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Item 5. Market for Registrant’s Common Equity

2022-03-04 compared with 2021-03-05 · 15 added, 177 removed, 24 unchanged (89% of the section changed)

2 unchanged sentences

As many of our shares of common stock are held of record in "street name" by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of beneficial holders of our common stock represented by these record holders.

The following are high and low closing prices as reported by NASDAQ.

Prices do not include retail markups, markdowns or commissions.

First Second Third Fourth

Quarter Quarter Quarter Quarter

High $40.40 $28.75 $29.07 $34.67

Low $20.16 $19.63 $20.90 $25.48

High $39.60 $36.71 $41.82 $39.79

Low $32.36 $33.22 $34.72 $36.46

In 2020, we paid cash dividends of $0.34 per share in the first and second quarters and $0.35 per share in the third and fourth quarters.

In 2019, we paid cash dividends of $0.30 per share in the first and second quarters and $0.33 per share in the third and fourth quarters.

Cash dividends totaled $8.9 million, $8.5 million, and $7.1 million in 2020, 2019, and 2018, respectively.

On February 25, 2021, the Board of Directors approved payment of a $0.37 subject to restrictions on the payment of dividends pursuant to applicable federal and state banking regulations and Alaska corporate law.

The dividends that the Bank pays to the Company are limited to the extent necessary for the Bank to meet the regulatory requirements of a “well-capitalized” bank.

Given the fact that the Bank believes it will remain “well-capitalized” and exceed the capital conservation buffer;

the Company expects to receive dividends from the Bank in 2021.

Repurchase of Securities

At December 31, 2020, there were no shares available under the stock repurchase program.

At December 31, 2021, there were 33,724 shares available under the previously announced stock repurchase program.

The Company repurchased 279,276 shares in 2021 and 327,000 shares in 2020.

On February 1, 2021, the Company announced that its Board of Directors had authorized the repurchase of up to an additional 313,000 shares of common stock.

On January 28, 2022, the Company announced that its Board of Directors had authorized the repurchase of up to an additional 300,000 shares of common stock.

The Company intends to continue to repurchase its stock from time to time depending upon market conditions, but we can make no assurances that we will continue this program.

The Company repurchased 188,264 shares of its common stock during the three-month period ending December 31, 2021.

Total Number of Shares (or Units) Purchased Average Price Paid per Shares (or Unit) Total Number of Shares (or Units) Purchased as Part of the Publicly Announced Plans or Programs Maximum Number (1) (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs

Period (a) (b) (c) (d)

October 1, 2021 - October 31, 2021 35,810 $44.24 35,810 186,178

November 1, 2021 - November 30, 2021 20,189 $44.58 20,189 165,989

December 1, 2021 - December 31, 2021 132,265 $42.60 132,265 33,724

Total 188,264 $43.12 188,264 33,724

Equity Compensation Plan Information

The following table sets forth information regarding securities authorized for issuance under the Company’s equity plans as of December 31, 2021.

Additional information regarding the Company’s equity plans is presented in Note 23 of the Notes to Consolidated Financial Statements included in Item 8 of this report.

Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) (2)

Weighted-Average Exercise Price of Outstanding Options,

Additional information regarding the Company’s equity plans is presented in Note 22 of the Notes to Consolidated Financial Statements included in Part II.

Item 8 of this report.

Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options,

Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))

3 unchanged sentences

1 Consists of the Company's 2020 Stock Incentive Plan, which replaced the 2017 Stock Incentive Plan (the "2017 Plan")

2 Includes 204,795 options awarded under the 2017 Plan and other previous stock option plans.

We do not have any equity compensation plans that have not been approved by our shareholders.

3 unchanged sentences

The comparable indices utilized are the Russell 3000 Index, representing approximately 98% of the U.S.

equity market, and the SNL Financial Bank Stock Index, comprised of publicly traded banks with assets of $1 billion to $5 billion, which are located in the United States.

equity market, and the S&P U.S.

Small Cap Banks Index, comprised of publicly traded banks with a market capitalization between $750 million to $3.3 billion, which are located in the United States.

The graph assumes that the value of the investment in the Company’s common stock and each of the two indices was $100 on December 31, 2016, and that all dividends were reinvested.

