• Northrim BanCorp Earns $8.4 Million, or $1.48 Per Diluted Share, in Third Quarter 2023

    Source: Nasdaq GlobeNewswire / 26 Oct 2023 16:15:01   America/New_York

    ANCHORAGE, Alaska, Oct. 26, 2023 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (“Northrim” or the “Company”) today reported net income of $8.4 million, or $1.48 per diluted share, in the third quarter of 2023, compared to $5.6 million, or $0.98 per diluted share, in the second quarter of 2023, and $10.1 million, or $1.76 per diluted share, in the third quarter a year ago. The increase in third quarter 2023 profitability as compared to the prior quarter was primarily the result of higher net interest income, a gain on an OREO sale, an increase in mortgage banking income, unrealized gains on marketable equity securities and a lower provision for credit losses compared to the preceding quarter. The decrease in profitability in the third quarter of 2023 compared to the same period a year ago was primarily due to a higher provision for credit losses due to loan growth, a decrease in mortgage banking income, higher cost of funds, and in increase in salaries and other personnel expense that was only partially offset by a gain on an OREO sale.

    Dividends per share in the third quarter remained consistent with the first and second quarters of 2023 at $0.60 per share and increased 20% from $0.50 per share in the third quarter of 2022.

    “We are pleased with our third quarter results which highlight Northrim's ability to deliver profitable growth in a variety of economic environments,” said Joe Schierhorn, President and Chief Executive Officer Northrim BanCorp, Inc. “We are particularly proud of our 8% increase in market share which is due to the hard work of the entire Northrim team and their commitment to deliver superior customer service to our customers. While challenges remain, we believe the strategies we've pursued over the past few years will continue to drive profits and expansion in our market.”

    Third Quarter 2023 Highlights:

    • Net interest income in the third quarter of 2023 increased 5% to $26.4 million compared to $25.1 million in the second quarter of 2023 and increased slightly compared to $26.3 million in the third quarter of 2022.
    • Net interest margin on a tax equivalent basis (“NIMTE”)* was 4.21% for the third quarter of 2023, unchanged from the second quarter of 2023 and a 6-basis point decrease compared to the third quarter of 2022 due primarily to a decrease in recoveries of interest income on nonaccrual loans, which was only partially offset by a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets.
    • The weighted average interest rate for new portfolio loans originated in the third quarter of 2023 was 7.39% compared to 6.93% in the second quarter of 2023 and 5.83% in the third quarter a year ago.  
    • Return on average assets (“ROAA”) was 1.22% and return on average equity (“ROAE”) was 14.67% for the third quarter of 2023.
    • Portfolio loans were $1.70 billion at September 30, 2023, up 4% from the preceding quarter and up 22% from a year ago, primarily due to new customer relationships, expanding market share and retaining certain mortgages in the loan portfolio. Approximately 74% of portfolio loans are variable and 18% of earning assets are subject to rate increases immediately when prime or other rate indices increase.
    • Opened a permanent branch in Nome, Alaska, a market with over $330 million in deposits as of June 30, 2023 according to the FDIC, with only one other bank.
    • Total deposits were $2.43 billion at September 30, 2023, up 5% from the preceding quarter, and down slightly from $2.44 billion a year ago. Non-interest bearing demand deposits increased 7% from the preceding quarter and decreased 11% year-over-year to $764.6 million at September 30, 2023 and still represent 31% of total deposits.
    • The average cost of interest-bearing deposits was 1.75% at September 30, 2023, up from 1.56% at June 30, 2023 and 0.28% at September 30, 2022.
    • Total liquid assets and investments and loans maturing within one year were $517.8 million and our funds available for borrowing under our existing lines of credit were $0.7 billion at September 30, 2023.
      
    Financial HighlightsThree Months Ended
    (Dollars in thousands, except per share data)September 30, 2023June 30, 2023March 31, 2023December 31, 2022September 30, 2022
    Total assets$2,790,189 $2,638,207 $2,580,037 $2,674,318 $2,717,514 
    Total portfolio loans$1,720,091 $1,659,239 $1,535,187 $1,501,785 $1,407,266 
    Total portfolio loans (excluding PPP loans)$1,716,934 $1,655,660 $1,531,007 $1,494,675 $1,395,932 
    Total deposits$2,427,930 $2,302,311 $2,296,273 $2,387,211 $2,439,335 
    Total shareholders’ equity$225,259 $221,336 $224,425 $218,629 $210,699 
    Net income$8,374 $5,577 $4,830 $8,595 $10,125 
    Diluted earnings per share$1.48 $0.98 $0.84 $1.48 $1.76 
    Return on average assets 1.22% 0.85% 0.76% 1.26% 1.52%
    Return on average shareholders’ equity 14.67% 9.85% 8.73% 15.71% 18.18%
    NIM 4.15% 4.14% 4.22% 4.31% 4.22%
    NIMTE* 4.21% 4.21% 4.30% 4.36% 4.27%
    Efficiency ratio 66.64% 74.03% 78.51% 65.23% 63.69%
    Total shareholders’ equity/total assets 8.07% 8.39% 8.70% 8.18% 7.75%
    Tangible common equity/tangible assets* 7.54% 7.83% 8.13% 7.62% 7.21%
    Book value per share$40.60 $39.45 $39.56 $38.35 $37.09 
    Tangible book value per share*$37.72 $36.60 $36.74 $35.55 $34.27 
    Dividends per share$0.60 $0.60 $0.60 $0.50 $0.50 
    Common stock outstanding 5,548,436  5,610,841  5,672,841  5,700,728  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 12.)

    The Alaska Department of Labor ("DOL") has reported that Alaska’s seasonally adjusted unemployment rate in August of 2023 was 3.9% compared to the U.S. rate of 3.8%. The total number of payroll jobs in Alaska, not including uniformed military, increased 1.4% or 4,800 jobs between August of 2022 and August of 2023.  

    According to the DOL, Leisure and Hospitality had the largest growth in new jobs through August compared to the prior year.   The sector added 2,000 positions for a year over year growth rate of 4.8% in August of 2023. The Oil & Gas sector grew the quickest as a percentage of growth at 5.7% or 400 new jobs. Construction added 600 jobs for a 3.2% growth rate and Health Care grew 2.3% or 900 jobs between August of 2022 and August of 2023. Manufacturing decreased 2.2% or 400 jobs due to a decline in seafood processing. The Information and Financial Activities sectors both declined by 100 jobs year over year in August of 2023.

