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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,  D.C. 20549 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 27, 2023
Northrim BanCorp, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
Alaska0-3350192-0175752
________________________
(State or other jurisdiction		_____________
(Commission		_________________
(I.R.S. Employer
of incorporation)File Number)Identification No.)
    
3111 C Street,  Anchorage,   Alaska 99503
___________________________________
(Address of principal executive offices)		 ___________
(Zip Code)
Registrant’s telephone number, including area code: 907-562-0062
Not Applicable
___________________________________________________
Former name or former address, if changed since last report
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act: None
TITLE OF EACH CLASSTRADING SYMBOLNAME OF EXCHANGE

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.126-2 of this chapter).

                                    Emerging growth company     ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ¨







Item 2.02 Results from Operations and Financial Condition.

On July 27, 2023, Northrim BanCorp, Inc. (the "Company") announced by press release its earnings for the second quarter ended June 30, 2023.

A copy of the press release is attached hereto as Exhibit 99.1.


Item 9.01 Financial Statements and Exhibits.

(a) Financial statements – not applicable
(b) Proforma financial information – not applicable
(c) Shell company transactions – not applicable
(d) Exhibit No.Description
99.1Press Release dated July 27, 2023







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
  Northrim BanCorp, Inc.
      
July 27, 2023 By: /s/ Jed W. Ballard
    Name: Jed W. Ballard
    Title: EVP, Chief Financial Officer




Exhibit Index

   
Exhibit No. Description
 


Exhibit 99.1

nrimpra10a.jpg
Contact:Joe Schierhorn, President, CEO, and COO
(907) 261-3308
Jed Ballard, Chief Financial Officer
(907) 261-3539
NEWS RELEASE

Northrim BanCorp Earns $5.6 Million, or $0.98 Per Diluted Share, in Second Quarter 2023

ANCHORAGE, Alaska - July 27, 2023 - Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the “Company”) today reported net income of $5.6 million, or $0.98 per diluted share, in the second quarter of 2023, compared to $4.8 million, or $0.84 per diluted share, in the first quarter of 2023, and $4.8 million, or $0.83 per diluted share, in the second quarter a year ago. The increase in second quarter 2023 profitability as compared to the prior quarter was primarily the result of higher mortgage banking income. This increase was partially offset by a higher provision for credit losses compared to the preceding quarter due to loan growth. The increase in profitability in the second quarter of 2023 compared to the same period a year ago was primarily due to an increase in net interest income, which was only partially offset by a higher provision for credit losses and a decrease in mortgage banking income.

Dividends per share in the second quarter remained consistent with the first quarter of 2023 at $0.60 per share and increased 48% from $0.41 per share in the second quarter of 2022.

“We had solid loan growth in the second quarter as we continue to establish new customer relationships and gain market share,” said Joe Schierhorn, President and Chief Executive Officer Northrim BanCorp, Inc. “We continue to face increased deposit and funding costs but expect stabilization of our net interest margin in future quarters as lower yielding securities and loans begin to reprice.Credit remains strong but we remain vigilant as businesses adjust to increased expenses due to inflation and interest costs due to the rate environment.”

Second Quarter 2023 Highlights:

•Net interest income in the second quarter of 2023 increased slightly to $25.1 million compared to $25.0 million in the first quarter of 2023 and increased 13% compared to $22.2 million in the second quarter of 2022.
•Net interest margin on a tax equivalent basis (“NIMTE”)* was 4.21% for the second quarter of 2023, a 9-basis point decrease from the first quarter of 2023 and a 51-basis point increase compared to the second quarter of 2022 due primarily to the increased yields on loans, investments, and cash.
•The weighted average interest rate for new portfolio loans booked in the second quarter of 2023 was 6.93% compared to 6.42% in the first quarter of 2023 and 5.07% in the second quarter a year ago.
•Return on average assets (“ROAA”) was 0.85% and return on average equity (“ROAE”) was 9.85% for the second quarter of 2023.
•Portfolio loans were $1.66 billion at June 30, 2023, up 8% from the preceding quarter and up 18% from a year ago, primarily due to new customer relationships and expanding market share. Approximately 74% of portfolio loans are variable and 15% of earning assets are subject to rate increases immediately when prime or other rate indices increase.
•Total deposits were $2.30 billion at June 30, 2023, up slightly from the preceding quarter, and down 1% from $2.34 billion a year ago. Demand deposits decreased 14% year-over-year to $711.4 million at June 30, 2023 and currently represent 31% of total deposits.

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•The average cost of interest-bearing deposits was 1.56% at June 30, 2023, up from 1.20% at March 31, 2023 and 0.16% at June 30, 2022.
•Total liquid assets and investments and loans maturing within one year were $442.9 million and our funds available for borrowing under our existing lines of credit were $1.2 billion at June 30, 2023.

Financial HighlightsThree Months Ended
(Dollars in thousands, except per share data)June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Total assets$2,638,207 $2,580,037 $2,674,318 $2,717,514 $2,611,154 
Total portfolio loans$1,659,239 $1,535,187 $1,501,785 $1,407,266 $1,405,709 
Total portfolio loans (excluding PPP loans)$1,655,660 $1,531,007 $1,494,675 $1,395,932 $1,373,837 
Total deposits$2,302,311 $2,296,273 $2,387,211 $2,439,335 $2,335,390 
Total shareholders’ equity
$221,336 $224,425 $218,629 $210,699 $215,289 
Net income $5,577 $4,830 $8,595 $10,125 $4,795 
Diluted earnings per share$0.98 $0.84 $1.48 $1.76 $0.83 
Return on average assets0.85 %0.76 %1.26 %1.52 %0.74 %
Return on average shareholders’ equity
9.85 %8.73 %15.71 %18.18 %8.58 %
NIM4.14 %4.22 %4.31 %4.22 %3.67 %
NIMTE*
4.21 %4.30 %4.36 %4.27 %3.70 %
Efficiency ratio74.03 %78.51 %65.23 %63.69 %77.39 %
Total shareholders’ equity/total assets
8.39 %8.70 %8.18 %7.75 %8.24 %
Tangible common equity/tangible assets*
7.83 %8.13 %7.62 %7.21 %7.68 %
Book value per share$39.45 $39.56 $38.35 $37.09 $37.90 
Tangible book value per share*
$36.60 $36.74 $35.55 $34.27 $35.08 
Dividends per share$0.60 $0.60 $0.50 $0.50 $0.41 
Common stock outstanding5,610,841 5,672,841 5,700,728 5,681,089 5,681,089 
* References to NIMTE, tangible book value per share, tangible common equity to tangible assets, and tangible common equity to tangible assets, excluding the fair value of the available for sale securities portfolio (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 13.)

The Alaska Department of Labor ("DOL") has released preliminary jobs data through May of 2023. The DOL reported Alaska’s seasonally adjusted unemployment rate for May of 2023 decreased to 3.6%, which is now lower than the U.S. rate, which rose to 3.7%. The DOL reports total payroll jobs in Alaska increased 1.8% or 5,800 jobs compared to May of 2022.

