ANCHORAGE, Alaska, April 23, 2008 (PRIME NEWSWIRE) -- Northrim BanCorp, Inc. (Nasdaq:NRIM) today reported deposit growth contributed to the net interest margin in the first quarter of 2008, helping to offset higher provisions for loan losses and declining asset quality. In the first quarter of 2008, net income totaled $2.1 million or $0.34 per diluted share, compared to $2.7 million, or $0.42 per diluted share, in the first quarter of 2007. All per share results reflect the payment of a 5% stock dividend in October 2007 and the ongoing share repurchase program.
"With the continuing strength in natural resources and commodity prices, the Alaska economy is attracting serious investments for new exploration, development, and transportation projects for natural resources," said Marc Langland, Chairman, President and CEO. "Recently BP and ConocoPhillips announced they will invest $600 million to reach the first major milestone for their Alaska natural gas pipeline project over the next three years. According to the companies, this will be the largest privately constructed project in the world with a total cost in excess of $30 billion. The companies announced plans to ship 4 billion cubic feet of natural gas per day by 2018. The State of Alaska Department of Revenue is also projecting that capital investment to continue to develop existing oil fields on the North Slope of Alaska will increase from $2.1 billion to $2.4 billion this year."
"Because of the strength in the energy sector and continued overall employment growth, Alaska's housing market continues to be stable. Although, we have noticed some softness this year in the upper end price range for homes above $750,000," continued Langland. "According to statistics from the Alaska Housing Finance Corporation, Alaska had the lowest foreclosure rate in the country in 2007 at 0.67%, compared to 2.04% nationally. AHFC also noted that Alaska's delinquency rate was 3.31%, which was the seventh lowest in the country, compared to 6.31% nationally."
FINANCIAL HIGHLIGHTS (at or for the quarter ended March 31, 2008, compared to March 31, 2007)
* Net interest margin was 5.60%, one of the highest in the nation. * Revenues grew 6% to $14.6 million, boosted by a 46% rise in other operating income. * Book value per share grew 7% to $16.15. * Tangible book value grew 4% to $14.63 per share. * Deposits grew 11%, with money market accounts up 26% and interest-bearing demand deposits up 24%. * Nonperforming assets increased to $23.2 million. * The loan loss provision in the first quarter of $1.7 million brought total reserves to $12.6 million, or 1.78% of portfolio loans. * Capital ratios remained above well capitalized requirements with Tier 1 capital / risk adjusted assets of 12.31%.
BALANCE SHEET PERFORMANCE
In the fourth quarter of 2007, Northrim completed the purchase of Alaska First Bank & Trust, N.A., which added $58 million to its assets and $48 million to its deposits. Total assets grew 10% to $1 billion at March 31, 2008, compared to $911 million a year ago. The loan portfolio totaled $705 million at March 31, 2008, compared to $720 million at March 31, 2007. Commercial loans, which accounted for 41% of the loan portfolio at March 31, 2008, were down 5% year over year. Commercial real estate loans, which accounted for 35% of the loan portfolio at March 31, 2008, grew 4% and construction loans, which accounted for 18% of the loan portfolio, declined 13% from a year ago. Consumer loans, which accounted for 6% of the portfolio, grew 21% at March 31, 2008, compared to a year ago, as a result of the growth in overall consumer accounts.
"Bolstered by ongoing employment growth, Alaska's real estate market continues to be stable, with relatively low residential inventories and low office and industrial vacancy rates," said Joe Beedle, Chief Lending Officer. "National trends in the real estate market and a change in mortgage underwriting standards have affected our local housing markets though and slowed down the home purchase cycle compared to last year. As a result, according to statistics from the Municipality of Anchorage, residential building permits decreased by 40% over the last year. We have several borrowers with residential construction and land development projects that were adversely affected by these trends in the industry. These projects make up a majority of our nonperforming loans. We believe that we have minimal construction risk remaining for these projects and expect that they will be completed timely once the summer construction season opens. We anticipate further resolutions on these properties later this year and into 2009 in light of the relatively stable market and large decrease in building permit activity that has reduced the supply of new properties coming onto the market.
