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What changed in NORTHRIM BANCORP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NORTHRIM BANCORP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+385 added−388 removedSource: 10-K (2025-03-10) vs 10-K (2024-03-08)

Top changes in NORTHRIM BANCORP INC's 2024 10-K

385 paragraphs added · 388 removed · 306 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

84 edited+22 added−23 removed87 unchanged
Biggest changeAt June 30, 2023, the date of the most recently available information, from the FDIC, Northrim Bank had approximately a 15% share of the Alaska bank deposits, 19% in the Anchorage area, 22% in Juneau, 19% in Matanuska-Susitna, 15% in Sitka, 12% in Fairbanks, 10% in Ketchikan, 10% in the Kenai Peninsula, 2% in Kodiak, and 8% in Nome.
Biggest changeAt June 30, 2024, the date of the most recently available information from the FDIC, the Bank had approximately a 16% share of the Alaska bank deposits, 19% in the Anchorage area, 21% in Juneau, 21% in Matanuska-Susitna, 18% in Sitka, 13% in Fairbanks, 12% in the Kenai Peninsula, 11% in Nome, 9% in Ketchikan, and 5% in Kodiak. 9 The following table sets forth market share data for the banks having a presence in Alaska as of June 30, 2024, the most recent date for which comparative deposit information is available.
Other Dodd-Frank Act changes include: (i) tightened capital requirements for the Bank and the Company; (ii) new requirements on parties engaged in residential mortgage origination, brokerage, lending and securitization; (iii) expanded restrictions on affiliate and insider transactions; (iv) enhanced restrictions on management compensation and related governance procedures; (v) creation of a federal Consumer Financial Protection Bureau (the "CFPB") with broad authority to regulate consumer financial products and services; and (vi) restrictions and prohibitions on the ability of banking entities to engage in proprietary trading and to invest in or have certain relationships with hedge funds and private equity funds.
Other Dodd-Frank Act changes include: (i) tightened capital requirements for the Bank and the Company; (ii) new requirements on parties engaged in residential mortgage origination, brokerage, lending and securitization; (iii) expanded restrictions on affiliate and insider transactions; (iv) enhanced restrictions on management compensation and related governance procedures; (v) creation of a federal Consumer Financial Protection Bureau (the "CFPB") with broad authority to regulate consumer financial 10 products and services; and (vi) restrictions and prohibitions on the ability of banking entities to engage in proprietary trading and to invest in or have certain relationships with hedge funds and private equity funds.
The regulations establish five capital categories; under the Rules, a bank generally is: “well capitalized” if it has a total risk-based capital ratio of 10.0% or more, a Tier 1 risk-based capital ratio of 8.0% or more, a common equity Tier 1 risk-based ratio of 6.5% or more, and a leverage capital ratio of 5.0% or more, and is not subject to any written agreement, order or capital directive to meet and maintain a specific capital level for any capital measure; “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a common equity Tier 1 risk-based ratio of 4.5% or more, and a leverage capital ratio of 4.0% or more; “undercapitalized” if it has a total risk-based capital ratio less than 8.0%, a Tier 1 risk-based capital ratio less than 6.0%, a common equity risk-based ratio less than 4.5% or a leverage capital ratio less than 4.0%; “significantly undercapitalized” if it has a total risk-based capital ratio less than 6.0%, a Tier 1 risk-based capital ratio less than 4.0%, a common equity risk-based ratio less than 3.0% or a leverage capital ratio less than 3.0%; and “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.
The regulations establish five capital categories; under the Rules, a bank generally is: “well capitalized” if it has a total risk-based capital ratio of 10.0% or more, a Tier 1 risk-based capital ratio of 8.0% or more, a common equity Tier 1 risk-based ratio of 6.5% or more, and a leverage capital ratio of 5.0% or more, and is not subject to any written agreement, order or capital directive to meet and maintain a specific capital level for any capital measure; 12 “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a common equity Tier 1 risk-based ratio of 4.5% or more, and a leverage capital ratio of 4.0% or more; “undercapitalized” if it has a total risk-based capital ratio less than 8.0%, a Tier 1 risk-based capital ratio less than 6.0%, a common equity risk-based ratio less than 4.5% or a leverage capital ratio less than 4.0%; “significantly undercapitalized” if it has a total risk-based capital ratio less than 6.0%, a Tier 1 risk-based capital ratio less than 4.0%, a common equity risk-based ratio less than 3.0% or a leverage capital ratio less than 3.0%; and “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.
