Northrim BanCorp, Inc. Reports Earnings per Share Up 27%, Net Income Up 21% in the Third Quarter

Business Wire, Oct 25, 2006

ANCHORAGE, Alaska -- Northrim BanCorp, Inc. (the "company") (Nasdaq:NRIM) reported today that diluted earnings per share for the quarter ended September 30, 2006 were $0.56, up 27% from $0.44 per diluted share for the same quarter a year ago (restated to reflect a 5% stock dividend distributed to shareholders on September 1, 2006). For the nine-month period ended September 30, 2006, diluted earnings per share were $1.50, a 21% increase from diluted earnings per share of $1.24 for the same period in 2005.

The company's net income for the quarter ended September 30, 2006 was $3.5 million, up 21%, from $2.8 million for the quarter ended September 30, 2005. Net income for the first nine months of 2006 was $9.3 million, up 15% from $8.1 million for the same period in 2005.

"We are very pleased with Northrim's results for the quarter and year to date," said Marc Langland, Chairman, President, and CEO. "Strength in our core banking services, and good results from our affiliates, continue to position the company for long-term growth and shareholder returns."

Total assets at September 30, 2006 were $902 million, up 6% from $850 million at September 30, 2005. Total loans were down 2% to $698 million at September 30, 2006, compared to $711 million at September 30, 2005. Commercial real estate loans were the primary driver of this decline, as customers sought to refinance for longer terms at fixed rates.

Total deposits increased 4% to $777 million at September 30, 2006, up from $746 million a year ago. Lower-cost deposits, including demand deposits, interest-bearing demand deposits, and savings deposits, grew $30 million, or 10%, to $329 million at September 30, 2006, from $299 million at September 30, 2005. Higher-cost deposits, including Alaska CDs, money market deposits and time deposits, declined $161,000 over the same period to a total of $448 million at September 30, 2006.

Net interest income, before the provision for loan losses, increased 7% to $11.9 million for the quarter ended September 30, 2006, from $11.1 million for the same period of 2005. Net interest income, as a percentage of average earning assets on a tax equivalent basis (net interest margin), for the third quarter of 2006 was 5.79%, an increase from 5.68% in the third quarter of 2005.

"We've had good deposit growth with our High Performance Checking program, which has changed our mix of deposits to emphasize more low-cost deposits," said Joe Schierhorn, CFO. "Segments of our loan portfolio have repriced to higher levels due to rising interest rates, and these two factors have led to an increase in our net interest margin."

Interest expense on borrowings increased to $418,000 for the quarter ended September 30, 2006, from $199,000 for the quarter ended September 30, 2005, due in large part to the interest expense from the additional $10.6 million in junior subordinated debentures that the company issued in December of 2005.

Total other operating income increased 47%, to $2.2 million for the quarter ended September 30, 2006, from $1.5 million for the quarter ended September 30, 2005. Purchased receivable income increased 88%, to $579,000 in the third quarter of 2006, from $308,000 in the same period of 2005 due to a 92% increase in the volume of purchased receivables. Other income grew 25%, to $542,000 in the third quarter of 2006 from $435,000 in the third quarter of 2005, due to increases in electronic banking revenues and a decrease in the loss from the company's affiliate, Elliott Cove Capital Management.

Employee benefit plan income from our affiliate, Northrim Benefits Group, contributed $271,000 to other operating income for the quarter ended September 30, 2006 and equity in earnings from the company's mortgage affiliate, Residential Mortgage, grew 15%, to $317,000 for the third quarter of 2006, from $276,000 for the third quarter of 2005.

Total other operating expense increased just 1%, to $7.7 million for the quarter ended September 30, 2006, from $7.6 million for the quarter ended September 30, 2005. The efficiency ratio improved to 53% for the quarter ended September 30, 2006, compared to 59% in the same period in 2005.

"We are pleased that our strong income growth against a 1% increase in operating expenses improved our efficiency ratio to 53% for the quarter," said Chris Knudson, Chief Operating Officer.

Net loan recoveries for the third quarter of 2006 were $215,000 versus net loan charge-offs of $62,000 for the third quarter of 2005. For the first nine months of 2006, net loan recoveries were $176,000, compared to net loan charge-offs of $44,000 for the same period in 2005. Non-performing assets totaled $8.3 million, or 0.93% of total assets, at September 30, 2006, as compared to non-performing assets of $5.9 million, or 0.69% of total assets, at September 30, 2005. The change in non-performing assets was caused in large part by an increase in loans 90 days past due to $2.8 million at September 30, 2006 from $446,000 at September 30, 2005.

At September 30, 2006, the allowance for loan losses was $12.6 million, or 1.81% of portfolio loans and 152% of non-performing loans. A year ago, the allowance for loan losses was $11.2 million, or 1.58% of portfolio loans and 192% of non-performing loans. The provision for loan losses for the quarter and six month period ended September 30, 2006 was $850,000 and $1.8 million, respectively, as compared to $428,000 and $528,000, respectively, for the same periods in 2005.