According to the DOL, Leisure and Hospitality had the largest growth of 7.2% year over year in May 2023. The 2,600 job increase over the prior 12 months brings the sector to 38,700 jobs, which is higher than the pre-pandemic level. Professional and Business Services added 800 jobs and Health Care increased by 600 jobs over the same 12 month period. The Oil and Gas sector has benefited from higher energy prices and new exploration activity, resulting in an increase of 300 jobs or 4.3% since May of 2022. Transportation, Warehousing and Utilities added 400 jobs and Retail also increased by 400 jobs year over year compared to May of 2022. Manufacturing, which is primarily seafood processing, declined 500 jobs and Information decreased 100 jobs for the same 12 month period.

Alaska’s Gross State Product (“GSP”) in the first quarter of 2023, was estimated to be $63.8 billion in current dollars, according to the Federal Bureau of Economic Analysis ("BEA"). Alaska’s inflation adjusted “real” GSP grew 1.6% at annualized rates in the first quarter of 2023, compared to the average U.S. rate of 2%. Alaska’s real GSP improvement in the first quarter of 2023 was most positively impacted by gains in the Construction and Health Care sectors.

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The BEA also calculated Alaska’s seasonally adjusted personal income at $52.1 billion in the first quarter of 2023. This was an annualized improvement of 7.2% for Alaska and larger than the national average of 5.1%. Alaskans had annualized wage earnings growth of 6.6%, compared to a U.S. average of 4.6% in the first quarter of 2023 as compared to a year ago.

The monthly average price of Alaska North Slope (“ANS”) crude oil has been in a stable range between $75.81 and $82.83 in the first six months of 2023. The Alaska Department of Revenue (“DOR”) calculated ANS crude oil production was 486 thousand barrels per day (“bpd”) in Alaska’s fiscal year ending June 30, 2022. The DOR has forecast production to increase to 494 thousand bpd in Alaska’s fiscal year 2023 and 504 thousand bpd in 2024. That number is projected by the DOR to grow to 556 thousand bpd in 2028. 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 first quarter of 2023 improved to 2.7% compared to 2.9% in the fourth quarter of 2022. Alaska’s delinquency rate of 2.7% compares to the national average rate of 3.3% for the first quarter of 2023. The Mortgage Bankers Association survey reported that the mortgage foreclosure inventory in Alaska in the first quarter of 2023 was 0.54% and the national average was 0.57%.

According to the Alaska Multiple Listing Services, the average sales price of a single family home in Anchorage rose 7.6% in 2022 to $456,544. This was the fifth consecutive year of price increases, following growth of 6.9% in 2021 and 5.8% in 2020. In the first six months of 2023, the average sales price in Anchorage continued to increase 3.7% to $473,330.

Average sales prices for single family homes in the Matanuska Susitna Borough rose 9.9% in 2022 to $382,504, 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. In the first six months of 2023, the average sales price in the Matanuska Susitna Borough has increased 3.5% to $395,952. These two markets represent the regions where the vast majority of Northrim Bank’s residential lending activity occurs.

The Alaska Multiple Listing Services reported there were 934 housing units sold in Anchorage in the first six months of 2023, compared to 1,298 in the first half of 2022 for a decline of 33.2%. Anchorage home sales also declined by 21.2% in 2022 compared to 2021. “A lack of inventory due to a reduction in the supply of new homes being constructed and a lower churn of existing homes being listed on the market are the primary reasons for the decline in sales,” explains Mark Edwards, EVP Chief Credit Officer and Bank Economist. “The limited supply of homes is not keeping up with demand and therefore price increases are continuing, despite the higher interest rate environment,” he concludes. The Matanuska Susitna Borough also experienced a lower volume of home sales in the last 18 months. For the first six months of 2023 there were 761 homes sales in the Matanuska Susitna Borough, compared to 1,077 in the first half of 2022 for a decrease of 29.3%. Matanuska Susitna Borough home sales also declined 11.9% in 2022 compared to the prior year according to the Alaska Multiple Listing Services.

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.


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Review of Income Statement

Consolidated Income Statement

In the second quarter of 2023, Northrim generated a ROAA of 0.85% and a ROAE of 9.85%, compared to 0.76% and 8.73%, respectively, in the first quarter of 2023 and 0.74% and 8.58%, respectively, in the second quarter a year ago.

Net Interest Income/Net Interest Margin

Net interest income increased slightly to $25.1 million in the second quarter of 2023 compared to $25.0 million in the first quarter of 2023 and increased 13% compared to $22.2 million in the second quarter of 2022. Interest expense on deposits increased to $6.1 million in the second quarter compared to $4.6 million in the first quarter of 2023 and $599,000 in the second quarter of 2022.

NIMTE* was 4.21% in the second quarter of 2023 compared to 4.30% in the preceding quarter and 3.70% in the second quarter a year ago. NIMTE* decreased 9 basis points in the second quarter of 2023 compared to the prior quarter mostly due to an increase in the cost of interest-bearing deposits and borrowings and increased 51 basis points compared to the second quarter of 2022 primarily due to higher yields on portfolio loans, investments, and interest bearing deposits in other banks. This increase in yields in the second quarter of 2023 compared to the second quarter of 2022 was only partially offset by higher rates on interest-bearing deposits and borrowings. The weighted average interest rate for new loans booked in the second quarter of 2023 was 6.93% compared to 6.42% in the first quarter of 2023 and 5.07% in the second quarter a year ago. No long-term investments were purchased in the second quarter of 2023, however, the Company purchased long-term investments in the first quarter of 2023 with a weighted average yield of 7.21% compared to 3.22% in the second quarter a year ago. “We expect our net interest margin to remain relatively stable as estimated increases in earning-asset yields and the change in mix of our earning-assets with the maturing of low rate investment securities supporting future loan growth to likely to be offset by increases in deposit rates, as the deposit market remains competitive in this rising interest rate environment,” said Jed Ballard, Chief Financial Officer. Northrim’s NIMTE* continues to remain above the peer average posted by the S&P U.S. Small Cap Bank Index with total market capitalization between $250 million and $1 billion as of March 31, 20231.

Provision for Credit Losses

Northrim recorded a provision for credit losses of $1.4 million in the second quarter of 2023, which includes a $103,000 benefit to the provision for credit losses on unfunded commitments and a provision for credit losses on loans of $1.5 million. This compares to a provision for credit losses of $360,000 in the first quarter of 2023, and a provision for credit losses of $463,000 in the second quarter a year ago. The increase in the provision for credit losses on loans in the second quarter of 2023 is primarily due to loan growth during the quarter which was only partially offset by a slight improvement in management's forecasted economic factors.

Nonperforming loans, net of government guarantees, decreased during the quarter to $5.3 million at June 30, 2023, compared to $6.1 million at March 31, 2023, and decreased compared to $7.3 million at June 30, 2022.

The allowance for credit losses was 292% of nonperforming loans, net of government guarantees, at the end of the second quarter of 2023, compared to 233% three months earlier and 158% a year ago.

1As of March 31, 2023, the S&P U.S. Small Cap Bank Index tracked 243 banks with total common market capitalization between $250 million to $1B for the following ratio: NIMTE* of 3.43%.