Higher or more sensitive risk weights are assigned to various categories of assets, among which are commercial real estate, credit facilities that finance the acquisition, development or construction of real property, certain 11 exposures or credits that are 90 days past due or are nonaccrual, foreign exposures, certain corporate exposures, securitization exposures, equity exposures and in certain cases mortgage servicing rights and deferred tax assets.
Higher or more sensitive risk weights are assigned to various categories of assets, among which are commercial real estate, credit facilities that finance the acquisition, development or construction of real property, certain exposures or credits that are 90 days past due or are nonaccrual, foreign exposures, certain corporate exposures, securitization exposures, equity exposures and in certain cases mortgage servicing rights and deferred tax assets.
We also offer our employees other flexible work options, such as variable work hours, condensed workweeks and part-time hours. There have been no material impacts to our operations due to the increase in these alternative working arrangements, and we are pleased to provide our employees with more flexibility to accommodate their needs.
We also offer our employees other flexible work options, such as variable work hours, condensed workweeks and part-time hours. There have been no material impacts to our operations due 4 to the increase in these alternative working arrangements, and we are pleased to provide our employees with more flexibility to accommodate their needs.
While state government revenue from oil royalties is immediately and directly impacted by a drop in oil prices, we believe that the large scale and nature of oil wells in Alaska are such that project commitments that currently exist will most likely not be disrupted by short-term price volatility.
While state government revenue from oil royalties is immediately and 8 directly impacted by a drop in oil prices, we believe that the large scale and nature of oil wells in Alaska are such that project commitments that currently exist will most likely not be disrupted by short-term price volatility.
We believe that there is opportunity to increase the Company’s loan portfolio, particularly in the commercial portion of the portfolio, in the Company’s 3 current market areas through existing and new customers. In addition to lending products, in many cases commercial customers also require multiple deposit and affiliated services that add franchise value to the Company.
We believe that there is opportunity to increase the Company’s loan portfolio, particularly in the commercial portion of the portfolio, in the Company’s current market areas through existing and new customers. In addition to lending products, in many cases commercial customers also require multiple deposit and affiliated services that add franchise value to the Company.
With certain exceptions, federal law imposes limitations on, and requires collateral for, extensions of credit by insured depository institutions, such as the Bank, to their non-bank affiliates, such as the Company. In addition, new capital rules may affect the Company's ability to pay dividends.
With certain exceptions, federal law imposes limitations on, and requires collateral for, extensions of credit by insured depository institutions, such as the Bank, to their non-bank affiliates, such as the Company. In addition, capital rules may affect the Company's ability to pay dividends.
In the liquidation or other resolution of a failed insured depository institution, claims for administrative expenses (including certain employee compensation claims) and deposits are afforded a priority over other general unsecured claims, 12 including non-deposit claims, and claims of a parent company such as the Company.
In the liquidation or other resolution of a failed insured depository institution, claims for administrative expenses (including certain employee compensation claims) and deposits are afforded a priority over other general unsecured claims, including non-deposit claims, and claims of a parent company such as the Company.
The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls 13 and risk management processes.
The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes.
Other services include personalized checks at account opening, overdraft protection from a savings account, commercial drive-up banking at many locations, automatic transfers and payments, People Pay (a peer-to-peer payment functionality), external transfers, Bill Pay, wire transfers, direct payroll deposit, electronic tax payments, Automated Clearing House origination and receipt, remote deposit capture, account reconciliation and positive pay, merchant services, cash management programs and sweep options to meet the needs of business customers, annuity products, and long term investment portfolios.
Other services include personalized checks at account opening, overdraft protection from a savings account, commercial drive-up banking at many locations, automatic transfers and payments, Zelle (a peer-to-peer payment functionality), external transfers, Bill Pay, wire transfers, direct payroll deposit, electronic tax payments, Automated Clearing House origination and receipt, remote deposit capture, account reconciliation and positive pay, merchant services, cash management programs and sweep options to meet the needs of business customers, annuity products, and long term investment portfolios.
In addition to its review of NAICS codes, the Company has also identified concentrations in various industries that may be adversely impacted by a future health pandemic and a decline in oil prices.
