• Northrim BanCorp Earns $4.8 Million, or $0.83 Per Diluted Share, in Second Quarter 2022

    المصدر: Nasdaq GlobeNewswire / 28 يوليو 2022 16:15:01   America/New_York

    ANCHORAGE, Alaska, July 28, 2022 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported net income of $4.8 million, or $0.83 per diluted share, in the second quarter of 2022, compared to $7.2 million, or $1.20 per diluted share, in the first quarter of 2022, and $8.3 million, or $1.33 per diluted share, in the second quarter a year ago. The decline in second quarter 2022 profitability as compared to the prior periods was primarily due to a continued decline in mortgage banking income, an increase in the provision for credit losses due to loan growth, and a decrease in the value of marketable equity securities. The decrease in the value of marketable equity securities reduced net income by $810,000 or $0.14 per diluted share in the second quarter of 2022. These items were partially offset by a 15% increase in net interest income in the second quarter of 2022 compared to the prior quarter as interest income increased and interest expense remained stable.

    Dividends per share remained at $0.41 in the second quarter of 2022 compared to the first quarter of 2022 and increased from $0.37 per share in the second quarter of 2021. Share repurchases also continued with 200,619 shares of common stock, or 3.5% of shares outstanding, repurchased in the second quarter.

    “Second quarter results benefited from rising interest rates resulting in a 15% increase in net interest income but were negatively impacted by certain items and the continued slowdown in mortgage originations,” said Joe Schierhorn, President and Chief Executive Officer. “Our core deposit base, asset sensitivity, and continued market share gains should continue to drive improved margins and profitability in a rising interest rate environment.”

    Second Quarter 2022 Highlights:

    • Net income decreased to $4.8 million, or $0.83 per diluted share, in the second quarter of 2022 compared to $7.2 million, or $1.20 per diluted share in the preceding quarter and $8.3 million, or $1.33 per diluted share in the second quarter of 2021.
    • For the second quarter of 2022, Community Banking revenue was $23.5 million, compared to $22.8 million in the first quarter of 2022, and $21.2 million in the second quarter of 2021.
    • Mortgage banking income was $5.9 million in the second quarter, compared to $7.0 million in the first quarter of 2022, and $11.4 million in the second quarter of 2021.
    • Net interest income in the second quarter of 2022 increased 15% to $22.2 million compared to $19.3 million in the first quarter of 2022 and increased 16% compared to $19.2 million in the second quarter of 2021.
    • Core net interest income* in the second quarter of 2022 (excluding Paycheck Protection Program ("PPP") interest and fees) increased 33% to $20.8 million in the second quarter of 2022, compared to $15.6 million in the second quarter of 2021.
    • Net interest margin on a tax equivalent basis (“NIMTE”)* was 3.70% for the second quarter of 2022, a 50-basis point increase from the first quarter of 2022 and a 20-basis point increase compared to the second quarter of 2021 due primarily to the increased yields on loans and investments.
    • The weighted average interest rate for new loans booked in the second quarter of 2022 was 4.66% compared to 4.02% in the first quarter of 2022 and 3.59% in the second quarter a year ago.
    • Long-term investments in the second quarter of 2022 were purchased with a weighted average yield of 3.22% compared to 1.93% in the first quarter of 2022 and 0.93% in the second quarter a year ago.
    • Return on average assets ("ROAA") was 0.74% and return on average equity ("ROAE") was 8.58% for the second quarter of 2022.
    • Portfolio loans were $1.41 billion at June 30, 2022, up 2% from the preceding quarter due to core loan growth and down 6% from a year ago, primarily as a result of PPP forgiveness.
    • Core portfolio loans (loans excluding PPP loans), were $1.37 billion at June 30, 2022, up 5% from the preceding quarter and up 16% from a year ago. At June 30, 2022, 76% of core portfolio loans are adjustable rate and are subject to rate increases as the prime rate and other indices increase.
    • Total deposits were $2.34 billion at both June 30, 2022 and March 31, 2022, and up 9% from $2.15 billion a year ago. Demand deposits increased 4% year-over-year to $830.2 million at June 30, 2022 and currently represent 35% of total deposits.
    • Repurchased 200,619 shares of common stock in the second quarter of 2022 at an average price of $41.04 per share.


    Financial HighlightsThree Months Ended
    (Dollars in thousands, except per share data)June 30,
    2022    		March 31,
    2022    		December 31,
    2021    		September 30,
    2021    		June 30,
    2021
    Total assets$2,611,154 $2,626,160 $2,724,719 $2,609,946 $2,453,567 
    Total portfolio loans$1,405,709 $1,377,387 $1,413,886 $1,450,657 $1,487,968 
    Total portfolio loans (excluding PPP loans)$1,373,837 $1,313,114 $1,295,657 $1,247,297 $1,187,032 
    Total deposits$2,335,390 $2,343,066 $2,421,631 $2,296,541 $2,146,438 
    Total shareholders' equity$215,289 $225,832 $237,817 $242,474 $237,218 
    Net income$4,795 $7,226 $8,114 $8,877 $8,345 
    Diluted earnings per share$0.83 $1.20 $1.31 $1.42 $1.33 
    Return on average assets 0.74% 1.12% 1.23% 1.40% 1.40%
    Return on average shareholders' equity 8.58% 12.36% 13.14% 14.47% 14.10%
    NIM 3.67% 3.18% 3.52% 3.45% 3.48%
    NIMTE* 3.70% 3.20% 3.54% 3.47% 3.50%
    Efficiency ratio 77.39% 70.02% 73.48% 68.07% 67.00%
    Total shareholders' equity/total assets 8.24% 8.60% 8.73% 9.29% 9.67%
    Tangible common equity/tangible assets* 7.68% 8.04% 8.19% 8.73% 9.07%
    Book value per share$37.90 $38.39 $39.54 $39.25 $38.22 
    Tangible book value per share*$35.08 $35.67 $36.88 $36.66 $35.64 
    Dividends per share$0.41 $0.41 $0.38 $0.38 $0.37 
    Common stock outstanding 5,681,089  5,881,708  6,014,813  6,177,300  6,206,913 

    * References to core net interest income, NIMTE, tangible book value per share, tangible common equity to tangible assets (all of which exclude intangible assets), and core net interest income represent non-GAAP financial measures. Management has presented these non-GAAP measurements in this earnings release, because it believes these measures are useful to investors. See the end of this release for reconciliations of these non-GAAP financial measures to GAAP financial measures.

    2nd Quarter Update:

    • Growth and Paycheck Protection Program:
      • In 2020 and 2021, Northrim funded a total of nearly 5,800 PPP loans totaling $612.6 million to both existing and new customers. Management estimates that Northrim funded approximately 24% of the number and 32% of the value of all Alaska PPP second round loans.

      • As of June 30, 2022, PPP has resulted in 2,344 new customers totaling $69.7 million in non-PPP loans, and $132.4 million in new deposit balances.

