 58.76% compared to 56.96% in the first nine months of 2006. The efficiency ratio, calculated by dividing noninterest expense (excluding intangible asset amortization expense) by net interest income and noninterest income, measures overhead costs as a percentage of total revenues.
BALANCE SHEET PERFORMANCE
Total assets grew 6% to $959 million at September 30, 2007, compared to $902 million a year ago, with portfolio investments up 19%, purchased receivables up 15%, and total loans down by less than 1%.
The loan portfolio totaled $695 million at September 30, 2007, compared to $698 million at September 30, 2006. Commercial loans, which account for 43% of the portfolio, grew 2% year over year. Commercial real estate loans, which account for 31% of the portfolio, declined by 1% and construction loans, which accounted for 20% of the portfolio, dropped 6% from a year ago. "Our exposure to new construction, particularly residential, has decreased as activity in that sector has declined this year," said Joe Beedle, Executive Vice President and Chief Lending Officer. Consumer loans, which account for 7% of the portfolio, grew 11% at September 30, 2007, compared to a year ago, as a result of the growth in overall consumer accounts.
Nonperforming assets showed a small improvement over the immediate prior quarter, although they were higher than last year at this time. "Our efforts to work with our customers to bring past due balances current helped us to reduce the balance of loans that were 90 days or more past due. A few large loans comprise the majority of nonperforming loans and these loans are well secured by real estate and other business assets," said Beedle.
At September 30, 2007, total nonperforming assets were $9.3 million, or 0.97% of total assets, down from $10.6 million, or 1.12% at June 30, 2007 and up from $8.3 million, or 0.93% at September 30, 2006. Nonperforming loans were $8.6 million, or 1.24% of total loans at quarter end, compared to $9.9 million, or 1.41% of total loans, at June 30, 2007, and $8.3 million, or 1.20% of total loans, a year ago.
The allowance for loan losses totaled $12.1 million, or 1.74% of gross loans, at quarter end compared to $12.6 million, or 1.81% of gross loans, at September 30, 2006 and an allowance of $11.8 million, or 1.69% of gross loans, at June 30, 2007. The allowance for loan losses increased at September 30, 2007 as compared to the quarter ending June 30, 2007 as a result of continued softening in the residential construction market. Net charge-offs for the third quarter ending September 30, 2007 were 49 basis points as a percentage of total loans, compared to 58 basis points for the second quarter ending June 30, 2007 and recoveries of 3 basis points in the third quarter ending September 30, 2006.
Total deposits increased 5% to $818 million at September 30, 2007, compared to $777 million a year earlier. "Strong growth in money market deposits helped offset a decline in balances of the Alaska CD program, and the success of our High Performance Checking program contributed to solid growth in demand deposits," said Knudson. "We expect the acquisition of Alaska First will further enhance our core deposit base."
At September 30, 2007, money market balances account for 23% of total deposits, up from 20% a year ago. Alaska CDs, a unique and flexible certificate of deposit, also accounted for 23% of total deposits at September 30, 2007 compared to 27% a year ago. Non interest bearing demand deposits represented 25% of the deposit mix at both September 30, 2007 and September 30, 2006.
Shareholders' equity increased 9% to $100 million, or $15.87 per share, at September 30, 2007, compared to $92 million, or $14.39 per share, at September 30, 2006. Tangible book value per share at September 30, 2007 was $14.82 compared to $13.29 at September 30, 2006. All per share calculations reflect the 5% stock dividend declared on September 6, 2007 and distributed to shareholders on October 5, 2007. In addition, these calculations reflect the fact that the Company repurchased 75,000 shares of its common stock during the third quarter ended September 30, 2007.
About Northrim BanCorp
Northrim BanCorp, Inc. is the parent company of Northrim Bank, a commercial bank that provides personal and business banking services through locations in Anchorage, Eagle River, Wasilla, and Fairbanks, Alaska, and an asset based lending division in Washington. The bank differentiates itself with a "Customer First Service" philosophy. Affiliated companies include Elliott Cove Capital Management, LLC; Residential Mortgage, LLC; Northrim Benefits Group, LLC; and Pacific Wealth Advisors, LLC.