In addition to its review of NAICS codes, the Company has also identified concentrations in various industries that may be adversely impacted by a potential future health pandemic and a decline in oil prices.
The policy provides that bank holding companies should not maintain a level of cash dividends that undermines a bank holding company’s ability to serve as a source of strength to its 10 banking subsidiaries.
The policy provides that bank holding companies should not maintain a level of cash dividends that undermines a bank holding company’s ability to serve as a source of strength to its banking subsidiaries.
The Company’s common stock trades on the Nasdaq Global Select Stock Market (“NASDAQ”) under the symbol, “NRIM.” The Company is regulated by the Board of Governors of the Federal Reserve System.
The Company’s common stock trades on the Nasdaq Global Select Stock Market (“NASDAQ”) under the symbol, “NRIM.” The Company is regulated by the Board of Governors of the Federal Reserve System, (the “FRB”).
Long Term Economic Factors We believe the long-term growth of the Alaska economy will most likely be determined by large scale natural resource development projects. Several multi-billion dollar projects can potentially advance in the moderate-term. Some of these projects include copper, gold and molybdenum production at the proposed Donlin Gold mine and continued exploration in the National Petroleum Reserve Alaska.
Long Term Economic Factors We believe the long-term growth of the Alaska economy will most likely be impacted by large scale natural resource development projects. Several multi-billion dollar projects can potentially advance in the moderate-term. Some of these projects include copper, gold and molybdenum production at the proposed Donlin Gold mine and continued exploration in the National Petroleum Reserve Alaska.
(“NCIC”) is a wholly-owned subsidiary of the Bank, which holds a 100% interest in a residential mortgage holding company, Residential Mortgage Holding Company, LLC, the parent company of Residential Mortgage, LLC (collectively “RML”).
(“NCIC”) is a wholly-owned subsidiary of the Bank, which holds a 100% interest in a residential mortgage holding company, Residential Mortgage Holding Company, LLC, the parent company of Residential Mortgage, LLC (collectively “RML”). • SCF is a wholly-owned subsidiary of the Bank.
PWA is a holding company that owns Pacific Portfolio Consulting, LLC and Pacific Portfolio Trust Company; • Northrim Statutory Trust 2 (“NST2”), an entity that we formed in December 2005 to facilitate a trust preferred securities offering by the Company. The Bank has three direct wholly-owned subsidiaries: • Northrim Capital Investments Co.
PWA is a holding company that owns Pacific Portfolio Consulting, LLC and Pacific Portfolio Trust Company; • Northrim Statutory Trust 2 (“NST2”), an entity that we formed in December 2005 to facilitate a trust preferred securities offering by the Company. The Bank has four direct wholly-owned subsidiaries: • Northrim Capital Investments Co.
We believe that these strategies will continue to benefit the Company in 2024, and we intend to continue to grow our balance sheet through increasing our market share. The Company’s business strategy also stresses the importance of customer deposit relationships to support its lending activities.
We believe that these strategies will continue to benefit the Company in 2025, and we intend to continue to grow our balance sheet through increasing our market share. The Company’s business strategy also stresses the importance of customer deposit relationships to support its lending activities.
Approximately 9% of those in executive and senior management positions identify as a member of a racial minority, 6% identify as individuals with a disability, and 6% identify as veterans. Diversity, Equity, and Inclusion We strive to ensure a respectful, diverse, and inclusive environment and experience for all of our employees.
Approximately 10% of those in executive and senior management positions identify as a member of a racial minority, 6% identify as individuals with a disability, and 6% identify as veterans. Diversity, Equity, and Inclusion We strive to ensure a respectful, diverse, and inclusive environment and experience for all of our employees.
The Company’s bank subsidiary is an Alaska-state chartered commercial bank and is subject to examination, supervision, and regulation by the Alaska Department of Commerce, Community and Economic Development, Division of Banking and Securities (the “Division”). The FDIC insures the Bank’s deposits and also examines, supervises, and regulates the Bank.
The Bank is an Alaska-state chartered commercial bank and is subject to examination, supervision, and regulation by the Alaska Department of Commerce, Community and Economic Development, Division of Banking and Securities (the “Division”). The FDIC insures the Bank’s deposits and also examines, supervises, and regulates the Bank.
Our business strategy also emphasizes the origination of a variety of home mortgage loan products, most of which we sell to the secondary market. We retain servicing for home mortgages that we originate and sell to the Alaska Housing Finance Corporation ("AHFC").
