NORTHRIM BANCORP INC

Previous wording

This quarterly report on Form 10-Q includes “forward-looking statements,” as that term is defined for purposes of Section 21E of the Securities Exchange Act of 1934, as amended, which are not historical facts. These forward-looking statements describe management’s expectations about future events and developments such as future operating results, growth in loans and deposits, continued success of the Company’s style of banking, and the strength of the local economy. All statements, other than statements of historical fact, regarding our financial position, business strategy, management’s plans and objectives for future operations are forward-looking statements. We use words such as “anticipate,” “believe,” “expect,” “intend” and similar expressions in part to help identify forward-looking statements. Forward-looking statements reflect management’s current plans and expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations, and those variations may be both material and adverse. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: descriptions of the financial condition, results of operations, asset based lending volumes, asset and credit quality trends and profitability and statements about the expected financial benefits and other effects of the acquisition of Sallyport Commercial Finance, LLC (“Sallyport”) by Northrim Bank; expected cost savings, synergies and other financial benefits from the acquisition of Sallyport by Northrim Bank might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; the ability of Northrim and Sallyport to execute their respective business plans; potential further increases in interest rates; the value of securities held in our investment portfolio; impact of the results of government initiatives, including tariffs, on the regulatory landscape, natural resource extraction industries, and capital markets; the impact of declines in the value of commercial and residential real estate markets, high unemployment rates, inflationary pressures and slowdowns in economic growth; changes in banking regulation or actions by bank regulators; potential further increases in inflation, supply-chain constraints, and potential geopolitical instability, including the wars in Ukraine and the Middle East; financial stress on borrowers (consumers and businesses) as a result of higher rates or an uncertain economic environment; the general condition of, and changes in, the Alaska economy; our ability to maintain or expand our market share or net interest margin; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements,…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This quarterly report on Form 10-Q includes “forward-looking statements,” as that term is defined for purposes of Section 21E of the Securities Exchange Act of 1934, as amended, which are not historical facts. These forward-looking statements describe management’s expectations about future events and developments such as future operating results, growth in loans and deposits, continued success of the Company’s style of banking, and the strength of the local economy. All statements, other than statements of historical fact, regarding our financial position, business strategy, management’s plans and objectives for future operations are forward-looking statements. We use words such as “anticipate,” “believe,” “expect,” “intend” and similar expressions in part to help identify forward-looking statements. Forward-looking statements reflect management’s current plans and expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations, and those variations may be both material and adverse. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: descriptions of the financial condition, results of operations, asset based lending volumes, asset and credit quality trends and profitability and statements about the expected financial benefits and other effects of the acquisition of Sallyport Commercial Finance, LLC (“Sallyport”) by Northrim Bank; expected cost savings, synergies and other financial benefits from the acquisition of Sallyport by Northrim Bank might not be realized within the expected time frames and costs or difficulties relating to integration matters might be greater than expected; the ability of Northrim and Sallyport to execute their respective business plans; potential further increases in interest rates; the value of securities held in our investment portfolio; impact of the results of government initiatives, including tariffs, on the regulatory landscape, natural resource extraction industries, and capital markets; the impact of declines in the value of commercial and residential real estate markets, high unemployment rates, inflationary pressures and slowdowns in economic growth; changes in banking regulation or actions by bank regulators; potential further increases in inflation, supply-chain constraints, and potential geopolitical instability, including the war in Ukraine and the conflicts in the Middle East; financial stress on borrowers (consumers and businesses) as a result of higher rates or an uncertain economic environment; the general condition of, and changes in, the Alaska economy; our ability to maintain or expand our market share or net interest margin; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our finan…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The Alaska Department of Labor (“DOL”) has reported Alaska’s seasonally adjusted unemployment rate in February of 2025 was 4.7% compared to the U.S. rate of 4.1%. The total number of payroll jobs in Alaska, not including uniformed military, increased 1.6% or 5,200 jobs between February of 2024 and February of 2025.

Current wording

The Alaska Department of Labor (“DOL”) has reported Alaska’s seasonally adjusted unemployment rate in May of 2025 was 4.7% compared to the U.S. rate of 4.2%. The rate has held steady in Alaska at 4.7% for eight consecutive months. The total number of payroll jobs in Alaska, not including uniformed military, increased 1.1% or 3,800 jobs between May of 2024 and May of 2025.

Previous wording

According to the DOL, the Oil and Gas sector had the largest growth rate in new jobs of 7.5% through February 2025 compared to the prior year, up 600 direct jobs. The Construction sector added 1,000 positions for a year-over-year growth rate of 6.1% in February of 2025. The larger Health Care sector grew by 1,400 jobs for an annual growth rate of 3.4%. Transportation, Warehousing and Utilities added 1,100 jobs for a 5% growth rate. Leisure and Hospitality increased 500 jobs year-over-year through February of 2025, up 1.6%.

