Northrim Bancorp Inc.
Annual Report 2019

Plain-text annual report

2 0 1 9 A N N U A L R E P O R T PROUD TO ALASKAN BE + + + + + + + + MESSA GE TO SHAREHOLDERS Over the past several years, we have invested time and capital to build capacity in our infrastructure, people, services and technology. In 2019, we began to leverage this expanded capacity, and our performance reflects the successful execution of our business plan. Northrim ended 2019 with record earnings of $20.7 million, an increase of 3% from 2018. Total revenue for 2019 increased 9% to $102.0 million, and total assets increased to $1.64 billion, up 9% from a year ago. Improved asset quality, including net loan recoveries for the year; higher production in our mortgage banking division; and loan and deposit growth were key drivers of this record profitability. Through the leadership and expertise of our credit administration and lending teams, the Bank’s loan portfolio quality improved and net recoveries provided a $1.2 million benefit to the loan loss provision in 2019. Portfolio loans increased 6% to $1.04 billion at the end of 2019, while average portfolio loans were up 5% from a year ago. While interest rate decreases challenged the Bank’s net interest margin, lower rates supported mortgage purchase and refinance activity at our wholly-owned subsidiary, Residential Mortgage. This was a significant contributor to other operating income in 2019. At year-end, net interest income increased 5% to $64.4 million, and our net interest margin remained above our peer average. Favorable cost of funds and growth in deposits continued to support our net interest margin. Total deposits increased 12% to $1.37 billion at year-end, with Alaskans accounting for nearly all of Northrim’s deposit base, underscoring the Bank’s continued commitment to serving the state. We expanded our Alaska market presence in 2019, with investments in new branches and people, contributing to our progress with both loans and deposits. Our new Soldotna Financial Center, serving the Kenai Peninsula, and several significant additions to the lending teams 1PG + + + + +R O S S A L A S K A C A supported our community banking operating results and led to increased statewide market share in 2019. We will continue to look for other opportunities to expand within our Alaska footprint. Northrim continues to have strong capital, maintaining levels above the regulatory requirements to be categorized as well-capitalized. In 2019, Northrim completed its authorized share repurchase plan, buying a total of 347,676 shares. We also increased our shareholder dividend by 24% in 2019. We intend to continue to use our share repurchase and dividend programs to enhance value to our shareholders. including modest in 2019, increased activity There were noticeable positive shifts in the state economy job growth in resource development, and transportation, military and tourism. As a bank, we advocate for a long-term, stable and sustainable fiscal plan for the state. We also encourage the state to make investments that will foster economic development. are increasingly able to meet all of our customers’ financial needs. Our support of the community remains strong, demonstrated in diverse sponsorships from the iconic Iditarod Trail Sled Dog Race, to our regional school-business partnerships and support of the University of Alaska system, as well as participation with United Way. As part of our vision to be an employer of choice, we remain committed to providing our employees with meaningful benefits, competitive salaries and opportunities to advance. We are pleased with our progress in 2019 and appreciate all of our employees who connect with customers throughout the state. As we continue to grow, Northrim is proud to be Alaskan, and we remain focused on helping all achieve more. We remain committed to our customers, community and employees. We are focused on attracting and retaining customers, using a consultative, active and relationship-based approach and providing superior personalized service. Through a culture of teamwork and development of relevant services, we JOE SCHIERHORN Chairman, President, CEO and COO, Northrim BanCorp, Inc. Chairman, President and CEO, Northrim Bank 2PG + + + + +2019 FINANCIAL SNAPSHOT [1]* (In thousands, except Share Data) Net interest income Provision (benefit) for loan losses Other operating income Compensation expense, RML acquisition payments Other operating expense 2019 2018 2017 2016 2015 2014 $64,442 $61,208 $57,678 $56,357 $56,909 $52,293 (1,175) 37,346 468 (500) 32,167 — 3,200 40,474 130 76,370 69,800 71,023 2,298 43,263 4,775 71,505 1,754 44,608 4,094 68,551 (636) 20,034 — 46,923 Income before provision for income taxes $26,125 $24,075 $23,799 $21,042 $27,118 $26,040 Provision for income taxes Net income Less: Net income attributable to noncontrolling interest 5,434 20,691 — 4,071 20,004 — 10,321 13,478 327 6,052 14,990 579 8,784 18,334 551 8,173 17,867 459 Net income attributable to Northrim BanCorp, Inc. $20,691 $20,004 $13,151 $14,411 $17,783 $17,408 Year-End Balance Sheet Assets Portfolio loans Deposits Shareholders' equity Common shares outstanding Average Balance Sheet Assets Earning assets Portfolio loans Deposits $1,643,996 $1,502,988 $1,518,596 $1,525,851 $1,498,691 $1,448,327 1,043,371 984,346 954,953 974,074 979,682 923,122 1,372,351 1,228,088 1,258,283 1,267,653 1,240,792 1,179,747 207,117 205,947 192,802 186,712 177,214 164,441 6,558,809 6,883,216 6,871,963 6,897,890 6,877,140 6,854,189 $1,555,707 $1,493,385 $1,511,052 $1,506,522 $1,480,913 $1,335,929 1,386,557 1,346,449 1,367,203 1,361,913 1,334,102 1,212,291 1,010,098 971,548 981,001 976,613 968,752 893,031 1,276,407 1,227,272 1,248,333 1,250,243 1,219,445 1,111,594 Diluted common shares outstanding 6,808,209 6,981,557 6,977,910 6,974,864 6,948,474 6,852,267 Per Common Share Data Basic earnings Diluted earnings Book value per share Tangible book value per share(2)* Cash dividends per share Performance Ratios Return on average assets Return on average equity Equity/assets Tangible common equity/tangible assets(3)* Net interest margin Net interest margin (tax equivalent)(4)* Non-interest income/total revenue Efficiency ratio(5)* Dividend payout ratio Asset Quality $3.08 $3.04 $31.58 $29.12 $1.26 1.33 % 9.92 % 12.60 % 11.73 % 4.65 % 4.70 % 36.69 % 75.43 % 40.79 % $2.91 $2.86 $29.92 $27.57 $1.02 1.34 % 9.95 % 13.70 % 12.76 % 4.55 % 4.60 % 34.45 % 74.68 % 35.08 % $1.91 $1.88 $28.06 $25.70 $0.86 0.87 % 6.81 % 12.70 % 11.75 % 4.22 % 4.28 % 41.24 % 72.39 % 45.44 % $2.09 $2.06 $27.07 $24.70 $0.78 0.96 % 7.93 % 12.24 % 11.29 % 4.14 % 4.20 % 43.43 % 76.44 % 37.59 % $2.59 $2.56 $25.77 $22.31 $0.74 1.20 % 10.47 % 11.82 % 10.40 % 4.27 % 4.32 % 43.94 % 71.31 % 28.81 % $2.57 $2.54 $23.99 $20.48 $0.70 1.30 % 11.19 % 11.35 % 9.86 % 4.31 % 4.36 % 27.70 % 64.48 % 27.40 % Nonperforming assets, net of government guarantees $19,946 $22,619 $28,729 $19,315 $5,178 $7,231 Nonperforming assets/assets, net of government guarantees Nonperforming loans/portfolio loans, net of government guarantees Net charge-offs (recoveries)/average loans Allowance for loan losses/portfolio loans Other Data Number of banking offices(6) Number of employees (FTE)(7) Financial Snapshot endnotes on page 22. 1.21 % 1.34 % (0.07)% 1.83 % 1.50 % 1.49 % 0.15 % 1.98 % 1.89 % 2.24 % 0.15 % 2.25 % 16 431 16 430 14 429 1.27 % 1.33 % 0.08 % 2.02 % 14 451 0.35 % 0.22 % 0.03 % 1.85 % 14 441 0.50 % 0.38 % (0.12)% 1.81 % 14 426 Five-Year Compound Growth Rate 4 % NM 13 % NM 10 % 0 % (8)% 3 % NM 4 % 3 % 2 % 3 % 5 % (1)% 3 % 3 % 2 % 3 % (0)% 4 % 4 % 6 % 7 % 12 % 0 % (2)% 2 % 4 % 2 % 2 % 6 % 3 % 8 % 22 % 19 % 29 % NM 0 % 3 % 0 % Net Income Attributable Net Income Attributable to Northrim BanCorp, Inc. to Northrim BanCorp, Inc. (in thousands) (in thousands) Total Assets Total Assets (in thousands) (in thousands) $1,750,000 $1,400,000 $1,050,000 $700,000 $350,000 $0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Portfolio Loans Portfolio Loans (in thousands) (in thousands) Total Deposits Total Deposits (in thousands) (in thousands) $1,500,000 $1,200,000 $900,000 $600,000 $300,000 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 $22,000 $17,600 $13,200 $8,800 $4,400 $0 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 4PG + + + + +o o i i t t a a R R l l a t i a t i p p a a C C l a l a t o t o T T 15.80% 15.90% 16.73% 15.63% 14.60% Loan Portfolio Loan Portfolio As of December 31, 2019 As of December 31, 2019 I O N T C U R 1 0 % C O N S T 20% 15% 10% 5% 0% 2015 2016 2017 2018 2019 Well-capitalized 1.89% 1.50% 1.21% C O 3 M M 9 % E R C I A L $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $280 $230 $180 $130 $80 $30 $-20 $-70 $-120 ) s d ) s n d a n a s s u u o o h h t t n i n ( i ( i l l i ) s n ) s o n o m i l l n i i ( m n i ( 9 1 0 2 , 1 3 9 1 0 2 , 1 3 r e b m e c e D r e b m e c e D f o s a l a t i p a C f o s a l a t i p a C ) ) A P A P N N ( ( s s t t e e s s s s A A g g n n i i m m r r o o f r f e r p e n p o n N o N y t i u q p E r o C p r n o a C B n m a i B r h t m r o i N r h f t o r o n N o i t f i s o o p n m o i o t C i s o p m o C 5PG 1.27% 0.35% 2015 2016 2017 2018 2019 NPA NPA/Assets Net of government guarantees $259 $207 $45 -$19 -$77 Total Capital Raised Cumulative Earnings Cumulative Dividends Paid Total Equity Repurchases, Equity Compensation, Costs of Capital Raises, and Other C O M M E R C I A L 4 7 % R E A L E S T A T E D E 3 3 % M A N D 4 % C O N S U M E R Deposits Deposits As of December 31, 2019 As of December 31, 2019 T I M E 2 % 1 KET R A Y M % 5 1 E N O M S 1 7 A % V I N G S 2 3 % A INTER E S T - B E D E M A N D G R I N C O M M U N I T Y ALLEN MARINE TOURS Supporting the local economy is at the heart of Allen Marine, which is Alaska family-owned and operated, with three generations active in the company. “We support businesses by being in business,” Zak says. Allen Marine’s desire to work with Alaska businesses extends to banking. “As a locally owned, family-owned company, we like working with fellow Alaskans,” Zak shares. “We are pleased to be aligned with a local entity like Northrim.” Northrim has played a role in several significant expansion projects in recent years, including financing the construction of the Fin Island Lodge and the St. Theodosius, a 78-foot catamaran for a new Hubbard Glacier tour. “Northrim provided the necessary capital for us to expand and respond to the growing industry in a timely manner,” Zak says. The relationship extends beyond lending to include succession planning endeavors, as well as deposit accounts, internet banking, merchant services and corporate credit cards, notes Todd Greimann, Northrim Senior Vice President, Southeast Regional Market Manager. “We look forward to continuing to serve Allen Marine, as an Alaska bank and Alaska company working together for a positive Alaska business environment,” he says. When Bob and Betty Allen took passengers on their first sightseeing cruise in 1970, they had no idea they were embarking on a journey that would make them the largest, most experienced day-cruise company in Alaska. Since that maiden voyage 50 years ago, Allen Marine has expanded exponentially, now with operations in Sitka, Juneau and Ketchikan, a fleet of nearly 50 vessels, and 150 full-time and 550 seasonal employees. “It’s an exciting time in the cruise and visitor industry It’s growing steadily and in Southeast Alaska. providing employment opportunities local Southeast residents,” says Zak Kirkpatrick, Allen Marine’s Chief Marketing Officer. for SOUTH EAST 6PG STRATEGIC EXPANSION & P OSITIVE MOMENTUM We realized a long-term goal in 2019 with the opening of our new financial center in Soldotna, on Alaska’s Kenai Peninsula. Soldotna brings our total number of branches in Alaska to 16, the latest in a continuing demonstration of investment in the state. We look forward to future strategic expansion throughout Alaska. branch manager, a third-generation Kenai Peninsula resident and accomplished banker, and the promotion of a lifelong Alaskan and long-time Northrim employee to regional market manager in Fairbanks. We are pleased with this momentum and are optimistic about growth in these and other markets. Positive momentum on the Kenai Peninsula and in other markets is already being generated, due in part to our ability to recruit and retain experienced, talented bankers. In the past year, we have welcomed several bankers with deep community and business connections and a wealth of experience in the financial industry. Two key examples include our new Soldotna As part of our vision to be an employer of choice, and recruit and retain top talent, we continued to make improvements to compensation and employee benefits in 2019. We look forward to realizing the return on these investments, as our high-performing employees drive growth, develop new relationships and create new opportunities. 7PG + + + + +C O M M U N I T Y OPA ORTHOPEDIC PHYSICIANS ALASKA “Northrim sought to understand our business needs holistically,” says Eric Olson, OPA’s Chief Financial Officer. “Northrim is playing a very important role in the growth and development of how we serve patients in the Valley.” Northrim also entered into a preferred provider relationship, which offers Bank employees a reduced rate through their insurance for receiving care at OPA. “Doing business with those who do business with us is extremely important,” Eric says. “We feel like Northrim’s approach to servicing our needs is the same approach we strive for in serving our patients – top-notch, genuine, individualized care.” In a state where health care access can be difficult and expensive, Orthopedic Physicians Alaska (OPA) is taking an innovative approach that is making a difference. OPA’s pioneering orthopedic injury walk-in clinics have saved patients with non-life threating injuries hundreds of thousands of dollars in unnecessary emergency room expenses. And by providing athletic training services to high schools at no charge, OPA prevents approximately 4,500 athletic injuries each year. “The founders’ collective vision to provide high-quality, insured low-cost orthopedic care, accessible to and non-insured patients in an independent private practice setting, has always been OPA’s driving force,” says Rick Watson, OPA’s Chief Executive Officer. OPA is the largest, most comprehensive orthopedic practice in Alaska – and they are continuing to grow. Most recently, OPA partnered with Alaska Heart & Vascular Institute and Gagnon Plastic & Reconstructive Surgery to construct a new building in Wasilla. OPA chose to work with Northrim on the construction financing for the state-of-the-art facility, slated to open this fall. The relationship has since expanded, with Northrim now providing a full suite of services. SOUTH CENTRAL 8PG Seamless Service, Complete Solutions encourage We to continue teamwork cross-departmental that allows us to seamlessly provide complete banking solu- tions to our customers, from re- tail banking to lending and cash management services. This com- mitment to working in concert and providing Superior Customer First Service has been significant as recent new customers have come to Northrim first as depos- it customers, then expanded into loan relationships as their bor- rowing needs arose. services. Over Listening carefully to the needs of the market enables us to continually improve and develop relevant the past year, these efforts have proven effective in attracting new customers and growing our banking relationships, positioning us to effectively compete with other financial institutions and successfully gain market share. Navigating an Ever-Changing Landscape Our continued significant invest- ment in technology and the talent to leverage that technology allows us to nimbly evolve and remain at the forefront of the ever-changing landscape of electronic banking, while improving efficiency and the customer experience. Our new branches, with smaller footprints and robust technology, exemplify our skillful navigation of the tran- sition between traditional branch banking and electronic bank- ing. Through our 16 statewide branches and electronic banking services, we are proud to serve approximately 90% of Alaska’s population. Conversion to a new loan origi- nation system in 2019 was also a substantial investment of time and resources, which will result in a faster, more responsive, more efficient loan approval, funding and booking process for both our customers and our team. Quality Growth improvement A highlight of our year was the overall in asset quality. We saw improvements in various qualitative loan factors, including loan portfolio quality, nonperforming loans, nonper- forming assets, net adversely classified loans and net loan re- coveries, and recorded a benefit for loan losses. This accomplishment is attribut- able to several factors, including the work of our credit adminis- tration team, under the leader- ship of Chief Credit Officer Mark Edwards. We were pleased to ex- pand the executive team in 2019 to include Mr. Edwards, a lifelong Alaskan and long-time Northrim employee, who also serves as Bank Economist. Consistent with our vision of con- tinual improvement, our lending team is also becoming increas- ingly experienced, with a focus on intimately understanding our customers’ operations, challeng- es and opportunities and provid- ing flexible, customized solutions. The result is high-quality loans that help our customers achieve their goals. This level of expertise and service has also led to new valuable customer relationships with some of the state’s oldest and most respected companies, and we are proud to earn their business and referrals. 9PG C O M M U N I T Y THE SHOPPES AT SUN MOUNTAIN Developer Cameron Johnson called Wasilla home for most of his growing-up years, and still considers it his hometown. “I want to see the Valley continue to prosper and grow responsibly. I believe I can help in both those areas,” he says. entertainment, banking, lodging, health and wellness care, housing and business opportunities. The development has already signed leases with popular chains including Sonic Drive-In, Planet Fitness and Krispy Kreme. His latest development, The Shoppes at Sun Mountain, is a significant stride in that direction. The 32-acre property in Wasilla had previously been foreclosed and languished vacant for years. “I have always had an interest in developing the Sun Mountain property,” Cameron says. is expected to Once completed, Sun Mountain create hundreds of new jobs and provide Mat-Su residents with new restaurant options, retail choices, Northrim Bank has provided financing solutions for Cameron’s businesses and developments since 2012. “In 2019, I transferred all of my business banking services from a national institution to Northrim and I couldn’t be happier with that decision. Their commitment to providing excellent customer service, business solutions and an aligned vision of seeing Alaska continue to thrive and grow has made Northrim an incredible partner in my many business ventures in the state,” Cameron says. “Cameron and his partners have been important customers for a long time. We’re pleased to have earned more of his business,” says Sue Wolfe, Northrim Vice President, Commercial Real Estate Loan Officer. “Northrim’s vision, innovative thinking, work ethic and dedication in providing the most competitive financing solutions for Sun Mountain played a vital role in its success,” Cameron says. “Northrim took a chance on me as a developer when other banks wouldn’t and that’s something I won’t forget.” SOUTH CENTRAL PG 10 COMPLEMENTING COMMUNITY BANKING In addition to community banking, Northrim has interests in other lines of business, including home mortgage lending, purchased receivables financing and wealth management. These subsidiaries, affiliates and divisions complement our core community banking activity, strengthen the diversity of our income streams, and enable us to offer complete financial services to meet our customers’ needs. Northrim Investment Services provides investment services through Elliott Cove Capital Management and insurance products via Elliott Cove Insurance Agency. Northrim Investment Services enables the Bank to offer a range of relevant, best-in-class financial products and services to meet the needs of our business and individual customers. PG 11 Northrim Funding Services, a division of the Bank, purchases the accounts receivable of capital- constrained small to mid-size businesses, as well as businesses experiencing rapid growth or change. The division also offers financial solu- tions to transition customers back to conventional bank lending programs. Despite increased competition, Northrim Fund- ing Services saw substantial growth in 2019, and continued to grow its customer base in Alaska and the Western United States. Funding Northrim contributed $3.3 million to other operating income in both 2019 and 2018. Services + + + + + interest in Pacific Northrim holds a 24% Wealth Advisors, LLC, the holding company for Pacific Portfolio Consulting, LLC and Pacific Portfolio Trust Company (collectively, “Pacific Portfolio”). Founded in 1992 and part of the Northrim family since 2006, Pacific Portfolio provides comprehensive financial guidance to individuals, families and institutions. Pacific Portfolio is led by founder, president and CEO Larry Hood, who once again was included in Barron’s prestigious annual ranking of Top 100 Independent Financial Advisors, moving up seven spots to No. 61 in 2019. Pacific Portfolio continues to grow its assets under advisement, ending the year at $4.0 