4 unchanged sentences

Russell 3000 100.00 121.13 114.78 150.39 181.8 228.45

SNL Bank $1B-$5B 100.00 143.87 153.37 134.37 163.35 138.81

SELECTED FINANCIAL DATA (1)

Years Ended December 31,

(In thousands, except per share data and shares outstanding amounts)

2020 2019 2018 2017 2016 2015 Five Year Compound Growth Rate

Net interest income $70,665 $64,442 $61,208 $57,678 $56,357 $56,909 4 %

Provision (benefit) for loan losses 2,432 (1,175) (500) 3,200 2,298 1,754 NM

Other operating income 63,328 37,346 32,167 40,474 43,263 44,608 7 %

Compensation expense, RML acquisition payments — 468 — 130 4,775 4,094 NM

Other operating expense 89,114 76,370 69,800 71,023 71,505 68,551 5 %

Income before provision for income taxes $42,447 $26,125 $24,075 $23,799 $21,042 $27,118 9 %

Provision for income taxes 9,559 5,434 4,071 10,321 6,052 8,784 2 %

Net Income 32,888 20,691 20,004 13,478 14,990 18,334 12 %

Net income attributable to

noncontrolling interest — — — 327 579 551 NM

Net income attributable to Northrim Bancorp, Inc.

$32,888 $20,691 $20,004 $13,151 $14,411 $17,783 13 %

Year End Balance Sheet

Assets $2,121,798 $1,643,996 $1,502,988 $1,518,596 $1,525,851 $1,498,691 7 %

Portfolio loans 1,444,050 1,043,371 984,346 954,953 974,074 979,682 8 %

Deposits 1,824,981 1,372,351 1,228,088 1,258,283 1,267,653 1,240,792 8 %

Securities sold under repurchase agreements — — 34,278 27,746 27,607 31,420 (100) %

Borrowings 14,817 8,891 7,241 7,362 4,338 2,120 48 %

Junior subordinated debentures 10,310 10,310 10,310 10,310 18,558 18,558 (11) %

Shareholders' equity 221,575 207,117 205,947 192,802 186,712 177,214 5 %

Common shares outstanding 6,251,004 6,558,809 6,883,216 6,871,963 6,897,890 6,877,140 (2) %

Average Balance Sheet

Assets $1,936,047 $1,555,707 $1,493,385 $1,511,052 $1,506,522 $1,480,913 6 %

Earning assets 1,758,839 1,386,557 1,346,449 1,367,203 1,361,913 1,334,102 6 %

Portfolio loans 1,339,908 1,010,098 971,548 981,001 976,613 968,752 7 %

Deposits 1,638,216 1,276,407 1,227,272 1,248,333 1,250,243 1,219,445 6 %

Securities sold under repurchase agreements — 15,167 29,940 29,690 27,322 24,447 (100) %

Borrowings 25,608 8,071 7,309 5,767 4,215 14,552 12 %

Junior subordinated debentures 10,310 10,310 10,310 15,066 18,558 18,558 (11) %

Shareholders' equity 211,721 208,602 201,022 193,129 181,628 169,802 5 %

Basic common shares outstanding 6,354,687 6,708,622 6,877,573 6,889,621 6,883,663 6,859,209 (2) %

Diluted common shares outstanding 6,431,367 6,808,209 6,981,557 6,977,910 6,974,864 6,948,474 (2) %

Per Common Share Data

Basic earnings $5.18 $3.08 $2.91 $1.91 $2.09 $2.59 15 %

Diluted earnings $5.11 $3.04 $2.86 $1.88 $2.06 $2.56 15 %

Book value per share $35.45 $31.58 $29.92 $28.06 $27.07 $25.77 7 %

Tangible book value per share (2)

$32.88 $29.12 $27.57 $25.70 $24.70 $22.31 8 %

Cash dividends per share $1.38 $1.26 $1.02 $0.86 $0.78 $0.74 13 %

Years Ended December 31,

2020 2019 2018 2017 2016 2015 Five Year Compound Growth Rate

Performance Ratios

Return on average assets 1.70 % 1.33 % 1.34 % 0.87 % 0.96 % 1.20 % 7 %

Return on average equity 15.53 % 9.92 % 9.95 % 6.81 % 7.93 % 10.47 % 8 %

Equity/assets 10.44 % 12.60 % 13.70 % 12.70 % 12.24 % 11.82 % (2) %

Tangible common equity/tangible assets (3)

