• Northrim BanCorp Earns $8.6 Million, or $1.48 Per Diluted Share, in Fourth Quarter 2022, and $30.7 Million, or $5.27 Per Diluted Share, for the Year Ended December 31, 2022

    ソース: Nasdaq GlobeNewswire / 26 1 2023 16:15:01   America/New_York

    ANCHORAGE, Alaska, Jan. 26, 2023 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported net income of $8.6 million, or $1.48 per diluted share, in the fourth quarter of 2022, compared to $10.1 million, or $1.76 per diluted share, in the third quarter of 2022, and $8.1 million, or $1.31 per diluted share, in the fourth quarter a year ago. The decrease in the fourth quarter of 2022 compared to the third quarter of 2022 is primarily due to an increase in the provision for credit losses primarily as a result of loan growth and lower net income in the Home Mortgage Lending segment resulting from a decline in mortgage originations. The increase in the fourth quarter of 2022 profitability as compared to the same quarter of the prior year was primarily due to an increase in net interest income, which was only partially offset by lower net income in the mortgage banking segment.

    Net income for the full year of 2022 decreased 18% to $30.7 million, or $5.27 per diluted share, compared to $37.5 million, or $6.00 per diluted share, for the full year of 2021. Full year 2022 results included a provision for credit losses of $1.8 million due to loan growth, compared to a $4.1 million benefit to the provision for credit losses in 2021. Record net interest income and continued core loan (excluding Paycheck Protection Program (“PPP”) loans) and deposit growth supported record 2022 earnings in the Community Banking segment, while a decline in mortgage originations resulted in a $897,000 loss in the Home Mortgage Lending segment in 2022 compared to $10.3 million in net income in 2021.

    Dividends per share in the fourth quarter of 2022 remained consistent with the third quarter of 2022 at $0.50 per share and increased 32% from $0.38 per share in the fourth quarter of 2021.

    “2022 demonstrated the strength of our bank as our high-quality deposit franchise funded solid loan and net interest income growth,” said Joe Schierhorn, President and Chief Executive Officer Northrim BanCorp, Inc. “We continue to invest in our business with new branches, new mortgage offices, and team members driving market share growth. We believe we are well-positioned to continue our growth this year and to demonstrate the value of Northrim Bank.”

    Fourth Quarter 2022 Highlights:

    • Net interest income in the fourth quarter of 2022 increased 4% to $27.3 million compared to $26.3 million in the third quarter of 2022 and increased 26% compared to $21.7 million in the fourth quarter of 2021.
    • Net interest margin on a tax equivalent basis (“NIMTE”)* was 4.36% for the fourth quarter of 2022, a 9-basis point increase from the third quarter of 2022 and an 82-basis point increase compared to the fourth quarter of 2021.
    • The weighted average interest rate for new loans booked in the fourth quarter of 2022 was 6.25% compared to 5.76% in the third quarter of 2022 and 4.16% in the fourth quarter a year ago.  
    • Return on average assets (“ROAA”) was 1.26% and return on average equity ("ROAE") was 15.7% for the fourth quarter of 2022.
    • Portfolio loans were $1.50 billion at December 31, 2022, up 7% from the preceding quarter and up 6% from a year ago. Core portfolio loans (excluding PPP loans) were $1.49 billion at December 31, 2022, up 7% from the preceding quarter and up 15% from a year ago. 18% of earnings assets are subject to rate increases immediately when prime or other rate indices increase.
    • Total deposits were $2.39 billion at December 31, 2022, down 2% from the preceding quarter, and down 1% from $2.42 billion a year ago. Noninterest bearing demand deposits represented 34% of total deposits at December 31, 2022.
    • Average interest-bearing deposits were $1.58 billion for the fourth quarter of 2022, up 4% from the preceding quarter, and up 8% from the fourth quarter a year ago.
    • The average cost of interest-bearing deposits was 0.56% in the fourth quarter of 2022, up from 0.28% in the third quarter of 2022 and 0.16% in the fourth quarter a year ago.
    • Total shareholders' equity was $218.6 million as of December 31, 2022, up 4% from the preceding quarter, and down 8% from $237.8 million a year ago. Shareholders' equity was impacted by the fair value of the available for sales securities portfolio which decreased $27.4 million in 2022 and, to a lesser extent the share repurchases totaling $14.2 million.
    • In 2020 and 2021, Northrim funded approximately 5,800 PPP loans totaling approximately $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 December 31, 2022, Northrim's PPP efforts have resulted in approximately 2,300 new customers totaling $135.9 million in new deposit balances and contributed to the growth in core portfolio loans.
    • The Company implemented assistance to help its customers experiencing financial challenges as a result of COVID-19. The total outstanding principal balance of loan modifications due to the impacts of COVID-19 as of December 31, 2022 was $1.0 million, down from $8.4 million as of September 30, 2022 and $49.2 million as of December 31, 2021. The $1.0 million of remaining COVID-19 loan accommodations are scheduled to return to normal principal and interest payments in the first quarter of 2023.
    • Nonperforming assets net of government guarantees decreased to $6.4 million at December 31, 2022, down from $10.8 million at September 30, 2022 and from $15.0 million a year ago primarily due to the sale of OREO property and from payoffs and partial paydowns on nonaccrual loans. Nonperforming assets net of government guarantees were 0.25% of total assets at December 31, 2022 compared to 0.42% at September 30, 2022 and 0.60% at December 31, 2021.

    Financial HighlightsThree Months Ended
    (Dollars in thousands, except per share data)December 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021
    Total assets$2,672,041 $2,717,514 $2,611,154 $2,626,160 $2,724,719 
    Total portfolio loans$1,501,785 $1,407,266 $1,405,709 $1,377,387 $1,413,886 
    Total core portfolio loans (excluding PPP loans)$1,494,675 $1,395,932 $1,373,837 $1,313,114 $1,295,657 
    Total deposits$2,387,211 $2,439,335 $2,335,390 $2,343,066 $2,421,631 
    Total shareholders' equity$218,629 $210,699 $215,289 $225,832 $237,817 
    Net income$8,595 $10,125 $4,795 $7,226 $8,114 
    Diluted earnings per share$1.48 $1.76 $0.83 $1.20 $1.31 
    Return on average assets 1.26% 1.52% 0.74% 1.12% 1.23%
    Return on average shareholders' equity 15.71% 18.18% 8.58% 12.36% 13.14%
    NIM 4.31% 4.22% 3.67% 3.18% 3.52%
    NIMTE* 4.36% 4.27% 3.70% 3.20% 3.54%
    Efficiency ratio 65.23% 63.69% 77.39% 70.02% 73.48%
    Total shareholders' equity/total assets 8.18% 7.75% 8.24% 8.60% 8.73%
    Tangible common equity/tangible assets* 7.63% 7.21% 7.68% 8.04% 8.19%
    Book value per share$38.35 $37.09 $37.90 $38.39 $39.54 
    Tangible book value per share*$35.55 $34.27 $35.08 $35.67 $36.88 
    Dividends per share$0.50 $0.50 $0.41 $0.41 $0.38 
    Common shares outstanding 5,700,728  5,681,089  5,681,089  5,881,708  6,014,813 


     

    * References to NIMTE, tangible book value per share, and tangible common equity to tangible assets (all of which exclude intangible assets) 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.