    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 an annualized rate 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 aided by gains in the Construction and Health Care sectors.

    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.

    The monthly average price of Alaska North Slope (“ANS”) crude oil has been in a range between $75.64 and $95.05 in the first nine months of 2023. The Alaska Department of Revenue (“DOR”) calculated ANS crude oil production was 480 thousand barrels per day (“bpd”) in Alaska’s fiscal year ending June 30, 2023. The DOR has forecast production to increase to 504 thousand bpd in Alaska’s fiscal year 2024. That number is projected to grow by the DOR 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 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 nine months of 2023, the average sales price in Anchorage continued to increase 5.4% to $481,360.  

    Average sales prices for single family homes in the Matanuska Susitna Borough rose 9.9% in 2022 to $382,439, continuing a trend of average price increases for more than a decade. In the first nine months of 2023, the average sales price in the Matanuska Susitna Borough has increased 5.3% to $402,799. These two markets represent where the vast majority of Northrim Bank’s residential lending activity occurs.

    The Alaska Multiple Listing Services reported there were 1,616 housing units sold in Anchorage in the first nine months of 2023, compared to 2,274 through September of 2022 for a decline of 28.9%. Anchorage home sales also declined by 21.2% in 2022 compared to 2021. For the first nine months of 2023 there were 1,258 homes sales in the Matanuska Susitna Borough, compared to 1,670 through September of 2022 for a decrease of 24.7%. Matanuska Susitna Borough home sales also declined 11.9% in 2022 compared to the prior year.

    “We believe that 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,” explained Mark Edwards, EVP Chief Credit Officer and Bank Economist. “The limited supply of homes did not keep up with demand through the summer and therefore price increases continued. I expect demand to moderate as interest rates continue to increase and buying typically slows seasonally in the winter months,” he concluded.

    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 third quarter of 2023, Northrim generated a ROAA of 1.22% and a ROAE of 14.67%, compared to 0.85% and 9.85%, respectively, in the second quarter of 2023 and 1.52% and 18.18%, respectively, in the third quarter a year ago.

    Net Interest Income/Net Interest Margin

    Net interest income increased 5% to $26.4 million in the third quarter of 2023 compared to $25.1 million in the second quarter of 2023 and increased slightly compared to $26.3 million in the third quarter of 2022. Interest expense on deposits increased to $7.1 million in the third quarter compared to $6.1 million in the second quarter of 2023 and $1.1 million in the third quarter of 2022.

    NIMTE* was 4.21% in the third quarter of 2023 unchanged from 4.21% in the preceding quarter and down from 4.27% in the third quarter a year ago. NIMTE* decreased 6 basis points in the third quarter of 2023 compared to the third quarter of 2022 primarily due to a decrease in recoveries of interest income on nonaccrual loans which was only partially offset by a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets. The weighted average interest rate for new loans booked in the third quarter of 2023 was 7.39% compared to 6.93% in the second quarter of 2023 and 5.83% in the third quarter a year ago. No long-term investments were purchased during the quarter, however, the yield on the portfolio increased to 2.43% for the quarter as a result of repricing of the variable rate investments which represent 10% of the investment portfolio. “We expect our net interest margin to continue to remain relatively stable as estimated increases in earning-asset yields will likely be offset by increases in deposit rates,” 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 June 30, 20231.

    Provision for Credit Losses

    Northrim recorded a provision for credit losses of $1.2 million in the third quarter of 2023, which includes a $440,000 provision for credit losses on unfunded commitments and a provision for credit losses on loans of $750,000 primarily as a result of growth in both unfunded commitments and loans. This compares to a provision for credit losses of $1.4 million in the second quarter of 2023, and the reversal of $353,000 in provision for credit losses in the third quarter a year ago. The decrease in the provision for credit losses on loans in the third quarter of 2023 compared to the second quarter is primarily due to lower loan growth during the quarter. The Company recorded a reversal of provision for credit losses in the third quarter of 2022 primarily due to the receipt of $1.3 million in net recoveries.

    Nonperforming loans, net of government guarantees, decreased during the quarter to $5.1 million at September 30, 2023, compared to $5.3 million at June 30, 2023, and $6.5 million at September 30, 2022.

    The allowance for credit losses was 326% of nonperforming loans, net of government guarantees, at the end of the third quarter of 2023, compared to 292% three months earlier and 185% 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 $8.0 million, or 23% of total third quarter 2023 revenues, as compared to $7.0 million, or 22% of revenues in the second quarter of 2023, and $8.7 million, or 25% of revenues in the third quarter of 2022. The increase in other operating income in the third quarter of 2023 as compared to the preceding quarter is primarily the result of an increase in mortgage banking income due to a higher volume of mortgage activity as well as a small unrealized gain on marketable securities compared to a loss in the preceding quarter. The fair market value of marketable equity securities increased $12,000 in the third quarter of 2023 compared to a decrease of $234,000 in the prior quarter and an increase of $33,000 in the third quarter of 2022. The decrease in other operating income in the third quarter of 2023 as compared to the third quarter a year ago was due primarily to a lower volume of mortgage activity. See further discussion regarding mortgage activity during the third quarter contained under “Home Mortgage Lending” below.

     

    1As of June 30, 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 3.30%.

    Other Operating Expenses

    Operating expenses were $22.9 million in the third quarter of 2023, compared to $23.8 million in the second quarter of 2023, and $22.3 million in the third quarter of 2022. The increase in other operating expenses in the third quarter of 2023 compared to the third quarter of 2022 is primarily due to increased salaries and other personnel expense which was only partially offset by a decrease in OREO expense due to a gain on sale recorded in the third quarter of 2023 for subsequent proceeds received related to a government guarantee on an OREO property sold in December 2022.

