ANCHORAGE, Alaska, April 24, 2024 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) ("Northrim" or the "Company") today reported net income of $8.2 million, or $1.48 per diluted share, in the first quarter of 2024, compared to $6.6 million, or $1.19 per diluted share, in the fourth quarter of 2023, and $4.8 million, or $0.84 per diluted share, in the first quarter a year ago. The increase in first quarter 2024 profitability as compared to the prior quarter was primarily the result of an increase in mortgage banking income, a lower provision for credit losses, and a gain on sale of other real estate owned ("OREO"). The increase in profitability in the first quarter of 2024 compared to the same period a year ago was primarily due to an increase in mortgage banking income, higher net interest income, a lower provision for credit losses, unrealized gains on marketable equity securities, and a gain on an OREO sale.
Dividends per share in the first quarter of 2024 increased 2% to $0.61 per share compared to $0.60 per share in the fourth and first quarters of 2023.
On March 29, 2024, the Company announced by press release that Mr. Schierhorn resigned from his position as President, Chief Executive Officer and Chief Operating Officer of the Company and Chief Executive Officer of the Bank, effective April 6, 2024. Mr. Schierhorn will continue to serve as Chairman of the Board of Directors of the Company and Chairman of the Board of Directors of the Bank. In connection with Mr. Schierhorn's resignation, Mr. Huston was appointed to the position of President, Chief Executive Officer and Chief Operating Officer of the Company and President and Chief Executive Officer of the Bank as part of the Company's long-term succession plans.
"We are grateful for Mr. Schierhorn's many years of leadership as one of Northrim's charter employees and in his role as Chairman, Chief Executive Officer, and President," said Mike Huston. "We look forward to his continued contributions as Chairman in the years ahead."
"First quarter results benefited from stable net interest income and operating expenses, lower credit loss provisions, and increased mortgage originations," continued Mr. Huston. "We continued our expansion by opening a branch in Homer to build on the success of the loan production office we opened there in 2023. Despite the uncertain interest rate outlook, the Alaskan economy continues to perform well and we believe we are well-positioned in 2024."
First Quarter 2024 Highlights:
- Net interest income in the first quarter of 2024 decreased 1% to $26.4 million compared to $26.7 million in the fourth quarter of 2023 and increased 6% compared to $25.0 million in the first quarter of 2023.
- Net interest margin on a tax equivalent basis ("NIMTE")* was 4.22% for the first quarter of 2024, up 10-basis points from the fourth quarter of 2023 and down 8-basis points from the first quarter a year ago.
- The weighted average interest rate for portfolio loans originated in the first quarter of 2024 was 7.15% compared to 7.35% for loans originated in the fourth quarter of 2023 and 6.04% in the first quarter a year ago.
- Return on average assets ("ROAA") was 1.19% and return on average equity ("ROAE") was 13.84% for the first quarter of 2024.
- Portfolio loans were $1.81 billion at March 31, 2024, up 1% from the preceding quarter and up 18% from a year ago, primarily due to retaining certain mortgages originated by Residential Mortgage, a subsidiary of Northrim Bank (the "Bank"), in the loan portfolio, new customer relationships, and expanding market share.
- Total deposits were $2.43 billion at March 31, 2024, down 2% from the preceding quarter, and up 6% from $2.30 billion a year ago. Non-interest bearing demand deposits decreased 5% from the preceding quarter and decreased 7% year-over-year to $714.2 million at March 31, 2024 and represents 29% of total deposits.
- The average cost of interest-bearing deposits was 2.13% at March 31, 2024, up from 2.00% at December 31, 2023 and 1.20% at March 31, 2023.
- A new branch opened in Homer, Alaska to serve the communities on the Kenai Peninsula along with the Soldotna branch that opened in 2019.
| Financial Highlights | Three Months Ended | ||||||||||||||
| (Dollars in thousands, except per share data) | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||
| Total assets | $ | 2,759,560 | $ | 2,807,497 | $ | 2,790,189 | $ | 2,638,207 | $ | 2,580,037 | |||||
| Total portfolio loans | $ | 1,811,135 | $ | 1,789,497 | $ | 1,720,091 | $ | 1,659,239 | $ | 1,535,187 | |||||
| Total deposits | $ | 2,434,083 | $ | 2,485,055 | $ | 2,427,930 | $ | 2,302,311 | $ | 2,296,273 | |||||
| Total shareholders' equity | $ | 239,327 | $ | 234,718 | $ | 225,259 | $ | 221,336 | $ | 224,425 | |||||
| Net income | $ | 8,199 | $ | 6,613 | $ | 8,374 | $ | 5,577 | $ | 4,830 | |||||
| Diluted earnings per share | $ | 1.48 | $ | 1.19 | $ | 1.48 | $ | 0.98 | $ | 0.84 | |||||
| Return on average assets | 1.19 | % | 0.93 | % | 1.22 | % | 0.85 | % | 0.76 | % | |||||
| Return on average shareholders' equity | 13.84 | % | 11.36 | % | 14.67 | % | 9.85 | % | 8.73 | % | |||||
| NIM | 4.16 | % | 4.06 | % | 4.15 | % | 4.14 | % | 4.22 | % | |||||
| NIMTE* | 4.22 | % | 4.12 | % | 4.21 | % | 4.21 | % | 4.30 | % | |||||
| Efficiency ratio | 68.93 | % | 72.21 | % | 66.64 | % | 74.03 | % | 78.51 | % | |||||
| Total shareholders' equity/total assets | 8.67 | % | 8.36 | % | 8.07 | % | 8.39 | % | 8.70 | % | |||||
| Tangible common equity/tangible assets* | 8.14 | % | 7.84 | % | 7.54 | % | 7.83 | % | 8.13 | % | |||||
| Book value per share | $ | 43.52 | $ | 42.57 | $ | 40.60 | $ | 39.45 | $ | 39.56 | |||||
| Tangible book value per share* | $ | 40.61 | $ | 39.68 | $ | 37.72 | $ | 36.60 | $ | 36.74 | |||||
| Dividends per share | $ | 0.61 | $ | 0.60 | $ | 0.60 | $ | 0.60 | $ | 0.60 | |||||
| Common stock outstanding | 5,499,578 | 5,513,459 | 5,548,436 | 5,610,841 | 5,672,841 | ||||||||||
* References to NIMTE, tangible book value per share, tangible common equity to tangible common assets, and tangible common equity to tangible assets, excluding the unrealized losses on the available for sale securities portfolio, (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 non-GAAP financial measures to GAAP financial measures.
Alaska Economic Update
(Note: sources for information included in this section are included on page 11.)
The Alaska Department of Labor ("DOL") has reported Alaska's seasonally adjusted unemployment rate in February of 2024 was 4.7% compared to the U.S. rate of 3.9%. The total number of payroll jobs in Alaska, not including uniformed military, increased 2.6% or 8,200 jobs between February of 2023 and February of 2024.
According to the DOL, Construction and Health Care had the largest growth in new jobs through February of 2024 compared to the prior year. The Construction sector added 1,900 positions for a year over year growth rate of 13.3% in February. The Health Care sector grew by 1,600 jobs for an annual growth rate of 4%. The Oil & Gas sector increased by 6.8% or 500 direct new jobs. Trade, Transportation & Utilities added 1,500 jobs year over year through February of 2024, up 2.4%. The Government sector grew by 1,400 jobs over the same period for 1.8% growth, mainly due to more state and local positions in Alaska.
