Northrim Banp(NRIM) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights Second Quarter 2025 Performance Overview Northrim BanCorp reported net income of $11.8 million, or $2.09 per diluted share, in Q2 2025, an increase from Q2 2024, driven by higher net interest, purchased receivable, and mortgage banking income, partially offset by increased provisions and expenses Q2 2025 Net Income and EPS Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Net Income | $11.8 million | $13.3 million | $9.0 million | | Diluted EPS | $2.09 | $2.38 | $1.62 | - The increase in Q2 2025 profitability YoY was primarily due to higher net interest income, increased purchased receivable income (driven by the Sallyport Commercial Finance acquisition on Oct 31, 2024), and higher mortgage banking income[1] - Dividends per share in Q2 2025 were $0.64, consistent with Q1 2025, and up from $0.61 in Q2 2024[2] Key Financial Highlights The company achieved strong financial performance in Q2 2025, with significant growth in net interest income and portfolio loans, improving net interest margin and expanding its loan portfolio Second Quarter 2025 Financial Highlights | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------------- | :---------- | :---------- | :---------- | | Net Interest Income | $33.6 million | $31.3 million | $27.1 million | | Net Interest Margin (NIMTE) | 4.72% | 4.61% | 4.30% | | Return on Average Assets (ROAA) | 1.48% | 1.76% | 1.31% | | Return on Average Equity (ROAE) | 16.37% | 19.70% | 14.84% | | Portfolio Loans (at period end) | $2.20 billion | $2.12 billion | $1.88 billion | | Total Deposits (at period end) | $2.81 billion | $2.78 billion | $2.46 billion | | Diluted Earnings Per Share | $2.09 | $2.38 | $1.62 | | Dividends Per Share | $0.64 | $0.64 | $0.61 | - Portfolio loans at June 30, 2025, were $2.20 billion, up 4% from the preceding quarter and 17% from a year ago, primarily due to new customer relationships, expanding market share, and retaining certain mortgages[3] - The Company sold $61 million in consumer mortgages in Q2 2025 to reduce residential real estate loan concentration and provide liquidity for future commercial and construction loan growth[3] Alaska Economic Update Employment and Job Growth Alaska's seasonally adjusted unemployment rate remained steady at 4.7% in May 2025, with total payroll jobs increasing by 1.1% year-over-year, driven by growth in key sectors like Oil and Gas, Construction, and Health Care Alaska Employment Statistics (May 2025) | Metric | Alaska | U.S. | | :-------------------- | :----- | :--- | | Unemployment Rate (%) | 4.7% | 4.2% | | Payroll Jobs YoY Growth (jobs) | 1.1% (3,800 jobs) | N/A | Sector-Specific Job Growth in Alaska (May 2024 - May 2025) | Sector | Job Growth | Growth Rate | | :-------------------------- | :--------- | :---------- | | Oil and Gas | 700 | 8.8% | | Construction | 700 | 3.7% | | Health Care | 1,200 | 2.9% | | Transportation, Warehousing and Utilities | 600 | 2.3% | | Professional and Business Services | 500 | 1.7% | | Government | 200 | 0.2% | | Information | -100 | -2.3% | | Manufacturing | -200 | -2.1% | | Wholesale Trade | -100 | -1.5% | | Financial Activities | -100 | -0.9% | Personal Income and Gross State Product (GSP) Alaska's seasonally adjusted personal income reached $57.4 billion in Q1 2025, with real GSP decreasing -1.8% annualized, primarily due to a decline in the Mining, Oil & Gas sector Alaska Personal Income and GSP (Q1 2025) | Metric | Alaska (Q1 2025) | U.S. (Q1 2025) | | :-------------------------------- | :--------------- | :------------- | | Seasonally Adjusted Personal Income | $57.4 billion | N/A | | Annualized Personal Income Improvement (%) | 6.4% | 6.7% | | Gross State Product (GSP) | $72 billion | N/A | | Real GSP Annualized Change (%) | -1.8% | -0.5% (U.S. GDP) | - The decrease in Alaska's real GSP in Q1 2025 was primarily caused by a decrease in the Mining, Oil & Gas sector, partially offset by improvements in the Construction sector[9] Trade and Inflation Alaska exported $5.9 billion in goods in 2024, with fish, minerals, and primary metals as major categories, while the state's CPI increased at a lower rate of 1.6% due to moderated motor fuel and transportation costs Alaska Exports (2024) | Metric | Value (in millions) | | :-------------------- | :------------ | | Total Exports | $5.9 billion | | Largest Importer (China) | $1.5 billion | | Largest Product (Fish) | $2.1 billion | | Minerals and Ores | $2.0 billion | | Primary Metals | $992 million | | Oil & Gas Exports | $380 million | Consumer Price Index (June 2024 - June 2025) | Region | CPI Increase (%) | | :----- | :----------- | | U.S. | 2.7% | | Alaska | 1.6% | - Inflation in Alaska was primarily driven by food and beverage, housing, and medical care costs, but moderated by declining motor fuel prices, transportation, recreation, and household furnishing costs[10] Oil & Gas Production and Permanent Fund Alaska North Slope (ANS) crude oil production increased to 469 thousand barrels per day (bpd) in fiscal year 2025 and is projected to grow significantly by fiscal year 2034, while the Alaska Permanent Fund reached $83.13 billion Alaska North