Income Statement
----------------
(Dollars in thousands, except per share data)
Quarter Ended September 30:
--------------------------------------
2007 2006 % Change
--------------------------------------
(unaudited) (unaudited) (unaudited)
Interest Income:
Interest and fees
on loans $ 16,613 $ 16,601 0%
Interest on portfolio
investments 964 725 33%
Interest on overnight
investments 893 515 73%
--------------------------------------
Total interest income 18,470 17,841 4%
Interest Expense:
Interest expense
on deposits 5,581 5,486 2%
Interest expense
on borrowings 477 418 14%
--------------------------------------
Total interest expense 6,058 5,904 3%
--------------------------------------
Net interest income 12,412 11,937 4%
Provision for loan losses 725 850 -15%
--------------------------------------
Net interest income
after provision for
loan losses 11,687 11,087 5%
Other Operating Income:
Service charges on
deposit accounts 873 494 77%
Purchased receivable
income 744 579 28%
Employee benefit plan
income 319 271 18%
Equity in earnings
from mortgage affiliate 202 317 -36%
Other income 645 542 19%
--------------------------------------
Total other operating
income 2,783 2,203 26%
Other Operating Expense:
Salaries and other
personnel expense 5,110 4,790 7%
Occupancy, net 695 626 11%
Equipment expense 333 325 2%
Intangible asset
amortization expense 28 121 -77%
Other expense 2,393 1,799 33%
--------------------------------------
Total other operating
expense 8,559 7,661 12%
--------------------------------------
Income before income
taxes and minority
interest 5,911 5,629 5%
--------------------------------------
Minority interest
in subsidiaries 85 70 21%
--------------------------------------
Pre tax income 5,826 5,559 5%
--------------------------------------
Provision for
income taxes 2,200 2,108 4%
--------------------------------------
Net income $ 3,626 $ 3,451 5%
======================================
Basic EPS $ 0.57 $ 0.54 6%
Diluted EPS $ 0.56 $ 0.53 6%
Average basic shares 6,386,334 6,428,830 -1%
Average diluted shares 6,480,057 6,520,261 -1%
Nine Months Ended September 30:
--------------------------------------
2007 2006 % Change
--------------------------------------
(unaudited) (unaudited) (unaudited)
Interest Income:
Interest and fees
on loans $ 50,370 $ 48,165 5%
Interest on portfolio
investments 2,949 1,851 59%
Interest on overnight
investments 1,506 852 77%
--------------------------------------
Total interest income 54,825 50,868 8%
Interest Expense:
Interest expense
on deposits 16,543 14,850 11%
Interest expense
on borrowings 1,380 1,256 10%
--------------------------------------
Total interest expense 17,923 16,106 11%
--------------------------------------
Net interest income 36,902 34,762 6%
Provision for loan losses 2,513 1,764 42%
--------------------------------------
Net interest income
after provision for
loan losses 34,389 32,998 4%
Other Operating Income:
Service charges on deposit
accounts 2,269 1,468 55%
Purchased receivable income 1,820 1,345 35%
Employee benefit plan income 890 829 7%
Equity in earnings from
mortgage affiliate 390 472 -17%
Other income 1,746 1,468 19%
--------------------------------------
Total other operating
income 7,115 5,582 27%
Other Operating Expense:
Salaries and other
personnel expense 15,526 14,226 9%
Occupancy, net 2,013 1,864 8%
Equipment expense 1,040 1,023 2%
Intangible asset
amortization expense 249 362 -31%
Other expense 7,287 5,865 24%
--------------------------------------
Total other operating
expense 26,115 23,340 12%
Income before income
taxes and minority
interest 15,389 15,240 1%
--------------------------------------
Minority interest in
subsidiaries 215 218 -1%
--------------------------------------
Pre tax income 15,174 15,022 1%
--------------------------------------
Provision for income taxes 5,677 5,737 -1%
--------------------------------------
Net income $ 9,497 $ 9,285 2%
======================================
Basic EPS $ 1.48 $ 1.45 2%
Diluted EPS $ 1.46 $ 1.43 2%
Average basic shares 6,420,054 6,420,642 0%
Average diluted shares 6,515,894 6,580,240 -1%
Balance Sheet
-------------
(Dollars in thousands, except per share data)
Sept. 30, Dec. 31, Sept. 30, Annual
2007 2006 2006 % Change
----------------------------------------
(unaudited) (unaudited) (unaudited)
Assets:
Cash and due from banks $ 26,159 $ 25,565 $ 30,316 -14%
Overnight investments 78,443 18,717 39,778 97%
Portfolio investments 90,536 100,325 75,884 19%
Loans:
Commercial loans 297,882 287,155 293,427 2%
Commercial real estate 213,214 237,599 215,664 -1%
Construction loans 141,268 153,059 150,772 -6%
Consumer loans 45,472 42,140 41,032 11%
Other loans 113 126 309 -63%
Unearned loan fees (3,000) (3,023) (3,128) -4%
