10-Q 1 nrim-20130331x10q.htm 10-Q 541483e8d1264e0

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

(Mark One)

þ  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2013

o    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from_____to____

Commission File Number 000-33501

NORTHRIM BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Alaska

 

92-0175752

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

3111 C Street

Anchorage, Alaska 99503

(Address of principal executive offices)    (Zip Code)

 

(907) 562-0062

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  þ  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,”  “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

 

 

 

Large accelerated filer  o

Accelerated filer  þ

Non-accelerated filer  o

Smaller reporting company  o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o  No  þ

The number of shares of the issuer's Common Stock, par value $1 per share, outstanding at May 6, 2013 was 6,514,414.

 


 

 

TABLE OF CONTENTS

 

 

 

PART  I

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

 

 

Consolidated Balance Sheets

4

 

Consolidated Statements of Income

5

 

Consolidated Statements of Comprehensive Income

6

 

Consolidated Statements of Changes in Shareholders’ Equity

7

 

Consolidated Statements of Cash Flows

8

 

Notes to the Consolidated Financial Statements

9

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

 

 

 

PART II

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

SIGNATURES 

 

37

 

 

 

 

 

1


 

PART I. FINANCIAL INFORMATION

These consolidated financial statements should be read in conjunction with the financial statements, accompanying notes and other relevant information included in Northrim BanCorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012.

2


 

ITEM 1. FINANCIAL STATEMENTS

 

CONSOLIDATED FINANCIAL STATEMENTS

NORTHRIM BANCORP, INC.

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(In Thousands, Except Share Data)

2013

 

2012

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Cash and due from banks

$

28,648 

 

$

40,834 

Interest bearing deposits in other banks

 

73,879 

 

 

113,979 

 

 

 

 

 

 

Investment securities available for sale

 

221,460 

 

 

203,918 

Investment securities held to maturity

 

2,747 

 

 

2,749 

Total portfolio investments

 

224,207 

 

 

206,667 

 

 

 

 

 

 

Investment in Federal Home Loan Bank stock

 

1,950 

 

 

1,967 

 

 

 

 

 

 

Loans held for sale

 

11,454 

 

 

11,705 

Loans

 

721,609 

 

 

704,213 

Allowance for loan losses

 

(16,641)

 

 

(16,408)

Net loans

 

716,422 

 

 

699,510 

Purchased receivables, net

 

18,683 

 

 

19,022 

Accrued interest receivable

 

2,970 

 

 

2,618 

Other real estate owned, net

 

4,516 

 

 

4,543 

Premises and equipment, net

 

27,912 

 

 

27,908 

Goodwill and intangible assets, net

 

8,111 

 

 

8,170 

Other assets

 

43,860 

 

 

34,889 

Total assets

$

1,151,158 

 

$

1,160,107 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Deposits:

 

 

 

 

 

Demand

$

344,012 

 

$

361,167 

Interest-bearing demand

 

144,683 

 

 

146,262 

Savings

 

92,227 

 

 

87,241 

Alaska CDs

 

102,584 

 

 

101,165 

Money market

 

179,138 

 

 

181,598 

Certificates of deposit less than $100,000

 

38,078 

 

 

39,343 

Certificates of deposit greater than $100,000

 

54,191 

 

 

53,353 

Total deposits

 

954,913 

 

 

970,129 

Securities sold under repurchase agreements

 

13,411 

 

 

19,038 

Borrowings

 

6,675 

 

 

4,479 

Junior subordinated debentures

 

18,558 

 

 

18,558 

Other liabilities

 

19,497 

 

 

11,550 

Total liabilities

 

1,013,054 

 

 

1,023,754 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

Preferred stock, $1 par value, 2,500,000 shares authorized, none issued or outstanding

 

 

 

 

 

Common stock, $1 par value, 10,000,000 shares authorized, 6,513,096 and 6,511,649 shares

 

 

 

 

 

         issued and outstanding at March 31, 2013 and December 31, 2012, respectively

 

6,513 

 

 

6,512 

Additional paid-in capital

 

53,753 

 

 

53,638 

Retained earnings

 

76,431 

 

 

74,742 

Accumulated other comprehensive income

 

1,328 

 

 

1,368 

Total Northrim BanCorp shareholders' equity

 

138,025 

 

 

136,260 

Noncontrolling interest

 

79 

 

 

93 

Total shareholders' equity

 

138,104 

 

 

136,353 

Total liabilities and shareholders' equity

$

1,151,158 

 

$

1,160,107 

 

See notes to consolidated financial statements

3


 

 

NORTHRIM BANCORP, INC.