Alaska's Gross State Product ("GSP") in the fourth quarter of 2023, was estimated to be $68.7 billion in current dollars, according to the Federal Bureau of Economic Analysis ("BEA"). Alaska's inflation adjusted "real" GSP grew 5.3% in all of 2023, placing Alaska fourth best of all 50 states. In the fourth quarter of 2023 Alaska grew at an annualized rate of 4.5%, compared to the average U.S. rate of 3.4%. Alaska's real GSP improvement in the fourth quarter of 2023 was aided by gains in the Mining, Oil and Gas sector.
The BEA also calculated Alaska's seasonally adjusted personal income at $53.7 billion in the fourth quarter of 2023. This was an annual improvement of 4.3% for Alaska compared to the national average improvement of 5.2%.
The monthly average price of Alaska North Slope ("ANS") crude oil was in a range between $75.64 and $95.05 in 2023. The Alaska Department of Revenue ("DOR") calculated ANS crude oil production was 479 thousand barrels per day ("bpd") in Alaska's fiscal year ending June 30, 2023. The DOR has forecast production to decline slightly to 468 thousand bpd in Alaska's fiscal year 2024 and grow to 477 thousand bpd in fiscal year 2025. The DOR projects the number to reach 641 thousand bpd by fiscal year 2034. This is primarily a result of new production coming on line in and around the NPR-A region west of Prudhoe Bay.
According to the Alaska Multiple Listing Services, the average sales price of a single family home in Anchorage rose 5.4% in 2023 to $481,181, following a 7.6% increase in 2022. This was the sixth consecutive year of price increases.
Average sales prices for single family homes in the Matanuska Susitna Borough rose 4% in 2023 to $397,589, after increasing 9.9% in 2022. This continues a trend of average price increases for more than a decade in the region. These two markets represent where the vast majority of the Bank's residential lending activity occurs.
However, the Alaska Multiple Listing Services reported a large decrease in the number of units sold in both communities. There were 2,162 housing units sold in Anchorage in 2023, down 24.1% compared to 2,849 in 2022. In the Matanuska Susitna Borough there were 1,636 homes sold in 2023, compared to 2,103 in 2022, a decrease of 22.2%.
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 "Business Banking" link and then click "Learn." Information from our website is not incorporated into, and does not form, a part of this earnings release.
Review of Income Statement
Consolidated Income Statement
In the first quarter of 2024, Northrim generated a ROAA of 1.19% and a ROAE of 13.84%, compared to 0.93% and 11.36%, respectively, in the fourth quarter of 2023 and 0.76% and 8.73%, respectively, in the first quarter a year ago.
Net Interest Income/Net Interest Margin
Net interest income decreased 1% to $26.4 million in the first quarter of 2024 compared to $26.7 million in the fourth quarter of 2023 and increased 6% compared to $25.0 million in the first quarter of 2023. Interest expense on deposits increased to $9.2 million in the first quarter compared to $8.7 million in the fourth quarter of 2023 and $4.6 million in the first quarter of 2023.
NIMTE* was 4.22% in the first quarter of 2024 up from 4.12% in the preceding quarter and down from 4.30% in the first quarter a year ago. NIMTE* decreased 8 basis points in the first quarter of 2024 compared to the first quarter of 2023 primarily due to an increase in costs on interest-bearing deposits which was only partially offset by a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets, higher earning-assets, and higher yields on those assets. The weighted average interest rate for new loans booked in the first quarter of 2024 was 7.15% compared to 7.35% in the fourth quarter of 2023 and 6.04% in the first quarter a year ago. No long-term investments were purchased during the first quarter of 2024, however, the yield on the portfolio increased to 2.82% for the quarter as a result of $45.6 million in maturities that had an average yield of 1.75% and repricing of the variable rate investments which represent 10% of the investment portfolio. "We continue to see modest deposit pricing pressure, however, the main impact on deposit cost is the mix of our deposit balances. Fortunately, we have been able to offset the cost increase with increased yields on our earning assets," said Jed Ballard, Chief Financial Officer. Northrim's NIMTE* continues to remain above the peer average posted by the S&P U.S. Small Cap Bank Index with total market capitalization between $250 million and $1 billion as of December 31, 20231.
Provision for Credit Losses
Northrim recorded a provision for credit losses of $149,000 in the first quarter of 2024, which is the net of a $72,000 benefit for credit losses on unfunded commitments and a provision for credit losses on loans of $221,000 primarily as a result of loan growth, changes in assumptions in management's current expected credit losses model, and an increase in the allowance for loans individually evaluated. This compares to a provision for credit losses of $885,000 in the fourth quarter of 2023, and provision for credit losses of $360,000 in the first quarter a year ago. The decrease in the provision for credit losses on loans in the first quarter of 2024 compared to the fourth quarter of 2023 is primarily due to lower loan growth during the quarter.
Nonperforming loans, net of government guarantees, increased during the quarter to $5.3 million at March 31, 2024, compared to $5.0 million at December 31, 2023, and decreased compared to $6.1 million at March 31, 2023.
The allowance for credit losses was 333% of nonperforming loans, net of government guarantees, at the end of the first quarter of 2024, compared to 345% three months earlier and 233% a year ago.
Other Operating Income
In addition to home mortgage lending, Northrim has interests in other businesses that complement its core community banking activities, including purchased receivables financing and wealth management. Other operating income contributed $7.8 million, or 23% of total first quarter 2024 revenues, as compared to $6.5 million, or 20% of revenues in the fourth quarter of 2023, and $4.9 million, or 16% of revenues in the first quarter of 2023. The increase in other operating income in the first quarter of 2024 as compared to the preceding quarter and the first quarter of 2023 is primarily the result of an increase in mortgage banking income due to a higher volume of mortgage activity. The fair market value of marketable equity securities increased $314,000 in the first quarter of 2024 compared to an increase of $565,000 in the prior quarter and a decrease of $223,000 in the first quarter of 2023. The increase in other operating income in the first quarter of 2024 as compared to the first quarter a year ago was due primarily to a higher volume of mortgage activity, as well as an increase in purchased receivable income due to higher balances and increased rates. See further discussion regarding mortgage activity during the first quarter contained under "Home Mortgage Lending" below.
Other Operating Expenses
Operating expenses were $23.6 million in the first quarter of 2024, compared to $24.0 million in the fourth quarter of 2023, and $23.5 million in the first quarter of 2023. The decrease in other operating expenses in the first quarter of 2024 compared to the fourth quarter of 2023 is primarily due to a decrease in OREO expense due to a gain on sale recorded in the first quarter of 2024 for subsequent proceeds received related to a government guarantee on an OREO property sold in December 2022.
1As of December 31, 2023, the S&P U.S. Small Cap Bank Index tracked 251 banks with total common market capitalization between $250 million to $1B for the following ratios: NIMTE* of 3.19%.
Income Tax Provision
In the first quarter of 2024, Northrim recorded $2.3 million in state and federal income tax expense for an effective tax rate of 21.9%, compared to $1.7 million, or 20.7% in the fourth quarter of 2023 and $1.2 million, or 20.4% in the first quarter a year ago. The increase in the tax rate in the first quarter of 2024 as compared to the first quarter of 2023 is primarily the result of a decrease in tax credits and tax exempt interest income as a percentage of pre-tax income in 2024 as compared to 2023.
Community Banking
In the most recent deposit market share data from the FDIC, Northrim's deposit market share in Alaska increased to 15.04% of Alaska's total deposits as of June 30, 2023 compared to 13.95% of Alaska's total deposits as of June 30, 2022. This represents 7.8% growth in market share percentage for Northrim during that period while, according to the FDIC, the total deposits in Alaska were down 8.5% during the same period. Northrim opened a branch in Kodiak in the first quarter of 2023, a loan production office in Homer in the second quarter of 2023, a permanent branch in Nome in the third quarter of 2023, and a branch in Homer in the first quarter of 2024. See below for further discussion regarding the Company's deposit movement for the quarter.
Net interest income in the Community Banking segment totaled $24.2 million in the first quarter of 2024, compared to $24.5 million in the fourth quarter of 2023 and $24.8 million in the first quarter of 2023. Net interest income decreased slightly in the first quarter of 2024 as compared to the fourth quarter of 2023 mostly due to higher interest expense on deposits and lower interest income on short term and portfolio investments. These changes were only partially offset by higher interest income on loans and lower interest expense on borrowings.
Other operating expenses totaled $17.6 million in the first quarter of 2024, down $964,000 or 5% from $18.5 million in the fourth quarter of 2023, and up slightly from the first quarter a year ago. The decrease in the first quarter of 2024 as compared to the prior quarter is mostly due to a decrease in salaries and other personnel expense and marketing expense, as well as a decrease in OREO expense due to a gain on sale recorded in the first quarter of 2024 for subsequent proceeds received related to a government guarantee on an OREO property sold in December 2022.
The following table provides highlights of the Community Banking segment of Northrim:
| Three Months Ended | ||||||||||
| (Dollars in thousands, except per share data) | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||
| Net interest income | $ | 24,215 | $ | 24,456 | $ | 24,050 | $ | 22,700 | $ | 24,752 |
| Provision for credit losses | 197 | 885 | 1,190 | 1,407 | 360 | |||||
| Other operating income | 3,813 | 4,048 | 3,597 | 3,067 | 2,900 | |||||
| Other operating expense | 17,552 | 18,516 | 16,946 | 17,805 | 17,417 | |||||
| Income before provision for income taxes | 10,279 | 9,103 | 9,511 | 6,555 | 9,875 | |||||
| Provision for income taxes | 2,242 | 1,941 | 1,709 | 1,192 | 2,315 | |||||
| Net income | $ | 8,037 | $ | 7,162 | $ | 7,802 | $ | 5,363 | $ | 7,560 |
| Weighted average shares outstanding, diluted | 5,554,930 | 5,578,491 | 5,624,906 | 5,677,292 | 5,757,458 | |||||
| Diluted earnings per share | $ | 1.45 | $ | 1.29 | $ | 1.39 | $ | 0.94 | $ | 1.31 |
Home Mortgage Lending
During the first quarter of 2024, mortgage loans funded for sale increased to $84.3 million, of which 96% was for home purchases, compared to $79.7 million and 96% of loans funded for home purchases in the fourth quarter of 2023, and increased as compared to $50.7 million, of which 95% was for home purchases in the first quarter of 2023.
The Company has mortgage products including adjustable rate mortgages, a second home product, jumbo, and extended locks which are intended to appeal to customers given the current interest rate environment. During the first quarter of 2024, our home mortgage lending subsidiary, Residential Mortgage originated $17.4 million in home mortgages, of which roughly one-third were adjustable rate mortgages and two-thirds were mortgages for second homes, that the Bank purchased and booked at a weighted average interest rate of 6.65%, down from $27.1 million and 7.05% in the fourth quarter of 2023, $21.6 million and 6.60% in the third quarter of 2023, $55.6 million and 5.70% in the second quarter of 2023, and $42.0 million and 5.11% in the first quarter of 2023. The increase in mortgage loans funded for investment has increased net interest income in the Home Mortgage Lending segment. Net interest income contributed $2.2 million to total revenue in the first quarter of 2024, down slightly from $2.3 million in the prior quarter, and up from $280,000 in the first quarter a year ago.
The expansion efforts of mortgage production in the Arizona, Colorado, and the Pacific Northwest markets contributed to 19% of Residential Mortgage's $102 million total production in the first quarter of 2024, 11% of the $107 million in total production in the fourth quarter of 2023, 8% of the $153 million in total production in the third quarter of 2023, 15% of the $169 million in total production in the second quarter of 2023, and 19% of $93 million in total production in the first quarter of 2023.
The net change in fair value of mortgage servicing rights decreased mortgage banking income by $25,000 during the first quarter of 2024 compared to a decrease of $1.0 million for the fourth quarter of 2023 and a decrease of $795,000 for the first quarter of 2023. Mortgage servicing revenue decreased to $1.6 million in the first quarter of 2024 from $2.2 million in the prior quarter and increased from $1.4 million in the first quarter of 2023 due to varying production of Alaska Housing Finance Corporation (AHFC) mortgages, which contribute to servicing revenues at origination. In the first quarter of 2024, the Company's servicing portfolio increased $15.5 million, which included $33.3 million in new mortgage loans, net of amortization and payoffs of $17.8 million as compared to a net increase of $62.4 million in the fourth quarter of 2024 and $12.2 million in the first quarter of 2023.
As of March 31, 2024, Northrim serviced 3,910 loans in its $1.06 billion home-mortgage-servicing portfolio, a 1% increase compared to the $1.04 billion serviced as of the end of the fourth quarter of 2023, and a 16% increase from the $911 million serviced 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, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||
| Mortgage commitments | $ | 56,208 | $ | 22,926 | $ | 50,128 | $ | 71,123 | $ | 41,050 | |||||
| Mortgage loans funded for sale | $ | 84,324 | $ | 79,742 | $ | 131,863 | $ | 113,824 | $ | 50,725 | |||||
| Mortgage loans funded for investment | 17,403 | 27,114 | 21,585 | 55,595 | 41,964 | ||||||||||
| Total mortgage loans funded | $ | 101,727 | $ | 106,856 | $ | 153,448 | $ | 169,419 | $ | 92,689 | |||||
| Mortgage loan refinances to total fundings | 4 | % | 4 | % | 5 | % | 3 | % | 5 | % | |||||
| Mortgage loans serviced for others | $ | 1,060,007 | $ | 1,044,516 | $ | 982,098 | $ | 921,616 | $ | 911,065 | |||||
| Net realized gains on mortgage loans sold | $ | 1,980 | $ | 1,462 | $ | 2,491 | $ | 2,570 | $ | 1,305 | |||||
| Change in fair value of mortgage loan commitments, net | 386 | (296 | ) | (289 | ) | 358 | 125 | ||||||||
| Total production revenue | 2,366 | 1,166 | 2,202 | 2,928 | 1,430 | ||||||||||
| Mortgage servicing revenue | 1,561 | 2,180 | 2,396 | 1,424 | 1,368 | ||||||||||
| Change in fair value of mortgage servicing rights: | |||||||||||||||
| Due to changes in model inputs of assumptions1 | 289 | (707 | ) | - | (3 | ) | (212 | ) | |||||||
| Other2 | (314 | ) | (301 | ) | (310 | ) | (571 | ) | (583 | ) | |||||
| Total mortgage servicing revenue, net | 1,536 | 1,172 | 2,086 | 850 | 573 | ||||||||||
| Other mortgage banking revenue | 129 | 99 | 117 | 135 | 5 | ||||||||||
| Total mortgage banking income | $ | 4,031 | $ | 2,437 | $ | 4,405 | $ | 3,913 | $ | 2,008 | |||||
| Net interest income | $ | 2,232 | $ | 2,276 | $ | 2,300 | $ | 2,442 | $ | 280 | |||||
| (Benefit) provision for credit losses | (48 | ) | - | - | - | - | |||||||||
| Mortgage banking income | 4,031 | 2,437 | 4,405 | 3,913 | 2,008 | ||||||||||
| Other operating expense | 6,086 | 5,477 | 5,951 | 5,977 | 6,092 | ||||||||||
| Income (loss) before provision for income taxes | 225 | (764 | ) | 754 | 378 | (3,804 | ) | ||||||||
| Provision (benefit) for income taxes | 63 | (215 | ) | 182 | 164 | (1,074 | ) | ||||||||
| Net income (loss) | $ | 162 | $ | (549 | ) | $ | 572 | $ | 214 | ($ | 2,730 | ) | |||
| Weighted average shares outstanding, diluted | 5,554,930 | 5,578,491 | 5,624,906 | 5,677,292 | 5,757,458 | ||||||||||
| Diluted earnings per share | $ | 0.03 | $ | (0.10 | ) | $ | 0.09 | $ | 0.04 | ($ | 0.47 | ) | |||
1Principally reflects changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates.
