Northrim Bancorp Inc.
Annual Report 2010

Plain-text annual report

N o r t h r i m B a n k L o c a t i o n s ANCHORAGE Northrim Headquarters PO Box 241489 Anchorage, AK 99524-1489 907-562-0062 800-478-2265 outside Anchorage northrim.com SouthSide Financial Center 8730 Old Seward Highway West Anchorage Branch & Small Business Center 2709 Spenard Road Midtown Financial Center 3111 C Street Seventh Avenue Branch 517 W. 7th Avenue Huffman Branch 1501 E. Huffman Road Jewel Lake Branch 9170 Jewel Lake Road 36th Avenue Branch 811 E. 36th Avenue EAGLE RivER WASiLLA Eagle River Branch 12812 Old Glenn Highway Wasilla Financial Center 850 E. USA Circle fAiRBANKS BELLEvUE, WASHiNGtON Fairbanks Financial Center Northrim Funding Services 360 Merhar Avenue 170 120th Avenue N.E., Suite 202 PO Box 50245 Bellevue, WA 98015 425-453-1105 A f f i l i a t e d C o m p a n i e s Elliott Cove Capital Management, LLC 1000 2nd Avenue, Suite 1440 Seattle, WA 98104 206-267-2683 elliottcove.com Residential Mortgage, LLC Headquarters 100 Calais Drive Anchorage, AK 99503 907-222-8800 residentialmtg.com Northrim Benefits Group, LLC 2550 Denali Street, Suite 1502 Pacific Portfolio Consulting, LLC and Pacific Portfolio Anchorage, AK 99503 907-263-1401 northrimbenefits.com Trust Company two Union Square 601 Union Street, Suite 4343 Seattle, WA 98101 206-623-6641 pacific-portfolio.com 2010 Financial Snapshot 2010 2009 2008 2007 2006 Unaudited (In Thousands Except Per Share Amounts) Net interest income Provision for loan losses Other operating income Other operating expense Income before income taxes Income taxes Net income Less: Net income attributable to noncontrolling interest Net income attributable to Northrim BanCorp $44,213 5,583 12,377 37,624 13,383 3,918 9,465 399 $9,066 $46,421 7,066 13,084 41,357 11,082 2,967 8,115 $45,814 7,199 11,354 40,394 9,575 3,122 6,453 $49,830 5,513 9,844 34,953 19,208 7,260 11,948 388 $7,727 370 $6,083 290 $11,658 $47,522 2,564 7,766 31,476 21,248 7,978 13,270 296 $12,974 Earnings per share: Basic Diluted Cash dividends per share Assets Portfolio loans Deposits Long-term debt Junior subordinated debentures Shareholders' equity $1.42 1.40 0.44 $1.22 1.20 0.40 $0.96 0.95 0.66 $1.82 1.80 0.57 $2.02 1.99 0.45 $1,054,529 671,812 892,136 4,766 18,558 117,122 $1,003,029 655,039 853,108 4,897 18,558 111,020 $1,006,392 711,286 843,252 15,986 18,558 104,648 $1,014,714 714,801 867,376 1,774 18,558 101,391 $925,620 717,056 794,904 2,174 18,558 95,418 Book value per share Tangible book value per share Net interest margin (tax equivalent) Efficiency ratio Return on assets Return on equity Equity/assets Dividend payout ratio Nonperforming loans/portfolio loans Net charge-offs/average loans Allowance for loan losses/portfolio loans Nonperforming assets/assets $18.21 $16.86 4.92% 65.96% 0.90% 7.87% 11.11% 31.41% 1.70% 0.66% 2.14% 2.07% $17.42 $16.01 5.33% 68.96% 0.79% 7.08% 11.07% 33.18% 2.67% 1.00% 2.00% 3.47% $16.53 $15.06 5.26% 70.05% 0.62% 5.85% 10.40% 68.93% 3.66% 0.86% 1.81% 3.84% $16.09 $14.51 5.89% 58.01% 1.24% 11.70% 10.00% 30.54% 1.59% 0.86% 1.64% 1.56% $15.61 $14.48 5.89% 56.06% 1.46% 14.45% 10.31% 21.43% 0.92% 0.16% 1.69% 0.79% Tax rate Number of banking offices Number of employees (FTE) Northrim BanCorp, Inc. 27% 11 295 34% 11 290 38% 10 302 29% 10 268 38% 10 277 $740,000 $720,000 $700,000 $680,000 $660,000 $640,000 $620,000 $15,000 $13,000 $11,000 $9,000 $7,000 $5,000 $3,000 $1,100,000 $1,050,000 $1,000,000 $950,000 $900,000 $850,000 $800,000 LOANS in $ thousands 2006 2007 2008 2009 2010 NET INCOME ATTRIBUTABLE TO NORTHRIM BANCORP in $ thousands 2006 2007 2008 2009 2010 ASSETS in $ thousands 2006 2007 2008 2009 2010 53,1977,392,594,3016,393,955,1977,452594,3016,393,7 TWENTY YEARS Northrim celebrated our 20th anniversary in December 2010, and we continue to execute well on our original strategies. Good strategy and execution underpin the value Northrim provides to our shareholders. N o r t h r i m B a n k L o c a t i