Our business strategy also emphasizes the origination of a variety of home mortgage loan products, most of which we sell to the secondary market. We retain servicing for home mortgages that we originate and sell to the Alaska Housing Finance Corporation (“AHFC”).
Management intends to maintain capital ratios for the Bank in 2024 that exceed the FDIC’s requirements for the “well-capitalized” capital requirement classification. The dividends that the Bank pays to the Company will be limited to the extent necessary for the Bank to meet the regulatory requirements of a “well-capitalized” bank.
Management intends to maintain capital ratios for the Bank in 2025 that exceed the FDIC’s requirements for the “well-capitalized” capital requirement classification. The dividends that the Bank pays to the Company will be limited to the extent necessary for the Bank to meet the regulatory requirements of a “well-capitalized” bank.
Notable amendments include, among others, significant changes to the collection of beneficial ownership information and the establishment of a beneficial ownership registry, which requires corporate entities to report beneficial ownership information to FinCEN. Many of the amendments require the Department of Treasury and FinCEN to promulgate rules.
Notable amendments include, among others, significant changes to the collection of beneficial ownership information and the establishment of a beneficial ownership registry, which requires legal entities to report beneficial ownership information to FinCEN. Many of the amendments require the Department of Treasury and FinCEN to promulgate rules.
Through NISC, we own 22% of the total outstanding equity interest in Pacific Wealth Advisors, LLC (“PWA”), an investment advisory, trust, and wealth management business located in Seattle, Washington.
Through NISC, we own 21% of the total outstanding equity interest in Pacific Wealth Advisors, LLC (“PWA”), an investment advisory, trust, and wealth management business located in Seattle, Washington.
Alaska is strategically located on the Pacific Rim, within nine hours by air from 95% of the northern hemisphere, and Anchorage is a worldwide air cargo and transportation link between the United States and international business in Asia and Europe. The economy of Alaska is dependent upon natural resource industries.
Alaska is strategically located on the Pacific Rim, within nine hours by air from 95% of the northern hemisphere, and Anchorage is a worldwide air cargo and transportation link between the United States and international business in Asia and Europe. The economy of Alaska is no longer entirely dependent upon natural resource industries.
We compete not only with other commercial banks, but also with many other financial competitors, including credit unions (including Global Credit Union, formerly Alaska USA Federal Credit Union, one of the nation’s largest credit unions), finance companies, mortgage banks and brokers, securities firms, insurance companies, private lenders, and other financial intermediaries, many of which have a state-wide or regional presence, and in some cases, a national presence.
We compete not only with other commercial banks, but also with many other financial competitors, including credit unions (including Global Credit Union, one of the nation’s largest credit unions), finance companies, mortgage banks and brokers, securities firms, insurance companies, private lenders, and other financial intermediaries, many of which have a state-wide or regional presence, and in some cases, a national presence.
In addition, Northrim provides for a strong work/life balance, including generous paid time off and paid parental leave. Employee Profile We consider our relations with our employees to be highly satisfactory. We had 472 full-time equivalent employees at December 31, 2023. None of our employees are covered by a collective bargaining agreement.
In addition, Northrim provides for a strong work/life balance, including generous paid time off and paid parental leave. Employee Profile We consider our relations with our employees to be highly satisfactory. We had 503 full-time equivalent employees at December 31, 2024. None of our employees are covered by a collective bargaining agreement.
Based on classification by North American Industry Classification System ("NAICS"), there are no segments that exceed 10% of portfolio loans, except for real estate (see Note 5, Loans and Credit Quality, of the Notes to Consolidated Financial Statements included in Part II. Item 8 of this report for a breakout of real estate loans).
Based on classification by North American Industry Classification System ("NAICS"), there are no segments or loan classifications that exceed 10% of portfolio loans, except for real estate (see Note 6, Loans and Credit Quality, of the Notes to Consolidated Financial Statements included in Part II. Item 8 of this report for a breakout of real estate loans).
Approximately 47% of the Company's employees are working remotely as of December 31, 2023 either on a full- or part-time basis, including employees that work remotely part-time and work in the office part-time, which we refer to as a "hybrid" work from home arrangement.
Approximately 40% of the Company's employees are working remotely as of December 31, 2024 either on a full- or part-time basis, including employees that work remotely part-time and work in the office part-time, which we refer to as a "hybrid" work from home arrangement.
