ANCHORAGE, Alaska, May 01, 2017 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported that net income attributable to the Company increased 13% to $3.8 million, or $0.55 per diluted share in the first quarter of 2017, compared to $3.4 million, or $0.48 per diluted share in the first quarter of 2016, and increased 7% from $3.6 million, or $0.51 per diluted share in the fourth quarter of 2016. A higher net interest margin as well as lower other operating expenses, some of which are one-time items, and an increase in the Company's mortgage servicing business more than offset contractions in both loans and deposits, as well as a decline in the origination of mortgage loans resulting from both normal seasonality and the slowing Alaska economy.
“The highlight of the first quarter of 2017 was that our profitability remained stable and resilient in light of the slowing Alaskan economy,” said Joseph Beedle, Chairman, President and CEO of Northrim Bancorp. “We expect mortgage originations to be lower in 2017 as compared to 2016. However, the Alaskan economic decline has been relatively moderate, and the slow and gradual nature of the contraction has helped Alaska businesses and consumers adapt to the changing economic environment.”
| Financial Highlights | Three Months Ended | ||||||||||||||
| (Dollars in thousands, except per share data) | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||||||||
| Total assets | $ | 1,512,580 | $ | 1,526,540 | $ | 1,540,120 | $ | 1,518,370 | $ | 1,500,199 | |||||
| Total portfolio loans | $ | 960,832 | $ | 975,015 | $ | 997,076 | $ | 967,346 | $ | 970,517 | |||||
| Average portfolio loans | $ | 970,493 | $ | 977,678 | $ | 979,164 | $ | 969,450 | $ | 980,117 | |||||
| Total deposits | $ | 1,247,073 | $ | 1,267,653 | $ | 1,278,366 | $ | 1,255,688 | $ | 1,246,968 | |||||
| Average deposits | $ | 1,230,947 | $ | 1,265,214 | $ | 1,263,750 | $ | 1,235,142 | $ | 1,236,555 | |||||
| Total shareholders' equity | $ | 189,452 | $ | 186,712 | $ | 185,758 | $ | 183,965 | $ | 180,398 | |||||
| Net income attributable to Northrim BanCorp | $ | 3,825 | $ | 3,590 | $ | 3,095 | $ | 4,350 | $ | 3,376 | |||||
| Diluted earnings per share | $ | 0.55 | $ | 0.51 | $ | 0.44 | $ | 0.63 | $ | 0.48 | |||||
| Return on average assets | 1.04 | % | 0.94 | % | 0.81 | % | 1.17 | % | 0.91 | % | |||||
| Return on average shareholders' equity | 8.30 | % | 7.96 | % | 6.73 | % | 9.42 | % | 7.61 | % | |||||
| Net interest margin ("NIM") | 4.15 | % | 4.01 | % | 4.11 | % | 4.21 | % | 4.23 | % | |||||
| Tax equivalent NIM* | 4.22 | % | 4.07 | % | 4.17 | % | 4.27 | % | 4.29 | % | |||||
| Efficiency ratio | 72.95 | % | 75.57 | % | 80.89 | % | 74.52 | % | 74.47 | % | |||||
| Total shareholders' equity/total assets | 12.53 | % | 12.23 | % | 12.06 | % | 12.12 | % | 12.02 | % | |||||
| Tangible common equity/tangible assets* | 11.57 | % | 11.28 | % | 11.12 | % | 10.72 | % | 10.61 | % | |||||
| Book value per share | $ | 27.42 | $ | 27.07 | $ | 26.99 | $ | 26.75 | $ | 26.23 | |||||
| Tangible book value per share* | $ | 25.06 | $ | 24.70 | $ | 24.61 | $ | 23.30 | $ | 22.78 | |||||
| Dividends per share | $ | 0.21 | $ | 0.20 | $ | 0.20 | $ | 0.19 | $ | 0.19 | |||||
* References to tax equivalent NIM, tangible book value per share, tangible common equity and tangible assets (all of which exclude intangible assets) represent non-GAAP financial measures. Management has presented these non-GAAP measurements in this earnings release, because it believes these measures are useful to investors. See the end of this release for reconciliations of these measures to GAAP financial measures.
- Net income attributable to Northrim BanCorp grew 7% in the first quarter of 2017 compared to the preceding quarter and 13% from a year ago.
- Community Banking, contributed 75% of total revenues and 86% of earnings in the first quarter of 2017.
- Home Mortgage Lending contributed 25% of total revenues and 14% of earnings in the quarter.
- Total revenues, which include net interest income plus total other operating income, declined 6% to $22.7 million in the first quarter of 2017, compared to $24.3 million in the fourth quarter of 2016, and declined 2% compared to $23.3 million in the same period a year ago. Lower average loan balances and reduced net realized gains on mortgage loans sold were the primary drivers for lower revenues.
- Net interest income was relatively flat at $13.8 million in the first quarter of 2017 compared to the previous quarter, and fell 2% from the first quarter a year ago, mainly reflecting a contraction in the Company's loan portfolio in the current quarter compared to both of the prior quarters. Fourth quarter 2016 included a $187,000 reduction of interest income related to one $8.7 million commercial loan relationship moving into nonaccrual status.
- Both net interest margin ("NIM") at 4.15% and net interest margin on a tax equivalent basis ("NIMTE")* at 4.22% increased in the first quarter of 2017 compared to the fourth quarter of 2016 and decreased from the first quarter of 2016. Northrim’s NIMTE remains above peer averages1.
- Northrim paid a quarterly cash dividend of $0.21 per share in March 2017, up from the $0.19 per share dividend paid in March 2016. The dividend provides an annual yield of approximately 2.6% at current market share prices.
- Book value per share increased 5% to $27.42 at the end of the first quarter of 2017 from $26.23 a year ago.
- The allowance for loan losses to portfolio loans grew to 2.07% at quarter end, compared to 1.87% a year ago primarily due to an increase in the specific impairment related to three lending relationships.
- Northrim remains well-capitalized with Tier 1 Capital to Risk Adjusted Assets improving to 15.19%, total shareholders' equity to total assets growing to 12.53%, and tangible common equity to tangible assets* increasing to 11.57% at March 31, 2017.
1 As of December 31, 2016, the SNL US Bank Index tracked 151 banks with assets between $1 billion and $5 billion with averages for the following ratios: NIM (tax equivalent) 3.59%, loan loss reserves to gross loans of 0.99%, return on average assets 0.89%, and return on average equity 8.46%
Alaska Economic Update
“We hosted our annual economic summits in Fairbanks, Juneau and Anchorage earlier this month with more than 500 attendees joining us for an in-depth review of the current economic outlook for Alaska,” said Joe Schierhorn, Northrim Bank’s President and CEO. “We believe the Alaska State Legislature is working hard to minimize the impacts of a state-wide recession and put Alaska on a financially-stable footing with a sustainable operating budget. We are increasingly optimistic that our legislators will craft a disciplined fiscal policy. We believe it will be necessary for the Alaska state government to utilize a well-rounded approach, including using a portion of the earnings from the $58 billion Alaska Permanent Fund (see www.apfc.org), decreased spending, and broad-based taxes to address the State budget deficit. Finally, we believe the state must be careful to not overtax our resource industry.”