Current wording

According to the DOL, the Oil and Gas sector had the largest growth rate in new jobs of 8.8% through May of this year compared to the prior year, up 700 direct jobs. The Construction sector added 700 positions for a year-over-year growth rate of 3.7% through May of 2025. The larger Health Care sector grew by 1,200 jobs for an annual growth rate of 2.9%. Transportation, Warehousing and Utilities added 600 jobs for a 2.3% growth rate over the same period. Professional and Business Services increased 500 jobs year-over-year through May of 2025, up 1.7%.

Previous wording

The Government sector grew by 600 jobs for 0.7% growth, adding 100 Federal jobs, and 500 State positions in Alaska over the same period. Declining sectors between February 2024 and February 2025 were Manufacturing (primarily seafood processing) shrinking 500 positions (-4.4%), Financial Activities, down 100 jobs (-0.9%), and Retail lost 100 jobs (-0.3%).

Current wording

The Government sector grew by 200 jobs for 0.2% growth, adding 400 State positions while losing 200 Federal jobs in Alaska over the same period. Declining sectors between May 2024 and May 2025 were Information down 100 jobs or (-2.3%), Manufacturing (primarily seafood processing) shrinking 200 positions (-2.1%), Wholesale Trade lost 100 jobs (-1.5%) and Financial Activities, down 100 jobs (-0.9%).

Previous wording

Alaska’s seasonally adjusted personal income was $56.5 billion in the fourth quarter of 2024 according to the Federal Bureau of Economic Analysis (“BEA”). This was an annualized improvement in the fourth quarter of 4.7% for Alaska, compared to the national average of 4.6%. Alaska enjoyed an annual personal income improvement of 6% in 2024 compared to the U.S. increase of 5.4%, ranking Alaska 6 th best in the nation. The $650 million increase in personal income in the fourth quarter in Alaska came from a $446 million increase in net earnings from wages, $154 million growth in government transfer receipts, and a $49 million increase in investment income.

Current wording

Alaska’s seasonally adjusted personal income was $57.4 billion in the first quarter of 2025 according to the Federal Bureau of Economic Analysis (“BEA”). This was an annualized improvement in the first quarter of 6.4% for Alaska, compared to the national average of 6.7%. Alaska enjoyed an annual personal income improvement of 6% in 2024 compared to the U.S. increase of 5.4%, ranking Alaska 6 th best in the nation. The $885 million increase in personal income in the first quarter of 2025 in Alaska came from a $352 million increase in net earnings from wages, $440 million growth in government transfer receipts, and a $92 million increase in investment income.

Previous wording

Alaska’s Gross State Product (“GSP”) in 2024, reached $70 billion for the first time according to the BEA. Alaska’s inflation adjusted “real” GSP increased 1.5% in 2024 and 4% annualized in the fourth quarter of 2024, placing Alaska third best of all 50 states for the quarter. The average U.S. GDP growth rate was 2.8% for the year and 2.4% in the fourth quarter of 2024. Alaska’s real GSP improvement in the fourth quarter of 2024 was primarily caused by growth in the Mining, Oil & Gas; Transportation & Warehousing; and to a lesser extent the Health Care sector. Construction played a larger role in the annual state GSP performance.

Current wording

Alaska’s Gross State Product (“GSP”) in the first quarter of 2025 reached $72 billion according to the BEA. Alaska’s inflation adjusted “real” GSP increased 1.5% in 2024 and decreased -1.8% annualized in the first quarter of 2025. The average U.S. GDP growth rate was 2.8% for 2025 and -0.5% in the first quarter of 2025. Alaska’s real GSP decrease in the first quarter of 2025 was primarily caused by a decrease in the Mining, Oil & Gas sector, somewhat offset by improvements in the Construction sector.

Previous wording

Based on data from the U.S. Chamber of Commerce, Alaska exported $5.2 billion in goods to foreign countries in 2023. China is the largest importer of Alaska’s products at $1.2 billion, followed by Japan at $710 million and Korea at $702 million in 2023. Fish and related maritime products accounted for the largest volume at $2.1 billion, followed by minerals and ores $1.5 billion, and primary metals at $780 million in 2023. Chief Credit Officer and Bank Economist Mark Edwards stated, “President Trump’s significant changes to international tariffs has created uncertainty in trade markets. At this time, it is unknown how each country will respond. Alaska’s natural resources are highly valued commodities throughout the world. If issues arise with one country, such as China, it is most likely that Alaska’s products will be redirected to other markets like Japan and South Korea or sold domestically in the United States. Canada is the largest long-term investor in Alaska’s mining industry. This involves significant fixed capital investments made over decades that are unlikely to shift dramatically in the short-run.

