Hope sells IWN 89.52: On a tangible book basis, a bank of this character should sell at no less than 1.5x and could justify a 2x multiple.

If we apply a 13x P/E multiple which is around both Northrim's historical average and consistent with peers, we arrive at a $39 stock price once this becomes evident. I believe that Northrim's earnings power is approaching $3 per share. Instead, Northrim is a valuation anomaly - its profitability and margins are far above peers yet its valuation is far below them. Clearly, significant value has been created over the past eight years that has not yet been factored into the stock price. Northrim has earned $2.23 per share over the last twelve months and currently has a $20.92 tangible book value.


Misti:
At minimum, the current sell-side estimates of $2.22 in FY 2015 and $2.12 in FY 2016 look especially conservative.

Jeanene:
Considering that the first quarter is seasonally the weakest for Northrim and that the Alaska Pacific deal will make an increasingly large contribution in coming quarters, it's possible that Northrim's adjusted earnings could surpass $3.00 this year.

Obdulia:
Excluding the earn out, Northrim would have earned a monstrous $0.74 in Q1 which annualizes to $2.96 per share.

Lorita:
Also, it is truly a onetime, non-recurring charge that Northrim won't have to pay next year.

Jeanette:
While this is a real expense, it is one shareholders shouldn't mind paying because it means the business is doing well.

Elwanda:
These have increased the bank's earnings power and have led to consistent tangible book value appreciation.

Sharolyn:
The bank has completed numerous accretive acquisitions over the years, scooping up branches, fee-generating business units, and other banks at value prices.

Maxima:
Northrim's strong balance sheet has also acted as a store of dry powder that has enabled management to be particularly opportunistic, especially during difficult economic environments.

Karima:
During the most recent financial crisis, which included a large decline in the price of oil, non-performing assets peaked at less than 4% during 2008 and quickly recovered.

Mi:
While many banks give lip service to these elements, Northrim's discipline has been made evident in its ability to successfully weather multiple economic cycles.

Russell 2000 Value Index Ishares (AMEX:IWN)
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