Consolidated Statements of Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

(In Thousands, Except Per Share Data)

2013

 

2012

 

 

 

 

 

 

Interest Income

 

 

 

 

 

Interest and fees on loans

$

10,342 

 

$

10,225 

Interest on investment securities available for sale

 

659 

 

 

749 

Interest on investment securities held to maturity

 

29 

 

 

38 

Interest on deposits in other banks

 

62 

 

 

40 

Total Interest Income

 

11,092 

 

 

11,052 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

Interest expense on deposits, borrowings and junior subordinated debentures

 

530 

 

 

698 

Net Interest Income

 

10,562 

 

 

10,354 

 

 

 

 

 

 

Provision for loan losses

 

150 

 

 

89 

Net Interest Income After Provision for Loan Losses

 

10,412 

 

 

10,265 

 

 

 

 

 

 

Other Operating Income

 

 

 

 

 

Purchased receivable income

 

702 

 

 

712 

Employee benefit plan income

 

569 

 

 

540 

Service charges on deposit accounts

 

525 

 

 

568 

Electronic banking income

 

504 

 

 

483 

Equity in earnings from RML

 

242 

 

 

301 

Gain on sale of securities

 

218 

 

 

27 

Rental income

 

28 

 

 

198 

Other income

 

351 

 

 

378 

Total Other Operating Income

 

3,139 

 

 

3,207 

 

 

 

 

 

 

Other Operating Expense

 

 

 

 

 

Salaries and other personnel expense

 

5,735 

 

 

5,706 

Occupancy expense

 

888 

 

 

996 

Marketing expense

 

447 

 

 

437 

Professional and outside services

 

349 

 

 

418 

Equipment expense

 

278 

 

 

294 

Software expense

 

265 

 

 

251 

Amortization of low income housing tax investments

 

245 

 

 

228 

Internet banking expense

 

184 

 

 

172 

Insurance expense

 

144 

 

 

118 

Reserve for purchased receivables

 

84 

 

 

 -

Intangible asset amortization expense

 

58 

 

 

64 

OREO (income) expense, net rental income and gains on sale

 

(6)

 

 

97 

Other operating expense

 

1,026 

 

 

977 

Total Other Operating Expense

 

9,697 

 

 

9,758 

 

 

 

 

 

 

Income Before Provision for Income Taxes

 

3,854 

 

 

3,714 

Provision for income taxes

 

1,090 

 

 

1,026 

Net Income

 

2,764 

 

 

2,688 

Less: Net income attributable to the noncontrolling interest

 

90 

 

 

112 

Net Income Attributable to Northrim BanCorp

$

2,674 

 

$

2,576 

 

 

 

 

 

 

Earnings Per Share, Basic

$

0.41 

 

$

0.40 

Earnings Per Share, Diluted

$

0.41 

 

$

0.39 

Weighted Average Shares Outstanding, Basic

 

6,512,455 

 

 

6,467,540 

Weighted Average Shares Outstanding, Diluted

 

6,590,807 

 

 

6,567,654 

 

See notes to consolidated financial statements

 

 

4


 

NORTHRIM BANCORP, INC.

Consolidated Statements of Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

(In Thousands)

2013

 

2012

 

 

 

 

 

 

Net income

$

2,764 

 

$

2,688 

Other comprehensive income, net of tax:

 

 

 

 

 

  Securities available for sale:

 

 

 

 

 

Unrealized gains (losses) arising during the period

$

151 

 

$

1,525 

Reclassification of net gains included in net income (net of tax expense

 

 

 

 

 

     $90,000 and $9,000 in 2013 and 2012, respectively

 

(128)

 

 

(16)

Income tax benefit (expense) related to unrealized (losses) gains

 

(63)

 

 

(627)

Total other comprehensive income (loss)

 

(40)

 

 

882 

Comprehensive income

 

2,724 

 

 

3,570 

Less: comprehensive income attributable to the noncontrolling interest

 

90 

 

 

112 

Total comprehensive income attributable to Northrim BanCorp

$

2,634 

 

$

3,458 

 

 

 

 

See notes to consolidated financial statements

 

5


 

 

NORTHRIM BANCORP, INC.