Slope (ANS) Crude Oil Production | Period | Production (thousand bpd) | | :-------------------- | :------------------------ | | FY 2024 | 461 | | FY 2025 | 469 | | FY 2034 (Forecast) | 663 | - The projected growth in ANS crude oil production is primarily a result of new production coming online in and around the NPR-A region, including the Pikka and Willow fields[11] Alaska Permanent Fund Value and Contribution | Metric | Value | | :-------------------------------- | :------------ | | Fund Value (May 31, 2025) | $83.13 billion | | FY 2025 Contribution to General Fund | $3.7 billion | Real Estate Market The average sales price for single-family homes in Anchorage and Matanuska Susitna Borough continued to rise through June 2025, with home sales volume increasing in both regions during the first half of the year Single-Family Home Average Sales Price Changes | Region | 2024 Increase (%) | Average Price (2024) | H1 2025 Increase (%) | Average Price (H1 2025) | | :---------------------- | :------------ | :------------------- | :--------------- | :---------------------- | | Anchorage | 6.2% | $510,064 | 2.6% | $523,059 | | Matanuska Susitna Borough | 3.8% | $412,859 | 6.9% | $441,463 | Home Sales Volume Changes (H1 2025 vs. H1 2024) | Region | Sales Volume Increase (%) | | :---------------------- | :-------------------- | | Anchorage | 4.8% | | Matanuska Susitna Borough | 13.1% | Consolidated Income Statement Review Net Income and Profitability Ratios Northrim's Return on Average Assets (ROAA) and Return on Average Equity (ROAE) in Q2 2025, while decreasing QoQ, showed improvement compared to Q2 2024 Profitability Ratios | Metric | Q2 2025 (%) | Q1 2025 (%) | Q2 2024 (%) | | :---------------------- | :------ | :------ | :------ | | Return on Average Assets | 1.48% | 1.76% | 1.31% | | Return on Average Equity | 16.37% | 19.70% | 14.84% | Net Interest Income and Net Interest Margin (NIMTE) Net interest income increased 7% QoQ and 24% YoY to $33.6 million in Q2 2025, with NIMTE rising to 4.72% due to a favorable earning-asset mix and higher yields on variable-rate loans Net Interest Income and NIMTE Trends | Metric | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :-------------------- | :---------- | :---------- | :---------- | | Net Interest Income | $33.6 million | $31.3 million | $27.1 million | | NIMTE (%) | 4.72% | 4.61% | 4.30% | | Interest Expense on Deposits | $10.3 million | $9.9 million | $9.5 million | - NIMTE increased 42 basis points YoY 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 variable rate loans reset at higher rates[21] - The weighted average interest rate for new loans booked in Q2 2025 was 7.27%, down from 7.30% in Q1 2025 and 7.90% in Q2 2024[21] Provision for Credit Losses Northrim recorded a provision for credit losses of $2.0 million in Q2 2025, a significant increase from prior periods, mainly due to higher loan balances and less favorable economic forecasts, while nonperforming assets decreased QoQ but increased YoY Provision for Credit Losses | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------------- | :---------- | :---------- | :---------- | | Total Provision for Credit Losses | $2.0 million | ($1.4 million) | ($120,000) | | Provision for Credit Losses on Loans | $1.8 million | ($1.1 million) | $134,000 | | Provision for Credit Losses on Unfunded Commitments | $157,000 | ($322,000) | ($254,000) | | Provision for Credit Losses on Purchased Receivables | $18,000 | $46,000 | N/A | - The increase in provision for credit losses on loans was primarily a result of increased loan balances and higher estimated loss rates due to less favorable economic forecasts and trends in qualitative factors[23] Nonperforming Assets and Allowance for Credit Losses | Metric | June 30, 2025 (in millions) | March 31, 2025 (in millions) | June 30, 2024 (in millions) | | :------------------------------------------------ | :------------ | :------------- | :------------ | | Nonperforming Assets, net of government guarantees | $11.9 million | $12.3 million | $5.1 million | | Allowance for Credit Losses on Loans / Nonperforming Loans, net of government guarantees (%) | 290% | 262% | 365% | Other Operating Income Other operating income significantly increased to $16.6 million in Q2 2025, representing 33% of total revenues, driven by increased purchased receivable income from the Sallyport acquisition and higher mortgage banking income Other Operating Income | Metric | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :---------------------- | :---------- | :---------- | :---------- | | Other Operating Income | $16.6 million | $13.0 million | $9.6 million | | % of Total Revenues (%) | 33% | 29% | 26% | - The increase in other operating income YoY was primarily a result of increased purchased receivable income due to the Company's acquisition of Sallyport on October 31, 2024[26] - Mortgage banking income in Q2 2025 increased compared to prior periods due to a higher volume of mortgage activity[26] Other Operating Expenses Operating expenses increased to $32.5 million in Q2 2025, mainly due to higher salaries and personnel expenses, including mortgage commissions, and increased data