      • As of June 30, 2022, Northrim customers had received forgiveness through the U.S. Small Business Administration ("SBA") on 5,407 PPP loans totaling $582.0 million, of which 417 PPP loans totaling $33.7 million were forgiven in the second quarter of 2022, 537 PPP loans totaling $56.9 million were forgiven in the first quarter of 2022, and 4,451 PPP loans totaling $491.4 million were forgiven in 2021. Of the PPP loans forgiven in the second quarter of 2022, 414 loans totaling $33.4 million related to PPP round two. As of June 30, 2022, approximately 99% of the number of PPP round one loans funded and 88% of the number of PPP round two loans funded have been forgiven.
    • Customer Accommodations: The Company implemented assistance to help its customers experiencing financial challenges as a result of COVID-19 in addition to participation in PPP lending. As of June 30, 2022, these accommodations include interest only and deferral options on loan payments. The total outstanding principal balance of loan modifications due to the impacts of COVID-19 as of June 30, 2022, March 31, 2022, and June 30, 2021 were as follows:

    Loan Modifications due to COVID-19 as of June 30, 2022
    (Dollars in thousands)Interest OnlyFull Payment DeferralTotal
    Portfolio loans$23,573 $—$23,573
    Number of modifications 5 — 5
    Number of relationships 2 — 2


    Loan Modifications due to COVID-19 as of March 31, 2022
    (Dollars in thousands)Interest OnlyFull Payment DeferralTotal
    Portfolio loans$45,074 $—$45,074
    Number of modifications 13 — 13
    Number of relationships 3 — 3


    Loan Modifications due to COVID-19 as of June 30, 2021
    (Dollars in thousands)Interest OnlyFull Payment DeferralTotal
    Portfolio loans$75,613$7,440$83,053
    Number of modifications 23 1 24
    Number of relationships 10 1 11


    The $23.6 million COVID-19 loan accommodations as of June 30, 2022 are scheduled to return to normal principal and interest payments in 2022.

    • Provision for Credit Losses: Northrim booked a provision for credit losses of $463,000 for the quarter ended June 30, 2022. This compares to a benefit for credit loss provisions of $150,000 during the previous quarter and a $427,000 benefit for credit losses in the second quarter a year ago. The provision for the current quarter was recorded using a discounted cash flow model under the Current Expected Credit Loss ("CECL") methodology and reflects expected lifetime credit losses on loans and off-balance sheet unfunded loan commitments. The increase in the provision for credit losses in the second quarter of 2022 is primarily the result of growth in core loans.
    • Credit Quality: Nonaccrual loans, net of government guarantees decreased to $7.3 million at June 30, 2022, compared to $8.7 million in the previous quarter, and $12.0 million at June 30, 2021. Net adversely classified loans decreased to $8.8 million at June 30, 2022, compared to $11.7 million in the first quarter of 2022 and $14.1 million in the second quarter a year ago. Net loan charge-offs were $46,000 in the second quarter of 2022, compared to net loan charge-offs of $262,000 in the first quarter and $64,000 in the second quarter of 2021.
    • Capital Management: At June 30, 2022, the Company’s tangible common equity to tangible assets* ratio was 7.68% and the capital of Northrim Bank (the "Bank") was well in excess of all regulatory requirements. During the second quarter of 2022, the Company repurchased 200,619 shares of common stock under the previously announced share repurchase programs, with no shares remaining of the 300,000 shares previously authorized for repurchase in February 2022.

    Alaska Economic Update
    (Note: sources for information included in this section are included on page 12.)

    The Alaska economy has seen continued job growth and personal income gains. A strong rebound in tourism activity, coupled with high oil prices has benefited the state. “The national focus on supply chain issues and the desire for more domestic production should improve the demand for Alaska’s vast natural resources,” stated Mark Edwards, EVP Chief Credit Officer and Bank Economist. “Like the rest of the nation, Alaska’s housing market saw large price increases over the last year. However, we expect the rapidly rising interest rate environment to temper the Alaska housing market in the second half of 2022.”

    The Alaska Department of Labor ("DOL") has released data through May of 2022. The DOL reports total payroll jobs in Alaska increased 2.9% or 8,900 jobs compared to May of 2021. The Leisure and Hospitality sector showed the fastest year over year increase of 12.4%. Tourism related jobs were the hardest hit from the pandemic travel restrictions, but were also the quickest to rebound. The Oil and Gas sector has benefited from high energy prices and added 600 jobs since May of 2021, a 9.1% increase. Other sectors showing improvement over the last 12 months include Trade, Warehousing, and Utilities (+6.8%), Other Services (+4.8%); Financial Activities (+2.8%), and Professional and Business Services (+2.6%). The only private sectors to decline year over year were Manufacturing (-2.9%) and Information (-2.1%). The Government sector was up slightly by 0.6%, an increase of 500 jobs through May 2022 year-over-year.

    Alaska’s Gross State Product (“GSP”), was estimated to be $58 billion at the end of 2021 by the Federal Bureau of Economic Analysis ("BEA"). This was a 0.3% increase in 2021 over 2020 figures. The BEA also calculated Alaska’s seasonally adjusted personal income was $49 billion in 2021, an improvement of 5.9% over 2020. This was largely a result of COVID related government transfer payments and an improvement in employment leading to higher wage income last year.

    The price of Alaska North Slope crude oil began 2021 averaging $55.56 a barrel in January and climbed steadily throughout the year due to rising global demand to a monthly average high of $84.36 in October 2021. 2022 began with a monthly average of $86.50 a barrel in January and surpassed $100 in March after the war in Ukraine began. Prices increased in the second quarter of 2022, reaching a monthly average of $120.17 a barrel in June.

    Alaska’s home mortgage delinquency level continues to be better than most of the nation. According to the Mortgage Bankers Association, Alaska’s delinquency rate in the first quarter of 2022 was 3.49% compared to the national average rate of 3.84%. The Mortgage Bankers Association survey reported that the mortgage foreclosure rate in Alaska in the first quarter of 2022 was identical to the national average rate of 0.53%.

    According to the Alaska Multiple Listing Services, the average sales price of a single family home in Anchorage rose 6.9% in 2021 to $424,148. In the first six months of 2022 prices climbed another 7.5% to $456,052. Average sales prices in the Matanuska Susitna Borough rose 15.6% in 2021 and another 11% in the first six months of 2022 to $386,429. These two markets represent where the vast majority of the Bank’s residential lending activity occurs. Prices also increased 13.9% in the Fairbanks North Star Borough, 13.4% in the Kenai Peninsula Borough, and 13.8% in the Kodiak Island Borough in 2021.

    The number of housing units sold in Anchorage was up significantly in 2021 by 11.2%, following an increase of 19.5% in 2020, as reported by the Alaska Multiple Listing Services. The Matanuska Susitna Borough also had strong sales activity, up 11.7% in 2021 and 9.7% in 2020.

    Northrim Bank sponsors the Alaskanomics blog to provide news, analysis, and commentary on Alaska’s economy. Join the conversation at Alaskanomics.com, or for more information on the Alaska economy, visit: www.northrim.com and click on the “Business Banking” link and then click “Learn.” Information from our website is not incorporated into, and does not form, a part of this earnings release.

    Review of Income Statement

    Consolidated Income Statement

    In the second quarter of 2022, Northrim generated a ROAA of 0.74% and a ROAE of 8.58%, compared to 1.12% and 12.36%, respectively, in the first quarter of 2022 and 1.40% and 14.10%, respectively, in the second quarter a year ago.

    Net Interest Income/Net Interest Margin

    Net interest income increased 16% to $22.2 million in the second quarter of 2022 compared to $19.2 million in the second quarter of 2021 and increased 15% compared to $19.3 million in the first quarter of 2022. Interest income continues to benefit from the amortization of PPP loan fees and the full recognition of the deferred PPP loan fees upon forgiveness by the SBA. During the second quarter of 2022, Northrim received $33.7 million in loan forgiveness through the SBA, compared to $56.9 million in loan forgiveness during the prior quarter, resulting in total net PPP fee income of $1.3 million and $2.1 million, respectively. As of June 30, 2022, there was $1.1 million of net deferred PPP fee income remaining.

    NIMTE* was 3.70% in the second quarter of 2022 compared to 3.20% in the preceding quarter and 3.50% in the second quarter a year ago. NIMTE* increased 50 basis points in the second quarter of 2022 compared to the prior quarter and 20 basis points compared to the second quarter of 2021 primarily due to higher yields on portfolio loans, investments, and interest bearing deposits in other banks. The weighted average interest rate for new loans booked in the second quarter of 2022 was 4.66% compared to 4.02% in the first quarter of 2022 and 3.59% in the second quarter a year ago. Additionally, the Company purchased long-term investments in the second quarter of 2022 with a weighted average yield of 3.22% compared to 1.93% in the first quarter of 2022 and 0.93% in the second quarter a year ago. Also notable during the second quarter of 2022 was the impact of SBA PPP loan fees and interest on net interest income, which increased our NIMTE* by 18 basis points during the quarter compared to what our NIMTE* would have been if we had not made any SBA PPP loans. “We expect our net interest margin to continue to improve with increases in interest rates in 2022, as nearly 75% of our loan portfolio has adjusting rates and our large cash position will reprice immediately upon any rate increases,” said Jed Ballard, Chief Financial Officer. Northrim's NIMTE* continues to remain above the peer average posted by the S&P U.S. Small Cap Bank Index with total market capitalization between $250 million and $1 billion as of March 31, 20221.

    Provision for Credit Losses

    Northrim recorded a provision for credit losses of $463,000 in the second quarter of 2022, which includes a $189,000 provision for credit losses on unfunded commitments and a provision for credit losses on loans of $274,000. This compares to a benefit to the provision for credit losses of $150,000 in the first quarter of 2022, and a benefit to the provision for credit losses of $427,000 in the second quarter a year ago. The provision for credit losses in the second quarter of 2022 is largely attributable to the growth in our core loan portfolio.

    Nonperforming loans, net of government guarantees, decreased during the quarter to $7.3 million at June 30, 2022, compared to $8.7 million at March 31, 2022, and decreased compared to $12.0 million at June 30, 2021. The allowance for credit losses was 158% of nonperforming loans, net of government guarantees, at the end of the second quarter of 2022, compared to 130% three months earlier and 121% a year ago.

     

     

    1As of March 31, 2022, the S&P U.S. Small Cap Bank Index tracked 289 banks with total common market capitalization between $250 million to $1B for the following ratios: NIMTE* of 2.78%.

    Other Operating Income

    In addition to home mortgage lending, Northrim has interests in other businesses that complement its core community banking activities, including purchased receivables financing and wealth management. Other operating income contributed $7.8 million, or 26% of total second quarter 2022 revenues, as compared to $10.8 million, or 36% of revenues in the first quarter of 2022, and $14.1 million, or 42% of revenues in the second quarter of 2021. The decrease in other operating income in the second quarter of 2022 as compared to the preceding quarter is primarily the result of $2.0 million in life insurance proceeds received in the first quarter of 2022 in connection with the death of the Company’s former Executive Vice President, General Counsel and Corporate Secretary who passed away on November 11, 2021. Additionally, there were decreases in the value of marketable equity securities and mortgage banking income. These decreases were only partially offset by increases in bankcard fees, purchased receivable income, and service charges on deposit accounts. The decrease in other operating income in the second quarter of 2022 as compared to the second quarter a year ago was due primarily to a lower volume of mortgage activity.

    Other Operating Expenses

    Operating expenses were $23.2 million in the second quarter of 2022, compared to $21.1 million in the first quarter of 2022, and $22.3 million in the second quarter of 2021. The increase in other operating expenses in the second quarter of 2022 compared to the first quarter of 2022 is primarily due to increased salaries and other personnel expense and higher mortgage commissions expense due to higher mortgage volume, as well as increased marketing expense due to the timing of payments for charitable contributions.

    Income Tax Provision

    In the second quarter of 2022, Northrim recorded $1.5 million in state and federal income tax expense for an effective tax rate of 24.1%, compared to $2.0 million, or 21.3% in the first quarter of 2022 and $3.1 million, or 26.9% in the second quarter a year ago. The increase in the tax rate in the second quarter of 2022 as compared to the first quarter of 2022 is primarily the result of a decrease in tax credits and tax exempt interest income as a percentage of pre-tax income.

    Community Banking

    Net interest income in the Community Banking segment totaled $21.6 million in the second quarter of 2022, compared to $18.9 million in the first quarter of 2022 and $18.5 million in the second quarter of 2021. Net interest income benefited from $1.5 million of PPP income in the second quarter of 2022, and $2.3 million of PPP income in the first quarter of 2022. As of June 30, 2022, there was $1.1 million of unearned loan fees net of costs related to round one and round two PPP loans.

    The following table provides highlights of the Community Banking segment of Northrim:

     Three Months Ended
    (Dollars in thousands, except per share data)June 30,
    2022    		March 31,
    2022    		December 31,
    2021    		September 30,
    2021    		June 30,
    2021
    Net interest income$21,603$18,909 $21,150 $19,728 $18,468 
    Provision (benefit) for credit losses 463 (150) (1,078) (1,106) (427)
    Other operating income 1,907 3,841  2,308  2,765  2,772 
    Other operating expense 16,415 14,831  15,583  14,849  14,551 
    Income before provision for income taxes 6,632 8,069  8,953  8,750  7,116 
    Provision for income taxes 1,605 1,641  1,211  1,955  1,850 
    Net income$5,027$6,428 $7,742 $6,795 $5,266 
    Weighted average shares outstanding, diluted 5,805,870 5,997,351  6,177,766  6,265,602  6,277,265 
    Diluted earnings per share$0.87$1.07 $1.25 $1.08 $0.84 


     Year-to-date
    (Dollars in thousands, except per share data)June 30,
    2022    		June 30,
    2021
    Net interest income$40,512$37,202 
    Provision (benefit) for credit losses 313  (1,915)
    Other operating income 5,748  5,046 
    Other operating expense 31,246  28,215 
    Income before provision for income taxes 14,701  15,948 
    Provision for income taxes 3,246  3,302 
    Net income$11,455$12,646 
    Weighted average shares outstanding, diluted 5,902,287  6,280,369 
    Diluted earnings per share$1.94$2.02 


    Home Mortgage Lending

    During the second quarter of 2022, mortgage loan volume increased to $191.0 million, of which 90% was for new home purchases, compared to $143.6 million and 76% of loans funded for new home purchases in the first quarter of 2022, and decreased as compared to $286.3 million, of which 69% was for new home purchases in the second quarter of 2021. The rising interest rate environment has caused the housing market to slow down compared to prior year and decreased the yields on mortgage loans sold in the second quarter of 2022 as compared to the prior quarter and the second quarter of the prior year.

    The net change in fair value of mortgage servicing rights decreased mortgage banking income by $250,000 during the second quarter of 2022, primarily due to an increase in the discount rate used to value the mortgage servicing rights, which was generally caused by the increase in mortgage rates and only partially offset by a reduction in estimated prepayment speeds.

    As of June 30, 2022, Northrim serviced 3,241 loans in its $818.3 million home-mortgage-servicing portfolio, a 4% increase compared to the $789.4 million serviced for the first quarter of 2022, and a 15% increase from the $713.9 million serviced a year ago. Delinquencies in the loan servicing portfolio totaled 2.6% at June 30, 2022, compared to 3.3% at June 30, 2021. Mortgage servicing revenue contributed $1.9 million to revenues in the second quarter of 2022, compared to $1.8 million in the first quarter of 2022, and $2.5 million in the second quarter of 2021.

    Total mortgage servicing income fluctuates based on the number of mortgage servicing rights originated during the period and changes in the fair value of those servicing rights. The fair value of mortgage servicing rights is driven by interest rate volatility and the number of serviced mortgages that pay off during the period, as well as fluctuations in estimated prepayment speeds based on published industry metrics. The change in the fair value of mortgage servicing rights was a decrease of $250,000 for the second quarter of 2022, compared to an increase of $711,000 for the first quarter of 2022 and a decrease of $567,000 for the second quarter of 2021.

    The following table provides highlights of the Home Mortgage Lending segment of Northrim:

     Three Months Ended
    (Dollars in thousands, except per share data)June 30,
    2022    		March 31,
    2022    		December 31,
    2021    		September 30,
    2021    		June 30,
    2021
    Mortgage commitments$116,167 $130,208 $81,617 $169,436 $173,994 
    Mortgage loans funded for sale$191,023 $143,575 $247,249 $283,165 $286,314 
    Mortgage loan refinances to total fundings 10% 24% 30% 23% 31%
    Mortgage loans serviced for others$818,266 $789,382 $772,764 $750,327 $713,926 
          
    Net realized gains on mortgage loans sold$4,649 $3,921 $7,214 $7,957 $9,470 
    Change in fair value of mortgage loan commitments, net (603) 409  (1,687) 533  (427)
    Total production revenue 4,046  4,330  5,527  8,490  9,043 
    Mortgage servicing revenue 1,932  1,771  1,975  2,449  2,452 
    Change in fair value of mortgage servicing rights:     
    Due to changes in model inputs of assumptions1 (225) 1,192  (89) (928) 16 
    Other2 (25) (481) (460) (530) (583)
    Total mortgage servicing revenue, net 1,682  2,482  1,426  991  1,885 
    Other mortgage banking revenue 172  170  316  412  432 
    Total mortgage banking income$5,900 $6,982 $7,269 $9,893 $11,360 
          
    Net interest income$609 $395 $560 $704 $724 
    Mortgage banking income 5,900  6,982  7,269  9,893  11,360 
    Other operating expense 6,823  6,270  7,416  7,685  7,785 
    (Loss) income before provision for income taxes (314) 1,107  413  2,912  4,299 
    (Benefit) provision for income taxes (82) 309  41  830  1,220 
    Net (loss) income($232)$798 $372 $2,082 $3,079 
          
    Weighted average shares outstanding, diluted 5,805,870  5,997,351  6,177,766  6,265,602  6,277,265 
    Diluted earnings per share($0.04)$0.13 $0.06 $0.34 $0.49 

    1Principally reflects changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates.
    2Represents changes due to collection/realization of expected cash flows over time.


     Year-to-date
    (Dollars in thousands, except per share data)June 30,
    2022    		June 30,
    2021
    Mortgage loans funded for sale$334,598 $587,277 
    Mortgage loan refinances to total fundings 16% 46%
       
    Net realized gains on mortgage loans sold$8,569 $21,265 
    Change in fair value of mortgage loan commitments, net (193) (329)
    Total production revenue 8,376  20,936 
    Mortgage servicing revenue 3,703  4,604 
    Change in fair value of mortgage servicing rights:  
    Due to changes in model inputs of assumptions1 967  (164)
    Other2 (506) (1,412)
    Total mortgage servicing revenue, net 4,164  3,028 
    Other mortgage banking revenue 342  1,018 
    Total mortgage banking income$12,882 $24,982 
       
    Net interest income$1,004 $1,483 
    Mortgage banking income 12,882  24,982 
    Other operating expense 13,093  15,448 
    Income before provision for income taxes 793  11,017 
    Provision for income taxes 227  3,137 
    Net income$566 $7,880 
       
    Weighted average shares outstanding, diluted 5,902,287  6,280,369 
    Diluted earnings per share$0.10 $1.25 

    1Principally reflects changes in discount rates and prepayment speed assumptions, which are primarily affected by changes in interest rates.
    2Represents changes due to collection/realization of expected cash flows over time.


    Balance Sheet Review

    Northrim’s total assets were $2.61 billion at June 30, 2022, down 1% from the preceding quarter and up 6% from a year ago. Northrim’s loan-to-deposit ratio was 60% at June 30, 2022, up slightly from 59% at March 31, 2022, and down from 69% at June 30, 2021.

    Liquidity levels remain high with interest bearing deposits in other banks at $312.9 million, representing 13% of interest-earning assets as of June 30, 2022, compared to 14% at June 30, 2021.

    Average interest-earning assets were $2.43 billion in the second quarter of 2022, down 1% from $2.46 billion in the first quarter of 2022 and up 10% from $2.22 billion in the second quarter a year ago. The average yield on interest-earning assets was 3.83% in the second quarter of 2022, up from 3.33% in the preceding quarter and 3.69% in the second quarter a year ago.

    Average investment securities increased to $589.6 million in the second quarter of 2022, compared to $491.0 million in the first quarter of 2022 and $354.3 million in the second quarter a year ago. The average net tax equivalent yield on the securities portfolio was 1.59% for the second quarter of 2022, up from 1.23% in the preceding quarter and up from 1.32% in the year ago quarter. The average estimated duration of the investment portfolio at June 30, 2022, was approximately three and a half years.

    “Core loans, excluding PPP loans, increased $60.7 million during the second quarter of 2022 as compared to the first quarter of 2022 as new customer relationships continued to expand and grow,” said Michael Huston, Bank President and Chief Lending Officer. At June 30, 2022, commercial loans represented 38% of total loans, PPP loans represented 2% of total loans, commercial real estate owner occupied loans comprised 17% of total loans, commercial real estate non-owner occupied loans comprised 29% of total loans, and construction loans made up 9% of total loans. Portfolio loans were $1.41 billion at June 30, 2022, up 2% from the preceding quarter and down 6% from a year ago. Portfolio loans excluding the impact from PPP (core loans) were $1.37 billion at June 30, 2022 up 5% from the preceding quarter and up 16% from a year ago. Average portfolio loans in the second quarter of 2022 were $1.40 billion, which was up 1% from the preceding quarter and down 9% from a year ago. Yields on average portfolio loans in the second quarter of 2022 increased to 5.52% from 5.27% in the first quarter of 2022 and increased from 4.75% in the second quarter of 2021. The increase in the yield on portfolio loans in the second quarter of 2022 compared to the first quarter of 2022 is primarily due to loan repricing due to the increases in interest rates and new loans booked at higher rates due to changes in the interest rate environment.

    Alaskans continue to account for substantially all of Northrim’s deposit base, which is primarily made up of low-cost transaction accounts. Total deposits were $2.34 billion at both June 30, 2022 and March 31, 2022, up 9% from $2.15 billion a year ago. Demand deposits increased by 2% from the prior quarter and increased 4% year-over-year to $830.2 million at June 30, 2022. Average interest-bearing deposits were down 1% to $1.51 billion with an average cost of 0.16% in the second quarter of 2022, compared to $1.53 billion and an average cost of 0.15% in the first quarter of 2022, and up 15% compared to $1.32 billion and an average cost of 0.27% in the second quarter of 2021.

