Northrim BanCorp Inc.
07/25/2007 | Press release | Archived content
Northrim BanCorp Reports Record Second Quarter Profits of $3.1 Million, or $0.51 Per Share
ANCHORAGE, Alaska, July 25, 2007 (PRIME NEWSWIRE) -- Northrim BanCorp, Inc. (Nasdaq:NRIM) today reported second quarter profits driven by a year-over-year increase in net interest margin and growth in core deposits and other operating income. Second quarter net income increased 7% to $3.1 million, or $0.51 per diluted share, compared to $2.9 million, or $0.47 per diluted share, in the second quarter of 2006. All per share results reflect the 5% stock dividend distributed to shareholders on September 1, 2006. For the first half of 2007, Northrim earned $5.9 million, or $0.94 per diluted share compared to $5.8 million or $0.94 per diluted share in the like period a year ago.
"The Alaska economy continues to benefit from higher energy prices, as well as higher prices for gold, silver zinc and other natural resources," said Marc Langland, Chairman, President, and CEO. "New exploration is accelerating throughout the state and this winter's employment on the North Slope reached levels not seen since the early 1980s."
"One of the highlights of our second quarter was reaching agreement to acquire Alaska First Bank & Trust," Langland continued. "While the transaction is a relatively small one for us, it brings more than $47 million in core deposits and two complementary branches that strengthen our position in the greater Anchorage market. We expect the transaction to close in October and for the acquisition to begin contributing to our earnings in early 2008."
FINANCIAL HIGHLIGHTS (at or for the three-month periods ended June 30, 2007, compared to June 30, 2006)
* Net interest margin was 5.94% up 12 basis points from the second quarter a year ago. * Revenues grew 12% to $15.1 million, fueled by a 37% rise in other operating income. * Book value per share grew 11% to $16.13 and tangible book value grew 13% to $15.03 per share. * Quarterly cash dividends increased 20% from a year ago to $0.15 per share. Northrim has increased its cash dividend at a 14% compounded annual growth rate since the company initiated dividend payments in 1995. * Core deposits grew 6% for the year, with money market balances up 41%.
REVIEW OF OPERATIONS
Revenue (net interest income plus noninterest income) grew 12% to $15.1 million in the second quarter of 2007, compared to $13.5 million in the second quarter of 2006. Net interest income before the provision for loan losses grew 7% to $12.4 million in the second quarter of 2007 from $11.5 million in the same quarter a year ago. Year-to-date revenue increased 10% to $28.8 million from $26.2 million in the first half of 2006. Net interest income before provision for loan losses grew 7% to $24.5 million in the first six months of 2007 from $22.8 million in the first half of last year.
"Core deposit growth generated by the success of our High Performance Checking program and continued growth in our business banking relationships are helping to moderate the impact of the flat yield curve on our margin," said Joe Schierhorn, CFO. Net interest margin (net interest income as a percentage of average earning assets on a tax equivalent basis) was 5.94% in the second quarter of 2007, compared to 5.82% in the second quarter a year ago. Net interest margin for the first half of 2006 was 5.99% compared to 5.81% in the first half of 2006.
"We significantly increased our provision for loan losses to account for higher levels of nonperforming loans compared to a year ago," said Schierhorn. The loan loss provision in the second quarter totaled $1.3 million compared to $860,000 in the second quarter of 2006. Second quarter net interest income after the provision for loan losses grew 4% to $11.1 million from $10.7 million a year ago. Year-to-date, the loan loss provision was $1.8 million up from $914,000 in the first half of 2006. Net interest income after provision for loan losses also grew 4% to $22.7 million in the first six months of 2007 compared to $21.9 million in the like period a year ago.
Other operating income continues to grow, fueled by the growing number of new checking accounts opened during the past year, introduction of new services that are generating strong fee income, and improved performance by Northrim's affiliates. Total other operating income increased 37% in the second quarter of 2007 to $2.7 million and rose 28% year-to-date to $4.3 million. Deposit account service charge income increased 82% to $892,000 in the second quarter and 43% to $1.4 million in the first six months of 2007, reflecting the growth in new accounts and the introduction of new overdraft options for customers. Purchased receivable income grew 43% to $649,000 in the second quarter and 40% to $1.1 million year-to-date. "We continue to introduce new services to our customers that help us strengthen and deepen the relationship we have with them," said Chris Knudson, Chief Operating Officer. "In doing so, we are also diversifying our revenue stream and building new sources of income."
