Business Combinations (Tables)

6 Months Ended

Jun. 30, 2015

Schedule of Business Acquisitions by Acquisition

A summary of the net assets acquired and the estimated fair value adjustments of Alaska Pacific are presented below:



	Alaska Pacific
(In Thousands)	April 1, 2014

Cost basis net assets		$14,733
Cash payment made	(6,423		)
Common stock issued	(7,446		)
Fair value adjustments:
Net loans	(1,137		)
Premises and equipment	547
Other intangible assets	623
Mortgage servicing rights	(119		)
Deposits	(844		)
Other	236
Bargain purchase gain		$170

A summary of the net assets acquired and the estimated fair value adjustments of RML are presented below:



	RML
(In Thousands)	December 1, 2014

Cost basis net assets		$11,915
Cash payment made	(18,240		)
Cash surrender value of life insurance paid	(3,896		)
Liability for future earn out payments	(7,318		)

Fair value adjustments:
Loans	(360		)
Trade name intangible	950
Rate lock derivative asset	960
Investment in Homestate Mortgage, LLC	1,490
Other	(311		)
Goodwill		($14,810	)

Assets Acquired and Liabilities Assumed

A summary of assets acquired and liabilities assumed at their estimated fair values are presented below:



	Alaska Pacific
(In Thousands)	April 1, 2014

Assets Acquired:
Cash and equivalents		$12,956
Investment securities	7,240
Loans	138,432
Premises and equipment	3,436
Other intangibles	623
Mortgage servicing rights	1,170
Other real estate owned	1,709
Other assets	1,645
Total assets acquired		$167,211

Liabilities Assumed:
Deposits		$151,438
Other liabilities	1,734
Total liabilities assumed		$153,172

A summary of assets acquired and liabilities assumed at their estimated fair values are presented below:



	RML
(In Thousands)	December 1, 2014

Assets Acquired:
Cash and equivalents		$10,828
Net loans	41,304
Premises and equipment	255
Trade name intangible	950
Rate lock derivative asset	960
Investment in Homestate Mortgage LLC	3,000
Other real estate owned	270
Other assets	10,291
Total assets acquired		$67,858

Liabilities Assumed:
Borrowings		$37,541
Other liabilities	6,625
Total liabilities assumed		$44,166

Schedule of Loans Acquired

Alaska Pacific purchased loans not subject to the requirements of FASB ASC 310-30 Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30") are presented below at acquisition:



(In Thousands)	April 1, 2014

Contractually required principal payments		$133,921
Purchase adjustment for credit, interest rate, and liquidity	612
Fair value of purchased non-credit impaired loans		$134,533

Loans Acquired with Deteriorating Quality

Purchased credit impaired loans at acquisition are presented below:



(In Thousands)	April 1, 2014

Contractually required principal payments		$7,553
Nonaccretable difference	(3,654		)
Fair value of purchased credit impaired loans		$3,899

Pro Forma Information

The following table presents unaudited combined pro forma results of operations for the six month period ended June 30, 2014 as if the acquisition of Alaska Pacific and RML had occurred on January 1, 2014. The proforma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisitions actually occurred on January 1, 2014.



(In Thousands, except earnings per share data)	Six Months Ended June 30, 2014
			Alaska						Pro Forma				Pro Forma
	Company		Pacific¹			RML²			Adjustments				Combined
Net interest and other income		$31,484		$2,095			$11,171	³		($218	)	⁴		$44,532
Net income attributable to Northrim BanCorp, Inc.	7,027		(1,282		)	1,760			2,980			⁵	10,485
Earnings Per Share, Basic		$1.05												$1.50
Earnings Per Share, Diluted		$1.04												$1.48
Weighted Average Shares Outstanding, Basic	6,683,897												6,974,109
Weighted Average Shares Outstanding, Diluted	6,774,434												7,064,646

¹ Alaska Pacific represents results from January 1 to March 31 for 2014.

² RML represents results from January 1 to June 30.

³ 2014 amount is comprised of net interest income of $160,000 and $11.0 million of other income.