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

    During 2022, the Alaska economy continued recovering from the effects of the COVID pandemic. Mark Edwards, Chief Credit Officer and Bank Economist summarizes, “jobs steadily increased throughout the year and unemployment remains low. Continued high inflation is impacting business activity, and incomes are rising, but not at the same pace as inflation. Average home sales prices were at record highs, but the number of units sold has declined as interest rates rose rapidly. Alaska is enjoying a healthy rebound in tourism activity and the construction, warehousing and transport sectors are performing well. Energy exploration success is projected to translate into new oil production which could help support Alaska state government budgets in the future.”

    The Alaska Department of Labor (“DOL”) has released preliminary data through November of 2022. The DOL reports total payroll jobs in Alaska increased 1.7% or 5,200 jobs compared to November of 2021. All private sectors showed year over year growth in jobs with the exception of Social Assistance, which declined 600 jobs over the last 12 months. The Government sector lost 300 jobs between November of 2021 and 2022.  

    According to the DOL, the Oil and Gas sector showed the largest year over year increase of 7.5%. The Oil and Gas sector has benefited from higher energy prices and new exploration activity, resulting in an increase of 500 jobs since November of 2021. The Trade, Transportation, and Utilities sectors have fully recovered from pre-COVID levels and now have 600 more jobs than November of 2019. The Leisure and Hospitality sector had strong growth of 7.3% over the same 12 month period, adding 2,100 jobs. Other Services grew 3.8%; Professional and Business Services added 2.7%; Construction grew 2.6%; and Manufacturing increased 1.3%.

    The DOL also reported Alaska’s seasonally adjusted unemployment rate for November of 2022 was 4.5% compared to 3.7% for the U.S. Both Alaska and the U.S. rates were unchanged from October.

    Alaska’s Gross State Product (“GSP”) in the third quarter of 2022, was estimated to be $65.1 billion in “nominal” terms, according to the Federal Bureau of Economic Analysis (“BEA”). Alaska’s inflation adjusted “real” GSP grew at an annualized rate of 8.7% in the third quarter of 2022 in the BEA’s most recent report published December 23, 2022. Alaska’s third quarter performance was the highest growth rate of all 50 states. Real GSP increased in 47 of the 50 U.S. states in the third quarter of 2022 at an average rate of 3.2%. Alaska’s real GSP improvement was primarily due to gains in the Oil and Gas sector, followed by growth in Transportation and Warehousing.

    The BEA also calculated Alaska’s seasonally adjusted personal income at $51 billion in the third quarter of 2022, an improvement of 5.8% over the prior quarter on an annualized basis. The national average was an increase of 5.3% for the same period.

    The price of Alaska North Slope (“ANS”) crude oil averaged $91.41 per barrel in Alaska’s fiscal year, which ended June 30, 2022. The Alaska Department of Revenue (“DOR”) forecasts ANS oil to average $88.45 per barrel in State fiscal year 2023 and $81 in 2024. The DOR calculated ANS crude oil production was 486 thousand barrels per day in Alaska’s fiscal year ending June 30, 2022. The DOR has forecast production to increase to 501 thousand barrels per day in Alaska’s fiscal year 2023 and 512 thousand barrels per day in 2024. This is primarily a result of new production coming on line in the NPR-A region west of Prudhoe Bay.   

    According to the Mortgage Bankers Association, Alaska’s home mortgage delinquency rate in the third quarter of 2022 was 2.56% compared to 3.58% in the second quarter of 2022.   The Alaska Housing Finance Corporation received COVID relief money that was widely distributed in this period that likely helped lower the delinquency levels. Alaska’s delinquency rate of 2.56% compares to the national average rate of 3.59% for the third quarter of 2022. The Mortgage Bankers Association survey reported that the mortgage foreclosure inventory in Alaska in the third quarter of 2022 was 0.60% and the national average was 0.56%.

    According to the Alaska Multiple Listing Services, the average sales price of a single family home in Anchorage rose 7.7% in 2022 to $456,610. This was the fifth consecutive year of price increases, following growth of 6.9% in 2021 and 5.8% in 2020. Average sales prices in the Matanuska Susitna Borough rose 10% in 2022 to $382,528, continuing a trend of average price increases for more than a decade. Average home prices in the Matanuska Susitna Borough increased 15.6% in 2021 and 9.9% in 2020. These two markets represent where the vast majority of Northrim Bank’s residential lending activity occurs.

    The number of housing units sold in Anchorage did slow in 2022 by 21.3% compared to 2021, as reported by the Alaska Multiple Listing Services. The number of units sold in Anchorage had been increasing for the prior three years, growing by 11.2% in 2021. The Matanuska Susitna Borough also experienced a lower volume of home sales, down 11.9% in 2022 compared to the prior year. The number of units sold in the Matanuska Susitna Borough had been increasing for the prior four years and grew by 11.7% in 2021.  

    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 fourth quarter of 2022, Northrim generated a ROAA of 1.26% and a ROAE of 15.71%, compared to 1.52% and 18.18%, respectively, in the third quarter of 2022 and 1.23% and 13.14%, respectively, in the fourth quarter a year ago.

    Net Interest Income/Net Interest Margin

    Net interest income increased 4% to $27.3 million in the fourth quarter of 2022 compared to $26.3 million in the third quarter of 2022 and increased 26% compared to $21.7 million in the fourth quarter of 2021. 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 U.S. Small Business Administration (“SBA”), though to a lesser extent than prior periods. During the fourth quarter of 2022, Northrim received $3.9 million in loan forgiveness through the SBA, compared to $21.1 million in loan forgiveness during the prior quarter, resulting in total net PPP fee income of $169,000 and $686,000, respectively. As of December 31, 2022, there was $221,000 of net deferred PPP fee income remaining.  

    NIMTE* was 4.36% in the fourth quarter of 2022 compared to 4.27% in the preceding quarter and 3.54% in the fourth quarter a year ago. NIMTE* increased 9 basis points in the fourth quarter of 2022 compared to the prior quarter and 82 basis points compared to the fourth 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 fourth quarter of 2022 was 6.25% compared to 5.76% in the third quarter of 2022 and 4.16% in the fourth quarter a year ago.   Additionally, the Company purchased long-term investments in the fourth quarter of 2022 with a weighted average yield of 5.64% compared to 4.01% in the third quarter of 2022 and 1.22% in the fourth quarter a year ago. The impact of SBA PPP loan fees and interest on net interest income, increased our NIMTE* by 3 basis points during the fourth quarter of this year 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 expected increases in interest rates during 2023, as nearly 72% 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 September 30, 20221.