o n s ANCHORAGE Northrim Headquarters PO Box 241489 Anchorage, AK 99524-1489 907-562-0062 800-478-2265 outside Anchorage northrim.com SouthSide Financial Center 8730 Old Seward Highway West Anchorage Branch & Small Business Center 2709 Spenard Road Midtown Financial Center 3111 C Street Seventh Avenue Branch 517 W. 7th Avenue Huffman Branch 1501 E. Huffman Road Jewel Lake Branch 9170 Jewel Lake Road 36th Avenue Branch 811 E. 36th Avenue EAGLE RivER WASiLLA Eagle River Branch 12812 Old Glenn Highway Wasilla Financial Center 850 E. USA Circle fAiRBANKS BELLEvUE, WASHiNGtON Fairbanks Financial Center Northrim Funding Services 360 Merhar Avenue 170 120th Avenue N.E., Suite 202 PO Box 50245 Bellevue, WA 98015 425-453-1105 A f f i l i a t e d C o m p a n i e s Elliott Cove Capital Management, LLC 1000 2nd Avenue, Suite 1440 Seattle, WA 98104 206-267-2683 elliottcove.com Residential Mortgage, LLC Headquarters 100 Calais Drive Anchorage, AK 99503 907-222-8800 residentialmtg.com Northrim Benefits Group, LLC 2550 Denali Street, Suite 1502 Pacific Portfolio Consulting, LLC and Pacific Portfolio Anchorage, AK 99503 907-263-1401 northrimbenefits.com Trust Company two Union Square 601 Union Street, Suite 4343 Seattle, WA 98101 206-623-6641 pacific-portfolio.com $740,000 $720,000 $700,000 $680,000 $660,000 $640,000 $620,000 $15,000 $13,000 $11,000 $9,000 $7,000 $5,000 $3,000 $1,100,000 $1,050,000 $1,000,000 $950,000 $900,000 $850,000 $800,000 LOANS in $ thousands 2006 2007 2008 2009 2010 NET INCOME ATTRIBUTABLE TO NORTHRIM BANCORP in $ thousands 2006 2007 2008 2009 2010 ASSETS in $ thousands 2006 2007 2008 2009 2010 Northrim BanCorp, Inc. 53,1977,392,594,3016,393,955,1977,452594,3016,393,7t r o p e R l a u n n A 0 1 0 2 2010 Financial Snapshot 2010 2009 2008 2007 2006 Unaudited (In Thousands Except Per Share Amounts) Net interest income Provision for loan losses Other operating income Other operating expense Income before income taxes Income taxes Net income Less: Net income attributable to noncontrolling interest Net income attributable to Northrim BanCorp $44,213 5,583 12,377 37,624 13,383 3,918 9,465 399 $9,066 $46,421 7,066 13,084 41,357 11,082 2,967 8,115 $45,814 7,199 11,354 40,394 9,575 3,122 6,453 $49,830 5,513 9,844 34,953 19,208 7,260 11,948 388 $7,727 370 $6,083 290 $11,658 $47,522 2,564 7,766 31,476 21,248 7,978 13,270 296 $12,974 Earnings per share: Basic Diluted Cash dividends per share Assets Portfolio loans Deposits Long-term debt Junior subordinated debentures Shareholders' equity $1.42 1.40 0.44 $1.22 1.20 0.40 $0.96 0.95 0.66 $1.82 1.80 0.57 $2.02 1.99 0.45 $1,054,529 671,812 892,136 4,766 18,558 117,122 $1,003,029 655,039 853,108 4,897 18,558 111,020 $1,006,392 711,286 843,252 15,986 18,558 104,648 $1,014,714 714,801 867,376 1,774 18,558 101,391 $925,620 717,056 794,904 2,174 18,558 95,418 Book value per share Tangible book value per share Net interest margin (tax equivalent) Efficiency ratio Return on assets Return on equity Equity/assets Dividend payout ratio Nonperforming loans/portfolio loans Net charge-offs/average loans Allowance for loan losses/portfolio loans Nonperforming assets/assets Tax rate Number of banking offices Number of employees (FTE) $18.21 $16.86 4.92% 65.96% 0.90% 7.87% 11.11% 31.41% 1.70% 0.66% 2.14% 2.07% 29% 10 268 $17.42 $16.01 5.33% 68.96% 0.79% 7.08% 11.07% 33.18% 2.67% 1.00% 2.00% 3.47% 27% 11 295 $16.53 $15.06 5.26% 70.05% 0.62% 5.85% 10.40% 68.93% 3.66% 0.86% 1.81% 3.84% 34% 11 290 $16.09 $14.51 5.89% 58.01% 1.24% 11.70% 10.00% 30.54% 1.59% 0.86% 1.64% 1.56% 38% 10 302 $15.61 $14.48 5.89% 56.06% 1.46% 14.45% 10.31% 21.43% 0.92% 0.16% 1.69% 0.79% 38% 10 277 MESSAGE To ShAREhoLDERS Net income increased 17% over 2009 and assets grew to $1.05 billion at year end. Northrim’s profits grew in 2010 due to continuing improvement in asset quality, growing operational efficiencies, and important contributions from our affiliated financial services businesses. Nonperforming assets declined 