    Shareholders’ equity was $215.3 million, or $37.90 book value per share, at June 30, 2022, compared to $225.8 million, or $38.39 book value per share, at March 31, 2022 and $237.2 million, or $38.22 book value per share, a year ago. Tangible book value per share* was $35.08 at June 30, 2022, compared to $35.67 at March 31, 2022, and $35.64 per share a year ago. The decrease in shareholders' equity in the second quarter of 2022 as compared to the first quarter of 2022 was largely the result of $8.2 million for the repurchase of stock during the quarter, as well as the decrease in the fair value of the available for sale securities portfolio, which decreased $5.5 million, net of tax, and dividends paid of $2.3 million, which was only partially offset by earnings of $4.8 million. Northrim continues to maintain capital levels in excess of the requirements to be categorized as “well-capitalized” with Tier 1 Capital to Risk Adjusted Assets of 12.74% at June 30, 2022, compared to 13.76% at March 31, 2022, and 14.54% at June 30, 2021.

    Asset Quality

    Nonperforming assets ("NPAs") net of government guarantees were $11.7 million at June 30, 2022, down from $13.1 million at March 31, 2022 and from $17.8 million a year ago. Of the NPAs at June 30, 2022, $5.9 million, or 74% are nonaccrual loans related to five commercial relationships. One of these relationships, which totaled $915,000 at June 30, 2022, is a business in the medical industry.

    Net adversely classified loans were $8.8 million at June 30, 2022, as compared to $11.7 million at March 31, 2022, and $14.1 million a year ago. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. Net loan charge-offs were $46,000 in the second quarter of 2022, compared to net loan charge-offs of $262,000 in the first quarter of 2022, and net loan charge-offs of $64,000 in the second quarter of 2021.

    Performing restructured loans that were not included in nonaccrual loans at June 30, 2022, net of government guarantees were $588,000, down from $596,000 three months earlier and down from $777,000 a year ago. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans, unless it is the result of the COVID-19 global pandemic. The Company presents restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.

    Excluding SBA PPP loans, Northrim had $121.3 million, or 9% of total portfolio loans, in the Healthcare sector; $96.6 million, or 7% of portfolio loans, in the Tourism sector; $63.1 million, or 5% in Retail loans; $50.0 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector; $59.9 million, or 4% in the Accommodations sector; $58.5 million, or 4% in the Fishing sector; and $51.1 million, or 4% in the Restaurants and Breweries sector as of June 30, 2022.

    Northrim estimates that $59.2 million, or approximately 4% of portfolio loans excluding SBA PPP loans, had direct exposure to the oil and gas industry in Alaska, as of June 30, 2022, and $3.2 million of these loans are adversely classified. As of June 30, 2022, Northrim has an additional $68.1 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and none of these unfunded commitments are considered to be adversely classified loans. Northrim defines direct exposure to the oil and gas sector as loans to borrowers that provide oilfield services and other companies that have been identified as significantly reliant upon activity in Alaska related to the oil and gas industry, such as lodging, equipment rental, transportation and other logistics services specific to this industry.

    About Northrim BanCorp

    Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 17 branches in Anchorage, the Matanuska Valley, Soldotna, Juneau, Fairbanks, Ketchikan, and Sitka, and loan production offices in Kodiak and Nome, serving 90% of Alaska’s population; and an asset based lending division in Washington; and a wholly-owned mortgage brokerage company, Residential Mortgage Holding Company, LLC. The Bank differentiates itself with its detailed knowledge of Alaska’s economy and its “Customer First Service” philosophy. Pacific Wealth Advisors, LLC is an affiliated company of Northrim BanCorp.

    www.northrim.com

    Forward-Looking Statement

    This release may contain “forward-looking statements” as that term is defined for purposes of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are, in effect, management’s attempt to predict future events, and thus are subject to various risks and uncertainties. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy, management’s plans and objectives for future operations, and statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic and the related responses of the government are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend” and words or phrases of similar meaning, as they relate to Northrim and its management are intended to help identify forward-looking statements. Although we believe that management’s expectations as reflected in forward-looking statements are reasonable, we cannot assure readers that those expectations will prove to be correct. Forward looking statements, whether concerning the COVID-19 pandemic and the government responses related thereto or otherwise, are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: the uncertainties relating to the impact of COVID-19 on the Company's credit quality, business, operations and employees; the impact of the results of government initiatives on the regulatory landscape, natural resource extraction industries, capital markets, and the response to and management of the COVID-19 pandemic, including the effectiveness of previously-enacted fiscal stimulus from the federal government and a potential infrastructure bill; the timing of PPP loan forgiveness; the impact of interest rates, inflation, supply-chain constraints, trade policies and tensions, including tariffs, and potential geopolitical instability, including the war in Ukraine; our ability to maintain strong asset quality and to maintain or expand our market share or net interest margins; and our ability to execute our business plan. Further, actual results may be affected by our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy as those factors relate to our cost of funds and return on assets. In addition, there are risks inherent in the banking industry relating to collectability of loans and changes in interest rates. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and from time to time are disclosed in our other filings with the Securities and Exchange Commission. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations. These forward-looking statements are made only as of the date of this release, and Northrim does not undertake any obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.

    References:

    www.sba.gov/ak

    https://www.bea.gov/

    http://almis.labor.state.ak.us/

    http://www.tax.alaska.gov/programs/oil/prevailing/ans.aspx

    http://www.tax.state.ak.us/

    www.mba.org

    https://www.alaskarealestate.com/MLSMember/RealEstateStatistics.aspx

    https://www.sba.gov/document/report-paycheck-protection-program-weekly-reports-2021

    https://www.capitaliq.spglobal.com/web/client?auth=inherit&overridecdc=1&#markets/indexFinancials


    Income Statement      
    (Dollars in thousands, except per share data)Three Months Ended Year-to-date
    (Unaudited)June 30,March 31,June 30, June 30,June 30,
      2022  2022  2021   2022  2021 
    Interest Income:      
    Interest and fees on loans$19,807 $18,268 $18,963  $38,075 $38,387 
    Interest on portfolio investments 2,419  1,548  1,229   3,967  2,363 
    Interest on deposits in banks 766  242  61   1,008  99 
    Total interest income 22,992  20,058  20,253   43,050  40,849 
    Interest Expense:      
    Interest expense on deposits 599  575  879   1,174  1,828 
    Interest expense on borrowings 181  179  182   360  336 
    Total interest expense 780  754  1,061   1,534  2,164 
    Net interest income 22,212  19,304  19,192   41,516  38,685 
           
    Provision (benefit) for credit losses 463  (150) (427)  313  (1,915)
    Net interest income after provision (benefit) for credit losses 21,749  19,454  19,619   41,203  40,600 
           
    Other Operating Income:      
    Mortgage banking income 5,900  6,982  11,360   12,882  24,982 
    Bankcard fees 927  804  879   1,731  1,619 
    Purchased receivable income 566  402  575   968  1,107 
    Service charges on deposit accounts 402  374  308   776  598 
    Keyman insurance proceeds —  2,002  —   2,002  — 
    Gain on sale of securities —  —  31   —  31 
    Unrealized gain (loss) on marketable equity securities (810) (422) 178   (1,232) 94 
    Other income 822  681  801   1,503  1,597 
    Total other operating income 7,807  10,823  14,132   18,630  30,028 
           