    Provision for Credit Losses

    Northrim recorded a provision for credit losses of $1.9 million in the fourth quarter of 2022, which includes a $117,000 provision for credit losses on unfunded commitments and a provision for credit losses on loans of $1.8 million. This compares to a benefit to the provision for credit losses of $353,000 in the third quarter of 2022, and a benefit to the provision for credit losses of $1.1 million in the fourth quarter a year ago. The $1.9 million provision for credit losses in the fourth quarter of 2022 is largely attributable to increases in loan and unfunded commitment balances. The third quarter of 2022 also included the receipt of $1.4 million in net loan recoveries.

    Nonperforming loans, net of government guarantees, decreased during the quarter to $6.4 million at December 31, 2022, compared to $6.5 million at September 30, 2022, and decreased compared to $10.7 million at December 31, 2021.  

    The allowance for credit losses was 215% of nonperforming loans, net of government guarantees, at the end of the fourth quarter of 2022, compared to 185% three months earlier and 110% a year ago.  

    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 $6.8 million, or 20% of total fourth quarter 2022 revenues, as compared to $8.7 million, or 25% of revenues in the third quarter of 2022, and $9.6 million, or 31% of revenues in the fourth quarter of 2021. The decrease in other operating income in the fourth quarter of 2022 as compared to the preceding quarter and the fourth quarter of 2022 is primarily the result of lower volume of mortgage activity which was only partially offset by an

     

    1As of September 30, 2022, the S&P U.S. Small Cap Bank Index tracked 245 banks with total common market capitalization between $250 million to $1B for the following ratios: NIMTE* of 3.41%. ROAA 1.43%, and ROAE 13.40%.

    increase in commercial servicing revenue primarily resulting from an increase in the fair value of commercial servicing rights.

    Other Operating Expenses

    Operating expenses were $22.2 million in the fourth quarter of 2022, compared to $22.3 million in the third quarter of 2022, and $23.0 million in the fourth quarter of 2021. The decrease in other operating expenses in the fourth quarter of 2022 compared to the third quarter of 2022 and fourth quarter of 2021 is primarily due to decreased salaries and other personnel expense that includes lower mortgage commission expense due to lower mortgage volume.

    Income Tax Provision

    In the fourth quarter of 2022, Northrim recorded $1.4 million in state and federal income tax expense for an effective tax rate of 13.6%, compared to $2.9 million, or 22.4% in the third quarter of 2022 and $1.3 million, or 13.4% in the fourth quarter a year ago. The decrease in the tax rate in the fourth quarter of 2022 as compared to the third quarter of 2022 is primarily the result of increased tax benefits related to the Company's investment in low income housing tax credits.

    Community Banking

    Northrim opened its eighteenth branch in Nome, Alaska in the fourth quarter of 2022. Northrim received permission from the State of Alaska to open a temporary location to meet the needs of the Nome Community in the aftermath of storms that devastated the region late last year. “We are pleased to be able to open a branch in Nome and are proud to be able to serve Northwest Alaska,” said Mike Huston, Northrim Bank President and Chief Lending Officer. “We have planned to open a financial center in Nome and are happy to open this branch early to help people access banking services, especially after the damage from Typhoon Merbok. We are looking forward to growing in the area and servicing the community.”

    Net interest income in the Community Banking segment totaled $26.7 million in the fourth quarter of 2022, compared to $25.7 million in the third quarter of 2022 and $21.2 million in the fourth quarter of 2021. Net interest income benefited from $193,000 of PPP income in the fourth quarter of 2022, and $735,000 of PPP income in the third quarter of 2022. As of December 31, 2022, there was $221,000 of unearned loan fees net of costs related to round one and round two PPP loans. Net interest income in the third quarter of 2022 also benefited from the recognition of $1.2 million in nonaccrual interest as a result of payments received on previously charged-off loans.

    In the recent deposit market share data from the FDIC for the period from June 30, 2021, to June 30, 2022, Northrim’s deposit market share in Alaska increased to $2.4 billion, or 13.95% of total Alaska deposits as of June 30, 2022 from $2.2 billion, or 13.00% of total Alaska deposits as of June 30, 2021. Northrim’s deposits grew 9% during this period while total deposits in Alaska were up 1% during the same period.

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

     Three Months Ended
    (Dollars in thousands, except per share data)December 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021
    Net interest income$26,741$25,668 $21,603$18,909 $21,150 
    Provision (benefit) for credit losses 1,886 (353) 463 (150) (1,078)
    Other operating income 3,819 2,938  1,907 3,841  2,308 
    Other operating expense 16,678 15,977  16,415 14,831  15,583 
    Income before provision for income taxes 11,996 12,982  6,632 8,069  8,953 
    Provision for income taxes 1,884 2,911  1,605 1,641  1,211 
    Net income Community Banking segment$10,112$10,071 $5,027$6,428 $7,742 
    Weighted average shares outstanding, diluted 5,769,415 5,740,494  5,805,870 5,977,351  6,177,766 
    Diluted earnings per share$1.74$1.75 $0.87$1.07 $1.25 


     Year Ended
    (Dollars in thousands, except per share data)December 31, 2022December 31, 2021
    Net interest income$92,921$78,080 
    Provision (benefit) for credit losses 1,846 (4,099)
    Other operating income 12,505 10,119 
    Other operating expense 63,901 58,647 
    Income before provision for income taxes 39,679 33,651 
    Provision for income taxes 8,041 6,468 
    Net income Community Banking segment$31,638$27,183 
    Weighted average shares outstanding, diluted 5,829,412 6,249,313 
    Diluted earnings per share$5.42$4.35 

    Home Mortgage Lending

    During the fourth quarter of 2022, mortgage loan volume sold decreased to $82.1 million, of which 89% was for home purchases, compared to $168.8 million and 93% of loans funded for home purchases in the third quarter of 2022, and decreased as compared to $247.2 million, of which 70% was for home purchases in the fourth quarter of 2021. The rising interest rate environment has caused the housing market to slow down and also resulted in fewer refinances compared to the prior year and decreased the yields on mortgage loans sold in the fourth quarter of 2022 as compared to the prior quarter and the fourth quarter a year ago.

    In addition to the $82.1 million in mortgage loans sold in the fourth quarter of 2022, Northrim originated $34.6 million in mortgage loans that have been retained by the Company instead of being sold into the secondary market. These represent mortgage products with adjustable rate mortgages whose interest rates are fixed for 7 years, jumbo mortgages and second home mortgages.

    The net change in fair value of mortgage servicing rights decreased mortgage banking income by $318,000 during the fourth quarter of 2022, primarily due to amortization of the asset as cash flows are collected, compared to an increase of $145,000 for the third quarter of 2022 and a decrease of $549,000 for the fourth quarter of 2021.