processing expense, with the YoY increase also reflecting Sallyport acquisition payments Other Operating Expenses | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :---------------------- | :---------- | :---------- | :---------- | | Total Operating Expenses | $32.5 million | $28.2 million | $25.2 million | | Salaries and other personnel expense increase (QoQ) | N/A | N/A | N/A | | - Mortgage commissions | $980,000 | N/A | N/A | | - Salary expense | $763,000 | N/A | N/A | | - Group medical expenses | $760,000 | N/A | N/A | - The increase in total other operating expenses YoY was primarily due to an increase in salaries and other personnel expense, compensation expense for Sallyport acquisition payments, and an increase in data processing expense[27] - The Specialty Finance segment's other operating expense increased $2.1 million YoY due to the Sallyport acquisition[27] Income Tax Provision Northrim recorded $4.0 million in income tax expense in Q2 2025, resulting in an effective tax rate of 25.3%, an increase from prior periods primarily due to a decrease in tax credits and tax-exempt interest income as a percentage of pre-tax income Income Tax Provision | Metric | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :---------------------- | :---------- | :---------- | :---------- | | Income Tax Expense | $4.0 million | $4.3 million | $2.5 million | | Effective Tax Rate (%) | 25.3% | 24.2% | 21.9% | - The increase in the tax rate in Q2 2025 compared to prior periods is primarily the result of a decrease in tax credits and tax-exempt interest income as a percentage of pre-tax income[28] Segment Performance Community Banking The Community Banking segment reported net interest income of $30.0 million in Q2 2025, a 23% increase YoY, driven by higher interest income on loans, despite increased provision for credit losses and operating expenses Community Banking Segment Financial Highlights (Q2 2025) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------------ | :---------- | :---------- | :---------- | | Net Interest Income | $29,971 | $28,151 | $24,318 | | (Benefit) Provision for Credit Losses | $1,319 | ($1,768) | ($184) | | Other Operating Income | $3,268 | $2,703 | $2,451 | | Other Operating Expense | $21,764 | $18,581 | $18,069 | | Net Income | $7,743 | $10,788 | $7,098 | | Diluted EPS | $1.37 | $1.93 | $1.27 | - Net interest income in Community Banking increased $5.7 million or 23% YoY, mostly due to higher interest income on loans, partially offset by lower investment income and higher interest expense on deposits and borrowings[30] - The increase in provision for credit losses in Q2 2025 was primarily a result of increased loan balances and an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors[31] Home Mortgage Lending The Home Mortgage Lending segment saw a significant increase in mortgage loans funded for sale, reaching $249.7 million in Q2 2025, with net interest income contributing $3.5 million and the servicing portfolio growing to $1.55 billion Home Mortgage Lending Segment Financial Highlights (Q2 2025) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------------ | :---------- | :---------- | :---------- | | Mortgage Loans Funded for Sale | $249,680 | $108,499 | $152,339 | | Mortgage Loans Funded for Investment | $27,455 | $13,061 | $29,175 | | Total Mortgage Loans Funded | $277,135 | $121,560 | $181,514 | | Mortgage Loans Serviced for Others | $1,553,987 | $1,484,714 | $1,101,800 | | Total Mortgage Banking Income | $7,400 | $4,251 | $5,884 | | Net Interest Income | $3,507 | $3,046 | $2,775 | | Provision (Benefit) for Credit Losses | $639 | ($307) | $64 | | Net Income | $1,929 | $804 | $1,366 | | Diluted EPS | $0.34 | $0.14 | $0.25 | - The Bank purchased $27.5 million in loans from its subsidiary, Residential Mortgage, in Q2 2025, with a weighted average interest rate of 6.71%[36] - The Company sold $61 million of reclassified consumer mortgage loans in Q2 2025, incurring a realized loss of $545,000[37] - The servicing portfolio increased by $69.3 million in Q2 2025, reaching $1.55 billion, a 41% increase YoY[40][41] Specialty Finance The Specialty Finance segment, including Northrim Funding Services and Sallyport, reported net income of $2.1 million in Q2 2025, with total revenue of $6.8 million primarily from purchased receivable income, and average purchased receivables at Sallyport reaching $71.0 million - The Specialty Finance segment includes Northrim Funding Services and Sallyport Commercial Finance, LLC, which was acquired on October 31, 2024, for approximately $53.9 million[44] Specialty Finance Segment Financial Highlights (Q2 2025) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------------ | :---------- | :---------- | :---------- | | Purchased Receivable Income | $5,897 | $6,150 | $1,242 | | Total Revenue | $6,754 | $6,682 | $1,412 | | Provision for Credit Losses | $18 | $666 | $0 | | Compensation Expense - SCF Acquisition Payments | $600 | $600 | $0 | | Net Income | $2,106 | $1,732 | $556 | | Diluted EPS | $0.38 | $0.31 | $0.10 | Sallyport Average Balances and Yields | Metric | Q2 2025 | Q1 2025 | | :-------------------------------- | :---------- | :---------- | | Average