NORTHRIM BANCORP INC
For the period ended Dec 31, 2024. Filed Mar 10, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 10, 2025
NRIM$23.49-0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-08.
0001163370-24-000010
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-10.
0001163370-25-000007
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 171 previous paragraphs and 169 current paragraphs.
104 unchanged; 58 reworded; 3 added; 8 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 32 previous and 32 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
On October 31, 2024, the Company completed the acquisition of SCF in an all cash transaction valued at approximately $53.9 million. The Company determined that a new Specialty Finance segment is appropriate for the Company upon completion of the acquisition. The Specialty Finance segment also includes Northrim Funding Services, which was previously reported in the Community Banking segment. Net income in the Specialty Finance segment decreased 25% to $1.8 million in 2024 from $2.5 million in 2023, primarily due to $1.1 million in one-time deal related costs.
Current report
•Net income in the Community Banking segment increased 19% or $4.9 million, to $30.3 million in 2024 as compared to 2023. This increase was primarily the result of a 7% increase in net interest income due to increased interest income on loans which was only partially offset by higher interest expense on deposits.
Current report
Purchased receivable income increased in 2024 as compared to 2023 primarily due to the acquisition of SCF in October 2024. Purchased receivable income from operations at Northrim Funding Services remained relatively consistent with the prior year at $4.4 million.
Removed paragraphs (8)
Previous report
•Net income in the Community Banking segment decreased 12% or $3.8 million, to $27.9 million in 2023 as compared to 2022. This decrease was primarily the result of the following:
Previous report
◦Loan and deposit growth supported 2023 earnings in the Community Banking segment but were offset by increased other operating expenses in the segment, which increased $6.8 million to $70.7 million in 2023 from $63.9 million in 2022, primarily due to increases in salaries and other personnel expense as the Company continues to expand its branch network into new markets.
Previous report
◦The provision for credit losses increased in 2023 to a provision of $3.8 million from a provision of $1.8 million in 2022 primarily due to higher loan growth in 2023 compared to 2022.
Previous report
•The Company repurchased 208,673 shares of its common stock in 2023 at an average price of $43.34 per share.
Previous report
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.
Previous report
8 FTE includes 332, 336, 321, 312, 311, and 320 Community Banking employees at the end of 2023, 2022, 2021, 2020, 2019 and 2018, respectively. FTE includes 140, 133, 130, 126, 120, and 110 Home Mortgage Lending employees at the end of 2023, 2022, 2021, 2020, 2019 and 2018, respectively.
Previous report
Commercial servicing revenue decreased in 2023 as compared to 2022 primarily due to a smaller increase in the fair value of commercial servicing rights in 2023 as compared to 2022.
Previous report
Purchased receivable income increased in 2023 as compared to 2022 due to higher average balances as customers sold receivables to fund their operating cash needs.
Reworded paragraphs (58)
Previous wording
Net income decreased 17% to $25.4 million or $4.49 per diluted share for the year ended December 31, 2023, from $30.7 million, or $5.27 per diluted share, for the year ended December 31, 2022. The decrease in net income is primarily the result of a $3.8 million decrease in net income in the Community Banking segment, as well as a $1.6 million decrease in net income in the Home Mortgage Lending segment.
Current wording
Net income increased 46% to $37.0 million or $6.62 per diluted share for the year ended December 31, 2024, from $25.4 million, or $4.49 per diluted share, for the year ended December 31, 2023. The increase in net income is primarily the result of a $7.3 million increase in net income in the Home Mortgage Lending segment, as well as a $4.9 million increase in net income in the Community Banking segment.
Previous wording
•Net income in the Home Mortgage Lending segment decreased 178%, or $1.6 million, to a loss of $2.5 million in 2023 from a loss of $897,000 in 2022 driven by a decrease in production volume sold to $376.2 million in 2023 from $585.5 million in 2022 largely due to the significant increase in interest rates in 2023 as well as the fact that the Company retained $146.3 million in mortgage loan originations on its balance sheet in 2023 compared to $34.6 million in 2022.
Current wording
•Net income in the Home Mortgage Lending segment increased 292%, or $7.3 million, to income of $4.8 million in 2024 from a loss of $2.5 million in 2023 driven by an increase in production volume sold to $609.2 million in 2024 from $376.2 million in 2023. Production volume outside of Alaska increased $85 million in 2024 compared to 2023, while production in Alaska increased $148 million in 2024 compared to 2023. Additionally, interest income on home mortgages held for investment increased in 2024 due to increased average balances.
