Review of Operations:

Revenue and Net Interest Income

Total revenues, which include net interest income plus other operating income, continue to benefit from contributions from our complementary financial business services. Total revenues increased 4% to $57.7 million in 2012 compared to $55.5 million a year ago. Fourth quarter total revenues increased 2% to $15.1 million compared to $14.8 million in the third quarter of 2012 and $14.6 million in the fourth quarter of 2011. 

For the year ended 2012, net interest income was down slightly to $42.2 million from $42.4 million in 2011. Fourth quarter 2012 net interest income increased 2% to $10.8 million, compared to $10.6 million in the immediate prior quarter and was unchanged from $10.8 million in the fourth quarter of 2011. 

"Low interest rates continue to put downward pressures on our margin, but loan growth and a healthy mix in our deposit balances have offset these pressures and allowed us to  sustain our net interest income," Schierhorn noted.  "In addition, our net interest margin continues to be well above the average for the SNL Bank and Thrift Index of 3.04% at September 30, 2012. In the fourth quarter of 2012, Northrim's net interest margin (NIM) was 4.25%, down 11 basis points from 4.36% in the third quarter and down 30 basis points from 4.55% in the fourth quarter a year ago. For 2012, NIM was 4.40% compared to 4.59% in 2011.

Provision for Loan Losses

"Net loan recoveries in the second half of the year totaled $1.7 million, resulting in a $1.6 million negative loan loss provision in 2012. With NPAs below 1% of total assets, and reserves at 2.33% of gross portfolio loans and more than three and a half times the balance of nonperforming loans, we believe a reverse provision was appropriate," said Schierhorn. Northrim booked a negative loan loss provision in the fourth quarter of 2012 totaling $300,000 and a negative provision of $1.4 million, in the preceding quarter and a provision of $350,000 in the fourth quarter a year ago.  For 2012, the provision for loan losses was a benefit of $1.6 million, compared to an expense of $2.0 million last year.

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