37% year-over-year. Northrim continued to maintain strong capital ratios well above regulatory requirements, with total capital/risk-adjusted assets of 15% at year-end 2010. Alaska has weathered the recession better than almost any other state in the nation, due largely to a natural resources-based economy which continues to benefit from rising commodities and energy prices. Alaska remains one of the few states with a stable fiscal foundation – more than $12 billion in liquid reserves and a Permanent Fund balance of $38.7 billion. Northrim celebrated its 20th anniversary in December 2010, and we continue to execute well on our original strategies: Strong balance sheet with emphasis on capital and liquidity Diversified income sources Focus on asset quality Strategic investments in our business and our people Leadership to build Alaska’s economy Exceptional service and added value for our customers – we call it “Customer First Service” Today’s operating environment for community banks is challenging. Economic growth is flat and loan demand remains weak. The resulting earning asset mix, with more securities and fewer loans, puts downward pressure on margins – and while Northrim’s margin remains high relative to our peers at 4.92%, it is lower than our historical average. The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) imposed as a result of the financial crisis will add significant costs and cut fee income. While many community banks are struggling in this environment, we believe Northrim is well positioned to meet these challenges by skillful execution of our strategies with each decision, large and small, that we make every day. In the pages of this annual report, we’ll highlight our strategies in action. Good strategy and execution underpin the value Northrim provides to our shareholders. As always, we appreciate your continued confidence and support. Marc Langland Chairman & CEO Joe Beedle President 1 2 $1.05B Northrim’s assets at year end 2010 15.33% Total capital/risk-adjusted assets Demand Deposits Interest-bearing Demand Deposits Savings Deposits Alaska CDs Money Market Deposits Time Deposits 3 Demand Deposits Interest-bearing Demand Deposits Savings Deposits Alaska CDs Money Market Deposits Time Deposits DEPOSITSDEPOSITSSTRoNG BALANCE ShEET A robust capital strategy has been the philosophy of the bank from the beginning. Northrim has had a stout balance sheet in both good and bad times – it’s given us the ability to weather loan issues from a position of strength and the foundation to grow when we’ve found the right opportunities. Northrim has one of the highest core deposit ratios in our peer group according to the Uniform Bank Performance Report. We don’t solicit deposits outside of our market area, and we lend money locally. We continue to have a solid base of local deposits, with noninterest-bearing demand deposits at 32% of total deposits. While loan demand has been slow in the past several years due to the soft economy, when demand returns we have a good “inventory” of funds to lend. TOTAL CAPITAL RATIOS 16% 15% 14% 13% 12% 11% 10% 9% Minimum Well - Capitalized Ratio 2006 2007 2008 2009 2010 4 Real Estate Term Commercial Real Estate Construction Home Equity Lines and Other Consumer Real Estate Term Real Estate Term Commercial Commercial Real Estate Construction Real Estate Construction Home Equity Lines and Other Home Equity Lines and Other Consumer Consumer NONPERFORMING ASSETS in $ thousands $42,000 $36,000 $30,000 $24,000 $18,000 $12,000 $6,000 5 2006 2007 2008 2009 2010 FoCUS oN ASSET QUALITY Commercial real estate loans accounted for 46% of Northrim’s loan portfolio and commercial loans comprised 38% of the portfolio at year end. The risk profile of the loan portfolio improved as nonperforming assets declined by $13 million year- over-year and net charge-offs decreased by $2.6 million, or 38%, during this same time period. over the last several years, Northrim’s executive and senior