--------------------------------------
Total loans 694,949 717,056 698,076 0%
Allowance for loan losses (12,074) (12,125) (12,646) -5%
--------------------------------------
Net loans 682,875 704,931 685,430 0%
Purchased receivables, net 23,168 21,183 20,215 15%
Premises and equipment,
net 13,910 12,874 11,888 17%
Goodwill and intangible
assets 6,656 6,903 7,024 -5%
Other assets 37,125 35,122 31,065 20%
--------------------------------------
Total assets $958,872 $925,620 $901,600 6%
======================================
Liabilities and
Shareholders' Equity:
Demand deposits $208,441 $206,343 $196,466 6%
Interest-bearing demand 86,250 89,476 83,178 4%
Savings deposits 51,645 48,330 49,436 4%
Alaska CDs 187,765 207,492 209,290 -10%
Money market deposits 187,448 157,345 156,564 20%
Time deposits 96,060 85,918 81,853 17%
--------------------------------------
Total deposits 817,609 794,904 776,787 5%
Borrowings 12,698 6,502 5,767 120%
Junior subordinated
debentures 18,558 18,558 18,558 0%
Other liabilities 9,703 10,209 8,218 18%
--------------------------------------
Total liabilities 858,568 830,173 809,330 6%
Minority interest in
subsidiaries 29 29 27 7%
Shareholders' equity 100,275 95,418 92,243 9%
--------------------------------------
Total liabilities
and equity $958,872 $925,620 $901,600 6%
======================================
Financial Ratios and Other Data
-------------------------------
(Dollars in thousands, except per share data)
September 30, December 31, September 30,
2007 2006 2006
--------------------------------------
(unaudited) (unaudited) (unaudited)
Asset Quality:
Non accrual loans $ 5,666 $ 5,176 $ 5,532
Loans 90 days past due 2,917 708 2,811
Restructured loans 17 748 --
--------------------------------------
Total non-performing
loans 8,600 6,632 8,343
Other real estate owned 717 717 --
--------------------------------------
Total non-performing
assets $ 9,317 $ 7,349 $ 8,343
--------------------------------------
Non-performing loans /
portfolio loans 1.24% 0.92% 1.20%
Non-performing assets /
assets 0.97% 0.79% 0.93%
Allowance for loan losses /
portfolio loans 1.74% 1.69% 1.81%
Allowance / non-performing
loans 140.40% 182.83% 151.58%
Loan (recoveries)
charge-offs, net for the
quarter $ 492 $ 1,322 ($215)
Loan (recoveries)
charge-offs, net
year-to-date $ 2,564 $ 1,145 ($176)
Net loan (recoveries)
charge-offs / average
loans, annualized 0.49% 0.16% -0.03%
Capital Data (At quarter end):
Book value per share $ 15.87 $ 14.87 $ 14.39
Tangible book value per
share $ 14.82 $ 13.80 $ 13.29
Tier 1 / Risk Adjusted Assets 13.33% 12.95% 12.84%
Total Capital / Risk
Adjusted Assets 14.58% 14.21% 14.09%
Tier 1 /Average Assets 11.89% 11.71% 11.57%
Shares outstanding 6,317,268 6,414,976 6,410,155
Unrealized gain (loss) on
AFS securities, net of
income taxes $ 3 ($287) ($341)
Profitability Ratios (For the
quarter):
Net interest margin (tax
equivalent) 5.81% 6.11% 5.79%
Efficiency ratio* 56.14% 53.30% 53.32%
Return on average assets 1.52% 1.60% 1.52%
Return on average equity 14.32% 15.55% 15.02%
Profitability Ratios
(Year-to-date):
Net interest margin (tax
equivalent) 5.93% 5.89% 5.81%
Efficiency ratio* 58.76% 55.97% 56.96%
Return on average assets 1.37% 1.46% 1.41%
Return on average equity 12.89% 14.45% 14.05%
*excludes intangible asset amortization expense
Average Balances
----------------
(Dollars in thousands, except per share data)
Sept. 30, Dec. 31, Sept. 30, Annual
2007 2006 2006 % Change
--------------------------------------
(unaudited)
Average Quarter Balances
Loans $698,570 $703,678 $710,157 -2%
Total earning assets 850,285 831,314 821,660 3%
Total assets 944,176 917,559 900,562 5%
Non-interest bearing
deposits 199,845 198,193 192,399 4%
Interest bearing deposits 601,787 590,184 585,758 3%
Total deposits 801,632 788,377 778,157 3%
Shareholders' equity 100,481 94,149 91,128 10%
Average Year-to-date Balances
Loans $711,148 $712,130 $714,978 -1%
Total earning assets 834,990 810,946 804,082 4%
Total assets 924,092 888,697 878,970 5%
Non-interest bearing deposit 190,573 185,959 181,835 5%
Interest bearing deposits 594,312 579,569 575,992 3%
Total deposits 784,885 765,528 757,827 4%
Shareholders' equity 98,523 89,797 88,330 12%
This release may contain "forward-looking statements" that are subject to 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 or management, are intended to help identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 our ability to maintain or expand our market share or net interest margins, and to implement our marketing and growth strategies. 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 collectibility 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 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.