Regulatory Matters

12 Months Ended

Dec. 31, 2016

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 common equity Tier 1 capital, total Tier 1 capital, total 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, 2016, 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 are required to meet more stringent minimum capital requirements. The Rules implemented 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 phase in 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 is 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.  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, 2016 and 2015, 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, 2016:
Common equity tier 1 capital (to risk-weighted assets)		$171,190	13.20	%		$58,360	≥ 4.5	%	NA		NA
Total Capital (to risk-weighted assets)		$204,927	15.80	%		$103,761	≥ 8	%	NA		NA
Tier I Capital (to risk-weighted assets)		$188,658	14.54	%		$77,851	≥ 6	%	NA		NA
Tier I Capital (to average assets)		$188,658	12.59	%		$59,939	≥ 4	%	NA		NA
As of December 31, 2015:
Common equity tier 1 capital (to risk-weighted assets)		$154,464	12.01	%		$57,876	≥ 4.5	%	NA		NA
Total Capital (to risk-weighted assets)		$187,761	14.60	%		$102,883	≥ 8	%	NA		NA
Tier I Capital (to risk-weighted assets)		$171,653	13.34	%		$77,205	≥ 6	%	NA		NA
Tier I Capital (to average assets)		$171,653	11.20	%		$61,305	≥ 4	%	NA		NA
Northrim Bank	Actual				Adequately-Capitalized				Well-Capitalized
(In Thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2016:
Common equity tier 1 capital (to risk-weighted assets)		$168,529	13.07	%		$58,025	≥ 4.5	%		$83,813	≥ 6.5	%
Total Capital (to risk-weighted assets)		$184,695	14.33	%		$103,110	≥ 8	%		$128,887	≥ 10	%
Tier I Capital (to risk-weighted assets)		$168,529	13.07	%		$77,366	≥ 6	%		$103,155	≥ 8	%
Tier I Capital (to average assets)		$168,529	11.30	%		$59,656	≥ 4	%		$74,570	≥ 5	%
As of December 31, 2015:
Common equity tier 1 capital (to risk-weighted assets)		$156,317	12.21	%		$57,611	≥ 4.5	%		$83,215	≥ 6.5	%
Total Capital (to risk-weighted assets)		$171,662	13.41	%		$102,408	≥ 8	%		$128,010	≥ 10	%
Tier I Capital (to risk-weighted assets)		$155,630	12.16	%		$76,791	≥ 6	%		$102,388	≥ 8	%
Tier I Capital (to average assets)		$155,630	10.18	%		$61,151	≥ 4	%		$76,439	≥ 5	%