managers have dedicated significant resources to improve its credit quality by creating a Quality Assurance Department to provide detailed and independent underwriting of its largest loans and to develop processes and procedures to manage concentrations within its loan portfolio. In addition, Northrim formed an Executive Loan Management Group comprised of executive and senior managers to focus on identifying, analyzing, and resolving its nonperforming assets. As a result of these efforts, Northrim reduced its nonperforming assets by 37% in 2010. our financial strength allowed us to reduce our other Real Estate owned (oREo) properties without damaging the market. We put good marketing plans and experienced people in place and had accurate assessments of the market and the value of the properties. Through this process we have gained a greater understanding of development projects well beyond what most lenders learn. We’ve used this knowledge to change our loan policy, look at the key risk factors that really make a difference in a development loan – including local government requirements and restrictions and the skills of the third parties who are hired to do design and build work. We remain the largest strategic player in the residential construction segment going forward and expect to continue to be a market leader. LOAN PORTFOLIOLOAN PORTFOLIOLOAN PORTFOLIO37% Reduction in nonperforming assets in 2010 2.07% Percentage of nonperforming assets to total assets 6 STRATEGIC INvESTMENTS At a time when many community banks retrenched in the face of the recession, Northrim continued to make strategic investments to position us for success. We completed the first year of a three- year program to strengthen and improve our information technology infrastructure to increase throughput and uptime for our branches, reduce expense and overhead, provide better availability and back-up of our data, provide greater redundancies, and strengthen our disaster recovery capabilities. We also invested in our core system and customer database to provide better functionality and information. We made improvements to our headquarters office building, which we now own, upgrading elevators and installing new energy- efficient cooling equipment. Northrim signed a five-year agreement with Intuit, one of the leading providers of personal and small business financial services, to continue support and development of our electronic banking platform as customers continue to migrate to self-service options for their banking needs. We also made investments in electronic fraud protection and back-end improvements to our processes to increase efficiency. We closed one branch in Fairbanks when our lease expired, consolidating our operations in our newest branch located in a growing retail area. We also completed a major renovation of our headquarters branch in Anchorage. In 2011, we will evaluate our branch footprint and strategy going forward to maximize the value of our facilities and staff. The company made a significant investment in Northrim’s brand, including thorough market research, an updated logo, and an advertising campaign to build awareness in our markets, as we expect to rely more on market share growth rather than economic growth for the next several years. Finally, we continue to invest in good people who understand the financial industry, Alaska’s economy and our customers. We have an engaged and effective senior management team that works together to lead the company. We’ve made strategic hires in many areas of the bank, and have invested in continuing education that has brought new ideas and perspective to our operations – all while reducing head count. 