Previous wording
•The net interest margin increased to 4.14% in 2023 from 3.85% in 2022 mostly due to an increase in average yields on interest earning assets to in 2023 compared to 2022 as a result of higher interest rates. This was only partially offset by an increase in the cost of interest-bearing liabilities.
Current wording
•The net interest margin increased to 4.28% in 2024 from 4.14% in 2023 mostly due to an increase in average yields on interest earning assets in 2024 compared to 2023 as a result of higher interest rates, as well as an increase in the mix of earning assets which includes a higher percentage of loans in 2024 versus 2023. These factors were only partially offset by an increase in the cost of interest-bearing liabilities.
Previous wording
•Loans increased 19% to $1.79 billion at December 31, 2023 compared to $1.50 billion at December 31, 2022, and deposits increased 4% to $2.49 billion at December 31, 2023 compared to $2.39 billion at December 31, 2022.
Current wording
•Loans increased 19% to $2.13 billion at December 31, 2024 compared to $1.79 billion at December 31, 2023, and deposits increased 8% to $2.68 billion at December 31, 2024 compared to $2.49 billion at December 31, 2023.
Previous wording
•Nonperforming loans, net of government guarantees, decreased to $5.0 million at the end of 2023 compared to $6.4 million at the end of 2022, while total adversely classified loans, net of government guarantees at December 31, 2023 decreased to $7.1 million from $7.6 million at December 31, 2022. The Allowance for Credit Losses ("ACL") totaled 0.97% of total portfolio loans at December 31, 2023, compared to 0.92% at December 31, 2022. The ACL as a percentage of total portfolio loans, net of government guarantees was 1.02% at December 31, 2023 compared to 0.99% at December 31, 2022.
Current wording
•Nonperforming loans, net of government guarantees, increased to $7.5 million at the end of 2024 compared to $5.0 million at the end of 2023, while total adversely classified loans, net of government guarantees at December 31, 2024 increased to $9.6 million from $7.1 million at December 31, 2023. The Allowance for Credit Losses (“ACL”) totaled 1.03% of total portfolio loans at December 31, 2024, compared to 0.97% at December 31, 2023. The ACL as a percentage of total portfolio loans, net of government guarantees was 1.10% at December 31, 2024 compared to 1.02% at December 31, 2023.
Previous wording
•The aggregate cash dividends paid by the Company in 2023 rose 28% to $13.6 million from $10.6 million paid in 2022. The Company paid cash dividends of $2.40 per share in 2023 and $1.82 per share in 2022.
Current wording
•The aggregate cash dividends paid by the Company in 2024 rose 1% to $13.8 million from $13.6 million paid in 2023. The Company paid cash dividends of $2.46 per share in 2024 and $2.40 per share in 2023.
Previous wording
•Total shareholders' equity was $234.7 million as of December 31, 2023, up 4% from the preceding quarter, and up 7% from $218.6 million a year ago. Shareholders' equity was positively impacted by the fair value of the available for sales securities portfolio which increased $12.6 million in 2023 and negatively impacted, but to a lesser extent, by the share repurchases totaling $9.0 million. The Company continued to maintain strong regulatory capital ratios with Tier 1 Capital to Risk Adjusted Assets of 11.43% at December 31, 2023.
Current wording
•Total shareholders' equity was $267.1 million as of December 31, 2024, up 14% from $234.7 million a year ago. Shareholders' equity was positively impacted by the fair value of the available for sales securities portfolio which increased $9.4 million in 2024 as compared to 2023. The Company continued to maintain strong regulatory capital ratios with Tier 1 Capital to Risk Adjusted Assets of 9.76% at December 31, 2024.
Previous wording
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 2023. 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 most comparable GAAP measurement below.
Current wording
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%. 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 most comparable GAAP measurement below.
Previous wording
7 Number of banking offices does not include RML locations. 2023 number of banking offices includes 19 full service branches and one loan production office. 2022 number of banking offices includes 18 full service branches and one loan production office. 2021 number of banking offices includes 17 full service branches and one loan production office. 2020 number of banking offices includes 16 full service branches and one loan production office. 2018 number of banking offices includes 15 full service branches and 1 loan production office.
Current wording
6 Number of banking offices does not include RML, NFS, or SCF locations. 2024 number of banking offices includes 20 full service branches. 2023 number of banking offices includes 19 full service branches and one loan production office. 2022 number of banking offices includes 18 full service branches and one loan production office. 2021 number of banking offices includes 17 full service branches and one loan production office. 2020 number of banking offices includes 16 full service branches and one loan production office.
Previous wording
9 Amount represents net interest income before provision for loan losses.
Current wording
9 Amount represents net interest income before provision for credit losses.
Previous wording
We earned net income of $25.4 million in 2023, compared to net income of $30.7 million in 2022. During these periods, net income per diluted share was $4.49 and $5.27, respectively. The following sections present discussion of the components that make up net income.