Purchased Receivables and Loan Balances | $71.0 million | $59.9 million | | Yield | 27.23% | 35.8% | | Yield (excluding nonaccrual fee income and line termination fee in Q1) | N/A | 27.4% | Balance Sheet Review Assets Overview Northrim's total assets reached $3.24 billion at June 30, 2025, marking a 3% increase QoQ and 15% YoY, with a loan-to-deposit ratio of 78% and sufficient liquidity maintained through $1.15 billion in liquid assets and available borrowing funds Total Assets and Loan-to-Deposit Ratio | Metric | June 30, 2025 (in billions) | March 31, 2025 (in billions) | June 30, 2024 (in billions) | | :-------------------- | :-------------- | :------------- | :------------ | | Total Assets | $3.24 billion | $3.14 billion | $2.82 billion | | Loan-to-Deposit Ratio (%) | 78% | 76% | 76% | - Liquid assets, investments, and loans maturing within one year totaled $1.15 billion, with an additional $507.9 million available for borrowing, indicating sufficient liquidity[50] Investment Securities Average investment securities decreased to $515.9 million in Q2 2025, while the average net tax equivalent yield increased to 3.07%, and total unrealized losses on available-for-sale securities significantly decreased YoY Investment Securities Overview | Metric | Q2 2025 (in millions) | Q1 2025 (in millions) | Q2 2024 (in millions) | | :------------------------------------------ | :---------- | :---------- | :---------- | | Average Investment Securities | $515.9 million | $523.8 million | $640.0 million | | Average Net Tax Equivalent Yield (%) | 3.07% | 2.97% | 2.82% | | Average Estimated Duration (June 30, 2025) | 2.4 years | N/A | 2.5 years (June 30, 2024) | | Total Unrealized Losses (AFS, net of tax) | $3.6 million | $5.5 million | $15.2 million | | Total Unrealized Losses (HTM) | $711,000 | $1.1 million | $3.0 million | - Approximately $307.5 million, or 11% of earning assets, are scheduled to mature in the next 24 months[52] Loans Portfolio Portfolio loans reached $2.20 billion at June 30, 2025, up 4% QoQ and 17% YoY, with diversified growth and an increased yield on average portfolio loans, while loans held for sale decreased QoQ due to sales Loans Portfolio Overview | Metric | June 30, 2025 (in billions/millions) | March 31, 2025 (in billions/millions) | June 30, 2024 (in billions/millions) | | :------------------------------------------ | :-------------- | :------------- | :------------ | | Portfolio Loans | $2.20 billion | $2.12 billion | $1.88 billion | | Portfolio Loans (excluding consumer mortgage) | $2.00 billion | N/A | N/A | | Loans Held for Sale | $127.1 million | $159.6 million | $85.9 million | | Yield on Average Portfolio Loans (Q2) (%) | 6.99% | 6.89% | 6.87% | | Yield on New Portfolio Loans (excluding consumer mortgage) (%) | 7.45% | 7.43% | 8.26% | | Legal Lending Limit (June 30, 2025) (in millions) | $39.4 million | N/A | N/A | - Portfolio loan growth in Q2 2025 was diversified, including increases in consumer mortgage loans ($19 million), construction loans ($31.2 million), commercial real estate owner-occupied loans ($17.1 million), and nonowner-occupied commercial real estate and multi-family loans ($6.5 million)[56] - Northrim had 22 relationships totaling $504.0 million in portfolio loans whose total direct and indirect commitments were greater than 50% of the legal lending limit[57] Deposits Total deposits reached $2.81 billion at June 30, 2025, up 1% QoQ and 14% YoY, with business accounts holding 75% of total deposits and demand deposits increasing to $777.9 million, while uninsured deposits totaled $1.02 billion Deposit Overview | Metric | June 30, 2025 (in billions/millions) | March 31, 2025 (in billions/millions) | June 30, 2024 (in billions/millions) | | :------------------------------------------ | :-------------- | :------------- | :------------ | | Total Deposits | $2.81 billion | $2.78 billion | $2.46 billion | | Demand Deposits | $777.9 million | $742.6 million | $704.5 million | | Demand Deposits as % of Total Deposits (%) | 28% | 27% | 29% | | Average Cost of Interest-Bearing Deposits (Q2) (%) | 2.04% | 2.01% | 2.21% | | Uninsured Deposits | $1.02 billion | N/A | N/A | | Uninsured Deposits as % of Total Deposits (%) | 36% | N/A | N/A | - 75% of total deposits were held in business accounts, and 25% in consumer accounts. 27 customers with balances over $10 million accounted for $731.1 million (27%) of total deposits[58] Shareholders' Equity and Capital Shareholders' equity increased to $290.2 million, or $52.55 book value per share, at June 30, 2025, driven by net earnings and an increase in the fair value of available-for-sale securities, with Northrim maintaining capital levels in excess of 'well-capitalized' requirements Shareholders' Equity and Book Value | Metric | June 30, 2025 (in millions) | March 31, 2025 (in millions) | June 30, 2024 (in millions) | | :-------------------------- | :-------------- | :------------- | :------------ | | Total Shareholders' Equity | $290.2 million | $279.8 million | $247.2 million | | Book Value Per Share ($) | $52.55 | $50.67 | $44.93 | | Tangible Book Value Per Share ($) | $43.35 | $41.47 | $42.03 | - The increase in