"We expect additional stimulus to our economy from state spending. The State of Alaska is projected to receive record revenues due to the high price of oil and a recent change in oil taxes. These additional revenues have created a $7.7 billion surplus. The legislature placed $5 billion of this surplus in savings and used the remaining $2.7 billion for its current capital budget. The 74% increase in the state's capital budget and the added savings should provide further support to the general economy and real estate industry."
In the first quarter of 2008, Northrim charged off $929,000 for one relationship, moved $3.7 million from nonaccrual for two properties into OREO and added $1.1 million into 90 days past due but still accruing and $2.4 million to nonaccrual loans. Nonperforming assets increased to $23.2 million, or 2.31% of total assets at March 31, 2008, from $11.0 million, or 1.21% of assets at March 31, 2007. In addition, Northrim had net charge-offs of $864,000, or 0.49% of average loans for the first quarter ended March 31, 2008, compared to $727,000, or 0.41% of average loans, charged off in the year ago quarter. The allowance for loan losses totaled $12.6 million, or 1.78% of gross loans and 84% of nonperforming loans, at March 31, 2008, compared to $11.9 million, or 1.65% of gross loans and 116% of nonperforming loans, at March 31, 2007.
Total deposits increased 11% to $858 million at March 31, 2008, compared to $775 million at March 31, 2007. "The growth in low cost deposits continues to support our net interest margin, and we remain very positive about the contributions generated from our High Performance Checking program," said Chris Knudson, Chief Operating Officer.
Money market balances accounted for 25% of total deposits at March 31, 2008, up from 22% a year ago. Alaska CDs, a unique and flexible savings account, accounted for 17% of total deposits at March 31, 2008, compared to 25% a year ago. Non interest bearing demand deposits represented 23% and interest bearing demand deposits were 12% of the deposit mix at March 31, 2008, compared to 24% and 11%, respectively, at March 31, 2007. Time deposits were 16% of deposits at quarter end 2007 up from 12% of deposits a year ago.
Shareholders' equity increased 5% to $102 million, or $16.15 per share, at March 31, 2008, compared to $97 million, or $15.08 per share, at March 31, 2007. Tangible book value per share at March 31, 2008, was $14.63 compared to $14.02 at March 31, 2007. All per share calculations reflect the 5% stock dividend paid October 5, 2007. In addition, these calculations reflect the repurchase of 137,500 shares in 2007.
REVIEW OF OPERATIONS
"Because most of our deposits are in low cost transaction accounts, our cost of funds remains stable and affordable. Our ability to grow core deposits has also contributed to our net interest margin," said Joe Schierhorn, CFO. Net interest margin (net interest income as a percentage of average earning assets on a tax equivalent basis) was 5.60% in the first quarter of 2008, compared to 6.04% in the first quarter a year ago.
Revenue (net interest income plus noninterest income) grew 6% to $14.6 million in the first quarter ending March 31, 2008, compared to $13.8 million in the first quarter of 2007. In the first quarter of 2008, net interest income grew to $12.2 million from $12.1 million in the first quarter of 2007. After the $1.7 million provision for loan losses, first quarter 2008 net interest income was down 10% to $10.5 million from $11.6 million for the first quarter of 2007, which included a provision for loan losses of $455,000.
Other operating income grew 46% in the first quarter of 2008 compared to the first quarter of 2007, reflecting the Bank's initiatives to expand the financial services it offers, directly and through affiliates. Total other operating income increased in the first quarter of 2008 to $2.4 million compared to $1.7 million in the first quarter of 2007. In the first quarter of 2008, deposit account service income grew 71% to $862,000 compared to $504,000 for the first quarter of 2007, reflecting the growth in new accounts and fees associated with new services. Purchased receivables contributed $529,000 to first quarter 2008 revenue, up 24% from the $427,000 generated in the first quarter of 2007. Employee benefit plan income also grew 19% in the first quarter of 2008 to $307,000 from $257,000 in the first quarter of 2007.
