• Northrim BanCorp Earnings of $8.3 Million, or $1.33 Per Diluted Share, in Second Quarter 2021, and $20.5 Million, or $3.27 Per Diluted Shares, in First Half of 2021

    Источник: Nasdaq GlobeNewswire / 26 июл 2021 15:15:01   America/Chicago

    ANCHORAGE, Alaska, July 26, 2021 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the "Company") today reported net income of $8.35 million, or $1.33 per diluted share, in the second quarter of 2021, compared to $12.18 million, or $1.94 per diluted share, in the first quarter of 2021, and $9.90 million, or $1.52 per diluted share, in the second quarter a year ago.  

    Fee and interest income from the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") loans and high levels of production in the Home Mortgage Lending segment contributed to profitability for the quarter. Also benefiting second quarter results was a $427,000 benefit to the provision for credit losses. This compares to a $1.5 million benefit to the provision for credit losses in the preceding quarter and a $404,000 provision for credit losses in the second quarter of 2020. The benefit to the provision for credit losses for the current quarter was recorded under ASU 2016-13, which is also commonly referred to as the Current Expected Credit Loss (“CECL”) methodology that Northrim implemented on January 1, 2021, and includes a benefit to the provision for credit losses on loans and unfunded commitments.

    Net income for the first six months of 2021 increased 88% to $20.53 million, or $3.27 per diluted share, compared to $10.93 million, or $1.68 per diluted share, in the first six months of 2020. The benefit to the provision for credit losses totaled $1.9 million in the first half of 2021, compared to a $2.5 million provision for credit losses in the first half of 2020. Increases in net interest income and mortgage banking revenue also contributed to the increase in net income during the first half of 2021 compared to the same period in 2020.

    “Our second quarter operating results were supported by another quarter of solid production in mortgage banking operations and the continued success of our outreach to new and existing customers, as we navigate through the pandemic and its impact on the Alaska economy,” said Joe Schierhorn, President and CEO. “Over the past 15 months we have been active participants in the SBA’s PPP lending programs, helping our new and existing business customers sustain their business operations. Under the initial PPP program, we helped approximately 2,900 businesses receive $375.6 million in PPP loans, and during the second PPP program we helped approximately 2,870 businesses receive $237.0 million in PPP loans, making Northrim the largest originator of PPP loans in Alaska. This growth has helped us remain in the Russell 3000 index, which dropped 82 bank stocks during its recent reconstitution.”

    COVID-19 Issues:

    • Industry Exposure: Northrim has identified various industries that may be adversely impacted by the COVID-19 pandemic and the volatility in oil prices that has occurred over the last year and a half. Though the industries affected may change through the progression of the pandemic, the following sectors for which Northrim has exposure, as a percent of the total loan portfolio excluding SBA PPP loans as of June 30, 2021, are: Healthcare (8%), Tourism (7%), Oil and Gas (5%), Aviation (non-tourism) (5%), Accommodations (3%), Retail (3%), Fishing (3%), and Restaurants (3%).
    • Customer Accommodations: The Company has implemented assistance to help its customers experiencing financial challenges as a result of COVID-19 in addition to participation in PPP lending. These accommodations include interest only and deferral options on loan payments, as well as the waiver of various fees related to loans, deposits and other services. The number of loans with modifications has decreased significantly since June 30, 2020, with approximately 92% of the modifications at June 30, 2021, representing five relationships. The total outstanding principal balance of loan modifications due to the impacts of COVID-19 as of June 30, 2021, March 31, 2021, and June 30, 2020 were as follows:
    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 


    Loan Modifications due to COVID-19 as of March 31, 2021
    (Dollars in thousands)Interest OnlyFull Payment DeferralTotal
    Portfolio loans$65,201 $23,096 $88,297 
    Number of modifications 21  9  30 


    Loan Modifications due to COVID-19 as of June 30, 2020
    (Dollars in thousands)Interest OnlyFull Payment DeferralTotal
    Portfolio loans$64,298 $293,224 $357,522 
    Number of modifications 76  403  479 

    Of 24 loan modifications totaling $83.1 million as of June 30, 2021, approximately 22 loans totaling $64.0 million have entered into a second modification.

    • Provision for Credit Losses: Northrim booked a benefit for credit loss provisions of $427,000 for the quarter ended June 30, 2021. This compares to a benefit for credit loss provisions of $1.5 million during the previous quarter and a $404,000 provision for credit losses in the second quarter a year ago. The provision for the current quarter was recorded using the CECL methodology and reflects expected lifetime credit losses on loans and off-balance sheet unfunded loan commitments. The decrease in the provision for credit loss in the second quarter of 2021 is primarily the result of the improvement in economic assumptions used to estimate lifetime credit losses, which was only partially offset by an increase in the provision for credit losses resulting from increases in loans and unfunded commitments.
    • Credit Quality: Net adversely classified loans improved to $14.1 million at June 30, 2021, compared to $15.7 million in the second quarter a year ago. Net loan charge-offs were $64,000 in the second quarter of 2021, compared to net loan charge-offs of $768,000 in the second quarter of 2020.
    • Branch Operations: No branch operations are limited as a result of COVID-19, while a number of customer and employee safety measures continue to be implemented.
    • Growth and Paycheck Protection Program:
      • Over the last fifteen months, Northrim funded a total of nearly 5,800 PPP loans totaling $612.6 million to both existing and new customers. Of this amount, 745 loans totaling $33 million were originated during the second quarter of 2021 and 2,125 loans totaling $204.0 million were originated during the first quarter of 2021, through the second round of PPP funding.
      • As of June 30, 2021, PPP has resulted in 2,340 new customers totaling $40 million in non-PPP loans, and $83 million in new deposit balances.
      • Management estimates that we funded approximately 24% of the number and 32% of the value of all Alaska PPP second round loans as of June 30, 2021.
      • As of June 30, 2021, Northrim customers had received forgiveness through the SBA on 2,321 PPP loans totaling $303 million, of which 617 PPP loans totaling $133 million were forgiven in the second quarter of 2021, and 1,167 PPP loans totaling $105 million were forgiven in the first quarter of 2021. Of the PPP loans forgiven in the second quarter of 2021, 81 loans totaling $2.2 million related to PPP round two.
      • The Company initially utilized the Federal Reserve Bank's Paycheck Protection Program Liquidity Facility to fund PPP loans, but paid back those funds in full during the second quarter of 2020 and has since funded the SBA PPP loans through core deposits and maturity of long-term investments.
    • Capital Management: At June 30, 2021, the Company’s tangible common equity to tangible assets* ratio was 9.07% and the capital of Northrim Bank (the "Bank") was well in excess of all regulatory requirements. During the second quarter of 2021, there were no shares repurchased under the previously announced share repurchase program.