    Income Tax Provision

    In the third quarter of 2023, Northrim recorded $1.9 million in state and federal income tax expense for an effective tax rate of 18.4%, compared to $1.4 million, or 19.6% in the second quarter of 2023 and $2.9 million, or 22.4% in the third quarter a year ago. The decrease in the tax rate in the third quarter of 2023 as compared to the third 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

    In the most recent deposit market share data from the FDIC, Northrim’s deposit market share in Alaska increased to 15.04% of Alaska's total deposits as of June 30, 2023 compared to 13.95% of Alaska's total deposits as of June 30, 2022. This represents 7.8% growth in market share percentage for Northrim during that period while, according to the FDIC, the total deposits in Alaska were down 8.5% during the same period. Northrim opened a branch in Kodiak in the first quarter of 2023, a loan production office in Homer in the second quarter of 2023, and a permanent branch in Nome in the third quarter of 2023. See below for further discussion regarding the Company's deposit movement for the quarter.

    Net interest income in the Community Banking segment totaled $24.1 million in the third quarter of 2023, compared to $22.7 million in the second quarter of 2023 and $25.7 million in the third quarter of 2022. Net interest income increased in the third quarter of 2023 as compared to the second quarter of 2023 mostly due to higher interest income on loans due to increases in both volume and rate. These increases were only partially offset by higher interest expense on deposits and borrowings and lower interest income on short term investments.

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

      
     Three Months Ended
    (Dollars in thousands, except per share data)September 30,
    2023    		June 30, 2023March 31,
    2023    		December
    31, 2022    		September
    30, 2022
    Net interest income$24,050$22,700$24,752$26,741$25,668 
    Provision (benefit) for credit losses 1,190 1,407 360 1,886 (353)
    Other operating income 3,597 3,067 2,900 3,819 2,938 
    Other operating expense 16,946 17,805 17,417 16,678 15,977 
    Income before provision for income taxes 9,511 6,555 9,875 11,996 12,982 
    Provision for income taxes 1,709 1,192 2,315 1,884 2,911 
    Net income$7,802$5,363$7,560$10,112$10,071 
    Weighted average shares outstanding, diluted 5,624,906 5,677,292 5,757,458 5,769,415 5,740,494 
    Diluted earnings per share$1.39$0.94$1.31$1.74$1.75 

     

     Year-to-date
    (Dollars in thousands, except per share data)September
    30, 2023    		September
    30, 2022
    Net interest income$71,502$66,180 
    Provision (benefit) for credit losses 2,957 (40)
    Other operating income 9,564 8,686 
    Other operating expense 52,168 47,223 
    Income before provision for income taxes 25,941 27,683 
    Provision for income taxes 5,216 6,157 
    Net income Community Banking segment$20,725$21,526 
    Weighted average shares outstanding, diluted 5,688,687 5,848,625 
    Diluted earnings per share$3.64$3.68 
        

    Home Mortgage Lending

    During the third quarter of 2023, mortgage loans funded for sale increased to $131.9 million, of which 95% was for home purchases, compared to $113.8 million and 97% of loans funded for home purchases in the second quarter of 2023, and decreased as compared to $168.8 million, of which 93% was for home purchases in the third quarter of 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 third quarter of 2023, our home mortgage lending subsidiary, Residential Mortgage originated $21.6 million in home mortgages, of which roughly half were adjustable rate mortgages and half were mortgages for second homes, that Northrim Bank purchased and booked as consumer loans at a weighted average interest rate of 6.60%, down from $55.6 million and 5.70% in the second quarter of 2023, $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 third quarter of 2023 was down 9% compared to the second quarter of 2023 and down 9% compared to the third 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 will continue to decrease, as they look to sell a larger percentage of production on the secondary market going forward. Mr. Ballard noted that “purchases of mortgages by Northrim Bank was a long-term, strategic decision to deploy excess liquidity, reduce asset sensitivity, and provide products to loan originators to market for increased production in this rising interest rate environment.” Mr. Ballard added, “our target for these mortgages is approximately 10% of our loan portfolio.”

    The expansion efforts of mortgage production in the Arizona, Colorado, and Pacific Northwest markets in late 2022 contributed to 8% of Residential Mortgage's $153 million total production in the third quarter of 2023, 15% of $169 million in 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 $310,000 during the third quarter of 2023 compared to a decrease of $574,000 for the second quarter of 2023 and an increase of $145,000 for the third quarter of 2022. Mortgage servicing revenue increased to $2.4 million in the third quarter of 2023 from $1.4 million in the prior quarter and from $2.1 million in the third quarter of 2022 due to higher production of Alaska Housing Finance Corporation (AHFC) mortgages which contribute to servicing revenues at origination. In the third quarter of 2023, the Company's servicing portfolio increased $78 million in new mortgage loans, net of amortization and payoffs as compared to $30 million in the second quarter of 2023 and $60 million in the third quarter of 2022.

    As of September 30, 2023, Northrim serviced 3,696 loans in its $982.1 million home-mortgage-servicing portfolio, a 7% increase compared to the $921.6 million serviced as of the end of the second quarter of 2023, and a 14% increase from the $859.3 million serviced a year ago. Delinquencies in the loan servicing portfolio totaled 3.2% at September 30, 2023, compared to 1.1% at September 30, 2022.

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

      
     Three Months Ended
    (Dollars in thousands, except per share data)September
    30, 2023    		June 30, 2023March 31,
    2023    		December
    31, 2022    		September
    30, 2022
    Mortgage commitments$50,128 $71,123 $41,050 $29,065 $74,731 
          
    Mortgage loans funded for sale$131,863 $113,824 $50,725 $82,149 $168,786 
    Mortgage loans funded for investment 21,585  55,595  41,964  34,622  — 
    Total mortgage loans funded$153,448 $169,419 $92,689 $116,771 $168,786 
    Mortgage loan refinances to total fundings 5% 3% 5% 11% 7%
    Mortgage loans serviced for others$982,098 $921,616 $911,065 $898,840 $859,288 
          
    Net realized gains on mortgage loans sold$2,491 $2,570 $1,305 $1,567 $3,736 
    Change in fair value of mortgage loan commitments, net (289) 358  125  (446) (395)
    Total production revenue 2,202  2,928  1,430  1,121  3,341 
    Mortgage servicing revenue 2,396  1,424  1,368  2,120  2,121 
    Change in fair value of mortgage servicing rights:     
    Due to changes in model inputs of assumptions1 —  (3) (212) 93  555 
    Other2 (310) (571) (583) (411) (410)
    Total mortgage servicing revenue, net 2,086  850  573  1,802  2,266 
    Other mortgage banking revenue 117  135  5  33  127 
    Total mortgage banking income$4,405 $3,913 $2,008 $2,956 $5,734 
          