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Other Operating Income

In addition to home mortgage lending, Northrim has interests in other businesses that complement its core community banking activities, including purchased receivables financing and wealth management. Other operating income contributed $7.0 million, or 22% of total second quarter 2023 revenues, as compared to $4.9 million, or 16% of revenues in the first quarter of 2023, and $7.8 million, or 26% of revenues in the second quarter of 2022. The increase in other operating income in the second quarter of 2023 as compared to the preceding quarter is primarily the result of an increase in mortgage banking income due to higher volume of mortgage activity. The decrease in other operating income in the second quarter of 2023 as compared to the second quarter a year ago was due primarily to lower volume of mortgage activity. See further discussion regarding mortgage activity during the
second quarter contained under “Home Mortgage Lending” below. The fair market value of marketable equity securities decreased $234,000 in the second quarter of 2023 compared to a decrease of $223,000 in the prior quarter and a decrease of $810,000 in the second quarter of 2022.

Other Operating Expenses

Operating expenses were $23.8 million in the second quarter of 2023, compared to $23.5 million in the first quarter of 2023, and $23.2 million in the second quarter of 2022. The increase in other operating expenses in the second quarter of 2023 compared to the prior reported periods is primarily due to increased marketing and insurance expenses as well as an increase in other operating expenses.

Income Tax Provision

In the second quarter of 2023, Northrim recorded $1.4 million in state and federal income tax expense for an effective tax rate of 19.6%, compared to $1.2 million, or 20.4% in the first quarter of 2023 and $1.5 million, or 24.1% in the second quarter a year ago. The decrease in the tax rate in the second quarter of 2023 as compared to the second quarter of 2022 is primarily the result of an increase in tax credits and tax exempt interest income as a percentage of pre-tax income in 2023 as compared to 2022.

Community Banking

Northrim opened a loan production office in Homer, Alaska in the second quarter of 2023. “We are pleased to continue our expansion throughout Alaska with our loan production office in Homer as we continue to look for opportunities to expand our market share,” said Mike Huston, Northrim Bank President.

Net interest income in the Community Banking segment totaled $22.7 million in the second quarter of 2023, compared to $24.8 million in the first quarter of 2023 and $21.6 million in the second quarter of 2022. Net interest income decreased in the second quarter of 2023 as compared to the first quarter of 2023 mostly due to a reclassification of $768,000 of mortgage net interest income from the first quarter of 2023 out of the Community Banking segment and into Home Mortgage Lending.

In the most 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 Alaska's total deposits as of June 30, 2022 from $2.2 billion, or 13.00% of Alaska's total deposits as of June 30, 2021. This represents 7.3% growth in market share percentage for Northrim during that period while, according to the FDIC, the total deposits in Alaska were up only 1% during the same period. See further discussion regarding the Company's deposit movement for the quarter below.


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The following table provides highlights of the Community Banking segment of Northrim:
Three Months Ended
(Dollars in thousands, except per share data)June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Net interest income$22,700 $24,752 $26,741 $25,668 $21,603 
Provision (benefit) for credit losses1,407 360 1,886 (353)463 
Other operating income3,067 2,900 3,819 2,938 1,907 
Other operating expense17,805 17,417 16,678 15,977 16,415 
   Income before provision for income taxes6,555 9,875 11,996 12,982 6,632 
Provision for income taxes1,192 2,315 1,884 2,911 1,605 
   Net income $5,363 $7,560 $10,112 $10,071 $5,027 
Weighted average shares outstanding, diluted5,677,292 5,757,458 5,769,415 5,740,494 5,805,870 
Diluted earnings per share$0.94 $1.31 $1.74 $1.75 $0.87 
Year-to-date
(Dollars in thousands, except per share data)June 30, 2023June 30, 2022
Net interest income$47,452 $40,512 
Provision for credit losses1,767 313 
Other operating income5,967 5,748 
Other operating expense35,222 31,246 
   Income before provision for income taxes16,430 14,701 
Provision for income taxes3,507 3,246 
   Net income Community Banking segment$12,923 $11,455 
Weighted average shares outstanding, diluted5,719,453 5,902,287 
Diluted earnings per share$2.26 $1.94 

Home Mortgage Lending

During the second quarter of 2023, mortgage loans funded for sale increased to $113.8 million, of which 97% was for home purchases, compared to $50.7 million and 95% of loans funded for home purchases in the first quarter of 2023, and decreased as compared to $191.0 million, of which 90% was for home purchases in the second quarter of 2022. The rising interest rate environment has caused the housing market to slow down and also resulted in fewer refinances compared to 2022.

The Company has developed mortgage products including adjustable rate mortgages, a second home product, and extended locks which are intended to appeal to customers given the current interest rate environment. During the second quarter of 2023, Residential Mortgage originated $55.6 million in home mortgages, which were mostly adjustable rate mortgages, that Northrim Bank purchased and booked as consumer loans at a weighted average interest rate of 5.70%, up from $42.0 million and 5.11% in the first quarter of 2023 and $34.6 million and 5.52% in the fourth quarter of 2022. Total mortgage production for the second quarter of 2023 was up 83% compared to the first quarter of 2023 and down 11% compared to the second quarter a year ago. Given the seasonality of the mortgage operations, the Company usually sees an increase in production in the second quarter. Additionally, management anticipates that the volume of mortgages that Northrim Bank will purchase from Residential Mortgage to decrease, as they look to sell a larger percentage of production on the secondary market going forward. Mr. Ballard noted that “the recent purchases of mortgage by Northrim Bank was a long-term, strategic decision in order to utilize prior year's excess liquidity, reduce asset sensitivity, and provide products to loan originators to market for increased production.” Mr. Ballard added, “our target for these mortgages is approximately 10% of our loan portfolio.”


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The expansion efforts of mortgage production in the Arizona, Colorado, and Pacific Northwest markets in late 2022 have contributed to 15% of Residential Mortgage's $169 million total production in the second quarter of 2023 and 19% of $93 million in total production in the first quarter of 2023.

The net change in fair value of mortgage servicing rights decreased mortgage banking income by $574,000 during the second quarter of 2023 compared to a decrease of $795,000 for the first quarter of 2023 and a decrease of $250,000 for the second quarter of 2022. Mortgage servicing revenue remained stable at $1.4 million in the second quarter of 2023 relative to the prior quarter and decreased from $1.9 million in the second quarter of 2022 due to lower production of Alaska Housing Finance Corporation (AHFC) mortgages which contribute to servicing revenues at origination. In the second quarter of 2023, the Company added $30 million in new mortgage loans to the servicing portfolio as compared to $26 million in the first quarter of 2023 and $57 million in the second quarter of 2022.

As of June 30, 2023, Northrim serviced 3,537 loans in its $921.6 million home-mortgage-servicing portfolio, a 1% increase compared to the $911.1 million serviced for the first quarter of 2023, and a 13% increase from the $818.3 million serviced a year ago. Delinquencies in the loan servicing portfolio totaled 2.1% at June 30, 2023, compared to 2.6% at June 30, 2022.

Other operating expense decreased to $6.0 million in the second quarter of 2023, compared to $6.1 million in the first quarter of 2023, and compared to $6.8 million in the second quarter of 2022. The decrease in other operating expenses in the second quarter of 2023 compared to the second quarter of 2022 is primarily due to decreased salaries and other personnel expense. Despite higher mortgage loan production volumes, salaries and other personnel expense decreased mostly due to deferred salary costs on mortgage loans originated for investment.