    As of December 31, 2022, Northrim serviced 3,459 loans in its $898.8 million home-mortgage-servicing portfolio, a 5% increase compared to the $859.3 million serviced for the third quarter of 2022, and a 16% increase from the $772.8 million serviced a year ago. Delinquencies in the loan servicing portfolio totaled 1.9% at December 31, 2022, compared to 2.6% at December 31, 2021. Mortgage servicing revenue contributed $2.1 million to revenues in the fourth quarter of 2022, compared to $2.1 million in the third quarter of 2022, and $2.0 million in the fourth quarter of 2021.

    The Company’s wholly owned subsidiary, Residential Mortgage, LLC (“RML”), expanded into Arizona and Colorado markets at the beginning of the fourth quarter of 2022 and near the end of the fourth quarter of 2022 further expanded into the Pacific Northwest market. “With the continued contraction of the mortgage industry, RML has the opportunity to bring on quality loan originators in a cost effective way by continuing to use our current employees to support the production of RML’s new loan originators,” said Mike Baldwin, RML President and Chief Operating Officer.

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

     Three Months Ended
    (Dollars in thousands, except per share data)December 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021
    Mortgage loan commitments$29,065 $74,731 $116,167 $130,208 $81,617 
    Mortgage loans funded for sale$82,149 $168,786 $191,023 $143,575 $247,249 
    Mortgage loan refinances to total fundings 11% 7% 10% 24% 30%
    Mortgage loans serviced for others$898,840 $859,288 $818,266 $789,382 $772,764 
          
    Net realized gains on mortgage loans sold$1,567 $3,736 $4,649 $3,921 $7,214 
    Change in fair value of mortgage loan commitments, net (446) (395) (603) 409  (1,687)
    Total production revenue 1,121  3,341  4,046  4,330  5,527 
    Mortgage servicing revenue 2,120  2,121  1,932  1,771  1,975 
    Change in fair value of mortgage servicing rights:     
    Due to changes in model inputs of assumptions1 93  555  (225) 1,192  (89)
    Other2 (411) (410) (25) (481) (460)
    Total mortgage servicing revenue, net 1,802  2,266  1,682  2,482  1,426 
    Other mortgage banking revenue 33  127  172  170  316 
    Total mortgage banking income$2,956 $5,734 $5,900 $6,982 $7,269 
          
    Net interest income$546 $643 $609 $395 $560 
    Mortgage banking income 2,956  5,734  5,900  6,982  7,269 
    Other operating expense 5,548  6,309  6,823  6,270  7,416 
    Income before provision for income taxes (2,046) 68  (314) 1,107  413 
    Provision for income taxes (529) 14  (82) 309  41 
    Net (loss) income Home Mortgage Lending segment($1,517)$54 ($232)$798 $372 
          
    Weighted average shares outstanding, diluted 5,769,415  5,740,494  5,805,870  5,977,351  6,177,766 
    Diluted (loss) earnings per share($0.26)$0.01 ($0.04)$0.13 $0.06 

    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 Ended
    (Dollars in thousands, except per share data)December 31, 2022December 31, 2021
    Mortgage loans funded for sale$585,533 $1,118,186 
    Mortgage loan refinances to total fundings 12% 37%
       
    Net realized gains on mortgage loans sold$13,873 $36,436 
    Change in fair value of mortgage loan commitments, net (1,035) (1,483)
    Total production revenue 12,838  34,953 
    Mortgage servicing revenue 7,944  9,028 
    Change in fair value of mortgage servicing rights:  
    Due to changes in model inputs of assumptions1 1,615  (1,181)
    Other2 (1,327) (2,402)
    Total mortgage servicing revenue, net 8,232  5,445 
    Other mortgage banking revenue 502  1,746 
    Total mortgage banking income$21,572 $42,144 
       
    Net interest income$2,193 $2,747 
    Mortgage banking income 21,572  42,144 
    Other operating expense 24,950  30,549 
    Income before provision for income taxes (1,185) 14,342 
    Provision for income taxes (288) 4,008 
    Net (loss) income Home Mortgage Lending segment($897)$10,334 
       
    Weighted average shares outstanding, diluted 5,829,412  6,249,313 
    Diluted (loss) earnings per share($0.15)$1.65 

    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 $2.67 billion at December 31, 2022, down 2% from the preceding quarter and from a year ago. Northrim’s loan-to-deposit ratio was 63% at December 31, 2022, up from 58% at September 30, 2022, and December 31, 2021.

    Liquidity levels remain high with interest bearing deposits in other banks at $231.6 million, representing 9% of interest-earning assets as of December 31, 2022, compared to 24% at December 31, 2021.

    Average interest-earning assets were $2.51 billion in the fourth quarter of 2022, up 2% from $2.47 billion in the third quarter of 2022 and up 3% from $2.45 billion in the fourth quarter a year ago. The average yield on interest-earning assets was 4.74% in the fourth quarter of 2022, up from 4.47% in the preceding quarter and 3.67% in the fourth quarter a year ago.

    Average investment securities increased to $712.8 million in the fourth quarter of 2022, compared to $678.6 million in the third quarter of 2022 and $432.3 million in the fourth quarter a year ago. The average net tax equivalent yield on the securities portfolio was 2.30% for the fourth quarter of 2022, up from 1.98% in the preceding quarter and up from 1.17% in the year ago quarter. The average estimated duration of the investment portfolio at December 31, 2022, was approximately three and a quarter years down from approximately four and a quarter years a year ago. Unrealized losses, net of tax, on available for sale securities decreased by $2.3 million in the fourth quarter of 2022 as compared to the prior quarter, and increased by $27.4 million compared to the year ago quarter, resulting in a total unrealized loss of $30.1 million at December 31, 2022 due primarily to rising interest rates.

    “Core loans, excluding PPP loans, increased $98.7 million during the fourth quarter of 2022 as compared to the third quarter of 2022, as new customer relationships continued to expand and grow,” said Huston. Consumer loans increased $32.6 million in the fourth quarter of 2022 primarily due to the origination of mortgages in the Home Mortgage Lending segment noted above that the Company retained instead of selling into the secondary market. At December 31, 2022, commercial loans represented 41% of total loans, PPP loans represented less than 1% 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, construction loans made up 8% of total loans, and consumer loans represented 5% of total loans. Portfolio loans were $1.50 billion at December 31, 2022, up 7% from the preceding quarter and up 6% from a year ago. Core loans, excluding the impact from PPP, were $1.49 billion at December 31, 2022 up 7% from the preceding quarter and up 15% from a year ago. Average portfolio loans in the fourth quarter of 2022 were $1.47 billion, which was up 4% from the preceding quarter and from a year ago. Yields on average portfolio loans in the fourth quarter of 2022 decreased to 5.98% from 6.05% in the third quarter of 2022 and increased from 5.75% in the fourth quarter of 2021. The decrease in the yield on portfolio loans in the fourth quarter of 2022 compared to the third quarter of 2022 is primarily due to a decrease in the collection of nonaccrual interest income to $190,000 in the fourth quarter from $1.2 million in the third quarter. The increase in yield in the fourth quarter of 2022 compared to the same quarter a year ago 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.