Mark Edwards, Northrim’s Senior Credit Officer and the Bank’s Economist offered the following analysis at our annual economic forum concerning the outlook for the Alaska economy in the near term:
“The performance of the Alaska economy in 2017 will be impacted by a number of key variables. There will be a short-term drag on the economy if the Alaska Legislature is able to create a sustainable budget by making difficult decisions on reduced spending levels, increased taxes and changes to the [Alaska] Permanent Fund. However, a balanced budget solution will have long-run positive impacts through a return of business confidence and a stabilized climate for private capital investment.
“We are closely monitoring the potential changes in interest rates and inflation, which have remained low for nearly a decade. Potentially rising rates will impact a number of sectors, and could be most broadly felt in the housing market.
“The change in federal administration in 2017 has the potential to positively impact the government regulation of natural resource development in Alaska and is likely to increase the levels of military and domestic infrastructure spending. The energy sector is starting to stabilize as the worst of falling oil prices and related cuts to employment and spending are likely behind us.
“Improvements in the U.S. economy are expected to sustain the recent growth in Alaska tourism activity. The health care industry continues to expand. This sector has been the leading source of job growth in Alaska over the last decade. Medical related construction and building improvements have also helped the economy.
“A decrease of 2.4% in payroll jobs statewide was the most negative economic indicator in 2016. A loss of 7,600 jobs was driven by layoffs in the oil & gas industry, which impacted business and professional services, construction and state government. As a result, population showed virtually no growth last year. Gross State Product and personal income statistics reported modest declines of less than 1%.”
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”. Mark Edwards' full analysis from the summit and further speakers are available at this site. Information from our website is not incorporated into, and does not form a part of this press release.
Review of Income Statement
Consolidated Income Statement
In the first quarter of 2017, Northrim generated a return on average assets of 1.04% and a return on average equity of 8.30%, in line with the 0.89% return on average assets and 8.46% return on average equity posted by the 151 banks that make up the SNL U.S. Bank Index with assets between $1 billion and $5 billion as of December 31, 2016. NIM and NIMTE* for the first quarter of 2017 were 4.15% and 4.22%, respectively, compared to 3.59% NIMTE* for the index peers.1
Net Interest Income/Net Interest Margin
Net interest income was almost unchanged at $13.8 million in the first quarter 2017 as compared to $13.9 million in the previous quarter, and contracted 2% from $14.2 million a year ago. The impact of lower loan balances in the first quarter of 2017 compared to the fourth quarter of 2016 was mostly offset by higher yields on investments and loans and the improved mix of assets as portfolio loans increased as a percentage of average interest-earning assets. In addition, in the fourth quarter of 2016, net interest income was reduced by the reversal of $187,000 in interest income on an $8.7 million commercial loan relationship that was moved to nonaccrual status. The 2% decrease in net interest income compared to the first quarter of 2016 was primarily due to a combination of lower volume and a lower yield, as well as a less favorable mix of earning assets as total portfolio loans decreased in the first quarter of 2017 as a percentage of average interest-earning assets compared to the first quarter of 2016. The lower yield in the first quarter of 2017 as compared to the same quarter in 2016 was primarily the result of a less favorable mix within total portfolio loans as balances have shifted to higher real estate loans as a percentage of total portfolio loans, which yield less than commercial and construction loans. This decrease in the yield on portfolio loans was only partially offset by increased yields on both long- and short-term investments due to increased interest rates.
NIM increased 14 basis points in the first quarter of 2017 compared to the preceding quarter and decreased 8 basis points from the same quarter a year ago. The following table summarizes the components of these changes:
| 1Q17 vs. 4Q16 | 1Q17 vs. 1Q16 | |||
| Nonaccrual interest adjustments | 0.05 | % | (0.01 | )% |
| Interest rates and loan fees | 0.08 | % | (0.04 | )% |
| Volume and mix of interest-earning assets | 0.01 | % | (0.03 | )% |
| Change in NIM | 0.14 | % | (0.08 | )% |
“We expect NIM will range from 4.05% to 4.15% and NIMTE* will range from 4.10% and 4.20% in 2017. While the mix of our earning assets improved in the first quarter of 2017, we expect the trends will revert to a shift towards higher balances in investment securities and cash equivalents from the higher-yielding loan portfolio. We believe that changes in the mix of our earning assets has a larger impact on our NIM and NIMTE* compared to many of our peers due to the short duration of our investment portfolio, which results in a lower yield commensurate with lower interest rate risk. Because the difference between the yield on our investment portfolio and the yield on our loan portfolio is larger than our peers, we experience more pronounced changes in our NIM and NIMTE* when the mix of our balance sheet changes. We continue to believe that both our NIM and NIMTE* will benefit in the event interest rates rise or the yield curve steepens, and we would be adversely affected if interest rates fall and the yield curve continues to flatten,” said Latosha Frye, Chief Financial Officer.
Provision for Loan Losses
The provision for loan losses was $400,000 in the first quarter 2017 compared to $743,000 in the fourth quarter of 2016 and $703,000 in the first quarter of 2016. While nonperforming loans, adversely classified loans, and delinquencies were relatively unchanged during the first quarter of 2017, a decline in portfolio loan balances resulted in the provision for loan losses declining in the current quarter from the prior periods. The Company also recorded a provision for loan losses in the first quarter of 2017 as a result of an increase in specific impairment related to one commercial lending relationship. The allowance for loan losses to portfolio loans at the end of the first quarter of 2017 increased to 2.07% from 2.02% at December 31, 2016, and 1.87% at March 31, 2016.
Other Operating Income
In addition to home mortgage lending, Northrim has interests in other businesses that complement its core community banking activities. It provides financial services to businesses and individuals through these interests, including purchased receivables financing, employee benefit plans, and wealth management. These complementary business activities and other noninterest income contributed $8.9 million, or 39% of total revenues in the first quarter of 2017, as compared to $10.4 million or 43% of revenues in the fourth quarter of 2016 and $9.1 million or 39% of revenues in the first quarter of 2016.
Other operating income decreased by 2% in the first quarter of 2017 from the same quarter a year ago and 14% from the fourth quarter of 2016. The changes in the first quarter of 2017 compared to both the preceding quarter and the year ago quarter are primarily due to changes in mortgage banking income. There is significant seasonality in mortgage banking in Alaska, and the first quarter is typically the lowest time of the year for mortgage activity, barring any significant increases in refinance activity. In addition, seasonality impacted both bank card fees and service charges in the first quarter of 2017, but revenue from these activities also declined as compared to the first quarter of 2016 mostly due to the slowing of the Alaska economy.
Other Operating Expenses
Operating expenses were $16.6 million in the first quarter 2017 compared to $18.4 million in the fourth quarter of 2016 and $17.4 million in the first quarter 2016. The decrease from the previous quarter was primarily the result of the decrease in compensation payments related to the acquisition of Residential Mortgage, LLC ("RML") due to lower earnings from RML, as well as the timing of professional and outside service usage and marketing campaigns. Additionally, lower than anticipated loan collection costs related to one commercial loan in the first quarter of 2017 contributed to the decrease in other operating expenses during that quarter compared to prior periods. The Company accrued $170,000 in other operating expense for this estimated cost in the fourth quarter of 2016, but reversed $100,000 of this estimate in the first quarter of 2017 when management determined that actual costs were $70,000. The Company also recorded a reduction in other operating expense in the first quarter of 2017 upon receipt of a $122,000 refund from the State of Washington for business and occupancy taxes related to 2012 - 2015 taxation years. The decrease in other operating expenses compared to the first quarter of 2016 resulted from the timing of charitable contributions, the same one-time items noted above, and a decrease in medical claims expenses. "We are also beginning the conversion of our core operating system, which will take place in the second quarter of 2017, and we believe that this conversion will allow us to better serve our customers and create operating efficiencies," said Frye. "Post-conversion, we also expect that our new core operating system will be more scalable, allowing for future growth without a corresponding increase in operating costs to accommodate that growth. While we expect that ongoing costs associated with our core operating system following the conversion will be unchanged, we estimate that we will incur additional expenses between $1.7 million and $2.0 million in 2017 related to this conversion. We anticipate that most of these additional expenses will be incurred in the next two quarters of 2017."
Community Banking
“Our community banking business continues to generate the majority of our revenues and profits,” said Schierhorn. “While the slowdown in the economy has also slowed growth in both our loan and deposit portfolios, we believe the franchise remains profitable and positioned to capitalize on future market opportunities.” Net income in the community banking segment increased 29% in the first quarter, compared to the preceding quarter and grew 18% year-over-year, primarily due to the reduction in other operating expenses noted above.
The following table provides highlights of the community banking segment of Northrim:
| Three Months Ended | |||||||||||||||
| (Dollars in thousands, except per share data) | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||||||||
| Net interest income | $ | 13,549 | $ | 13,584 | $ | 13,901 | $ | 13,829 | $ | 13,933 | |||||
| Provision for loan losses | 400 | 743 | 652 | 200 | 703 | ||||||||||
| Other operating income | 3,446 | 3,399 | 3,594 | 3,354 | 3,409 | ||||||||||
| Compensation expense, RML acquisition payments | 174 | 708 | 3,250 | 687 | 130 | ||||||||||
| Other operating expense | 11,613 | 12,151 | 11,649 | 12,504 | 12,306 | ||||||||||
| Income before provision for income taxes | 4,808 | 3,381 | 1,944 | 3,792 | 4,203 | ||||||||||
| Provision for income taxes | 1,422 | 727 | 50 | 805 | 1,285 | ||||||||||
| Net income | 3,386 | 2,654 | 1,894 | 2,987 | 2,918 | ||||||||||
| Less: net income attributable to the noncontrolling interest | 97 | 105 | 188 | 156 | 130 | ||||||||||
| Net income attributable to Northrim BanCorp | $ | 3,289 | $ | 2,549 | $ | 1,706 | $ | 2,831 | $ | 2,788 | |||||
| Average diluted shares | 6,993,726 | 6,983,771 | 6,973,354 | 6,968,891 | 6,964,707 | ||||||||||
| Diluted earnings per share | $ | 0.47 | $ | 0.36 | $ | 0.24 | $ | 0.41 | $ | 0.40 | |||||
Home Mortgage Lending
Home mortgage lending contributed $5.7 million to revenues and $0.08 to net earnings per share in the first quarter 2017. “Both economic and seasonal factors contributed to the lower production and profits from the mortgage business this quarter,” said Frye. Despite the slowdown in the economy, the housing markets in Alaska’s population centers remain stable. Average days on the market have been steady at 80 days in Anchorage and the Mat-Su Valley, and were at 65 days in Fairbanks. Sales remain steady for both the single-family homes and condominiums, as well.
In the fourth quarter of 2015, Northrim began servicing the loans it originates for the Alaska Housing Finance Corporation, which accounted for approximately 20% of loans funded. Northrim now services 1,244 loans in its $307.5 million servicing portfolio, which has more than doubled in size over the past year. Servicing income contributed $1.4 million to first quarter mortgage banking income, compared to $1.2 million for the fourth quarter of 2016 and $701,000 in the first quarter a year ago.
The following table provides highlights of the Home Mortgage Lending segment of Northrim:
| Three Months Ended | |||||||||||||||
| (Dollars in thousands, except per share data) | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||||||||
| Mortgage commitments | $ | 67,589 | $ | 62,421 | $ | 72,315 | $ | 98,788 | $ | 83,823 | |||||
| Mortgage loans funded for sale | $ | 115,058 | $ | 169,235 | $ | 224,594 | $ | 208,921 | $ | 133,050 | |||||
| Mortgage loan refinances to total fundings | 24 | % | 25 | % | 24 | % | 18 | % | 16 | % | |||||
| Mortgage loans serviced for others | $ | 307,502 | $ | 272,442 | $ | 231,167 | $ | 193,230 | $ | 160,803 | |||||
| Net realized gains on mortgage loans sold | $ | 3,721 | $ | 5,987 | $ | 7,502 | $ | 7,147 | $ | 4,777 | |||||
| Change in fair value of mortgage loan commitments, net | 128 | (551 | ) | (331 | ) | 480 | 48 | ||||||||
| Total production revenue | 3,849 | 5,436 | 7,171 | 7,627 | 4,825 | ||||||||||
| Mortgage servicing revenue, net | 1,435 | 1,191 | 782 | 510 | 701 | ||||||||||
| Other mortgage banking revenue | 166 | 333 | 388 | 373 | 170 | ||||||||||
| Total mortgage banking income | $ | 5,450 | $ | 6,960 | $ | 8,341 | $ | 8,510 | $ | 5,696 | |||||
| Net interest income | $ | 284 | $ | 307 | $ | 312 | $ | 250 | $ | 241 | |||||
| Provision for loan losses | — | — | — | — | — | ||||||||||
| Other operating income | 5,450 | 6,960 | 8,341 | 8,510 | 5,696 | ||||||||||
| Other operating expense | 4,819 | 5,495 | 6,287 | 6,178 | 4,935 | ||||||||||
| Income before provision for income taxes | 915 | 1,772 | 2,366 | 2,582 | 1,002 | ||||||||||
| Provision for income taxes | 379 | 731 | 977 | 1,063 | 414 | ||||||||||
| Net income attributable to Northrim BanCorp | $ | 536 | $ | 1,041 | $ | 1,389 | $ | 1,519 | $ | 588 | |||||
| Average diluted shares | 6,993,726 | 6,983,771 | 6,973,354 | 6,968,891 | 6,964,707 | ||||||||||
| Diluted earnings per share | $ | 0.08 | $ | 0.15 | $ | 0.20 | $ | 0.22 | $ | 0.08 | |||||
Balance Sheet Review
Northrim’s assets were $1.51 billion at March 31, 2017, up 1% from the first quarter a year ago and down 1% from December 31, 2016. The mix of assets at each period end continued to shift from portfolio loans to portfolio investments and cash equivalents.