Current wording

Alaska exported $5.9 billion in goods to foreign countries in 2024 according to the U.S. International Trade Administration. China is the largest importer of Alaska’s products at $1.5 billion, followed by Australia at $804 million, Japan at $674 million and South Korea at $634 million in 2024. Fish and related maritime products accounted for the largest volume at $2.1 billion, followed by minerals and ores at $2 billion, and primary metals at $992 million in 2024. Oil & Gas exports are $380 million because the majority of Alaska’s production is refined and consumed in the United States.

Previous wording

According to the US Bureau of Labor Statistics, the Consumer Price Index, or CPI, for the U.S. increased 2.8% between February of 2024 and February of 2025. In Alaska, the rate of increase was 2.9% for the same time period. Food and beverage; housing rents and mortgage rates; transportation; and medical care costs are the largest causes for inflation. Declining motor fuel prices, new and used car prices, and household furnishing costs have helped moderate inflationary pressures in Alaska.

Current wording

According to the US Bureau of Labor Statistics, the Consumer Price Index (“CPI”) for the U.S. increased 2.7% between June of 2024 and June of 2025. In Alaska, the rate of CPI increase was lower at 1.6% for the same time period. Food and beverage, housing costs, and medical care costs were the largest causes for inflation.Declining motor fuel prices, transportation, recreation and household furnishing costs have helped moderate inflationary pressures in Alaska.

Previous wording

The monthly average price of Alaska North Slope (“ANS”) crude oil was $76.39 in January, $74.03 in February and $73.39 in March of 2025. The Alaska Department of Revenue (“DOR”) calculated ANS crude oil production was 461 thousand barrels per day (“bpd”) in Alaska’s fiscal year ending June 30, 2024. Through nine months of the fiscal year 2025, production has averaged slightly above the State of Alaska forecast of 467 thousand bpd. In the Spring 2025 Revenue Forecast published March 12, 2025, the DOR expects production to continue to grow to 663 thousand bpd by fiscal year 2034. This is primarily a result of new production coming on-line in and around the NPR-A region west of Prudhoe Bay. A partnership between Santos and Repsol is constructing the new Pikka oil field and ConocoPhillips is developing the large new Willow oil field. There are also a number of smaller new oil fields in Alaska’s North Slope that are contributing to the State of Alaska’s production growth estimates.

Current wording

The monthly average price of Alaska North Slope (“ANS”) crude oil has ranged between $76.39 a barrel in January of 2025 and $67.07 in May of the prior year. The June 2025 average was $72.62. The Alaska Department of Revenue (“DOR”) calculated ANS crude oil production was 461 thousand barrels per day (“bpd”) in Alaska’s fiscal year ending June 30, 2024. Production rose to 469 thousand bpd in fiscal year ending June 30, 2025. In the Spring 2025 Revenue Forecast published March 12, 2025, the DOR expects production to continue to grow to 663 thousand bpd by fiscal year 2034. This is primarily a result of new production coming on-line in and around the NPR-A region west of Prudhoe Bay. A partnership between Santos and Repsol is constructing the new Pikka field and ConocoPhillips is developing the large new Willow field. There are also a number of smaller new fields in the ANS that are contributing to the State of Alaska’s production growth estimates.

Previous wording

The Alaska Permanent Fund is seeded annually by the oil wealth the State continues to save each year and has grown significantly over 40 years of successful investment. As of February 28, 2025 the funds value was $81.35 billion. According to the DOR it is scheduled to contribute $3.7 billion to the Alaska General Fund in fiscal year 2025 for general government spending and to pay the annual dividend to Alaskan residents.

Current wording

The Alaska Permanent Fund is seeded annually by the oil wealth the State continues to save each year and has grown significantly over 40 years of successful investment. As of May 31, 2025 the fund's value was $83.13 billion. According to the DOR it is scheduled to contribute $3.7 billion to Alaska General Fund in fiscal year 2025 for general government spending and to pay the annual dividend to Alaskan residents.

Previous wording

According to the Alaska Multiple Listing Services, the average sales price of a single family home in Anchorage rose 6.2% in 2024 to $510,109, following a 5.2% increase in 2023. This was the seventh consecutive year of price increases.

Current wording

According to the Alaska Multiple Listing Services, the average sales price of a single family home in Anchorage rose 6.2% in 2024 to $510,064, following a 5.2% increase in 2023. This was the seventh consecutive year of price increases. Through June of 2025 prices have continued to increase on average 2.6% to $523,059.

Previous wording

The average sales price for single family homes in the Matanuska Susitna Borough rose 3.8% in 2024 to $412,859, after increasing 4% in 2023. This continues a trend of average price increases for more than a decade in the region. These two markets represent where the vast majority of the residential lending activity for Northrim Bank (the “Bank”) occurs.