2Represents changes due to collection/realization of expected cash flows over time.
Balance Sheet Review
Northrim's total assets were $2.76 billion at March 31, 2024, down 2% from the preceding quarter and up 7% from a year ago. Northrim's loan-to-deposit ratio was 74% at March 31, 2024, up from 72% at December 31, 2023, and 67% at March 31, 2023.
At March 31, 2024, our liquid assets and investments and loans maturing within one year were $515.6 million and our funds available for borrowing under our existing lines of credit were $712.3 million. Given these sources of liquidity and our expectations for customer demands for cash and for our operating cash needs, we believe our sources of liquidity to be sufficient for the foreseeable future.
Average interest-earning assets were $2.56 billion in the first quarter of 2024, down 2% from $2.61 billion in the fourth quarter of 2023 and up 6% from $2.40 billion in the first quarter a year ago. The average yield on interest-earning assets was 5.69% in the first quarter of 2024, up from 5.51% in the preceding quarter and 5.10% in the first quarter a year ago.
Average investment securities decreased to $670.9 million in the first quarter of 2024, compared to $690.7 million in the fourth quarter of 2023 and $727.6 million in the first quarter a year ago. The average net tax equivalent yield on the securities portfolio was 2.82% for the first quarter of 2024, up from 2.48% in the preceding quarter and up from 2.40% in the year ago quarter. The average estimated duration of the investment portfolio at March 31, 2024, was approximately 2.7 years compared to approximately 3.1 years at March 31, 2023. As of March 31, 2024, $48.8 million of available for sale securities with a weighted average yield of 1.83% are scheduled to mature in the next six months, $40.1 million with a weighted average yield of 0.66% are scheduled to mature in six months to one year, and $238.1 million with a weighted average yield of 1.52% are scheduled to mature in the following year, representing a total of $326.9 million or 13% of earning assets that are scheduled to mature in the next 24 months.
Total unrealized losses, net of tax, on available for sale securities decreased by $210,000 in the first quarter of 2024 resulting in total unrealized loss, net of tax, of $17.2 million compared to $17.4 million at December 31, 2023, and $24.3 million a year ago. The average maturity of the available for sale securities with the majority of the unrealized loss is 1.8 years. Total unrealized losses on held to maturity securities were $3.4 million at March 31, 2024, compared to $3.3 million at December 31, 2023, and $4.2 million a year ago.
Average interest bearing deposits in other banks decreased to $61.6 million in the first quarter of 2024 from $126.2 million in the fourth quarter of 2023 and $130.9 million in the first quarter of 2023 as cash was used to fund the growing loan portfolio and provide funds to deposit customers.
Portfolio loans were $1.81 billion at March 31, 2024, up 1% from the preceding quarter and up 18% from a year ago. Portfolio loans, excluding consumer mortgage loans, were $1.59 billion at March 31, 2024, relatively unchanged from the preceding quarter and up 12% from a year ago. Average portfolio loans in the first quarter of 2024 were $1.79 billion, which was up 2% from the preceding quarter and up 18% from a year ago. Yields on average portfolio loans in the first quarter of 2024 increased to 6.75% from 6.55% in the fourth quarter of 2023 and increased from 6.28% in the first quarter of 2023. The increase in the yield on portfolio loans in the first quarter of 2024 compared to the fourth quarter of 2023 and the first quarter a year ago is primarily due to loan repricing due to the increases in interest rates and new loans booked at higher rates due to changes in the interest rate environment. The yield on new portfolio loans, excluding consumer mortgage loans, was 8.46% in the first quarter of 2024 as compared to 7.91% in the fourth quarter of 2023 and 8.06% in the first quarter of 2023. Approximately 32% of loans mature or reprice in the next three months, 15% of loans mature or reprice in three to twelve months, and 16% of loans mature or reprice in one to two years.
Alaskans continue to account for substantially all of Northrim's deposit base. Total deposits were $2.43 billion at March 31, 2024, down 2% from $2.49 billion at December 31, 2023, and up 6% from $2.30 billion a year ago. "The decrease in deposits in the first quarter of 2024 were consistent with our customers' business cycles, where we typically see growth in the second half of the year," said Ballard. At March 31, 2024, 70% of total deposits were held in business accounts and 30% of deposit balances were held in consumer accounts. Northrim had approximately 33,000 deposit customers with an average balance of $73,000 as of March 31, 2024. Northrim had 19 customers with balances over $10 million as of March 31, 2024, which accounted for $459.9 million, or 19%, of total deposits. Of these $459.9 million of deposits, approximately 35% are insured using ICS or CDARS and an additional 17% are long-term customers with whom Northrim has significant lending relationships. ICS and CDARS deposits are divided into amounts under the FDIC insurance maximum and allocated among member banks, making the large deposit eligible for FDIC insurance. Demand deposits decreased by 5% from the prior quarter and decreased 7% year-over-year to $714.2 million at March 31, 2024. Demand deposits decreased to 29% of total deposits at March 31, 2024 compared to 31% of total deposits at December 31, 2023 and 35% of total deposits at March 31, 2023. Average interest-bearing deposits were up slightly to $1.73 billion with an average cost of 2.13% in the first quarter of 2024, compared to $1.72 billion and an average cost of 2.00% in the fourth quarter of 2023, and up 12% compared to $1.54 billion and an average cost of 1.20% in the first quarter of 2023. Uninsured deposits totaled $989.5 million or 41% of total deposits as of March 31, 2024 compared to $1.1 billion or 46% of total deposits as of December 31, 2022. Since interest rates began increasing in 2022, Northrim has taken a proactive, targeted approach to increase deposit rates.
Shareholders' equity was $239.3 million, or $43.52 book value per share, at March 31, 2024, compared to $234.7 million, or $42.57 book value per share, at December 31, 2023 and $224.4 million, or $39.56 book value per share, a year ago. Tangible book value per share* was $40.61 at March 31, 2024, compared to $39.68 at December 31, 2023, and $36.74 per share a year ago. The increase in shareholders' equity in the first quarter of 2024 as compared to the fourth quarter of 2023 was largely the result of earnings of $8.2 million and an increase in the fair value of the available for sale securities portfolio, which increased $210,000, net of tax, which were only partially offset by dividends paid of $3.4 million and repurchases of common stock of $789,000. The Company purchased 15,034 shares of common stock in the first quarter of 2024 at an average cost of $52.46 per share and has 110,000 shares remaining under the current share repurchase program as of March 31, 2024. Tangible common equity to tangible assets* was 8.14% as of March 31, 2024. Tangible common equity to tangible common assets, excluding the impact of the fair value of the available for sale securities portfolio*, was 8.71% as of March 31, 2024, compared to 8.41% as of December 31, 2023 and 8.99% as of March 31, 2023. Northrim continues to maintain capital levels in excess of the requirements to be categorized as "well-capitalized" with Tier 1 Capital to Risk Adjusted Assets of 11.55% at March 31, 2024, compared to 11.43% at December 31, 2023, and 12.75% at March 31, 2023.