shareholders' equity QoQ was largely the result of earnings of $11.8 million and an increase in the fair value of available-for-sale securities ($1.9 million, net of tax), partially offset by dividends paid ($3.6 million)[59] Capital Ratios | Metric | June 30, 2025 (%) | March 31, 2025 (%) | June 30, 2024 (%) | | :------------------------------------ | :------------ | :------------- | :------------ | | Tangible Common Equity/Tangible Assets | 7.50% | 7.41% | 8.24% | | Tier 1 Capital to Risk Adjusted Assets | 9.80% | 9.76% | 11.68% | Asset Quality Nonperforming Assets (NPAs) Nonperforming assets (NPAs), net of government guarantees, decreased slightly QoQ to $11.9 million at June 30, 2025, but increased significantly YoY, primarily due to the Sallyport acquisition, with $7.5 million attributable to Specialty Finance Nonperforming Assets (NPAs) by Segment | Metric | June 30, 2025 (in millions) | March 31, 2025 (in millions) | June 30, 2024 (in millions) | | :------------------------------------------ | :-------------- | :------------- | :------------ | | Total NPAs, net of government guarantees | $11.9 million | $12.3 million | $5.1 million | | Community Banking NPAs | $4.2 million | N/A | N/A | | Specialty Finance NPAs | $7.5 million | N/A | N/A | - The increase in nonperforming assets YoY is primarily the result of the acquisition of Sallyport in Q4 2024[24] Adversely Classified Loans and Charge-offs Net adversely classified loans increased significantly to $35.8 million at June 30, 2025, primarily due to two commercial relationships totaling $16.0 million, while net loan charge-offs were $140,000 in Q2 2025 Adversely Classified Loans and Net Loan Charge-offs | Metric | June 30, 2025 (in millions/thousands) | March 31, 2025 (in millions/thousands) | June 30, 2024 (in millions/thousands) | | :------------------------------------------ | :-------------- | :------------- | :------------ | | Net Adversely Classified Loans | $35.8 million | $20.4 million | $7.1 million | | Net Loan Charge-offs (Recoveries) for the quarter | $140,000 | ($34,000) | ($26,000) | - The increase in adversely classified loans QoQ is mostly attributable to two commercial relationships totaling $16.0 million[63] - Northrim had 13 loan modifications to borrowers experiencing financial difficulty totaling $3.3 million, net of government guarantees, in the last twelve months as of June 30, 2025[63] Loan Portfolio Sector Exposure As of June 30, 2025, Northrim's portfolio loans had significant exposure to various sectors, including Healthcare, Tourism, and Accommodations, with direct exposure to the Alaska oil and gas industry totaling $105.9 million Loan Portfolio Sector Exposure (June 30, 2025) | Sector | Portfolio Loans (in millions) | % of Total Portfolio Loans (%) | | :-------------------------- | :-------------- | :------------------------- | | Healthcare | $141.2 million | 6% | | Tourism | $127.2 million | 6% | | Accommodations | $121.0 million | 5% | | Retail | $93.4 million | 4% | | Aviation (non-tourism) | $84.2 million | 4% | | Fishing | $76.2 million | 3% | | Restaurants and Breweries | $59.5 million | 3% | Oil and Gas Industry Exposure (June 30, 2025) | Metric | Value (in millions) | | :------------------------------------------ | :-------------- | | Direct Exposure to Oil and Gas Industry | $105.9 million | | % of Portfolio Loans (%) | 5% | | Adversely Classified Oil and Gas Loans | $1.5 million | | Unfunded Commitments to Oil and Gas Industry | $76.9 million | About Northrim BanCorp Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 20 branches, operating with a 'Customer First Service' philosophy and deep knowledge of Alaska's economy, with wholly-owned subsidiaries in specialty finance and home mortgage lending - Northrim BanCorp, Inc. is the parent company of Northrim Bank, an Alaska-based community bank with 20 branches, known for its detailed knowledge of Alaska's economy and 'Customer First Service' philosophy[66] - Wholly-owned subsidiaries include Sallyport Commercial Finance, LLC (specialty finance) and Residential Mortgage Holding Company, LLC (regional home mortgage). Pacific Wealth Advisors, LLC is an affiliated company[66] Forward-Looking Statements & References This section contains forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations, including financial condition, asset quality, interest rate changes, economic conditions, regulatory changes, and integration risks from the Sallyport acquisition - Forward-looking statements are subject to various risks and uncertainties, including financial condition, asset quality, interest rate changes, economic conditions, regulatory changes, and integration risks from the Sallyport acquisition[68] - Readers should not place undue reliance on forward-looking statements and are advised to consult the 'Risk Factors' section of the Annual Report on Form 10-K for a comprehensive list of factors that may cause actual results to differ[68] Detailed Financial Tables Consolidated Income Statement The consolidated income statement provides a detailed breakdown of revenues, expenses, and net income for the three months and year-to-date periods ending June 30, 2025, compared