Operating expenses rose 12% in both the second quarter and first six months of 2007 with compensation, internet banking, training costs, and professional fees accounting for the majority of the increase. 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 for the six month period ended June 30, 2007. Noninterest expense in the second quarter of 2007 was $8.6 million compared to $7.7 million in the second quarter a year ago. Noninterest expense in the first six months of 2007 was $17.6 million compared to $15.7 million a year ago.
"We continue to make investments in our people and infrastructure to broaden our delivery channels and build the skills of our banking professionals," said Knudson. The efficiency ratio during the second quarter of 2007 was 56.61% down from 64.01% in the first quarter and up slightly from 56.36% a year ago. In the first six months of the year, the efficiency ratio was 60.15% compared to 58.91% in the first half 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
Northrim continued to increase its total assets, reaching $947 million at June 30, 2007, compared to $879 million a year ago, with portfolio investments up 36% and purchased receivables up 7%, offsetting a 4% decline in total loans.
The loan portfolio totaled $700 million at June 30, 2007, compared to $728 million at June 30, 2006. Commercial loans, which account for 41% of the portfolio, dropped 8% and commercial real estate loans, which account for 33% of the portfolio, declined by 3% from a year ago due to continued refinance activity and management's decision to reduce risk levels in the portfolio. Consumer loans, which account for 6% of the portfolio, grew 12% compared to a year ago, as a result of the growth in overall consumer accounts.
Asset quality showed a small improvement over the immediate prior quarter, although nonperforming assets were higher than last year at this time and loan charge-offs also increased significantly compared to last year. "We believe these loans are well secured, and we continue to work with our customers to bring non-performing loans current," said Joe Beedle, Executive Vice President and Chief Lending Officer.
Total nonperforming assets were $10.6 million, or 1.12% of total assets at June 30, 2007, down from $11.0 million, or 1.21% of total assets at March 31, 2007, and up from $6.5 million, or 0.74% a year ago. Nonperforming loans were $9.9 million, or 1.41% of total loans at quarter end, compared to $10.2 million or 1.42% of total loans at March 31, 2007, and $6.5 million, or 0.90% of total loans a year ago.
The allowance for loan losses totaled $11.8 million, or 1.69% of gross loans at quarter end, compared to $11.6 million, or 1.59% of gross loans, at June 30, 2006. Net charge-offs in the quarter were 58 basis points as a percentage of total loans, compared to 1 basis point a year ago.
Total deposits increased 6% to $808 million at June 30, 2007, compared to $761 million a year earlier. "Overall growth in deposits is a direct result of the success of our High Performance Checking program, and the changing mix of deposits reflects the current interest rate environment," said Knudson. "Because of the success we've had with our deposit gathering programs, we have been able to replace a number of higher priced CDs with organic core deposits. We believe the acquisition of Alaska First will further enhance our core deposit base."
At the end of the second quarter, money market balances account for 26% of total deposits, up from 19% a year ago. Alaska CDs, a unique and flexible certificate of deposit, accounted for 22% of total deposits compared to 27% a year ago, and non interest bearing demand deposits represented 23% of the mix compared to 25% a year ago.
Shareholders' equity increased 11% to $98 million, or $16.13 per share, at June 30, 2007, compared to $88 million, or $14.48 per share, at June 30, 2006. Tangible book value per share at quarter-end was $15.03 compared to $13.31 a year earlier. All per share calculations reflect the 5% stock dividend paid to shareholders on September 1, 2006.
Northrim BanCorp will be presenting at the Howe Barnes Hoefer and Arnett 12th Annual Bank Conference in Chicago on August 13 and 14. For more information visit the company's website at https://www.northrim.com.
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 https://http://www.primenewswire.com/newsroom/prs/?pkgid=3818
Income Statement
----------------
(Dollars in thousands, except per share data)
Quarter Ended June 30:
-------------------------------------
2007 2006 % Change
-------------------------------------
(unaudited) (unaudited) (unaudited)
Interest Income:
Interest and fees on loans $ 16,936 $ 16,288 4%
Interest on portfolio
investments 978 597 64%
Interest on overnight
investments 459 78 488%
-------------------------------------
Total interest income 18,373 16,963 8%
Interest Expense:
Interest expense on deposits 5,534 4,968 11%
Interest expense on
borrowings 452 469 -4%
-------------------------------------
Total interest expense 5,986 5,437 10%
-------------------------------------
Net interest income 12,387 11,526 7%
Provision for loan losses 1,333 860 55%
-------------------------------------
Net interest income
after provision for
loan losses 11,054 10,666 4%
Other Operating Income:
Service charges on deposit
accounts 892 490 82%
Purchased receivable income 649 453 43%
Employee benefit plan income 314 385 -18%
Equity in earnings from
mortgage affiliate 174 148 18%
Other income 641 475 35%
-------------------------------------
Total other operating
income 2,670 1,951 37%
Other Operating Expense:
Salaries and other
personnel expense 5,161 4,671 10%
Occupancy, net 620 597 4%
Equipment expense 365 357 2%
Intangible asset
amortization expense 100 120 -17%
Other expense 2,378 1,970 21%
-------------------------------------
Total other operating
expense 8,624 7,715 12%
-------------------------------------
Income before income
taxes and minority
interest 5,100 4,902 4%
-------------------------------------
Minority interest in
subsidiaries 80 103 -22%
-------------------------------------
Pre tax income 5,020 4,799 5%
-------------------------------------
Provision for income taxes 1,878 1,860 1%
-------------------------------------
Net income $ 3,142 $ 2,939 7%
=====================================
Basic EPS $ 0.51 $ 0.48 6%
Diluted EPS $ 0.51 $ 0.47 9%
Average basic shares 6,128,254 6,112,476 0%
Average diluted shares 6,221,803 6,197,828 0%
Income Statement
----------------
(Dollars in thousands, except per share data)
Six Months Ended June 30:
-------------------------------------
2007 2006 % Change
-------------------------------------
(unaudited) (unaudited) (unaudited)
Interest Income:
Interest and fees on loans $ 33,757 $ 31,564 7%
Interest on portfolio
investments 1,985 1,126 76%
Interest on overnight
investments 613 337 82%
-------------------------------------
Total interest income 36,355 33,027 10%
Interest Expense:
Interest expense on
deposits 10,962 9,364 17%
Interest expense on
borrowings 903 838 8%
-------------------------------------
Total interest expense 11,865 10,202 16%
-------------------------------------
Net interest income 24,490 22,825 7%
Provision for loan losses 1,788 914 96%
-------------------------------------
Net interest income
after provision for
loan losses 22,702 21,911 4%
Other Operating Income:
Service charges on deposit
accounts 1,396 974 43%
Purchased receivable income 1,076 766 40%
Employee benefit plan income 571 558 2%
Equity in earnings from
mortgage affiliate 188 155 21%
Other income 1,101 926 19%
-------------------------------------
Total other operating
income 4,332 3,379 28%
Other Operating Expense:
Salaries and other
personnel expense 10,416 9,436 10%
Occupancy, net 1,318 1,238 6%
Equipment expense 707 698 1%
Intangible asset
amortization expense 221 241 -8%
Other expense 4,894 4,066 20%
-------------------------------------
Total other operating
expense 17,556 15,679 12%
Income before income
taxes and minority
interest 9,478 9,611 -1%
-------------------------------------
Minority interest in
subsidiaries 130 148 -12%
-------------------------------------
Pre tax income 9,348 9,463 -1%
-------------------------------------
Provision for income taxes 3,477 3,629 -4%
-------------------------------------
Net income $ 5,871 $ 5,834 1%
=====================================
Basic EPS $ 0.96 $ 0.95 1%
Diluted EPS $ 0.94 $ 0.94 0%
Average basic shares 6,136,184 6,110,999 0%
Average diluted shares 6,233,083 6,192,599 1%
Balance Sheet
-------------
(Dollars in thousands, except per share data)
June 30, Dec. 31, June 30, Annual
2007 2006 2006 % Change
-----------------------------------------------
(unaudited) (unaudited) (unaudited)
Assets:
Cash and due from
banks $ 27,020 $ 25,565 $ 30,882 -13%
Overnight investments 74,231 18,717 6,810 990%
Portfolio investments 79,445 100,325 58,532 36%
Loans:
Commercial loans 286,574 287,155 312,526 -8%