Current wording

The average sales price for single family homes in the Matanuska Susitna Borough rose 3.8% in 2024 to $412,859, after increasing 4% in 2023. This continues a trend of average price increases for more than a decade in the region. Through June of 2025 prices have continued to increase on average 6.9% to $441,463. These two markets represent where the vast majority of residential lending activity of Northrim Bank (the “Bank”) occurs.

Previous wording

The Alaska Multiple Listing Services reported a 3.4% increase in the number of units sold in Anchorage when comparing 2024 to 2023. There was virtually no change in the number of homes sold in the Matanuska Susitna Borough, with only four fewer homes sold in 2024 than in 2023 or -0.2%.

Current wording

There was virtually no change in the number of homes sold in the Matanuska Susitna Borough, with only four fewer homes sold in 2024 than in 2023 or -0.2%. In the first six months of 2025 the number of units sold has increased 13.1% in the Matanuska Susitna Borough compared to the first half of 2024 according to the Alaska Multiple Listing Services.

Previous wording

The Board of Governors of the Federal Reserve System lowered its benchmark interest rate target to 4.25%-4.50% as of both March 31, 2025 and December 31, 2024. The prime rate of interest is 7.50% as of both March 31, 2025 and December 31, 2024.

Current wording

The Board of Governors of the Federal Reserve System left its benchmark interest rate target unchanged at 4.25%-4.50% as of both June 30, 2025 and December 31, 2024. The prime rate of interest is 7.50% as of both June 30, 2025 and December 31, 2024.

Previous wording

Highlights and Summary of Performance - First Quarter of 2025

Current wording

Highlights and Summary of Performance - Second Quarter of 2025

Previous wording

The Company reported net income and earnings per diluted share of $13.3 million and $2.38, respectively, for the first quarter of 2025 compared to net income and earnings per diluted share of $8.2 million and $1.48, respectively, for the first quarter of 2024. The increase in net income for the three-month period ending March 31, 2025 compared to the same period last year is primarily attributable to an increase in purchased receivable income, higher net interest income, increased mortgage banking income, and a benefit to the provision for credit losses, which were only partially offset by higher operating expenses.

Current wording

The Company reported net income and earnings per diluted share of $11.8 million and $2.09, respectively, for the second quarter of 2025 compared to net income and earnings per diluted share of $9.0 million and $1.62, respectively, for the second quarter of 2024. The Company reported net income and earnings per diluted share of $25.1 million and $4.47, respectively for the first six months of 2025 compared to net income and earnings per diluted share of $17.2 million and $3.10, respectively, for the first six months of 2024. The increase in net income for both periods in 2025 compared to the same periods last year is primarily attributable to higher net interest income, an increase in purchased receivable income and increased mortgage banking income, which were only partially offset by higher operating expenses and an increase in the provision for credit losses.

Previous wording

•The average cost of interest-bearing deposits for the quarter was 2.01% at March 31, 2025, down from 2.13% at March 31, 2024.

Current wording

•The average cost of interest-bearing deposits was 2.04% at June 30, 2025, down from 2.21% at June 30, 2024.

Previous wording

•Mortgage loan originations increased to $121.56 million in the first quarter of 2025, up from $101.73 million in the first quarter a year ago. Mortgage loans funded for sale were $108.50 million in the first quarter of 2025, compared to $84.32 million in the first quarter of 2024.

Current wording

•Mortgage loan originations were $277.1 million in the second quarter of 2025, up from $181.5 million in the second quarter a year ago. Mortgage loans funded for sale were $249.7 million in the second quarter of 2025, compared to $152.3 million in the second quarter of 2024.

Previous wording

Nonperforming assets: Nonperforming assets, net of government guarantees were $12.3 million at March 31, 2025 and $11.6 million at December 31, 2024. Other Real Estate Owned (“OREO”), net of government guarantees was zero at both March 31, 2025 and December 31, 2024. Repossessed assets were $297,000 as of both March 31, 2025 and December 31, 2024. Nonperforming loans, net of government guarantees increased $455,000 or 6% to $8.0 million as of March 31, 2025 from $7.5 million as of December 31, 2024, primarily due to the addition of four loans in the first three months of 2025. Nonperforming purchased receivables increased $239,000 or 6% to $4.0 million as of March 31, 2025 from $3.8 million as of December 31, 2024. Of the nonperforming assets at March 31, 2025, $4.5 million are attributable to the Community Banking segment and $7.6 million are attributable to the Specialty Finance segment.