    As of December 31, 2022, Northrim customers had received forgiveness through the SBA on 5,742 PPP loans totaling $607.0 million, of which 47 PPP loans totaling $3.9 million were forgiven in the fourth quarter of 2022, 364 PPP loans totaling $21.1 million were forgiven in the third quarter of 2022, 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. All the PPP loans forgiven in the fourth quarter of 2022 were related to PPP round two. As of December 31, 2022, nearly 100% of the number of PPP round one loans funded and 99% of the number of PPP round two loans funded have been forgiven.

    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 $2.39 billion at December 31, 2022, down 2% from $2.44 billion at September 30, 2022, and down 1% from $2.42 billion a year ago. At December 31, 2022, 68% of total deposits were held in business accounts and 32% of deposit balances were held in consumer accounts. Demand deposits decreased by 7% from the prior quarter and decreased 10% year-over-year to $797.4 million at December 31, 2022. Average interest-bearing deposits were up 4% to $1.58 billion with an average cost of 0.56% in the fourth quarter of 2022, compared to $1.52 billion and an average cost of 0.28% in the third quarter of 2022, and up 8% compared to $1.46 billion and an average cost of 0.16% in the fourth quarter of 2021.

    Shareholders’ equity was $218.6 million, or $38.35 book value per share, at December 31, 2022, compared to $210.7 million, or $37.09 book value per share, at September 30, 2022 and $237.8 million, or $39.54 book value per share, a year ago. Tangible book value per share* was $35.55 at December 31, 2022, compared to $34.27 at September 30, 2022, and $36.88 per share a year ago. Tangible common equity to tangible assets* was 7.63% as of December 31, 2022, compared to 7.21% at September 30, 2022, and 8.19% at December 31, 2021. Excluding the impact of the fair value of the available for sales securities portfolio, tangible common equity to tangible common assets* was 8.67% as of December 31, 2022. 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 12.81% at December 31, 2022, compared to 12.98% at September 30, 2022, and 14.08% at December 31, 2021.

    Asset Quality

    Nonperforming assets (“NPAs”) net of government guarantees were $6.4 million at December 31, 2022, down from $10.8 million at September 30, 2022 and from $15.0 million a year ago primarily due to the sale of OREO property which reduced OREO to zero from $5.6 million at September 30, 2022 and December 31, 2021. The Company holds a government guarantee related to the OREO property that was sold in December 2022, however, the value of this guarantee has not been included in the Company's financial statements in 2022 due to uncertainty as to the total amount that will be received from the guarantee. For the fourth quarter of 2022, a loss from the sale of OREO of $414,000 is included in OREO expense, net of rental income and gains on sale in the income statement. We expect to receive proceeds related to this government guarantee in 2023.

    Nonaccrual loans net of guarantees decreased to $6.4 million at December 31, 2022 from $6.5 million at September 30, 2022 and from $10.7 million as of December 31, 2021 primarily due to loan payoffs or paydowns. Of the NPAs at December 31, 2022, $4.8 million, or 74% are nonaccrual loans related to four commercial relationships.

    Net adversely classified loans were $7.6 million at December 31, 2022, as compared to $7.6 million at September 30, 2022, and $13.7 million a year ago. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. Net loan recoveries were $87,000 in the fourth quarter of 2022, compared to net loan recoveries of $1.3 million in the third quarter of 2022, and net loan charge-offs of $1.1 million in the fourth quarter of 2021.

    Performing restructured loans that were not included in nonaccrual loans at December 31, 2022, net of government guarantees were $291,000, down from $574,000 three months earlier and down from $773,000 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 $126.5 million, or 8% of total portfolio loans, in the Healthcare sector; $96.3 million, or 6% of portfolio loans, in the Tourism sector; $70.8 million, or 5% in the Fishing sector; $65.1 million, or 4% in the Accommodations sector; $54.8 million, or 4% in Retail loans; $50.8 million, or 3% of portfolio loans, in the Aviation (non-tourism) sector; and $46.9 million, or 3% in the Restaurants and Breweries sector as of December 31, 2022.

    Northrim estimates that $83.4 million, or approximately 6% of portfolio loans excluding SBA PPP loans, had direct exposure to the oil and gas industry in Alaska, as of December 31, 2022, and $2.7 million of these loans are adversely classified. As of December 31, 2022, Northrim has an additional $51.8 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 18 branches in Anchorage, the Matanuska Valley, Soldotna, Juneau, Fairbanks, Ketchikan, Sitka, and Nome, and a loan production office in Kodiak, 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 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, 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 effect of COVID-19 and other infectious illness outbreaks that may arise in the future and the resulting governmental and societal responses; the impact of the results of government initiatives on the regulatory landscape, natural resource extraction industries, and capital markets; current and future economic conditions, including the effects of declines in the real estate market, high unemployment rates, inflationary pressures, and slowdowns in economic growth; financial stress on borrowers (consumers and business) as a result of higher interest rates or an uncertain economic environment; the impact of inflationary pressure, supply-chain constraints, trade policies and tensions, including tariffs, and potential geopolitical instability, including the war in Ukraine; our ability to identify and address cyber-security risks, including security breaches, “denial of service attacks”, “hacking”, and identity theft; 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)December 31,September 30,December 31, December 31,December 31,
      2022 2022  2021   2022  2021 
    Interest Income:      
    Interest and fees on loans$22,580$22,130 $20,954  $82,785 $79,241 
    Interest on investments 4,380 3,530  1,322   11,878  4,918 
    Interest on deposits in banks 2,758 1,899  199   5,665  447 
    Total interest income 29,718 27,559  22,475   100,328  84,606 
    Interest Expense:      
    Interest expense on deposits 2,247 1,064  582   4,485  3,077 
    Interest expense on borrowings 184 184  183   728  702 
    Total interest expense 2,431 1,248  765   5,213  3,779 
    Net interest income 27,287 26,311  21,710   95,115  80,827 
           
    Provision (benefit) for credit losses 1,886 (353) (1,078)  1,846  (4,099)
    Net interest income after provision (benefit) for      
    loan losses 25,401 26,664  22,788   93,269  84,926 
           
    Other Operating Income:      
    Mortgage banking income 2,956 5,734  7,269   21,572  42,144 
    Commercial servicing revenue 1,186 197  (71)  1,628  306 
    Bankcard fees 974 992  892   3,697  3,389 
    Purchased receivable income 473 561  622   2,002  2,259 
    Service charges on deposit accounts 403 432  354   1,611  1,297 
    Unrealized gain (loss) on marketable equity securities 81 33  (128)  (1,119) (101)
    Keyman insurance proceeds — —  —   2,002  — 
    Gain on sale of securities — —  —   —  67 
    Other income 702 723  568   2,684  3,208 
    Total other operating income 6,775 8,672  9,577   34,077  52,263 
           