Other operating expenses rose 6% in the first quarter of 2008 with higher occupancy costs and moderately higher compensation expense. Other operating expense in the first quarter of 2008 was $9.5 million compared to $8.9 million in the first quarter a year ago. The efficiency ratio during the first quarter of 2008 was 64.15% compared to 64.01% a year ago. 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.
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.
The Northrim BanCorp, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3818
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.
Income Statement
----------------
(Dollars in thousands, except per share data)
Quarter Ended March 31:
----------------------------------
2008 2007 % Change
----------------------------------
(unaudited) (unaudited) (unaudited)
Interest Income:
Interest and fees on loans $ 14,446 $ 16,821 -14%
Interest on portfolio
investments 1,717 1,007 71%
Interest on overnight
investments 195 154 27%
----------------------------------
Total interest income 16,358 17,982 -9%
Interest Expense:
Interest expense on deposits 3,730 5,429 -31%
Interest expense on borrowings 433 450 -4%
----------------------------------
Total interest expense 4,163 5,879 -29%
----------------------------------
Net interest income 12,195 12,103 1%
Provision for loan losses 1,700 455 274%
----------------------------------
Net interest income after
provision for loan losses 10,495 11,648 -10%
Other Operating Income:
Service charges on deposit
accounts 862 504 71%
Purchased receivable income 529 427 24%
Employee benefit plan income 307 257 19%
Equity in earnings from
mortgage affiliate 33 14 136%
Other income 691 460 50%
----------------------------------
Total other operating income 2,422 1,662 46%
Other Operating Expense:
Salaries and other personnel
expense 5,403 5,255 3%
Occupancy, net 824 698 18%
Equipment expense 296 342 -13%
Intangible asset amortization
expense 88 121 -27%
Other expense 2,854 2,516 13%
----------------------------------
Total other operating expense 9,465 8,932 6%
----------------------------------
Income before income taxes
and minority interest 3,452 4,378 -21%
----------------------------------
Minority interest in subsidiaries 75 50 50%
----------------------------------
Pre tax income 3,377 4,328 -22%
----------------------------------
Provision for income taxes 1,229 1,599 -23%
----------------------------------
Net income $ 2,148 $ 2,729 -21%
==================================
Basic EPS $ 0.34 $ 0.42 -19%
Diluted EPS $ 0.34 $ 0.42 -19%
Average basic shares 6,349,499 6,444,843 -1%
Average diluted shares 6,376,233 6,545,093 -3%
Balance Sheet
-------------
(Dollars in thousands, except per share data)
Annual
March 31, December 31, March 31, %
2008 2007 2007 Change
----------------------------------------------
(unaudited) (unaudited) (unaudited)
Assets:
Cash and due from
banks $ 24,550 $ 30,767 $ 20,658 19%
Overnight investments 67,629 33,039 21,937 208%
Portfolio investments 125,947 161,713 84,498 49%
Loans:
Commercial loans 286,793 284,686 300,804 -5%
Commercial real
estate 243,609 243,245 234,769 4%
Construction loans 125,024 138,070 144,024 -13%
Consumer loans 51,582 51,139 42,772 21%
Other loans 369 405 364 1%
Unearned loan fees (2,425) (2,744) (2,589) -6%
----------------------------------------------
Total loans 704,952 714,801 720,144 -2%
Allowance for loan
losses (12,571) (11,735) (11,853) 6%
----------------------------------------------