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The following table provides highlights of the Home Mortgage Lending segment of Northrim:
Three Months Ended
(Dollars in thousands, except per share data)June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Mortgage commitments$71,123 $41,050 $29,065 $74,731 $116,167 
Mortgage loans funded for sale$113,824 $50,725 $82,149 $168,786 $191,023 
Mortgage loans funded for investment$55,595 $41,964 $34,622 $— $— 
Total mortgage loans funded$169,419 $92,689 $116,771 $168,786 $191,023 
Mortgage loan refinances to total fundings3 %5 %11 %7 %10 %
Mortgage loans serviced for others$921,616 $911,065 $898,840 $859,288 $818,266 
Net realized gains on mortgage loans sold$2,570 $1,305 $1,567 $3,736 $4,649 
Change in fair value of mortgage loan commitments, net358 125 (446)(395)(603)
Total production revenue2,928 1,430 1,121 3,341 4,046 
Mortgage servicing revenue1,424 1,368 2,120 2,121 1,932 
Change in fair value of mortgage servicing rights:
     Due to changes in model inputs of assumptions1
(3)(212)93 555 (225)
     Other2
(571)(583)(411)(410)(25)
Total mortgage servicing revenue, net850 573 1,802 2,266 1,682 
Other mortgage banking revenue135 5 33 127 172 
   Total mortgage banking income$3,913 $2,008 $2,956 $5,734 $5,900 
Net interest income$2,442 $280 $546 $643 $609 
Mortgage banking income3,913 2,008 2,956 5,734 5,900 
Other operating expense5,977 6,092 5,548 6,309 6,823 
   (Loss) income before provision for income taxes378 (3,804)(2,046)68 (314)
(Benefit) provision for income taxes164 (1,074)(529)14 (82)
   Net (loss) income$214 ($2,730)($1,517)$54 ($232)
Weighted average shares outstanding, diluted5,677,292 5,757,458 5,769,415 5,740,494 5,805,870 
Diluted earnings per share$0.04 ($0.47)($0.26)$0.01 ($0.04)
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.


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Year-to-date
(Dollars in thousands, except per share data)June 30, 2023June 30, 2022
Mortgage loans funded for sale$164,549 $334,598 
Mortgage loans funded for investment97,559 — 
Total mortgage loans funded$262,108 $334,598 
Mortgage loan refinances to total fundings4 %16 %
Net realized gains on mortgage loans sold$3,875 $8,569 
Change in fair value of mortgage loan commitments, net482 (193)
Total production revenue4,357 8,376 
Mortgage servicing revenue2,792 3,703 
Change in fair value of mortgage servicing rights:
     Due to changes in model inputs of assumptions1
(215)967 
     Other2
(1,154)(506)
Total mortgage servicing revenue, net1,423 4,164 
Other mortgage banking revenue140 342 
   Total mortgage banking income$5,920 $12,882 
Net interest income$2,722 $1,004 
Mortgage banking income5,921 12,882 
Other operating expense12,069 13,093 
   Income before provision for income taxes(3,426)793 
Provision for income taxes(910)227 
   Net (loss) income Home Mortgage Lending segment($2,516)$566 
Weighted average shares outstanding, diluted5,719,453 5,902,287 
Diluted (loss) earnings per share($0.44)$0.10 
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 $2.64 billion at June 30, 2023, up 2% from the preceding quarter and 1% from a year ago. Northrim’s loan-to-deposit ratio was 72% at June 30, 2023, up from 67% at March 31, 2023, and 60% at June 30, 2022.

At June 30, 2023, our liquid assets and investments and loans maturing within one year were $442.9 million and our funds available for borrowing under our existing lines of credit were $1.2 billion. Given these sources of liquidity and our expectations for customer demands for cash and for our operating cash needs, we believe our sources of liquidity to be sufficient for the foreseeable future.

Average interest-earning assets were $2.43 billion in the second quarter of 2023, up 1% from $2.40 billion in the first quarter of 2023 and consistent with $2.43 billion in the second quarter a year ago. The average yield on interest-earning assets was 5.31% in the second quarter of 2023, up from 5.10% in the preceding quarter and 3.83% in the second quarter a year ago.

Average investment securities increased to $727.8 million in the second quarter of 2023, compared to $727.6 million in the first quarter of 2023 and $589.6 million in the second quarter a year ago. The average net tax equivalent yield on the securities portfolio was 2.40% for the second quarter of 2023, consistent with 2.40% in the preceding quarter and up from 1.59% in the year ago quarter. The average estimated duration of the investment

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portfolio at June 30, 2023, was approximately three-years compared to approximately three and a half-years at June 30, 2022. As of June 30, 2023, $66.1 million available for sale securities are scheduled to mature in the next six months, $61.9 million are scheduled to mature in six months to one year, and $175.6 million are scheduled to mature in the following year, representing a total of $303.5 million or 12% of earning assets that are scheduled to mature in the next 24 months.

Total unrealized losses, net of tax, on available for sale securities increased by $3.2 million in the second quarter of 2023 resulting in total unrealized loss, net of tax, of $27.5 million due largely to increasing interest rates, compared to $24.3 million at March 31, 2023, and $19.9 million a year ago. Total unrealized losses on held to maturity securities were $4.2 million at June 30, 2023, compared to $4.2 million at March 31, 2023, and $3.4 million a year ago.

Average interest bearing deposits in other banks decreased to $66.1 million in the second quarter from $130.9 million in the first quarter of 2023 and $382.0 million in the second quarter of 2022 as cash was used to fund the growing loan portfolio.

“Portfolio loans increased $124.1 million during the second quarter of 2023 as compared to the first quarter of 2023, largely as a result of new customer relationships and expanding market share, as well as mortgages purchased from Residential Mortgage,” said Mike Huston, Northrim Bank President. Mr. Huston added that “last quarter we noted that we had a strong loan pipeline, which materialized in the second quarter.” Portfolio loans were $1.66 billion at June 30, 2023, up 8% from the preceding quarter and up 18% from a year ago. Average portfolio loans in the second quarter of 2023 were $1.60 billion, which was up 5% from the preceding quarter and up 15% from a year ago. Yields on average portfolio loans in the second quarter of 2023 increased to 6.48% from 6.28% in the first quarter of 2023 and increased from 5.52% in the second quarter of 2022. The increase in the yield on portfolio loans in the second quarter of 2023 compared to the first quarter of 2023 and the second 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. Yields on average portfolio loans, excluding consumer mortgage loans, were 6.57% in the second quarter of 2023 as compared to 6.32% in the first quarter of 2023 and 5.51% in the second quarter of 2022. 31% of loans mature or reprice in the next three months, 13% of loans mature or reprice in three to twelve months, and 17% of loans mature or reprice in one to two years.

Alaskans continue to account for substantially all of Northrim’s deposit base. Total deposits were $2.30 billion at June 30, 2023, consistent with $2.30 billion at March 31, 2023, and down 1% from $2.34 billion a year ago. At June 30, 2023, 69% of total deposits were held in business accounts and 31% of deposit balances were held in consumer accounts. Northrim had approximately 33,000 deposit customers with an average balance of $70,000 as of June 30, 2023. Northrim had 15 customers with balances over $10 million as of June 30, 2023, which accounted for $332.6 million, or 14%, of total deposits. Of these $332.6 million of deposits, approximately 41% are insured using ICS or CDARS and an additional 20% are long-term customers with whom Northrim has significant lending relationships. ICS and CDARS deposits are divided into amounts under the FDIC insurance maximum and allocated among member banks, making the large deposit eligible for FDIC insurance. Demand deposits decreased by 7% from the prior quarter and decreased 14% year-over-year to $711.4 million at June 30, 2023. Demand deposits decreased to 31% of total deposits at June 30, 2023 from 34% at March 31, 2023 and 35% of total deposits at March 31, 2022. Average interest-bearing deposits were up 2% to $1.57 billion with an average cost of 1.56% in the second quarter of 2023, compared to $1.54 billion and an average cost of 1.20% in the first quarter of 2023, and up 4% compared to $1.51 billion and an average cost of 0.16% in the second quarter of 2022. Uninsured deposits totaled $910.7 million or 40% of total deposits as of June 30, 2023 compared to $1.1 billion or 46% of total deposits as of December 31, 2022. As interest rates continued to increase in the first six months of 2023, Northrim has taken a proactive, targeted approach to increase deposit rates. There was no significant unusual deposit activity during the first six months of 2023.

Shareholders’ equity was $221.3 million, or $39.45 book value per share, at June 30, 2023, compared to $224.4 million, or $39.56 book value per share, at March 31, 2023 and $215.3 million, or $37.90 book value per share, a year ago. Tangible book value per share* was $36.60 at June 30, 2023, compared to $36.74 at March 31, 2023, and $35.08 per share a year ago. The decrease in shareholders’ equity in the second quarter of 2023 as

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compared to the first quarter of 2023 was largely the result of the decrease in the fair value of the available for sale securities portfolio, which decreased $3.0 million, net of tax, as well as dividends paid of $3.4 million and repurchases of common stock of $2.5 million, which was only partially offset by earnings of $5.6 million. The Company purchased 62,000 shares of common stock in the second quarter of 2023 at an average cost of $40.33 per share and has 195,113 shares remaining under the current share repurchase program as of June 30, 2023. Tangible common equity to tangible assets* was 7.83% as of June 30, 2023. Tangible common equity to tangible common assets, excluding the impact of the fair value of the available for sale securities portfolio*, was 8.79% as of June 30, 2023, compared to 8.99% as of March 31, 2023 and 8.38% as of June 30, 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 12.13% at June 30, 2023, compared to 12.75% at March 31, 2023, and 12.74% at June 30, 2022.

Asset Quality

Northrim believes it has a consistent lending approach throughout the economic cycles, which emphasizes appropriate loan-to-value ratios, adequate debt coverage ratios, and competent management.

Nonperforming assets (“NPAs”) net of government guarantees were $5.6 million at June 30, 2023 and down from $6.4 million at March 31, 2023 and down from $11.7 million a year ago. Of the NPAs at June 30, 2023, $3.9 million, or 70% are nonaccrual loans related to three commercial relationships.

Net adversely classified loans were $6.9 million at June 30, 2023, as compared to $7.2 million at March 31, 2023, and $8.8 million a year ago. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. Net loan charge-offs were $22,000 in the second quarter of 2023, compared to net loan recoveries of $60,000 in the first quarter of 2023, and net loan charge-offs of $46,000 in the second quarter of 2022.

Special mention loans decreased to $5.9 million at June 30, 2023 from $15.5 million at March 31, 2023. The improvement comes primarily from a commercial credit that was previously cited with documentation deficiencies that have since been rectified. Northrim is actively working with the customers to improve the credit risk profile of these loans.

The Company adopted Accounting Standards Update 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02") on January 1, 2023. The amendments in ASU 2022-02 eliminate the accounting guidance for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan modifications by creditors when a borrower is experiencing financial difficulty. Northrim had two loan modification to borrowers experiencing financial difficulty totaling $2.2 million, net of government guarantees in the second quarter of 2023.

Northrim had $127.6 million, or 8% of portfolio loans, in the Healthcare sector, $102.2 million, or 6% of portfolio loans, in the Tourism sector, $75.7 million, or 5% of portfolio loans, in the Accommodations sector, $72.5 million, or 4% of portfolio loans, in the Retail sector, $71.6 million, or 4% of portfolio loans, in the Fishing sector, $64.7 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector, and $48.6 million, or 3% in the Restaurants and Breweries sector as of June 30, 2023.

Northrim estimates that $97.3 million, or approximately 6% of portfolio loans, had direct exposure to the oil and gas industry in Alaska, as of June 30, 2023, and $3.4 million of these loans are adversely classified. As of June 30, 2023, Northrim has an additional $42.5 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and $816,000 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.

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About Northrim BanCorp

Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 19 branches in Anchorage, the Matanuska Valley, Soldotna, Juneau, Fairbanks, Ketchikan, Sitka, Kodiak, and Nome, and a loan production office in Homer, 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. Northrim 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

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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: potential further increases in interest rates; the value of securities held in our investment portfolio; the impact of the results of government initiatives on the regulatory landscape, natural resource extraction industries, and capital markets; the impact of declines in the value of commercial and residential real estate markets, high unemployment rates, inflationary pressures and slowdowns in economic growth; changes in banking regulation or actions by bank regulators; inflation, supply-chain constraints, and potential geopolitical instability, including the war in Ukraine; financial stress on borrowers (consumers and businesses) as a result of higher rates or an uncertain economic environment; the general condition of, and changes in, the Alaska economy; our ability to maintain or expand our market share or net interest margin; the sufficiency of our provision for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to current expected credit losses accounting guidance; our ability to maintain asset quality; our ability to implement our marketing and growth strategies; our ability to identify and address cyber-security risks, including security breaches, “denial of service attacks,” “hacking,” and identity theft; disease, outbreaks, such as the COVID-19 pandemic, or similar health threats and measures implemented to combat them; and our ability to execute our business plan. Further, actual results may be affected by competition 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. 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, 2022, 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://tax.alaska.gov/programs/programs/reports/RSB.aspx?Year=2023&Type=Spring

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




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Income Statement
(Dollars in thousands, except per share data)Three Months EndedYear-to-date
(Unaudited)June 30,March 31,June 30,June 30,June 30,
20232023202220232022
Interest Income:  
     Interest and fees on loans$26,313 $23,694 $19,807 $50,007 $38,075 
     Interest on portfolio investments4,679 4,612 2,419 9,291 3,967 
     Interest on deposits in banks828 1,489 766 2,317 1,008 
          Total interest income31,820 29,795 22,992 61,615 43,050 
Interest Expense:  
     Interest expense on deposits6,114 4,583 599 10,697 1,174 
     Interest expense on borrowings564 180 181 744 360 
          Total interest expense6,678 4,763 780 11,441 1,534 
          Net interest income25,142 25,032 22,212 50,174 41,516 
Provision for credit losses1,407 360 463 1,767 313 
          Net interest income after provision for credit losses23,735 24,672 21,749 48,407 41,203 
Other Operating Income:  
     Mortgage banking income3,913 2,008 5,900 5,921 12,882 
     Purchased receivable income1,018 977 566 1,995 968 
     Bankcard fees986 908 927 1,894 1,731 
     Service charges on deposit accounts505 457 402 962 776 
     Keyman insurance proceeds— — — — 2,002 
     Unrealized loss on marketable equity securities(234)(223)(810)(457)(1,232)
     Other income792 781 822 1,573 1,503 
          Total other operating income6,980 4,908 7,807 11,888 18,630 
Other Operating Expense:  
     Salaries and other personnel expense15,183 15,484 15,401 30,667 29,507 
     Data processing expense2,377 2,355 2,311 4,732 4,303 
     Occupancy expense1,811 1,943 1,748 3,754 3,474 
     Marketing expense933 564 814 1,497 1,239 
     Professional and outside services801 722 708 1,523 1,430 
     Insurance expense647 557 516 1,204 1,082 
     Intangible asset amortization expense3 4 6 7 12 
     OREO expense, net rental income and gains on sale(8)26 19 18 7 
     Other operating expense2,035 1,854 1,715 3,889 3,285 
          Total other operating expense23,782 23,509 23,238 47,291 44,339 
          Income before provision for income taxes6,933 6,071 6,318 13,004 15,494 
     Provision for income taxes1,356 1,241 1,523 2,597 3,473 
          Net income$5,577 $4,830 $4,795 $10,407 $12,021 
          Basic EPS$0.99 $0.85 $0.83 $1.84 $2.05 
          Diluted EPS$0.98 $0.84 $0.83 $1.82 $2.03 
          Weighted average shares outstanding, basic5,632,174 5,691,432 5,750,873 5,661,803 5,844,455 
          Weighted average shares outstanding, diluted5,677,292 5,757,458 5,805,870 5,719,453 5,902,287 





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Balance Sheet
(Dollars in thousands)
(Unaudited)June 30,March 31,June 30,
202320232022
Assets:
     Cash and due from banks$34,809 $28,976 $24,035 
     Interest bearing deposits in other banks1,943 110,235 312,888 
     Investment securities available for sale, at fair value671,139 677,734 612,027 
     Investment securities held to maturity36,750 36,750 29,750 
     Marketable equity securities, at fair value10,604 10,515 9,122 
     Investment in Federal Home Loan Bank stock5,858 3,752 3,824 
     Loans held for sale60,759 23,985 63,080 
     Portfolio loans1,659,239 1,535,187 1,405,709 
     Allowance for credit losses, loans(15,645)(14,157)(11,537)
          Net portfolio loans1,643,594 1,521,030 1,394,172 
     Purchased receivables, net21,866 21,190 15,277 
     Mortgage servicing rights, at fair value18,248 18,303 16,301 
     Other real estate owned, net273 273 5,638 
     Premises and equipment, net39,573 38,163 37,106 
     Lease right of use asset10,088 9,469 9,875 
     Goodwill and intangible assets15,977 15,980 15,997 
     Other assets66,726 63,682 62,062 
          Total assets$2,638,207$2,580,037$2,611,154
Liabilities:  
     Demand deposits$711,390 $767,772 $830,156 
     Interest-bearing demand795,128 717,910 666,283 
     Savings deposits275,602 292,857 349,208 
     Money market deposits232,698 262,478 319,843 
     Time deposits287,493 255,256 169,900 
          Total deposits2,302,311 2,296,273 2,335,390 
     Other borrowings 64,887 13,991 14,302 
     Junior subordinated debentures10,310 10,310 10,310 
     Lease liability10,087 9,466 9,846 
     Other liabilities29,276 25,572 26,017 
          Total liabilities2,416,871 2,355,612 2,395,865 
Shareholders’ Equity:  
          Total shareholders’ equity 221,336 224,425 215,289 
          Total liabilities and shareholders’ equity$2,638,207 $2,580,037 $2,611,154 

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Additional Financial Information
(Dollars in thousands)
(Unaudited)

Composition of Portfolio Loans
June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Balance% of totalBalance% of totalBalance% of totalBalance% of totalBalance% of total
Commercial loans$666,949 40 %$608,499 39 %$600,292 41 %$584,533 41 %$547,495 39 %
SBA Paycheck Protection Program loans3,723 — %4,375 — %7,331 — %11,724 1 %32,948 2 %
CRE owner occupied loans258,440 16 %254,911 17 %255,470 17 %231,404 16 %241,575 17 %
CRE nonowner occupied loans448,955 27 %432,679 28 %438,680 29 %418,845 30 %416,285 30 %
Construction loans115,522 7 %119,641 8 %125,739 8 %118,452 8 %131,850 9 %
Consumer loans173,584 10 %123,707 8 %82,883 5 %50,281 4 %43,852 3 %
   Subtotal1,667,173 1,543,812 1,510,395 1,415,239 1,414,005 
Unearned loan fees, net(7,934)(8,625)(8,610)(7,973)(8,296)
     Total portfolio loans$1,659,239 $1,535,187 $1,501,785 $1,407,266 $1,405,709 
Composition of Deposits
June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Balance% of totalBalance% of totalBalance% of totalBalance% of totalBalance% of total
Demand deposits$711,390 31 %$767,772 34 %$797,434 34 %$861,378 35 %$830,156 35 %
Interest-bearing demand795,128 35 %717,910 31 %767,686 32 %757,422 31 %666,283 29 %
Savings deposits275,602 12 %292,857 13 %320,917 13 %344,975 14 %349,208 15 %
Money market deposits232,698 10 %262,478 11 %308,317 13 %309,690 13 %319,843 14 %
Time deposits287,493 12 %255,256 11 %192,857 8 %165,870 7 %169,900 7 %
   Total deposits$2,302,311 $2,296,273 $2,387,211 $2,439,335 $2,335,390 

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Additional Financial Information
(Dollars in thousands)
(Unaudited)
Asset QualityJune 30,March 31,June 30,
202320232022
     Nonaccrual loans$7,723 $8,775 $8,001 
     Loans 90 days past due and accruing— — — 
          Total nonperforming loans7,723 8,775 8,001 
             Nonperforming loans guaranteed by government(2,374)(2,692)(683)
                Net nonperforming loans 5,349 6,083 7,318 
     Other real estate owned273 273 5,638 
             Other real estate owned guaranteed by government— — (1,279)
                Net nonperforming assets$5,622 $6,356 $11,677 
     Nonperforming loans, net of government guarantees / portfolio loans0.32 %0.40 %0.52 %
     Nonperforming loans, net of government guarantees / portfolio loans,
                net of government guarantees0.34 %0.43 %0.57 %
     Nonperforming assets, net of government guarantees / total assets0.21 %0.25 %0.45 %
     Nonperforming assets, net of government guarantees / total assets
                net of government guarantees0.22 %0.26 %0.47 %
     Adversely classified loans, net of government guarantees$6,927 $7,221 $8,836 
     Special mention loans, net of government guarantees$5,882 $15,547 $5,665 
     Loans 30-89 days past due and accruing, net of government guarantees /
                portfolio loans0.01 %0.06 %0.02 %
     Loans 30-89 days past due and accruing, net of government guarantees /
                portfolio loans, net of government guarantees0.01 %0.06 %0.02 %
     Allowance for credit losses / portfolio loans0.94 %0.92 %0.82 %
     Allowance for credit losses / portfolio loans, net of government guarantees1.01 %0.99 %0.90 %
     Allowance for credit losses / nonperforming loans, net of government
               guarantees292 %233 %158 %
     Gross loan charge-offs for the quarter$49 $14 $166 
     Gross loan recoveries for the quarter($27)($74)($120)
     Net loan (recoveries) charge-offs for the quarter$22 ($60)$46 
     Net loan charge-offs (recoveries) year-to-date($38)($60)$308 
     Net loan charge-offs (recoveries) for the quarter / average loans, for the quarter— %— %— %
     Net loan charge-offs (recoveries) year-to-date / average loans,
          year-to-date annualized— %(0.02)%0.04 %

