Safe and Sound

Northrim Bank

Anchorage, AK
4
Star Rating
Anchorage, AK-based Northrim Bank is an FDIC-insured bank started in 1990. Regulatory filings show the bank having equity of $177.7 million on $1.51 billion in assets, as of December 31, 2017.

U.S. bank customers have $1.27 billion on deposit at 14 offices in AK run by 429 full-time employees. With that footprint, the bank holds loans and leases worth $1.00 billion, including real estate loans of $710.8 million.

Overall, Bankrate believes that, as of December 31, 2017, Northrim Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is essential. It works as a buffer against losses and affords protection for depositors during times of economic instability for the bank. From a safety and soundness perspective, more capital is preferred.

Northrim Bank scored below the national average of 13.13 on our test to measure capital adequacy, receiving a score of 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Northrim Bank's Tier 1 capital ratio was 12.74 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic challenges.

Overall, Northrim Bank held equity amounting to 11.77 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.

Having a large number of these types of assets may eventually require a bank to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and increasing the chances of a future failure.

Northrim Bank scored 32 out of a possible 40 points on Bankrate's test of asset quality, failing to reach the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 2.14 percent of Northrim Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Northrim Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

On Bankrate's test of earnings, Northrim Bank scored 16 out of a possible 30, better than the national average of 15.12.

One important measure of a bank's earnings is return on equity, or net income (profit, essentially) divided by the total amount of equity. The most recent annualized quarterly return on equity for Northrim Bank was 7.69 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $14.0 million on total equity of $177.7 million. The bank had an annualized return on average assets, or ROA, of 0.93 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.