    Second Quarter 2021 Highlights:

    • For the second quarter of 2021, total revenue was $33.3 million, compared to $34.5 million in the second quarter of 2020, and $35.0 million in the first quarter of 2021.
      • Community Banking provided 64% of total revenues and 63% of earnings in the second quarter of 2021.
      • Home Mortgage Lending provided 36% of total revenue and 37% of earnings in the second quarter of 2021.
    • Net interest income in the second quarter of 2021 was $19.2 million, down from $19.5 million in the preceding quarter and up 10% from $17.5 million in the second quarter a year ago.
    • Net interest margin on a tax equivalent basis (“NIMTE”)* was 3.50% in the second quarter of 2021, a 42-basis point contraction compared to the preceding quarter, and a 52-basis point contraction compared to the second quarter a year ago.
    • Return on average assets ("ROAA") was 1.42% and return on average equity ("ROAE") was 14.26% for the second quarter of 2021 compared to ROAA of 2.04% and ROAE of 19.44% for the second quarter of 2020.
    • Net loans increased 4% to $1.47 billion at June 30, 2021, compared to $1.41 billion at June 30, 2020, and decreased compared to $1.53 billion at March 31, 2021.
    • Total deposits increased 24% to $2.15 billion at June 30, 2021, compared to $1.74 billion at June 30, 2020, and increased 5% compared to $2.05 billion at March 31, 2021.
    • The mortgage servicing right asset increased by $1.2 million for the quarter ended June 30, 2021, compared to an increase of $439,000 for the preceding quarter and a decrease of $933,000 for the second quarter a year ago.  
    Financial HighlightsThree Months Ended
    (Dollars in thousands, except per share data)June 30,
    2021    		March 31,
    2021    		December 31,
    2020    		September 30,
    2020    		June 30,
    2020
    Total assets$2,453,567 $2,351,243 $2,121,798 $2,097,738 $2,016,705 
    Total portfolio loans$1,487,968 $1,548,924 $1,444,050 $1,492,720 $1,433,201 
    Average portfolio loans$1,541,701 $1,492,906 $1,489,029 $1,465,839 $1,342,717 
    Total deposits$2,146,438 $2,051,317 $1,824,981 $1,806,133 $1,737,359 
    Average deposits$2,082,983 $1,894,868 $1,820,251 $1,750,167 $1,620,008 
    Total shareholders' equity$237,218 $231,452 $221,575 $214,616 $206,923 
    Net income$8,345 $12,181 $10,100 $11,855 $9,900 
    Diluted earnings per share$1.33 $1.94 $1.59 $1.84 $1.52 
    Return on average assets 1.42% 2.25% 1.90% 2.31% 2.04%
    Return on average shareholders' equity 14.26% 21.40% 18.22% 22.10% 19.44%
    NIM 3.48% 3.90% 3.94% 3.90% 3.98%
    NIMTE* 3.50% 3.92% 3.96% 3.93% 4.02%
    Efficiency ratio 67.00% 60.24% 65.31% 58.85% 64.76%
    Total shareholders' equity/total assets 9.67% 9.84% 10.44% 10.23% 10.26%
    Tangible common equity/tangible assets* 9.07% 9.22% 9.76% 9.54% 9.54%
    Book value per share$38.22 $37.29 $35.45 $34.18 $32.49 
    Tangible book value per share*$35.64 $34.71 $32.88 $31.62 $29.97 
    Dividends per share$0.37 $0.37 $0.35 $0.35 $0.34 
                    

    * References to NIMTE, tangible book value per share, and tangible common equity and 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 on page 14.)

    The Alaska economy began to recover from the effect of the pandemic in the fourth quarter of 2020. Alaska’s real gross state product ("GSP") continued to increase in the first quarter of 2021. Mark Edwards, EVP Chief Credit Officer and Bank Economist summarized the impacts on Alaska, “Nearly all business sectors have shown improvements in jobs in 2021 compared to the lows experienced in 2020. Personal income continued to grow in 2020 and the first quarter of 2021, with billions in federal aid reaching Alaska. Oil prices are now above pre-COVID levels. The housing market is strong with average sales prices and the number of units sold up significantly last year and in the first half of 2021. Meanwhile, home foreclosure and delinquency rates continue to improve.”

    The Alaska Department of Labor ("DOL") has released data through May of 2021. They report total payroll jobs have grown 16,500 from May of 2020. This is a total of 305,000 jobs or an improvement of 5.7% over the prior 12 months. Tourism related jobs were the hardest hit from travel restrictions and have also been the fastest to recover. According to the DOL, the Leisure and Hospitality sector added 6,000 jobs between May of 2020 and May of 2021. However, this is still 9,900 jobs less than May of 2019. Oil and Gas direct jobs continued to decline in the last 12 months, down 1,400 jobs to 6,100 in May of 2021. This is the only major sector to have fewer jobs than May of 2020. Construction has recovered more than half of the 1,300 job decline from two years ago, adding 700 jobs since May of 2020. Health Care and Manufacturing, which is primarily seafood processing, have now surpassed the total number of jobs seen two years ago in May of 2019 according to the DOL report.

    Alaska’s GSP was $52.1 billion in 2020, compared to $54.7 billion in 2019, according to the Federal Bureau of Economic Analysis ("BEA"). Alaska’s reduction was 4.9% and the worst state was Hawaii at 8%. Both states were more negatively affected by travel restrictions reducing tourism. The U.S. GDP declined 3.5% in 2020. Alaska’s largest GSP declines in 2020 came from Transportation and Warehousing, followed by Accommodation and Food Services, Oil & Gas and Health Care. All of these sectors showed positive recovery in the fourth quarter of 2020 in Alaska, helping place it ninth fastest growing for the quarter of the 50 U.S. states. Alaska’s real GSP growth continued in the first quarter of 2021, increasing 5.4% on an annualized basis, according to a June 25, 2021 BEA report.

    Alaska’s seasonally adjusted personal income for 2020 was $47.4 billion compared to $46 billion in 2019, according to the BEA. Personal income in the U.S. in 2020 increased 6.1% and Alaska rose 3.1%. Per capita income in the U.S. was $59,729 compared to $64,780 in Alaska, according to the BEA. This places Alaska as the ninth highest per capita income of the 50 U.S. states.

    In a typical year, the majority of personal income is derived from wage earnings. Additionally, some people receive government transfer payments, such as social security, Medicare and Medicaid. Personal income is further supported by earnings from dividends, interest and rents. However, in 2020 earnings from wages and investments decreased $500 million in Alaska, according to the BEA's report. The growth in personal income came predominately from a $1.9 billion increase in government transfer payments. About half of the transfer payment increase was from unemployment insurance. Direct stimulus payments accounted for a large part of the remainder. In Alaska, earnings from wages decreased 1.5% or $435 million in 2020 and investment income fell 0.7% or $65 million. Government transfer payments rose 24.2% or $1.9 billion over 2019 levels.

    Alaska North Slope (“ANS”) crude oil had monthly average prices in 2018 and 2019 ranging from $58.86 to $80.03 a barrel. ANS began 2020 at $65.48. Prices fell quickly at the beginning of 2020, responding to fears that COVID-19 would devastate the global economy and reduce the demand for travel. The low month was April of 2020, when ANS averaged $16.54 a barrel. However, by June of last year the oil markets stabilized and for the last six months of 2020 the average monthly price remained between $40.42 and $50.32. In the first six months of 2021 ANS prices continued to rise. The monthly average price was $55.56 in January of 2021. It rose to $65.60 in March, and $73.18 in June of 2021.

    Alaska’s home mortgage delinquency and foreclosure levels continue to be better than most of the nation. According to the Mortgage Bankers Association, Alaska’s foreclosure rate improved from 0.63% at the end of 2019 to 0.45% at the end of 2020. In the first quarter of 2021 the foreclosure rate improved again slightly to 0.41%. The comparable national average rate was higher than Alaska at 0.54% in the first quarter of 2021. We believe that the foreclosure rates are somewhat misleading because the federal moratorium on foreclosure activity on occupied homes led to declining foreclosure numbers, even though job losses strained the economy and borrowers' ability to pay.