Commercial real
estate 232,463 237,599 238,657 -3%
Construction loans 138,352 153,059 139,825 -1%
Consumer loans 44,605 42,140 39,703 12%
Other loans 884 126 481 84%
Unearned loan fees (2,754) (3,023) (3,104) -11%
-----------------------------------------------
Total loans 700,124 717,056 728,088 -4%
Allowance for loan
losses (11,841) (12,125) (11,581) 2%
-----------------------------------------------
Net loans 688,283 704,931 716,507 -4%
Purchased
receivables, net 22,295 21,183 20,854 7%
Premises and
equipment, net 12,962 12,874 11,618 12%
Intangible assets 6,683 6,903 7,148 -7%
Other assets 36,362 35,122 26,946 35%
-----------------------------------------------
Total assets $947,281 $925,620 $879,297 8%
===============================================
Liabilities and
Shareholders' Equity:
Demand deposits $186,903 $206,343 $191,537 -2%
Interest-bearing
demand 82,883 89,476 74,818 11%
Savings deposits 55,272 48,330 48,166 15%
Alaska CDs 181,159 207,492 203,388 -11%
Money market
deposits 206,929 157,345 146,639 41%
Time deposits 94,625 85,918 96,289 -2%
-----------------------------------------------
Total deposits 807,771 794,904 760,837 6%
Borrowings 11,294 6,502 6,234 81%
Junior subordinated
debentures 18,558 18,558 18,558 0%
Other liabilities 11,470 10,209 5,266 118%
-----------------------------------------------
Total liabilities 849,093 830,173 790,895 7%
Minority interest in
subsidiaries 26 29 25 4%
Shareholders' equity 98,162 95,418 88,377 11%
-----------------------------------------------
Total liabilities
and equity $947,281 $925,620 $879,297 8%
===============================================
Financial Ratios and Other Data
-------------------------------
(Dollars in thousands, except per share data)
June 30, Dec. 31, June 30,
2007 2006 2006
-------------------------------------
(unaudited) (unaudited) (unaudited)
Asset Quality:
Non accrual loans $ 5,268 $ 5,176 $ 4,686
Loans 90 days past due 4,579 708 1,846
Restructured loans 36 748 --
-------------------------------------
Total non-performing
loans 9,883 6,632 6,532
Other real estate owned 717 717 --
-------------------------------------
Total non-performing
assets $ 10,600 $ 7,349 $ 6,532
-------------------------------------
Non-performing loans /
portfolio loans 1.41% 0.92% 0.90%
Non-performing assets /
assets 1.12% 0.79% 0.74%
Allowance for loan losses /
portfolio loans 1.69% 1.69% 1.59%
Allowance / non-performing
loans 119.81% 182.83% 177.30%
Loan (recoveries)
charge-offs, net for the
quarter $ 1,345 $ 1,322 $ 149
Loan (recoveries)
charge-offs, net
year-to-date $ 2,072 $ 1,145 $ 39
Net loan (recoveries)
charge-offs / average
loans, annualized 0.58% 0.16% 0.01%
Capital Data (At quarter end):
Book value per share $ 16.13 $ 15.61 $ 14.48
Tangible book value per
share $ 15.03 $ 14.48 $ 13.31
Tier 1 / Risk Adjusted
Assets 13.22% 12.95% 12.31%
Total Capital / Risk
Adjusted Assets 14.47% 14.21% 13.56%
Tier 1 /Average Assets 11.91% 11.71% 11.59%
Shares outstanding 6,085,572 6,114,247 6,102,106
Unrealized gain (loss) on
AFS securities, net of
income taxes ($253) ($287) ($692)
Profitability Ratios (For the quarter):
Net interest margin (tax
equivalent) 5.94% 6.11% 5.82%
Efficiency ratio* 56.61% 53.30% 56.36%
Return on average assets 1.36% 1.60% 1.35%
Return on average equity 12.79% 15.55% 13.38%
Profitability Ratios (Year-to-date):
Net interest margin (tax
equivalent) 5.99% 5.89% 5.81%
Efficiency ratio* 60.15% 55.97% 58.91%
Return on average assets 1.30% 1.46% 1.36%
Return on average equity 12.14% 14.45% 13.54%
*excludes intangible asset amortization expense
Average Balances
----------------
(Dollars in thousands, except per share data)
June 30, Dec. 31, June 30, Annual
2007 2006 2006 % Change
-----------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Average Quarter Balances
Loans $719,643 $703,678 $725,776 -1%
Total earning
assets 839,214 831,314 796,926 5%
Total assets 927,064 917,559 873,654 6%
Non-interest bearing
deposits 191,603 198,193 176,480 9%
Interest bearing
deposits 596,934 590,184 573,867 4%
Total deposits 788,537 788,377 750,347 5%
Shareholders' equity 98,532 94,149 88,072 12%
Average Year-to-date
Balances
Loans $717,542 $712,130 $717,263 0%
Total earning assets 827,216 810,946 794,980 4%
Total assets 913,884 888,697 868,148 5%
Non-interest bearing
deposits 185,861 185,959 176,466 5%
Interest bearing
deposits 590,513 579,569 570,988 3%
Total deposits 776,374 765,528 747,454 4%
Shareholders' equity 97,527 89,797 86,912 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.
CONTACT: Northrim BanCorp, Inc.Joe Schierhorn, Chief Financial Officer
(907) 261-3308
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