Current wording

Nonperforming assets: Nonperforming assets, net of government guarantees were $11.9 million at June 30, 2025 and $11.6 million at December 31, 2024. Other Real Estate Owned (“OREO”), net of government guarantees was zero at both June 30, 2025 and December 31, 2024. Repossessed assets were $50,000 as of June 30, 2025 and $297,000 as of December 31, 2024. Nonperforming loans, net of government guarantees increased $258,000 or 3% to $7.8 million as of June 30, 2025 from $7.5 million as of December 31, 2024, primarily due to the addition of four loans in the first six months of 2025. Nonperforming purchased receivables increased $249,000 or 7% to $4.0 million as of June 30, 2025 from $3.8 million as of December 31, 2024. Of the nonperforming assets at June 30, 2025, $4.2 million are attributable to the Community Banking segment, $197,000 are attributable to the Home Mortgage Lending segment, and $7.5 million are attributable to the Specialty Finance segment.

Previous wording

Potential problem assets: Potential problem loans are loans which are currently performing in accordance with contractual terms but 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 or past due. These loans are closely monitored and their performance is reviewed by management on a regular basis. At March 31, 2025, management had identified $12.5 million potential problem loans, up from $1.6 million at December 31, 2024.

Current wording

Potential problem assets: Potential problem loans are loans which are currently performing in accordance with contractual terms but 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 or past due. These loans are closely monitored and their performance is reviewed by management on a regular basis. At June 30, 2025, management had identified $28.0 million potential problem loans, up from $1.6 million at December 31, 2024.

Previous wording

Net income for the first quarter of 2025 increased $5.1 million to $13.3 million as compared to $8.2 million for the same period in 2024. The increase in net income in the first quarter of 2025 as compared to the same quarter a year ago is largely attributable to a $4.8 million increase in purchased receivable income, a $4.9 million increase in net interest income, a $1.6 million decrease in the provision for credit losses, and a $1.4 million increase in mortgage banking income. These changes were only partially offset by higher operating expenses and a higher provision for income taxes.

Current wording

Net income for the second quarter of 2025 increased $2.8 million to $11.8 million as compared to $9.0 million for the same period in 2024. The increase in net income in the second quarter of 2025 as compared to the same quarter a year ago is largely attributable to a $6.5 million increase in net interest income, a $4.7 million increase in purchased receivable income, and a $1.5 million increase in mortgage banking income. These increases were only partially offset by a $7.3 million increase in other operating expenses and a $2.1 million increase in the provision for credit losses.

Previous wording

The increase in net interest margin in the first quarter of 2025 as compared to the same period of 2024 was primarily due to a favorable change in the mix of earning-assets, an increase in total earning assets, and higher yields on earning assets, which were only partially offset by higher interest costs.

Current wording

Net interest income for the second quarter of 2025 increased 24% or $6.5 million, to $33.6 million as compared to $27.1 million for the second quarter of 2024. The net interest margin increased 42 basis points to 4.66% in the second quarter of 2025 as compared to 4.24% in the second quarter of 2024. The increase in net interest income in the second quarter of 2025 compared to the same period in 2024 was primarily the result of increased interest on loans and interest bearing deposits in other banks which was only partially offset by a decrease in interest income on investments, as well as an increase in interest expense on interest-bearing deposits and borrowings. The increase in net interest margin in the second quarter of 2025 as compared to the same period of 2024 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets and higher yields on those assets which were only partially offset by an increase in borrowings.

Previous wording

•Net interest margin was 4.55% for the first quarter of 2025, a 31 basis point increase from the first quarter of 2024. The increase in net interest margin in the first quarter of 2025 compared to the same period in 2024 was primarily to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets, slightly higher yields on those assets, and a decrease in costs on interest-bearing liabilities.

Current wording

Net interest income for the first six months of 2025 increased 21% or $11.4 million, to $64.9 million as compared to $53.5 million for the first six months of 2024. The net interest margin increased 41 basis points to 4.61% in the first six months of 2025 as compared to 4.20% in the first six months of 2024. The increase in net interest income in the first six of 2025 compared to the same period in 2024 was primarily the result of increased interest on loans which was only partially offset by a decrease in interest income on investments and interest bearing deposits in other banks, as well as an increase in interest expense on interest-bearing deposits and borrowings. The increase in net interest margin in the first six months of 2025 as compared to the same period of 2024 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets and higher yields on those assets, as well as a decrease in the cost of interest-bearing liabilities.

Previous wording

3 Interest income includes loan fees. Loan fees recognized during the period and included in the yield calculation totaled $1.1 million and $1.0 million in the first quarter of 2025 and 2024, respectively.

Current wording

3 Interest income includes loan fees. Loan fees recognized during the period and included in the yield calculation totaled $1.2 million and $1.2 million in the second quarter of 2025 and 2024, respectively.

Previous wording

4 Nonaccrual loans are included with a zero effective yield. Average nonaccrual loans included in the computation of the average loan balances were $7.6 million and $5.7 million in the first quarter of 2025 and 2024, respectively.

Current wording

4 Nonaccrual loans are included with a zero effective yield. Average nonaccrual loans included in the computation of the average loan balances were $8.1 million and $5.0 million in the second quarter of 2025 and 2024, respectively.

Previous wording

The provision or benefit for credit loss is the amount of expense or benefit that, based on our judgment, is required to maintain the Allowance for Credit Losses (“ACL”) at an appropriate level under the Company's Current Expected Credit Losses (“CECL”) model. The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity. The following table presents the major categories of credit loss expense for the three-month periods ended March 31, 2025 and 2024:

Current wording

The provision or benefit for credit loss is the amount of expense or benefit that, based on our judgment, is required to maintain the Allowance for Credit Losses (“ACL”) at an appropriate level under the Company's Current Expected Credit Losses (“CECL”) model. The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity. The following table presents the major categories of credit loss expense for the three and six-month periods ended June 30, 2025 and 2024:

Previous wording

Other operating income for the three-month period ended March 31, 2025 increased $6.4 million, or 81%, to $14.2 million as compared to $7.8 million for the same period in 2024, primarily due to a $4.8 million increase in purchased receivable income, as well as a $1.4 million increase in mortgage banking income in the first quarter of 2025 compared to the same quarter a year ago. The fair value of marketable equity securities also increased $364,000 in the first quarter of 2025 compared to the same quarter a year ago. The increase in purchased receivable income in the three-month period ended March 31, 2025 as compared to the same period in 2024 was primarily due to the acquisition of Sallyport in the fourth quarter of 2024.

Current wording

Other operating income for the three-month period ended June 30, 2025 increased $7.1 million, or 74%, to $16.6 million as compared to $9.6 million for the same period in 2024, primarily due to a $4.7 million increase in purchased receivable income, as well as a $1.5 million increase in mortgage banking income in the second quarter of 2025 compared to the same quarter a year ago. The fair value of marketable equity securities also increased $138,000 in the second quarter of 2025 compared to the same quarter a year ago. The increase in purchased receivable income in the three-month period ended June 30, 2025 as compared to the same period in 2024 was primarily due to the acquisition of Sallyport in the fourth quarter of 2024.

Previous wording

For the first quarter of 2025, Northrim recorded a higher effective tax rate as compared to the same period in 2024 as a result of a decrease in tax credits and tax exempt interest income as a percentage of pre-tax income in 2025. In the first quarter of 2025, Northrim recorded $4.3 million in state and federal income tax expense, for an effective tax rate of 24.19% compared to $2.3 million and 21.94% for the same period in 2024.

Current wording

For the second quarter of 2025, Northrim recorded a higher effective tax rate as compared to the same period in 2024 as a result of a decrease in tax credits and tax exempt interest income as a percentage of pre-tax income in 2025. In the second quarter of 2025, Northrim recorded $4.0 million in state and federal income tax expense, for an effective tax rate of 25.30% compared to $2.5 million and 21.95% for the same period in 2024. In the six-month period ended June 30, 2025, Northrim recorded $8.2 million in state and federal income tax expense, for an effective tax rate of 24.72% compared to $4.8 million and 21.94% for the same period in 2024.

Previous wording

Investment Securities include investment securities available for sale, investment securities held to maturity, and marketable equity securities, at March 31, 2025 decreased 3% to $508.5 million from $524.1 million at December 31, 2024 primarily due to maturities and calls of available for sale securities during the first three months of 2025.

Current wording

Investment Securities include investment securities available for sale, investment securities held to maturity, and marketable equity securities, at June 30, 2025 decreased 9% to $474.9 million from $524.1 million at December 31, 2024 primarily due to maturities and calls of available for sale securities during the first six months of 2025.

Previous wording

The average estimated duration of the investment portfolio at March 31, 2025, was approximately 2.4 years. As of March 31, 2025, $70.0 million of available for sale securities with a weighted average yield of 2.25% are scheduled to mature in the next six months, $80.7 million with a weighted average yield of 1.16% are scheduled to mature in six months to one year, and $168.6 million with a weighted average yield of 1.67% are scheduled to mature in the following year, representing a total of $319.4 million or 11% of earning assets that are scheduled to mature in the next 24 months.

Current wording

The average estimated duration of the investment portfolio at June 30, 2025, was approximately 2.4 years. As of June 30, 2025, $55.7 million of available for sale securities with a weighted average yield of 1.40% are scheduled to mature in the next six months, $106.8 million with a weighted average yield of 1.28% are scheduled to mature in six months to one year, and $145.0 million with a weighted average yield of 1.96% are scheduled to mature in the following year, representing a total of $307.5 million or 11% of earning assets that are scheduled to mature in the next 24 months.