9.76 % 11.73 % 12.76 % 11.75 % 11.29 % 10.40 % (1) %

Net interest margin 4.02 % 4.65 % 4.55 % 4.22 % 4.14 % 4.27 % (1) %

Net interest margin (tax equivalent) (4)

4.05 % 4.70 % 4.60 % 4.28 % 4.20 % 4.32 % (1) %

Non-interest income/total revenue 47.26 % 36.69 % 34.45 % 41.24 % 43.43 % 43.94 % 1 %

Efficiency ratio (5)

66.47 % 75.43 % 74.68 % 72.39 % 76.44 % 71.31 % (1) %

Dividend payout ratio 26.66 % 40.79 % 35.08 % 45.44 % 37.59 % 28.81 % (2) %

Asset Quality

Nonperforming loans, net of government guarantees $10,048 $13,951 $14,694 $21,411 $12,936 $2,125 36 %

Nonperforming assets, net of government guarantees 16,289 19,946 22,619 28,729 19,315 5,178 26 %

Nonperforming loans, net of government guarantees/portfolio loans 0.70 % 1.34 % 1.49 % 2.24 % 1.33 % 0.22 % 26 %

Net charge-offs (recoveries)/average loans 0.03 % (0.07) % 0.15 % 0.15 % 0.08 % 0.03 % NM

Allowance for loan losses/portfolio loans 1.46 % 1.83 % 1.98 % 2.25 % 2.02 % 1.85 % (5) %

Nonperforming assets, net of government guarantees/assets 0.77 % 1.21 % 1.50 % 1.89 % 1.27 % 0.35 % 17 %

Effective tax rate (6)

23 % 21 % 17 % 43 % 29 % 32 % (6) %

Number of banking offices (7)

17 16 16 14 14 14 4 %

Number of employees (FTE) (8)

438 431 430 429 451 441 — %

1 These unaudited schedules provide selected financial information concerning the Company that should be read in conjunction with Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report.

2 Tangible book value per share is a non-GAAP ratio defined as shareholders’ equity, less intangible assets, divided by common shares outstanding.

Management believes that tangible book value is a useful measurement of the value of the Company’s equity because it excludes the effect of intangible assets on the Company’s equity.

See reconciliation to book value per share, the most comparable GAAP measurement below.

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.

Management believes this ratio is important as it has received more attention over the past several years from stock analysts and regulators.

The most comparable GAAP measure of shareholders' equity to total assets is calculated by dividing total shareholders' equity by total assets.

See reconciliation to shareholders' equity to total assets below.

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 2018 through 2020 and 41.11% in all other years presented.

Management believes that tax-equivalent net interest margin is a useful financial measure because it enables investors to evaluate net interest margin excluding tax expense in order to monitor our effectiveness in growing higher interest yielding assets and

managing our costs of interest bearing liabilities over time on a fully tax equivalent basis.

See reconciliation to net interest margin, the comparable GAAP measurement below.

5 In managing our business, we review the efficiency ratio exclusive of intangible asset amortization, which is a non-GAAP performance measurement.

Management believes that this is a useful financial measurement because we believe this presentation provides investors with a more accurate picture of our operating efficiency.

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.

Other companies may define or calculate this data differently.

For additional information see the "Other Operating Expense" section in Part II.

Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report.

See reconciliation to comparable GAAP measurement below.

6 The Company’s 2017 results included the impact of the enactment of the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017.

The law includes significant changes to the U.S.

corporate tax system, including a Federal corporate rate reduction from 35% to 21%.

In 2017, the Company applied the newly enacted corporate federal income tax rate of 21%, reducing the value of the Company's net deferred tax asset, resulting in approximately a $2.7 million increase in tax expense.

In 2018, the Company finalized changes related to the reduction in the federal tax rate which resulted in a $470,000 reduction in tax expense.

7 Number of banking offices does not include RML locations.

2020 number of banking offices includes 16 full service branches and 1 loan production office.

2018 number of banking offices includes 15 full service branches and 1 loan production office.

8 FTE includes 312, 311, 320, 314, 321, and 317 Community Banking employees in 2020, 2019, 2018, 2017, 2016 and 2015, respectively.

FTE includes 126, 120, 110, 115, 130, and 124 Home Mortgage Lending employees in 2020, 2019, 2018, 2017, 2016 and 2015, respectively.

Reconciliation of Selected Non-GAAP Financial Data to GAAP Financial Measures

These unaudited schedules provide selected financial information concerning the Company that should be read in conjunction with "Part II.

Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report.

Reconciliation of total shareholders' equity to tangible common shareholders’ equity (Non-GAAP) and total assets to tangible assets:

(In Thousands) 2020 2019 2018 2017 2016 2015

Total shareholders' equity $221,575 $207,117 $205,947 $192,802 $186,712 $177,214

Total assets 2,121,798 1,643,996 1,502,988 1,518,596 1,525,851 1,498,691

Total shareholders' equity to total assets ratio 10.44 % 12.60 % 13.70 % 12.70 % 12.24 % 11.82 %

(In Thousands) 2020 2019 2018 2017 2016 2015

Total shareholders' equity $221,575 $207,117 $205,947 $192,802 $186,712 $177,214

goodwill and other intangible assets, net 16,046 16,094 16,154 16,224 16,324 23,776

Tangible common shareholders' equity $205,529 $191,023 $189,793 $176,578 $170,388 $153,438

Total assets $2,121,798 $1,643,996 $1,502,988 $1,518,596 $1,525,851 $1,498,691

goodwill and other intangible assets, net 16,046 16,094 16,154 16,224 16,324 23,776

Tangible assets $2,105,752 $1,627,902 $1,486,834 $1,502,372 $1,509,527 $1,474,915

Tangible common equity to tangible assets ratio 9.76 % 11.73 % 12.76 % 11.75 % 11.29 % 10.40 %

Reconciliation of tangible book value per share (Non-GAAP) to book value per share

(In thousands, except per share data) 2020 2019 2018 2017 2016 2015

Total shareholders' equity $221,575 $207,117 $205,947 $192,802 $186,712 $177,214

Divided by common shares outstanding 6,251,004 6,558,809 6,883,216 6,871,963 6,897,890 6,877,140

Book value per share $35.45 $31.58 $29.92 $28.06 $27.07 $25.77

(In thousands, except per share data) 2020 2019 2018 2017 2016 2015

Total shareholders' equity $221,575 $207,117 $205,947 $192,802 $186,712 $164,441

goodwill and intangible assets, net 16,046 16,094 16,154 16,224 16,324 23,776

$205,529 $191,023 $189,793 $176,578 $170,388 $140,665

Divided by common shares outstanding 6,251,004 6,558,809 6,883,216 6,871,963 6,897,890 6,877,140

Tangible book value per share $32.88 $29.12 $27.57 $25.70 $24.70 $20.45

Reconciliation of tax-equivalent net interest margin (Non-GAAP) to net interest margin

(In Thousands) 2020 2019 2018 2017 2016 2015

Net interest income (9)

$70,665 $64,442 $61,208 $57,678 $56,357 $56,909

Divided by average interest-bearing assets 1,758,839 1,386,557 1,346,449 1,367,203 1,361,913 1,334,102

Net interest margin 4.02 % 4.65 % 4.55 % 4.22 % 4.14 % 4.27 %

(In Thousands) 2020 2019 2018 2017 2016 2015

Net interest income (9)

$70,665 $64,442 $61,208 $57,678 $56,357 $56,909

reduction in tax expense related to

tax-exempt interest income 613 722 726 872 808 722

$71,278 $65,164 $61,934 $58,550 $57,165 $57,631

Divided by average interest-bearing assets 1,758,839 1,386,557 1,346,449 1,367,203 1,361,913 1,334,102

Tax-equivalent net interest margin 4.05 % 4.70 % 4.60 % 4.28 % 4.20 % 4.32 %

Calculation of efficiency ratio

(In Thousands) 2020 2019 2018 2017 2016 2015

Net interest income (9)

$70,665 $64,442 $61,208 $57,678 $56,357 $56,909

Other operating income 63,328 37,346 32,167 40,474 43,263 44,608

Total revenue 133,993 101,788 93,375 98,152 99,620 101,517

Other operating expense 89,114 76,838 69,800 71,153 76,280 72,645

Less intangible asset amortization 48 60 70 100 135 258

Adjusted other operating expense $89,066 $76,778 $69,730 $71,053 $76,145 $72,387

Efficiency ratio 66.47 % 75.43 % 74.68 % 72.39 % 76.44 % 71.31 %

9 Amount represents net interest income before provision for loan losses.

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.

SmallCap Banks 100.00 104.33 87.06 109.22 99.19 138.09

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity