GlobeNewswire Inc | Feb 1, 2021 04:15PM EST

February 01, 2021

ANCHORAGE, Alaska, Feb. 01, 2021 (GLOBE NEWSWIRE) -- Northrim BanCorp, Inc. (NASDAQ:NRIM) (Northrim or the "Company") today reported net income of $10.10 million, or $1.59 per diluted share, in the fourth quarter of 2020, compared to $11.86 million, or $1.84 per diluted share, in the third quarter of 2020, and $4.58 million, or $0.69 per diluted share, in the fourth quarter a year ago.

Net income for the full year 2020 increased 59% to $32.89 million, or $5.11 per diluted share, compared to $20.69 million, or $3.04 per diluted share, for the full year 2019. The provision for loan losses increased to $2.4 million in 2020, compared to a $1.2 million benefit for loan loss provisions in 2019. Increased production in the Home Mortgage Lending segment, continued loan and core deposit growth, and fee and interest income from the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") loans contributed to profitability for the year.

Northrims achievements in 2020 were due to increased production in mortgage operations and our success in reaching out to and supporting our customers with the PPP and other products and services, said Joe Schierhorn, President and CEO. The investments we have made in our people, our infrastructure and our technology, all came together in 2020 and have enabled us to help both new and existing customers as we navigate through the economic impact of the pandemic.

Several events occurred in 2020 that contributed to our operating performance during the year, including our participation in economic stimulus programs such as the PPP, and our decision to offer government assisted programs to customers that were new to the bank, Schierhorn continued. Northrims participation in the PPP helped service the needs of our existing customers as well as the 1,200 new customers we were able to help during the year. According to the SBA, Northrim originated more PPP loans in Alaska than any other financial institution in the state, funding 23% of all PPP loans in the state through the period ending September 30, 2020. We were able to help nearly 2,900 Alaskan companies receive PPP funding. With the new round of PPP funding that became available earlier this month, we plan to participate in the new round in an effort to and help business customers that have been impacted by the pandemic.

COVID-19 Update:

-- Industry Exposure: Northrim has identified various industries that may be adversely impacted by the COVID-19 pandemic and the decline in oil prices that occurred in 2020. Though the industries affected may change through the progression of the pandemic, the following sectors for which Northrim has exposure, as a percent of the total loan portfolio excluding SBA PPP loans as of December 31, 2020, are: Tourism (7%), Oil and Gas (6%), Aviation (non-tourism) (5%), Healthcare (8%), Accommodations (3%), Retail (2%) and Restaurants (3%). -- Customer Accommodations: The Company has implemented assistance to help customers experiencing financial challenges as a result of COVID-19 in addition to participation in PPP lending. These accommodations include interest only and deferral options on loan payments, as well as the waiver of various fees related to loans, deposits and other services. The number of loans with modifications has decreased significantly since June 30, 2020 with approximately 93% of the modifications at December 31, 2020 representing five relationships. The total outstanding principal balance of loan modifications due to the impacts of COVID-19 as of December 31, 2020, September 30, 2020 and June 30, 2020 were as follows:

Loan Modifications due to COVID-19 as of December 31, 2020(Dollars in thousands) Interest Only Full Payment Deferral TotalPortfolio loans $ 43,379 $ 22,165 $ 65,544 Number of modifications 23 11 34

Loan Modifications due to COVID-19 as of September 30, 2020(Dollars in thousands) Interest Only Full Payment Deferral TotalPortfolio loans $ 46,056 $ 74,337 $ 120,393 Number of modifications 16 59 75

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

Consumer loans represent less than 1% of total loan modifications identified above. Of the $65.5 million and 34 loan modifications as of December 31, 2020, approximately $53.9 million and 31 loans have entered into a second modification.

Loan Loss Reserve: Northrim booked a benefit for loan loss provisions of $599,000 for the quarter ended December 31, 2020. This compares to a provision for loan losses of $567,000 during the previous quarter and a? $150,000 benefit for loan loss provisions in the fourth quarter a year ago. For the full year 2020, the provision for loan losses was $2.4 million, compared to a benefit for loan loss provisions of $1.2 million for all of 2019.

Credit Quality: Net adversely classified loans were $12.8 million at December 31, 2020, compared to $22.3 million in the fourth quarter a year ago. Net? loan recoveries were $53,000 in the fourth quarter of 2020, compared to net loan recoveries of $101,000 in the fourth quarter of 2019.

Branch Operations: All branches are fully operational, while a number of? customer and employee safety measures continue to be implemented.

? Growth and Paycheck Protection Program:

o For the full year of 2020, Northrim funded a total of 2,888 PPP loans totaling $375.6 million to both existing and new customers. o According to the SBA, the Company originated more SBA PPP loans in the State of Alaska than any other financial institution, funding 23% of the number and 28% of the value of all Alaska PPP loans for the period ending September 30, 2020. o As of December 31, 2020, Northrim customers had received forgiveness through the SBA on 537 PPP loans totaling $65.1 million. o The Company initially utilized the Federal Reserve Bank's Paycheck Protection Program Liquidity Facility to fund PPP loans, but paid back those funds in full during the second quarter and has since funded the SBA PPP loans through core deposits and maturity of long-term investments.

Capital Management: At December 31, 2020, the Company?s tangible common equity to tangible assets^* ratio was 9.76% and the capital of Northrim Bank? (the "Bank") was well in excess of all regulatory requirements. During the fourth quarter of 2020, the Company repurchased the final 45,549 shares of common stock authorized by the Board of Directors under the previously announced stock repurchase authorization at an average price of $28.55.

Fourth Quarter and Full Year 2020 Highlights:

-- For the year 2020, total revenue, which includes net interest income plus other operating income, increased 32% to $134.0 million, compared to $101.8 million in 2019. -- For the fourth quarter of 2020, total revenue increased 41% to $37.0 million, compared to $26.1 million in the fourth quarter of 2019, and decreased compared to $39.9 million in the third quarter of 2020. -- Community Banking provided 58% of total revenues and 50% of earnings in the fourth quarter of 2020. -- Home Mortgage Lending provided 42% of total revenue and 50% of earnings in the fourth quarter of 2020. -- Net interest income in 2020 increased 10% to $70.7 million, from $64.4 million in 2019. -- Net interest income in the fourth quarter of 2020 was $19.2 million, up 5% from $18.3 million in the preceding quarter and up 17% from $16.4 million in the fourth quarter a year ago. -- Net interest margin on a tax equivalent basis (NIMTE)* was 4.05% for the year, a 65-basis point contraction compared to 2019. -- NIMTE* was 3.96% in the fourth quarter of 2020, a 3-basis point increase compared to the preceding quarter, and a 56-basis point contraction compared to the fourth quarter a year ago. -- Return on average assets ("ROAA") was 1.90% and return on average equity ("ROAE") was 18.22% for the fourth quarter of 2020 and ROAA was 1.70% and ROAE was 15.53% for the year 2020. -- Net loans increased 39% to $1.42 billion at December 31, 2020, compared to $1.02 billion at December 31, 2019, and decreased compared to $1.47 billion at September 30, 2020. -- Total deposits increased 33% to $1.82 billion at December 31, 2020, compared to $1.37 billion at December 31, 2019, and increased 1% compared to $1.81 billion at September 30, 2020. -- The Company's wholly owned subsidiary, Residential Mortgage, LLC, generated a $200.8 million increase in production during the quarter ended December 31, 2020, as compared to the same period in 2019. -- The decrease in mortgage interest rates resulted in a decrease of the Bank's mortgage servicing rights by $1.2 million for the quarter ended December 31, 2020, compared to a decrease of $1.5 million for the preceding quarter and a decrease of $321,000 for the fourth quarter a year ago.

Financial Three Months EndedHighlights(Dollars inthousands, December 31, 2020 September 30, June 30, 2020 March 31, 2020 December 31, 2019except per 2020share data)Total assets $ 2,121,798 $ 2,097,738 $ 2,016,705 $ 1,691,262 $ 1,643,996 Totalportfolio $ 1,444,050 $ 1,492,720 $ 1,433,201 $ 1,081,873 $ 1,043,371 loansAverageportfolio $ 1,489,029 $ 1,465,839 $ 1,342,717 $ 1,059,023 $ 1,027,728 loansTotal $ 1,824,981 $ 1,806,133 $ 1,737,359 $ 1,395,492 $ 1,372,351 depositsAverage $ 1,820,251 $ 1,750,167 $ 1,620,008 $ 1,359,206 $ 1,361,786 depositsTotalshareholders' $ 221,575 $ 214,616 $ 206,923 $ 197,723 $ 207,117 equityNet income $ 10,100 $ 11,855 $ 9,900 $ 1,033 $ 4,580 Dilutedearnings per $ 1.59 $ 1.84 $ 1.52 $ 0.16 $ 0.69 shareReturn onaverage 1.90 % 2.31 % 2.04 % 0.25 % 1.11 %assetsReturn onaverage 18.22 % 22.10 % 19.44 % 2.00 % 8.74 %shareholders'equityNIM 3.94 % 3.90 % 3.98 % 4.32 % 4.48 %NIMTE^* 3.96 % 3.93 % 4.02 % 4.37 % 4.52 %Efficiency 65.31 % 58.85 % 64.76 % 84.87 % 78.79 %ratioTotalshareholders' 10.44 % 10.23 % 10.26 % 11.69 % 12.60 %equity/totalassetsTangiblecommon equity 9.76 % 9.54 % 9.54 % 10.84 % 11.73 %/tangibleassets^*Book value $ 35.45 $ 34.18 $ 32.49 $ 31.06 $ 31.58 per shareTangible bookvalue per $ 32.88 $ 31.62 $ 29.97 $ 28.53 $ 29.12 share^*Dividends per $ 0.35 $ 0.35 $ 0.34 $ 0.34 $ 0.33 share



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

Alaska Economic Update(Note: sources for information included in this section are included on page 14.)

2020 was an unprecedented year in just about every economic measure. Mark Edwards, EVP Chief Credit Officer and Bank Economist summarized, wild swings in oil prices and unemployment resulting from government mandated business closures were then supported by trillions of dollars, with billions flowing to Alaska, in assistance programs in an attempt to counteract the negative economic impact of these health policies. Despite the economic shocks from COVID-19, housing prices and the number of home sales increased sharply in Alaska as long-term interest rates fell.

Employment data from the State of Alaska is available through November. Total payroll jobs were 293,500 for November 2020, down 7.4% compared to the same period in 2019. Leisure and hospitality was the hardest hit, down 22% year over year, a loss of 7,000 jobs. Transportation, Warehousing and Utilities declined 14.9% or 3,100 since last November. Direct Oil and Gas jobs fell 29.9% or 2,900 jobs. Professional and Business Services has also been negatively impacted, down 8.1% or 2,200 jobs over the last 12 months.

Alaskas annualized and seasonally adjusted gross state product (GSP) was $50.4 billion in the third quarter of 2020, compared to $54.5 billion in the third quarter of 2019, according to the Federal Bureau of Economic Analysis ("BEA") in a report released on December 23, 2020. Alaskas real GSP increased by 0.7% in 2018 and 0.6% in 2019. 2020 has been very erratic due to COVID-19. Alaskas GSP declined 6% at a seasonally adjusted annualized rate in the first quarter of 2020 and declined 33.8% in second quarter. However, in the third quarter of 2020 the GSP in Alaska improved 32.2% at an annualized rate. This is very similar to the nationwide averages for the U.S. which saw a decline of 5% in the first quarter of 2020, a loss of 31.4% in the second quarter and a positive improvement of 33.4% in the third quarter. In the third quarter of 2020 in Alaska, the largest improvements came from Transportation and Warehousing, Government, Health Care and Accommodation and Food Services.

Alaskas seasonally adjusted personal income for the third quarter of 2020 was $48.6 billion compared to $46 billion in the third quarter of 2019, according to a report released by the BEA on December 17, 2020. In a typical year, the majority of personal income is derived from wage earnings. Additionally, some people receive government transfer payments, such as social security, Medicare and Medicaid. Personal income is further supported by earnings from dividends, interest and rents.

In the second quarter of 2020, Alaskas personal income rose by $2.6 billion compared to the prior year as government transfer payments rose by $4.9 billion, according to the BEA, mainly from COVID-19 stimulus money. This was somewhat offset by a $2.2 billion reduction in wage income and a $139 million decrease in investment and rental income. In the third quarter of 2020, these two major segments of income reversed. Wage earnings improved by $2.6 billion and government transfer payments decreased by $3.5 billion compared to the prior quarter. Investment and rental income was relatively unchanged, down $55 million. The net effect of all this movement is personal income is $2.6 billion or 5.6% higher in the third quarter of 2020 in Alaska than where it was in the third quarter of 2019.

This is similar to what has occurred across the country. Government transfer payments in the U.S. increased $2.45 trillion in the second quarter of 2020, while wage declines were a much smaller $920 billion. Then there was a reduction of government transfer payments in the third quarter of $1.3 trillion, somewhat offset by an improvement of $814 billion in wage earnings in the U.S. In the U.S., personal income is $1.3 trillion or 7.1% higher in the third quarter of 2020 than it was in the third quarter of 2019.

Alaska North Slope (ANS) crude oil had monthly averages in 2018 and 2019 ranging from $58.86 to $80.03 a barrel. ANS began 2020 at $65.48. Prices fell quickly at the beginning of the year, responding to fears that COVID-19 would devastate the global economy and reduce the demand for travel. The low month was April when ANS averaged $16.54 a barrel. However, by June the oil markets stabilized and for the last six months the average monthly price remained between $40.42 and $43.55. The November monthly average was $42.91. ANS daily prices rose above $50 a barrel on December 10th and finished the year at $52.19.

Alaskas crude oil production averaged 485,300 barrels per day (bpd) in fiscal year (FY) 2020, which ended in June. This was a decrease of 4.8% compared to the previous FY end. Total output declined 1.2% in FY 2018 and 4.5% in FY 2019. The State Department of Revenue forecasts production on the North Slope to increase by 0.7% in FY 2021 to 488,900 bpd.

Alaskas home mortgage delinquency and foreclosure levels continue to be better than most of the nation. According to the Mortgage Bankers Association, Alaskas foreclosure rate was 0.49% at the end of the third quarter 2020, an improvement from 0.71% in the third quarter of 2019. The comparable national average rate was slightly higher at 0.59% in the third quarter of 2020, but also improved from 0.84% for the same period in 2019. The survey reported that the percentage of delinquent mortgage loans in Alaska was 6.78% at the end of September 2020, up from 3.16% for the third quarter of 2019. The comparable delinquency rate for the entire country was higher at 7.6% in the third quarter of 2020, also higher than 4.09% for the same period in 2019.

According to the Multiple Listing Services, the average sales price of a single family home in Anchorage rose 5.9% in 2020 to $396,918. This is following increases of 0.5% and 2.3% in 2019 and 2018 respectively. Average sales prices in the Matanuska Susitna Borough rose 10% in 2020, continuing a decade of price gains. These two markets represent where the vast majority of the banks residential building activity occurs.

The number of units sold in Anchorage was up significantly in 2020 by 19.3%, climbing from 2,719 homes sold in 2019 to 3,244 last year. The Matanuska Susitna Borough also had strong sales activity, up 9.5% in 2020 to 2,131 units sold. Mr. Edwards commented, the main difference was a record number of sales occurred in the last quarter of the year, when sales activity typically declines in the winter. The low interest rate environment has been a major factor.

According to the Federal Reserve Bank of St. Louis, the average 30 year fixed rate mortgage in the U.S. is at all-time record lows. Rates began 2020 at 3.72% in the first week of January and have fallen more than a percent to 2.67% in the last week of December 2020.

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

Review of Income Statement

Consolidated Income Statement

In the fourth quarter of 2020, Northrim generated a ROAA of 1.90% and a ROAE of 18.22%, compared to 2.31% and 22.10%, respectively, in the third quarter of 2020 and 1.11% and 8.74%, respectively, in the fourth quarter a year ago. Northrims ROAA and ROAE are above peer averages posted by the SNL Small Cap U.S. Bank Index with total market capitalization between $250 million and $1 billion as of September 30, 20201.

Net Interest Income/Net Interest Margin

Net interest income increased 17% to $19.2 million in the fourth quarter of 2020 compared to $16.4 million in the fourth quarter of 2019 and increased 5% compared to $18.3 million in the third quarter of 2020. Interest income benefited from the growth in the loan portfolio, excluding PPP loans, during the fourth quarter of 2020, as well as the amortization of PPP loan fees and the full recognition of the deferred PPP loan fees upon forgiveness.

NIMTE* was 3.96% in the fourth quarter of 2020 compared to 3.93% in the preceding quarter and 4.52% in the fourth quarter a year ago. The decline in our NIMTE* compared to the prior year was impacted by the 150 basis point reduction in short-term interest rates during the last twelve months and the mix of our earning assets due to the increased liquidity of the Bank, said Jed Ballard, Chief Financial Officer. Also notable was the impact of SBA PPP loans, which increased our NIMTE* by 7 basis points during the fourth quarter of 2020 compared to what our NIMTE* would have been if we had not made any SBA PPP loans, or 3.89%. For the year, SBA PPP loans decreased our NIMTE* by 12 basis points compared to what our NIMTE* would have been if we had not made any SBA PPP loans or 4.17%. Northrims NIMTE* continues to remain above the peer average posted by the SNL Small Cap U.S. Bank Index with total market capitalization between $250 million and $1 billion as of September 30, 20201.

The yield on interest earning assets in the fourth quarter of 2020 was 4.24%, down one basis point from the third quarter of 2020 and down 73 basis points compared to the fourth quarter a year ago. The cost of funds was 46 basis points in the fourth quarter of 2020, down eight basis points compared to the preceding quarter and down 24 basis points compared to the fourth quarter a year ago.



1As of September 30, 2020, the SNL Small Cap US Bank Index tracked 106 banks with total common market capitalization between $250 million to $1B for the following ratios: NIMTE* of 3.15%. ROAA 1.01%, and ROAE 9.60% .

Provision for Loan Losses

Northrim recorded a benefit for loan loss provision of $599,000 in the fourth quarter of 2020. This compares to a $567,000 provision for loan losses in the third quarter of 2020, and a benefit for loan loss provision of $150,000 in the fourth quarter a year ago. The benefit to the provision for loan losses during the quarter primarily reflects our current assessment of risks associated with the COVID-19 pandemic off-set by an improvement in overall credit quality of the loan portfolio, said Ballard. For the year, Northrim recorded a provision for loan losses of $2.4 million, compared to a benefit for loan losses of $1.2 million in 2019. The total allowance for loan losses to portfolio loans decreased at December 31, 2020, compared to September 30, 2020, primarily due to a decrease in qualitative factors and increased compared to December 31, 2019, primarily due to the increase in loans at December 31, 2020, even when excluding SBA PPP loans which are 100% guaranteed by the government.

Nonperforming loans, net of government guarantees, improved during the quarter to $10.0 million at December 31, 2020, compared to $11.0 million at September 30, 2020, and $14.0 million at December 31, 2019. The allowance for loan losses was 210% of nonperforming loans, net of government guarantees, at the end of the fourth quarter of 2020, compared to 196% three months earlier and 137% 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 $17.7 million, or 48% of total fourth quarter 2020 revenues, as compared to $21.6 million, or 54% of revenues in the third quarter of 2020, and $9.7 million, or 37% of revenues in the fourth quarter of 2019. For the year 2020, other operating income totaled $63.3 million, or 47% of revenues, compared to $37.3 million, or 37% of revenues in 2019. The increase in other operating income in 2020 was due primarily to the increased volume of mortgage activity.

Other notable changes during the quarter include changes in the fair value mark-to-market of the marketable equity securities portfolio, which increased other income by $408,000 in the fourth quarter of 2020, compared to a $375,000 increase in the third quarter of 2020 and a $129,000 increase in the fourth quarter of 2019. There was $206,000 in interest rate swap income in the fourth quarter of 2020. This compares to $726,000 in interest rate swap income in the preceding quarter and $230,000 in interest rate swap income in the fourth quarter of 2019 on the execution of interest rate swaps related to the Company's commercial lending operations.

Other Operating Expenses

Operating expenses were $24.1 million in the fourth quarter of 2020, compared to $23.5 million in the third quarter of 2020, and $20.6 million in the fourth quarter of 2019. Factors impacting other operating expenses include higher salary costs and personnel expenses primarily related to mortgage banking origination volume. The Company also has incurred an increase in FDIC insurance costs during 2020 as a result of asset growth and due to a premium credit that was received from the FDIC in the fourth quarter of 2019, causing a larger increase when comparing quarters. For the year 2020, operating expenses were $89.1 million, up from $76.8 million in 2019.

Income Tax Provision

In the fourth quarter of 2020, Northrim recorded $3.3 million in state and federal income tax expense for an effective tax rate of 24.7% compared to $4.0 million, or 25.2% in the third quarter of 2020 and $1.1 million, or 19.4% in the fourth quarter a year ago. For the year, Northrim recorded $9.6 million in state and federal income tax expense, for an effective tax rate of 22.5% compared to $5.4 million and 20.8% for 2019.

The Company expensed $454,000 in the fourth quarter of 2018 to accrue for a potential increase in tax expense related to an audit that was performed by the State of Alaska for tax years 2014-2016. The Company appealed the State of Alaska's decision on this matter and reversed the tax accrual in the second quarter of 2020. This matter was concluded in the fourth quarter of 2020 in the Company's favor.

Community Banking

In December we celebrated Northrims 30th Anniversary, and we were also awarded the SBAs 2019 Alaska Community Bank of the Year, said Schierhorn. We have always considered our Alaskan communities to be our primary focus, and while growing, we never lost sight of our mission to serve the people and businesses within the communities we support. We will be opening our second Fairbanks branch in February of this year and in March of 2020 we opened a loan production office in Kodiak. We will continue to look for ways to expand our branch network and support our customers and communities.

Net interest income in the Community Banking segment totaled $18.3 million in the fourth quarter of 2020, compared to $17.3 million in the third quarter of 2020 and $16.1 million in the fourth quarter of 2019. Net interest income benefited from $3.8 million of PPP income in the fourth quarter of 2020 and $8.1 million for the year. As of December 31, 2020 there was $5.9 million of unearned loan fees net of costs related to PPP loans.

Other operating income in the Community Banking segment was down for the fourth quarter 2020 compared to the preceding quarter and also the fourth quarter of the prior year. The primary change from the preceding quarter related to the large interest rate swap income in the third quarter of 2020 of $726 thousand compared to $206 thousand in the fourth quarter of 2020. The significant change in other operating income from the prior year fourth quarter was due to a decrease in purchased receivable income as a result of lower average balances in 2020 as many customers have been using proceeds from government stimulus rather than drawing on their accounts receivable lines.

Other operating expense in the Community Banking segment for the fourth quarter of 2020 increased $1.2 million compared to the preceding quarter and $700 thousand compared to the fourth quarter of the 2019. The primary reason for the change from the preceding quarter was due to an increase in the profit share accrual as a result of continued strong performance by the Company through the end of the year. The primary reason for the change in the other operating costs from the fourth quarter of 2019 is due to increased FDIC insurance costs as a result of asset growth of the Company, as well as a credit received in the fourth quarter of 2019 which decreased that quarters costs.