Previous wording

Loans decreased slightly by $4.9 million, to $2.124 billion at March 31, 2025 from $2.129 billion at December 31, 2024, mostly as a result of the reclassification of $100.4 million 1-4 family residential properties secured by first liens to loans held for sale which was only partially offset by increased commercial and commercial real estate loans.

Current wording

Loans increased by $72.9 million, to $2.202 billion at June 30, 2025 from $2.129 billion at December 31, 2024, primarily as a result of increases in commercial real estate and commercial and industrial loans. These increases were only partially offset by the sale of 1-4 family residential loans secured by first liens in the first six month of 2025.

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 oilfield services, lodging, equipment rental, transportation, and other logistic services specific to the industry. The Company estimates that $106.3 million, or approximately 5% of loans as of March 31, 2025 have direct exposure to the oil and gas industry as compared to $99.7 million, or approximately 5% of loans as of December 31, 2024. The Company's unfunded commitments to borrowers that have direct exposure to the oil and gas industry were $32.6 million and $45.8 million at March 31, 2025 and December 31, 2024, 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 $1.4 million as of March 31, 2025 and $1.1 million as of December 31, 2024.

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 oilfield services, lodging, equipment rental, transportation, and other logistic services specific to the industry. The Company estimates that $105.9 million, or approximately 5% of loans as of June 30, 2025 have direct exposure to the oil and gas industry as compared to $99.7 million, or approximately 5% of loans as of December 31, 2024. The Company's unfunded commitments to borrowers that have direct exposure to the oil and gas industry were $76.9 million and $45.8 million at June 30, 2025 and December 31, 2024, 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 $1.4 million as of June 30, 2025 and $1.1 million as of December 31, 2024.

Previous wording

The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions. At March 31, 2025, the Company had $140.7 million, or 7% of portfolio loans, in the Healthcare sector, $122.5 million, or 6% of portfolio loans, in the Tourism sector, $110.9 million, or 5% of portfolio loans, in the Accommodations sector, $91.2 million, or 4% of portfolio loans, in the Retail sector, $85.7 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector, $75.5 million, or 4% of portfolio loans, in the Fishing sector, and $60.2 million, or 3% in the Restaurant sector.

Current wording

The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions. At June 30, 2025, the Company had $141.2 million, or 6% of portfolio loans, in the Healthcare sector, $127.2 million, or 6% of portfolio loans, in the Tourism sector, $121.0 million, or 5% of portfolio loans, in the Accommodations sector, $93.4 million, or 4% of portfolio loans, in the Retail sector, $84.2 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector, $76.2 million, or 3% of portfolio loans, in the Fishing sector, and $59.5 million, or 3% in the Restaurant sector.

Previous wording

The ACL for loans held for investment at March 31, 2025 decreased $1.1 million from December 31, 2024 primarily due to the reclassification of $100.4 million in loans held for investment to loans held for sale. This change was only partially offset by increases in other loan balances and other changes in management's CECL model assumptions. While management believes that it uses the best information available to determine the ACL, unforeseen market conditions and other events could result in adjustment to the ACL, and net income could be significantly affected if circumstances differed substantially from the assumptions used in making the final determination of the ACL.

Current wording

The ACL for loans held for investment at June 30, 2025 increased $565,000 from December 31, 2024 primarily due to increases in loan balances as well as an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors. While management believes that it uses the best information available to determine the ACL, unforeseen market conditions and other events could result in adjustment to the ACL, and net income could be significantly affected if circumstances differed substantially from the assumptions used in making the final determination of the ACL.

Previous wording

Deposits are the Company’s primary source of funds. Total deposits increased $97.8 million, or 4%, to $2.78 billion as of March 31, 2025 compared to $2.68 billion as of December 31, 2024, primarily due to new deposit relationships. The following table summarizes the Company's composition of deposits as of the periods indicated:

Current wording

Deposits are the Company’s primary source of funds. Total deposits increased $129.0 million, or 5%, to $2.81 billion as of June 30, 2025 compared to $2.68 billion as of December 31, 2024, primarily due to new deposit relationships and normal seasonal fluctuations. The following table summarizes the Company's composition of deposits as of the periods indicated:

Previous wording

The only deposit category with stated maturity dates is certificates of deposit. At March 31, 2025, the Company had $397.5 million in certificates of deposit as compared to certificates of deposit of $418.4 million at December 31, 2024. At March 31, 2025, $361.4 million, or 91%, of the Company’s certificates of deposits are scheduled to mature over the next 12 months as compared to $369.7 million, or 88%, of total certificates of deposit at December 31, 2024. The aggregate amount of certificates of deposit in amounts of $250,000 and greater at March 31, 2025 and December 31, 2024, was $199.1 million and $217.1 million, respectively. The following table sets forth the amount outstanding of deposits in amounts of $250,000 and greater by time remaining until maturity and percentage of total deposits as of March 31, 2025:

Current wording

The only deposit category with stated maturity dates is certificates of deposit. At June 30, 2025, the Company had $390.9 million in certificates of deposit as compared to certificates of deposit of $418.4 million at December 31, 2024. At June 30, 2025, $356.9 million, or 91%, of the Company’s certificates of deposits are scheduled to mature over the next 12 months as compared to $369.7 million, or 88%, of total certificates of deposit at December 31, 2024. The aggregate amount of certificates of deposit in amounts of $250,000 and greater at June 30, 2025 and December 31, 2024, was $195.6 million and $217.1 million, respectively. The following table sets forth the amount outstanding of deposits in amounts of $250,000 and greater by time remaining until maturity and percentage of total deposits as of June 30, 2025:

Previous wording

At March 31, 2025, 74% of total deposits were held in business accounts and 26% of deposit balances were held in consumer accounts. Northrim had approximately 34,000 deposit customers with an average balance of $61,000 as of March 31, 2025. Northrim had 27 customers with balances over $10 million as of March 31, 2025 which accounted for $694.7 million, or 26%, of total deposits.

Current wording

At June 30, 2025, 75% of total deposits were held in business accounts and 25% of deposit balances were held in consumer accounts. Northrim had approximately 34,000 deposit customers with an average balance of $60,000 as of June 30, 2025. Northrim had 27 customers with balances over $10 million as of June 30, 2025 which accounted for $731.1 million, or 27%, of total deposits.

Previous wording

Uninsured deposits totaled approximately $1.04 billion or 37% of total deposits as of March 31, 2025 compared to $1.1 billion or 40% of total deposits as of December 31, 2024. There was no unusual deposit activity during the first three months of 2025.

Current wording

Uninsured deposits totaled approximately $1.02 billion or 36% of total deposits as of June 30, 2025 compared to $1.1 billion or 40% of total deposits as of December 31, 2024. There was no unusual deposit activity during the first six months of 2025.

Previous wording

FHLB: The Bank is a member of the Federal Home Loan Bank of Des Moines (the “FHLB”). As a member, the Bank is eligible to obtain advances from the FHLB. FHLB advances are dependent on the availability of acceptable collateral such as marketable securities or real estate loans, although all FHLB advances are secured by a blanket pledge of the Bank’s assets. At March 31, 2025, our maximum borrowing line from the FHLB was approximately 45% of the Bank’s assets, subject to the FHLB’s collateral requirements. Based on the Company's current collateral pledged to the FHLB, less outstanding advances, the Company's borrowing line is $374.8 million as of March 31, 2025. The Company has outstanding advances of $13.1 million as of March 31, 2025 which were originated to match fund low income housing projects that qualify for long term fixed interest rates. These advances have original terms of either 18 or 20 years with 30 year amortization periods and fixed interest rates ranging from 1.23% to 3.25%.

Current wording

FHLB: The Bank is a member of the Federal Home Loan Bank of Des Moines (the “FHLB”). As a member, the Bank is eligible to obtain advances from the FHLB. FHLB advances are dependent on the availability of acceptable collateral such as marketable securities or real estate loans, although all FHLB advances are secured by a blanket pledge of the Bank’s assets. At June 30, 2025, our maximum borrowing line from the FHLB was approximately 45% of the Bank’s assets, subject to the FHLB’s collateral requirements. Based on the Company's current collateral pledged to the FHLB, less outstanding advances, the Company's borrowing line is $343.3 million as of June 30, 2025. The Company has outstanding advances of $13.0 million as of June 30, 2025 which were originated to match fund low income housing projects that qualify for long term fixed interest rates. These advances have original terms of either 18 or 20 years with 30 year amortization periods and fixed interest rates ranging from 1.23% to 3.25%. Additionally, the Company has a short-term $50.0 million advance from the FHLB outstanding as of June 30, 2025 at an interest rate of 4.48% which matures in August 2025.

Previous wording

Federal Reserve Bank: The Federal Reserve Bank of San Francisco (the “Federal Reserve Bank”) is holding $70.0 million of securities as collateral to secure the Company's ability to take advances through the discount window on March 31, 2025. There were no discount window advances outstanding at either March 31, 2025 or December 31, 2024.

Current wording

Federal Reserve Bank: The Federal Reserve Bank of San Francisco (the “Federal Reserve Bank”) is holding $65.0 million of securities as collateral to secure the Company's ability to take advances through the discount window on June 30, 2025. There were no discount window advances outstanding at either June 30, 2025 or December 31, 2024.