billion, one-third of which are in Alaska. company The to Northrim’s other operating income in 2019, compared to $231,000 in 2018. contributed $305,000 Residential Mortgage has been a Northrim affiliate since 1998, and became a wholly-owned subsidiary in 2014. The company, which is the leading mortgage loan originator in the state, has a significant footprint across Alaska, with offices in Anchorage, Juneau, Kodiak, Soldotna, Eagle River, Fairbanks and the Mat-Su Region. After flat performance over the past several years, and coinciding efforts to reduce expenses and improve efficiency, Residential Mortgage operations in 2019, increased substantially driven in part by lower mortgage interest rates. While a part of the mortgage demand was due to an increase in refinancing, purchase activity was also up, increasing 7% year over year. In 2019, Northrim serviced 2,643 loans in our home-mortgage-servicing $659.0 million portfolio, which is an 18% increase over the prior year. Mortgage banking operations contributed $24.2 million to Northrim’s other operating income in 2019, compared to $20.8 million in 2018. PG 12 COMMUNITY ENGAGEMENT As a community bank in Alaska, we believe it is our responsibility to be good community stewards, actively vested in the communities where we live and work. This engagement is modeled at the top level of the Bank. From the boardroom to the local branch, our employees are encouraged to actively support issues, organizations and events for which they are passionate. Just as we take the time to understand the financial needs of our customers, we take the time to discern what is meaningful in each of our communities, and our support and engagement takes many forms. In 2019, we continued our Lead Dog sponsorship of the Iditarod Trail Sled Dog Race, an iconic Alaska event and a point of pride for many Alaskans. We support the efforts of United Way, both as an organization and as individuals. Believing in the critical importance of our state’s university system, we remain steadfast supporters of University of Alaska campuses across the state. We spend time with local students through our school-business partnerships. We share expertise and encouragement through financial literacy workshops at local shelters. We devote time to serving on boards and committees for a diverse array of nonprofit and industry organizations throughout Alaska. We are leaders in addressing issues of importance to our state, from developing the next generation of IT professionals, to influencing the economy through efforts such as ongoing advocacy, and educating Alaskans via our annual economic luncheons and Alaskanomics blog. PG 13 + + + + +SET APART BY SUPERIOR SERVICE Superior Customer First Service is a core Northrim value, and through it, we strive to differentiate ourselves from other financial institutions. Building a reputation for this high level of service requires the daily dedicated performance of each individual employee within our Bank family. Our success is directly attributable to the positive attitude, skills and service of employees throughout the company, from the branches to behind the scenes. it We believe is essential to emphasize the importance of Superior Customer First Service, share how it’s making a difference and celebrate those employees who have gone above and beyond in providing it. Our Customer First Service Award celebrates a select group of employees who have exemplified this value in 2019. We honor them and thank the many other employees who are dedicated to providing Superior Customer First Service. Back Row, L to R Jayme Griffin Universal Banker, Eagle River Branch Bronte Howard Universal Banker, Wasilla Financial Center Bill Kurtz AVP, Branch Manager, Midtown Financial Center Angela Merculief Bank Applications Supervisor Front Row, L to R Kimberly Farrell Brewington VP, Commercial Cash Management Officer Aiko Willborg Compensation Analyst Meliza Maluto Electronic Banking Operations Administrator Sue Wolfe VP, Commercial Real Estate Loan Officer Photo taken at Eastside Community Branch in Anchorage PG 14 + + + + +E A D E R S H I P L LEADERSHIP. LONGEVITY. LEVEL OF SERVICE. Each day, our executive and senior management teams offer a breadth of talent from diverse fields, a deep level of expertise and strong commitment to service. The Bank, along with our customers, directly benefit from their longevity at Northrim, experience in the industry, and connections in the community. We are also grateful for the leadership and expertise our board members bring from many different sectors in order to provide trusted guidance and direction for the future of the Bank. PG 15 E X E C U T I V E T E A M Mark Edwards EVP, Chief Credit Officer & Bank Economist Mike Huston EVP, Chief Lending Officer Joe Schierhorn Chairman, President & Chief Executive Officer Jed Ballard EVP, Chief Financial Officer Audrey Amundson EVP, Director of Accounting, Treasury & Financial Planning Lynn Wolfe EVP, Chief Administration Officer Mike Martin EVP, Chief Operating Officer, General Counsel & Corporate Secretary Benjamin Craig EVP, Chief Information Officer PG 16 + + + + +R O I N E S M A N A G E M E N T T E A M From L to R: Suzanne Whittle SVP, Compliance Manager Todd Greimann SVP, Regional Market Manager Catherine Claxton SVP, Real Estate Lending Manager Linda Uttech SVP, Facilities Manager Barb Ervin SVP, Director of Business Applications Cindy