Current wording
We earned net income of $37.0 million in 2024, compared to net income of $25.4 million in 2023. During these periods, net income per diluted share was $6.62 and $4.49, respectively. The following sections present discussion of the components that make up net income.
Previous wording
Net interest income in 2023 was $103.3 million, compared to $95.1 million in 2022. The increase in 2023 as compared to 2022 was primarily the result of increased interest on loans and investments which was only partially offset by an increase in interest expense on deposits and borrowings. Interest income on loans increased $25.8 million in 2023 as compared to 2022 due to an increase in interest rates and higher net average interest-earning asset balances. Interest expense increased $23.5 million in 2023 as compared to the prior year as a result of higher interest rates and higher average interest-bearing deposit balances. During 2023 and 2022, net interest margins were 4.14% and 3.85%, respectively. The increase in net interest margin in 2023 as compared to 2022 is primarily the result of higher yields on earning-assets and higher average portfolio loan balances.
Current wording
Net interest income in 2024 was $113.2 million, compared to $103.3 million in 2023. The increase in 2024 as compared to 2023 was primarily the result of increased interest on loans which was only partially offset by decreases of interest income on available for sale securities and deposits in other banks, as well as an increase in interest expense on deposits. Interest income on loans increased $26.1 million in 2024 as compared to 2023 due to an increase in interest rates and higher net average interest-earning asset balances. Interest expense increased $12.0 million in 2024 as compared to the prior year as a result of higher interest rates and higher average interest-bearing deposit balances. During 2024 and 2023, net interest margins were 4.28% and 4.14%, respectively. The increase in net interest margin in 2024 as compared to 2023 is primarily the result of higher yields on earning-assets and higher average portfolio loan balances.
Previous wording
1 Interest income includes loan fees. Loan fees recognized during the period and included in the yield calculation totaled $4.4 million, $8.5 million and $16.2 million for 2023, 2022 and 2021, respectively.
Current wording
1 Interest income includes loan fees. Loan fees recognized during the period and included in the yield calculation totaled $4.5 million, $4.4 million and $8.5 million for 2024, 2023 and 2022, respectively.
Previous wording
2 Nonaccrual loans are included with a zero effective yield. Average nonaccrual loans included in the computation of the average loans were $7.1 million, $8.6 million, and $12.3 million in 2023, 2022 and 2021, respectively.
Current wording
2 Nonaccrual loans are included with a zero effective yield. Average nonaccrual loans included in the computation of the average loans were $5.4 million, $7.1 million, and $8.6 million in 2024, 2023 and 2022, respectively.
Previous wording
The following table sets forth the changes in consolidated net interest income attributable to changes in volume and to changes in interest rates. Changes attributable to the combined effect of volume and interest rate have been allocated proportionately to the changes due to volume and the changes due to interest rate:
Current wording
The following table sets forth the changes in consolidated net interest income attributable to changes in volume and to changes in interest rates for the periods indicated. Changes attributable to the combined effect of volume and interest rate have been allocated proportionately to the changes due to volume and the changes due to interest rate:
Previous wording
The Company adopted ASU 2016-13, Financial Instruments - Credit Losses, effective January 1, 2021. The provision for credit loss expense is the amount of expense that, based on our judgment, is required to maintain the ACL at an appropriate level under the current expected credit loss methodology ("CECL"). The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity. Refer to Note 1 of the notes to Consolidated Financial Statements included in Part II. Item 8 of this report for detailed discussion regarding ACL methodologies for loans, available for sale debt securities, held to maturity securities, loans held for investment, unfunded commitments, and purchased receivables.
Current wording
The provision for credit loss expense is the amount of expense that, based on our judgment, is required to maintain the ACL at an appropriate level under the current expected credit loss methodology (“CECL”). The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity. Refer to Note 1 of the notes to Consolidated Financial Statements included in Part II. Item 8 of this report for detailed discussion regarding ACL methodologies for loans, available for sale debt securities, held to maturity securities, loans held for investment, unfunded commitments, and purchased receivables.
Previous wording
In general the increase in the provision for credit losses in 2023 as compared to 2022 is primarily the result of increased portfolio loans and unfunded commitment balances, and, to a lesser extent, a decrease in management's assumptions for prepayment and curtailment speeds. These increases were only partially offset by a decrease in rate due to improvement in management's forecast of economic factors as of December 31, 2023 compared to December 31, 2022. In general the increase in the provision for credit losses in 2022 as compared to 2021 is primarily the result of increased portfolio loan and unfunded commitment balances, and, to a lesser extent, an increase in projected loss rates. In 2021, there was a reversal of the provision primarily due to a decrease in projected loss rates following the uncertainty of the impacts of the COVID-19 pandemic in 2020 and the first half of 2021. The ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, as well as loan portfolio composition, quality, and duration.
Current wording
The provision for credit losses on loans held for investment remained relatively consistent in 2024 compared to 2023 due to continued growth in the portfolio and the fact that forecasted economic conditions remain stable between the two periods. The decrease in the provision for credit losses on unfunded commitments in 2024 compared to 2023 in primarily due to a change in the mix of unfunded commitments. In general the increase in the provision for credit losses in 2023 as compared to 2022 is primarily the result of increased portfolio loan and unfunded commitment balances, and, to a lesser extent, a decrease in management's assumptions for prepayment and curtailment speeds. These increases were only partially offset by a decrease in rate due to improvement in management's forecast of economic factors as of December 31, 2023 compared to December 31, 2022. The ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, as well as loan portfolio composition, quality, and duration.
Previous wording
The most significant item contributing to the decrease in other operating income in 2023 was a decrease in mortgage banking income, followed by a decrease in keyman insurance proceeds and commercial servicing revenue. Life insurance proceeds were received in 2022 in connections with the death of the Company's former Executive Vice President, General Counsel and Corporate Secretary who passed away on November 11, 2021. These decreases were partially offset by increases in purchased receivable income, gain on marketable equity securities, service charges on deposit accounts, and bankcard fees.
Current wording
The most significant item contributing to the increase in other operating income in 2024 was an increase in mortgage banking income, followed by an increase in purchased receivable income. Bankcard fees, service charges on deposit accounts, interest rate swap income, gain on marketable equity securities, and gain on sale of securities also increased. These increases were partially offset by a decrease in commercial servicing revenue.
Previous wording
Mortgage banking income consists of gross income from the origination and sale of mortgages as well as mortgage loan servicing fees and is the largest component of other operating income at 48% of total other operating income in 2023 and 63% in 2022. Mortgage banking income decreased in 2023 compared to 2022 mainly due to a decrease in mortgage loans originated and sold which decreased to $376.2 million in 2023 from $585.5 million in 2022. The overall decrease in mortgage originations sold in 2023 as compared to the prior year is primarily the result of the changes in interest rates during the year that led to decreased activity, as well as the fact that the Company retained $146.3 million in mortgage loan originations on its balance sheet in 2023 compared to $34.6 million in 2022.
Current wording
Mortgage banking income consists of gross income from the origination and sale of mortgages as well as mortgage loan servicing fees and is the largest component of other operating income at 57% of total other operating income in 2024 and 48% in 2023. Mortgage banking income increased in 2024 compared to 2023 mainly due to an increase in mortgage loans originated and sold which increased to $609.2 million in 2024 from $376.2 million in 2023. Approximately one third of the overall increase in mortgage originations sold in 2024 as compared to 2023 is from outside of Alaska and the two thirds is from production in the state of Alaska.
Previous wording
Gain on marketable equity securities increased in 2023 as compared to 2022 due to increased fair value on this portfolio.
Current wording
Bankcard fees and service charges on deposit accounts increased in 2024 due an increase in the number of the Company's deposit customers which led to higher transaction volume as compared to 2023, as well as an increase in some transactional fees. Gain on marketable equity securities increased in 2024 as compared to 2023 due to increased fair value on this portfolio. Gain on sale of securities increased in 2024 as compared to 2023 due to the sale of marketable equity securities in 2024. Commercial servicing revenue decreased in 2024 as compared to 2023 primarily due to a decrease in commercial loan servicing balances.
Previous wording
Other operating expense increased by 6% in 2023 as compared to 2022. The largest increase was in salaries and other personnel expense, primarily related to community banking operations, as the Company expanded its branch network into new markets. Data processing expense, occupancy expense, insurance expense, marketing expense and professional and outside services also increased in 2023 compared to 2022 due to the increase in branch locations, increased customer and transaction volume, increased FDIC insurance costs associated with asset growth, and increased legal and investment management fees. These increases were partially offset by decreases in other real estate owned (“OREO”) expense. OREO expense decreased in 2023 primarily due to gains on sale of OREO properties as compared to 2022 as subsequent proceeds were received related to a government guarantee on an OREO property sold in December 2022.
Current wording
Other operating expense increased by 11% in 2024 as compared to 2023. The largest increase was in salaries and other personnel expense. Salaries and other personnel expense increased $3.1 million in the Home Mortgage Lending segment due to increased mortgage production which resulted in higher loan officer commissions. Salaries and other personnel expense increased $2.1 million in the Community Banking segment primarily due to higher profit share expense, which generally increases when net income increases to reflect a higher payout to employees. Data processing expense, occupancy expense, insurance expense, marketing expense and professional and outside services also increased in 2024 compared to 2023 due to the increase in branch locations, increased customer and transaction volume, increased FDIC insurance costs associated with asset growth, and increased professional and outside services related to the acquisition of SCF. Other real estate owned (“OREO”) expense, net of rental income and gains on sale also increased in 2024 primarily due to smaller gains on sale of OREO properties as compared to 2023 as subsequent proceeds were received related to a government guarantee on an OREO property sold in December 2022.
Previous wording
The provision for income taxes decreased $1.5 million or 20%, to $6.2 million in 2023 as compared to 2022. The decrease in 2023 is primarily due to lower pretax income. The Company's effective tax rate decreased to 19.7% in 2023 from 20.1% in 2022, primarily due to an increase in tax exempt income and low income housing tax credits as a percentage of pre-tax income in 2023 compared to 2022.
Current wording
The provision for income taxes increased $3.8 million or 61%, to $10.0 million in 2024 as compared to 2023. The increase in 2024 is primarily due to higher pretax income. The Company's effective tax rate increased to 21.3% in 2024 from 19.7% in 2023, primarily due to a decrease in tax exempt income and low income housing tax credits as a percentage of pre-tax income in 2024 compared to 2023.
Previous wording
The composition of our investment securities portfolio, which includes securities available for sale, held-to-maturity investments, and marketable equity securities, reflects management’s investment strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of interest income. The investment securities portfolio also mitigates interest rate and credit risk inherent in the loan portfolio, while providing a vehicle for the investment of available funds, a source of liquidity (by pledging as collateral or through repurchase agreements), and collateral for certain public funds deposits. Investment securities designated as available for sale comprised 93% of the portfolio as of December 31, 2023 and are available to meet liquidity requirements in a contingency situation.
Current wording
The composition of our investment securities portfolio, which includes securities available for sale, held-to-maturity investments, and marketable equity securities, reflects management’s investment strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of interest income. The investment securities portfolio also mitigates credit risk inherent in the loan portfolio, while providing a vehicle for the investment of available funds, a source of liquidity (by pledging as collateral or through repurchase agreements), and collateral for certain public funds deposits. Investment securities designated as available for sale comprised 91% of the portfolio as of December 31, 2024 and are available to meet liquidity requirements in a contingency situation.
Previous wording
Our investment portfolio consists primarily of government sponsored entity securities, corporate securities, collateralized loan obligations, and municipal securities. Investment securities at December 31, 2023 decreased $36.7 million, or 5%, to $687.8 million from $724.5 million at December 31, 2022. The decrease at December 31, 2023 as compared to December 31, 2022 came from investment maturities and calls that were used to fund growth in portfolio loans. The average maturity of the investment portfolio was approximately 2.8 years at December 31, 2023 as compared to approximately 3.3 years at December 31, 2022. Investment securities may be pledged as collateral to secure public deposits or borrowings. At December 31, 2023 and 2022, $180.1 million and $59.3 million in securities were pledged for deposits and borrowings, respectively.
Current wording
Our investment portfolio consists primarily of government sponsored entity securities, corporate securities, and collateralized loan obligations. Investment securities at December 31, 2024 decreased $163.8 million, or 24%, to $524.1 million from $687.8 million at December 31, 2023. The decrease at December 31, 2024 as compared to December 31, 2023 came from investment maturities and calls that were used to fund growth in portfolio loans. The average maturity of the investment portfolio was approximately 2.4 years at December 31, 2024 as compared to approximately 2.8 years at December 31, 2023. Investment securities may be pledged as collateral to secure public deposits or borrowings. At December 31, 2024 and 2023, $177.4 million and $180.1 million in securities were pledged for deposits and borrowings, respectively.
Previous wording
All of our loans and credit lines are subject to approval procedures and amount limitations. These limitations apply to the borrower’s total outstanding indebtedness and commitments to us, including the indebtedness of any guarantor. Generally, we are permitted to make loans to one borrower of up to 15% of the unimpaired capital and surplus of the Bank. The legal lending limit for the Bank was $34.5 million at December 31, 2023. At December 31, 2023, the Company had two relationships whose total direct and indirect commitments exceeded $34.5 million; however, no individual direct relationship exceeded the loans-to-one borrower limitation.
Current wording
All of our loans and credit lines are subject to approval procedures and amount limitations. These limitations apply to the borrower’s total outstanding indebtedness and commitments to us, including the indebtedness of any guarantor. Generally, we are permitted to make loans to one borrower of up to 15% of the unimpaired capital and surplus of the Bank. The legal lending limit for the Bank was $37.0 million at December 31, 2024. At December 31, 2024, the Company had one relationship whose total direct and indirect commitments exceeded $37.0 million; however, no individual direct relationship exceeded the loans-to-one borrower limitation.
Previous wording
The Company's loans have grown significantly in recent history, in part due to PPP loans, but over the last four years, core loans have also increased significantly. Management attributes higher growth in core loans in 2023 and 2022 to our ability to attract new customers through our outreach to the community. The Company's "Land and Expand" program was designed to increase both loans and deposits as we attract a broader customer base and convert new PPP customers into full banking relationships.
Current wording
The Company's loans have grown significantly in recent years. Management attributes higher growth in loans in 2024 and 2023 to our ability to attract new customers through our outreach to the community. The Company's “Land and Expand” program was designed to increase both loans and deposits as we attract a broader customer base and convert new customers into full banking relationships.
Previous wording
The following table presents growth information for loans and loans excluding PPP loans:
Current wording
The following table presents growth information for loans and loans excluding Paycheck Protection Program (“PPP”) loans:
Previous wording
The Company defines "direct exposure" to the oil and gas industry as companies that it has identified as significantly reliant upon activity related to the oil and gas industry, such as oil producers or drilling and exploration companies, and companies who provide oilfield services, lodging, equipment rental, transportation, and other logistic services specific to the industry. The Company estimates that $96.1 million, or approximately 5% of loans as of December 31, 2023 have direct exposure to the oil and gas industry as compared to $83.4 million, or approximately 6% of loans as of December 31, 2022. The Company's unfunded commitments to borrowers that have direct exposure to the oil and gas industry were $38.6 million and $51.8 million at December 31, 2023 and 2022, respectively. The portion of the Company's ACL that related to the loans with direct exposure to the oil and gas industry was estimated at $884,000 and $786,000 as of December 31, 2023 and 2022, respectively.
Current wording
The Company defines "direct exposure" to the oil and gas industry as companies that it has identified as significantly reliant upon activity related to the oil and gas industry, such as oil producers or drilling and exploration companies, and companies who provide oilfield services, lodging, equipment rental, transportation, and other logistic services specific to the industry. The Company estimates that $99.7 million, or approximately 5% of loans as of December 31, 2024 have direct exposure to the oil and gas industry as compared to $96.1 million, or approximately 5% of loans as of December 31, 2023. The Company's unfunded commitments to borrowers that have direct exposure to the oil and gas industry were $45.8 million and $38.6 million at December 31, 2024 and 2023, respectively. The portion of the Company's ACL that related to the loans with direct exposure to the oil and gas industry was estimated at $1.1 million and $884,000 as of December 31, 2024 and 2023, respectively.
Previous wording
The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions. At December 31, 2023, the Company had $123.3 million, or 7% of total portfolio loans, in the Healthcare sector; $100.4 million, or 6% of portfolio loans, in the Tourism sector; $84.2 million, or 5% in the Accommodations sector; $75.0 million, or 4% in the Fishing sector; $72.8 million, or 4% in Retail loans; $63.4 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector; and $52.2 million, or 3% in the Restaurants and Breweries sector.
Current wording
The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions. At December 31, 2024, the Company had $138.0 million, or 6% of total portfolio loans, in the Healthcare sector; $117.0 million, or 5% of portfolio loans, in the Tourism sector; $104.3 million, or 5% in the Accommodations sector; $87.4 million, or 4% in Retail loans; $84.6 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector; $76.5 million, or 4% in the Fishing sector; and $55.1 million, or 3% in the Restaurants and Breweries sector.
Previous wording
The following table sets forth information regarding our nonperforming loans and total nonperforming assets:
Current wording
The following table sets forth information regarding our nonperforming loans and total nonperforming assets for the periods indicated:
Previous wording
The Company’s nonperforming assets, net of government guarantees decreased to $5.8 million at December 31, 2023 as compared to $6.4 million at December 31, 2022. This decrease was mostly due to principal paydowns on nonaccrual loans which were only partially offset by additions to nonaccrual loans in 2023. There was interest income of $656,000 and $2.2 million recognized in net income for 2023 and 2022, respectively, related to interest collected on nonaccrual loans whose principal had been paid down to zero. The Company held a government guarantee related to the OREO property that was sold in December 2022; however, the value of this guarantee was not included in the Company's financial statements in 2022 due to uncertainty as to the total amount that would be received from the guarantee. The Company received proceeds from the guarantee in the third quarter of 2023 which were recorded as a gain on sale of OREO.