⁴ Amount of amortization/ accretion of the fair value adjustments on loans and certificates of deposit for Alaska Pacific and amount of accretion of the fair value adjustments on loans and income recognized under the equity method prior to the December 2014 acquisition for RML.

⁵ Amount of amortization/accretion of the fair value adjustments on loans and certificates of deposit, bargain purchase gain, amortization of core deposit intangible, and the change in the provision for income taxes for Alaska Pacific and amount of accretion of the fair value adjustments on loans, income recognized under the equity method, gain on acquisition, earn out accretion, and the change in the provision for income taxes for RML.

The proforma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2014.



(In Thousands, except earnings per share data)	Six Months Ended June 30, 2014
						Pro Forma				Pro Forma
	Company		RML¹			Adjustments				Combined
Net interest and other income		$31,484		$11,171	²		($198	)	³		$42,457
Net income attributable to Northrim BanCorp, Inc.	7,027		1,760			2,857			⁴	11,644
Earnings Per Share, Basic		$1.05									$1.74
Earnings Per Share, Diluted		$1.04									$1.72
Weighted Average Shares Outstanding, Basic	6,683,897									6,683,897
Weighted Average Shares Outstanding, Diluted	6,774,434									6,774,434

¹ RML represents results from January 1 to June 30.

² 2014 amount is comprised of net interest income of $160,000 and $11.0 million of other income.

³ Amount of accretion of the fair value adjustments on loans and income recognized under the equity method prior to the December 2014 acquisition.

⁴ Amount of accretion of the fair value adjustments on loans, income recognized under the equity method, gain on acquisition, earn out accretion, and the change in the provision for income taxes.

The following table presents unaudited pro forma results of operations for the six month period ended June 30, 2014 as if the acquisition of Alaska Pacific had occurred on January 1, 2014. The proforma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2014.



(In Thousands, except earnings per share data)	Six Months Ended June 30, 2014
						Pro Forma				Pro Forma
	Company		Alaska Pacific¹			Adjustments				Combined
Net interest and other income		$31,484		$2,095			($10	)	²		$33,569
Net income attributable to Northrim BanCorp, Inc.	7,027		(1,282		)	123			³	5,868
Earnings Per Share, Basic		$1.05									$0.84
Earnings Per Share, Diluted		$1.04									$0.83
Weighted Average Shares Outstanding, Basic	6,683,897									6,974,109
Weighted Average Shares Outstanding, Diluted	6,774,434									7,064,646

¹ Alaska Pacific represents results from January 1 to March 31 for 2014.

² Amount of amortization/ accretion of the fair value adjustments on loans and certificates of deposit.

³ Amount of amortization/accretion of the fair value adjustments on loans and certificates of deposit, bargain purchase gain, amortization of core deposit intangible, and the change in the provision for income taxes.

Contingent Consideration Terms

er the purchase agreement, the earn-out payments are calculated as follows:



First tier earn-out payment	Adjusted pretax earnings greater than $1,000,000 and less than or equal to $2,000,000	Payment will be calculated as product of amount of adjusted pretax earnings times 40%
Second tier earn-out payment	Adjusted pretax earnings greater than $2,000,000 and less than or equal to $3,000,000	The first tier earn-out payment, plus the product of amount of adjusted pretax earnings greater than $2,000,000 and less than $3,000,000 times 50%
Third tier earn-out payment	Adjusted pretax earnings greater than $3,000,000 and less than or equal to $4,000,000	The first tier plus the second tier earn-out payment, plus the product of amount of adjusted pretax earnings greater than $3,000,000 and less than $4,000,000 times 70%
Fourth tier earn- out payment	Adjusted pretax earnings greater than $4,000,000 and less than or equal to $6,000,000	The first, second and third tier earn-out payment, plus the product of amount of adjusted pretax earnings greater than $4,000,000 and less than $6,000,000 times 85%
Fifth tier earn-out payment	Adjusted pretax earnings greater than $6,000,000	The first, second, third and fourth tier earn-out payment, plus the product of amount of adjusted pretax earnings greater than $6,000,000 times 55%