7 268 Number of full-time equivalent Northrim employees, down from 295 in 2009 8 9 LEADERShIP To BUILD ALASkA’S ECoNoMY Marc Langland and the late Arne Espe built a new bank from scratch because they believed customers wanted a different approach. But, they also wanted to make a difference in the state; to play a role in Alaska’s greater economic environment. Twenty years later, Northrim and its leaders continue to play key roles in the state’s economy. During this period, Northrim has invested more than $2.5 million in Alaska’s universities, including significant financial support of the Institute of Social and Economic Research for a multi-year project to model Alaska’s economy and educate Alaska’s citizens. Northrim’s managers lead and serve on the boards of Alaska’s most influential organizations. In 2010, Northrim launched the Alaskanomics blog to provide news, analysis, and commentary on Alaska’s economy. With contributions from economists, business leaders, policy makers and everyday Alaskans, Alaskanomics.com aims to engage readers in an ongoing conversation about the statewide economy, now and in the future. Northrim sponsors the Associated General Contractors’ annual construction spending forecast and the Resource Development Council’s annual conference on Alaska’s resources. Northrim and our employees support the communities we serve in many ways – through personal and company contributions, individual and company volunteerism, and community leadership. $2.5MM Northrim’s investments in Alaska’s universities 10 INCoME DIvERSITY Northrim’s strategic focus on developing and growing diverse sources of non-interest income continues to be successful for the company, contributing 22% of 2010 revenues. While bank service charges continue to be pressured by new consumer regulations, including the Dodd-Frank Act, electronic banking fees have increased steadily as our customer base has grown and customers manage more of their financial transactions electronically. In the next year, however, these fees may be significantly impacted by regulation. Loan service fees and purchased receivables income also contribute to the bank’s noninterest income. Northrim has invested in financial service affiliates to provide geographic and industry diversity, grow revenues, and provide the bank’s customers with a variety of financial services to meet their individual needs. In 2010, employee benefit plan income from Northrim Benefits Group totaled $1.9 million, up from $1.7 million a year ago. We have been successful in making good referrals of Northrim business customers who are looking for advice in the changing health care insurance market, and many of our customers have benefited from lower premiums. Income from Northrim’s mortgage affiliate, Residential Mortgage, contributed $1.4 million to 2010 non-interest income, down from the near record level of $2.3 million in 2009. historically low mortgage interest rates generated strong refinancing activity in 2010, which is unlikely to continue in 2011. Residential Mortgage is the leading mortgage company in Alaska, with strong brand recognition and an excellent reputation for service, which complements Northrim’s “Customer First Service” philosophy. our two wealth management affiliates, Elliott Cove Capital Management and Pacific Portfolio, also contribute to revenues and add value to our customer relationships. Elliott Cove provides investment advisory services to Northrim Bank customers and other bank customers in the Pacific Northwest, and Pacific Wealth Advisors provides investment advisory, trust, and wealth management services to clients in the Pacific Northwest and Alaska. 