Consolidated Statements of Changes in Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Common Stock

 

Additional

 

 

 

Other

 

Non-

 

 

 

 

Number

 

 

Par

 

Paid-in

 

Retained

Comprehensive

 

controlling

 

 

 

(In Thousands)

of Shares

 

 

Value

 

Capital

 

Earnings

Income

 

Interest

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2012

6,467 

 

$

6,467 

 

$

53,164 

 

$

65,469 

$

283 

 

$

52 

 

$

125,435 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividend declared

 -

 

 

 -

 

 

 -

 

 

(3,673)

 

 -

 

 

 -

 

 

(3,673)

Stock based compensation expense

 -

 

 

 -

 

 

454 

 

 

 -

 

 -

 

 

 -

 

 

454 

Exercise of stock options

45 

 

 

45 

 

 

(213)

 

 

 -

 

 -

 

 

 -

 

 

(168)

Excess tax benefits from share-based payment arrangements

 -

 

 

 -

 

 

233 

 

 

 -

 

 -

 

 

 -

 

 

233 

Distributions to noncontrolling interest

 -

 

 

 -

 

 

 -

 

 

 -

 

 -

 

 

(471)

 

 

(471)

Other comprehensive income

 -

 

 

 -

 

 

 -

 

 

 -

 

1,085 

 

 

 -

 

 

1,085 

Net income attributable to the noncontrolling interest

 -

 

 

 -

 

 

 -

 

 

 -

 

 -

 

 

512 

 

 

512 

Net income attributable to Northrim BanCorp

 -

 

 

 -

 

 

 -

 

 

12,946 

 

 -

 

 

 -

 

 

12,946 

Twelve Months Ended December 31, 2012

6,512 

 

$

6,512 

 

$

53,638 

 

$

74,742 

$

1,368 

 

$

93 

 

$

136,353 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividend declared

 -

 

 

 -

 

 

 -

 

 

(985)

 

 -

 

 

 -

 

 

(985)

Stock based compensation expense

 -

 

 

 -

 

 

112 

 

 

 -

 

 -

 

 

 -

 

 

112 

Exercise of stock options

 

 

 

 

(7)

 

 

 -

 

 -

 

 

 -

 

 

(6)

Excess tax benefits from share-based payment arrangements

 -

 

 

 -

 

 

10 

 

 

 -

 

 -

 

 

 -

 

 

10 

Distributions to noncontrolling interest

 -

 

 

 -

 

 

 -

 

 

 -

 

 -

 

 

(104)

 

 

(104)

Other comprehensive income

 -

 

 

 -

 

 

 -

 

 

 -

 

(40)

 

 

 -

 

 

(40)

Net income attributable to the noncontrolling interest

 -

 

 

 -

 

 

 -

 

 

 -

 

 -

 

 

90 

 

 

90 

Net income attributable to Northrim BanCorp

 -

 

 

 -

 

 

 -

 

 

2,674 

 

 -

 

 

 -

 

 

2,674 

Three Months Ended March 31, 2013

6,513 

 

$

6,513 

 

$

53,753 

 

$

76,431 

$

1,328 

 

$

79 

 

$

138,104 

 

See notes to consolidated financial statements

 

6


 

 

NORTHRIM BANCORP, INC.

Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

(In Thousands)

2013

 

2012

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

Net income

$

2,764 

 

$

2,688 

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

 

 

 

 

 

Gain on sale of securities, net

 

(218)

 

 

(27)

Depreciation and amortization of premises and equipment

 

443 

 

 

405 

Amortization of software

 

49 

 

 

47 

Intangible asset amortization

 

58 

 

 

64 

Amortization of investment security premium, net of discount accretion

 

32 

 

 

91 

Deferred tax liability

 

370 

 

 

161 

Stock-based compensation

 

112 

 

 

113 

Excess tax benefits from share-based payments

 

(10)

 

 

 -

Deferral of loan fees and costs, net

 

