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Northrim Banp(NRIM) - 2020 Q2 - Quarterly Report
Northrim BanpNorthrim Banp(US:NRIM)2020-08-04 17:38

Economic Impact - The unemployment rate in Alaska surged from 5.6% in March to 13.5% in April 2020, slightly moderating to 12.6% in May 2020[124]. - The tourism and hospitality sectors in Alaska experienced a significant decline, with leisure and hospitality jobs dropping by 39.7%, resulting in a loss of 15,300 jobs in May 2020[124]. - Alaska's gross state product (GSP) was reported at $54 billion in Q1 2020, with a real GSP decrease of 4% annualized for the quarter, outperforming the national average decline of 5%[128]. - Alaska's personal income grew by 3.7% in 2019, with total income increasing from $44.4 billion at the end of 2018 to $46.1 billion in Q1 2020[129]. - The delinquency rate for mortgage loans in Alaska was 3.23% in Q1 2020, up from 2.85% at the end of 2019, while the national average was higher at 4%[131]. Company Financial Performance - The Company reported net income of $9.9 million and diluted earnings per share of $1.52 for Q2 2020, a 132% increase from $4.3 million and $0.62 in Q2 2019[136]. - Total revenue for Q2 2020 increased by 37% to $35.0 million, driven by a $9.3 million increase in mortgage banking income[138]. - Net interest income rose by 9% to $17.5 million in Q2 2020 compared to $16.0 million in Q2 2019, while net interest margin decreased to 3.98% from 4.71%[143]. - Other operating income rose by $8.0 million, or 83%, to $17.5 million in Q2 2020 compared to $9.6 million in Q2 2019, driven by a $9.3 million increase in mortgage banking income[154]. - Other operating expenses increased by $2.9 million, or 14%, to $22.7 million in Q2 2020, primarily due to higher salaries and data processing costs[155]. Loan and Credit Metrics - The Company reported a total of $357.522 million in loan modifications due to COVID-19, with $64.298 million in interest-only modifications and $293.224 million in full payment deferrals[133]. - The Company booked a loan loss provision of $404,000 for Q2 2020, up from $300,000 in Q2 2019, reflecting increased risks due to COVID-19 and oil price declines[135]. - Nonperforming assets increased by 4% to $20.8 million as of June 30, 2020, compared to $19.9 million at December 31, 2019[138]. - The Company had identified potential problem loans of $3.6 million as of June 30, 2020, down from $9.0 million at December 31, 2019[139]. - The Company had a net charge-off of $768,000 for the three months ended June 30, 2020, compared to a recovery of $9,000 for the same period in 2019[171]. Capital and Liquidity - The Company maintains capital ratios exceeding the FDIC's "well-capitalized" requirements, with a total risk-based capital ratio of 15.24% as of June 30, 2020, compared to the required minimum of 8.00%[188]. - The Company's Tier 1 risk-based capital ratio stands at 13.99% as of June 30, 2020, significantly above the required minimum of 6.00%[188]. - Total deposits increased by $365 million, or 27%, to $1.737 billion as of June 30, 2020, compared to $1.372 billion as of December 31, 2019[172]. - The Company had total unfunded commitments to fund loans and letters of credit of $335.4 million as of June 30, 2020[181]. - The maximum borrowing line from the FHLB was $901.1 million, approximately 45% of the Bank's assets, as of June 30, 2020[175]. Market and Economic Conditions - The average monthly Alaska North Slope (ANS) crude oil prices fell from $65.48 in January to a low of $16.54 in April 2020, before recovering to an average of $41.78 in June[125]. - The Federal Reserve's actions, including a 1.5% decrease in the Fed Funds rate, have significantly reduced borrowers' interest expenses and added liquidity to the credit markets[126]. - The Company is in the process of developing and validating models for estimating credit losses, with a focus on forward-looking economic scenarios[120]. - The Company has completed substantially all loss forecasting models for estimating credit losses under the CECL framework, with an estimated impact of a $5.0 million to $6.0 million decrease in the allowance for credit losses if adopted early[121]. - Direct exposure to the oil and gas industry decreased to $70.2 million, or approximately 5% of loans, as of June 30, 2020, down from $79.2 million, or approximately 8%, at December 31, 2019[163].