    Other Operating Expense:      
    Salaries and other personnel expense 15,401  14,106  14,917   29,507  29,645 
    Data processing expense 2,311  1,992  2,206   4,303  4,241 
    Occupancy expense 1,748  1,726  1,869   3,474  3,529 
    Marketing expense 814  425  672   1,239  1,076 
    Professional and outside services 708  722  642   1,430  1,266 
    Insurance expense 516  566  329   1,082  643 
    OREO expense, net rental income and gains on sale 19  (12) 47   7  11 
    Intangible asset amortization expense 6  6  9   12  18 
    Other operating expense 1,715  1,570  1,645   3,285  3,234 
    Total other operating expense 23,238  21,101  22,336   44,339  43,663 
           
    Income before provision for income taxes 6,318  9,176  11,415   15,494  26,965 
    Provision for income taxes 1,523  1,950  3,070   3,473  6,439 
    Net income$4,795 $7,226 $8,345  $12,021 $20,526 
           
    Basic EPS$0.83 $1.22 $1.34  $2.05 $3.30 
    Diluted EPS$0.83 $1.20 $1.33  $2.03 $3.27 
    Weighted average shares outstanding, basic 5,750,873  5,938,037  6,206,913   5,844,455  6,213,392 
    Weighted average shares outstanding, diluted 5,805,870  5,997,351  6,277,265   5,902,287  6,280,369 


    Balance Sheet   
    (Dollars in thousands)   
    (Unaudited)June 30,March 31,June 30,
      2022  2022  2021 
        
    Assets:   
    Cash and due from banks$24,035 $19,326 $25,486 
    Interest bearing deposits in other banks 312,888  513,482  321,399 
    Investment securities available for sale, at fair value 612,027  488,347  337,231 
    Investment securities held to maturity 29,750  24,750  20,000 
    Marketable equity securities, at fair value 9,122  7,997  9,588 
    Investment in Federal Home Loan Bank stock 3,824  3,828  3,114 
    Loans held for sale 63,080  49,980  105,819 
        
    Portfolio loans 1,405,709  1,377,387  1,487,968 
    Allowance for credit losses, loans (11,537) (11,310) (14,539)
    Net portfolio loans 1,394,172  1,366,077  1,473,429 
    Purchased receivables, net 15,277  8,552  12,500 
    Mortgage servicing rights, at fair value 16,301  15,422  12,835 
    Other real estate owned, net 5,638  5,638  7,073 
    Premises and equipment, net 37,106  37,416  38,202 
    Lease right of use asset 9,875  10,432  11,374 
    Goodwill and intangible assets 15,997  16,003  16,028 
    Other assets 62,062  58,910  59,489 
    Total assets$2,611,154 $2,626,160 $2,453,567 
        
    Liabilities:   
    Demand deposits$830,156 $812,545 $798,231 
    Interest-bearing demand 666,283  674,393  582,669 
    Savings deposits 349,208  351,681  322,645 
    Money market deposits 319,843  329,261  258,116 
    Time deposits 169,900  175,186  184,777 
    Total deposits 2,335,390  2,343,066  2,146,438 
    Other borrowings 14,302  14,404  14,680 
    Junior subordinated debentures 10,310  10,310  10,310 
    Lease liability 9,846  10,402  11,335 
    Other liabilities 26,017  22,146  33,586 
    Total liabilities 2,395,865  2,400,328  2,216,349 
        
    Shareholders' Equity:   
    Total shareholders' equity 215,289  225,832  237,218 
    Total liabilities and shareholders' equity$2,611,154 $2,626,160 $2,453,567 
        


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Composition of Portfolio Loans            
     June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2020    		 June 30,
    2021
     Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total
    Commercial loans$547,495 38% $529,331 37% $521,785 37% $498,585 34% $476,900 31%
    SBA Paycheck Protection loans 32,948 2%  66,680 5%  122,729 9%  211,449 14%  311,971 21%
    CRE owner occupied loans 241,575 17%  230,350 17%  220,367 15%  206,756 14%  190,880 13%
    CRE nonowner occupied loans 416,285 29%  397,212 29%  402,879 28%  405,666 28%  373,325 25%
    Construction loans 131,850 9%  126,679 9%  121,104 8%  106,020 7%  115,917 8%
    Consumer loans 43,852 3%  36,516 3%  36,565 3%  37,044 3%  36,420 2%
    Subtotal 1,414,005    1,386,768    1,425,429    1,465,520    1,505,413  
    Unearned loan fees, net (8,296)   (9,381)   (11,543)   (14,863)   (17,445) 
    Total portfolio loans$1,405,709   $1,377,387   $1,413,886   $1,450,657   $1,487,968  
                   


    Composition of Deposits            
     June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2020 June 30, 2021
     Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total
    Demand deposits$830,15635% $812,54535% $887,82437% $868,81038% $798,23137%
    Interest-bearing demand 666,28329%  674,39329%  692,68329%  644,03528%  582,66927%
    Savings deposits 349,20815%  351,68115%  348,16414%  330,46514%  322,64515%
    Money market deposits 319,84314%  329,26114%  314,99613%  278,52912%  258,11612%
    Time deposits 169,9007%  175,1867%  177,9647%  174,7028%  184,7779%
    Total deposits$2,335,390  $2,343,066  $2,421,631  $2,296,541  $2,146,438 


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Asset QualityJune 30, March 31, June 30, 
      2022   2022   2021  
    Nonaccrual loans$8,001  $9,609  $12,976  
    Loans 90 days past due and accruing —   —   128  
    Total nonperforming loans 8,001   9,609   13,104  
    Nonperforming loans guaranteed by government (683)   (907)   (1,096)  
    Net nonperforming loans 7,318   8,702   12,008  
    Other real estate owned 5,638   5,638   7,073  
    Repossessed assets —   —   —  
    Other real estate owned guaranteed by government (1,279)   (1,279)   (1,279)  
    Net nonperforming assets$11,677  $13,061  $17,802  
    Nonperforming loans, net of government guarantees / portfolio loans 0.52 % 0.63 % 0.81 %
    Nonperforming loans, net of government guarantees / portfolio loans,      
    net of government guarantees 0.57 % 0.70 % 1.06 %
    Nonperforming assets, net of government guarantees / total assets 0.45 % 0.50 % 0.73 %
    Nonperforming assets, net of government guarantees / total assets      
    net of government guarantees 0.47 % 0.53 % 0.85 %
           
    Performing restructured loans$3,008  $2,978  $2,341  
    Performing restructured loans guaranteed by government (2,420)   (2,382)   (1,564)  
    Net performing restructured loans$588  $596  $777  
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees$7,906  $9,298  $12,785  
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees / portfolio loans 0.56 % 0.68 % 0.86 %
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees / portfolio loans, net of government guarantees 0.61 % 0.75 % 1.13 %
    Nonperforming assets plus performing restructured loans, net of government      
    guarantees / total assets 0.47 % 0.52 % 0.76 %
    Nonperforming assets plus performing restructured loans, net of government      
    guarantees / total assets, net of government guarantees 0.49 % 0.55 % 0.89 %
           
    Adversely classified loans, net of government guarantees$8,836  $11,652  $14,055  
    Special mention loans, net of government guarantees$5,665  $4,211  $15,855  
    Loans 30-89 days past due and accruing, net of government guarantees /      
    portfolio loans 0.02 % 0.03 % 0.02 %
    Loans 30-89 days past due and accruing, net of government guarantees /      
    portfolio loans, net of government guarantees 0.02 % 0.03 % 0.03 %
           