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

Three Months Ended(Dollars inthousands, December 31, September 30, June 30, 2020 March 31, 2020 December 31,except per 2020 2020 2019share data)Net interest $ 18,349 $ 17,388 $ 16,649 $ 15,261 $ 16,080 incomeProvision(benefit) (599 ) 567 404 2,060 (150 )for loanlossesOtheroperating 2,921 3,696 2,308 1,768 3,347 incomeCompensationexpense, netRML ? ? ? ? 468 acquisitionpaymentsOtheroperating 15,536 14,353 14,113 13,612 14,765 expenseIncomebeforeprovision 6,333 6,164 4,440 1,357 4,344 for incometaxesProvisionfor income 1,303 1,249 (124 ) 266 719 taxesNet income $ 5,030 $ 4,915 $ 4,564 $ 1,091 $ 3,625 Weightedaverageshares 6,324,461 6,413,221 6,440,898 6,560,593 6,647,510 outstanding,dilutedDilutedearnings per $ 0.79 $ 0.76 $ 0.70 $ 0.17 $ 0.55 share

Year-to-date(Dollars in thousands, except per share data) December 31, December 31, 2020 2019Net interest income $ 67,647 $ 63,201 (Benefit) provision for loan losses 2,432 (1,175 )Other operating income 10,693 13,145 Compensation expense, net RML acquisition ? 468 paymentsOther operating expense 57,614 54,520 Income before provision for income taxes 18,294 22,533 Provision for income taxes 2,694 4,408 Net income $ 15,600 $ 18,125 Weighted average shares outstanding, diluted 6,431,367 6,808,209 Diluted earnings per share $ 2.42 $ 2.66

Home Mortgage Lending

The significant activity in the mortgage market has continued through the fourth quarter of 2020, due to the low interest rate environment and the hard work of our mortgage lending teams, said Ballard. Refinance activity was particularly robust, up 233% compared to the fourth quarter a year ago, while home purchases in our market also remain strong.

During the fourth quarter of 2020, mortgage loan volume was $381.9 million, of which 52% was for new home purchases, compared to $364.2 million and 61% of loans funded for new home purchases in the third quarter of 2020, and $181.1 million, of which 70% was for new home purchases in the fourth quarter of 2019.

Loan fundings increased during the quarter and year-over-year driven by both increased refinance activity and new home purchase activity. This was partially offset by the net change in fair value of mortgage servicing rights, which decreased mortgage banking income by $1.2 million during the fourth quarter of 2020.

Our mortgage servicing business, which we initiated to service loans primarily for the Alaska Housing Finance Corporation, generated continued growth during the quarter, said Ballard. As of December 31, 2020, Northrim serviced 2,819 loans in its $683.1 million home-mortgage-servicing portfolio, which is a 4% increase from the $655.7 million serviced for the third quarter of 2020, and a 4% increase from the $659.0 million serviced a year ago. Delinquencies in the loan servicing portfolio totaled $31.4 million at December 31, 2020, compared to $10.4 million at December 31, 2019. Mortgage servicing revenue contributed $2.5 million to revenues in the fourth quarter of 2020 compared to $2.0 million in the third quarter of 2020 and $1.7 million in the fourth quarter of 2019. As a result of COVID-19, approximately 5% of mortgages serviced were in forbearance as of December 31, 2020, compared to 6% as of September 30, 2020, and 2% as of December 31, 2019.

Total mortgage servicing income fluctuates based on the number of mortgage servicing rights originated during the period and changes in the fair value of those servicing rights. The fair value of mortgage servicing rights are driven by interest rate volatility and the number of serviced mortgages that pay off during the period as well as fluctuations in estimated prepayment speeds based on published industry metrics. The change in the fair value of mortgage servicing rights was a decrease of $1.2 million for the fourth quarter of 2020, compared to a decrease of $1.5 million for the third quarter of 2020 and a decrease of $321,000 for the fourth quarter of 2019.

For the full year 2020, the change in fair value of mortgage servicing rights was a decrease of $5.6 million as compared to a decrease of $2.6 million for 2019, as a result of the historically low mortgage rates during 2020.

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

Three Months Ended(Dollars inthousands, December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019except pershare data)Mortgage $ 150,276 $ 257,304 $ 206,274 $ 197,892 $ 48,796 commitmentsMortgageloans funded $ 381,942 $ 364,159 $ 381,086 $ 168,224 $ 181,102 for saleMortgageloanrefinances 48 % 39 % 65 % 46 % 30 %to totalfundingsMortgageloans $ 683,117 $ 655,733 $ 655,183 $ 678,096 $ 659,048 serviced forothers Net realizedgains on $ 15,557 $ 14,736 $ 11,322 $ 4,643 $ 5,215 mortgageloans soldChange infair valueof mortgage (2,724 ) 1,943 3,579 (545 ) (455 ) loancommitments,netTotalproduction 12,833 16,679 14,901 4,098 4,760 revenueMortgageservicing 2,510 2,044 1,633 1,327 1,679 revenueChange infair valueof mortgage servicingrights:Due tochanges inmodel inputs (410 ) (699 ) (891 ) (701 ) 72 ofassumptions^1Other^2 (783 ) (806 ) (1,037 ) (229 ) (393 ) Totalmortgage 1,317 539 (295 ) 397 1,358 servicingrevenue, netOthermortgage 661 714 621 170 270 bankingrevenueTotalmortgage $ 14,811 $ 17,932 $ 15,227 $ 4,665 $ 6,388 bankingincome Net interest $ 875 $ 906 $ 808 $ 429 $ 330 incomeMortgagebanking 14,811 17,932 15,227 4,665 6,388 incomeOtheroperating 8,611 9,153 8,561 5,175 5,382 expenseIncomebeforeprovision 7,075 9,685 7,474 (81 ) 1,336 for incometaxesProvisionfor income 2,005 2,745 2,138 (23 ) 381 taxesNet income $ 5,070 $ 6,940 $ 5,336 ($ 58 ) $ 955 Weightedaverageshares 6,324,461 6,413,221 6,440,898 6,560,593 6,647,510 outstanding,dilutedDilutedearnings per $ 0.80 $ 1.08 $ 0.82 ($ 0.01 ) $ 0.14 share

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 December 31, 2020 December 31, 2019data)Mortgage loans funded for sale $ 1,295,411 $ 684,297 Mortgage loan refinances to total fundings 50 % 26 % Net realized gains on mortgage loans sold $ 46,258 $ 19,813 Change in fair value of mortgage loan 2,253 21 commitments, netTotal production revenue 48,511 19,834 Mortgage servicing revenue 7,514 6,115 Change in fair value of mortgage servicing rights:Due to changes in model inputs of (2,701 ) (1,312 ) assumptions^1Other^2 (2,855 ) (1,295 ) Total mortgage servicing revenue, net 1,958 3,508 Other mortgage banking revenue 2,166 859 Total mortgage banking income $ 52,635 $ 24,201 Net interest income $ 3,018 $ 1,241 Mortgage banking income 52,635 24,201 Other operating expense 31,500 21,850 Income before provision for income taxes 24,153 3,592 Provision for income taxes 6,865 1,026 Net income $ 17,288 $ 2,566 Weighted average shares outstanding, 6,431,367 6,808,209 dilutedDiluted earnings per share $ 2.69 $ 0.38

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

Northrims total assets increased to $2.12 billion at December 31, 2020, up 1% from the preceding quarter and up 29% from a year ago. Northrims loan-to-deposit ratio was 79% at December 31, 2020, down from 83% at September 30, 2020 and up from 76% at December 31, 2019.

Average interest-earning assets were $1.94 billion in the fourth quarter of 2020, up 4% from $1.87 billion in the third quarter of 2020 and up 33% from $1.45 billion in the fourth quarter a year ago. The average yield on interest-earning assets was 4.24% in the fourth quarter of 2020, down from 4.25% in the preceding quarter and 4.97% in the fourth quarter a year ago.

Average investment securities increased to $231.9 million in the fourth quarter of 2020, compared to $217.6 million in the third quarter of 2020 and decreased compared to $279.8 million in the fourth quarter a year ago. The average net tax equivalent yield on the securities portfolio was 1.73% for the fourth quarter of 2020, down from 2.11% in the preceding quarter and 2.65% in the year ago quarter. The average estimated duration of the investment portfolio at December 31, 2020, was 2.9 years. In an effort to diversify its investment portfolio into higher yielding, longer duration assets, Northrim added $10.0 million of investment securities, classified as held to maturity on the books at December 31, 2020.

Much of the loan production during the third and fourth quarters resulted from new customers we obtained through the PPP process, said Ballard. At December 31, 2020, commercial loans represented 33% of total loans, PPP loans represented 21% of total loans, commercial real estate owner occupied loans comprised 11% of total loans, commercial real estate non-owner occupied loans comprised 24% of total loans, and construction loans made up 8% of total loans. Portfolio loans were $1.44 billion at December 31, 2020, down 3% from the preceding quarter and up 38% from a year ago. Portfolio loans excluding the impact from PPP were $1.14 billion at December 31, 2020, up 1% from the preceding quarter and up 9% from a year ago. Average portfolio loans in the fourth quarter of 2020 were $1.49 billion, up 2% from the preceding quarter and up 45% from a year ago. Yields on average portfolio loans in the fourth quarter of 2020 increased to 5.00% from 4.83% in the third quarter of 2020 and decreased compared to 5.94% in the fourth quarter of 2019.

Alaskans continue to account for substantially all of Northrims deposit base, which is primarily made up of low-cost transaction accounts. At December 31, 2020, balances in transaction accounts represented 90% of total deposits. Total deposits were $1.82 billion at December 31, 2020, up 1% from $1.81 billion at September 30, 2020, and up 33% from $1.37 billion a year ago. Demand deposits increased 42% year-over-year to $643.8 million at December 31, 2020. Average interest-bearing deposits were up 6% to $1.14 billion with an average cost of 0.40% in the fourth quarter of 2020, compared to $1.08 billion and an average cost of 0.49% in the third quarter of 2020, and up 25% compared to $910.4 million and an average cost of 0.65% in the fourth quarter of 2019.

In 2020, we captured market share in all of our markets by adding new customer relationships and strong future growth opportunities. Our lenders, retail bankers and commercial cash managers have worked hard to meet the needs of our customers and are contributing to our success, said Michael Martin, the Bank's Chief Operating Officer and General Counsel.

Shareholders equity was $221.6 million, or $35.45 per share, at December 31, 2020, compared to $214.6 million, or $34.18 per share, at September 30, 2020 and $207.1 million, or $31.58 per share, a year ago. Tangible book value per share* was $32.88 at December 31, 2020, compared to $31.62 at September 30, 2020, and $29.12 per share a year ago. Northrim continues to maintain capital levels in excess of the requirements to be categorized as well-capitalized with Tier 1 Capital to Risk Adjusted Assets of 14.20% at December 31, 2020, compared to 14.11% at September 30, 2020, and 14.38% at December 31, 2019.

Asset Quality

Credit quality continued to improve throughout the year, with nonperforming loans at December 31, 2020 decreasing 28% compared to a year ago and decreasing 9% compared to three months earlier, said Martin. We are being diligent with monitoring the loan portfolio and working closely with our customers given the current economic environment.

Nonperforming assets ("NPAs") net of government guarantees were $16.3 million at December 31, 2020, down from $17.9 million at September 30, 2020 and $19.9 million a year ago. Of the NPAs, $6.8 million, or 42% are nonaccrual loans related to five commercial relationships. Two of these relationships, which totaled $2.4 million at December 31, 2020, are businesses in the medical industry.

Net adversely classified loans were $12.8 million at December 31, 2020, as compared to $14.5 million at September 30, 2020, and $22.3 million a year ago. Net loan recoveries were $53,000 in the fourth quarter of 2020, compared to net loan recoveries of $463,000 in the third quarter of 2020, and net loan recoveries of $101,000 in the fourth quarter of 2019. Adversely classified loans are loans that Northrim has classified as substandard, doubtful, and loss, net of government guarantees. As of December 31, 2020, $9.9 million, or 78% of net adversely classified loans are attributable to ten relationships with six loans to commercial businesses, two loans to medical businesses, and two loans to oilfield services commercial businesses.

Performing restructured loans that were not included in nonaccrual loans at December 31, 2020, net of government guarantees were $832,000, down from $865,000 three months earlier and from $1.4 million a year ago. Borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, term extensions, or payment alterations are categorized as restructured loans, unless it is the result of the COVID-19 global pandemic. The Company presents restructured loans that are performing separately from those that are classified as nonaccrual to provide more information on this category of loans and to differentiate between accruing performing and nonperforming restructured loans.

Excluding SBA PPP loans, Northrim had $78.9 million, or 7% of portfolio loans, in the tourism sector; $56.1 million, or 5% of portfolio loans, in the aviation (non-tourism) sector; $96.9 million, or 8% of total portfolio loans, in the healthcare sector; $37.2 million, or 3% in the accommodations sector; $17.4 million, or 2% in retail loans; and $31.0 million, or 3% in the restaurant sector, as of December 31, 2020.

Northrim estimates that $65.1 million, or approximately 6% of portfolio loans excluding SBA PPP loans, had direct exposure to the oil and gas industry in Alaska, as of December 31, 2020, and $1.4 million of these loans are adversely classified. As of December 31, 2020, Northrim has an additional $63.5 million in unfunded commitments to companies with direct exposure to the oil and gas industry in Alaska, and none of these unfunded commitments are considered to be adversely classified loans. Northrim defines direct exposure to the oil and gas sector as loans to borrowers that provide oilfield services and other companies that have been identified as significantly reliant upon activity in Alaska related to the oil and gas industry, such as lodging, equipment rental, transportation and other logistics services specific to this industry.

About Northrim BanCorp

Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 16 branches in Anchorage, the Matanuska Valley, Soldotna, Juneau, Fairbanks, Ketchikan, and Sitka, and a loan production office in Kodiak, serving 90% of Alaskas population; and an asset based lending division in Washington; and a wholly-owned mortgage brokerage company, Residential Mortgage Holding Company, LLC. The Bank differentiates itself with its detailed knowledge of Alaskas 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, managements 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 managements views only as of the date hereof. All statements, other than statements of historical fact, regarding our financial position, business strategy, managements plans and objectives for future operations, and statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic and the related responses of the government are forward-looking statements. When used in this report, the words anticipate, believe, estimate, expect, and intend and words or phrases of similar meaning, as they relate to Northrim and its management are intended to help identify forward-looking statements. Although we believe that managements expectations as reflected in forward-looking statements are reasonable, we cannot assure readers that those expectations will prove to be correct. Forward looking statements, whether concerning the COVID-19 pandemic and the government responses related thereto or otherwise, are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: the uncertainties relating to the impact of COVID-19 on the Company's credit quality, business, operations and employees; the availability and terms of funding from government sources related to COVID-19; the timing of PPP loan forgiveness; our ability to maintain strong asset quality and to maintain or expand our market share or net interest margins; and our ability to execute our business plan. Further, actual results may be affected by our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy as those factors relate to our cost of funds and return on assets. In addition, there are risks inherent in the banking industry relating to collectability of loans and changes in interest rates. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and from time to time are disclosed in our other filings with the Securities and Exchange Commission. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations. These forward-looking statements are made only as of the date of this release, and Northrim does not undertake any obligation to release revisions to these forward-looking statements to reflect events or conditions after the date of this release.

References:

https://www.bea.gov/

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

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

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

www.mba.org

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

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

Income Statement(Dollars inthousands, Three Months Ended Year-to-dateexcept pershare data)(Unaudited) December 31, September 30, December 31, December 31, December 31, 2020 2020 2019 2020 2019Interest Income:Interest andfees on $ 19,587 $ 18,691 $ 15,957 $ 71,091 $ 62,150 loansInterest onportfolio 967 1,086 1,774 5,316 7,011 investmentsInterest ondeposits in 25 17 331 309 922 banksTotalinterest 20,579 19,794 18,062 76,716 70,083 incomeInterest Expense:Interestexpense on 1,144 1,320 1,484 5,279 4,961 depositsInterestexpense on 211 180 168 772 680 borrowingsTotalinterest 1,355 1,500 1,652 6,051 5,641 expenseNet interest 19,224 18,294 16,410 70,665 64,442 income Provision(benefit) (599 ) 567 (150 ) 2,432 (1,175 ) for loanlossesNet interestincome afterprovision (benefit)forloan losses 19,823 17,727 16,560 68,233 65,617 OtherOperating Income:Mortgagebanking 14,811 17,932 6,388 52,635 24,201 incomePurchasedreceivable 538 516 916 2,650 3,271 incomeBankcard 743 770 762 2,837 2,976 feesGain onmarketable 408 375 129 61 911 equitysecuritiesServicecharges on 300 269 333 1,102 1,557 depositaccountsInterestrate swap 206 726 230 949 964 incomeGain on saleof ? ? ? 98 23 securitiesOther income 726 1,040 977 2,996 3,443 Total otheroperating 17,732 21,628 9,735 63,328 37,346 income OtherOperating Expense:Salaries andother 16,826 16,418 13,884 61,137 51,317 personnelexpenseDataprocessing 2,015 1,851 1,804 7,668 7,128 expenseOccupancy 1,701 1,648 1,618 6,624 6,607 expenseProfessionaland outside 951 884 681 3,157 2,531 servicesMarketing 739 302 764 2,320 2,373 expenseInsurance 300 315 (35 ) 1,228 557 expenseIntangibleasset 12 12 15 48 60 amortizationexpenseCompensationexpense RMLacquisition ? ? 468 ? 468 payments,netOREOexpense, netrental (250 ) 23 (7 ) (242 ) (193 ) income andgains onsaleOtheroperating 1,853 2,053 1,423 7,174 5,990 expenseTotal otheroperating 24,147 23,506 20,615 89,114 76,838 expense Incomebeforeprovision 13,408 15,849 5,680 42,447 26,125 for incometaxesProvisionfor income 3,308 3,994 1,100 9,559 5,434 taxesNet income $ 10,100 $ 11,855 $ 4,580 $ 32,888 $ 20,691 Basic EPS $ 1.61 $ 1.87 $ 0.70 $ 5.18 $ 3.08 Diluted EPS $ 1.59 $ 1.84 $ 0.69 $ 5.11 $ 3.04 Weightedaverageshares 6,245,254 6,338,465 6,552,471 6,354,687 6,708,622 outstanding,basicWeightedaverageshares 6,324,461 6,413,221 6,647,510 6,431,367 6,808,209 outstanding,diluted

Balance Sheet (Dollars in thousands) (Unaudited) December 31, September 30, December 31, 2020 2020 2019 Assets: Cash and due from banks $ 23,304 $ 31,165 $ 20,518 Interest bearing deposits in other 92,661 69,964 74,906 banksInvestment securities available 247,633 215,369 276,138 for saleMarketable equity securities 9,052 8,534 7,945 Investment securities held to 10,000 ? ? maturityInvestment in Federal Home Loan 2,551 2,508 2,138 Bank stockLoans held for sale 146,178 128,105 67,834 Portfolio loans 1,444,050 1,492,720 1,043,371 Allowance for loan losses (21,136 ) (21,683 ) (19,088 ) Net portfolio loans 1,422,914 1,471,037 1,024,283 Purchased receivables, net 13,922 13,520 24,373 Mortgage servicing rights, at fair 11,218 10,589 11,920 valueOther real estate owned, net 7,289 6,962 7,043 Premises and equipment, net 38,102 38,615 38,422 Lease right of use asset 12,440 12,943 14,306 Goodwill and intangible assets, 16,046 16,058 16,094 netOther assets 68,488 72,369 58,076 Total assets $ 2,121,798 $ 2,097,738 $ 1,643,996 Liabilities: Demand deposits $ 643,825 $ 697,363 $ 451,896 Interest-bearing demand 459,095 427,811 320,264 Savings deposits 308,725 272,624 229,918 Money market deposits 237,705 227,106 205,801 Time deposits 175,631 181,229 164,472 Total deposits 1,824,981 1,806,133 1,372,351 Other borrowings 14,817 13,737 8,891 Junior subordinated debentures 10,310 10,310 10,310 Lease liability 12,378 12,881 14,229 Other liabilities 37,737 40,061 31,098 Total liabilities 1,900,223 1,883,122 1,436,879 Shareholders' Equity: Total shareholders' equity 221,575 214,616 207,117 Total liabilities and $ 2,121,798 $ 2,097,738 $ 1,643,996 shareholders' equity

Additional Financial Information(Dollars in thousands)(Unaudited)

Composition of Portfolio Investments December 31, 2020 September 30, 2020 December 31, 2019 Balance % of Balance % of Balance % of total total totalU.S. Treasury $ 37,547 14.1 % $ 37,691 16.8 % $ 57,480 20.2 %securitiesU.S. Agency 137,054 51.4 % 119,861 53.6 % 154,372 54.4 %securitiesCorporate 40,492 15.2 % 27,215 12.2 % 35,066 12.3 %securitiesMarketableequity 9,052 3.4 % 8,534 3.8 % 7,945 2.8 %securitiesCollateralized 41,684 15.6 % 28,266 12.6 % 25,923 9.1 %loan obligationsAlaskamunicipality, 856 0.3 % 2,336 1.0 % 3,297 1.2 %utility, orstate bondsTotal portfolio $ 266,685 $ 223,903 $ 284,083 investments

Composition of Portfolio Loans December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 Balance % of Balance % of Balance % of Balance % of Balance % of total total total total totalCommercial $ 469,540 33 % $ 460,542 31 % $ 426,675 29 % $ 434,832 40 % $ 412,690 39 %loansSBA PaymentProtection 310,518 21 % 375,636 25 % 353,485 24 % ? ? % ? ? %loansCRE owneroccupied 163,597 11 % 148,993 10 % 154,741 11 % 146,453 13 % 138,891 13 %loansCRE nonowneroccupied 355,694 24 % 364,232 24 % 360,533 25 % 355,753 33 % 355,466 34 %loansConstruction 118,782 8 % 120,619 8 % 114,464 8 % 109,849 10 % 100,626 10 %loansConsumer 37,654 3 % 37,183 2 % 38,310 3 % 39,923 4 % 40,783 4 %loansSubtotal 1,455,785 1,507,205 1,448,208 1,086,810 1,048,456 Unearnedloan fees, (11,735 ) (14,485 ) (15,007 ) (4,937 ) (5,085 ) netTotalportfolio $ 1,444,050 $ 1,492,720 $ 1,433,201 $ 1,081,873 $ 1,043,371 loans

Composition of Deposits December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 Balance % of Balance % of Balance % of Balance % of Balance % of total total total total totalDemand deposits $ 643,825 35 % $ 697,363 38 % $ 680,033 40 % $ 453,003 33 % $ 451,896 33 %Interest-bearing 459,095 25 % 427,811 24 % 400,138 23 % 333,352 24 % 320,264 23 %demandSavings deposits 308,725 17 % 272,624 15 % 261,934 15 % 228,383 16 % 229,918 17 %Money market 237,705 13 % 227,106 13 % 215,735 12 % 207,418 15 % 205,801 15 %depositsTime deposits 175,631 10 % 181,229 10 % 179,519 10 % 173,336 12 % 164,472 12 %Total deposits $ 1,824,981 $ 1,806,133 $ 1,737,359 $ 1,395,492 $ 1,372,351

Additional Financial Information(Dollars in thousands)(Unaudited)