11 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 Deposit Service Charges Employee Benefit Plan Income Purchased Receivable Income Electronic Banking Fees Equity in Earnings from Mortgage Affiliate Rental Income Gain on Sale of Securities Other Merchant Credit Card Transaction Fees Loan Service Fees OTHER INCOME in $ thousands 2006 2007 2008 2009 2010 OTHER INCOMENorthrim Benefits Group (NBG) provides group health insurance and benefit plans to businesses and organizations with two to 1,000 employees. NBG is based in Anchorage and assists clients in Alaska and across the country. Founded in 1992, Pacific Portfolio serves affluent individuals, families, corporations, foundations and not-for-profit organizations. As a fee-only advisor, the company sells no investment products, enabling its team of professionals to provide advice in an environment that is free from conflicts of interest. Residential Mortgage, LLC (“Residential Mortgage”) is an Alaskan-owned mortgage company dedicated to providing professional home loan financing. Residential Mortgage has been affiliated with Northrim Bank since the company began operations in 1998. Northrim Bank helped found Elliott Cove Capital Management in 2002. Elliott Cove provides investment management services to a wide range of individual and corporate clients throughout the United States. Their mission is to provide above-average returns with below-average risk through intelligent, disciplined asset allocation. 12 S e n i o r M a n a g e r s From left: Suzanne Whittle, Catherine Claxton, Jim Miller, Sheri Gower, Blythe Campbell, Dennis Bingham, Ben Craig, Joe Beedle, Steve Hartung, Marc Langland, Amber Zins, Len Horst, Lynn Wolfe, Carolyn Jennings, Joe Schierhorn, Chris Knudson, Audrey Amundson, Tara Tetzlaff, Dan Lowell, Gary Conatser. Standing from left: Chris Knudson, Marc Langland, Mark Copeland, Ronald Davis, John Swalling. Seated from left: David Wight, Richard Lowell. Not pictured: Larry Cash, Anthony Drabek and Irene Sparks Rowan. B o a r d o f D i r e c t o r s Marc Langland, Director since 1990 Chairman and CEo Chris Knudson, Director since 1998 Executive vice President and Coo Larry S. Cash, Director since 1995 President and CEo, RIM Architects, LLC since 1986 Mark G. Copeland, Director since 1990 owner of Strategic Analysis, LLC, a management consulting firm, since 1999. Member of Copeland, Landye, Bennett and Wolf, LLP, a law firm, for 30 years prior to that time. Ronald A. Davis, Director since 1997 CEo and Administrator, Tanana valley Clinic until his retirement in 1998. Secretary/Treasurer, Canoe Alaska from 1996 to 1999. vice President, Acordia of Alaska Insurance from 1999 to 2003. 13 Anthony Drabek, Director since 1991 President and CEo, Natives of kodiak, Inc., an Alaska Native corporation, from 1989 to 2010. Chairman and President, koncor Forest Products Company. Richard L. Lowell, Director since 1990 President, Ribelin Lowell and Company, an insurance brokerage firm, from 1985 to 2004. Irene Sparks Rowan, Director since 1991 Director, klukwan, Inc., an Alaska Native corporation, 1988 to 2000, and 2009 to 2010. John C. Swalling, Director since 2002 President and Director, Swalling & Associates, PC, an accounting firm, since 1991. David G. Wight, Director since 2006 President and CEo, Alyeska Pipeline Service Company from 2000 to 2005, following a 40-year career with the Amoco Corporation, which became BP in 1998. 70 years of combined tenure from the executive officers at Northrim Bank Executive Officers Marc Langland, Chairman & Chief Executive Officer**** Joe Beedle, President Steve hartung, Chief Credit Officer* Chris knudson, Chief Operations Officer**** Joe Schierhorn, Chief Financial Officer**** Senior Vice Presidents Audrey Amundson, Accounting Manager, Controller**** Dennis Bingham, Loan Administration Officer Blythe Campbell, Marketing & Communications Manager Catherine Claxton, Commercial Real Estate Loan Manager*** Gary Conatser, Commercial Loan Manager Len horst, Commercial Loan Manager Carolyn Jennings, Branch Administration Manager*** Dan Lowell, Northrim Funding Services Manager* Jim Miller, Senior Credit Officer** Tara Tetzlaff, Construction Loan Manager*** Suzanne Whittle, Information Services & Compliance Manager** Lynn Wolfe, Loan Support Services Manager*** Vice Presidents katie Bates, Electronic Banking Manager* Tammy Breihahn, Community Development Compliance Officer*** Sig Casiano, Construction Loan Officer Bill Cessnun, Commercial Loan Officer Lori Cox, Item Processing Manager* Ben Craig, Chief Technology