Current wording
The Company’s nonperforming assets, net of government guarantees increased to $11.6 million at December 31, 2024 as compared to $5.8 million at December 31, 2023. This increase was mostly due to the addition of an SCF nonaccrual loan and an SCF purchased receivable relationship, which were only partially offset by paydowns to nonaccrual loans in 2024. There was interest income of $241,000 and $656,000 recognized in net income for 2024 and 2023, respectively, related to interest collected on nonaccrual loans whose principal had been paid down to zero. The Company held a government guarantee related to the OREO property that was sold in December 2022; however, the value of this guarantee was not included in the Company's financial statements in 2022 due to uncertainty as to the total amount that would be received from the guarantee. The Company received proceeds from the guarantee in the third quarter of 2023 and first quarter of 2024 which were recorded as a gain on sale of OREO.
Previous wording
The Company made a $1.0 million loan in 2021 to facilitate the sale of OREO in 2021, but did not make any loans to facilitate the sale of OREO in 2022 or 2023. Our underwriting policies and procedures for loans to facilitate the sale of OREO are no different than our standard loan policies and procedures.
Current wording
The Company did not make any loans to facilitate the sale of OREO in 2024, 2023, or 2022. Our underwriting policies and procedures for loans to facilitate the sale of OREO are no different than our standard loan policies and procedures.
Previous wording
At December 31, 2023, management had identified potential problem loans of $1.9 million as compared to potential problem loans of $1.6 million at December 31, 2022. Potential problem loans are loans which are currently performing that have developed negative indications that the borrower may not be able to comply with present payment terms and which may later be included in nonaccrual, past due, or impaired loans. The increase in potential problem loans at December 31, 2023 from December 31, 2022 was primarily due to the addition of four new potential problem loans in 2023 that were partially offset by paydowns to existing potential problem loans.
Current wording
At December 31, 2024, management had identified potential problem loans of $1.6 million as compared to potential problem loans of $1.9 million at December 31, 2023. Potential problem loans are loans which are currently performing that have developed negative indications that the borrower may not be able to comply with present payment terms and which may later be included in nonaccrual, past due, or impaired loans. The decrease in potential problem loans at December 31, 2024 from December 31, 2023 was primarily due to paydowns to existing potential problem loans in 2024 that were partially offset by the addition of two new potential problem loans.
Previous wording
The ACL for loans increased to $17.3 million at December 31, 2023 compared to $13.8 million at December 31, 2022 primarily due to an increase in loan balances, net of guarantees, as well as a slight increase in expected future loss rates due to a decrease in management's assumptions about prepayment and curtailment rates. The Company determined that an ACL of $17.3 million, or 0.97% of portfolio loans, is appropriate as of December 31, 2023 based on our analysis of the current credit quality of the portfolio and forecasted economic conditions. The ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, as well as loan portfolio composition, quality, and duration.
Current wording
The ACL for loans increased to $22.0 million at December 31, 2024 compared to $17.3 million at December 31, 2023 primarily due to an increase in loan balances, net of guarantees. The Company determined that an ACL of $22.0 million, or 1.03% of portfolio loans, is appropriate as of December 31, 2024 based on our analysis of the current credit quality of the portfolio and forecasted economic conditions. The ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, as well as loan portfolio composition, quality, and duration.
Previous wording
Purchased receivable balances increased at December 31, 2023 to $36.8 million from $20.0 million at December 31, 2022, and year-to-date average purchased receivable balances were $24.8 million and $7.0 million in 2023 and 2022, respectively. Purchased receivable income was $4.5 million and $2.0 million in 2023 and 2022, respectively.
Current wording
Purchased receivable balances increased at December 31, 2024 to $74.1 million from $36.8 million at December 31, 2023, and year-to-date average purchased receivable balances were $38.7 million and $24.8 million in 2024 and 2023, respectively. Purchased receivable income was $7.1 million and $4.5 million in 2024 and 2023, respectively. The increase in purchased receivable balances at December 31, 2024 and the increase in purchased receivable income as compared to the prior year is primarily due to the acquisition of SCF on October 31, 2024.
Previous wording
Deposits are our primary source of funds. Total deposits increased 4% to $2.49 billion at December 31, 2023 from $2.39 billion at December 31, 2022. Our deposits generally are expected to fluctuate according to the level of our market share, economic conditions, and normal seasonal trends.
Current wording
Deposits are our primary source of funds. Total deposits increased 8% to $2.68 billion at December 31, 2024 from $2.49 billion at December 31, 2023. Our deposits generally are expected to fluctuate according to the level of our market share, economic conditions, and normal seasonal trends.