30 

 

 

272 

Provision for loan losses

 

150 

 

 

89 

Reserve for purchased receivables

 

84 

 

 

 -

Purchases of loans held for sale

 

(20,242)

 

 

(39,620)

Proceeds from the sale of loans held for sale

 

20,493 

 

 

55,176 

Gain on sale of other real estate owned

 

(21)

 

 

(19)

Equity in undistributed earnings from mortgage affiliate

 

192 

 

 

(8)

Net changes in assets and liabilities:

 

 

 

 

 

Decrease in accrued interest receivable

 

(352)

 

 

(259)

(Increase) decrease in other assets

 

1,015 

 

 

272 

Increase (decrease) in other liabilities

 

(2,724)

 

 

(859)

Net Cash Provided by Operating Activities

 

2,225 

 

 

18,586 

Investing Activities:

 

 

 

 

 

Investment in securities:

 

 

 

 

 

Purchases of investment securities available for sale

 

(40,951)

 

 

(7,101)

Proceeds from sales/maturities of securities available for sale

 

23,528 

 

 

13,736 

Proceeds from calls/maturities of securities held to maturity

 

 -

 

 

510 

Proceeds from redemption of FHLB stock

 

17 

 

 

 -

Decrease in purchased receivables, net

 

255 

 

 

7,864 

(Increase) in loans, net

 

(17,504)

 

 

(20,771)

Proceeds from sale of other real estate owned

 

201 

 

 

50 

Investment in other real estate owned

 

 -

 

 

(17)

Decrease in loan to Elliott Cove, net

 

106 

 

 

33 

Purchases of premises and equipment

 

(447)

 

 

(282)

Net Cash (Used) by Investing Activities

 

(34,795)

 

 

(5,978)

Financing Activities:

 

 

 

 

 

(Decrease) in deposits

 

(15,216)

 

 

(9,842)

(Decrease) in securities sold under repurchase agreements

 

(5,627)

 

 

(881)

Increase (decrease) in borrowings

 

2,196 

 

 

(36)

Distributions to noncontrolling interest

 

(104)

 

 

(108)

Excess tax benefits from share-based payments

 

10 

 

 

 -

Cash dividends paid

 

(975)

 

 

(842)

Net Cash (Used) by Financing Activities

 

(19,716)

 

 

(11,709)

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

(52,286)

 

 

899 

Cash and Cash Equivalents at Beginning of Period

 

141,313 

 

 

79,530 

Cash and Cash Equivalents at End of Period

$

89,027 

 

$

80,429 

Supplemental Information:

 

 

 

 

 

Income taxes paid

$

 

$

Interest paid

$

529 

 

$

700 

Transfer of loans to other real estate owned

$

161 

 

$

1,499 

Loans made to facilitate sales of other real estate owned

$

 -

 

$

50 

Cash dividends declared but not paid

$

10 

 

$

10 

 

See notes to consolidated financial statements

7


 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

(Unaudited)

1.  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by Northrim BanCorp, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Certain reclassifications have been made to prior year amounts to maintain consistency with the current year with no impact on net income or total shareholders’ equity.  The Company determined that it operates as a single operating segment.  Operating results for the interim period ended March 31, 2013, are not necessarily indicative of the results anticipated for the year ending December 31, 2013.  These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

2.  Significant Accounting Policies and Recent Accounting Pronouncements

The Company’s significant accounting policies are discussed in Note 1 to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02,  Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”).  The amendments to the Codification in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  This ASU was effective for the Company’s financial statements for annual and interim periods beginning on or after December 15, 2012, and has been applied prospectively.  The adoption of this standard did not have a material impact on the Company’s consolidated financial position or results of operations.

3.  Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing deposits with other banks, banker’s acceptances, commercial paper, securities purchased under agreement to resell, federal funds sold, and securities with maturities of less than 90 days at acquisition.  As of March 31, 2013, the Company had two certificates of deposit totaling $13.5 million in another bank.  Cash and cash equivalent balances placed with the Federal Reserve of San Francisco is the only concentration representing more than 10% of the Company’s equity.