Officer Latosha Dickinson, Assistant Controller Ray Dinger, Commercial Real Estate Loan Officer** Mark Edwards, Commercial Loan Officer & Bank Economist Barb Ervin, Assistant Branch Administrator* kimberly Farrell Brewington, Commercial Cash Management Officer** Angela Freeman, Small Business & Consumer Loan Manager* Sheri Gower, Human Resources Manager** Glenna hartman, Credit Administration Officer** Janet holland, Facilities Manager** Mike hook, Credit Administration Officer Jesse Janssen, Commercial Loan Officer** Rich Jerger, Project Manager** Josh king, Relationship Manager Paul kirschner, Relationship Manager Jeanine Lillo, Assistant Controller* kelly Lykins-Longlet, Risk Management Officer* kathy Martin, Construction Loan Officer** heidi Moes, Loan Servicing Officer* Mary Perez, Sales & Service Manager* Steve Ponto, Commercial Loan Officer Mark Renner, Commercial Loan Officer Sharon Wright, Loan Documentation Officer** Amber Zins, Internal Audit Manager Assistant Vice Presidents Lisa Adams, Operations Manager Lynn Akers, Branch Sales Manager** Aracelis Bell, Relationship Manager* Robin Bettisworth, Audit Supervisor Erika Bills, Business Development & Retention Officer*** Jay Blury, Marketing Officer Tori Brandon, Credit Administration Officer*** holly Burns, Operations Manager* Cindy Cevasco, Business Development & Retention Officer** Sean Christian, Strategic & Planning Manager* ken Denny, Security Manager Anita Devore, Branch Sales Manager II Esther Fouts, Accounting Supervisor*** Marsha Fry, Commercial Real Estate Portfolio Administrator*** Tina hartley, Special Credits Officer III** Dawn hoxie, Branch Sales Manager*** Fiona Johnson, Branch Sales Manager II Tammy kosa, Branch Sales Manager II* Brigitte Lampert, Branch Sales Manager kelly McCormack, Small Business Loan Officer Darci ornellas, Branch Administration Operations Officer Amy Penrose, Branch Sales Manager II* Rick Pinkerton, Loan Review Officer* Fran Ponge, Branch Sales Manager* heidi Roesler, Human Resources Officer Paula Sanders-Grau, Commercial Cash Management Officer* Ben Schulman, Branch Sales Manager II Bill Simpson, Special Credits Officer III Rodlynn Smallwood, Branch Sales Manager II Rina Suesue, Branch Sales Manager* Mhay Sy, Loan Quality Assurance Officer Sherry Townsend, Community Development Compliance Officer** Chris vaughan, Commercial Loan Officer oziel villasenor, Branch Sales Manager Sandy Walters, Small Business Loan Officer** Nancy Wilson, Deposit Compliance Officer* Cathy Wright, Loan Administration Support Officer** AVP and above as of 1/31/11: * ≥ Five-year employee, ** ≥ Ten-year employee, *** ≥ Fifteen-year employee, **** ≥ Twenty-year employee 14 Customer First Ser vice It is part of Northrim’s brand t o p rovide th e ve r y high est level of ser vice, and it’s called “C ust ome r F irst Se r vic e.” Nort hrim Bank is committed to providing caring , p rofess iona l, pers ona l atten tion each time a custom er call s or visits. Each em ploye e signs a pe rsonal pledge to uphold Northrim’s st an dard s. The Custom er First Ser vice Award acknowled ges th ose in dividuals who have dem onstrated the epitom e o f Cust ome r First Ser vice . one or t wo empl oyees each quarter earn t he re cogn ition t hro ug hou t t he Northrim Bank organization. Below are the we ll-d eser vin g r ecip ien ts for 2010. C u s t o m e r F i r s t S e r v i c e Aw a r d W i n n e r s Back row from left: Leary David, Midtown Financial Center, Terry Lee, Item Processing, Maricel Abella, West Anchorage Branch, Becci Freeman, Wasilla Financial Center. Front row from left: Rhiannon Calkins, Executive Department, Carmen Mojica, Electronic Banking, Paula LaBreck, Wasilla Financial Center. 