Asset Quality
Northrim believes it has a consistent lending approach throughout economic cycles, which emphasizes appropriate loan-to-value ratios, adequate debt coverage ratios, and competent management.
Nonperforming assets ("NPAs") net of government guarantees were $5.4 million at March 31, 2024, down from $5.8 million at December 31, 2023 and down from $6.4 million a year ago. Of the NPAs at March 31, 2024, $3.3 million, or 61% are nonaccrual loans related to three commercial relationships.
Net adversely classified loans were $7.2 million at March 31, 2024, as compared to $7.1 million at December 31, 2023, and $7.2 million a year ago. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. Net loan recoveries were $42,000 in the first quarter of 2024, compared to net loan charge-offs of $96,000 in the fourth quarter of 2023, and net loan recoveries of $60,000 in the first quarter of 2023. Additionally, Northrim had nine loan modifications to borrowers experiencing financial difficulty totaling $4.8 million, net of government guarantees in the first quarter of 2024.
Northrim had $123.1 million, or 7% of portfolio loans, in the Healthcare sector, $108.6 million, or 6% of portfolio loans, in the Tourism sector, $92.6 million, or 5% of portfolio loans, in the Accommodations sector, $74.0 million, or 4% of portfolio loans, in the Fishing sector, $74.0 million, or 4% of portfolio loans, in the Retail sector, $59.6 million, or 3% of portfolio loans, in the Aviation (non-tourism) sector, and $52.5 million, or 3% in the Restaurants and Breweries sector as of March 31, 2024.
Northrim estimates that $88.0 million, or approximately 5% of portfolio loans, had direct exposure to the oil and gas industry in Alaska, as of March 31, 2024, and $1.8 million of these loans are adversely classified. As of March 31, 2024, Northrim has an additional $42.6 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and no unfunded commitments on adversely classified loans. Northrim defines direct exposure to the oil and gas sector as loans to borrowers that provide oilfield services and other companies that have been 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 20 branches in Anchorage, Eagle River, the Matanuska Valley, the Kenai Peninsula, Juneau, Fairbanks, Nome, Kodiak, 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. Pacific Wealth Advisors, LLC is an affiliated company of Northrim BanCorp.
www.northrim.com
Forward-Looking Statement
This release may contain "forward-looking statements" as that term is defined for purposes of Section 21E of the Securities Exchange Act of 1934, as amended. 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, 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: potential further increases in interest rates; the value of securities held in our investment portfolio; the impact of the results of government initiatives on the regulatory landscape, natural resource extraction industries, and capital markets; the impact of declines in the value of commercial and residential real estate markets, high unemployment rates, inflationary pressures and slowdowns in economic growth; changes in banking regulation or actions by bank regulators; inflation, supply-chain constraints, and potential geopolitical instability, including the wars in Ukraine and the Middle East; financial stress on borrowers (consumers and businesses) as a result of higher rates or an uncertain economic environment; the general condition of, and changes in, the Alaska economy; our ability to maintain or expand our market share or net interest margin; the sufficiency of our provision for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to current expected credit losses accounting guidance; our ability to maintain asset quality; our ability to implement our marketing and growth strategies; our ability to identify and address cyber-security risks, including security breaches, "denial of service attacks," "hacking," and identity theft; disease, outbreaks, such as the COVID-19 pandemic, or similar health threats and measures implemented to combat them; and our ability to execute our business plan. Further, actual results may be affected by competition 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. 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, 2023, 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.
| Contact: | Mike Huston, President, CEO, and COO |
| (907) 261-8750 | |
| Jed Ballard, Chief Financial Officer | |
| (907) 261-3539 |
References:
www.sba.gov/ak
https://www.bea.gov/
http://almis.labor.state.ak.us/
http://www.tax.alaska.gov/programs/oil/prevailing/ans.aspx
http://www.tax.state.ak.us/
www.mba.org
https://www.alaskarealestate.com/MLSMember/RealEstateStatistics.aspx
https://www.capitaliq.spglobal.com/web/client?auth=inherit&overridecdc=1&markets/indexFinancials
| Income Statement | |||||||||
| (Dollars in thousands, except per share data) | Three Months Ended | ||||||||
| (Unaudited) | March 31, | December 31, | March 31, | ||||||
| 2024 | 2023 | 2023 | |||||||
| Interest Income: | |||||||||
| Interest and fees on loans | $ | 30,450 | $ | 29,508 | $ | 23,694 | |||
| Interest on portfolio investments | 4,520 | 4,677 | 4,612 | ||||||
| Interest on deposits in banks | 838 | 1,743 | 1,489 | ||||||
| Total interest income | 35,808 | 35,928 | 29,795 | ||||||
| Interest Expense: | |||||||||
| Interest expense on deposits | 9,180 | 8,676 | 4,583 | ||||||
| Interest expense on borrowings | 181 | 520 | 180 | ||||||
| Total interest expense | 9,361 | 9,196 | 4,763 | ||||||
| Net interest income | 26,447 | 26,732 | 25,032 | ||||||
| Provision for credit losses | 149 | 885 | 360 | ||||||
| Net interest income after provision for credit losses | 26,298 | 25,847 | 24,672 | ||||||
| Other Operating Income: | |||||||||
| Mortgage banking income | 4,031 | 2,437 | 2,008 | ||||||
| Purchased receivable income | 1,345 | 1,307 | 977 | ||||||
| Bankcard fees | 917 | 946 | 908 | ||||||
| Service charges on deposit accounts | 549 | 532 | 457 | ||||||
| Unrealized gain (loss) on marketable equity securities | 314 | 565 | (223 | ) | |||||
| Other income | 688 | 698 | 781 | ||||||
| Total other operating income | 7,844 | 6,485 | 4,908 | ||||||
| Other Operating Expense: | |||||||||
| Salaries and other personnel expense | 15,417 | 15,417 | 15,484 | ||||||
| Data processing expense | 2,659 | 2,500 | 2,355 | ||||||
| Occupancy expense | 1,962 | 1,783 | 1,943 | ||||||
| Insurance expense | 779 | 675 | 557 | ||||||
| Professional and outside services | 755 | 802 | 722 | ||||||