    Other Operating Expense:      
    Salaries and other personnel expense 14,155 14,510  15,011   58,172  60,412 
    Data processing expense 2,309 2,315  2,128   8,926  8,567 
    Occupancy expense 1,731 1,710  1,842   6,915  7,078 
    Marketing expense 984 524  1,132   2,747  2,741 
    Professional and outside services 669 894  832   2,993  2,801 
    Insurance expense 427 545  628   2,054  1,593 
    OREO expense, net rental income and gains on sale 384 109  (65)  500  (432)
    Intangible asset amortization expense 6 7  10   25  37 
    Other operating expense 1,561 1,672  1,481   6,520  6,399 
    Total other operating expense 22,226 22,286  22,999   88,852  89,196 
           
    Income before provision for income taxes 9,950 13,050  9,366   38,494  47,993 
    Provision for income taxes 1,355 2,925  1,252   7,753  10,476 
    Net income$8,595$10,125 $8,114  $30,741 $37,517 
           
    Basic EPS$1.51$1.77 $1.33  $5.33 $6.07 
    Diluted EPS$1.48$1.76 $1.31  $5.27 $6.00 
    Weighted average shares outstanding, basic 5,690,354 5,681,089  6,100,160   5,765,088  6,180,801 
    Weighted average shares outstanding, diluted 5,769,415 5,740,494  6,177,766   5,829,412  6,249,313 


    Balance Sheet   
    (Dollars in thousands)   
    (Unaudited)December 31,September 30,December 31,
      2022  2022  2021 
        
    Assets:   
    Cash and due from banks$27,747 $20,334 $20,805 
    Interest bearing deposits in other banks 231,603  386,587  625,022 
    Investment securities available for sale, at fair value 677,029  651,921  426,684 
    Investment securities held to maturity 36,750  36,750  20,000 
    Marketable equity securities, at fair value 10,740  11,149  8,420 
    Investment in Federal Home Loan Bank stock 3,816  3,820  3,107 
    Loans held for sale 27,538  49,356  73,650 
    Portfolio loans 1,501,785  1,407,266  1,413,886 
    Allowance for credit losses, loans (13,838) (11,982) (11,739)
    Net portfolio loans 1,487,947  1,395,284  1,402,147 
    Purchased receivables, net 17,717  4,785  6,987 
    Mortgage servicing rights, at fair value 18,635  17,709  13,724 
    Other real estate owned, net —  5,638  5,638 
    Premises and equipment, net 37,821  36,931  37,164 
    Operating lease right-of-use assets 9,868  10,434  11,001 
    Goodwill and intangible assets 15,984  15,990  16,009 
    Other assets 68,846  70,826  54,361 
    Total assets$2,672,041 $2,717,514 $2,724,719 
        
    Liabilities:   
    Demand deposits$797,434 $861,378 $887,824 
    Interest-bearing demand 767,686  757,422  692,683 
    Savings deposits 320,917  344,975  348,164 
    Money market deposits 308,317  309,690  314,996 
    Time deposits 192,857  165,870  177,964 
    Total deposits 2,387,211  2,439,335  2,421,631 
    Other borrowings 14,095  14,199  14,508 
    Junior subordinated debentures 10,310  10,310  10,310 
    Operating lease liabilities 9,865  10,430  10,965 
    Other liabilities 31,931  32,541  29,488 
    Total liabilities 2,453,412  2,506,815  2,486,902 
        
    Shareholders' Equity:   
    Total shareholders' equity 218,629  210,699  237,817 
    Total liabilities and shareholders' equity$2,672,041 $2,717,514 $2,724,719 
        


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Composition of Portfolio Loans            
     December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021
     Balance% of total Balance% of total Balance% of total Balance% of total Balance% of total
    Commercial loans$600,292 41% $584,533 41% $547,495 39% $529,331 37% $521,785 37%
    SBA Paycheck Protection Program loans 7,331 —%  11,724 1%  32,948 2%  66,680 5%  122,729 9%
    CRE owner occupied loans 255,470 17%  231,404 16%  241,575 17%  230,350 17%  220,367 15%
    CRE nonowner occupied loans 438,680 29%  418,845 30%  416,285 30%  397,212 29%  402,879 28%
    Construction loans 125,739 8%  118,452 8%  131,850 9%  126,679 9%  121,104 8%
    Consumer loans 82,883 5%  50,281 4%  43,852 3%  36,516 3%  36,565 3%
    Subtotal 1,510,395    1,415,239    1,414,005    1,386,768    1,425,429  
    Unearned loan fees, net (8,610)   (7,973)   (8,296)   (9,381)   (11,543) 
    Total portfolio loans$1,501,785   $1,407,266   $1,405,709   $1,377,387   $1,413,886  
                   


    Composition of Deposits            
     December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021
     Balance% of total Balance% of total Balance% of total Balance% of total Balance% of total
    Demand deposits$797,43434% $861,37835% $830,15635% $812,54535% $887,82437%
    Interest-bearing demand 767,68632%  757,42231%  666,28329%  674,39329%  692,68329%
    Savings deposits 320,91713%  344,97514%  349,20815%  351,68115%  348,16414%
    Money market deposits 308,31713%  309,69013%  319,84314%  329,26114%  314,99613%
    Time deposits 192,8578%  165,8707%  169,9007%  175,1867%  177,9647%
    Total deposits$2,387,211  $2,439,335  $2,335,390  $2,343,066  $2,421,631 


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Asset QualityDecember 31, September 30, December 31, 
      2022   2022   2021  
    Nonaccrual loans$7,076  $7,092  $11,650  
    Loans 90 days past due and accruing —   —   —  
    Total nonperforming loans 7,076   7,092   11,650  
    Nonperforming loans guaranteed by government (646)  (619)  (978) 
    Net nonperforming loans 6,430   6,473   10,672  
    Other real estate owned —   5,638   5,638  
    Repossessed assets —   —   —  
    Other real estate owned guaranteed by government —   (1,279)  (1,279) 
    Net nonperforming assets$6,430  $10,832  $15,031  
    Nonperforming loans, net of government guarantees / portfolio loans 0.43 % 0.46 % 0.75 %
    Nonperforming loans, net of government guarantees / portfolio loans,      
    net of government guarantees 0.46 % 0.50 % 0.88 %
    Nonperforming assets, net of government guarantees / total assets 0.24 % 0.40 % 0.55 %
    Nonperforming assets, net of government guarantees / total assets      
    net of government guarantees 0.25 % 0.42 % 0.60 %
           
    Performing restructured loans$291  $3,033  $2,355  
    Performing restructured loans guaranteed by government —   (2,459)  (2,518) 
    Net performing restructured loans$291  $574  $773  
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees$6,721  $7,047  $11,445  
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees / portfolio loans 0.45 % 0.50 % 0.81 %
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees / portfolio loans, net of government guarantees 0.48 % 0.55 % 0.94 %
    Nonperforming assets plus performing restructured loans, net of government      
    guarantees / total assets 0.25 % 0.42 % 0.58 %
    Nonperforming assets plus performing restructured loans, net of government      
    guarantees / total assets, net of government guarantees 0.26 % 0.44 % 0.63 %
           
