Northrim Banp(NRIM)2020-03-06 20:17Economic Outlook - The company expects modest growth opportunities in 2020 due to lower oil prices impacting the Alaskan economy [18]. - The Alaska economy showed a job growth of 1,900 jobs, or 0.6%, in December 2019 compared to December 2018, indicating a recovery trend [34]. Employment and Workforce - As of December 31, 2019, the company had 431 full-time equivalent employees, with 311 in Community Banking and 120 in Home Mortgage Lending [22]. Loan Portfolio and Credit Quality - Approximately 8% of the loan portfolio has direct exposure to the oil and gas industry in Alaska, with 40% attributable to 31 large borrowing relationships [28]. - The company emphasizes managing credit quality, allocating more resources to credit management to enhance financial analysis of complex loan relationships [20]. - Alaska's foreclosure rate was 0.71% at the end of Q3 2019, lower than the national average of 0.84% [35]. Revenue Sources - The company derived 31% of its revenue from the residential housing market in 2019, up from 29% in 2018 [37]. Market Position and Competition - As of June 30, 2019, Northrim Bank held approximately 12% of the total bank deposits in Alaska, with a market share of 17% in Anchorage and 14% in both Juneau and Sitka [41]. - The company competes with seven commercial banks in Alaska, with Wells Fargo Bank Alaska leading with a 30% market share of total deposits [41]. - Credit unions in Alaska accounted for a 44% share of total deposits held in banks and credit unions as of June 30, 2019 [43]. - The company faces competition from non-bank financial institutions that can offer higher deposit rates due to fewer regulatory constraints [40]. Regulatory Environment - The company is subject to regulatory capital requirements, including a common equity Tier 1 capital ratio of 4.5% and a total risk-based ratio of 8.0% [63]. - The Dodd-Frank Act has permanently increased the maximum amount of deposit insurance coverage to 10 million at December 31, 2019, primarily due to trust preferred securities included in the Company's regulatory capital [73]. - The Bank received a "Satisfactory" rating from the FDIC in its most recent Community Reinvestment Act examination [77]. Financial Performance and Projections - The estimated total interest-earning assets at December 31, 2019, amounted to 939,656,000, with 90.5% maturing within one year [280]. - The interest sensitivity gap at December 31, 2019, was 10,233 thousand (15.87%) in the first year with a 400 basis points rate hike [282]. - Projected net income increase of 4,771 thousand (7.40%) in the first year with a 100 basis points rate cut [282]. - Projected net income decrease of 21,346 thousand (33.38%) in the second year with a 400 basis points rate hike [282]. - Net income increase of 7,870 thousand (12.31%) in the second year with a 100 basis points rate cut [282]. - Net income decrease of $5,832 thousand (39.25%) in the second year with a 100 basis points rate cut [282]. - Company acknowledges potential balance sheet strategies to mitigate interest rate risk [281]. - Projections are subject to various assumptions and may not reflect actual results [281]. Customer Acquisition and Services - The company has targeted new customer acquisitions in professional fields such as physicians and attorneys, enhancing franchise value through multiple services [18]. - The company plans to continue expanding electronic services and enhancing information security for deposit products [19]. Branch Network - The company has 16 branches, contributing to its competitive positioning in the Alaskan banking market [43]. - The total financial institution branches in Alaska amount to 214, with credit unions having 93 branches [43]. Compliance - The Company believes it is in compliance with the USA PATRIOT Act as of December 31, 2019 [78].