Previous wording
The Company's mix of deposits continues to contribute to a low cost of funds with balances in transaction accounts representing 87% of total deposits at December 31, 2023 and 92% at December 31, 2022.
Current wording
The Company's mix of deposits continues to contribute to a low cost of funds with balances in transaction accounts representing 84% of total deposits at December 31, 2024 and 87% at December 31, 2023.
Previous wording
The only deposit category with stated maturity dates is certificates of deposit. At December 31, 2023, we had $331.3 million in certificates of deposit, of which $268.5 million, or 81%, are scheduled to mature in 2024. The Company’s certificates of deposit increased to $331.3 million during 2023 as compared to $192.9 million at December 31, 2022. The aggregate amount of certificates of deposit in amounts of $250,000 or more at December 31, 2023 and 2022, was $142.1 million and $77.5 million, respectively. The following table sets forth the amount outstanding of certificates of deposits in amounts of $250,000 or more by time remaining until maturity and percentage of total deposits as of December 31, 2023:
Current wording
The only deposit category with stated maturity dates is certificates of deposit. At December 31, 2024, we had $418.4 million in certificates of deposit, of which $369.7 million, or 88%, are scheduled to mature in 2025. The Company’s certificates of deposit increased to $418.4 million during 2024 as compared to $331.3 million at December 31, 2023. The aggregate amount of certificates of deposit in amounts of $250,000 or more at December 31, 2024 and 2023, was $217.1 million and $142.1 million, respectively. The following table sets forth the amount outstanding of certificates of deposits in amounts of $250,000 or more by time remaining until maturity and percentage of total deposits as of December 31, 2024:
Previous wording
The Company offers the Certificate of Deposit Account Registry Service® (CDARS®) as a member of Promontory Interfinancial Network, LLCSM (Network). When a Network member places a deposit using CDARS, that certificate of deposit is divided into amounts under the standard FDIC insurance maximum ($250,000) and is allocated among member banks, making the large deposit eligible for FDIC insurance. The Company had $48.1 million CDARS certificates of deposits at December 31, 2023 and $30.2 million CDARS certificates of deposits at December 31, 2022.
Current wording
The Company offers the Certificate of Deposit Account Registry Service® (CDARS®) as a member of IntraFi® Network SM (Network). When a Network member places a deposit using CDARS, that certificate of deposit is divided into amounts under the standard FDIC insurance maximum ($250,000) and is allocated among member banks, making the large deposit eligible for FDIC insurance. The Company had $49.2 million CDARS certificates of deposits at December 31, 2024 and $48.1 million CDARS certificates of deposits at December 31, 2023.
Previous wording
Uninsured deposits totaled $1.0 billion or 41% of total deposits as of December 31, 2023 compared to $1.1 billion or 46% of total deposits as of December 31, 2022. As interest rates continued to increase in 2023, Northrim took a proactive, targeted approach to increase deposit rates.
Current wording
Uninsured deposits totaled $1.1 billion or 40% of total deposits as of December 31, 2024 compared to $1.0 billion or 41% of total deposits as of December 31, 2023. As interest rates continued to increase in 2024, Northrim took a proactive, targeted approach to increase deposit rates and retain deposit customers.
Showing the first 40 of 58 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
As of December 31, 2024, management utilizes and forecasts U.S. unemployment and U.S. gross domestic product as the loss drivers for all of the loan pools that utilize the DCF method. The Company added U.S. gross domestic product as a loss driver in 2024 because we determined that there is better model fit using this multi-factor model. The Company's regression models for PD as of December 31, 2024 utilize peer historical loan level default data. Peers for this purpose include banks in the United States with total assets between $1 billion and $5 billion whose loan portfolios share certain characteristics with the Company's loan portfolio. Peers differ by loan segment; the Company refined the peer groups in 2024 in order to add more precision to the model. A bank is included in the peer group for each loan segment in 2024 under the following circumstances:
Current report — wording carried from elsewhere
• The percentage the balance of the loan segment compared to total loans over a five year look back period is within 0.5 standard deviations of the Company's data;
Current report — wording carried from elsewhere
• The percentage of total charge offs for the loan segment over a five year look back period is within 0.25 standard deviations of the Company's data; and
Current report — wording carried from elsewhere
• The percentage of total charge offs for the loan segment during the recessionary period from the fourth quarter of 2008 to the fourth quarter of 2012 is within 0.25 standard deviations of the Company's data.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Bankcard fees and service charges on deposit accounts increased in 2023 due an increase in the number of the Company's deposit customers which led to higher transaction volume as compared to 2022.