Fields VP, Internal Audit Manager Katie Bates SVP, Director of Electronic Channels Kari Skinner SVP, Marketing & Communications Director Jason Criqui SVP, Commercial Lending Manager Carolyn Jennings SVP, Retail Banking Manager Amber Zins SVP, Human Resources Director Dan Lowell SVP, Northrim Funding Services Manager Latosha Frye SVP, Corporate Accounting Manager PG 17 + + + + +B O A R D O F D I R E C T O R S Joe Schierhorn Director since 2016 Larry Cash Director since 1995 Anthony Drabek Director since 1991 Karl Hanneman Director since 2014 David Karp Director since 2015 David McCambridge Director since 2011 Chairman, Audit Committee Krystal Nelson Director since 2015 Chairman, Compensation Committee Aaron Schutt Director since 2018 John Swalling Director since 2002 Lead Director Chairman, Governance & Nominating Committee Linda Thomas Director since 2014 David Wight Director since 2006 Joe Schierhorn Chairman, President, CEO and COO, Northrim BanCorp, Inc. Chairman, President and CEO, Northrim Bank Larry Cash CEO RIM Architects, LLC since 2017 (President from 1986-2016) Executive Committee/Director Anchorage Economic Development Corporation (Emeritus) Member/Manager of RIM Investments, LLC Board Trustee of Alaska Pacific University (Emeritus) Anthony Drabek Director, Koniag, Inc., an Alaska Native Corporation, since 2019 President and CEO, Natives of Kodiak, Inc., an Alaska Native Corporation, from 1989-2010 Chairman, Koncor Forest Products Company, from 1986-2010 and President from 2001-2010 Karl Hanneman CEO and Director, International Tower Hill Mines Ltd. (COO from 2015-2016, Alaska General Manager from 2010- 2015) Director, Fairbanks Chamber of Commerce since 2010 Director, Usibeli Coal Mine, Inc. since 2011 Director, Sunshine Silver Mining & Refining Corp. since 2018 David Karp SVP, Managing Director, Alaska Saltchuk, since 2019 President and CEO, Northern Aviation Services, Inc. from 2011-2018 Director, Alaska Communications Systems, Inc. since 2011 Member, National Air Carriers Association David McCambridge Audit Partner, KPMG LLP, from 1978-2010 Director and Treasurer of the Tanaka Foundation from 1985-2015 Director, Great Alaska Council Boy Scouts of America, from 1993-2012 Director Alaska Kidney Foundation (since 1999) and President Krystal Nelson SVP and COO, Bering Straits Native Corporation since 2014 SVP and COO, Ahtna Engineering Services from 2007-2014 Recipient of Alaska Top 40 under 40 Award in 2004 Aaron Schutt President and CEO, Doyon Limited, an Alaska Native Corporation since 2011 (COO from 2008-2011 and SVP from 2006-2011) Director, Akeela, Inc., since 2001 and Chair since 2018 Director, Alaska Native Heritage Center from 2012-2019 Director, ANCSA Regional Association and Chair since 2018 Board of Managers for Doyon Utilities, LLC since 2007 John Swalling President and Director, Swalling & Associates, PCC, an accounting firm, from 1991-2019 Director of Swalling Construction Co., Inc., from 1975-2018 Ernst & Young LLP, Partner from 1984- 1991 Director and past Chairman, Providence Health & Services Alaska, from 1998-2019 Director and past Chairman, Visit Anchorage, from 1986-2019 Director and Vice Chairman, CIVIC Ventures, from 2005-2019 Linda Thomas CEO, VP and Director, Alaskan Brewing & Bottling Co. and its subsidiaries since 2016 (CFO from 1994-1996, COO from 1996-2016) Director and Past President, Bartlett Regional Hospital Director and Past President, Juneau Chamber of Commerce David Wight President and CEO, Alyeska Pipeline Service Company from 2000-2005, following a 41-year career with the Amoco Corporation, which became BP in 1999 Director, Storm Cat Energy from 2006- 2010 Director, Alaska Gasline Development Corporation since 2016 PG 18 R H T R O N I M B A N K O F F I C E R S EXECUTIVE VICE PRESIDENTS Audrey Amundson, Director of Accounting, Treasury & Financial Planning***** Benjamin Craig, Chief Information Officer** Jed Ballard, Chief Financial Officer Joseph Schierhorn, Chairman, President & Chief Executive Officer***** Lynn Wolfe, Chief Administration Officer***** Mark Edwards, Chief Credit Officer & Bank Economist** Michael Huston, Chief Lending Officer Michael Martin, Chief Operating Officer, General Counsel & Corporate Secretary* SENIOR VICE PRESIDENTS Amber Zins, Human Resources Director** Barbara Ervin, Director of Business Applications*** Carolyn Jennings, Retail Banking Manager**** Catherine Claxton, Real Estate Lending Manager***** Daniel Lowell, NFS Division Manager*** Jason Criqui, Commercial Lending Manager* Kari Skinner, Marketing & Communications Director Kathleen Bates, Director of Electronic Channels*** Latosha Frye, Corporate Accounting Manager** Linda Uttech, Director of Facilities Operations* Suzanne Whittle, Compliance Manager**** Todd Greimann, Regional Market Manager II VICE PRESIDENTS Adam Baxter, Commercial Loan Officer V* Aili Peyton-Jalbert, Commercial Cash Management Officer Allen Hippler, Commercial Loan Officer V* Anita DeVore, Regional Sales & Service Manager*** Annette Delong, Construction Loan Unit Manager* Bruce Tretzen, NFS Relationship Manager Cynthia Fields, Internal Audit Director Cynthia El-Khoury Hanna, Loan Documentation Manager Darci Ornellas, Regional Sales & Consumer Lending Manager**** Douglas Frey, Security & Business Continuity Manager Erick Stoeckle, Enterprise Architecture Manager* Gerlie Monta-Guevarra, Branch Manager II* Jaime Kissner, Commercial Loan