    The Mortgage Bankers Association survey reported that the percentage of delinquent mortgage loans at the end of 2019 in Alaska was 2.9%. This increased to 6.2% at the end of 2020 after the effects of COVID-19 impacted jobs. In the first quarter of 2021 it has improved to 5.4% in Alaska. According to the survey, the comparable delinquency rate for the entire country remains higher than Alaska at 6.1% in the first quarter of 2021.

    According to the Alaska Multiple Listing Services, the average sales price of a single family home in Anchorage rose 5.9% in 2020 to $396,779. This is following increases of 0.5% and 2.3% in 2019 and 2018, respectively. Average sales prices in the Matanuska Susitna Borough rose 9.9% in 2020, continuing a decade of consecutive price gains. These two markets represent where the vast majority of the Bank’s residential building activity occurs. The average sales price for the first six months of 2021 is 8% higher in Anchorage and 14.8% higher in the Matanuska Susitna Borough than the 12 month average of 2020.

    The number of units sold in Anchorage was up significantly in 2020 by 19.5%, climbing from 2,719 homes sold in 2019 to 3,250 last year, as reported by the Alaska Multiple Listing Services. The main difference was a record number of sales occurred in the last quarter of the year, when sales activity typically declines in the winter. The Matanuska Susitna Borough also had strong sales activity, up 9.7% in 2020 to 2,135 units sold compared to 1,946 in 2019. The Matanuska Susitna Borough also had stronger than normal sales in the second half of 2020. In the first six months of 2021 there have been 1,567 home sales in Anchorage, or 30.3% more than in the first six months of 2020. The Matanuska Susitna Borough had 998 sales in the first half of 2021, an increase of 25.2% over the same time period in 2020.

    We believe that the low interest rate environment has been a major factor. According to the Federal Reserve Bank of St. Louis, the average 30 year fixed rate mortgage in the U.S. hit an all-time record low last year. Rates began 2020 at 3.7% in the first week of January and fell one percent to 2.7% by the end of the year. Rates began to rise in the first quarter of 2021 and finished March at 3.2%. However, in the second quarter of 2021 they declined to slightly under 3%.

    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 2021, Northrim generated a ROAA of 1.42% and a ROAE of 14.26%, compared to 2.25% and 21.40%, respectively, in the first quarter of 2021 and 2.04% and 19.44%, respectively, in the second quarter a year ago. Northrim’s ROAA and ROAE are above peer averages posted by the SNL Small Cap U.S. Bank Index with total market capitalization between $250 million and $1 billion as of March 31, 20211.

    Net Interest Income/Net Interest Margin

    Net interest income increased 10% to $19.2 million in the second quarter of 2021 compared to $17.5 million in the second quarter of 2020 and decreased modestly compared to $19.5 million in the first quarter of 2021. Interest income benefited 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 2021, Northrim received $133 million in loan forgiveness through the SBA, compared to $105 million in loan forgiveness during the prior quarter, resulting in total net PPP fee income of $2.6 million and $3.3 million, respectively. As of June 30, 2021, there was $1.0 million of net PPP fee income from round one remaining and $10.0 million remaining from round two for total net deferred fees on PPP loans of $11.0 million. In the first six months of 2021, net interest income increased 17% to $38.7 million, compared to $33.1 million in the first six months of 2020.

    NIMTE* was 3.50% in the second quarter of 2021 compared to 3.92% in the preceding quarter and 4.02% in the second quarter a year ago. “Our NIMTE* contracted compared to the prior quarter and a year ago due to our increased liquidity, which was partially offset by the recognition of PPP loan fees as loans are forgiven,” said Jed Ballard, Chief Financial Officer. “Also notable was the impact of SBA PPP loan interest on net interest income, which increased our NIMTE* by 7 basis points during the second quarter of 2021 compared to what our NIMTE* would have been if we had not made any SBA PPP loans, or 3.43%. The increase from SBA PPP loans this quarter is the result of recognition of fee income on loans that were forgiven.” Even with the drop in Northrim’s NIMTE*, it continues to remain above the peer average posted by the SNL Small Cap U.S. Bank Index with total market capitalization between $250 million and $1 billion as of March 31, 20211.

    The yield on interest earning assets in the second quarter of 2021 was 3.69%, down 45 basis points from the first quarter of 2021 and down 69 basis points compared to the second quarter a year ago. The cost of interest-bearing liabilities was 32 basis points in the second quarter of 2021, down four basis points compared to the preceding quarter and down 25 basis points compared to the second quarter a year ago.

     

    1As of March 31, 2021, the SNL Small Cap US Bank Index tracked 110 banks with total common market capitalization between $250 million to $1B for the following ratios: NIMTE* of 3.16%. ROAA 1.30%, and ROAE 12.75%.


    Provision for Credit Losses

    Northrim recorded a benefit to the provision for credit losses of $427,000 in the second quarter of 2021, which includes a $266,000 benefit to the provision for credit losses on unfunded commitments and a benefit of $161,000 for credit losses on loans. This compares to a benefit to the provision for credit losses on loans of $1.5 million in the first quarter of 2021, and a provision for credit losses on loans of $404,000 in the second quarter a year ago. “While outstanding balances of both loans and unfunded commitments increased during the second quarter of this year, the benefit to the provision for credit losses on loans and unfunded commitments during the quarter primarily emulates our current assessment of risks associated with the economy and reflects expected lifetime credit losses based upon the conditions that existed as of quarter-end,” said Ballard. “The ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, as well as loan portfolio composition, quality, and portfolio duration.”

    Nonperforming loans, net of government guarantees, decreased during the quarter to $12.0 million at June 30, 2021, compared to $13.1 million at March 31, 2021, and decreased compared to $12.7 million at June 30, 2020. The allowance for credit losses was 121% of nonperforming loans, net of government guarantees, at the end of the second quarter of 2021, compared to 113% three months earlier and 162% 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 $14.1 million, or 42% of total second quarter 2021 revenues, as compared to $15.9 million, or 45% of revenues in the first quarter of 2021, and $17.5 million, or 50% of revenues in the second quarter of 2020. The decrease in other operating income in the second quarter of 2021 as compared to the second quarter a year ago was due primarily to a lower volume of mortgage activity. In the first six months of 2021, other operating income totaled $30.0 million, or 44% of revenues, compared to $24.0 million, or 42% of revenues in the first six months of 2020.

    Other notable changes during the quarter include changes in the fair value mark-to-market of the marketable equity securities portfolio, which increased other income by $178,000 in the second quarter of 2021, compared to an $84,000 decrease in the first quarter of 2021 and a $149,000 increase in the second quarter of 2020. There was $103,000 in interest rate swap income in the second quarter of 2021. This compares to $92,000 in interest rate swap income in the preceding quarter and $17,000 in interest rate swap income in the second quarter of 2020 on the execution of interest rate swaps related to the Company's commercial lending operations.

    Other Operating Expenses

    Operating expenses were $22.3 million in the second quarter of 2021, compared to $21.3 million in the first quarter of 2021, and $22.7 million in the second quarter of 2020. The quarterly increase in operating expense as compared to the first quarter of 2021 reflects higher salary costs and personnel expenses as well as higher data processing expense and elevated occupancy expense compared to the prior quarter. In the first six months of 2021, operating expenses were $43.7 million, up from $41.5 million in the first six months of 2020.