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Additional Financial Information
(Dollars in thousands)
(Unaudited)
Nonperforming Assets Rollforward
WritedownsTransfers toTransfers to
Balance at March 31, 2023Additions this quarterPayments this quarter/Charge-offs
 this quarter		OREO/ REPOPerforming Status
this quarter		Sales this quarterBalance at June 30, 2023
Commercial loans$6,375 $— ($545)($49)$— $— $— $5,781 
Commercial real estate2,095 — (449)— — — — 1,646 
Construction loans109 — — — — — — 109 
Consumer loans196 — (9)— — — — 187 
Non-performing loans guaranteed by government(2,692)— 269 49 — — — (2,374)
   Total non-performing loans6,083 — (734)— — — — 5,349 
Other real estate owned273 — — — — — — 273 
   Total non-performing assets,
   net of government guarantees$6,356 $— ($734)$— $— $— $— $5,622 


The following table details loan charge-offs, by industry:
Loan Charge-offs by Industry
Three Months Ended
June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Charge-offs:
Residential intellectual & developmental disability facility$49 $— $— $— $— 
Land subdivision— — — — 166 
Architectural services— — — 20 — 
Restaurants— — — 25 — 
Consumer— 14 — 3 — 
   Total charge-offs$49 $14 $— $48 $166 




Northrim BanCorp Earns $5.6 Million, or $0.98 per Diluted Share in 2Q23
July 27, 2023
19 of 24

Additional Financial Information
(Dollars in thousands)
(Unaudited)
Average Balances, Yields, and Rates
Three Months Ended
June 30, 2023March 31, 2023June 30, 2022
AverageAverageAverage
AverageTax EquivalentAverageTax EquivalentAverageTax Equivalent
BalanceYield/RateBalanceYield/RateBalanceYield/Rate
Assets
Interest bearing deposits in other banks$66,058 4.96 %$130,929 4.55 %$382,015 0.79 %
Portfolio investments727,833 2.40 %727,610 2.40 %589,553 1.59 %
Loans held for sale37,594 5.96 %20,901 5.54 %59,677 4.16 %
Portfolio loans1,603,126 6.48 %1,524,130 6.28 %1,398,149 5.52 %
   Total interest-earning assets2,434,611 5.31 %2,403,570 5.10 %2,429,394 3.83 %
Nonearning assets185,342 185,755 172,655 
   Total assets$2,619,953 $2,589,325 $2,602,049 
Liabilities and Shareholders’ Equity
Interest-bearing deposits$1,568,173 1.56 %$1,543,437 1.20 %$1,513,957 0.16 %
Borrowings54,602 4.11 %24,366 2.92 %24,675 2.92 %
   Total interest-bearing liabilities1,622,775 1.65 %1,567,803 1.23 %1,538,632 0.20 %
Noninterest-bearing demand deposits 735,615 756,088 808,186 
Other liabilities34,514 41,067 31,064 
Shareholders’ equity227,049 224,367 224,167 
   Total liabilities and shareholders’ equity$2,619,953 $2,589,325 $2,602,049 
   Net spread3.66 %3.87 %3.63 %
   NIM4.14 %4.22 %3.67 %
   NIMTE*
4.21 %4.30 %3.70 %
   Cost of funds1.13 %0.83 %0.13 %
   Average portfolio loans to average
        interest-earning assets65.85 %63.41 %57.55 %
   Average portfolio loans to average total deposits69.59 %66.28 %60.21 %
   Average non-interest deposits to average
         total deposits31.93 %32.88 %34.80 %
   Average interest-earning assets to average
         interest-bearing liabilities150.03 %153.31 %157.89 %

The components of the change in NIMTE* are detailed in the table below:
2Q23 vs. 1Q232Q23 vs. 2Q22
Nonaccrual interest adjustments— %(0.11)%
Impact of SBA Paycheck Protection Program loans— %(0.17)%
Interest rates on loans and liabilities and loan fees, all other loans(0.15)%0.72 %
Volume and mix of other interest-earning assets and liabilities0.06 %0.07 %
Change in NIMTE*(0.09)%0.51 %


Northrim BanCorp Earns $5.6 Million, or $0.98 per Diluted Share in 2Q23
July 27, 2023
20 of 24


Additional Financial Information
(Dollars in thousands)
(Unaudited)
Average Balances, Yields, and Rates
Year-to-date
June 30, 2023June 30, 2022
AverageAverage
AverageTax EquivalentAverageTax Equivalent
BalanceYield/RateBalanceYield/Rate
Assets
Interest bearing deposits in other banks$98,314 4.69 %$459,843 0.44 %
Portfolio investments727,722 2.40 %540,563 1.43 %
Loans held for sale29,294 5.80 %56,173 3.65 %
Portfolio loans1,563,847 6.39 %1,389,050 5.40 %
   Total interest-earning assets2,419,177 5.21 %2,445,629 3.58 %
Nonearning assets185,545 164,611 
   Total assets$2,604,722 $2,610,240 
Liabilities and Shareholders' Equity
Interest-bearing deposits$1,555,874 1.39 %$1,519,995 0.16 %
Borrowings39,567 3.74 %24,726 2.91 %
   Total interest-bearing liabilities1,595,441 1.44 %1,544,721 0.20 %
Noninterest-bearing demand deposits 745,795 801,481 
Other liabilities37,772 33,436 
Shareholders' equity225,714 230,602 
   Total liabilities and shareholders' equity$2,604,722 $2,610,240 
   Net spread3.77 %3.38 %
   NIM4.18 %3.42 %
   NIMTE*
4.25 %3.45 %
   Cost of funds0.98 %0.13 %
   Average portfolio loans to average interest-earning assets64.64 %56.80 %
   Average portfolio loans to average total deposits67.94 %59.83 %
   Average non-interest deposits to average total deposits32.40 %34.52 %
   Average interest-earning assets to average interest-bearing liabilities151.63 %158.32 %

The components of the change in NIMTE* are detailed in the table below:
YTD23 vs.YTD22
Nonaccrual interest adjustments(0.05)%
Impact of SBA Paycheck Protection Program loans(0.20)%
Interest rates and loan fees1.00 %
Volume and mix of interest-earning assets and liabilities0.05 %
Change in NIMTE*0.80 %


Northrim BanCorp Earns $5.6 Million, or $0.98 per Diluted Share in 2Q23
July 27, 2023
21 of 24