to prior periods, showing significant increases in total interest income and net interest income, alongside higher other operating income, but also notable increases in provision for credit losses and other operating expenses Consolidated Income Statement | (Unaudited) | June 30, 2025 (in thousands) | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | June 30, 2025 (YTD) (in thousands) | June 30, 2024 (YTD) (in thousands) | | :------------------------------------------ | :------------ | :------------- | :------------ | :------------------ | :------------------ | | Interest Income: | | | | | | | Interest and fees on loans | $40,519 | $37,470 | $32,367 | $77,989 | $62,817 | | Interest on portfolio investments | 3,765 | 3,675 | 4,310 | 7,440 | 8,830 | | Interest on deposits in banks | 515 | 416 | 232 | 931 | 1,070 | | Total interest income | 44,799 | 41,561 | 36,909 | 86,360 | 72,717 | | Interest Expense: | | | | | | | Interest expense on deposits | 10,304 | 9,935 | 9,476 | 20,239 | 18,656 | | Interest expense on borrowings | 903 | 329 | 380 | 1,232 | 561 | | Total interest expense | 11,207 | 10,264 | 9,856 | 21,471 | 19,217 | | Net interest income | 33,592 | 31,297 | 27,053 | 64,889 | 53,500 | | Provision (benefit) for credit losses | 1,976 | (1,409) | (120) | 567 | 29 | | Net interest income after provision for credit losses | 31,616 | 32,706 | 27,173 | 64,322 | 53,471 | | Other Operating Income: | | | | | | | Mortgage banking income | 7,400 | 4,251 | 5,884 | 11,651 | 9,915 | | Purchased receivable income | 5,897 | 6,100 | 1,242 | 12,047 | 2,587 | | Bankcard fees | 1,153 | 1,074 | 1,105 | 2,227 | 2,022 | | Service charges on deposit accounts | 726 | 677 | 572 | 1,403 | 1,121 | | Unrealized gain (loss) on marketable equity securities | 78 | (50) | (60) | 28 | 254 | | Other income | 1,386 | 988 | 834 | 2,324 | 1,522 | | Total other operating income | 16,640 | 13,040 | 9,577 | 29,680 | 17,421 | | Other Operating Expense: | | | | | | | Salaries and other personnel expense | 20,854 | 17,223 | 16,627 | 38,077 | 32,044 | | Data processing expense | 3,366 | 3,104 | 2,601 | 6,470 | 5,260 | | Occupancy expense | 2,104 | 1,889 | 1,843 | 3,993 | 3,805 | | Professional and outside services | 1,113 | 1,115 | 726 | 2,228 | 1,481 | | Marketing expense | 1,042 | 672 | 690 | 1,714 | 1,203 | | Insurance expense | 756 | 1,017 | 692 | 1,773 | 1,471 | | Compensation expense - SCF acquisition payments | 600 | 600 | — | 1,200 | — | | OREO expense, net rental income and gains on sale | 2 | 3 | 2 | 5 | (389) | | Other expense | 2,651 | 2,548 | 2,013 | 5,199 | 3,957 | | Total other operating expense | 32,488 | 28,171 | 25,194 | 60,659 | 48,832 | | Income before provision for income taxes | 15,768 | 17,575 | 11,556 | 33,343 | 22,060 | | Provision for income taxes | 3,990 | 4,251 | 2,536 | 8,241 | 4,841 | | Net income | $11,778 | $13,324 | $9,020 | $25,102 | $17,219 | | Basic EPS | $2.13 | $2.41 | $1.64 | $4.54 | $3.13 | | Diluted EPS | $2.09 | $2.38 | $1.62 | $4.47 | $3.10 | | Weighted average shares outstanding, basic | 5,521,811 | 5,519,998 | 5,500,588 | 5,520,905 | 5,500,083 | | Weighted average shares outstanding, diluted | 5,611,558 | 5,608,102 | 5,558,580 | 5,611,734 | 5,562,025 | Consolidated Balance Sheet The consolidated balance sheet presents the company's financial position at June 30, 2025, compared to prior periods, showing growth in total assets, portfolio loans, and deposits, along with changes in investment securities, purchased receivables, and shareholders' equity Consolidated Balance Sheet | (Unaudited) | June 30, 2025 (in thousands) | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | | :------------------------------------------ | :------------ | :------------- | :------------ | | Assets: | | | | | Cash and due from banks | $43,734 | $29,671 | $33,364 | | Interest bearing deposits in other banks | 97,549 | 35,852 | 21,058 | | Investment securities available for sale, at fair value | 429,421 | 463,096 | 584,964 | | Investment securities held to maturity | 36,750 | 36,750 | 36,750 | | Marketable equity securities, at fair value | 8,747 | 8,669 | 12,381 | | Investment in Federal Home Loan Bank stock | 8,343 | 5,342 | 4,929 | | Loans held for sale | 127,116 | 159,603 | 85,926 | | Portfolio loans | 2,202,115 | 2,124,330 | 1,875,907 | | Allowance for credit losses, loans | (22,585) | (20,922) | (17,694) | | Net portfolio loans | 2,179,530 | 2,103,408 | 1,858,213 | | Purchased receivables, net | 109,098 | 95,489 | 25,722 | | Mortgage servicing rights, at fair value | 27,506 | 26,814 | 21,077 | | Other real estate owned, net | — | — | — | | Premises and equipment, net | 36,501 | 37,070 | 40,393 | | Lease right of use asset | 7,033 | 7,632 | 8,244 | | Goodwill and intangible assets | 50,824 | 50,824 | 15,967 | | Other assets | 81,608 | 80,740 | 72,680 | | Total assets | $3,243,760 | $3,140,960 | $2,821,668 | | Liabilities: | | | | | Demand deposits | $777,948 | $742,560 | $704,471 | | Interest-bearing demand | 1,196,048 | 1,187,465 | 906,010 | | Savings deposits | 248,141 | 256,650 | 238,156 | | Money market deposits | 196,166 | 193,842 | 195,159 | | Time deposits | 390,867 | 397,460 | 420,010 | | Total