    Income Tax Provision

    For the second quarter and first half of 2021, Northrim recorded a higher effective tax rate as compared to the same periods in 2020 as a result of a decrease in tax credits and tax exempt interest income as a percentage of pre-tax income in 2021, as well as the reversal of a $454,000 accrual of tax expense in the second quarter of 2020. In the second quarter of 2021, Northrim recorded $3.1 million in state and federal income tax expense for an effective tax rate of 26.9%, compared to $3.4 million, or 21.7% in the first quarter of 2021 and $2.0 million, or 16.9% in the second quarter a year ago. For the first half of 2021, Northrim recorded $6.4 million in state and federal income tax expense, for an effective tax rate of 23.9% compared to $2.3 million and 17.1% for the same period in 2020.

    Community Banking

    “Our mission as a community bank has always been to serve the people and businesses within our communities, and that has never been more apparent than this past year,” said Schierhorn. “We have managed to capture market share and expand our customer base during very challenging times. To better serve our customers, we opened our second Fairbanks branch during the first quarter of 2021 and in March of 2020 we opened a loan production office in Kodiak. We will continue to look for ways to expand our branch network and support our customers and communities.”

    Net interest income in the Community Banking segment totaled $18.5 million in the second quarter of 2021, compared to $18.7 million in the first quarter of 2020 and $16.6 million in the second quarter of 2020. Net interest income benefited from $3.6 million of PPP income in the second quarter of 2021, and $4.2 million of PPP income in the first quarter of 2021. As of June 30, 2021, there was $11.0 million of unearned loan fees net of costs related to round one and round two PPP loans.

    The following tables provide highlights of the Community Banking segment of Northrim:

     Three Months Ended
    (Dollars in thousands, except per share data)June 30,
    2021    		March 31,
    2021    		December 31,
    2020    		September 30,
    2020    		June 30,
    2020
    Net interest income$18,468  $18,734  $18,349  $17,388 $16,649  
    (Benefit) provision for credit losses (427)  (1,488)  (599)  567  404  
    Other operating income 2,772   2,274   2,921   3,696  2,308  
    Other operating expense 14,551   13,664   15,536   14,353  14,113  
    Income before provision for income taxes 7,116   8,832   6,333   6,164  4,440  
    Provision (benefit) for income taxes 1,850   1,452   1,303   1,249  (124) 
    Net income$5,266  $7,380  $5,030  $4,915 $4,564  
    Weighted average shares outstanding, diluted 6,277,265   6,277,177   6,324,461   6,413,221  6,440,898  
    Diluted earnings per share$0.84  $1.18  $0.79  $0.76 $0.70  


     Year-to-date
    (Dollars in thousands, except per share data)June 30,
    2021    		June 30,
    2020
    Net interest income$37,202  $31,910 
    (Benefit) provision for credit losses (1,915)  2,464 
    Other operating income 5,046   4,076 
    Other operating expense 28,215   27,725 
    Income before provision for income taxes 15,948   5,797 
    Provision for income taxes 3,302   142 
    Net income$12,646  $5,655 
    Weighted average shares outstanding, diluted 6,280,369   6,496,515 
    Diluted earnings per share$2.02  $0.87 


    Home Mortgage Lending

    “The increased activity in the mortgage market has continued through the second quarter of 2021, although loan refinance activity slowed somewhat compared to the record pace of the last few quarters, due to a slight uptick in interest rates,” said Ballard. “We continue to see strong new home purchases in our market, especially during the spring and summer months.”

    During the second quarter of 2021, mortgage loan volume was $286.3 million, of which 69% was for new home purchases, compared to $301.0 million and 40% of loans funded for new home purchases in the first quarter of 2021, and $381.1 million, of which 35% was for new home purchases in the second quarter of 2020.

    Loan fundings decreased during the second quarter of 2021 as compared to the preceding quarter and year-over-year, driven by lower refinance activity. The net change in fair value of mortgage servicing rights decreased mortgage banking income by $567,000 during the second quarter of 2021 and by $1.0 million during the first quarter of 2021, primarily due to continued refinance of existing mortgages in the servicing portfolio.

    “Our mortgage servicing business, which we initiated to service loans primarily for the Alaska Housing Finance Corporation, generated continued growth throughout the quarter,” said Ballard. As of June 30, 2021, Northrim serviced 2,919 loans in its $713.9 million home-mortgage-servicing portfolio, compared to $682.8 million serviced for the first quarter of 2021, and a 9% increase from the $655.2 million serviced a year ago. Delinquencies in the loan servicing portfolio totaled $23.9 million at June 30, 2021, compared to $52.8 million at June 30, 2020. Mortgage servicing revenue contributed $2.5 million to revenues in the second quarter of 2021 compared to $2.2 million in the first quarter of 2021 and $1.6 million in the second quarter of 2020. As a result of COVID-19, approximately 3% of mortgages serviced were in forbearance as of June 30, 2021, compared to 4% as of March 31, 2021, and 8% as of June 30, 2020.

    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 $567,000 for the second quarter of 2021, compared to a decrease of $1.0 million for the first quarter of 2021 and a decrease of $1.9 million for the second quarter of 2020.

    The following tables provide highlights of the Home Mortgage Lending segment of Northrim:

     Three Months Ended
    (Dollars in thousands, except per share data)June 30,
    2021    		March 31,
    2021    		December 31,
    2020    		September 30,
    2020    		June 30,
    2020
    Mortgage commitments$173,994  $181,417  $150,276  $257,304  $206,274  
    Mortgage loans funded for sale$286,314  $300,963  $381,942  $364,159  $381,086  
    Mortgage loan refinances to total fundings 31 % 60 % 48 % 39 % 65 %
    Mortgage loans serviced for others$713,926  $682,827  $683,117  $655,733  $655,183  
          
    Net realized gains on mortgage loans sold$9,470  $11,795  $15,557  $14,736  $11,322  
    Change in fair value of mortgage loan commitments, net (427)  98   (2,724)  1,943   3,579  
    Total production revenue 9,043   11,893   12,833   16,679   14,901  
    Mortgage servicing revenue 2,452   2,152   2,510   2,044   1,633  
    Change in fair value of mortgage servicing rights:     
    Due to changes in model inputs of assumptions1 16   (180)  (410)  (699)  (891) 
    Other2 (583)  (829)  (783)  (806)  (1,037) 
    Total mortgage servicing revenue, net 1,885   1,143   1,317   539   (295) 
    Other mortgage banking revenue 432   586   661   714   621  
    Total mortgage banking income$11,360  $13,622  $14,811  $17,932  $15,227  
          
    Net interest income$724  $759  $875  $906  $808  
    Mortgage banking income 11,360   13,622   14,811   17,932   15,227  
    Other operating expense 7,785   7,663   8,611   9,153   8,561  
    Income before provision for income taxes 4,299   6,718   7,075   9,685   7,474  
    Provision for income taxes 1,220   1,917   2,005   2,745   2,138  
    Net income$3,079  $4,801  $5,070  $6,940  $5,336  
          
    Weighted average shares outstanding, diluted 6,277,265   6,277,177   6,324,461   6,413,221   6,440,898  
    Diluted earnings per share$0.49  $0.76  $0.80  $1.08  $0.82  

    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,
    2021    		June 30,
    2020
    Mortgage loans funded for sale$587,277  $549,310  
    Mortgage loan refinances to total fundings 46 % 59 %
       