Segments The Company operates in two primary segments: Community Banking and Home Mortgage Lending. Measures of the revenues, profit or loss, and total assets for each of the Company's segments are included in Part II. Item 8. "Financial Statements and Supplementary Data" of this report, which is incorporated herein by reference.
Segments The Company operates in three reportable segments: Community Banking, Home Mortgage Lending, and Specialty Finance. Measures of the revenues, profit or loss, and total assets for each of the Company's segments are included in Part II. Item 8. "Financial Statements and Supplementary Data" of this report, which is incorporated herein by reference.
Part of the POMV concept creates an allocation of a portion of investment earnings to unrestricted revenue instead of restricted revenue. According to the DOR, in 2023 and 2022, investment earnings allocated from the Alaska Permanent Fund under the POMV represented $3.5 billion, or 49%, and $3.0 billion, or 43%, respectively, of unrestricted State revenues.
Part of the POMV concept creates an allocation of a portion of investment earnings to unrestricted revenue instead of restricted revenue. According to the DOR, in 2024 and 2023, investment earnings allocated from the Alaska Permanent Fund under the POMV represented $3.7 billion, or 55%, and $3.5 billion, or 49%, respectively, of unrestricted State revenues.
As of December 31, 2023, Alaska's Constitutional Budget Reserve was $2.8 billion and the Alaska Permanent Fund had a balance of $77.4 billion. Investment revenue generated by the Alaska Permanent Fund is also used to pay an annual dividend to every eligible Alaskan citizen.
As of December 31, 2024, Alaska's Constitutional Budget Reserve was $2.8 billion and the Alaska Permanent Fund had a balance of $79.6 billion. Investment revenue generated by the Alaska Permanent Fund is also used to pay an annual dividend to every eligible Alaskan citizen.
Key sectors of the Alaska economy are the oil industry, government and military spending, and the fishing, mining, tourism, air cargo, transportation, and construction industries, as well as health services. Recent Economic Developments The Alaska Department of Labor ("DOL") has reported Alaska’s seasonally adjusted unemployment rate in November of 2023 was 4.4% compared to the U.S. rate of 3.7%.
Key sectors of the Alaska economy are the oil industry, government and military spending, and the fishing, mining, tourism, air cargo, transportation, and construction industries, as well as health services. Recent Economic Developments The Alaska Department of Labor (“DOL”) has reported Alaska’s seasonally adjusted unemployment rate in November 2024 was 4.6% compared to the U.S. rate of 4.2%.
On September 29, 2022, FinCEN issued a final regulation implementing the BSA amendments included in the NDAA with respect to beneficial ownership reporting. The Bank’s policies and procedures are designed to comply with the requirements of the anti-money laundering laws, including the USA PATRIOT ACT.
On September 29, 2022, FinCEN issued a final regulation implementing the BSA amendments included in the NDAA with respect to beneficial ownership reporting which regulation has been stayed by a federal court. The Bank’s policies and procedures are designed to comply with the requirements of the anti-money laundering laws, including the USA PATRIOT ACT.
Additionally, approximately 39% of our loan portfolio at December 31, 2023 is attributable to 50 large borrowing relationships. Moreover, our business activities are currently focused primarily in the state of Alaska.
Additionally, approximately 37% of our loan portfolio at December 31, 2024 is attributable to 30 large borrowing relationships. Moreover, our business activities are currently focused primarily in the state of Alaska.
Additionally, effective January 1, 2022 the Company enhanced its paid parental leave program for employees following the birth of a child or the placement of a child in connection with an adoption. In the third quarter of 2022, the Company increased base wages for all Community Banking employees below the level of Senior Vice President.
The Company also recently enhanced its paid parental leave program for employees following the birth of a child or the placement of a child in connection with an adoption, and increased base wages for all Community Banking employees below the level of Senior Vice President.
Our interest-bearing accounts generally earn interest at rates established by management based on competitive market factors and management’s desire to increase or decrease certain types or maturities of deposits. 5 Several of our deposit services and products are: • A specialized business checking account customized to account activity; • A money market deposit account; • A “Jump-Up” certificate of deposit (“CD”) that allows additional deposits with the opportunity to increase the rate to the current market rate for a similar term CD; • A savings account that is priced like a money market account that allows additional deposits, quarterly withdrawals without penalty, and tailored maturity dates; • IntraFi® Network Deposits℠ and business sweep; • Consumer online banking, mobile app, and mobile deposit; • Business online banking, business mobile app, and business mobile deposit; and • Instantly issued debit cards for business and consumer accounts at account opening.