Asset Quality December 31, September 30, December 31, 2020 2020 2019 Nonaccrual loans $ 11,120 $ 12,647 $ 15,356 Loans 90 days past due and 449 ? ? accruingTotal nonperforming loans 11,569 12,647 15,356 Nonperforming loans guaranteed (1,521 ) (1,600 ) (1,405 ) by governmentNet nonperforming loans 10,048 11,047 13,951 Other real estate owned 7,289 6,962 7,043 Repossessed assets 231 779 231 Nonperforming purchased ? 410 ? receivablesOther real estate owned (1,279 ) (1,279 ) (1,279 ) guaranteed by governmentNet nonperforming assets $ 16,289 $ 17,919 $ 19,946 Nonperforming loans, net ofgovernment guarantees / 0.70 % 0.74 % 1.34 %portfolio loansNonperforming loans, net ofgovernment guarantees / portfolio loans,net of government guarantees 0.92 % 1.02 % 1.38 %Nonperforming assets, net ofgovernment guarantees / total 0.77 % 0.85 % 1.21 %assetsNonperforming assets, net ofgovernment guarantees / total assetsnet of government guarantees 0.92 % 1.06 % 1.24 % Performing restructured loans $ 2,355 $ 2,367 $ 1,448 Performing restructured loans (1,523 ) (1,502 ) ? guaranteed by governmentNet performing restructured $ 832 $ 865 $ 1,448 loansNonperforming loans plusperforming restructured loans, net of governmentguarantees $ 10,880 $ 11,912 $ 15,399 Nonperforming loans plusperforming restructured loans, net of governmentguarantees / portfolio loans 0.75 % 0.80 % 1.48 %Nonperforming loans plusperforming restructured loans, net of governmentguarantees / portfolio loans, 0.99 % 1.10 % 1.52 %net of government guaranteesNonperforming assets plusperforming restructured loans, net of governmentguarantees / total assets 0.81 % 0.90 % 1.30 %Nonperforming assets plusperforming restructured loans, net of governmentguarantees / total assets, net 0.97 % 1.12 % 1.33 %of government guarantees Adversely classified loans, net $ 12,768 $ 14,492 $ 22,330 of government guaranteesSpecial mention loans, net of $ 19,063 $ 18,141 $ 19,748 government guaranteesLoans 30-89 days past due andaccruing, net of government guarantees /portfolio loans 0.05 % 0.16 % 0.15 %Loans 30-89 days past due andaccruing, net of government guarantees /portfolio loans, net of 0.07 % 0.22 % 0.15 %government guarantees Allowance for loan losses / 1.46 % 1.45 % 1.83 %portfolio loansAllowance for loan losses /portfolio loans, net of 1.93 % 2.00 % 1.88 %government guaranteesAllowance for loan losses /nonperforming loans, net of 210 % 196 % 137 %government guarantees Gross loan charge-offs for the $ 11 $ 141 $ 11 quarterGross loan recoveries for the $ 64 ($ 604 ) ($ 112 ) quarterNet loan (recoveries) ($ 53 ) ($ 463 ) ($ 101 ) charge-offs for the quarterNet loan (recoveries) $ 384 $ 436 ($ 744 ) charge-offs year-to-dateNet loan (recoveries)charge-offs for the quarter / 0.00 % (0.03 ) % (0.01 ) %average loans, for the quarterNet loan (recoveries)charge-offs year-to-date / average loans,year-to-date annualized 0.03 % 0.05 % (0.07 ) %

Additional Financial Information(Dollars in thousands)(Unaudited)

Nonperforming Assets Rollforward Writedowns Transfers Transfers to to Balance at Additions Payments Performing Balance at September this this /Charge-offs OREO/ REPO Status Sales this December 31, 30, 2020 quarter quarter this quarter this quarter 2020 quarterCommercial loans $6,831 $? ($754 ) ($11 ) ($490 ) $? $? $5,576 Commercial real 4,940 449 (267 ) ? ? ? ? 5,122 estateConstruction 702 ? ? ? ? ? ? 702 loansConsumer loans 174 ? (5 ) ? ? ? ? 169 Non-performingloans guaranteed (1,600 ) ? 79 ? ? ? ? (1,521 ) by governmentTotalnon-performing 11,047 449 (947 ) (11 ) (490 ) ? ? 10,048 loansOther real estate 6,962 490 ? ? ? ? (163 ) 7,289 ownedRepossessed 779 ? ? ? ? ? (548 ) 231 assetsNonperforming purchasedreceivables 410 ? (410 ) ? ? ? ? ? Other real estate owned guaranteedby government (1,279 ) ? ? ? ? ? ? (1,279 ) Totalnon-performing assets,net of government $17,919 $939 ($947 ) ($11 ) ($490 ) $? ($711 ) $16,289 guarantees

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

Loan Charge-offs by Industry Three Months Ended December September June 30, March 31, December 31, 2020 30, 2020 2020 2020 31, 2019Charge-offs: Support for oil and $? $? $? $36 $? gas operationsFood service ? ? ? 99 ? contractorsRetail sales ? ? ? 16 ? Offices of physicians 11 ? ? ? ? Excavation and ? 33 ? ? ? constructionHealth care and ? 108 804 ? ? social assistanceConsumer ? ? ? 14 11 Total charge-offs $11 $141 $804 $165 $11

Additional Financial Information(Dollars in thousands)(Unaudited)

Average Balances, Yields, and Rates Three Months Ended December 31, 2020 September 30, 2020 December 31, 2019 Average Average Average Average Tax Average Tax Average Tax Equivalent Equivalent Equivalent Balance Yield/Rate Balance Yield/Rate Balance Yield/RateAssets Interest bearingdeposits in other $ 84,872 0.12 % $ 60,504 0.11 % $ 79,076 1.64 %banksPortfolio 231,867 1.73 % 217,599 2.11 % 279,841 2.65 %investmentsLoans held for sale 135,776 2.79 % 122,994 3.11 % 68,111 3.76 %Portfolio loans 1,489,029 5.00 % 1,465,839 4.83 % 1,027,728 5.94 %Totalinterest-earning 1,941,544 4.24 % 1,866,936 4.25 % 1,454,756 4.97 %assetsNonearning assets 175,413 172,853 176,871 Total assets $ 2,116,957 $ 2,039,789 $ 1,631,627 Liabilities andShareholders' EquityInterest-bearing $ 1,140,327 0.40 % $ 1,077,193 0.49 % $ 910,402 0.65 %depositsBorrowings 24,819 3.35 % 23,574 3.02 % 19,226 3.42 %Totalinterest-bearing 1,165,146 0.46 % 1,100,767 0.54 % 929,628 0.70 %liabilities Noninterest-bearing 679,924 672,974 451,384 demand depositsOther liabilities 51,363 52,611 42,650 Shareholders' 220,524 213,437 207,965 equityTotal liabilitiesand shareholders' $ 2,116,957 $ 2,039,789 $ 1,631,627 equityNet spread 3.78 % 3.71 % 4.27 %NIM 3.94 % 3.90 % 4.48 %NIMTE^* 3.96 % 3.93 % 4.52 %Average portfolio loans to averageinterest-earning 76.69 % 78.52 % 70.65 % assetsAverage portfolioloans to average 81.80 % 83.75 % 75.47 % total depositsAveragenon-interest deposits to averagetotal deposits 37.35 % 38.45 % 33.15 % Averageinterest-earning assets to averageinterest-bearing 166.64 % 169.60 % 156.49 % liabilities

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

4Q20 vs. 3Q20 4Q20 vs. 4Q19Nonaccrual interest adjustments (0.19 ) % (0.04 ) %Impact of SBA Paycheck Protection Program loans 0.40 % 0.07 %Interest rates and loan fees (0.11 ) % (0.63 ) %Volume and mix of interest-earning assets and (0.07 ) % 0.04 %liabilitiesChange in NIMTE* 0.03 % (0.56 ) %