    Net realized gains on mortgage loans sold$21,265  $15,965  
    Change in fair value of mortgage loan commitments, net (329)  3,034  
    Total production revenue 20,936   18,999  
    Mortgage servicing revenue 4,604   2,960  
    Change in fair value of mortgage servicing rights:  
    Due to changes in model inputs of assumptions1 (164)  (1,592) 
    Other2 (1,412)  (1,266) 
    Total mortgage servicing revenue, net 3,028   102  
    Other mortgage banking revenue 1,018   791  
    Total mortgage banking income$24,982  $19,892  
       
    Net interest income$1,483  $1,237  
    Mortgage banking income 24,982   19,892  
    Other operating expense 15,448   13,736  
    Income before provision for income taxes 11,017   7,393  
    Provision for income taxes 3,137   2,115  
    Net income$7,880  $5,278  
       
    Weighted average shares outstanding, diluted 6,280,369   6,496,515  
    Diluted earnings per share$1.25  $0.81  

    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 increased to $2.45 billion at June 30, 2021, up 4% from the preceding quarter and up 22% from a year ago. Northrim’s loan-to-deposit ratio was 69% at June 30, 2021, down from 76% at March 31, 2021, and 82% at June 30, 2020.

    Average interest-earning assets were $2.22 billion in the second quarter of 2021, up 9% from $2.03 billion in the first quarter of 2021 and up 26% from $1.76 billion in the second quarter a year ago. The average yield on interest-earning assets was 3.69% in the second quarter of 2021, down from 4.14% in the preceding quarter and down from 4.38% in the second quarter a year ago.

    Average investment securities increased to $354.3 million in the second quarter of 2021, compared to $298.8 million in the first quarter of 2021 and $256.5 million in the second quarter a year ago. The average net tax equivalent yield on the securities portfolio was 1.32% for the second quarter of 2021, down from 1.45% in the preceding quarter and down from 2.50% in the year ago quarter. The average estimated duration of the investment portfolio at June 30, 2021, was 4.25 years. In an effort to diversify its investment portfolio into higher yielding, longer duration assets, Northrim added $10.0 million of investment securities, classified as held to maturity in the first quarter of 2021.

    “Loan growth was strong during the quarter, with $41 million in new loans, excluding PPP loans. However, this was offset by $133 million in PPP loan forgiveness during the quarter,” said Ballard. “Much of the loan production during the past four quarters resulted from new customers we obtained through the PPP process.” At June 30, 2021, commercial loans represented 31% of total loans, PPP loans represented 21% of total loans, commercial real estate owner occupied loans comprised 13% of total loans, commercial real estate non-owner occupied loans comprised 25% of total loans, and construction loans made up 8% of total loans. Portfolio loans were $1.49 billion at June 30, 2021, down 4% from the preceding quarter and up 4% from a year ago. Portfolio loans excluding the impact from PPP were $1.19 billion at June 30, 2021, up 4% from the preceding quarter and up 9% from a year ago. Average portfolio loans in the second quarter of 2021 were $1.54 billion, which was up 3% from the preceding quarter and up 13% from a year ago. Yields on average portfolio loans in the second quarter of 2021 decreased to 4.75% from 5.08% in the first quarter of 2021 and decreased compared to 4.99% in the second quarter of 2020.

    Alaskans continue to account for substantially all of Northrim’s deposit base, which is primarily made up of low-cost transaction accounts. At June 30, 2021, balances in transaction accounts represented 91% of total deposits. Total deposits were $2.15 billion at June 30, 2021, up 5% from $2.05 billion at March 31, 2021, and up 24% from $1.74 billion a year ago. Demand deposits increased 17% year-over-year to $798.2 million at June 30, 2021. Average interest-bearing deposits were up 9% to $1.32 billion with an average cost of 0.27% in the second quarter of 2021, compared to $1.21 billion and an average cost of 0.32% in the first quarter of 2021, and up 29% compared to $1.02 billion and an average cost of 0.53% in the second quarter of 2020.

    “We continue to attract new customers through our outreach in the community and with new relationships we established from PPP lending. The Alaska economy is relatively flat, and so a majority of our deposit growth is coming from our success in capturing market share,” said Michael Martin, the Bank's Chief Operating Officer and General Counsel. “The investments in our people, products and services have allowed us to attract a broader customer base and convert new PPP customers into full banking relationships.”

    Shareholders’ equity was $237.2 million, or $38.22 per share, at June 30, 2021, compared to $231.5 million, or $37.29 per share, at March 31, 2021 and $206.9 million, or $32.49 per share, a year ago. Tangible book value per share* was $35.64 at June 30, 2021, compared to $34.71 at March 31, 2021, and $29.97 per share a year ago. 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 14.54% at June 30, 2021, compared to 14.55% at March 31, 2021, and 13.99% at June 30, 2020.

    Asset Quality

    “Credit quality remains solid, with nearly every credit quality metric improving compared to a year ago,” said Martin. “While we are pleased with the overall performance in the loan portfolio, we still have elevated credit monitoring structures in place and are working closely with our customers given the current economic environment.”

    Nonperforming assets ("NPAs") net of government guarantees were $17.8 million at June 30, 2021, down from $19.6 million at March 31, 2021 and from $20.8 million a year ago. Of the NPAs at June 30, 2021, $9.5 million, or 54% are nonaccrual loans related to six commercial relationships. One of these relationships, which totaled $1.2 million at June 30, 2021, is a business in the medical industry.

    Net adversely classified loans were $14.1 million at June 30, 2021, as compared to $16.9 million at March 31, 2021, and $15.7 million a year ago. Net loan charge-offs were $64,000 in the second quarter of 2021, compared to net loan recoveries of $44,000 in the first quarter of 2021, and net loan charge offs of $768,000 in the second quarter of 2020. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. As of June 30, 2021, $11.5 million, or 82% of net adversely classified loans are attributable to nine relationships with five loans to commercial businesses, one loan to a medical business, and three loans to oilfield services commercial businesses.

    Performing restructured loans that were not included in nonaccrual loans at June 30, 2021, net of government guarantees were $777,000, down from $812,000 three months earlier and from $966,000 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 $93.7 million, or 8% of total portfolio loans, in the healthcare sector; $82.3 million, or 7% of portfolio loans, in the tourism sector; $57.8 million, or 5% of portfolio loans, in the aviation (non-tourism) sector; $36.4 million, or 3% in the accommodations sector; $36.3 million, or 3% in retail loans, $37.9 million, or 3% in the fishing sector; and $40.8 million, or 3% in the restaurant sector, as of June 30, 2021.