8


 

4.  Investment Securities

The carrying values and approximate fair values of investment securities at the periods indicated are presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government sponsored entities

$

139,155 

 

$

410 

 

$

 -

 

$

139,565 

Municipal securities

 

21,626 

 

 

541 

 

 

16 

 

 

22,151 

U.S. Agency mortgage-backed securities

 

33 

 

 

 

 

 -

 

 

34 

Corporate bonds

 

55,889 

 

 

1,195 

 

 

 

 

57,081 

Preferred stock

 

2,501 

 

 

128 

 

 

 -

 

 

2,629 

Total securities available for sale

$

219,204 

 

$

2,275 

 

$

19 

 

$

221,460 

Securities held to maturity

 

 

 

 

 

 

 

 

 

 

 

Municipal securities

$

2,747 

 

$

220 

 

$

 -

 

$

2,967 

Total securities held to maturity

$

2,747 

 

$

220 

 

$

 -

 

$

2,967 

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and government sponsored entities

$

123,959 

 

$

455 

 

$

 -

 

$

124,414 

Municipal securities

 

21,124 

 

 

613 

 

 

 

 

21,728 

U.S. Agency mortgage-backed securities

 

35 

 

 

 

 

 -

 

 

36 

Corporate bonds

 

52,951 

 

 

1,081 

 

 

50 

 

 

53,982 

Preferred stock

 

3,524 

 

 

234 

 

 

 -

 

 

3,758 

Total securities available for sale

$

201,593 

 

$

2,384 

 

$

59 

 

$

203,918 

Securities held to maturity

 

 

 

 

 

 

 

 

 

 

 

Municipal securities

$

2,749 

 

$

229 

 

$

 -

 

$

2,978 

Total securities held to maturity

$

2,749 

 

$

229 

 

$

 -

 

$

2,978 

 

The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.  There were five and six securities with unrealized losses as of March 31, 2013 and December 31, 2012, respectively, that have been in a loss position for less than twelve months.  There were no securities with unrealized losses as of March 31, 2013 and December 31, 2012 that have been in an unrealized loss position for more than twelve months.  Because the Company does not intend to sell, nor is it required to sell these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

At March 31, 2013, $31.7 million in securities, or 14%, of the investment portfolio was pledged, as compared to $42.7 million, or 20%, at December 31, 2012.  We held no securities of any single issuer (other than government sponsored entities) that exceeded 10% of our shareholders’ equity at March 31, 2013 and December 31, 2012.

The amortized cost and fair values of debt securities at March 31, 2013, are distributed by contractual maturity as shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  Although preferred stock has no stated maturity, it is aggregated in the calculation of weighted average yields presented below in the category of investments that mature in ten years or more.

9


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In  Thousands)

Amortized Cost

 

Fair Value

 

Weighted Average Yield

 

 

 

 

US Treasury and government sponsored entities

 

 

 

 

 

 

 

 

Within 1 year

$

59,466 

 

$

59,782 

 

0.80 

%

1-5 years

 

79,689 

 

 

79,783 

 

0.49 

%

Total

$

139,155 

 

$

139,565 

 

0.62 

%

 

 

 

 

 

 

 

 

 

U.S. Agency mortgage-backed securities

 

 

 

 

 

 

 

 

5-10 years

$

33 

 

$

34 

 

4.45 

%

Total

$

33 

 

$

34 

 

4.45 

%

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

 

 

 

 

 

 

Within 1 year

$

5,173 

 

$

5,209 

 

1.25 

%

1-5 years

 

50,716 

 

 

51,872 

 

2.16 

%

Total

$

55,889 

 

$

57,081 

 

2.07 

%

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

 

 

Over 10 years

 

2,501 

 

 

2,629 

 

5.19 

%

Total

$

2,501 

 

$

2,629 

 

5.19 

%

 

 

 

 

 

 

 

 

 

Municipal securities

 

 

 

 

 

 

 

 

Within 1 year

$

2,605 

 

$

2,621 

 

1.86 

%

1-5 years

 

12,784 

 

 

13,022 

 

1.70 

%

5-10 years

 

8,984 

 

 

9,475 

 

4.71 

%

Total

$

24,373 

 

$

25,118 

 

2.82 

%

 

 

 

 

 

 

 

 

 

The proceeds and resulting gains and losses, computed using specific identification, from sales of investment securities for the three months ending March 31, 2013 and  2012, respectively, are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Proceeds