Average investment securities increased 5% from the preceding quarter and 11% from a year ago. The investment portfolio generated an average net tax equivalent yield of 1.59% for the first quarter of 2017. The average estimated duration of the investment portfolio was 1.8 years, at March 31, 2017.
Average loans held for sale decreased 37% to $34.4 million in the first quarter of 2017 compared to the preceding quarter, and decreased 10% from the same quarter a year ago, primarily reflecting the seasonality of the mortgage business and the slowing demand for home loans in the Alaska marketplace.
Portfolio loans decreased 1% to $960.8 million at March 31, 2017. Average portfolio loans in the first quarter of 2017 were also down 1% to $970.5 million compared to both the preceding and year ago quarters. Construction and land development loans, which are by nature short-term, declined 4% in the first quarter of 2017 compared to the previous quarter and fell 25% year-over-year. Partially offsetting this decline was the increase in commercial loans which grew 4% year-over-year. Additionally, non-owner occupied commercial real estate loans increased 2% in the quarter compared to the previous quarter and 7% year-over-year.
Alaskans' account for substantially all of Northrim’s deposit base, which is primarily made up of low-cost transaction accounts. Balances in transaction accounts at March 31, 2017, represented 89% of total deposits. At March 31, 2017, total deposits were $1.25 billion, down slightly from $1.27 billion from the immediate prior quarter and unchanged from a year ago. Year-over-year, first quarter average non-interest bearing deposits declined 3% and average interest-bearing deposits increased 1%, leaving average total deposits down less than 1% to $1.23 billion in the first quarter of 2017.
Shareholders’ equity increased 5% to $189.5 million, or $27.42 per share, at March 31, 2017, compared to $180.4 million, or $26.23 per share, a year ago. Tangible book value per share* was $25.06 at March 31, 2017, compared to $22.78 per share a year ago. Northrim continues to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” under the Basel III and Dodd Frank regulatory standards with Tier 1 Capital to Risk Adjusted Assets of 15.19% at March 31, 2017.
Asset Quality
Asset quality was largely unchanged during the first quarter of 2017 compared to the previous quarter and declined from the first quarter of 2016 mainly as a result of the movement of three relationships from adversely classified to nonperforming status. These included one $8.7 million commercial relationship in the medical industry moving to nonaccrual loans in the fourth quarter of 2016, one $2.3 million commercial relationship in the transportation industry moving to nonaccrual loans in the second quarter of 2016, and one $3.3 million land development loan moving into other real estate owned during the fourth quarter of 2016. The ratio of nonperforming assets to total assets, net of government guarantees was 1.22% for the first quarter of 2017, down from 1.27% in the fourth quarter of 2016 and up from 0.29% a year ago.
Adversely classified loans, net of government guarantees improved to $34.5 million at the end of the first quarter of 2017 as compared to $35.6 million at the end of 2016 and $38.4 million one year ago. Net charge-offs in the first quarter of 2017 were $204,000 compared to $754,000 in the previous quarter and $672,000 in the first quarter of 2016. “None of these charge-offs were related directly to the oil sector,” said Frye. The following table details loan charge-offs, by industry:
| (Dollars in thousands) | Three Months Ended | ||||||||
| March 31, 2017 | December 31, 2016 | March 31, 2016 | |||||||
| Charge-offs: | |||||||||
| Agriculture, forestry, fishing and hunting | $ | — | $ | — | $ | 493 | |||
| Construction | — | 535 | 218 | ||||||
| Transportation and warehousing | 250 | — | 22 | ||||||
| Other services | — | 31 | — | ||||||
| Retail trade | 12 | 4 | — | ||||||
| Consumer | 17 | 21 | 1 | ||||||
| Total charge-offs | $ | 279 | $ | 591 | $ | 734 | |||
Performing restructured loans, that were not included in nonaccrual loans at the end of the first quarter 2017, decreased to $6.3 million compared to $11.6 million a year ago primarily due to the $8.7 million commercial relationship noted above that moved to nonaccrual status. 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. The Company presents restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.
Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. As of March 31, 2017, $28.5 million, or 82% of adversely classified loans net of government guarantees are attributable to four relationships in the following sectors; one retail commercial business, one commercial real estate property, one medical business, and one oilfield services commercial business.
The allowance for loan losses increased to 2.07% of portfolio loans at March 31, 2017, compared to 2.02% at December 31, 2016, and 1.87% at the end of the first quarter 2016, mainly due to an increase in specific impairment related to one commercial lending relationship.
Northrim estimates that $56.2 million, or approximately 6% of portfolio loans as of March 31, 2017, has direct exposure to the oil and gas industry in Alaska, and $4.3 million of these loans are adversely classified. Northrim has an additional $57.0 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and none of these unfunded commitments are considered to be adversely classified loans. “We continue to have no loans to oil producers or exploration companies," said Frye. "We define direct exposure to the oil and gas sector as loans to borrowers that provide oilfield services and other companies that we have identified as significantly reliant upon activity in Alaska related to the oil and gas industry, such as lodging, equipment rental, transportation and other logistics services specific to this industry."
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 90% of Alaska’s population; and an asset based lending division in Washington; and a wholly-owned mortgage brokerage company, Residential Mortgage Holding Company, LLC. The Bank differentiates itself with its detailed knowledge of Alaska’s economy and its “Customer First Service” philosophy. Affiliated companies include Northrim Benefits Group, LLC; and Pacific Wealth Advisors, LLC.
Forward-Looking Statement
This release may contain “forward-looking statements” as that term is defined for purposes of Section 21E 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 to 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; 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, 2016, and from time to time are disclosed in our other filings with the Securities and Exchange Commission. 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.