    Net interest income$2,300 $2,442 $280 $546 $643 
    Mortgage banking income 4,405  3,913  2,008  2,956  5,734 
    Other operating expense 5,951  5,977  6,092  5,548  6,309 
    (Loss) income before provision for income taxes 754  378  (3,804) (2,046) 68 
    (Benefit) provision for income taxes 182  164  (1,074) (529) 14 
    Net (loss) income$572 $214 ($2,730)($1,517)$54 
          
    Weighted average shares outstanding, diluted 5,624,906  5,677,292  5,757,458  5,769,415  5,740,494 
    Diluted earnings per share$0.09 $0.04 ($0.47)($0.26)$0.01 

    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)September 30, 2023September 30, 2022
    Mortgage loans funded for sale$296,412 $503,384 
    Mortgage loans funded for investment 119,144  — 
    Total mortgage loans funded$415,556 $503,384 
    Mortgage loan refinances to total fundings 5% 13%
       
    Net realized gains on mortgage loans sold$6,366 $12,306 
    Change in fair value of mortgage loan commitments, net 194  (589)
    Total production revenue 6,560  11,717 
    Mortgage servicing revenue 5,188  5,824 
    Change in fair value of mortgage servicing rights:  
    Due to changes in model inputs of assumptions1 (215) 1,522 
    Other2 (1,464) (916)
    Total mortgage servicing revenue, net 3,509  6,430 
    Other mortgage banking revenue 257  469 
    Total mortgage banking income$10,326 $18,616 
       
    Net interest income$5,022 $1,647 
    Mortgage banking income 10,326  18,616 
    Other operating expense 18,020  19,402 
    Income before provision for income taxes (2,672) 861 
    Provision for income taxes (728) 241 
    Net (loss) income Home Mortgage Lending segment($1,944)$620 
       
    Weighted average shares outstanding, diluted 5,688,687  5,848,625 
    Diluted (loss) earnings per share($0.34)$0.11 

    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 $2.79 billion at September 30, 2023, up 6% from the preceding quarter and 3% from a year ago. Northrim’s loan-to-deposit ratio was 71% at September 30, 2023, down slightly from 72% at June 30, 2023, and up from 58% at September 30, 2022.

    At September 30, 2023, our liquid assets and investments and loans maturing within one year were $517.8 million and our funds available for borrowing under our existing lines of credit were $0.7 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 $2.52 billion in the third quarter of 2023, up 3% from $2.43 billion in the second quarter of 2023 and up 2% from $2.47 billion in the third quarter a year ago. The average yield on interest-earning assets was 5.48% in the third quarter of 2023, up from 5.31% in the preceding quarter and 4.47% in the third quarter a year ago.

    Average investment securities decreased to $715.8 million in the third quarter of 2023, compared to $727.8 million in the second quarter of 2023 and increased compared to $678.6 million in the third quarter a year ago. The average net tax equivalent yield on the securities portfolio was 2.43% for the third quarter of 2023, up from 2.40% in the preceding quarter and up from 1.98% in the year ago quarter. The average estimated duration of the investment portfolio at September 30, 2023, was approximately 2.8 years compared to approximately 3.5 years at September 30, 2022. As of September 30, 2023, $87.7 million of available for sale securities are scheduled to mature in the next six months, $47.4 million are scheduled to mature in six months to one year, and $173.9 million are scheduled to mature in the following year, representing a total of $309.0 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 decreased by $944,000 in the third quarter of 2023 resulting in total unrealized loss, net of tax, of $26.5 million compared to $27.5 million at June 30, 2023, and $32.4 million a year ago. The average maturity of the available for sale securities with the majority of the unrealized loss is 1.9 years. Total unrealized losses on held to maturity securities were $4.5 million at September 30, 2023, compared to $4.2 million at June 30, 2023, and $5.1 million a year ago.

    Average interest bearing deposits in other banks decreased to $42.3 million in the third quarter from $66.1 million in the second quarter of 2023 and $324.3 million in the third quarter of 2022 as cash was used to fund the growing loan portfolio.

    Portfolio loans were $1.72 billion at September 30, 2023, up 4% from the preceding quarter and up 22% from a year ago. Portfolio loans, excluding consumer mortgage loans, increased by 3% or $42.9 million to $1.56 billion from the preceding quarter and were up 13% from a year ago. Average portfolio loans in the third quarter of 2023 were $1.70 billion, which was up 6% from the preceding quarter and up 20% from a year ago. Yields on average portfolio loans in the third quarter of 2023 increased to 6.61% from 6.48% in the second quarter of 2023 and increased from 6.05% in the third quarter of 2022. The increase in the yield on portfolio loans in the third quarter of 2023 compared to the second quarter of 2023 and the third 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. The yield on average portfolio loans, excluding consumer mortgage loans, was 7.98% in the third quarter of 2023 as compared to 7.70% in the second quarter of 2023 and 5.94% in the third quarter of 2022. 33% of loans mature or reprice in the next three months, 12% 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 $2.43 billion at September 30, 2023, up 5% from $2.30 billion at June 30, 2023, and down slightly from $2.44 billion a year ago. At September 30, 2023, 71% of total deposits were held in business accounts and 29% of deposit balances were held in consumer accounts. Northrim had approximately 33,000 deposit customers with an average balance of $73,000 as of September 30, 2023. Northrim had 16 customers with balances over $10 million as of September 30, 2023, which accounted for $370.6 million, or 15%, of total deposits. Of these $370.6 million of deposits, approximately 32% are insured using ICS or CDARS and an additional 28% 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 increased by 7% from the prior quarter and decreased 11% year-over-year to $764.6 million at September 30, 2023. Demand deposits remained consistent at 31% of total deposits at September 30, 2023 and June 30, 2023 and decreased from 35% of total deposits at September 30, 2022. Average interest-bearing deposits were up 3% to $1.62 billion with an average cost of 1.75% in the third quarter of 2023, compared to $1.57 billion and an average cost of 1.56% in the second quarter of 2023, and up 7% compared to $1.52 billion and an average cost of 0.28% in the third quarter of 2022. Uninsured deposits totaled $999.5 million or 41% of total deposits as of September 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 nine months of 2023, Northrim has taken a proactive, targeted approach to increase deposit rates.

    Shareholders’ equity was $225.3 million, or $40.60 book value per share, at September 30, 2023, compared to $221.3 million, or $39.45 book value per share, at June 30, 2023 and $210.7 million, or $37.09 book value per share, a year ago. Tangible book value per share* was $37.72 at September 30, 2023, compared to $36.60 at June 30, 2023, and $34.27 per share a year ago. The increase in shareholders’ equity in the third quarter of 2023 as compared to the second quarter of 2023 was largely the result of earnings of $8.4 million and an increase in the fair value of the available for sale securities portfolio, which increased $944,000, net of tax, which were only partially offset by dividends paid of $3.4 million and repurchases of common stock of $2.7 million. The Company purchased 63,000 shares of common stock in the third quarter of 2023 at an average cost of $43.03 per share and has 132,113 shares remaining under the current share repurchase program as of September 30, 2023. Tangible common equity to tangible assets* was 7.54% as of September 30, 2023. Tangible common equity to tangible common assets, excluding the impact of the fair value of the available for sale securities portfolio*, was 8.42% as of September 30, 2023, compared to 8.79% as of June 30, 2023 and 8.31% as of September 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 11.67% at September 30, 2023, compared to 12.13% at June 30, 2023, and 12.98% at September 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 $5.2 million at September 30, 2023, down from $5.6 million at June 30, 2023 and down from $10.8 million a year ago. Of the NPAs at September 30, 2023, $3.8 million, or 73% are nonaccrual loans related to three commercial relationships.

    Net adversely classified loans were $7.3 million at September 30, 2023, as compared to $6.9 million at June 30, 2023, and $7.6 million a year ago. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. Net loan recoveries were $96,000 in the third quarter of 2023, compared to net loan charge-offs of $22,000 in the second quarter of 2023, and net loan recoveries of $1.3 million in the third quarter of 2022.

    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 eight loan modifications to borrowers experiencing financial difficulty totaling $5.5 million, net of government guarantees in the third quarter of 2023.

    Northrim had $124.3 million, or 7% of portfolio loans, in the Healthcare sector, $103.0 million, or 6% of portfolio loans, in the Tourism sector, $79.6 million, or 5% of portfolio loans, in the Accommodations sector, $78.3 million, or 5% of portfolio loans, in the Fishing sector, $71.8 million, or 4% of portfolio loans, in the Retail sector, $62.5 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector, and $48.4 million, or 3% in the Restaurants and Breweries sector as of September 30, 2023.

    Northrim estimates that $100.3 million, or approximately 6% of portfolio loans, had direct exposure to the oil and gas industry in Alaska, as of September 30, 2023, and $2.2 million of these loans are adversely classified. As of September 30, 2023, Northrim has an additional $34.9 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and no unfunded commitments on 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 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

    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 wars in Ukraine and the Middle East; 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://www.capitaliq.spglobal.com/web/client?auth=inherit&overridecdc=1&#markets/indexFinancials

    Income Statement      
    (Dollars in thousands, except per share data)Three Months Ended Year-to-date
    (Unaudited)September 30,June 30,September 30, September 30,September 30,
      2023  2023  2022   2023  2022 
    Interest Income:      
    Interest and fees on loans$29,097 $26,313 $22,130  $79,104 $60,205 
    Interest on portfolio investments 4,727  4,679  3,530   14,018  7,497 
    Interest on deposits in banks 584  828  1,899   2,901  2,907 
    Total interest income 34,408  31,820  27,559   96,023  70,609 
    Interest Expense:      
    Interest expense on deposits 7,138  6,114  1,064   17,835  2,238 
    Interest expense on borrowings 920  564  184   1,664  544 
    Total interest expense 8,058  6,678  1,248   19,499  2,782 
    Net interest income 26,350  25,142  26,311   76,524  67,827 
           
    Provision (benefit) for credit losses 1,190  1,407  (353)  2,957  (40)
    Net interest income after provision for credit losses 25,160  23,735  26,664   73,567  67,867 
           
    Other Operating Income:      
    Mortgage banking income 4,405  3,913  5,734   10,326  18,616 
    Purchased receivable income 1,180  1,018  561   3,175  1,529 
    Bankcard fees 1,022  986  992   2,916  2,723 
    Service charges on deposit accounts 550  505  432   1,512  1,208 
    Unrealized loss on marketable equity securities 12  (234) 33   (445) (1,199)
    Keyman insurance proceeds —  —  —   —  2,002 
    Other income 833  792  920   2,406  2,423 
    Total other operating income 8,002  6,980  8,672   19,890  27,302 
           
    Other Operating Expense:      
    Salaries and other personnel expense 15,657  15,183  14,510   46,324  44,017 
    Data processing expense 2,589  2,377  2,315   7,321  6,618 
    Occupancy expense 1,857  1,811  1,710   5,611  5,184 
    Professional and outside services 803  801  894   2,326  2,324 
    Insurance expense 640  647  545   1,844  1,627 
    Marketing expense 499  933  524   1,996  1,763 
    Intangible asset amortization expense 4  3  7   11  19 
    OREO expense, net rental income and gains on sale (784) (8) 109   (766) 116 
    Other operating expense 1,631  2,035  1,672   5,521  4,957 
    Total other operating expense 22,896  23,782  22,286   70,188  66,625 
           
    Income before provision for income taxes 10,266  6,933  13,050   23,269  28,544 
    Provision for income taxes 1,892  1,356  2,925   4,488  6,398 
    Net income$8,374 $5,577 $10,125  $18,781 $22,146 
           
    Basic EPS$1.50 $0.99 $1.77  $3.34 $3.82 
    Diluted EPS$1.48 $0.98 $1.76  $3.30 $3.79 
    Weighted average shares outstanding, basic 5,569,238  5,632,174  5,681,089   5,630,948  5,790,000 
    Weighted average shares outstanding, diluted 5,624,906  5,677,292  5,740,494   5,688,687  5,848,625 

     

    Balance Sheet   
    (Dollars in thousands)   
    (Unaudited)September 30,June 30,September 30,
      2023  2023  2022 
        
    Assets:   
    Cash and due from banks$31,276 $34,809 $20,334 
    Interest bearing deposits in other banks 79,952  1,943  386,587 
    Investment securities available for sale, at fair value 652,150  671,139  651,921 
    Investment securities held to maturity 36,750  36,750  36,750 
    Marketable equity securities, at fair value 10,615  10,604  11,149 
    Investment in Federal Home Loan Bank stock 6,334  5,858  3,820 
    Loans held for sale 63,151  60,759  49,356 
        
    Portfolio loans 1,720,091  1,659,239  1,407,266 
    Allowance for credit losses, loans (16,491) (15,645) (11,982)
    Net portfolio loans 1,703,600  1,643,594  1,395,284 
    Purchased receivables, net 34,578  21,866  4,785 
    Mortgage servicing rights, at fair value 19,396  18,248  17,709 
    Other real estate owned, net 150  273  5,638 
    Premises and equipment, net 40,920  39,573  36,931 
    Lease right of use asset 9,673  10,088  10,434 
    Goodwill and intangible assets 15,973  15,977  15,990 
    Other assets 85,671  66,726  70,826 
    Total assets$2,790,189 $2,638,207 $2,717,514 
        
    Liabilities:   
    Demand deposits$764,647 $711,390 $861,378 
    Interest-bearing demand 875,814  795,128  757,422 
    Savings deposits 265,799  275,602  344,975 
    Money market deposits 230,814  232,698  309,690 
    Time deposits 290,856  287,493  165,870 
    Total deposits 2,427,930  2,302,311  2,439,335 
    Other borrowings 63,781  64,887  14,199 
    Junior subordinated debentures 10,310  10,310  10,310 
    Lease liability 9,673  10,087  10,430 
    Other liabilities 53,236  29,276  32,541 
    Total liabilities 2,564,930  2,416,871  2,506,815 
        
    Shareholders’ Equity:   
    Total shareholders’ equity 225,259  221,336  210,699 
    Total liabilities and shareholders’ equity$2,790,189 $2,638,207 $2,717,514 
        

    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Composition of Portfolio Loans            
                 
     September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
     Balance% of total Balance% of total Balance% of total Balance% of total Balance% of total
    Commercial loans$674,435 39% $666,949 40% $608,499 39% $600,292 41% $584,533 41%
    SBA Paycheck Protection Program loans3,287 —% 3,723 —% 4,375 —% 7,331 —% 11,724 1%
    CRE owner occupied loans259,010 15% 274,716 16% 254,911 17% 255,470 17% 231,404 16%
    CRE nonowner occupied loans460,878 27% 432,679 27% 432,679 28% 438,680 29% 418,845 30%
    Construction loans135,706 8% 115,522 7% 119,641 8% 125,739 8% 118,452 8%
    Consumer loans195,061 11% 173,584 10% 123,707 8% 82,883 5% 50,281 4%
    Subtotal1,728,377   1,667,173   1,543,812   1,510,395   1,415,239  
    Unearned loan fees, net(8,286)  (7,934)  (8,625)  (8,610)  (7,973) 
    Total portfolio loans$1,720,091   $1,659,239   $1,535,187   $1,501,785   $1,407,266  
                   

     

    Composition of Deposits            
     September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
     Balance% of total Balance% of total Balance% of total Balance% of total Balance% of total
    Demand deposits$764,64731% $711,39031% $767,77234% $797,43434% $861,37835%
    Interest-bearing demand875,81436% 795,12835% 717,91031% 767,68632% 757,42231%
    Savings deposits265,79911% 275,60212% 292,85713% 320,91713% 344,97514%
    Money market deposits230,81410% 232,69810% 262,47811% 308,31713% 309,69013%
    Time deposits290,85612% 287,49312% 255,25611% 192,8578% 165,8707%
    Total deposits$2,427,930  $2,302,311  $2,296,273  $2,387,211  $2,439,335 
     

    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Asset QualitySeptember 30, June 30, September 30, 
      2023   2023   2022  
    Nonaccrual loans$6,492  $7,723  $7,092  
    Loans 90 days past due and accruing 28   —   —  
    Total nonperforming loans 6,520   7,723   7,092  
    Nonperforming loans guaranteed by government (1,455)  (2,374)  (619) 
    Net nonperforming loans 5,065   5,349   6,473  
    Other real estate owned 150   273   5,638  
    Other real estate owned guaranteed by government —   —   (1,279) 
    Net nonperforming assets$5,215  $5,622  $10,832  
    Nonperforming loans, net of government guarantees / portfolio loans 0.29 % 0.32 % 0.46 %
    Nonperforming loans, net of government guarantees / portfolio loans,      
    net of government guarantees 0.31 % 0.34 % 0.50 %
    Nonperforming assets, net of government guarantees / total assets 0.19 % 0.21 % 0.40 %
    Nonperforming assets, net of government guarantees / total assets      
    net of government guarantees 0.19 % 0.22 % 0.42 %
           
    Adversely classified loans, net of government guarantees$7,250  $6,927  $7,550  
    Special mention loans, net of government guarantees$5,457  $5,882  $5,879  
    Loans 30-89 days past due and accruing, net of government guarantees /      
    portfolio loans — % 0.01 % 0.29 %
    Loans 30-89 days past due and accruing, net of government guarantees /      
    portfolio loans, net of government guarantees — % 0.01 % 0.31 %
           
    Allowance for credit losses / portfolio loans 0.96 % 0.94 % 0.85 %
    Allowance for credit losses / portfolio loans, net of government guarantees 1.02 % 1.01 % 0.93 %
    Allowance for credit losses / nonperforming loans, net of government      
    guarantees 326 % 292 % 185 %
           
    Gross loan charge-offs for the quarter$91  $49  $48  
    Gross loan recoveries for the quarter($187) ($27) ($1,396) 
    Net loan (recoveries) charge-offs for the quarter($96) $22  ($1,348) 
    Net loan charge-offs (recoveries) year-to-date($134) ($38) ($1,040) 
    Net loan charge-offs (recoveries) for the quarter / average loans, for the quarter (0.01)% — % (0.10)%
    Net loan charge-offs (recoveries) year-to-date / average loans,      
    year-to-date annualized (0.01)% — % (0.10)%
                 

    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Nonperforming Assets Rollforward       
        WritedownsTransfers toTransfers to  
     Balance at June 30, 2023Additions this quarterPayments this quarter/Charge-offs
    this quarter    		OREO/ REPOPerforming Status
    this quarter    		Sales this quarterBalance at September 30, 2023
    Commercial loans$5,781 $291($1,189)($91)$—$—$—$4,792 
    Commercial real estate 1,646  — (164) —  — — — 1,482 
    Construction loans 109  — —  —  — — — 109 
    Consumer loans 187  — (50) —  — — — 137 
    Non-performing loans guaranteed by government (2,374) — 919  —  — — — (1,455)
    Total non-performing loans 5,349  291 (484) (91) — — — 5,065 
    Other real estate owned 273  — —  (123) — — — 150 
    Total non-performing assets,        
    net of government guarantees$5,622 $291($484)($214)$—$—$—$5,215 
                         

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

    Loan Charge-offs by Industry    
     Three Months Ended
     September 30, 2023June 30, 2023March 31, 2023December 31, 2022September 30, 2022
    Charge-offs:     
    Offices of physicians$91$—$—$—$—
    Residential intellectual & developmental disability facility — 49 — — —
    Architectural services — — — — 20
    Restaurants — — — — 25
    Consumer — — 14 — 3
    Total charge-offs$91$49$14$—$48
               

    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Average Balances, Yields, and Rates        
     Three Months Ended
     September 30, 2023 June 30, 2023 September 30, 2022
      Average  Average  Average
     AverageTax Equivalent AverageTax Equivalent AverageTax Equivalent
     BalanceYield/Rate BalanceYield/Rate BalanceYield/Rate
    Assets        
    Interest bearing deposits in other banks$42,273 5.39% $66,058 4.96% $324,280 2.29%
    Portfolio investments715,767 2.43% 727,833 2.40% 678,609 1.98%
    Loans held for sale62,350 6.34% 37,594 5.96% 53,769 4.88%
    Portfolio loans1,695,736 6.61% 1,603,126 6.48% 1,414,982 6.05%
    Total interest-earning assets2,516,126 5.48% 2,434,611 5.31% 2,471,640 4.47%
    Nonearning assets205,770   185,342   174,182  
    Total assets$2,721,896   $2,619,953   $2,645,822  
             
    Liabilities and Shareholders’ Equity        
    Interest-bearing deposits$1,619,478 1.75% $1,568,173 1.56% $1,517,033 0.28%
    Borrowings76,681 4.73% 54,602 4.11% 24,573 2.92%
    Total interest-bearing liabilities1,696,159 1.88% 1,622,775 1.65% 1,541,606 0.32%
             
    Noninterest-bearing demand deposits747,147   735,615   846,764  
    Other liabilities52,078   34,514   36,446  
    Shareholders’ equity226,512   227,049   221,006  
    Total liabilities and shareholders’ equity$2,721,896   $2,619,953   $2,645,822  
    Net spread 3.60%  3.66%  4.15%
    NIM 4.15%  4.14%  4.22%
    NIMTE* 4.21%  4.21%  4.27%
    Cost of funds 1.31%  1.13%  0.21%
    Average portfolio loans to average        
    interest-earning assets67.39%  65.85%  57.25% 
    Average portfolio loans to average total deposits71.65%  69.59%  59.86% 
    Average non-interest deposits to average        
    total deposits31.57%  31.93%  35.82% 
    Average interest-earning assets to average        
    interest-bearing liabilities148.34%  150.03%  160.33% 
                

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

     3Q23 vs. 2Q233Q23 vs. 3Q22
    Nonaccrual interest adjustments—%(0.16)%
    Impact of SBA Paycheck Protection Program loans—%(0.08)%
    Interest rates on loans and liabilities and loan fees, all other loans(0.11) %0.02%
    Volume and mix of other interest-earning assets and liabilities0.11%0.16%
    Change in NIMTE*—%(0.06)%
        

    Additional Financial Information
    (Dollars in thousands)
    (Unaudited)

    Average Balances, Yields, and Rates     
     Year-to-date
     September 30, 2023 September 30, 2022
      Average  Average
     AverageTax Equivalent AverageTax Equivalent
     BalanceYield/Rate BalanceYield/Rate
    Assets     
    Interest bearing deposits in other banks$79,362 4.82% $414,159 0.93%
    Portfolio investments 723,693 2.41%  587,084 1.64%
    Loans held for sale 40,433 6.06%  55,363 4.05%
    Portfolio loans 1,608,293 6.46%  1,397,789 5.62%
    Total interest-earning assets 2,451,781 5.30%  2,454,395 3.88%
    Nonearning assets 192,430    167,835  
    Total assets$2,644,211   $2,622,230  
          
    Liabilities and Shareholders' Equity     
    Interest-bearing deposits$1,577,308 1.51% $1,518,997 0.20%
    Borrowings 52,075 4.23%  24,674 2.91%
    Total interest-bearing liabilities 1,629,383 1.60%  1,543,671 0.24%
          
    Noninterest-bearing demand deposits 746,251    816,741  
    Other liabilities 42,596    34,451  
    Shareholders' equity 225,981    227,367  
    Total liabilities and shareholders' equity$2,644,211   $2,622,230  
    Net spread 3.70%  3.64%
    NIM 4.17%  3.69%
    NIMTE* 4.24%  3.73%
    Cost of funds 1.10%  0.16%
    Average portfolio loans to average interest-earning assets 65.60%   56.95% 
    Average portfolio loans to average total deposits 69.22%   59.84% 
    Average non-interest deposits to average total deposits 32.12%   34.97% 
    Average interest-earning assets to average interest-bearing liabilities 150.47%   159.00% 
              

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

     YTD23 vs.YTD22
    Nonaccrual interest adjustments(0.09)%
    Impact of SBA Paycheck Protection Program loans(0.13)%
    Interest rates and loan fees0.65 %
    Volume and mix of interest-earning assets and liabilities0.08  %
    Change in NIMTE*0.51 %
        

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

    Capital Data (At quarter end)      
     September 30, 2023 June 30, 2023 September 30, 2022 
    Book value per share$40.60  $39.45  $37.09  
    Tangible book value per share*$37.72  $36.60  $34.27  
    Total shareholders’ equity/total assets 8.07 % 8.39 % 7.75 %
    Tangible Common Equity/Tangible Assets* 7.54 % 7.83 % 7.21 %
    Tier 1 Capital / Risk Adjusted Assets 11.67 % 12.13 % 12.98 %
    Total Capital / Risk Adjusted Assets 12.58 % 13.02 % 13.75 %
    Tier 1 Capital / Average Assets 9.02 % 9.28 % 8.97 %
    Shares outstanding 5,548,436   5,610,841   5,681,089  
    Total unrealized loss on AFS debt securities, net of income taxes($26,526) ($27,470) ($32,448) 
    Total unrealized gain (loss) on derivatives and hedging activities, net of income taxes$1,485  $1,028  $1,060  
                 

     

    Profitability Ratios          
     September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 
    For the quarter:          
    NIM4.15%4.14%4.22%4.31%4.22%
    NIMTE*4.21%4.21%4.30%4.36%4.27%
    Efficiency ratio66.64%74.03%78.51%65.23%63.69%
    Return on average assets1.22%0.85%0.76%1.26%1.52%
    Return on average equity14.67%9.85%8.73%15.71%18.18%
               

     

     September 30, 2023 September 30, 2022 
    Year-to-date:    
    NIM4.17%3.69%
    NIMTE* 4.24%3.73%
    Efficiency ratio72.79%70.02%
    Return on average assets0.95%1.13%
    Return on average equity11.11%13.02%
         

    *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
     September
    30, 2023    		 June 30, 2023 March 31,
    2023    		 December
    31, 2022    		 September
    30, 2022
    Net interest income$26,350  $25,142  $25,032  $27,287  $26,311 
    Divided by average interest-bearing assets 2,516,126   2,434,611   2,403,570   2,513,862   2,471,640 
    Net interest margin (“NIM”)2 4.15%  4.14%  4.22%  4.31%  4.22%
              
    Net interest income$26,350  $25,142  $25,032  $27,287  $26,311 
    Plus: reduction in tax expense related to         
    tax-exempt interest income 373   400   429   325   284 
     $26,723  $25,542  $25,461  $27,612  $26,595 
    Divided by average interest-bearing assets 2,516,126   2,434,611   2,403,570   2,513,862   2,471,640 
    NIMTE2 4.21%  4.21%  4.30%  4.36%  4.27%
                        

     

     Year-to-date
     September 30,
    2023    		 September 30,
    2022
    Net interest income$76,524  $67,827 
    Divided by average interest-bearing assets 2,451,781   2,454,395 
    Net interest margin ("NIM")3 4.17%  3.69%
        
    Net interest income$76,524  $67,827 
    Plus: reduction in tax expense related to   
    tax-exempt interest income 1,202   614 
     $77,726  $68,441 
    Divided by average interest-bearing assets 2,451,781   2,454,395 
    NIMTE3 4.24%  3.73%
            

    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.

    *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.

     September
    30, 2023    		 June 30, 2023 March 31,
    2023    		 December
    31, 2022    		 September
    30, 2022
              
    Total shareholders’ equity$225,259 $221,336 $224,425 $218,629 $210,699
    Divided by shares outstanding 5,548  5,611  5,673  5,701  5,681
    Book value per share$40.60 $39.45 $39.56 $38.35 $37.09
     

     

     September
    30, 2023    		 June 30, 2023 March 31,
    2023    		 December
    31, 2022    		 September
    30, 2022
              
    Total shareholders’ equity$225,259 $221,336 $224,425 $218,629 $210,699
    Less: goodwill and intangible assets 15,973  15,977  15,980  15,984  15,990
     $209,286 $205,359 $208,445 $202,645 $194,709
    Divided by shares outstanding 5,548  5,611  5,673  5,701  5,681
    Tangible book value per share$37.72 $36.60 $36.74 $35.55 $34.27
     

    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.

    		September
    30, 2023    		 June 30, 2023 March 31,
    2023    		 December
    31, 2022    		 September
    30, 2022
              
    Total shareholders’ equity$225,259  $221,336  $224,425  $218,629  $210,699 
    Total assets 2,790,189   2,638,207   2,580,037   2,674,318   2,717,514 
    Total shareholders’ equity to total assets 8.07%  8.39%  8.70%  8.18%  7.75%
                        

     

    Northrim BanCorp, Inc.

    		September
    30, 2023    		 June 30, 2023 March 31,
    2023    		 December
    31, 2022    		 September
    30, 2022
    Total shareholders’ equity$225,259  $221,336  $224,425  $218,629  $210,699 
    Less: goodwill and other intangible assets, net 15,973   15,977   15,980   15,984   15,990 
    Tangible common shareholders’ equity$209,286  $205,359  $208,445  $202,645  $194,709 
              
    Total assets$2,790,189  $2,638,207  $2,580,037  $2,674,318  $2,717,514 
    Less: goodwill and other intangible assets, net 15,973   15,977   15,980   15,984   15,990 
    Tangible assets$2,774,216  $2,622,230  $2,564,057  $2,658,334  $2,701,524 
    Tangible common equity ratio 7.54%  7.83%  8.13%  7.62%  7.21%
                        

    *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.

    		September
    30, 2023    		 June 30, 2023 September
    30, 2022
          
    Total shareholders' equity$225,259  $221,336  $210,699 
    Total assets 2,790,189   2,638,207   2,717,514 
    Total shareholders' equity to total assets 8.07%  8.39%  7.75%

     

    Northrim BanCorp, Inc.

    		September
    30, 2023    		 June 30, 2023 September
    30, 2022
          
    Total shareholders' equity$225,259  $221,336  $210,699 
    Less: goodwill and other intangible assets, net 15,973   15,977   15,990 
    Less: unrealized gain (loss) on available for sale securities, net income taxes (26,526)  (27,470)  (32,448)
    Tangible common shareholders' equity, excluding the fair value of the available for sale securities portfolio$235,812  $232,829  $227,157 
          
    Total assets$2,790,189  $2,638,207  $2,717,514 
    Less: goodwill and other intangible assets, net 15,973   15,977   15,990 
    Less: unrealized gain (loss) on available for sale securities, net income taxes (26,526)  (27,470)  (32,448)
    Tangible assets, excluding the fair value of the available for sale securities portfolio$2,800,742  $2,649,700  $2,733,972 
    Tangible common equity ratio, excluding the fair value of the available for sale securities portfolio 8.42%  8.79%  8.31%
                

    Note Transmitted on GlobeNewswire on October 26, 2023, at 12:15 pm Alaska Standard Time.

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

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