| Marketing expense | 513 | 933 | 564 | ||||||
| Intangible asset amortization expense | - | 6 | 4 | ||||||
| OREO expense, net rental income and gains on sale | (391 | ) | (28 | ) | 26 | ||||
| Other operating expense | 1,944 | 1,905 | 1,854 | ||||||
| Total other operating expense | 23,638 | 23,993 | 23,509 | ||||||
| Income before provision for income taxes | 10,504 | 8,339 | 6,071 | ||||||
| Provision for income taxes | 2,305 | 1,726 | 1,241 | ||||||
| Net income | $ | 8,199 | $ | 6,613 | $ | 4,830 | |||
| Basic EPS | $ | 1.49 | $ | 1.19 | $ | 0.85 | |||
| Diluted EPS | $ | 1.48 | $ | 1.19 | $ | 0.84 | |||
| Weighted average shares outstanding, basic | 5,499,578 | 5,513,041 | 5,691,432 | ||||||
| Weighted average shares outstanding, diluted | 5,554,930 | 5,578,491 | 5,757,458 | ||||||
| Balance Sheet | |||||||||
| (Dollars in thousands) | |||||||||
| (Unaudited) | March 31, | December 31, | March 31, | ||||||
| 2024 | 2023 | 2023 | |||||||
| Assets: | |||||||||
| Cash and due from banks | $ | 30,159 | $ | 27,457 | $ | 28,976 | |||
| Interest bearing deposits in other banks | 50,205 | 91,073 | 110,235 | ||||||
| Investment securities available for sale, at fair value | 592,479 | 637,936 | 677,734 | ||||||
| Investment securities held to maturity | 36,750 | 36,750 | 36,750 | ||||||
| Marketable equity securities, at fair value | 13,467 | 13,153 | 10,515 | ||||||
| Investment in Federal Home Loan Bank stock | 3,236 | 2,980 | 3,752 | ||||||
| Loans held for sale | 43,818 | 31,974 | 23,985 | ||||||
| Portfolio loans | 1,811,135 | 1,789,497 | 1,535,187 | ||||||
| Allowance for credit losses, loans | (17,533 | ) | (17,270 | ) | (14,157 | ) | |||
| Net portfolio loans | 1,793,602 | 1,772,227 | 1,521,030 | ||||||
| Purchased receivables, net | 37,698 | 36,842 | 21,190 | ||||||
| Mortgage servicing rights, at fair value | 20,055 | 19,564 | 18,303 | ||||||
| Other real estate owned, net | - | - | 273 | ||||||
| Premises and equipment, net | 40,836 | 40,693 | 38,163 | ||||||
| Lease right of use asset | 8,867 | 9,092 | 9,469 | ||||||
| Goodwill and intangible assets | 15,967 | 15,967 | 15,980 | ||||||
| Other assets | 72,421 | 71,789 | 63,682 | ||||||
| Total assets | $ | 2,759,560 | $ | 2,807,497 | $ | 2,580,037 | |||
| Liabilities: | |||||||||
| Demand deposits | $ | 714,244 | $ | 749,683 | $ | 767,772 | |||
| Interest-bearing demand | 889,581 | 927,291 | 717,910 | ||||||
| Savings deposits | 246,902 | 255,338 | 292,857 | ||||||
| Money market deposits | 209,785 | 221,492 | 262,478 | ||||||
| Time deposits | 373,571 | 331,251 | 255,256 | ||||||
| Total deposits | 2,434,083 | 2,485,055 | 2,296,273 | ||||||
| Other borrowings | 13,569 | 13,675 | 13,991 | ||||||
| Junior subordinated debentures | 10,310 | 10,310 | 10,310 | ||||||
| Lease liability | 8,884 | 9,092 | 9,466 | ||||||
| Other liabilities | 53,387 | 54,647 | 25,572 | ||||||
| Total liabilities | 2,520,233 | 2,572,779 | 2,355,612 | ||||||
| Shareholders' Equity: | |||||||||
| Total shareholders' equity | 239,327 | 234,718 | 224,425 | ||||||
| Total liabilities and shareholders' equity | $ | 2,759,560 | $ | 2,807,497 | $ | 2,580,037 | |||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Composition of Portfolio Loans | |||||||||||||||||||||||||||||
| March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||||||||||||||||||||||
| Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | ||||||||||||||||||||
| Commercial loans | $ | 475,220 | 26 | % | $ | 486,057 | 27 | % | $ | 492,145 | 28 | % | $ | 499,780 | 29 | % | $ | 448,446 | 29 | % | |||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||
| Owner occupied properties | 372,507 | 20 | % | 368,357 | 20 | % | 359,019 | 21 | % | 350,411 | 21 | % | 344,734 | 22 | % | ||||||||||||||
| Nonowner occupied and | |||||||||||||||||||||||||||||
| multifamily properties | 529,904 | 30 | % | 519,115 | 30 | % | 509,939 | 30 | % | 494,505 | 31 | % | 476,897 | 32 | % | ||||||||||||||
| Residential real estate: | |||||||||||||||||||||||||||||
| 1-4 family properties | |||||||||||||||||||||||||||||
| secured by first liens | 218,552 | 12 | % | 203,534 | 11 | % | 180,719 | 10 | % | 160,467 | 10 | % | 112,758 | 7 | % | ||||||||||||||
| 1-4 family properties | |||||||||||||||||||||||||||||
| secured by junior liens & | |||||||||||||||||||||||||||||
| revolving secured by first liens | 35,460 | 2 | % | 33,783 | 2 | % | 27,342 | 2 | % | 24,970 | 1 | % | 22,864 | 1 | % | ||||||||||||||
| 1-4 family construction | 27,751 | 2 | % | 31,239 | 2 | % | 32,374 | 2 | % | 35,527 | 2 | % | 40,881 | 3 | % | ||||||||||||||
| Construction loans | 153,537 | 8 | % | 149,788 | 8 | % | 120,909 | 7 | % | 96,015 | 6 | % | 92,615 | 6 | % | ||||||||||||||
| Consumer loans | 6,444 | - | % | 6,180 | - | % | 5,930 | - | % | 5,498 | - | % | 4,617 | - | % | ||||||||||||||
| Subtotal | 1,819,375 | 1,798,053 | 1,728,377 | 1,667,173 | 1,543,812 | ||||||||||||||||||||||||
| Unearned loan fees, net | (8,240 | ) | (8,556 | ) | (8,286 | ) | (7,934 | ) | (8,625 | ) | |||||||||||||||||||
| Total portfolio loans | $ | 1,811,135 | $ | 1,789,497 | $ | 1,720,091 | $ | 1,659,239 | $ | 1,535,187 | |||||||||||||||||||
| Composition of Deposits | ||||||||||||||||||||||||
| March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||||||||
| Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | Balance | % of total | |||||||||||||||
| Demand deposits | $ | 714,244 | 29 | % | $ | 749,683 | 31 | % | $ | 764,647 | 31 | % | $ | 711,390 | 31 | % | $ | 767,772 | 34 | % | ||||
| Interest-bearing demand | 889,581 | 37 | % | 927,291 | 37 | % | 875,814 | 36 | % | 795,128 | 35 | % | 717,910 | 31 | % | |||||||||
| Savings deposits | 246,902 | 10 | % | 255,338 | 10 | % | 265,799 | 11 | % | 275,602 | 12 | % | 292,857 | 13 | % | |||||||||
| Money market deposits | 209,785 | 9 | % | 221,492 | 9 | % | 230,814 | 10 | % | 232,698 | 10 | % | 262,478 | 11 | % | |||||||||
| Time deposits | 373,571 | 15 | % | 331,251 | 13 | % | 290,856 | 12 | % | 287,493 | 12 | % | 255,256 | 11 | % | |||||||||
| Total deposits | $ | 2,434,083 | $ | 2,485,055 | $ | 2,427,930 | $ | 2,302,311 | $ | 2,296,273 | ||||||||||||||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Asset Quality | March 31, | December 31, | March 31, | ||||||||
| 2024 | 2023 | 2023 | |||||||||
| Nonaccrual loans | $ | 5,260 | $ | 6,069 | $ | 8,775 | |||||
| Loans 90 days past due and accruing | - | - | - | ||||||||
| Total nonperforming loans | 5,260 | 6,069 | 8,775 | ||||||||
| Nonperforming loans guaranteed by government | - | (1,067 | ) | (2,692 | ) | ||||||