References:
https://www.bea.gov/regional/index.htm
http://almis.labor.state.ak.us/
https://www.alaskarealestate.com/Consumer/PublicStatistics.aspx
http://gfbr.org/#
http://www.seakrealtor.com/
| Income Statement | |||||||||||||
| (Dollars in thousands, except per share data) | Three Months Ended | ||||||||||||
| (Unaudited) | March 31, | December 31, | Three Month | March 31, | One Year | ||||||||
| 2017 | 2016 | % Change | 2016 | % Change | |||||||||
| Interest Income: | |||||||||||||
| Interest and fees on loans | $ | 13,238 | $ | 13,423 | -1 | % | $ | 13,778 | -4 | % | |||
| Interest on portfolio investments | 1,179 | 1,032 | 14 | % | 993 | 19 | % | ||||||
| Interest on deposits in banks | 48 | 67 | -28 | % | 47 | 2 | % | ||||||
| Total interest income | 14,465 | 14,522 | 0 | % | 14,818 | -2 | % | ||||||
| Interest Expense: | |||||||||||||
| Interest expense on deposits | 445 | 447 | 0 | % | 471 | -6 | % | ||||||
| Interest expense on borrowings | 187 | 184 | 2 | % | 173 | 8 | % | ||||||
| Total interest expense | 632 | 631 | 0 | % | 644 | -2 | % | ||||||
| Net interest income | 13,833 | 13,891 | 0 | % | 14,174 | -2 | % | ||||||
| Provision for loan losses | 400 | 743 | -46 | % | 703 | -43 | % | ||||||
| Net interest income after provision for loan losses | 13,433 | 13,148 | 2 | % | 13,471 | 0 | % | ||||||
| Other Operating Income: | |||||||||||||
| Mortgage banking income | 5,450 | 6,960 | -22 | % | 5,696 | -4 | % | ||||||
| Employee benefit plan income | 936 | 871 | 7 | % | 964 | -3 | % | ||||||
| Purchased receivable income | 689 | 703 | -2 | % | 534 | 29 | % | ||||||
| Bankcard fees | 572 | 675 | -15 | % | 633 | -10 | % | ||||||
| Service charges on deposit accounts | 439 | 473 | -7 | % | 499 | -12 | % | ||||||
| Gain (loss) on sale of securities | 14 | — | NM | (23 | ) | 161 | % | ||||||
| Other income | 796 | 677 | 18 | % | 802 | -1 | % | ||||||
| Total other operating income | 8,896 | 10,359 | -14 | % | 9,105 | -2 | % | ||||||
| Other Operating Expense: | |||||||||||||
| Salaries and other personnel expense | 10,842 | 11,332 | -4 | % | 11,251 | -4 | % | ||||||
| Occupancy expense | 1,621 | 1,590 | 2 | % | 1,608 | 1 | % | ||||||
| Data processing expense | 1,238 | 1,215 | 2 | % | 1,150 | 8 | % | ||||||
| Professional and outside services | 622 | 858 | -28 | % | 641 | -3 | % | ||||||
| Marketing expense | 510 | 596 | -14 | % | 738 | -31 | % | ||||||
| Insurance expense | 253 | 179 | 41 | % | 315 | -20 | % | ||||||
| OREO (income) expense, net rental income and gains on sale | 177 | 28 | 532 | % | (26 | ) | 781 | % | |||||
| Compensation expense, RML acquisition payments | 174 | 708 | -75 | % | 130 | 34 | % | ||||||
| Intangible asset amortization expense | 26 | 29 | -10 | % | 35 | -26 | % | ||||||
| Other operating expense | 1,143 | 1,819 | -37 | % | 1,529 | -25 | % | ||||||
| Total other operating expense | 16,606 | 18,354 | -10 | % | 17,371 | -4 | % | ||||||
| Income before provision for income taxes | 5,723 | 5,153 | 11 | % | 5,205 | 10 | % | ||||||
| Provision for income taxes | 1,801 | 1,458 | 24 | % | 1,699 | 6 | % | ||||||
| Net income | 3,922 | 3,695 | 6 | % | 3,506 | 12 | % | ||||||
| Less: Net income attributable to the noncontrolling interest | 97 | 105 | -8 | % | 130 | -25 | % | ||||||
| Net income attributable to Northrim BanCorp | $ | 3,825 | $ | 3,590 | 7 | % | $ | 3,376 | 13 | % | |||
| Basic EPS | $ | 0.55 | $ | 0.52 | 6 | % | $ | 0.49 | 12 | % | |||
| Diluted EPS | $ | 0.55 | $ | 0.51 | 8 | % | $ | 0.48 | 15 | % | |||
| Average basic shares | 6,909,780 | 6,897,890 | 0 | % | 6,877,140 | 0 | % | ||||||
| Average diluted shares | 6,993,726 | 6,983,771 | 0 | % | 6,964,707 | 0 | % | ||||||
| Balance Sheet | |||||||||||||
| (Dollars in thousands) | |||||||||||||
| (Unaudited) | March 31, | December 31, | Three Month | March 31, | One Year | ||||||||
| 2017 | 2016 | % Change | 2016 | % Change | |||||||||
| Assets: | |||||||||||||
| Cash and due from banks | $ | 36,729 | $ | 34,485 | 7 | % | $ | 23,361 | 57 | % | |||
| Interest bearing deposits in other banks | 44,203 | 16,066 | 175 | % | 55,914 | -21 | % | ||||||
| Portfolio investments | 325,037 | 332,118 | -2 | % | 297,264 | 9 | % | ||||||
| Investment in Federal Home Loan Bank stock | 1,993 | 1,965 | 1 | % | 1,875 | 6 | % | ||||||
| Loans held for sale | 28,028 | 43,596 | -36 | % | 38,907 | -28 | % | ||||||
| Portfolio loans | 960,832 | 975,015 | -1 | % | 970,517 | -1 | % | ||||||
| Allowance for loan losses | (19,893 | ) | (19,697 | ) | 1 | % | (18,183 | ) | 9 | % | |||
| Net portfolio loans | 940,939 | 955,318 | -2 | % | 952,334 | -1 | % | ||||||
| Purchased receivables, net | 14,485 | 20,491 | -29 | % | 11,707 | 24 | % | ||||||
| Mortgage servicing rights | 5,325 | 4,157 | 28 | % | 2,234 | 138 | % | ||||||
| Other real estate owned, net | 5,802 | 6,574 | -12 | % | 2,702 | 115 | % | ||||||
| Premises and equipment, net | 39,682 | 39,318 | 1 | % | 40,348 | -2 | % | ||||||
| Goodwill and intangible assets | 16,298 | 16,324 | 0 | % | 23,741 | -31 | % | ||||||
| Other assets | 54,059 | 56,128 | -4 | % | 49,812 | 9 | % | ||||||
| Total assets | $ | 1,512,580 | $ | 1,526,540 | -1 | % | $ | 1,500,199 | 1 | % | |||
| Liabilities: | |||||||||||||
| Demand deposits | $ | 421,867 | $ | 449,206 | -6 | % | $ | 442,842 | -5 | % | |||
| Interest-bearing demand | 194,414 | 201,349 | -3 | % | 195,896 | -1 | % | ||||||
| Savings deposits | 252,218 | 241,088 | 5 | % | 230,834 | 9 | % | ||||||
| Money market deposits | 244,881 | 244,295 | 0 | % | 240,675 | 2 | % | ||||||
| Time deposits | 133,693 | 131,715 | 2 | % | 136,721 | -2 | % | ||||||
| Total deposits | 1,247,073 | 1,267,653 | -2 | % | 1,246,968 | — | % | ||||||
| Securities sold under repurchase agreements | 31,783 | 27,607 | 15 | % | 25,946 | 22 | % | ||||||
| Other borrowings | 4,326 | 4,338 | 0 | % | 7,727 | -44 | % | ||||||
| Junior subordinated debentures | 18,558 | 18,558 | — | % | 18,558 | — | % | ||||||
| Other liabilities | 21,388 | 21,672 | -1 | % | 20,602 | 4 | % | ||||||
| Total liabilities | 1,323,128 | 1,339,828 | -1 | % | 1,319,801 | 0 | % | ||||||
| Shareholders' Equity: | |||||||||||||
| Northrim BanCorp shareholders' equity | 189,324 | 186,594 | 1 | % | 180,125 | 5 | % | ||||||
| Noncontrolling interest | 128 | 118 | 8 | % | 273 | -53 | % | ||||||
| Total shareholders' equity | 189,452 | 186,712 | 1 | % | 180,398 | 5 | % | ||||||
| Total liabilities and shareholders' equity | $ | 1,512,580 | $ | 1,526,540 | -1 | % | $ | 1,500,199 | 1 | % | |||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Composition of Portfolio Investments | |||||||||||||||||
| March 31, 2017 | December 31, 2016 | March 31, 2016 | |||||||||||||||
| Balance | % of total | Balance | % of total | Balance | % of total | ||||||||||||
| U.S. Treasury securities | $ | 30,082 | 9.2 | % | $ | 30,063 | 9.1 | % | $ | 35,264 | 11.9 | % | |||||
| U.S. Agency securities | 230,553 | 70.9 | % | 233,298 | 70.2 | % | 205,405 | 69.1 | % | ||||||||
| U.S. Agency mortgage-backed securities | 1 | 0.0 | % | 2 | 0.0 | % | 7 | — | % | ||||||||
| Corporate bonds | 45,434 | 14.0 | % | 49,699 | 15.0 | % | 45,594 | 15.3 | % | ||||||||
| Alaska municipality, utility, or state bonds | 14,181 | 4.4 | % | 14,296 | 4.3 | % | 10,400 | 3.5 | % | ||||||||
| Other municipality, utility, or state bonds | 4,786 | 1.5 | % | 4,760 | 1.4 | % | 594 | 0.2 | % | ||||||||
| Total portfolio investments | $ | 325,037 | $ | 332,118 | $ | 297,264 | |||||||||||
| Composition of Portfolio Loans | |||||||||||||||||||||||||||||
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |||||||||||||||||||||||||
| Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | ||||||||||||||||||||
| Commercial loans | $ | 275,809 | 29 | % | $ | 278,178 | 28 | % | $ | 275,994 | 28 | % | $ | 269,905 | 28 | % | $ | 266,027 | 27 | % | |||||||||
| CRE owner occupied loans | 140,102 | 15 | % | 152,178 | 16 | % | 184,505 | 18 | % | 171,269 | 18 | % | 147,081 | 15 | % | ||||||||||||||
| CRE nonowner occupied loans | 408,472 | 41 | % | 402,003 | 41 | % | 379,913 | 38 | % | 380,122 | 38 | % | 383,390 | 40 | % | ||||||||||||||
| Construction loans | 94,004 | 10 | % | 98,220 | 10 | % | 109,093 | 11 | % | 96,236 | 10 | % | 126,155 | 13 | % | ||||||||||||||
| Consumer loans | 46,838 | 5 | % | 48,870 | 5 | % | 51,979 | 5 | % | 54,134 | 6 | % | 52,115 | 5 | % | ||||||||||||||
| Subtotal | 965,225 | 979,449 | 1,001,484 | 971,666 | 974,768 | ||||||||||||||||||||||||
| Unearned loan fees, net | (4,393 | ) | (4,434 | ) | (4,408 | ) | (4,320 | ) | (4,251 | ) | |||||||||||||||||||
| Total portfolio loans | $ | 960,832 | $ | 975,015 | $ | 997,076 | $ | 967,346 | $ | 970,517 | |||||||||||||||||||
| Composition of Deposits | |||||||||||||||||||||||||||||
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |||||||||||||||||||||||||
| Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | ||||||||||||||||||||
| Demand deposits | $ | 421,867 | 33 | % | $ | 449,206 | 36 | % | $ | 474,971 | 37 | % | $ | 461,970 | 37 | % | $ | 442,842 | 35 | % | |||||||||
| Interest-bearing demand | 194,414 | 16 | % | 201,349 | 16 | % | 194,426 | 15 | % | 183,885 | 15 | % | 195,896 | 16 | % | ||||||||||||||
| Savings deposits | 252,218 | 20 | % | 241,088 | 19 | % | 236,821 | 19 | % | 231,246 | 18 | % | 230,834 | 19 | % | ||||||||||||||
| Money market deposits | 244,881 | 20 | % | 244,295 | 19 | % | 242,102 | 19 | % | 241,334 | 19 | % | 240,675 | 19 | % | ||||||||||||||
| Time deposits | 133,693 | 11 | % | 131,715 | 10 | % | 130,046 | 10 | % | 137,253 | 11 | % | 136,721 | 11 | % | ||||||||||||||
| Total deposits | $ | 1,247,073 | $ | 1,267,653 | $ | 1,278,366 | $ | 1,255,688 | $ | 1,246,968 | |||||||||||||||||||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Asset Quality | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2017 | 2016 | 2016 | ||||||||||
| Nonaccrual loans | $ | 13,513 | $ | 13,893 | $ | 3,196 | ||||||
| Loans 90 days past due and accruing | 588 | 456 | 47 | |||||||||
| Total nonperforming loans | 14,101 | 14,349 | 3,243 | |||||||||
| Nonperforming loans guaranteed by government | (1,478 | ) | (1,413 | ) | (1,561 | ) | ||||||
| Net nonperforming loans | 12,623 | 12,936 | 1,682 | |||||||||
| Other real estate owned | 5,802 | 6,574 | 2,702 | |||||||||
| Other real estate owned guaranteed by government | — | (195 | ) | — | ||||||||
| Net nonperforming assets | $ | 18,425 | $ | 19,315 | $ | 4,384 | ||||||
| Nonperforming loans / portfolio loans, net of government guarantees | 1.31 | % | 1.33 | % | 0.17 | % | ||||||
| Nonperforming assets / total assets, net of government guarantees | 1.22 | % | 1.27 | % | 0.29 | % | ||||||
| Performing restructured loans | $ | 6,290 | $ | 6,131 | $ | 11,600 | ||||||
| Nonperforming loans plus performing restructured loans, net of government | ||||||||||||
| guarantees | $ | 18,913 | $ | 19,067 | $ | 13,282 | ||||||
| Nonperforming loans plus performing restructured loans / portfolio loans, net of | ||||||||||||
| government guarantees | 1.97 | % | 1.96 | % | 1.37 | % | ||||||
| Nonperforming assets plus performing restructured loans / total assets, net of | ||||||||||||
| government guarantees | 1.63 | % | 1.68 | % | 1.07 | % | ||||||
| Adversely classified loans, net of government guarantees | $ | 34,489 | $ | 35,634 | $ | 38,361 | ||||||
| Loans 30-89 days past due and accruing, net of government guarantees / | ||||||||||||
| portfolio loans | 0.21 | % | 0.22 | % | 0.01 | % | ||||||
| Allowance for loan losses / portfolio loans | 2.07 | % | 2.02 | % | 1.87 | % | ||||||
| Allowance for loan losses / nonperforming loans, net of government guarantees | 158 | % | 152 | % | 1,081 | % | ||||||
| Gross loan charge-offs for the quarter | $ | 279 | $ | 591 | $ | 734 | ||||||
| Gross loan recoveries for the quarter | ($75 | ) | ($66 | ) | ($62 | ) | ||||||
| Net loan charge-offs for the quarter | $ | 204 | $ | 525 | $ | 672 | ||||||
| Net loan charge-offs year-to-date | $ | 204 | $ | 754 | $ | 672 | ||||||
| Net loan charge-offs for the quarter / average loans, for the quarter | 0.02 | % | 0.05 | % | 0.07 | % | ||||||
| Nonperforming Assets Rollforward | |||||||||||||||||||||
| Balance at | Additions | Payments | Writedowns | Transfers to | Sales | Balance at | |||||||||||||||
| December 31, 2016 | this quarter | this quarter | /Charge-offs this quarter | Performing Status this quarter | this quarter | March 31, 2017 | |||||||||||||||
| Commercial loans | $ | 13,904 | $ | 249 | ($120 | ) | ($262 | ) | ($172 | ) | $ | — | $ | 13,599 | |||||||
| Commercial real estate | 226 | 6 | — | — | (88 | ) | (29 | ) | 115 | ||||||||||||
| Construction loans | — | — | — | — | — | — | — | ||||||||||||||
| Consumer loans | 219 | 185 | — | (17 | ) | — | — | 387 | |||||||||||||
| Non-performing loans guaranteed by government | (1,413 | ) | (65 | ) | — | — | — | — | (1,478 | ) | |||||||||||
| Total non-performing loans | 12,936 | 375 | (120 | ) | (279 | ) | (260 | ) | (29 | ) | 12,623 | ||||||||||
| Other real estate owned | 6,574 | — | — | (166 | ) | — | (606 | ) | 5,802 | ||||||||||||
| Other real estate owned guaranteed | |||||||||||||||||||||
| by government | (195 | ) | — | — | — | — | 195 | — | |||||||||||||
| Total non-performing assets, | |||||||||||||||||||||
| net of government guarantees | $ | 19,315 | $ | 375 | ($120 | ) | ($445 | ) | ($260 | ) | ($440 | ) | $ | 18,425 | |||||||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Average Balances, Yields, and Rates | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| March 31, 2017 | December 31, 2016 | March 31, 2016 | |||||||||||||||
| Average | Average | Average | |||||||||||||||
| Average | Tax Equivalent | Average | Tax Equivalent | Average | Tax Equivalent | ||||||||||||
| Balance | Yield/Rate | Balance | Yield/Rate | Balance | Yield/Rate | ||||||||||||
| Assets | |||||||||||||||||
| Interest bearing deposits in other banks | $ | 23,490 | 0.81 | % | $ | 37,328 | 0.54 | % | $ | 38,024 | 0.49 | % | |||||
| Portfolio investments | 323,753 | 1.59 | % | 309,519 | 1.48 | % | 291,607 | 1.49 | % | ||||||||
| Loans held for sale | 34,435 | 3.95 | % | 54,266 | 3.54 | % | 38,164 | 3.87 | % | ||||||||
| Portfolio loans | 970,493 | 5.44 | % | 977,678 | 5.31 | % | 980,117 | 5.55 | % | ||||||||
| Total interest-earning assets | 1,352,171 | 4.40 | % | 1,378,791 | 4.25 | % | 1,347,912 | 4.48 | % | ||||||||
| Nonearning assets | 139,405 | 142,987 | 141,282 | ||||||||||||||
| Total assets | $ | 1,491,576 | $ | 1,521,778 | $ | 1,489,194 | |||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||
| Interest-bearing deposits | $ | 814,232 | 0.22 | % | $ | 804,334 | 0.22 | % | $ | 805,823 | 0.23 | % | |||||
| Borrowings | 52,579 | 1.40 | % | 51,879 | 1.38 | % | 50,864 | 1.34 | % | ||||||||
| Total interest-bearing liabilities | 866,811 | 0.29 | % | 856,213 | 0.29 | % | 856,687 | 0.30 | % | ||||||||
| Noninterest-bearing demand deposits | 416,715 | 460,880 | 430,732 | ||||||||||||||
| Other liabilities | 21,090 | 25,247 | 23,379 | ||||||||||||||
| Shareholders' equity | 186,960 | 179,438 | 178,396 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,491,576 | $ | 1,521,778 | $ | 1,489,194 | |||||||||||
| Net spread | 4.11 | % | 3.96 | % | 4.18 | % | |||||||||||
| Net interest margin ("NIM") | 4.15 | % | 4.01 | % | 4.23 | % | |||||||||||
| Tax equivalent NIM* | 4.22 | % | 4.07 | % | 4.29 | % | |||||||||||
| Average portfolio loans to average | |||||||||||||||||
| interest-earning assets | 71.77 | % | 70.91 | % | 72.71 | % | |||||||||||
| Average portfolio loans to average total deposits | 78.84 | % | 77.27 | % | 79.26 | % | |||||||||||
| Average non-interest deposits to average | |||||||||||||||||
| total deposits | 33.85 | % | 36.43 | % | 34.83 | % | |||||||||||
| Average interest-earning assets to average | |||||||||||||||||
| interest-bearing liabilities | 155.99 | % | 161.03 | % | 157.34 | % | |||||||||||
| Capital Data (At quarter end) | ||||||||||||
| March 31, 2017 | December 31, 2016 | March 31, 2016 | ||||||||||
| Book value per share | $ | 27.42 | $ | 27.07 | $ | 26.23 | ||||||
| Tangible book value per share* | $ | 25.06 | $ | 24.70 | $ | 22.78 | ||||||
| Total shareholders' equity/total assets | 12.53 | % | 12.23 | % | 12.02 | % | ||||||
| Tangible Common Equity/Tangible Assets* | 11.57 | % | 11.28 | % | 10.61 | % | ||||||
| Tier 1 Capital / Risk Adjusted Assets | 15.19 | % | 14.54 | % | 13.66 | % | ||||||
| Total Capital / Risk Adjusted Assets | 16.44 | % | 15.80 | % | 14.92 | % | ||||||
| Tier 1 Capital / Average Assets | 12.95 | % | 12.59 | % | 11.87 | % | ||||||
| Shares outstanding | 6,909,865 | 6,897,890 | 6,877,140 | |||||||||
| Unrealized gain on AFS securities, net of income taxes | ($31 | ) | ($397 | ) | $458 | |||||||
Additional Financial Information
(Dollars and shares in thousands)
(Unaudited)
| Profitability Ratios | |||||||||||||||
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |||||||||||
| For the quarter: | |||||||||||||||
| Net interest margin ("NIM") | 4.15 | % | 4.01 | % | 4.11 | % | 4.21 | % | 4.23 | % | |||||
| Tax equivalent NIM* | 4.22 | % | 4.07 | % | 4.17 | % | 4.27 | % | 4.29 | % | |||||
| Efficiency ratio | 72.95 | % | 75.57 | % | 80.89 | % | 74.52 | % | 74.47 | % | |||||
| Return on average assets | 1.04 | % | 0.94 | % | 0.81 | % | 1.17 | % | 0.91 | % | |||||
| Return on average equity | 8.30 | % | 7.96 | % | 6.73 | % | 9.42 | % | 7.61 | % | |||||
*Non-GAAP Financial Measures
(Dollars and shares in thousands, except per share data)
(Unaudited)
Tax equivalent NIM
Tax equivalent NIM 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 2017 and 2016. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of tax equivalent NIM to net interest margin.
| Three Months Ended | |||||||||||||||||||
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |||||||||||||||
| Net interest income | $ | 13,833 | $ | 13,891 | $ | 14,213 | $ | 14,079 | $ | 14,174 | |||||||||
| Divided by average interest-bearing assets | 1,352,171 | 1,378,791 | 1,375,470 | 1,345,143 | 1,347,912 | ||||||||||||||
| Net interest margin ("NIM")2 | 4.15 | % | 4.01 | % | 4.11 | % | 4.21 | % | 4.23 | % | |||||||||
| Net interest income | $ | 13,833 | $ | 13,891 | $ | 14,213 | $ | 14,079 | $ | 14,174 | |||||||||
| Plus: reduction in tax expense related to | |||||||||||||||||||
| tax-exempt interest income | 222 | 209 | 196 | 197 | 206 | ||||||||||||||
| $ | 14,055 | $ | 14,100 | $ | 14,409 | $ | 14,276 | $ | 14,380 | ||||||||||
| Divided by average interest-bearing assets | 1,352,171 | 1,378,791 | 1,375,470 | 1,345,143 | 1,347,912 | ||||||||||||||
| Tax equivalent NIM2 | 4.22 | % | 4.07 | % | 4.17 | % | 4.27 | % | 4.29 | % | |||||||||
2 Calculated using actual days in the quarter divided by 365 for quarters ended in 2017 and actual days in the quarter divided by 366 for quarters ended in 2016.
(Dollars and shares in thousands, except per share data)
(Unaudited)
Tangible Book Value
Tangible book value is a non-GAAP measure defined as shareholders' equity, less intangible assets, divided by shares outstanding. The following table sets forth the reconciliation of tangible book value per share and book value per share.
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |||||||||||||||
| Total shareholders' equity | $ | 189,452 | $ | 186,712 | $ | 185,758 | $ | 183,965 | $ | 180,398 | |||||||||
| Divided by shares outstanding | 6,910 | 6,898 | 6,882 | 6,877 | 6,877 | ||||||||||||||
| Book value per share | $ | 27.42 | $ | 27.07 | $ | 26.99 | $ | 26.75 | $ | 26.23 | |||||||||
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |||||||||||||||
| Total shareholders' equity | $ | 189,452 | $ | 186,712 | $ | 185,758 | $ | 183,965 | $ | 180,398 | |||||||||
| Less: goodwill and intangible assets | 16,298 | 16,324 | 16,354 | 23,706 | 23,741 | ||||||||||||||
| $ | 173,154 | $ | 170,388 | $ | 169,404 | $ | 160,259 | $ | 156,657 | ||||||||||
| Divided by shares outstanding | 6,910 | 6,898 | 6,882 | 6,877 | 6,877 | ||||||||||||||
| Tangible book value per share | $ | 25.06 | $ | 24.70 | $ | 24.61 | $ | 23.30 | $ | 22.78 | |||||||||
Tangible Common Equity to Tangible Assets
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 most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets.
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |||||||||||||||
| Total shareholders' equity | $ | 189,452 | $ | 186,712 | $ | 185,758 | $ | 183,965 | $ | 180,398 | |||||||||
| Total assets | 1,512,580 | 1,526,540 | 1,540,120 | 1,518,370 | 1,500,199 | ||||||||||||||
| Total shareholders' equity to total assets | 12.53 | % | 12.23 | % | 12.06 | % | 12.12 | % | 12.02 | % | |||||||||
| March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | |||||||||||||||
| Total shareholders' equity | $ | 189,452 | $ | 186,712 | $ | 185,758 | $ | 183,965 | $ | 180,398 | |||||||||
| Less: goodwill and other intangible assets, net | 16,298 | 16,324 | 16,354 | 23,706 | 23,741 | ||||||||||||||
| Tangible common shareholders' equity | $ | 173,154 | $ | 170,388 | $ | 169,404 | $ | 160,259 | $ | 156,657 | |||||||||
| Total assets | $ | 1,512,580 | $ | 1,526,540 | $ | 1,540,120 | $ | 1,518,370 | $ | 1,500,199 | |||||||||
| Less: goodwill and other intangible assets, net | 16,298 | 16,324 | 16,354 | 23,706 | 23,741 | ||||||||||||||
| Tangible assets | $ | 1,496,282 | $ | 1,510,216 | $ | 1,523,766 | $ | 1,494,664 | $ | 1,476,458 | |||||||||
| Tangible common equity ratio | 11.57 | % | 11.28 | % | 11.12 | % | 10.72 | % | 10.61 | % | |||||||||