Northrim Banp(NRIM) - 2021 Q4 - Annual Report

Financial Performance - Net income attributable to the Company increased 14% to $37.5 million or $6.00 per diluted share for the year ended December 31, 2021, compared to $32.9 million or $5.11 per diluted share for the year ended December 31, 2020[192]. - Net income in the Community Banking segment increased 74% or $11.6 million to $27.2 million in 2021, primarily due to a $7.3 million increase in interest and fee income on PPP loans[193]. - Net income in the Home Mortgage Lending segment decreased 40% or $7.0 million to $10.3 million in 2021, primarily due to a decrease in production volume to $1.118 billion from $1.295 billion in 2020[193]. - Net income for 2021 was $37.5 million, an increase from $32.9 million in 2020, with diluted earnings per share rising to $6.00 from $5.11[212]. Interest Income and Margin - Interest and fee income on PPP loans rose to $15.4 million in 2021 from $8.1 million in 2020, with $426.3 million in PPP loans forgiven in 2021 compared to $65.1 million in 2020[193]. - The net interest margin decreased to 3.58% in 2021 from 4.02% in 2020, attributed to lower average yields on interest-earning assets[198]. - Net interest income for 2021 was $80.83 million, an increase from $70.67 million in 2020, reflecting a growth of approximately 15.3%[209]. - Net interest income increased to $80.8 million in 2021 from $70.7 million in 2020, primarily due to a $7.3 million rise in interest and fee income on PPP loans[214]. - Interest income on PPP loans was $2.9 million in 2021, up from $2.5 million in 2020, while loan fee income on PPP loans surged to $12.5 million from $5.6 million[214]. Credit Losses and Provisions - The provision for credit losses decreased to a benefit of $4.1 million in 2021 from a provision of $2.4 million in 2020, reflecting improved economic assumptions[193]. - The provision for credit loss expense in 2021 was a reversal of $4.1 million, compared to an expense of $2.4 million in 2020, reflecting improved economic assumptions[219]. - The allowance for credit losses totaled 0.83% of total portfolio loans at December 31, 2021, compared to 1.46% at December 31, 2020[193]. - The allowance for credit losses (ACL) was $11.7 million, or 0.83% of portfolio loans, as of December 31, 2021, reflecting the current credit quality and economic conditions[249]. Shareholder Equity and Dividends - The aggregate cash dividends paid by the Company in 2021 rose 6% to $9.4 million from $8.8 million in 2020[198]. - Total shareholders' equity rose to $237.82 million in 2021 from $221.58 million in 2020, marking a growth of 7.3%[207]. - Tangible book value per share increased to $36.88 in 2021 from $32.88 in 2020, reflecting a growth of 12.2%[207]. Operational Efficiency - The efficiency ratio improved to 66.99% in 2021 from 66.47% in 2020, indicating enhanced operational efficiency[210]. - Return on average assets decreased to 1.54% in 2021 from 1.70% in 2020, while return on average equity slightly increased to 15.68% from 15.53%[208]. Loan and Deposit Growth - Total loans amounted to $1,413,886 thousand as of December 31, 2021, reflecting an 8% growth rate over five years[238]. - Loans excluding PPP loans reached $1,295,657 thousand, with a 14% year-over-year increase[238]. - Total deposits increased by 33% to $2.4 billion at December 31, 2021, up from $1.8 billion at December 31, 2020, largely due to funding PPP loans and new client relationships[254]. - Average total deposits for 2021 were $2,125.1 million, compared to $1,638.2 million in 2020[256]. Investment and Liquidity - Investment securities increased by 71% to $455.1 million in 2021 from $266.7 million in 2020, reflecting a strategy to maintain liquidity and mitigate risks[230]. - As of December 31, 2021, the Company had cash and cash equivalents of $645.8 million, representing 24% of total assets, up from $116.0 million (6% of total assets) as of December 31, 2020[265]. - The Company has liquid assets totaling $907.9 million and available borrowing capacity of $1.27 billion as of December 31, 2021[267]. Interest Rate Risk - The company is exposed to interest rate risk, with key sources including re-pricing risk, basis risk, yield curve risk, and option risk[295][296][297]. - The estimated impact on net interest income for a 400 basis points increase in interest rates is $22,226, representing a 31.06% change in the first year[307]. - A 100 basis points increase in interest rates is anticipated to result in a net interest income change of $5,590, or 7.81% in the first year[307]. Other Operating Income and Expenses - Other operating income decreased by 17% to $52.3 million in 2021 from $63.3 million in 2020, with mortgage banking income being the largest component at 81% of total other operating income[221][223]. - Total other operating expenses increased by less than 1% to $89.2 million in 2021, with significant increases in data processing (12%), occupancy (7%), and insurance expenses (30%)[226][227].