Regulatory Matters

12 Months Ended

Dec. 31, 2014

Regulatory Capital Requirements [Abstract]

Regulatory Matters

Regulatory Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory practices.  The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgment by the regulators about components, risk weightings, and other factors.

Federal banking agencies have established minimum amounts and ratios of total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets.  The regulations set forth the definitions of capital, risk-weighted and average assets.  Management believes, as of December 31, 2014, that the Company and the Bank met all capital adequacy requirements.

In July 2013, federal banking regulators (including the FDIC and the FRB) adopted new capital rules (the “Rules”). The Rules apply to both depository institutions (such as the Bank) and their holding companies (such as the Company). The Rules reflect, in part, certain standards initially adopted by the Basel Committee on Banking Supervision in December 2010 (which standards are commonly referred to as “Basel III”) as well as requirements contemplated by the Dodd-Frank Act.

Under the Rules, beginning in 2015, both the Company and the Bank will be required to meet more stringent minimum capital requirements. The Rules implement a new capital ratio of common equity Tier 1 capital to risk-based assets. Common equity Tier 1 capital generally consists of retained earnings and common stock instruments (subject to certain adjustments), as well as accumulated other comprehensive income (“AOCI”) except to the extent that the Company and the Bank exercise a one-time irrevocable option to exclude certain components of AOCI. The Company and the Bank are each required to have a common equity Tier 1 capital ratio of 4.5% as well as a Tier 1 leverage ratio of 4.0%, a Tier 1 risk-based ratio of 6.0% and a total risk-based ratio of 8.0%. In addition to the preceding requirements, both the Company and the Bank are required to establish a “conservation buffer,” consisting of common equity Tier 1 capital, which is at least 2.5% above each of the preceding common equity Tier 1 capital ratio, the Tier 1 risk-based ratio and the total risk-based ratio. An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers.

The tables below illustrate the capital requirements for the Company and the Bank and the actual capital ratios for each entity that exceed these requirements.  Management intends to maintain capital ratios for the Bank in 2015 in excess of the FDIC’s “well-capitalized” classification.  The dividends that the Bank pays to the Company are limited to the extent necessary for the Bank to meet the regulatory requirements of a “well-capitalized” bank.  The capital ratios for the Company exceed those for the Bank primarily because the $18 million trust preferred securities offerings that the Company completed in the second quarter of 2003 and in the fourth quarter of 2005 are included in the Company’s capital for regulatory purposes although they are accounted for as a liability in its financial statements.  The trust preferred securities are not accounted for on the Bank’s financial statements nor are they included in its capital.  As a result, the Company has $18 million more in regulatory capital than the Bank at December 31, 2014 and 2013, which explains most of the difference in the capital ratios for the two entities.

Northrim BanCorp, Inc.	Actual				Adequately-Capitalized				Well-Capitalized
(In Thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2014:
Total Capital (to risk-weighted assets)		$175,256	14.31	%		$97,977	≥ 8	%		$122,471	≥ 10	%
Tier I Capital (to risk-weighted assets)		$159,925	13.06	%		$48,982	≥ 4	%		$73,472	≥ 6	%
Tier I Capital (to average assets)		$159,925	11.21	%		$57,065	≥ 4	%		$71,331	≥ 5	%
As of December 31, 2013:
Total Capital (to risk-weighted assets)		$168,587	16.61	%		$81,198	≥ 8	%		$101,497	≥ 10	%
Tier I Capital (to risk-weighted assets)		$155,851	15.35	%		$40,613	≥ 4	%		$60,919	≥ 6	%
Tier I Capital (to average assets)		$155,851	13.06	%		$47,734	≥ 4	%		$59,667	≥ 5	%
Northrim Bank	Actual				Adequately-Capitalized				Well-Capitalized
(In Thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2014:
Total Capital (to risk-weighted assets)		$162,125	13.30	%		$97,519	≥ 8	%		$121,898	≥ 10	%
Tier I Capital (to risk-weighted assets)		$146,869	12.05	%		$48,753	≥ 4	%		$73,130	≥ 6	%
Tier I Capital (to average assets)		$146,869	10.35	%		$56,761	≥ 4	%		$70,951	≥ 5	%
As of December 31, 2013:
Total Capital (to risk-weighted assets)		$151,308	15.00	%		$80,698	≥ 8	%		$100,872	≥ 10	%
Tier I Capital (to risk-weighted assets)		$138,650	13.75	%		$40,335	≥ 4	%		$60,502	≥ 6	%
Tier I Capital (to average assets)		$138,650	11.68	%		$47,483	≥ 4	%		$59,354	≥ 5	%