Additional Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Capital Data (At quarter end)
June 30, 2023March 31, 2023June 30, 2022
Book value per share$39.45 $39.56 $37.90 
Tangible book value per share*
$36.60 $36.74 $35.08 
Total shareholders’ equity/total assets8.39 %8.70 %8.24 %
Tangible Common Equity/Tangible Assets*
7.83 %8.13 %7.68 %
Tier 1 Capital / Risk Adjusted Assets12.13 %12.75 %12.74 %
Total Capital / Risk Adjusted Assets13.02 %13.60 %13.45 %
Tier 1 Capital / Average Assets9.28 %9.40 %8.84 %
Shares outstanding5,610,8415,672,8415,681,089
Total unrealized loss on AFS debt securities, net of income taxes($27,470)($24,311)($19,911)
Total unrealized gain (loss) on derivatives and hedging activities, net of income taxes$1,028 $827 $571 
Profitability Ratios
June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
For the quarter:
     NIM4.14 %4.22 %4.31 %4.22 %3.67 %
     NIMTE*
4.21 %4.30 %4.36 %4.27 %3.70 %
     Efficiency ratio74.03 %78.51 %65.23 %63.69 %77.39 %
     Return on average assets0.85 %0.76 %1.26 %1.52 %0.74 %
     Return on average equity9.85 %8.73 %15.71 %18.18 %8.58 %
June 30, 2023June 30, 2022
Year-to-date:
     NIM4.18 %3.42 %
     NIMTE*
4.25 %3.45 %
     Efficiency ratio76.19 %73.70 %
     Return on average assets0.81 %0.93 %
     Return on average equity9.30 %10.51 %




Northrim BanCorp Earns $5.6 Million, or $0.98 per Diluted Share in 2Q23
July 27, 2023
22 of 24


*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 2023 and 2022. 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, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Net interest income$25,142 $25,032 $27,287 $26,311 $22,212 
Divided by average interest-bearing assets2,434,611 2,403,570 2,513,862 2,471,640 2,429,394 
Net interest margin (“NIM”)2
4.14 %4.22 %4.31 %4.22 %3.67 %
Net interest income$25,142 $25,032 $27,287 $26,311 $22,212 
Plus: reduction in tax expense related to     
     tax-exempt interest income400 429 325 284 193 
 $25,542 $25,461 $27,612 $26,595 $22,405 
Divided by average interest-bearing assets2,434,611 2,403,570 2,513,862 2,471,640 2,429,394 
NIMTE2
4.21 %4.30 %4.36 %4.27 %3.70 %
Year-to-date
June 30, 2023June 30, 2022
Net interest income$50,174 $41,516 
Divided by average interest-bearing assets2,419,177 2,445,629 
Net interest margin ("NIM")3
4.18 %3.42 %
Net interest income$50,174 $41,516 
Plus: reduction in tax expense related to
     tax-exempt interest income829 358 
 $51,003 $41,874 
Divided by average interest-bearing assets2,419,177 2,445,629 
NIMTE3
4.25 %3.45 %

2Calculated using actual days in the quarter divided by 365 for the quarters ended in 2023 and 2022, respectively.

3Calculated using actual days in the year divided by 365 for year-to-date period in 2023 and 2022.


Northrim BanCorp Earns $5.6 Million, or $0.98 per Diluted Share in 2Q23
July 27, 2023
23 of 24


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


Tangible Book Value Per Share

Tangible book value per share 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, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Total shareholders’ equity$221,336 $224,425 $218,629 $210,699 $215,289 
Divided by shares outstanding5,611 5,673 5,701 5,681 5,681 
Book value per share$39.45 $39.56 $38.35 $37.09 $37.90
June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Total shareholders’ equity$221,336 $224,425 $218,629 $210,699 $215,289 
Less: goodwill and intangible assets15,977 15,980 15,984 15,990 15,997 
$205,359 $208,445 $202,645 $194,709 $199,292 
Divided by shares outstanding5,611 5,673 5,701 5,681 5,681 
Tangible book value per share$36.60 $36.74 $35.55 $34.27 $35.08





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, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Total shareholders’ equity$221,336 $224,425 $218,629 $210,699 $215,289 
Total assets2,638,207 2,580,037 2,674,318 2,717,514 2,611,154 
Total shareholders’ equity to total assets8.39 %8.70 %8.18 %7.75 %8.24 %
Northrim BanCorp, Inc.

June 30, 2023March 31, 2023December 31, 2022September 30, 2022June 30, 2022
Total shareholders’ equity$221,336 $224,425 $218,629 $210,699 $215,289 
Less: goodwill and other intangible assets, net15,977 15,980 15,984 15,990 15,997 
Tangible common shareholders’ equity$205,359 $208,445 $202,645 $194,709 $199,292 
Total assets$2,638,207 $2,580,037 $2,674,318 $2,717,514 $2,611,154 
Less: goodwill and other intangible assets, net15,977 15,980 15,984 15,990 15,997 
Tangible assets$2,622,230 $2,564,057 $2,658,334 $2,701,524 $2,595,157 
Tangible common equity ratio7.83 %8.13 %7.62 %7.21 %7.68 %




Northrim BanCorp Earns $5.6 Million, or $0.98 per Diluted Share in 2Q23
July 27, 2023
24 of 24


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


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

Tangible common equity to tangible assets, excluding the fair value of the available for sale 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, excluding the fair value of the available for sale securities portfolio, and shareholders' equity to total assets.

Northrim BanCorp, Inc.

June 30, 2023March 31, 2023June 30, 2022
Total shareholders' equity$221,336 $224,425 $215,289 
Total assets2,638,207 2,580,037 2,611,154 
Total shareholders' equity to total assets8.39 %8.70 %8.24 %
Northrim BanCorp, Inc.

June 30, 2023March 31, 2023June 30, 2022
Total shareholders' equity$221,336 $224,425 $215,289 
Less: goodwill and other intangible assets, net15,977 15,980 15,997 
Less: unrealized gain (loss) on available for sale securities, net income taxes(27,470)(24,311)(19,911)
Tangible common shareholders' equity, excluding the fair value of the available for sale securities portfolio$232,829 $232,756 $219,203 
Total assets$2,638,207 $2,580,037 $2,611,154 
Less: goodwill and other intangible assets, net15,977 15,980 15,997 
Less: unrealized gain (loss) on available for sale securities, net income taxes(27,470)(24,311)(19,911)
Tangible assets, excluding the fair value of the available for sale securities portfolio$2,649,700 $2,588,368 $2,615,068 
Tangible common equity ratio, excluding the fair value of the available for sale securities portfolio8.79 %8.99 %8.38 %


Note Transmitted on GlobeNewswire on July 27, 2023, at 12:15 pm Alaska Standard Time.

v3.23.2
Document and Entity Information Document
Jul. 27, 2023
Cover [Abstract]  
Document Type 8-K
Document Period End Date Jul. 27, 2023
Entity Registrant Name Northrim BanCorp, Inc.
Entity Central Index Key 0001163370
Amendment Flag false
Entity Incorporation, State or Country Code AK
Entity File Number 0-33501
Entity Tax Identification Number 92-0175752
Entity Address, Address Line One 3111 C Street,
Entity Address, City or Town Anchorage,
Entity Address, State or Province AK
Entity Address, Postal Zip Code 99503
City Area Code 907-
Local Phone Number 562-0062
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Northrim BanCorp (NASDAQ:NRIM)
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