    Allowance for credit losses / portfolio loans 0.82 % 0.82 % 0.98 %
    Allowance for credit losses / portfolio loans, net of government guarantees 0.90 % 0.92 % 1.29 %
    Allowance for credit losses / nonperforming loans, net of government      
    guarantees 158 % 130 % 121 %
           
    Gross loan charge-offs for the quarter$166  $295  $110  
    Gross loan recoveries for the quarter($120)  ($33)  ($46)  
    Net loan (recoveries) charge-offs for the quarter$46  $262  $64  
    Net loan charge-offs (recoveries) year-to-date$308  $262  $20  
    Net loan charge-offs (recoveries) for the quarter / average loans, for the quarter 0.00 % 0.02 % — %
    Net loan charge-offs (recoveries) year-to-date / average loans,      
    year-to-date annualized 0.04 % 0.07 % 0.00 %


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Nonperforming Assets Rollforward       
        WritedownsTransfers toTransfers to  
     Balance at
    March 31,
    2022    		Additions
    this
    quarter    		Payments
    this
    quarter    		/Charge-offs
    this quarter    		OREO/
    REPO    		Performing
    Status
    this quarter    		Sales this
    quarter    		Balance at
    June 30,
    2022
    Commercial loans$5,230 $—($469)($166)$—$—$—$4,595 
    Commercial real estate 3,993  — (990) —  — — — 3,003 
    Construction loans 109  — —  —  — — — 109 
    Consumer loans 277  22 (5) —  — — — 294 
    Non-performing loans guaranteed by government (907) — 224  —  — — — (683)
    Total non-performing loans 8,702  22 (1,240) (166) — — — 7,318 
    Other real estate owned 5,638  — —  —  — — — 5,638 
    Other real estate owned guaranteed        
    by government (1,279) — —  —  — — — (1,279)
    Total non-performing assets,        
    net of government guarantees$13,061 $22($1,240)($166)$—$—$—$11,677 


    The following table details loan charge-offs, by industry:

    Loan Charge-offs by Industry    
     Three Months Ended
     June 30,
    2022    		March 31,
    2022    		December 31,
    2021    		September 30,
    2021    		June 30,
    2021
    Charge-offs:     
    Land subdivision$166$—$—$—$—
    Assisted living facility — 19 — — —
    Aircraft parts and auxiliary equipment manufacturing — — 185 — 110
    Amusement and recreational activities — — 9 — —
    Scenic and sightseeing transportation — — 416 — —
    Site preparation contractors — 276 224 — —
    Specialized freight trucking, long-distance — — 345 — —
    Total charge-offs$166$295$1,179$—$110


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Average Balances, Yields, and Rates        
     Three Months Ended
     June 30, 2022 March 31, 2022 June 30, 2021
      Average  Average  Average
     AverageTax Equivalent AverageTax Equivalent AverageTax Equivalent
     BalanceYield/Rate BalanceYield/Rate BalanceYield/Rate
    Assets        
    Interest bearing deposits in other banks$382,015 0.79% $538,537 0.18% $208,067 0.12%
    Portfolio investments 589,553 1.59%  491,029 1.23%  354,260 1.32%
    Loans held for sale 59,677 4.16%  52,630 3.08%  111,228 2.74%
    Portfolio loans 1,398,149 5.52%  1,379,850 5.27%  1,541,701 4.75%
    Total interest-earning assets 2,429,394 3.83%  2,462,046 3.33%  2,215,256 3.69%
    Nonearning assets 172,655    156,482    173,164  
    Total assets$2,602,049   $2,618,528   $2,388,420  
             
    Liabilities and Shareholders' Equity        
    Interest-bearing deposits$1,513,957 0.16% $1,526,100 0.15% $1,316,029 0.27%
    Borrowings 24,675 2.92%  24,777 2.91%  25,032 2.90%
    Total interest-bearing liabilities 1,538,632 0.20%  1,550,877 0.20%  1,341,061 0.32%
             
    Noninterest-bearing demand deposits 808,186    794,702    766,954  
    Other liabilities 31,064    35,835    43,017  
    Shareholders' equity 224,167    237,114    237,388  
    Total liabilities and shareholders' equity$2,602,049   $2,618,528   $2,388,420  
    Net spread 3.63%  3.13%  3.37%
    NIM 3.67%  3.18%  3.48%
    NIMTE* 3.70%  3.20%  3.50%
    Cost of funds 0.13%  0.13%  0.20%
    Average portfolio loans to average        
    interest-earning assets 57.55%   56.04%   69.59% 
    Average portfolio loans to average total deposits 60.21%   59.46%   74.01% 
    Average non-interest deposits to average        
    total deposits 34.80%   34.24%   36.82% 
    Average interest-earning assets to average        
    interest-bearing liabilities 157.89%   158.75%   165.19% 

    The components of the change in NIMTE* are detailed in the table below:

     2Q22 vs. 1Q222Q22 vs. 2Q21
    Nonaccrual interest adjustments(0.01) %(0.04) %
    Impact of SBA Paycheck Protection Program loans(0.11) %0.11  %
    Interest rates and loan fees, all other loans0.45  %0.36  %
    Volume and mix of other interest-earning assets and liabilities0.17  %(0.23) %
    Change in NIMTE*0.50  %0.20  %


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Average Balances, Yields, and Rates     
     Year-to-date
     June 30, 2022 June 30, 2021
      Average  Average
     AverageTax Equivalent AverageTax Equivalent
     BalanceYield/Rate BalanceYield/Rate
    Assets     
    Interest bearing deposits in other banks$459,843 0.44% $164,712 0.12%
    Portfolio investments 540,563 1.43%  326,671 1.38%
    Loans held for sale 56,173 3.65%  112,897 2.74%
    Portfolio loans 1,389,050 5.40%  1,517,438 4.91%
    Total interest-earning assets 2,445,629 3.58%  2,121,718 3.90%
    Nonearning assets 164,611    171,870  
    Total assets$2,610,240   $2,293,588  
          
    Liabilities and Shareholders' Equity     
    Interest-bearing deposits$1,519,995 0.16% $1,261,855 0.29%
    Borrowings 24,726 2.91%  25,066 2.68%
    Total interest-bearing liabilities 1,544,721 0.20%  1,286,921 0.34%
          
    Noninterest-bearing demand deposits 801,481    727,589  
    Other liabilities 33,436    44,959  
    Shareholders' equity 230,602    234,119  
    Total liabilities and shareholders' equity$2,610,240   $2,293,588  
    Net spread 3.38%  3.56%
    NIM 3.42%  3.68%
    NIMTE* 3.45%  3.70%
    Cost of funds 0.13%  0.22%
    Average portfolio loans to average interest-earning assets 56.80%   71.52% 
    Average portfolio loans to average total deposits 59.83%   76.27% 
    Average non-interest deposits to average total deposits 34.52%   36.57% 
    Average interest-earning assets to average interest-bearing liabilities 158.32%   164.87% 


    The components of the change in NIMTE* are detailed in the table below:

     YTD22 vs.YTD21
    Nonaccrual interest adjustments0.05  %
    Impact of SBA Paycheck Protection Program loans0.09  %
    Interest rates and loan fees 0.07  %
    Volume and mix of interest-earning assets and liabilities(0.46) %
    Change in NIMTE*(0.25) %


    Additional Financial Information
    (Dollars in thousands, except per share data)
    (Unaudited)