    Northrim estimates that $65.0 million, or approximately 5% of portfolio loans excluding SBA PPP loans, had direct exposure to the oil and gas industry in Alaska, as of June 30, 2021, and $5.2 million of these loans are adversely classified. As of June 30, 2021, Northrim has an additional $67.3 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 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, 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 the recent U.S. elections 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, trade policies and tensions, including tariffs, and potential geopolitical instability; 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, 2020, 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:

    https://www.americanbanker.com/news/why-so-many-banks-are-getting-dropped-from-the-russell-3000

    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://fred.stlouisfed.org/series/MORTGAGE30US

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



    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,
     202120212020 20212020
    Interest Income:      
    Interest and fees on loans$18,963  $19,424  $17,454  $38,387  $32,813  
    Interest on portfolio investments 1,229   1,134   1,519   2,363   3,263  
    Interest on deposits in banks 61   38   31   99   267  
    Total interest income 20,253   20,596   19,004   40,849   36,343  
    Interest Expense:      
    Interest expense on deposits 879   949   1,331   1,828   2,815  
    Interest expense on borrowings 182   154   216   336   381  
    Total interest expense 1,061   1,103   1,547   2,164   3,196  
    Net interest income 19,192   19,493   17,457   38,685   33,147  
           
    (Benefit) provision for credit losses (427)  (1,488)  404   (1,915)  2,464  
    Net interest income after provision (benefit) for credit losses 19,619   20,981   17,053   40,600   30,683  
           
    Other Operating Income:      
    Mortgage banking income 11,360   13,622   15,227   24,982   19,892  
    Bankcard fees 879   740   681   1,619   1,324  
    Purchased receivable income 575   532   675   1,107   1,596  
    Service charges on deposit accounts 308   290   171   598   533  
    Unrealized gain (loss) on marketable equity securities 178   (84)  149   94   (722) 
    Interest rate swap income 103   92   17   195   17  
    Gain on sale of securities 31   —   —   31   98  
    Other income 698   704   615   1,402   1,230  
    Total other operating income 14,132   15,896   17,535   30,028   23,968  
           
    Other Operating Expense:      
    Salaries and other personnel expense 14,917   14,728   15,637   29,645   27,893  
    Data processing expense 2,206   2,035   2,033   4,241   3,802  
    Occupancy expense 1,869   1,660   1,618   3,529   3,275  
    Marketing expense 672   404   696   1,076   1,279  
    Professional and outside services 642   624   714   1,266   1,322  
    Insurance expense 329   314   301   643   613  
    OREO expense, net rental income and gains on sale 47   (36)  21   11   (15) 
    Intangible asset amortization expense 9   9   12   18   24  
    Other operating expense 1,645   1,589   1,642   3,234   3,268  
    Total other operating expense 22,336   21,327   22,674   43,663   41,461  
           
    Income before provision for income taxes 11,415   15,550   11,914   26,965   13,190  
    Provision for income taxes 3,070   3,369   2,014   6,439   2,257  
    Net income$8,345  $12,181  $9,900  $20,526  $10,933  
           
    Basic EPS$1.34  $1.96  $1.54  $3.30  $1.70  
    Diluted EPS$1.33  $1.94  $1.52  $3.27  $1.68  
    Weighted average shares outstanding, basic 6,206,913   6,219,871   6,367,397   6,213,392   6,417,514  
    Weighted average shares outstanding, diluted 6,277,265   6,277,177   6,440,898   6,280,369   6,496,515  



    Balance Sheet   
    (Dollars in thousands)   
    (Unaudited)June 30,March 31,June 30,
     202120212020
        
    Assets:   
    Cash and due from banks$25,486  $20,332  $34,331  
    Interest bearing deposits in other banks 321,399   183,258   55,081  
    Investment securities available for sale, at fair value 337,231   303,810   202,347  
    Investment securities held to maturity 20,000   20,000   —  
    Marketable equity securities, at fair value 9,588   9,471   7,758  
    Investment in Federal Home Loan Bank stock 3,114   3,116   2,428  
    Loans held for sale 105,819   116,128   133,975  
    Portfolio loans 1,487,968   1,548,924   1,433,201  
    Allowance for credit losses, loans (14,539)  (14,764)  (20,653) 
    Net portfolio loans 1,473,429   1,534,160   1,412,548  
    Purchased receivables, net 12,500   11,818   11,549  
    Mortgage servicing rights, at fair value 12,835   11,657   10,721  
    Other real estate owned, net 7,073   7,563   7,205  
    Premises and equipment, net 38,202   38,171   39,055  
    Lease right of use asset 11,374   11,934   13,189  
    Goodwill and intangible assets 16,028   16,037   16,070  
    Other assets 59,489   63,788   70,448  
    Total assets$2,453,567$2,351,243$2,016,705
        
    Liabilities:   
    Demand deposits$798,231  $762,793  $680,033  
    Interest-bearing demand 582,669   524,373   400,138  
    Savings deposits 322,645   325,625   261,934  
    Money market deposits 258,116   253,934   215,735  
    Time deposits 184,777   184,592   179,519  
    Total deposits 2,146,438   2,051,317   1,737,359  
    Other borrowings 14,680   14,749   11,754  
    Junior subordinated debentures 10,310   10,310   10,310  
    Lease liability 11,335   11,883   13,121  
    Other liabilities 33,586   31,532   37,238  
    Total liabilities 2,216,349   2,119,791   1,809,782  
        
    Shareholders' Equity:   
    Total shareholders' equity 237,218   231,452   206,923  
    Total liabilities and shareholders' equity$2,453,567  $2,351,243  $2,016,705  



    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Composition of Portfolio Investments       
     June 30, 2021 March 31, 2021 June 30, 2020
     Balance% of total Balance% of total Balance% of total
    U.S. Treasury securities$87,097 23.7% $77,184 23.2% $47,832 22.8%
    U.S. Agency securities 166,254 45.4%  147,309 44.2%  92,171 43.8%
    Corporate securities 55,487 15.1%  50,456 15.1%  32,043 15.3%
    Marketable equity securities 9,588 2.6%  9,471 2.8%  7,758 3.7%
    Collateralized loan obligations 47,541 13.0%  48,005 14.4%  27,974 13.3%
    Alaska municipality, utility, or state bonds 852 0.2%  856 0.3%  2,327 1.1%
    Total portfolio investments$366,819   $333,281   $210,105  


    Composition of Portfolio Loans            
     June 30,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020    		 June 30,
    2020
     Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total    		 Balance% of
    total
    Commercial loans$476,900 31% $449,153 30% $469,540 33% $460,542 31% $426,675 29%
    SBA Paycheck Protection loans 311,971 21%  414,381 26%  310,518 21%  375,636 25%  353,485 24%
    CRE owner occupied loans 190,880 13%  178,476 11%  163,597 11%  148,993 10%  154,741 11%
    CRE nonowner occupied loans 373,325 25%  368,145 23%  355,694 24%  364,232 24%  360,533 25%
    Construction loans 115,917 8%  121,943 8%  118,782 8%  120,619 8%  114,464 8%
    Consumer loans 36,420 2%  34,603 2%  37,654 3%  37,183 2%  38,310 3%
    Subtotal 1,505,413    1,566,701    1,455,785    1,507,205    1,448,208  
    Unearned loan fees, net (17,445)   (17,777)   (11,735)   (14,485)   (15,007) 
    Total portfolio loans$1,487,968   $1,548,924   $1,444,050   $1,492,720   $1,433,201  


    Composition of Deposits            
     June 30,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020    		 June 30,
    2020
     Balance% of total Balance% of total Balance% of total Balance% of total Balance% of total
    Demand deposits$798,231 37% $762,793 37% $643,825 35% $697,363 38% $680,033 40%
    Interest-bearing demand 582,669 27%  524,373 26%  459,095 25%  427,811 24%  400,138 23%
    Savings deposits 322,645 15%  325,625 16%  308,725 17%  272,624 15%  261,934 15%
    Money market deposits 258,116 12%  253,934 12%  237,705 13%  227,106 13%  215,735 12%
    Time deposits 184,777 9%  184,592 9%  175,631 10%  181,229 10%  179,519 10%
    Total deposits$2,146,438   $2,051,317   $1,824,981   $1,806,133   $1,737,359  