| Net nonperforming loans | 5,260 | 5,002 | 6,083 | ||||||||
| Other real estate owned | - | - | 273 | ||||||||
| Nonperforming purchased receivables | 183 | 808 | - | ||||||||
| Net nonperforming assets | $ | 5,443 | $ | 5,810 | $ | 6,356 | |||||
| Nonperforming loans, net of government guarantees / portfolio loans | 0.29 | % | 0.28 | % | 0.40 | % | |||||
| Nonperforming loans, net of government guarantees / portfolio loans, | |||||||||||
| net of government guarantees | 0.31 | % | 0.30 | % | 0.43 | % | |||||
| Nonperforming assets, net of government guarantees / total assets | 0.20 | % | 0.21 | % | 0.25 | % | |||||
| Nonperforming assets, net of government guarantees / total assets | |||||||||||
| net of government guarantees | 0.21 | % | 0.21 | % | 0.26 | % | |||||
| Adversely classified loans, net of government guarantees | $ | 7,206 | $ | 7,057 | $ | 7,221 | |||||
| Special mention loans, net of government guarantees | $ | 9,976 | $ | 6,580 | $ | 15,547 | |||||
| Loans 30-89 days past due and accruing, net of government guarantees / | |||||||||||
| portfolio loans | 0.03 | % | 0.03 | % | 0.06 | % | |||||
| Loans 30-89 days past due and accruing, net of government guarantees / | |||||||||||
| portfolio loans, net of government guarantees | 0.04 | % | 0.03 | % | 0.06 | % | |||||
| Allowance for credit losses / portfolio loans | 0.97 | % | 0.97 | % | 0.92 | % | |||||
| Allowance for credit losses / portfolio loans, net of government guarantees | 1.03 | % | 1.02 | % | 0.99 | % | |||||
| Allowance for credit losses / nonperforming loans, net of government | |||||||||||
| guarantees | 333 | % | 345 | % | 233 | % | |||||
| Gross loan charge-offs for the quarter | $ | 25 | $ | 281 | $ | 14 | |||||
| Gross loan recoveries for the quarter | $ | (67 | ) | $ | (185 | ) | $ | (74 | ) | ||
| Net loan (recoveries) charge-offs for the quarter | $ | (42 | ) | $ | 96 | $ | (60 | ) | |||
| Net loan charge-offs (recoveries) for the quarter / average loans, for the quarter | - | % | 0.01 | % | - | % | |||||
Additional Financial Information
(Dollars in thousands)
(Unaudited)
| Average Balances, Yields, and Rates | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||||||||
| 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 | $ | 61,561 | 5.38 | % | $ | 126,174 | 5.40 | % | $ | 130,929 | 4.55 | % | |||||
| Portfolio investments | 670,937 | 2.82 | % | 690,659 | 2.48 | % | 727,610 | 2.40 | % | ||||||||
| Loans held for sale | 32,635 | 6.13 | % | 45,732 | 6.55 | % | 20,901 | 5.54 | % | ||||||||
| Portfolio loans | 1,793,425 | 6.75 | % | 1,749,732 | 6.55 | % | 1,524,130 | 6.28 | % | ||||||||
| Total interest-earning assets | 2,558,558 | 5.69 | % | 2,612,297 | 5.51 | % | 2,403,570 | 5.10 | % | ||||||||
| Nonearning assets | 201,137 | 214,934 | 185,755 | ||||||||||||||
| Total assets | $ | 2,759,695 | $ | 2,827,231 | $ | 2,589,325 | |||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||
| Interest-bearing deposits | $ | 1,731,923 | 2.13 | % | $ | 1,724,409 | 2.00 | % | $ | 1,543,437 | 1.20 | % | |||||
| Borrowings | 23,944 | 2.95 | % | 47,964 | 4.25 | % | 24,366 | 2.92 | % | ||||||||
| Total interest-bearing liabilities | 1,755,867 | 2.14 | % | 1,772,373 | 2.06 | % | 1,567,803 | 1.23 | % | ||||||||
| Noninterest-bearing demand deposits | 705,134 | 760,566 | 756,088 | ||||||||||||||
| Other liabilities | 60,407 | 63,321 | 41,067 | ||||||||||||||
| Shareholders' equity | 238,287 | 230,971 | 224,367 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 2,759,695 | $ | 2,827,231 | $ | 2,589,325 | |||||||||||
| Net spread | 3.55 | % | 3.45 | % | 3.87 | % | |||||||||||
| NIM | 4.16 | % | 4.06 | % | 4.22 | % | |||||||||||
| NIMTE* | 4.22 | % | 4.12 | % | 4.30 | % | |||||||||||
| Cost of funds | 1.53 | % | 1.44 | % | 0.83 | % | |||||||||||
| Average portfolio loans to average | |||||||||||||||||
| interest-earning assets | 70.10 | % | 66.98 | % | 63.41 | % | |||||||||||
| Average portfolio loans to average total deposits | 73.59 | % | 70.41 | % | 66.28 | % | |||||||||||
| Average non-interest deposits to average | |||||||||||||||||
| total deposits | 28.93 | % | 30.61 | % | 32.88 | % | |||||||||||
| Average interest-earning assets to average | |||||||||||||||||
| interest-bearing liabilities | 145.71 | % | 147.39 | % | 153.31 | % | |||||||||||
The components of the change in NIMTE* are detailed in the table below:
| 1Q24 vs. 4Q23 | 1Q24 vs. 1Q23 | |||
| Nonaccrual interest adjustments | 0.02 | % | - | % |
| Interest rates on loans and liabilities and loan fees, all other loans | 0.08 | % | (0.35)% | |
| Volume and mix of other interest-earning assets and liabilities | - | % | 0.27 | % |
| Change in NIMTE* | 0.10 | % | (0.08)% | |
Additional Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
| Capital Data (At quarter end) | |||||||||||
| March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||
| Book value per share | $ | 43.52 | $ | 42.57 | $ | 39.56 | |||||
| Tangible book value per share* | $ | 40.61 | $ | 39.68 | $ | 36.74 | |||||
| Total shareholders' equity/total assets | 8.67 | % | 8.36 | % | 8.70 | % | |||||
| Tangible Common Equity/Tangible Assets* | 8.14 | % | 7.84 | % | 8.13 | % | |||||
| Tier 1 Capital / Risk Adjusted Assets | 11.55 | % | 11.43 | % | 12.75 | % | |||||
| Total Capital / Risk Adjusted Assets | 12.47 | % | 12.35 | % | 13.60 | % | |||||
| Tier 1 Capital / Average Assets | 9.01 | % | 8.72 | % | 9.40 | % | |||||
| Shares outstanding | 5,499,578 | 5,513,459 | 5,672,841 | ||||||||
| Total unrealized loss on AFS debt securities, net of income taxes | $ | (17,205 | ) | $ | (17,415 | ) | $ | (24,311 | ) | ||
| Total unrealized gain on derivatives and hedging activities, net of income taxes | $ | 1,172 | $ | 978 | $ | 827 | |||||
| Profitability Ratios | ||||||||||
| March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||
| For the quarter: | ||||||||||
| NIM | 4.16 | % | 4.06 | % | 4.15 | % | 4.14 | % | 4.22 | % |
| NIMTE* | 4.22 | % | 4.12 | % | 4.21 | % | 4.21 | % | 4.30 | % |
| Efficiency ratio | 68.93 | % | 72.21 | % | 66.64 | % | 74.03 | % | 78.51 | % |
| Return on average assets | 1.19 | % | 0.93 | % | 1.22 | % | 0.85 | % | 0.76 | % |
| Return on average equity | 13.84 | % | 11.36 | % | 14.67 | % | 9.85 | % | 8.73 | % |
*Non-GAAP Financial Measures
(Dollars and shares in thousands, except per share data)
(Unaudited)
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although we believe these non-GAAP financial measures are frequently used by stakeholders in the evaluation of the Company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP.