    Adversely classified loans, net of government guarantees$7,581  $7,550  $13,739  
    Special mention loans, net of government guarantees$4,760  $5,879  $22,110  
    Loans 30-89 days past due and accruing, net of government guarantees /      
    portfolio loans 0.01 % 0.29 % — %
    Loans 30-89 days past due and accruing, net of government guarantees /      
    portfolio loans, net of government guarantees 0.01 % 0.31 % — %
           
    Allowance for credit losses / portfolio loans 0.92 % 0.85 % 0.83 %
    Allowance for credit losses / portfolio loans, net of government guarantees 0.99 % 0.93 % 0.97 %
    Allowance for credit losses / nonperforming loans, net of government      
    guarantees 215 % 185 % 110 %
           
    Gross loan charge-offs for the quarter$—  $48  $1,179  
    Gross loan recoveries for the quarter($87) ($1,396) ($53) 
    Net loan (recoveries) charge-offs for the quarter($87) ($1,348) $1,126  
    Net loan (recoveries) charge-offs year-to-date($1,127) ($1,040) $1,107  
    Net loan (recoveries) charge-offs for the quarter / average loans, for the quarter (0.01)% (0.10)% 0.08 %
    Net loan (recoveries) charge-offs year-to-date / average loans,      
    year-to-date annualized (0.08)% (0.10)% 0.07 %


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Nonperforming Assets Rollforward       
        WritedownsTransfers toTransfers to  
     Balance at
    September
    30, 2022    		Additions
    this
    quarter    		Payments
    this
    quarter    		/Charge-
    offs
    this quarter    		OREO/
    REPO    		Performing
    Status
    this quarter    		Sales this
    quarter    		Balance at
    December 31,
    2022
    Commercial loans$4,306 $453 ($410) $— $— $— $— $4,349 
    Commercial real estate 2,473  —  (60) — — — —  2,413 
    Construction loans 109  —  —  — — — —  109 
    Consumer loans 204  7  (6) — — — —  205 
    Non-performing loans guaranteed by government (619) (49) 22  — — — —  (646)
    Total non-performing loans 6,473  411  (454) — — — —  6,430 
    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$10,832 $411 ($454) $— $— $—($4,359)$6,430 

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

    Loan Charge-offs by Industry    
     Three Months Ended
     December 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021
    Charge-offs:     
    Architectural services $—$20 $— $— $—
    Land subdivision — — 166 — —
    Assisted living facility — — — 19 —
    Restaurants — 25 — — —
    Consumer — 3 — — —
    Aircraft parts and auxiliary equipment manufacturing — — — — 185
    Amusement and recreational activities — — — — 9
    Scenic and sightseeing transportation — — — — 416
    Site preparation contractors — — — 276 224
    Specialized freight trucking, long-distance — — — — 345
    Total charge-offs $—$48$166$295$1,179


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Average Balances, Yields, and Rates        
     Three Months Ended
     December 31, 2022 September 30, 2022 December 31, 2021
      Average  Average  Average
     AverageTax Equivalent AverageTax Equivalent AverageTax Equivalent
     BalanceYield/Rate BalanceYield/Rate BalanceYield/Rate
    Assets        
    Interest bearing deposits in other banks$294,267 3.67% $324,280 2.29% $521,930 0.15%
    Portfolio investments 712,842 2.30%  678,609 1.98%  432,330 1.17%
    Loans held for sale 40,186 5.52%  53,769 4.88%  81,859 2.82%
    Portfolio loans 1,466,567 5.98%  1,414,982 6.05%  1,410,597 5.75%
    Total interest-earning assets 2,513,862 4.74%  2,471,640 4.47%  2,446,716 3.67%
    Nonearning assets 182,884    174,182    173,149  
    Total assets$2,696,746   $2,645,822   $2,619,865  
             
    Liabilities and Shareholders' Equity        
    Interest-bearing deposits$1,579,845 0.56% $1,517,033 0.28% $1,457,202 0.16%
    Borrowings 24,470 2.92%  24,573 2.92%  24,879 2.90%
    Total interest-bearing liabilities 1,604,315 0.60%  1,541,606 0.32%  1,482,081 0.20%
             
    Noninterest-bearing demand deposits 831,841    846,764    852,405  
    Other liabilities 43,500    36,446    40,459  
    Shareholders' equity 217,090    221,006    244,920  
    Total liabilities and shareholders' equity$2,696,746   $2,645,822   $2,619,865  
    Net spread 4.14%  4.15%  3.47%
    NIM 4.31%  4.22%  3.52%
    NIMTE* 4.36%  4.27%  3.54%
    Cost of funds 0.40%  0.21%  0.13%
    Average portfolio loans to average        
    interest-earning assets 58.34%   57.25%   57.65% 
    Average portfolio loans to average total deposits 60.81%   59.86%   61.08% 
    Average non-interest deposits to average        
    total deposits 34.49%   35.82%   36.91% 
    Average interest-earning assets to average        
    interest-bearing liabilities 156.69%   160.33%   165.09% 

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

     4Q22 vs. 3Q224Q22 vs. 4Q21
    Nonaccrual interest adjustments(0.16)%(0.10)%
    Impact of SBA Paycheck Protection Program loans(0.07)%(0.43)%
    Interest rates and loan fees0.28 %1.23 %
    Volume and mix of interest-earning assets and liabilities0.04 %0.12 %
    Change in NIMTE*0.09 %0.82 %


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Average Balances, Yields, and Rates     
     Year-to-date
     December 31, 2022 December 31, 2021
      Average  Average
     AverageTax Equivalent AverageTax Equivalent
     BalanceYield/Rate BalanceYield/Rate
    Assets     
    Interest bearing deposits in other banks$383,939 1.46% $311,536 0.14%
    Portfolio investments 618,782 1.84%  369,172 1.27%
    Loans held for sale 51,537 4.34%  101,752 2.80%
    Portfolio loans 1,415,125 5.71%  1,478,318 5.18%
    Total interest-earning assets 2,469,383 4.10%  2,260,778 3.76%
    Nonearning assets 171,625    171,821  
    Total assets$2,641,008   $2,432,599  
          
    Liabilities and Shareholders' Equity     
    Interest-bearing deposits$1,534,334 0.29% $1,340,988 0.23%
    Borrowings 24,623 2.92%  24,993 2.79%
    Total interest-bearing liabilities 1,558,957 0.33%  1,365,981 0.28%
          
    Noninterest-bearing demand deposits 820,547    784,092  
    Other liabilities 36,731    43,312  
    Shareholders' equity 224,773    239,214  
    Total liabilities and shareholders' equity$2,641,008   $2,432,599  
    Net spread 3.77%  3.48%
    NIM 3.85%  3.58%
    NIMTE* 3.89%  3.60%
    Cost of funds 0.22%  0.18%
    Average portfolio loans to average interest-earning assets 57.31%   65.39% 
    Average portfolio loans to average total deposits 60.09%   69.57% 
    Average non-interest deposits to average total deposits 34.84%   36.90% 
    Average interest-earning assets to average interest-bearing liabilities 158.40%   165.51% 

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

     YTD22 vs.YTD21
    Nonaccrual interest adjustments0.03 %
    Impact of SBA Paycheck Protection Program loans(0.13)%
    Interest rates and loan fees0.43 %
    Volume and mix of interest-earning assets and liabilities(0.04)%
    Change in NIMTE*0.29 %


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

    Capital Data (At quarter end)      
     December 31, 2022 September 30, 2022 December 31, 2021 
    Book value per share$38.35  $37.09  $39.54  
    Tangible book value per share*$35.55  $34.27  $36.88  
    Total shareholders' equity/Total assets 8.18 % 7.75 % 8.73 %
    Tangible common equity/Tangible assets* 7.63 % 7.21 % 8.19 %
    Tier 1 capital / Risk adjusted assets 12.81 % 12.98 % 14.08 %
    Total capital / Risk adjusted assets 13.64 % 13.75 % 14.79 %
    Tier 1 capital / Average assets 9.01 % 8.97 % 9.03 %
    Shares outstanding 5,700,728   5,681,089   6,014,813  
    Unrealized gain on AFS debt securities, net of income taxes($30,121) ($32,448) ($2,722) 
    Unrealized (loss) on derivatives and hedging activities, net of income taxes$1,040  $1,060  ($684) 


    Profitability Ratios          
     December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 
    For the quarter:          
    NIM4.31%4.22%3.67%3.18%3.52%
    NIMTE* 4.36%4.27%3.70%3.20%3.54%
    Efficiency ratio65.23%63.69%77.39%70.02%73.48%
    Return on average assets1.26%1.52%0.74%1.12%1.23%
    Return on average equity15.71%18.18%8.58%12.36%13.14%


     December 31, 2022 December 31, 2021 
    Year-to-date:    
    NIM3.85%3.58%
    NIMTE* 3.89%3.60%
    Efficiency ratio68.76%66.99%
    Return on average assets1.16%1.54%
    Return on average equity13.68%15.68%


    *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 2021 and 2020. 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
     December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021
    Net interest income$27,287  $26,311  $22,212  $19,304  $21,710 
    Divided by average interest-bearing assets 2,513,862   2,471,640   2,429,394   2,462,046   2,446,716 
    Net interest margin ("NIM")2 4.31%  4.22%  3.67%  3.18%  3.52%
              
    Net interest income$27,287  $26,311  $22,212  $19,304  $21,710 
    Plus: reduction in tax expense related to         
    tax-exempt interest income 325   284   193   137   131 
     $27,612  $26,595  $22,405  $19,441  $21,841 
    Divided by average interest-bearing assets 2,513,862   2,471,640   2,429,394   2,462,046   2,446,716 
    NIMTE2 4.36%  4.27%  3.70%  3.20%  3.54%


     Year-to-date
     December 31, 2022 December 31, 2021
    Net interest income$95,115  $80,827 
    Divided by average interest-bearing assets 2,469,383   2,260,778 
    Net interest margin ("NIM")3 3.85%  3.58%
        
    Net interest income$95,115  $80,827 
    Plus: reduction in tax expense related to   
    tax-exempt interest income 939   489 
     $96,054  $81,316 
    Divided by average interest-bearing assets 2,469,383   2,260,778 
    NIMTE3 3.89%  3.60%

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

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


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

    Tangible Book Value

    Tangible book value is a non-GAAP measure defined as shareholders' equity, less intangible assets, divided by common 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.

     December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021
              
    Total shareholders' equity$218,629 $210,699 $215,289 $225,832 $237,817
    Divided by common shares outstanding 5,701  5,681  5,681  5,882  6,015
    Book value per share$38.35 $37.09 $37.90 $38.39 $39.54


     December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021
              
    Total shareholders' equity$218,629 $210,699 $215,289 $225,832 $237,817
    Less: goodwill and intangible assets 15,984  15,990  15,997  16,003  16,009
     $202,645 $194,709 $199,292 $209,829 $221,808
    Divided by common shares outstanding 5,701  5,681  5,681  5,882  6,015
    Tangible book value per share$35.55 $34.27 $35.08 $35.67 $36.88

    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.

    		December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021
              
    Total shareholders' equity$218,629  $210,699  $215,289  $225,832  $237,817 
    Total assets 2,672,041   2,717,514   2,611,154   2,626,160   2,724,719 
    Total shareholders' equity to total assets 8.18%  7.75%  8.24%  8.60%  8.73%


    Northrim BanCorp, Inc.

    		December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021
    Total shareholders' equity$218,629  $210,699  $215,289  $225,832  $237,817 
    Less: goodwill and other intangible assets, net 15,984   15,990   15,997   16,003   16,009 
    Tangible common shareholders' equity$202,645  $194,709  $199,292  $209,829  $221,808 
              
    Total assets$2,672,041  $2,717,514  $2,611,154  $2,626,160  $2,724,719 
    Less: goodwill and other intangible assets, net 15,984   15,990   15,997   16,003   16,009 
    Tangible assets$2,656,057  $2,701,524  $2,595,157  $2,610,157  $2,708,710 
    Tangible common equity ratio 7.63%  7.21%  7.68%  8.04%  8.19%

    Tangible Common Equity to Tangible Assets, excluding the fair value of the available for sales securities portfolio

    Tangible common equity to tangible assets, excluding the fair value of the available for sales securities portfolio, is a non-GAAP ratio that represents total equity less goodwill and intangible assets and the unrealized gain (loss) on available for sale securities, net of income taxes divided by total assets less goodwill and intangible assets and the unrealized gain (loss) on available for sale securities, net of income taxes. 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.

    		December 31,
    2022
      
    Total shareholders' equity$218,629 
    Total assets 2,672,041 
    Total shareholders' equity to total assets 8.18%


    Northrim BanCorp, Inc.

    		December 31,
    2022
    Total shareholders' equity$218,629 
    Less: goodwill and other intangible assets, net 15,984 
    Less: unrealized gain (loss) on available for sale securities, net income taxes (30,121)
    Tangible common shareholders' equity, excluding the fair value of the available for sale securities portfolio$232,766 
      
    Total assets$2,672,041 
    Less: goodwill and other intangible assets, net 15,984 
    Less: unrealized gain (loss) on available for sale securities, net income taxes (30,121)
    Tangible assets, excluding the fair value of the available for sale securities portfolio$2,686,178 
    Tangible common equity ratio, excluding the fair value of the available for sale securities portfolio 8.67%


    Note Transmitted on GlobeNewswire on January 26, 2023, 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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