    Capital Data (At quarter end)      
     June 30,
    2022    		 March 31,
    2022    		 June 30,
    2021    		 
    Book value per share$37.90  $38.39  $38.22  
    Tangible book value per share*$35.08  $35.67  $35.64  
    Total shareholders' equity/total assets 8.24 % 8.60 % 9.67 %
    Tangible Common Equity/Tangible Assets* 7.68 % 8.04 % 9.07 %
    Tier 1 Capital / Risk Adjusted Assets 12.74 % 13.76 % 14.54 %
    Total Capital / Risk Adjusted Assets 13.45 % 14.49 % 15.45 %
    Tier 1 Capital / Average Assets 8.84 % 9.00 % 9.77 %
    Shares outstanding 5,681,089   5,881,708   6,206,913  
    Total unrealized gain on AFS debt securities, net of income taxes($19,911) ($14,390) $109  
    Total unrealized (loss) on derivatives and hedging activities, net of income taxes$571  ($20) ($760) 


    Profitability Ratios          
     June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021    		 June 30,
    2021    		 
    For the quarter:          
    NIM3.67%3.18%3.52%3.45%3.48%
    NIMTE* 3.70%3.20%3.54%3.47%3.50%
    Efficiency ratio77.39%70.02%73.48%68.07%67.00%
    Return on average assets0.74%1.12%1.23%1.40%1.40%
    Return on average equity8.58%12.36%13.14%14.47%14.10%


     June 30,
    2022    		 June 30,
    2021    		 
    Year-to-date:    
    NIM3.42%3.68%
    NIMTE* 3.45%3.70%
    Efficiency ratio73.70%63.52%
    Return on average assets0.93%1.80%
    Return on average equity10.51%17.68%


    *Non-GAAP Financial Measures
    (Dollars and shares in thousands, except per share data)
    (Unaudited)

    Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although we believe these non-GAAP financial measures are frequently used by stakeholders in the evaluation of the Company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP.

    Net interest margin on a tax equivalent basis

    Net interest margin on a tax equivalent basis ("NIMTE") is a non-GAAP performance measurement in which interest income on non-taxable investments and loans is presented on a tax equivalent basis using a combined federal and state statutory rate of 28.43% in both 2022 and 2021. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of NIMTE to net interest margin.

     Three Months Ended
     June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021    		 June 30,
    2021
    Net interest income$22,212  $19,304  $21,710  $20,432  $19,192 
    Divided by average interest-bearing assets 2,429,394   2,462,046   2,446,716   2,348,423   2,215,256 
    Net interest margin ("NIM")2 3.67%  3.18%  3.52%  3.45%  3.48%
              
    Net interest income$22,212  $19,304  $21,710  $20,432  $19,192 
    Plus: reduction in tax expense related to         
    tax-exempt interest income 193   137   131   126   121 
     $22,405  $19,441  $21,841  $20,558  $19,313 
    Divided by average interest-bearing assets 2,429,394   2,462,046   2,446,716   2,348,423   2,215,256 
    NIMTE2 3.70%  3.20%  3.54%  3.47%  3.50%


     Year-to-date
     June 30,
    2022    		 June 30,
    2021
    Net interest income$41,516  $38,685 
    Divided by average interest-bearing assets 2,445,629   2,121,718 
    Net interest margin ("NIM")3 3.42%  3.68%
        
    Net interest income$41,516  $38,685 
    Plus: reduction in tax expense related to   
    tax-exempt interest income 330   232 
     $41,846  $38,917 
    Divided by average interest-bearing assets 2,445,629   2,121,718 
    NIMTE3 3.45%  3.70%

    2Calculated using actual days in the quarter divided by 365 for the quarters ended in 2022 and 2021, respectively.

    3Calculated using actual days in the year divided by 365 for year-to-date period in 2022 and 2021, respectively.


    *Non-GAAP Financial Measures
    (Dollars and shares in thousands, except per share data)
    (Unaudited)

    Core net interest income

    Core net interest income is a non-GAAP measure defined as net interest income less interest income on SBA PPP loans. The most comparable GAAP measure is net interest income and the following table sets forth the reconciliation of core net interest income to net interest income.

     Three Months Ended
     June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021    		 June 30,
    2021
    Net interest income$22,212 $19,304 $21,710 $20,432 $19,192
              
    Net interest income$22,212 $19,304 $21,710 $20,432 $19,192
    Less interest income on SBA PPP loans 1,451  2,310  4,003  3,667  3,557
    Core net interest income$20,761 $16,994 $17,707 $16,765 $15,635



     Year-to-date
     June 30,
    2022    		 June 30,
    2021
    Net interest income$41,516 $38,685
        
    Net interest income$41,516 $38,685
    Less interest income on SBA PPP loans 3,761  7,758
    Core net interest income$37,755 $30,927


    Tangible Book Value

    Tangible book value is a non-GAAP measure defined as shareholders' equity, less intangible assets, divided by shares outstanding. The most comparable GAAP measure is book value per share and the following table sets forth the reconciliation of tangible book value per share and book value per share.

     June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021    		 June 30,
    2021
              
    Total shareholders' equity$215,289 $225,832 $237,817 $242,474 $237,218
    Divided by shares outstanding 5,681  5,882  6,015  6,177  6,207
    Book value per share$37.90 $38.39 $39.54 $39.25 $38.22


     June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021    		 June 30,
    2021
              
    Total shareholders' equity$215,289 $225,832 $237,817 $242,474 $237,218
    Less: goodwill and intangible assets 15,997  16,003  16,009  16,019  16,028
     $199,292 $209,829 $221,808 $226,455 $221,190
    Divided by shares outstanding 5,681  5,882  6,015  6,177  6,207
    Tangible book value per share$35.08 $35.67 $36.88 $36.66 $35.64


    *Non-GAAP Financial Measures
    (Dollars and shares in thousands, except per share data)
    (Unaudited)

    Tangible Common Equity to Tangible Assets

    Tangible common equity to tangible assets is a non-GAAP ratio that represents total equity less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets and the following table sets forth the reconciliation of tangible common equity to tangible assets and shareholders' equity to total assets.

    Northrim BanCorp, Inc.

    		June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021    		 June 30,
    2021
              
    Total shareholders' equity$215,289  $225,832  $237,817  $242,474  $237,218 
    Total assets 2,611,154   2,626,160   2,724,719   2,609,946   2,453,567 
    Total shareholders' equity to total assets 8.24%  8.60%  8.73%  9.29%  9.67%


    Northrim BanCorp, Inc.

    		June 30,
    2022    		 March 31,
    2022    		 December 31,
    2021    		 September 30,
    2021    		 June 30,
    2021
    Total shareholders' equity$215,289  $225,832  $237,817  $242,474  $237,218 
    Less: goodwill and other intangible assets, net 15,997   16,003   16,009   16,019   16,028 
    Tangible common shareholders' equity$199,292  $209,829  $221,808  $226,455  $221,190 
              
    Total assets$2,611,154  $2,626,160  $2,724,719  $2,609,946  $2,453,567 
    Less: goodwill and other intangible assets, net 15,997   16,003   16,009   16,019   16,028 
    Tangible assets$2,595,157  $2,610,157  $2,708,710  $2,593,927  $2,437,539 
    Tangible common equity ratio 7.68%  8.04%  8.19%  8.73%  9.07%


    Note Transmitted on GlobeNewswire on July 28, 2022, at 12:15 pm Alaska Standard Time.

    Contact:Joe Schierhorn, President, CEO, and COO
     (907) 261-3308
     Jed Ballard, Chief Financial Officer
     (907) 261-3539

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