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Asset QualityJune 30, March 31, June 30, 
     2021 2021 2020 
    Nonaccrual loans$12,976  $14,463  $14,365  
    Loans 90 days past due and accruing 128   —   —  
    Total nonperforming loans 13,104   14,463   14,365  
    Nonperforming loans guaranteed by government (1,096)  (1,382)  (1,635) 
    Net nonperforming loans 12,008   13,081   12,730  
    Other real estate owned 7,073   7,563   7,205  
    Repossessed assets —   225   919  
    Other real estate owned guaranteed by government (1,279)  (1,279)  (1,279) 
    Net nonperforming assets$17,802  $19,590  $20,801  
    Nonperforming loans, net of government guarantees / portfolio loans 0.81 % 0.84 % 0.89 %
    Nonperforming loans, net of government guarantees / portfolio loans,      
    net of government guarantees 1.06 % 1.19 % 1.21 %
    Nonperforming assets, net of government guarantees / total assets 0.73 % 0.83 % 1.03 %
    Nonperforming assets, net of government guarantees / total assets      
    net of government guarantees 0.85 % 1.03 % 1.27 %
           
    Performing restructured loans$2,341  $2,354  $2,887  
    Performing restructured loans guaranteed by government (1,564)  (1,542)  (1,921) 
    Net performing restructured loans$777  $812  $966  
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees$12,785  $13,893  $13,696  
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees / portfolio loans 0.86 % 0.90 % 0.96 %
    Nonperforming loans plus performing restructured loans, net of government      
    guarantees / portfolio loans, net of government guarantees 1.13 % 1.26 % 1.30 %
    Nonperforming assets plus performing restructured loans, net of government      
    guarantees / total assets 0.76 % 0.87 % 1.08 %
    Nonperforming assets plus performing restructured loans, net of government      
    guarantees / total assets, net of government guarantees 0.89 % 1.08 % 1.34 %
           
    Adversely classified loans, net of government guarantees$14,055  $16,902  $15,703  
    Special mention loans, net of government guarantees$15,855  $14,629  $16,079  
    Loans 30-89 days past due and accruing, net of government guarantees /      
    portfolio loans 0.02 % 0.05 % 0.05 %
    Loans 30-89 days past due and accruing, net of government guarantees /      
    portfolio loans, net of government guarantees 0.03 % 0.07 % 0.06 %
           
    Allowance for credit losses / portfolio loans 0.98 % 0.95 % 1.44 %
    Allowance for credit losses / portfolio loans, net of government guarantees 1.29 % 1.34 % 1.96 %
    Allowance for credit losses / nonperforming loans, net of government      
    guarantees 121 % 113 % 162 %
           
    Gross loan charge-offs for the quarter$110  $163  $804  
    Gross loan recoveries for the quarter$(46) $(207) $(36) 
    Net loan (recoveries) charge-offs for the quarter$64  $(44) $768  
    Net loan charge-offs (recoveries) year-to-date$20  $(44) $899  
    Net loan charge-offs (recoveries) for the quarter / average loans, for the quarter 0.00 % 0.00 % 0.06 %
    Net loan charge-offs (recoveries) year-to-date / average loans,      
    year-to-date annualized — % (0.01)% 0.15 %


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Nonperforming Assets Rollforward       
             
     Balance at
    March 31,
    2021    		Additions
    this
    quarter    		Payments
    this
    quarter    		Writedowns/
    Charge-offs
    this quarter    		Transfers to
    OREO/
    REPO    		Transfers to
    Performing
    Status
    this quarter    		Sales this
    quarter    		Balance at
    June 30,
    2021
    Commercial loans$9,789  $— ($1,344) ($110) $— $— $—  $8,335  
    Commercial real estate 4,393   128  (63)  —   —  —  —   4,458  
    Construction loans 117   —  (8)  —   —  —  —   109  
    Consumer loans 164   45  (7)  —   —  —  —   202  
    Non-performing loans guaranteed by government (1,382)  —  286   —   —  —  —   (1,096) 
    Total non-performing loans 13,081   173  (1,136)  (110)  —  —  —   12,008  
    Other real estate owned 7,563   —  —   —   —  —  (490)  7,073  
    Repossessed assets 225   —  —   —   —  —  (225)  —  
    Nonperforming purchased receivables —   —  —   —   —  —  —   —  
    Other real estate owned guaranteed        
    by government (1,279)  —  —   —   —  —  —   (1,279) 
    Total non-performing assets, net of government guarantees$19,590  $173 ($1,136) ($110) $— $— ($715) $17,802  


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

    Loan Charge-offs by Industry    
     Three Months Ended
     June 30,
    2021    		March 31,
    2021    		December 31,
    2020    		September 30,
    2020    		June 30,
    2020
    Charge-offs:     
    Plastic material and resin manufacturing$— $150 $— $— $— 
    Aircraft parts and auxiliary equipment manufacturing 110  13  —  —  — 
    Office of physicians —  —  11  —  — 
    Excavation and construction —  —  —  33  — 
    Health care and social assistance —  —  —  108  804 
    Total charge-offs$110 $163 $11 $141 $804 


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Average Balances, Yields, and Rates        
     Three Months Ended
     June 30, 2021 March 31, 2021 June 30, 2020
      Average  Average  Average
     AverageTax
    Equivalent    		 AverageTax
    Equivalent    		 AverageTax
    Equivalent
     BalanceYield/Rate BalanceYield/Rate BalanceYield/Rate
    Assets        
    Interest bearing deposits in other banks$208,067 0.12% $120,875 0.12% $51,448 0.24%
    Portfolio investments 354,260 1.32%  298,776 1.45%  256,500 2.50%
    Loans held for sale 111,228 2.74%  114,585 2.73%  111,475 3.12%
    Portfolio loans 1,541,701 4.75%  1,492,906 5.08%  1,342,717 4.99%
    Total interest-earning assets 2,215,256 3.69%  2,027,142 4.14%  1,762,140 4.38%
    Nonearning assets 173,164    170,565    186,583  
    Total assets$2,388,420   $2,197,707   $1,948,723  
             
    Liabilities and Shareholders' Equity        
    Interest-bearing deposits$1,316,029 0.27% $1,207,079 0.32% $1,017,544 0.53%
    Borrowings 25,032 2.90%  25,100 2.47%  73,349 1.17%
    Total interest-bearing liabilities 1,341,061 0.32%  1,232,179 0.36%  1,090,893 0.57%
             
    Noninterest-bearing demand deposits 766,954    687,789    602,464  
    Other liabilities 43,017    46,922    50,525  
    Shareholders' equity 237,388    230,817    204,841  
    Total liabilities and shareholders' equity$2,388,420   $2,197,707   $1,948,723  
    Net spread 3.37%  3.78%  3.81%
    NIM 3.48%  3.90%  3.98%
    NIMTE* 3.50%  3.92%  4.02%
    Cost of funds 0.20%  0.23%  0.37%
    Average portfolio loans to average interest-earning assets 69.59%   73.65%   76.20% 
    Average portfolio loans to average total deposits 74.01%   78.79%   82.88% 
    Average non-interest deposits to average total deposits 36.82%   36.30%   37.19% 
    Average interest-earning assets to average interest-bearing liabilities 165.19%   164.52%   161.53% 


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

     2Q21 vs. 1Q212Q21 vs. 2Q20
    Nonaccrual interest adjustments0.02 %0.01 %
    Impact of SBA Paycheck Protection Program loans(0.14)%0.22 %
    Interest rates and loan fees, all other loans(0.06)%(0.28)%
    Volume and mix of other interest-earning assets and liabilities(0.24)%(0.47)%
    Change in NIMTE*(0.42)%(0.52)%