15 Information and Addresses Annual Meeting: Thursday, May 19, 2011, 9:00am Hilton Anchorage Hotel - 500 W. 3rd Avenue Anchorage, AK Stock Symbol: Northrim BanCorp, Inc. (NASDAQ: NRIM) Auditor: Moss Adams, LLP Transfer Agent & Registrar: American Stock Transfer & Trust Company 800-937-5449, info@amstock.com Legal Counsel: Davis Wright Tremaine, LLP Investor Requests: For stock information and copies of earnings & dividend releases, click on “Investor Information” section at northrim.com Investor Email Subscription: Send a request to investors@nrim.com; Call our Corporate Secretary at 907-261-3301; or, write Corporate Secretary, Northrim Bank P.O. Box 241489, Anchorage, AK 99524-1489 Credits: Photography: Chris Arend Photography Design: Nerland Agency Printing: A.T. Publishing & Printing, Inc. This report has not been approved or disapproved for accuracy or adequacy by the Federal Deposit Insurance Corporation, Federal Reserve Bank, Securities and Exchange Commission, or any other regulatory authority. Member FDIC, Equal Opportunity Lender Equal Opportunity Employer This report may include forward-looking statements, which are not historical facts. These forward-looking statements describe management’s expectations about future events and developments such as future operating results, growth in loans and deposits, continued success of the Company’s style of banking, and the strength of the local economy. All statements other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this report are forward-looking. We use words such as “anticipate,” “believe,” “expect,” “intend” and similar expressions in part to help identify forward-looking statements. Forward- looking statements reflect management’s current plans and expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations, and those variations may be both material and adverse. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: the general condition of, and changes in, the Alaska economy; factors that impact our net interest margin; and our ability to maintain asset quality. 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. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in our filings with the SEC. 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. In addition, you should note that we do not intend to update any of the forward- looking statements or the uncertainties that may adversely impact those statements, other than as required by law. 16 N o r t h r i m B a n k L o c a t i o n s ANCHORAGE Northrim Headquarters PO Box 241489 Anchorage, AK 99524-1489 907-562-0062 800-478-2265 outside Anchorage northrim.com SouthSide Financial Center 8730 Old Seward Highway West Anchorage Branch & Small Business Center 2709 Spenard Road Midtown Financial Center 3111 C Street Seventh Avenue Branch 517 W. 7th Avenue Huffman Branch 1501 E. Huffman Road Jewel Lake Branch 9170 Jewel Lake Road 36th Avenue Branch 811 E. 36th Avenue EAGLE RivER WASiLLA Eagle River Branch 12812 Old Glenn Highway Wasilla Financial Center 850 E. USA Circle fAiRBANKS BELLEvUE, WASHiNGtON Fairbanks Financial Center 360 Merhar Avenue Northrim Funding Services 170 120th Avenue N.E., Suite 202 PO Box 50245 Bellevue, WA 98015 425-453-1105 A f f i l i a t e d C o m p a n i e s Elliott Cove Capital Management, LLC 1000 2nd Avenue, Suite 1440 Seattle, WA 98104 206-267-2683 elliottcove.com Residential Mortgage, LLC Headquarters 100 Calais Drive Anchorage, AK 99503 907-222-8800 residentialmtg.com Northrim Benefits Group, LLC 2550 Denali Street, Suite 1502 Anchorage, AK 99503 907-263-1401 northrimbenefits.com Pacific Portfolio Consulting, LLC and Pacific Portfolio Trust Company two Union Square 601 Union Street, Suite 4343 Seattle, WA 98101 206-623-6641 pacific-portfolio.com LOANS in $ thousands 2006 2007 2008 2009 2010 NET INCOME ATTRIBUTABLE TO NORTHRIM BANCORP in $ thousands 2006 2007 2008 2009 2010 ASSETS in $ thousands $740,000 $720,000 $700,000 $680,000 $660,000 $640,000 $620,000 $15,000 $13,000 $11,000 $9,000 $7,000 $5,000 $3,000 $1,100,000 $1,050,000 $1,000,000 $950,000 $900,000 $850,000 $800,000 Northrim BanCorp, Inc. 2006 2007 2008 2009 2010 53,1977,392,594,3016,393,955,1977,452594,3016,393,7

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