Net loans 692,381 703,066 708,291 -2%
Purchased
receivables, net 20,841 19,437 20,365 2%
Premises and
equipment, net 16,623 15,621 12,834 30%
Goodwill and
intangible assets 9,569 9,946 6,783 41%
Other real estate
owned 8,264 4,445 829 897%
Other assets 35,914 36,680 34,970 3%
----------------------------------------------
Total assets $1,001,718 $1,014,714 $ 911,165 10%
==============================================
Liabilities and
Shareholders' Equity:
Demand deposits $ 199,597 $ 224,986 $ 184,653 8%
Interest-bearing
demand 102,819 96,455 83,194 24%
Savings deposits 55,066 55,285 47,856 15%
Alaska CDs 148,105 171,341 194,952 -24%
Money market
deposits 212,696 215,819 168,867 26%
Time deposits 139,856 103,490 95,915 46%
----------------------------------------------
Total deposits 858,139 867,376 775,437 11%
Borrowings 12,645 16,770 8,602 47%
Junior subordinated
debentures 18,558 18,558 18,558 0%
Other liabilities 10,408 10,595 11,802 -12%
----------------------------------------------
Total liabilities 899,750 913,299 814,399 10%
Minority interest
in subsidiaries 36 24 18 100%
Shareholders' equity 101,932 101,391 96,748 5%
----------------------------------------------
Total liabilities
and equity $1,001,718 $1,014,714 $ 911,165 10%
==============================================
Financial Ratios and Other Data
-------------------------------
(Dollars in thousands, except per share data)
March 31, December 31, March 31,
2008 2007 2007
----------------------------------
(unaudited) (unaudited) (unaudited)
Asset Quality:
Non accrual loans $ 12,095 $ 9,673 $ 6,435
Loans 90 days past due 2,793 1,665 3,679
Restructured loans -- -- 78
----------------------------------
Total non-performing loans 14,888 11,338 10,192
Other real estate owned 8,264 4,445 829
----------------------------------
Total non-performing assets $ 23,152 $ 15,783 $ 11,021
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Non-performing loans /
portfolio loans 2.11% 1.59% 1.42%
Non-performing assets / assets 2.31% 1.56% 1.21%
Allowance for loan losses /
portfolio loans 1.78% 1.64% 1.65%
Allowance / non-performing loans 84.44% 103.50% 116.30%
Loan (recoveries) charge-offs,
net for the quarter $ 864 $ 3,559 $ 727
Net loan (recoveries)
charge-offs / average loans,
annualized 0.49% 0.86% 0.41%
Capital Data (At quarter end):
Book value per share $ 16.15 $ 16.09 $ 15.08
Tangible book value per share $ 14.63 $ 14.51 $ 14.02
Tier 1 / Risk Adjusted Assets 12.31% 12.32% 13.29%
Total Capital / Risk Adjusted
Assets 13.57% 13.57% 14.54%
Tier 1 / Average Assets 11.36% 11.10% 12.08%
Shares outstanding 6,311,807 6,300,256 6,417,458
Unrealized gain (loss) on AFS
securities, net of income
taxes $ 236 $ 225 ($173)
Profitability Ratios (For the
quarter):
Net interest margin (tax
equivalent) 5.60% 5.79% 6.04%
Efficiency ratio 64.15% 55.82% 64.01%
Return on average assets 0.88% 0.86% 1.23%
Return on average equity 8.40% 8.32% 11.47%
Average Balances
----------------
(Dollars in thousands, except per share data)
Annual
March 31, December 31, March 31, %
2008 2007 2007 Change
----------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Average Quarter
Balances
Loans $ 707,282 $ 710,398 $ 715,417 -1%
Total earning
assets 877,486 891,617 815,088 8%
Total assets 976,205 992,473 900,557 8%
Non-interest
bearing deposits 194,298 213,345 180,054 8%
Interest bearing
deposits 630,877 627,410 584,018 8%
Total deposits 825,175 840,755 764,072 8%
Shareholders' equity 102,793 103,056 96,512 7%