Net interest margin on a tax equivalent basis
Net interest margin on a tax equivalent basis ("NIMTE") 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 28.43% in both 2024 and 2023. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of NIMTE to net interest margin.
| Three Months Ended | |||||||||||||||||||
| March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||||||||||||
| Net interest income | $ | 26,447 | $ | 26,732 | $ | 26,350 | $ | 25,142 | $ | 25,032 | |||||||||
| Divided by average interest-bearing assets | 2,558,558 | 2,612,297 | 2,516,126 | 2,434,611 | 2,403,570 | ||||||||||||||
| Net interest margin ("NIM")2 | 4.16 | % | 4.06 | % | 4.15 | % | 4.14 | % | 4.22 | % | |||||||||
| Net interest income | $ | 26,447 | $ | 26,732 | $ | 26,350 | $ | 25,142 | $ | 25,032 | |||||||||
| Plus: reduction in tax expense related to | |||||||||||||||||||
| tax-exempt interest income | 379 | 374 | 373 | 400 | 429 | ||||||||||||||
| $ | 26,826 | $ | 27,106 | $ | 26,723 | $ | 25,542 | $ | 25,461 | ||||||||||
| Divided by average interest-bearing assets | 2,558,558 | 2,612,297 | 2,516,126 | 2,434,611 | 2,403,570 | ||||||||||||||
| NIMTE2 | 4.22 | % | 4.12 | % | 4.21 | % | 4.21 | % | 4.30 | % | |||||||||
2Calculated using actual days in the quarter divided by 366 for the quarters ended in 2024 and 365 for the quarters ended in 2023, respectively.
*Non-GAAP Financial Measures
(Dollars and shares in thousands, except per share data)
(Unaudited)
Tangible Book Value Per Share
Tangible book value per share is a non-GAAP measure defined as shareholders' equity, less intangible assets, divided by shares outstanding. The most comparable GAAP measure is book value per share and the following table sets forth the reconciliation of tangible book value per share and book value per share.
| March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||
| Total shareholders' equity | $ | 239,327 | $ | 234,718 | $ | 225,259 | $ | 221,336 | $ | 224,425 | ||||
| Divided by shares outstanding | 5,500 | 5,513 | 5,548 | 5,611 | 5,673 | |||||||||
| Book value per share | $ | 43.52 | $ | 42.57 | $ | 40.60 | $ | 39.45 | $ | 39.56 | ||||
| March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||
| Total shareholders' equity | $ | 239,327 | $ | 234,718 | $ | 225,259 | $ | 221,336 | $ | 224,425 | ||||
| Less: goodwill and intangible assets | 15,967 | 15,967 | 15,973 | 15,977 | 15,980 | |||||||||
| $ | 223,360 | $ | 218,751 | $ | 209,286 | $ | 205,359 | $ | 208,445 | |||||
| Divided by shares outstanding | 5,500 | 5,513 | 5,548 | 5,611 | 5,673 | |||||||||
| Tangible book value per share | $ | 40.61 | $ | 39.68 | $ | 37.72 | $ | 36.60 | $ | 36.74 | ||||
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. The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets and the following table sets forth the reconciliation of tangible common equity to tangible assets and shareholders' equity to total assets.
| Northrim BanCorp, Inc. | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||
| Total shareholders' equity | $ | 239,327 | $ | 234,718 | $ | 225,259 | $ | 221,336 | $ | 224,425 | |||||||||
| Total assets | 2,759,560 | 2,807,497 | 2,790,189 | 2,638,207 | 2,580,037 | ||||||||||||||
| Total shareholders' equity to total assets | 8.67 | % | 8.36 | % | 8.07 | % | 8.39 | % | 8.70 | % | |||||||||
| Northrim BanCorp, Inc. | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||||||
| Total shareholders' equity | $ | 239,327 | $ | 234,718 | $ | 225,259 | $ | 221,336 | $ | 224,425 | |||||||||
| Less: goodwill and other intangible assets, net | 15,967 | 15,967 | 15,973 | 15,977 | 15,980 | ||||||||||||||
| Tangible common shareholders' equity | $ | 223,360 | $ | 218,751 | $ | 209,286 | $ | 205,359 | $ | 208,445 | |||||||||
| Total assets | $ | 2,759,560 | $ | 2,807,497 | $ | 2,790,189 | $ | 2,638,207 | $ | 2,580,037 | |||||||||
| Less: goodwill and other intangible assets, net | 15,967 | 15,967 | 15,973 | 15,977 | 15,980 | ||||||||||||||
| Tangible assets | $ | 2,743,593 | $ | 2,791,530 | $ | 2,774,216 | $ | 2,622,230 | $ | 2,564,057 | |||||||||
| Tangible common equity ratio | 8.14 | % | 7.84 | % | 7.54 | % | 7.83 | % | 8.13 | % | |||||||||
*Non-GAAP Financial Measures
(Dollars and shares in thousands, except per share data)
(Unaudited)
Tangible Common Equity to Tangible Assets, excluding the unrealized losses on the available for sales securities portfolio
Tangible common equity to tangible assets, excluding the unrealized losses on the available for sales securities portfolio, is a non-GAAP ratio that represents total equity less goodwill and intangible assets and the unrealized gain (loss) on available for sale securities, net of income taxes divided by total assets less goodwill and intangible assets and the unrealized gain (loss) on available for sale securities, net of income taxes. The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets and the following table sets forth the reconciliation of tangible common equity to tangible assets, excluding the unrealized losses on the available for sales securities portfolio and shareholders' equity to total assets.
| Northrim BanCorp, Inc. | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||
| Total shareholders' equity | $ | 239,327 | $ | 234,718 | $ | 224,425 | |||||
| Total assets | 2,759,560 | 2,807,497 | 2,580,037 | ||||||||
| Total shareholders' equity to total assets | 8.67 | % | 8.36 | % | 8.70 | % | |||||
| Northrim BanCorp, Inc. | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||
| Total shareholders' equity | $ | 239,327 | $ | 234,718 | $ | 224,425 | |||||
| Less: goodwill and other intangible assets, net | 15,967 | 15,967 | 15,980 | ||||||||
| Less: unrealized (loss) on available for sale securities, net income taxes | (17,205 | ) | (17,415 | ) | (24,311 | ) | |||||
| Tangible common shareholders' equity, excluding unrealized losses on available for sale securities | $ | 240,565 | $ | 236,166 | $ | 232,756 | |||||
| Total assets | $ | 2,759,560 | $ | 2,807,497 | $ | 2,580,037 | |||||
| Less: goodwill and other intangible assets, net | 15,967 | 15,967 | 15,980 | ||||||||
| Less: unrealized (loss) on available for sale securities, net income taxes | (17,205 | ) | (17,415 | ) | (24,311 | ) | |||||
| Tangible assets, excluding unrealized losses on available for sale securities | $ | 2,760,798 | $ | 2,808,945 | $ | 2,588,368 | |||||
| Tangible common equity ratio, excluding unrealized losses on available for sale securities | 8.71 | % | 8.41 | % | 8.99 | % | |||||
Note Transmitted on GlobeNewswire on April 24, 2024, at 12:15 pm Alaska Standard Time.