Officer IV James Beasley, Electronic Banking Manager James Richards, Business Development Officer-Relationship Manager II* Jason Gentry, Lending Branch Manager Jeanine Lillo, Controller*** Joann Thayer, Commercial Cash Management Officer** John Damjanovich, Commercial Real Estate Loan Officer V Jonathan Tibbs, Commercial Loan Officer IV Joseph Gelione, Commercial Loan Unit Manager Josh King, NFS Assistant Division Manager** Jyah Gitomer, Call Center Manager Kathleen Martin, Construction Loan Officer V**** Kelly Lykins-Longlet, Risk Manager*** Kelly McCormack, Lending Team Lead** Kimberly Farrell Brewington, Commercial Cash Management Officer**** Lisa Adams, NFS Operations Manager** Marc Guevarra, Commercial Loan Officer IV* Michael Dye, Lending Branch Manager II Mildred Sy, Special Credits & Loan Servicing Manager** Nathaniel Olmstead, Data Analytics Manager Phillip Reid, Commercial Loan Officer V Ryan Caldwell, Systems & Network Manager Scotty Watkins, Lending Team Lead Sean Christian, Strategic & Planning Manager** Sue Wolfe, Commercial Real Estate Loan Officer V* Tammy Kosa, Regional Market Manager I*** Timothy Breeden, Commercial Loan Officer IV William Simpson, Collections Supervisor** PG 19 ASSISTANT VICE PRESIDENTS Angela Bradford, Community Development & Loan Compliance Manager* Annie Her, Branch Manager I* Aracelis Bell, NIS Relationship Banker*** Benjamin Schulman, Loan Officer III* Bessie Paraoan, Special Credits Officer I** Christopher Chambos, Retail & Investment Services Manager* Danicia Shiryayev, Loan Officer III Dawn Hoxie, Branch Manager II***** Delores Siah, Branch Manager II* Diana Soliday, Branch Manager II** Eileen Kehoe, Mortgage Servicing Manager Erika Bills, Business Banker III**** Erin Gage, Retail Banking Operations Manager**** Esther Fouts, Accounting Supervisor***** James Larson, Special Credits Officer II Jill Milham, Retail Banking Operations Assistant Manager* Joseph Moran, Construction Loan Officer III* Judith Schnese, Audit Manager** Katherine Bender, Community & Public Relations Manager* Kathleen Stilwell, Card Services Manager Kelly Reynolds, Security Manager** Kristi Dent, Consumer Lender II Lawrence Gluck, Loan QA Officer Maia Hernandez, Branch Manager I* Marsha Fry, Commercial Real Estate Loan Officer III***** Maureen Swartwood, Branch Manager II Micah Scott, BSA & Deposit Compliance Manager** Nicole Pintsch, Assistant Controller** Reynold Thomas Udarbe, Branch Manager I* Rick Pinkerton, Loan Review Officer*** Rodlynn Smallwood, Operations Support Manager** Seane English, Credit Administration Operations Manager* Susan Kurtz, Branch Manager I Susan Stenstrom, Assistant Corporate Secretary** Tammi Whistler, Loan Administrative Officer* Teressa Saaiman, Branch Manager I* William Kurtz, Branch Manager II Leary David, Branch Manager I** Yana Milette, Electronic Banking Operations Manager OFFICERS Astrid Erdman, Business Banker I Blake Rod, Assistant Branch Manager Brian Leonard, Assistant Branch Manager II* Brigitte Lampert, Assistant Branch Manager** Christina Clayton, Assistant Branch Manager Christina Lawrence, Assistant Branch Manager II**** Cindy Cheely, Business Banker II** Criselda Parrocha, Business Banker I**** Dagmar Sanchez, Senior Training Specialist***** Daisy Arce, Assistant Branch Manager* Deatrice Swazer, Senior Real Estate Valuation Officer*** Deborah Bolton, Assistant Branch Manager** Ervin Hetemi, Loan Officer II Fejie Monta-Carandang, Assistant Branch Manager* Heidi Hurben, Assistant Branch Manager Jay Gilling, Security Officer* Joohee Ok, Call Center Assistant Manager* Justin Jay, Assistant Branch Manager Katreena Little, Assistant Branch Manager II** Lillian Owens, Loan Officer II* Lindsay Atkins, Assistant Branch Manager* Maricel Bratcher, Assistant Branch Manager*** Mary Fox, Special Credits Associate Officer*** Megan Liska, Corporate Training Manager Milagros Castiglione, Business Banker I*** Neddie Manabat, Assistant Branch Manager II* Nicole Shook, Operations Support Assistant Manager**** Pamela Oberts, Assistant Branch Manager Paula Duracinski, Facilities Manager**** Rosemarie Yadao, Assistant Branch Manager* Sarah Maycock, Electronic Banking Support Manager Sathiane Sikeo, Assistant Branch Manager** Stephanie Love, Marketing & Sales Manager Susan Peach, Real Estate Valuation Officer* Terre Lefebvre, Merchant Relationship Manager*** Tiana Allen, Special Credits Associate Officer AVP and above as of 1/30/2020: * ≥ Five-year employee, ** ≥Ten-year employee, *** ≥ Fifteen-year employee, **** ≥Twenty-year employee, ***** ≥Twenty-five-year employee PG 20 + + + + + N O I S S I M · V I S I O N · V A L U E S MISSION To be Alaska’s most trusted financial institution We are committed to adding value for our customers, communities, and shareholders. VISION To be Alaska’s premier bank and employer of choice We will be a leader in financial expertise, products and services, focused on continuous improvement and market growth. VALUES WE ARE Proud to be Alaskan We are Alaskan managed. We embody Alaska’s frontier spirit and values, and strongly support our communities. Engaged We achieve more because we are dynamic, proactive, and innovative. Superior Customer First Service We have a sincere appreciation for our customers. We want to build lasting customer relationships through professional, prompt, and caring service. Accountable We take personal responsibility. We do what we say we will do. Growth We look for growth opportunities for our customers, our institution and our employees. We strive to be better, personally and professionally. Integrity We are trustworthy, reliable, and ethical, and provide our customers with secure, confidential services. We do what is right. Aligned We value alignment within teams and across departments. Together we are stronger. PG 21 I N F O R M A T I O N & A D D R E S S E S Annual Meeting: May 28, 2020, 9:00 am 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 LLC (800) 937-5449, info@amstock.com Legal Counsel: Davis Wright Tremaine LLP Investor Information: For stock information and SEC filings, copies of earnings and dividend releases, click on “Investor Relations” section at northrim.com Investor Requests: Call our Corporate Secretary at (907) 562-0062 or write Corporate Secretary, Northrim Bank PO Box 241489, Anchorage, AK 99524-1489 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. An Equal Opportunity and Affirmative Action Employer. Qualified applicants and employees receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, age, national origin, physical or mental disability, protected veteran status, pregnancy, parenthood, marital status, changes in marital status, genetic information or any other status protected by federal, state or local law. Cautionary note regarding forward-looking statements This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, which are not historical facts. These forward-looking statements are, in effect, management’s attempt to predict future events, and thus are subject to various risks and uncertainties. Readers should not place undue reliance on forward- looking statements, which reflect management’s views only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” and “intend” and words or phrases of similar meaning are intended to help identify forward-looking statements. Although we believe that management’s expectations as reflected in forward-looking statements are reasonable, we cannot assure readers that those expectations will prove to be correct as 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. 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 Securities and Exchange Commission. Forward-looking statements contained herein are made only as of the date of this report, 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 report. Financial Snapshot Endnotes: (*) Refer to the Company’s Form 10-K at northrim.com for further discussion of non-GAAP ratios. (1) These unaudited schedules provide selected financial information concerning the Company’s Form 10-K. (2) Tangible book value per share is a non-GAAP ratio defined as shareholders’ equity, less intangible assets, divided by common shares outstanding. (3) 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. (4) Tax-equivalent net interest margin 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 2019 and 2018 and 41.11% in all other years presented. (5) In managing our business, we review the efficiency ratio exclusive of intangible asset amortization, which is a non-GAAP performance measurement. The efficiency ratio is calculated by dividing other operating expense, exclusive of intangible asset amortization, by the sum of net interest income and other operating income. (6) Number of banking offices does not include Residential Mortgage Lending locations. 2018 number includes 15 full service branches and one loan production office. (7) FTE includes 311, 320, 314, 321, 317, and 309 Community Banking employees in 2019, 2018, 2017, 2016, 2015 and 2014, respectively. FTE includes 120, 110, 115, 130, 124, and 117 Home Mortgage Lending employees in 2019, 2018, 2017, 2016, 2015 and 2014, respectively. PG 22 ANCHORAGE Northrim Headquarters PO Box 241489 Anchorage, AK 99524 (907) 562-0062 (800) 478-2265 outside Anchorage northrim.com Eastside Community Branch 7905 Creekside Center Drive, Suite 100 Huffman Branch 1501 E. Huffman Road Jewel Lake Branch 9170 Jewel Lake Road Lake Otis Community Branch 2270 E. 37th Avenue Midtown Financial Center 3111 C Street Seventh Avenue Branch 517 W. 7th Avenue, Suite 300 Southside Financial Center 8730 Old Seward Highway West Anchorage Branch 2709 Spenard Road EAGLE RIVER Eagle River Branch 12812 Old Glenn Highway, Suite CO3 WASILLA Wasilla Financial Center 850 E. USA Circle, Suite A (907) 376-0357 FAIRBANKS Fairbanks Financial Center 360 Merhar Avenue (907) 455-1111 SOLDOTNA Soldotna Financial Center 44384 Sterling Highway, Suite 101 (907) 260-7669 JUNEAU Juneau Financial Center 2094 Jordan Avenue (907) 789-4844 Juneau Downtown Branch 301 N. Franklin Street (907) 789-4844 SITKA Sitka Financial Center 315 Lincoln Street, Suite 206 (907) 747-8688 KETCHIKAN Ketchikan Financial Center 2491 Tongass Avenue (907) 225-4545 BELLEVUE, WASHINGTON Northrim Funding Services 170 120th Avenue N.E., Suite 202 PO Box 50245 Bellevue, WA 98015 (425) 453-1105 HOME MORTGAGE LENDING Residential Mortgage, LLC Headquarters 100 Calais Drive Anchorage, AK 99503 (907) 222-8800 residentialmtg.com 10 locations statewide AFFILIATED COMPANIES Northrim Investment Services 3111 C Street Anchorage, AK 99503 (907) 562-0062 Pacific Portfolio Consulting, LLC and Pacific Portfolio Trust Company Columbia Center 701 5th Avenue, Suite 6850 Seattle, WA 98104 (206) 623-6641 pacific-portfolio.com # A C H I E V E M O R E + + + + + 

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