    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Average Balances, Yields, and Rates     
     Year-to-date
     June 30, 2021 June 30, 2020
      Average  Average
     AverageTax Equivalent AverageTax Equivalent
     BalanceYield/Rate BalanceYield/Rate
    Assets     
    Interest bearing deposits in other banks$164,712 0.12% $59,762 0.88%
    Portfolio investments 326,671 1.38%  270,284 2.55%
    Loans held for sale 112,897 2.74%  80,925 3.24%
    Portfolio loans 1,517,438 4.91%  1,200,870 5.30%
    Total interest-earning assets 2,121,718 3.90%  1,611,841 4.58%
    Nonearning assets 171,870    180,316  
    Total assets$2,293,588   $1,792,157  
          
    Liabilities and Shareholders' Equity     
    Interest-bearing deposits$1,261,855 0.29% $971,701 0.58%
    Borrowings 25,066 2.68%  47,769 1.59%
    Total interest-bearing liabilities 1,286,921 0.34%  1,019,470 0.63%
          
    Noninterest-bearing demand deposits 727,589    517,906  
    Other liabilities 44,959    48,378  
    Shareholders' equity 234,119    206,403  
    Total liabilities and shareholders' equity$2,293,588   $1,792,157  
    Net spread 3.56%  3.95%
    NIM 3.68%  4.14%
    NIMTE* 3.70%  4.18%
    Cost of funds 0.22%   0.42% 
    Average portfolio loans to average interest-earning assets 71.52%   74.50% 
    Average portfolio loans to average total deposits 76.27%   80.62% 
    Average non-interest deposits to average total deposits 36.57%   34.77% 
    Average interest-earning assets to average interest-bearing liabilities 164.87%   158.11% 


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

     YTD21 vs.YTD20
    Nonaccrual interest adjustments0.02 %
    Impact of SBA Paycheck Protection Program loans0.14 %
    Interest rates and loan fees(0.42)%
    Volume and mix of interest-earning assets and liabilities(0.22)%
    Change in NIMTE*(0.48)%


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

    Capital Data (At quarter end)      
     June 30, 2021 March 31, 2021 June 30, 2020 
    Book value per share$38.22  $37.29  $32.49  
    Tangible book value per share*$35.64  $34.71  $29.97  
    Total shareholders' equity/total assets 9.67 % 9.84 % 10.26 %
    Tangible Common Equity/Tangible Assets* 9.07 % 9.22 % 9.54 %
    Tier 1 Capital / Risk Adjusted Assets 14.54 % 14.55 % 13.99 %
    Total Capital / Risk Adjusted Assets 15.45 % 15.50 % 15.24 %
    Tier 1 Capital / Average Assets 9.77 % 10.33 % 11.92 %
    Shares outstanding 6,206,913   6,206,913   6,368,046  
    Unrealized gain on AFS debt securities, net of income taxes$109  $177  $1,269  
    Unrealized (loss) on derivatives and hedging activities, net of income taxes($760) ($340) ($1,718) 


    Profitability Ratios          
     June 30,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020    		 June 30,
    2020    		 
    For the quarter:          
    NIM3.48 %3.90 %3.94 %3.90 %3.98 %
    NIMTE* 3.50 %3.92 %3.96 %3.93 %4.02 %
    Efficiency ratio67.00 %60.24 %65.31 %58.85 %64.76 %
    Return on average assets1.42 %2.25 %1.90 %2.31 %2.04 %
    Return on average equity14.26 %21.40 %18.22 %22.10 %19.44 %


     June 30,
    2021    		 June 30,
    2020    		 
    Year-to-date:    
    NIM3.68 %4.14 %
    NIMTE* 3.70 %4.18 %
    Efficiency ratio63.52 %72.55 %
    Return on average assets1.80 %1.23 %
    Return on average equity17.68 %10.65 %



    *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
     June 30,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020    		 June 30,
    2020
    Net interest income$19,192  $19,493  $19,224  $18,294  $17,457 
    Divided by average interest-bearing assets 2,215,256   2,027,142   1,941,544   1,866,936   1,762,140 
    Net interest margin ("NIM")2 3.48%  3.90%  3.94%  3.90%  3.98%
              
    Net interest income$19,192  $19,493  $19,224  $18,294  $17,457 
    Plus: reduction in tax expense related to tax-exempt interest income 121   111   122   136   168 
     $19,313  $19,604  $19,346  $18,430  $17,625 
    Divided by average interest-bearing assets 2,215,256   2,027,142   1,941,544   1,866,936   1,762,140 
    NIMTE2 3.50%  3.92%  3.96%  3.93%  4.02%


     Year-to-date
     June 30,
    2021    		 June 30,
    2020
    Net interest income$38,685  $33,147 
    Divided by average interest-bearing assets 2,121,718   1,611,841 
    Net interest margin ("NIM")3 3.68%  4.14%
        
    Net interest income$38,685  $33,147 
    Plus: reduction in tax expense related to tax-exempt interest income 232   349 
     $38,917  $33,496 
    Divided by average interest-bearing assets 2,121,718   1,611,841 
    NIMTE3 3.70%  4.18%

    2Calculated using actual days in the quarter divided by 365 for the quarter ended in 2021 and 366 for quarters ended in 2020.

    3Calculated using actual days in the year divided by 365 for year-to-date period in 2021 and 366 for year-to-date period in 2020.


    *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 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,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020    		 June 30,
    2020
              
    Total shareholders' equity$237,218  $231,452  $221,575  $214,616  $206,923 
    Divided by shares outstanding 6,207   6,207   6,251   6,279   6,368 
    Book value per share$38.22  $37.29  $35.45  $34.18  $32.49 


     June 30,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020    		 June 30,
    2020
              
    Total shareholders' equity$237,218  $231,452  $221,575  $214,616  $206,923 
    Less: goodwill and intangible assets 16,028   16,037   16,046   16,058   16,070 
     $221,190  $215,415  $205,529  $198,558  $190,853 
    Divided by shares outstanding 6,207   6,207   6,251   6,279   6,368 
    Tangible book value per share$35.64  $34.71  $32.88  $31.62  $29.97 

    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,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020    		 June 30,
    2020
              
    Total shareholders' equity$237,218  $231,452  $221,575  $214,616  $206,923 
    Total assets 2,453,567   2,351,243   2,121,798   2,097,738   2,016,705 
    Total shareholders' equity to total assets 9.67%  9.84%  10.44%  10.23%  10.26%


    Northrim BanCorp, Inc.

    		June 30,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020    		 June 30,
    2020
    Total shareholders' equity$237,218  $231,452  $221,575  $214,616  $206,923 
    Less: goodwill and other intangible assets, net 16,028   16,037   16,046   16,058   16,070 
    Tangible common shareholders' equity$221,190  $215,415  $205,529  $198,558  $190,853 
              
    Total assets$2,453,567  $2,351,243  $2,121,798  $2,097,738  $2,016,705 
    Less: goodwill and other intangible assets, net 16,028   16,037   16,046   16,058   16,070 
    Tangible assets$2,437,539  $2,335,206  $2,105,752  $2,081,680  $2,000,635 
    Tangible common equity ratio 9.07%  9.22%  9.76%  9.54%  9.54%


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


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