 

Gross Gains

 

Gross Losses

2013

 

 

 

 

 

 

 

 

Available for sale securities

$

23,528 

 

$

218 

 

$

 -

2012

 

 

 

 

 

 

 

 

Available for sale securities

$

13,736 

 

$

27 

 

$

 -

 

 

 

 

 

 

 

 

 

A summary of interest income for the three months ending March 31, 2013 and 2012 on available for sale investment securities is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

 

2013

 

 

2012

US Treasury and government sponsored entities

$

207 

 

$

307 

U.S. Agency mortgage-backed securities

 

 -

 

 

Other

 

307 

 

 

300 

    Total taxable interest income

$

514 

 

$

608 

 

 

 

 

 

 

Municipal securities

$

145 

 

$

141 

    Total tax-exempt interest income

 

145 

 

 

141 

    Total

$

659 

 

$

749 

 

 

 

 

 

 

10


 

 

For the periods ending March 31, 2013 and December 31, 2012, we held Federal Home Loan Bank of Seattle (“FHLB”) stock with a book value approximately equal to its market value in the amount of $2.0 million for each period. The Company evaluated its investment in FHLB stock for other-than-temporary impairment as of March 31, 2013, consistent with its accounting policy.  Based on the Company’s evaluation of the underlying investment, including the fact that the FHLB of Seattle recently began redeeming stock at par, the long-term nature of the investment, the liquidity position of the FHLB of Seattle, and the Company’s intent and ability to hold the investment for a period of time sufficient to recover the par value, the Company did not recognize an other-than-temporary impairment loss. 

5.  Loans Held for Sale

From time to time, the Company has purchased residential loans from our mortgage affiliate, Residential Mortgage Holding Company LLC (“RML”).  The Company then sells these loans in the secondary market.  The Company purchased $20.2 million and sold $20.5 million in loans during the three-month period ending March 31, 2013.  The Company purchased $39.6 million and sold $55.2 million in loans during the three-month period ending March 31, 2012.

6.  Loans

The following table presents total portfolio loans by portfolio segment and class of financing receivable, based on our risk classification criteria: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

Commercial

Real estate construction one-to-four family

Real estate construction other

Real estate term owner occupied

Real estate term non-owner occupied

Real estate term other

Consumer secured by 1st deeds of trust

Consumer other

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AQR Pass

$

281,060 

$

25,437 

$

20,763 

$

72,265 

$

234,815 

$

30,021 

$

16,332 

$

17,402 

$

698,095 

AQR Special Mention

 

6,681 

 

2,342 

 

1,748 

 

3,897 

 

2,504 

 

 -

 

501 

 

276 

 

17,949 

AQR Substandard

 

1,450 

 

2,505 

 

 -

 

287 

 

2,058 

 

1,605 

 

203 

 

315 

 

8,423 

AQR Doubtful

 

14 

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

14 

AQR Loss

 

184 

 

 -

 

 -

 

405 

 

 -

 

 -

 

 -

 

 -

 

589 

  Subtotal

$

289,389 

$

30,284 

$

22,511 

$

76,854 

$

239,377 

$

31,626 

$

17,036 

$

17,993 

$

725,070 

Less: Unearned origination fees, net of origination costs

 

 

 

 

 

(3,461)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

721,609 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AQR Pass

$

265,562 

$

28,780 

$

21,061 

$

73,985 

$

230,010 

$

28,304 

$

16,911 

$

17,817 

$

682,430 

AQR Special Mention

 

6,064 

 

1,282 

 

 -

 

2,522 

 

2,546 

 

126 

 

620 

 

238 

 

13,398 

AQR Substandard

 

1,597 

 

2,511 

 

 -

 

1,600 

 

2,087 

 

3,379 

 

183 

 

250 

 

11,607 

AQR Doubtful

 

189 

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

189 

AQR Loss

 

20 

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

 -

 

20 

  Subtotal

$

273,432 

$

32,573 

$

21,061 

$

78,107 

$

234,643 

$

31,809 

$

17,714 

$

18,305 

$

707,644 

Less: Unearned origination fees, net of origination costs

 

 

 

 

 

(3,431)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

704,213