Additional Financial Information(Dollars in thousands)(Unaudited)

Average Balances, Yields, and Rates Year-to-date December 31, 2020 December 31, 2019 Average Average Average Tax Average Tax Equivalent Equivalent Balance Yield/Rate Balance Yield/RateAssets Interest bearingdeposits in other $ 66,260 0.46 % $ 46,404 1.96 %banksPortfolio investments 247,384 2.26 % 273,711 2.68 %Loans held for sale 105,287 3.05 % 56,344 3.96 %Portfolio loans 1,339,908 5.08 % 1,010,098 5.96 %Total interest-earning 1,758,839 4.40 % 1,386,557 5.11 %assetsNonearning assets 177,208 169,150 Total assets $ 1,936,047 $ 1,555,707 Liabilities and Shareholders' EquityInterest-bearing $ 1,040,606 0.51 % $ 850,202 0.58 %depositsBorrowings 35,918 2.13 % 33,730 1.98 %Total interest-bearing 1,076,524 0.56 % 883,932 0.64 %liabilities Noninterest-bearing 597,610 426,205 demand depositsOther liabilities 50,192 36,968 Shareholders' equity 211,721 208,602 Total liabilities and $ 1,936,047 $ 1,555,707 shareholders' equityNet spread 3.84 % 4.47 %NIM 4.02 % 4.65 %NIMTE^* 4.05 % 4.70 %Average portfolioloans to average 76.18 % 72.85 % interest-earningassetsAverage portfolioloans to average total 81.79 % 79.14 % depositsAverage non-interestdeposits to average 36.48 % 33.39 % total depositsAverageinterest-earningassets to average 163.38 % 156.86 % interest-bearingliabilities

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

YTD20 vs.YTD19Nonaccrual interest adjustments 0.05 %Impact of SBA Paycheck Protection Program loans (0.12 )%Interest rates and loan fees (0.56 )%Volume and mix of interest-earning assets and liabilities (0.02 )%Change in NIMTE* (0.65 )%

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

Capital Data(At quarter end) December 31, 2020 September 30, 2020 December 31, 2019 Book value $35.45 $34.18 $31.58 per shareTangible bookvalue per $32.88 $31.62 $29.12 share^*Totalshareholders' 10.44 % 10.23 % 12.60 %equity/totalassetsTangibleCommon Equity 9.76 % 9.54 % 11.73 %/TangibleAssets^*Tier 1Capital / 14.20 % 14.11 % 14.38 %Risk AdjustedAssetsTotal Capital/ Risk 15.46 % 15.36 % 15.63 %AdjustedAssetsTier 1Capital / 10.25 % 10.31 % 12.41 %AverageAssetsShares 6,251,004 6,279,304 6,558,809 outstandingUnrealizedgain on AFSdebt $1,260 $1,308 $965 securities,net of incometaxesUnrealizedloss onderivatives ($1,242 ) ($1,543 ) ($534 ) and hedgingactivities

Profitability Ratios December September June 30, March December 31, 2020 30, 2020 2020 31, 2020 31, 2019For the quarter:NIM 3.94 % 3.90 % 3.98 % 4.32 % 4.48 %NIMTE^* 3.96 % 3.93 % 4.02 % 4.37 % 4.52 %Efficiency 65.31 % 58.85 % 64.76 % 84.87 % 78.79 %ratioReturn onaverage 1.90 % 2.31 % 2.04 % 0.25 % 1.11 %assetsReturn onaverage 18.22 % 22.10 % 19.44 % 2.00 % 8.74 %equity

December 31, 2020 December 31, 2019 Year-to-date: NIM 4.02 % 4.65 %NIMTE^* 4.05 % 4.70 %Efficiency ratio 66.47 % 75.43 %Return on average assets 1.70 % 1.33 %Return on average equity 15.53 % 9.92 %

*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 2020 and 2019. The most comparable GAAP measure is net interest margin and the following table sets forth the reconciliation of NIMTE to net interest margin.

Three Months Ended December 31, September 30, June 30, 2020 March 31, 2020 December 31, 2020 2020 2019Net interest $ 19,224 $ 18,294 $ 17,457 $ 15,690 $ 16,410 incomeDivided byaverage 1,941,544 1,866,936 1,762,140 1,461,542 1,454,756 interest-bearingassetsNet interest 3.94 % 3.90 % 3.98 % 4.32 % 4.48 %margin ("NIM")^2 Net interest $ 19,224 $ 18,294 $ 17,457 $ 15,690 $ 16,410 incomePlus: reductionin tax expense related totax-exempt 122 136 168 187 180 interest income $ 19,346 $ 18,430 $ 17,625 $ 15,877 $ 16,590 Divided byaverage 1,941,544 1,866,936 1,762,140 1,461,542 1,454,756 interest-bearingassetsNIMTE^2 3.96 % 3.93 % 4.02 % 4.37 % 4.52 %

Year-to-date December 31, December 31, 2020 2019Net interest income $ 70,665 $ 64,442 Divided by average interest-bearing 1,758,839 1,386,557 assetsNet interest margin ("NIM")^3 4.02 % 4.65 % Net interest income $ 70,665 $ 64,442 Plus: reduction in tax expense related to tax-exempt interest income 613 722 $ 71,278 $ 65,164 Divided by average interest-bearing 1,758,839 1,386,557 assetsNIMTE^3 4.05 % 4.70 %

2Calculated using actual days in the quarter divided by 366 for the quarter ended in 2020 and 365 for quarters ended in 2019.

3Calculated using actual days in the year divided by 366 for year-to-date period in 2020 and 365 for year-to-date period in 2019.

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

Tangible Book Value

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

December 31, September 30, June 30, 2020 March 31, December 31, 2020 2020 2020 2019 Totalshareholders' $ 221,575 $ 214,616 $ 206,923 $ 197,723 $ 207,117 equityDivided byshares 6,251 6,279 6,368 6,366 6,559 outstandingBook value $ 35.45 $ 34.18 $ 32.49 $ 31.06 $ 31.58 per share

December 31, September 30, June 30, 2020 March 31, December 31, 2020 2020 2020 2019 Totalshareholders' $ 221,575 $ 214,616 $ 206,923 $ 197,723 $ 207,117 equityLess:goodwill and 16,046 16,058 16,070 16,082 16,094 intangibleassets $ 205,529 $ 198,558 $ 190,853 $ 181,641 $ 191,023 Divided byshares 6,251 6,279 6,368 6,366 6,559 outstandingTangible bookvalue per $ 32.88 $ 31.62 $ 29.97 $ 28.53 $ 29.12 share

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 December 31, September 30, December 31,BanCorp, Inc. 2020 2020 June 30, 2020 March 31, 2020 2019

Totalshareholders' $ 221,575 $ 214,616 $ 206,923 $ 197,723 $ 207,117 equityTotal assets 2,121,798 2,097,738 2,016,705 1,691,262 1,643,996 Totalshareholders' 10.44 % 10.23 % 10.26 % 11.69 % 12.60 %equity tototal assets

Northrim December 31, September 30, December 31,BanCorp, Inc. 2020 2020 June 30, 2020 March 31, 2020 2019

Totalshareholders' $ 221,575 $ 214,616 $ 206,923 $ 197,723 $ 207,117 equityLess:goodwill andother 16,046 16,058 16,070 16,082 16,094 intangibleassets, netTangiblecommon $ 205,529 $ 198,558 $ 190,853 $ 181,641 $ 191,023 shareholders'equity Total assets $ 2,121,798 $ 2,097,738 $ 2,016,705 $ 1,691,262 $ 1,643,996 Less:goodwill andother 16,046 16,058 16,070 16,082 16,094 intangibleassets, netTangible $ 2,105,752 $ 2,081,680 $ 2,000,635 $ 1,675,180 $ 1,627,902 assetsTangiblecommon equity 9.76 % 9.54 % 9.54 % 10.84 % 11.73 %ratio