deposits | 2,809,170 | 2,777,977 | 2,463,806 | | Other borrowings | 63,026 | 13,136 | 43,961 | | Junior subordinated debentures | 10,310 | 10,310 | 10,310 | | Lease liability | 7,077 | 7,682 | 8,269 | | Other liabilities | 63,958 | 52,099 | 48,122 | | Total liabilities | 2,953,541 | 2,861,204 | 2,574,468 | | Shareholders' Equity: | | | | | Total shareholders' equity | 290,219 | 279,756 | 247,200 | | Total liabilities and shareholders' equity | $3,243,760 | $3,140,960 | $2,821,668 | Composition of Portfolio Loans This table details the composition of Northrim's portfolio loans across various categories, including commercial, commercial real estate (owner-occupied and nonowner-occupied), residential real estate, construction, and consumer loans, showing trends over the past five quarters Composition of Portfolio Loans | | June 30, 2025 (in thousands) | % of total | March 31, 2025 (in thousands) | % of total | December 31, 2024 (in thousands) | % of total | September 30, 2024 (in thousands) | % of total | June 30, 2024 (in thousands) | % of total | | :------------------------------------------ | :------------ | :--------- | :------------- | :--------- | :------------------ | :--------- | :------------------- | :--------- | :------------ | :--------- | | Commercial loans | $569,753 | 27 % | $573,593 | 27 % | $518,148 | 24 % | $492,414 | 24 % | $495,781 | 26 % | | Commercial real estate: | | | | | | | | | | | | Owner occupied properties | 447,561 | 20 % | 430,442 | 20 % | 420,060 | 20 % | 412,827 | 20 % | 383,832 | 20 % | | Nonowner occupied and multifamily properties | 696,766 | 31 % | 690,277 | 32 % | 619,431 | 29 % | 584,302 | 31 % | 551,130 | 30 % | | Residential real estate: | | | | | | | | | | | | 1-4 family properties secured by first liens | 206,905 | 9 % | 188,219 | 9 % | 270,535 | 13 % | 248,514 | 12 % | 222,026 | 12 % | | 1-4 family properties secured by junior liens & revolving secured by first liens | 60,118 | 3 % | 53,836 | 3 % | 48,857 | 2 % | 45,262 | 2 % | 41,258 | 2 % | | 1-4 family construction | 36,005 | 2 % | 34,017 | 2 % | 39,789 | 2 % | 39,794 | 2 % | 29,510 | 2 % | | Construction loans | 187,442 | 8 % | 156,211 | 7 % | 214,068 | 10 % | 185,362 | 9 % | 154,009 | 8 % | | Consumer loans | 7,570 | — % | 7,424 | — % | 7,562 | — % | 7,836 | — % | 6,679 | — % | | Subtotal | 2,212,120 | | 2,134,019 | | 2,138,450 | | 2,016,311 | | 1,884,225 | | | Unearned loan fees, net | (10,005) | | (9,689) | | (9,187) | | (8,746) | | (8,318) | | | Total portfolio loans | $2,202,115 | | $2,124,330 | | $2,129,263 | | $2,007,565 | | $1,875,907 | | Composition of Deposits This table illustrates the breakdown of Northrim's deposit base by type, including demand, interest-bearing demand, savings, money market, and time deposits, showing their balances and percentage of total deposits over the past five quarters Composition of Deposits | | June 30, 2025 (in thousands) | % of total | March 31, 2025 (in thousands) | % of total | December 31, 2024 (in thousands) | % of total | September 30, 2024 (in thousands) | % of total | June 30, 2024 (in thousands) | % of total | | :-------------------------- | :------------ | :--------- | :------------- | :--------- | :------------------ | :--------- | :------------------- | :--------- | :------------ | :--------- | | Demand deposits | $777,948 | 28 % | $742,560 | 27 % | $706,225 | 27 % | $763,595 | 29 % | $704,471 | 29 % | | Interest-bearing demand | 1,196,048 | 42 % | 1,187,465 | 43 % | 1,108,404 | 41 % | 979,238 | 37 % | 906,010 | 36 % | | Savings deposits | 248,141 | 9 % | 256,650 | 9 % | 250,900 | 9 % | 245,043 | 9 % | 238,156 | 10 % | | Money market deposits | 196,166 | 7 % | 193,842 | 7 % | 196,290 | 7 % | 204,821 | 8 % | 195,159 | 8 % | | Time deposits | 390,867 | 14 % | 397,460 | 14 % | 418,370 | 16 % | 435,870 | 17 % | 420,010 | 17 % | | Total deposits | $2,809,170 | | $2,777,977 | | $2,680,189 | | $2,628,567 | | $2,463,806 | | Asset Quality Tables These tables provide a comprehensive view of Northrim's asset quality, including nonaccrual loans, total nonperforming loans, repossessed assets, nonperforming purchased receivables, and adversely classified loans, broken down by segment, along with key ratios such as allowance for credit losses to nonperforming loans and net loan charge-offs Asset Quality | Asset Quality | June 30, 2025 (in thousands) | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | | :------------------------------------------ | :------------ | :------------- | :------------ | | Nonaccrual loans - Community Banking | $4,180 | $4,274 | $4,233 | | Nonaccrual loans - Home Mortgage Lending | 197 | 221 | 253 | | Nonaccrual loans - Specialty Finance | 3,484 | 3,573 | 344 | | Nonaccrual loans - Total | 7,861 | 8,068 | 4,830 | | Total nonperforming loans - Total | 7,861 | 8,068 | 4,847 | | Net nonperforming assets - Total | $11,858 | $12,292 | $5,144 | | Adversely classified loans, net of gov't guarantees - Total | $35,835 | $20,417 | $7,068 | | Special mention loans, net of gov't guarantees - Total | $4,756 | $15,133 | $8,902 | Asset Quality Ratios and Charge-offs | Asset Quality, Continued | June 30, 2025 (%) | March 31, 2025 (%) | June 30, 2024 (%) | | :-------------------------------------------------------------------------------- | :------------ | :------------- | :------------ | | Nonperforming loans, net of government guarantees / portfolio loans (%) | 0.35 % | 0.38 % | 0.26 % | | Nonperforming assets, net of government guarantees / total assets (%) | 0.37 % | 0.39 % | 0.18 % | | Allowance for credit losses for loans / portfolio loans (%) | 1.03 % | 0.98 % | 0.94 % | | Allowance for credit losses for loans / nonperforming loans, net of government guarantees (%) | 290 % | 262 % | 365 % | | Net loan (recoveries) charge-offs for the quarter - Total (in thousands) | $140 | ($34) | ($26) | | Net purchased receivable charge-offs (recoveries) for the quarter (in thousands) | $281 | $— | $— | Average Balances, Yields, and Rates These tables present average balances, yields, and rates for interest-earning assets and interest-bearing liabilities for the three months and year-to-date periods ending June 30, 2025, highlighting trends in net spread, net interest margin (NIM and NIMTE), and cost of funds, along with key ratios like average portfolio loans to average interest-earning assets Average Balances, Yields, and Rates (Three Months Ended) | | June 30, 2025 (in thousands) | Average Tax Equivalent Yield/Rate (%) | March 31, 2025 (in thousands) | Average Tax Equivalent Yield/Rate (%) | June 30, 2024 (in thousands) | Average Tax Equivalent Yield/Rate (%) | | :------------------------------------------ | :------------ | :------------------------------ | :------------- | :------------------------------ | :------------ | :------------------------------ | | Assets | | | | | | | | Interest bearing deposits in other banks | $27,216 | 7.60 % | $37,969 | 4.44 % | $17,352 | 5.27 % | | Portfolio investments | 515,916 | 3.07 % | 523,753 | 2.97 % | 639,980 | 2.82 % | | Loans held for sale | 173,675 | 6.50 % | 46,223 | 5.86 % | 65,102 | 6.08 % | | Portfolio loans | 2,172,482 | 6.99 % | 2,173,425 | 6.89 % | 1,845,832 | 6.87 % | | Total interest-earning assets | 2,889,289 | 6.27 % | 2,781,370 | 6.10 % | 2,568,266 | 5.83 % | | Liabilities and Shareholders' Equity | | | | | | | | Interest-bearing deposits | $2,029,100 | 2.04 % | $2,002,594 | 2.01 % | $1,725,013 | 2.21 % | | Borrowings | 86,404 | 4.14 % | 37,081 | 3.55 % | 38,390 | 3.92 % | | Total interest-bearing liabilities | 2,115,504 | 2.12 % | 2,039,675 | 2.04 % | 1,763,403 | 2.25 % | | Net spread | | 4.15 % | | 4.06 % | | 3.58 % | | NIM | | 4.66 % | | 4.55 % | | 4.24 % | | * NIMTE | | 4.72 % | | 4.61 % | | 4.30 % | | Cost of funds | | 1.57 % | | 1.52 % | | 1.60 % | Average Balances, Yields, and Rates (Year-to-date) | | June 30, 2025 (in thousands) | Average Tax Equivalent Yield/Rate (%) | June 30, 2024 (in thousands) | Average Tax Equivalent Yield/Rate (%) | | :------------------------------------------ | :------------ | :------------------------------ | :------------ | :------------------------------ | | Assets | | | | | | Total interest-earning assets | 2,835,627 | 6.19 % | 2,563,412 | 5.76 % | | Liabilities and Shareholders' Equity | | | | | | Total interest-bearing liabilities | 2,077,799 | 2.08 % | 1,759,635 | 2.19 % | | Net spread | | 4.11 % | | 3.57 % | | NIM | | 4.61 % | | 4.20 % | | * NIMTE | | 4.66 % | | 4.26 % | | Cost of funds | | 1.55 % | | 1.57 % | Capital Data and Profitability Ratios These tables provide key capital data at quarter-end, including book value per share, tangible book value per share, and various capital ratios, along with profitability ratios such as NIM, NIMTE, efficiency ratio, return on average assets, and return on average equity for both quarterly and year-to-date periods Capital Data (At quarter end) | | June 30, 2025 ($) | March 31, 2025 ($) | June 30, 2024 ($) | | :------------------------------------------ | :------------ | :------------- | :------------ | | Book value per share | $52.55 | $50.67 | $44.93 | | * Tangible book value per share | $43.35 | $41.47 | $42.03 | | Total shareholders' equity/total assets (%) | 8.95 % | 8.91 % | 8.76 % | | * Tangible Common Equity/Tangible Assets (%) | 7.50 % | 7.41 % | 8.24 % | | Tier 1 Capital / Risk Adjusted Assets (%) | 9.80 % | 9.76 % | 11.68 % | | Total Capital / Risk Adjusted Assets (%) | 10.71 % | 10.62 % | 12.58 % | | Tier 1 Capital / Average Assets (%) | 7.99 % | 8.02 % | 9.17 % | | Shares outstanding | 5,522,271 | 5,520,892 | 5,501,562 | | Total unrealized loss on AFS debt securities, net of income taxes (in thousands) | ($3,571) | ($5,452) | ($15,197) | | Total unrealized gain on derivatives and hedging activities, net of income taxes (in thousands) | $1,026 | $1,097 | $1,212 | Profitability Ratios | | June 30, 2025 (%) | March 31, 2025 (%) | December 31, 2024 (%) | September 30, 2024 (%) | June 30, 2024 (%) | | :-------------------------- | :------------ | :------------- | :------------------ | :----------------- | :------------ | | For the quarter: | | | | | | | NIM | 4.66 % | 4.55 % | 4.41 % | 4.29 % | 4.24 % | | * NIMTE | 4.72 % | 4.61 % | 4.47 % | 4.35 % | 4.30 % | | Efficiency ratio | 64.68 % | 63.54 % | 66.96 % | 66.11 % | 68.78 % | | Return on average assets | 1.48 % | 1.76 % | 1.43 % | 1.22 % | 1.31 % | | Return on