Several of our deposit services and products are: 5 • A specialized business checking account customized to account activity; • A money market deposit account; • A “Jump-Up” certificate of deposit (“CD”) that allows additional deposits with the opportunity to increase the rate to the current market rate for a similar term CD; • A savings account that is priced like a money market account that allows additional deposits, quarterly withdrawals without penalty, and tailored maturity dates; • A Bank-On certified consumer checking account; • IntraFi® Network Deposits℠ and business sweep; • Consumer online banking, mobile app, and mobile deposit; • Business online banking, business mobile app, and business mobile deposit; and • Instantly issued debit cards for business and consumer accounts at account opening.
Supervision and Regulation The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the “BHC Act”) registered with and subject to examination by the Board of Governors of the Federal Reserve System (the “FRB”).
Supervision and Regulation The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the “BHC Act”) registered with and subject to examination by the FRB.
The Bank would be considered a large bank with assets of greater than $2 billion under the final rule and therefore will be evaluated under new lending, retail services and products, community development financing, and community development services tests.
CRA evaluations and data collection requirements will be tailored based on bank size and type. The Bank would be considered a large bank with assets of greater than $2 billion under the final rule and therefore will be evaluated under new lending, retail services and products, community development financing, and community development services tests.
Because of our relatively small size, our experienced senior management team can be more involved with serving customers and making credit decisions, all of which are made in Alaska, allowing us to compete more favorably with larger competitors for business lending relationships.
Our experienced senior management team is intimately involved with serving customers and making credit decisions, all of which are made in Alaska for our Community Banking segment, allowing us to compete more favorably with larger competitors for business lending relationships.
In 2023, 24% of our revenue was derived from the residential housing market in the form of loan fees and interest on residential construction and land development loans and income from our Home Mortgage Lending segment as compared to 25% and 38% in 2022 and 2021, respectively.
In 2024, 31% of our revenue was derived from the residential housing market in the form of loan fees and interest on mortgage loans, interest and fees on residential construction and land development loans, gains on the sale or mortgage loans, and mortgage servicing income as compared to 24% and 25% in 2023 and 2022, respectively.
The Dodd-Frank Act significantly modified and expanded the legal and regulatory requirements imposed on banks and other financial institutions. The Dodd-Frank Act permanently increased the maximum amount of deposit insurance coverage to $250,000 per depositor and deposit insurance assessments paid by the Bank are now based on the Bank’s total assets.
The Dodd-Frank Act permanently increased the maximum amount of deposit insurance coverage to $250,000 per depositor and deposit insurance assessments paid by the Bank are now based on the Bank’s total assets.
Approximately 34% of the workforce identify as a member of a racial minority, 3% identify as individuals with a disability, and 1% identify as veterans. In executive and senior management positions, 37% identify as women and 63% as men as of December 31, 2023.
Approximately 35% of the workforce identify as a member of a racial minority, 8% identify as individuals with a disability, and 3% identify as veterans. In executive and senior management positions, 39% identify as women and 61% as men as of December 31, 2024.
The Company has $465.4 million non-owner occupied commercial real estate loans as of December 31, 2023 of which 17% are office class A or B, 14% are office / warehouse, 14% are retail centers, 10% are hotels, 10% are apartments, 8% are mini warehouse and self-storage, 7% are warehouse, and 20% are other.
The Company has $619.4 million non-owner occupied commercial real estate loans as of December 31, 2024 of which 18% are apartments, 16% are retail centers, 15% are office class A or B, 12% are office / warehouse, 9% are hotels, 8% are mini warehouse and self-storage, 5% are warehouse, and 17% are other.
In addition, FinCEN has promulgated customer due diligence and customer identification rules that require banks to identify and verify the identity of the beneficial owners. In addition to complying with the BSA, the Bank is subject to the USA PATRIOT Act.
In addition, FinCEN has promulgated customer due diligence and customer identification rules that require banks to identify and verify the identity of the beneficial owners.
Management believes that calculated, sustainable organic and inorganic market share growth coupled with good asset quality, an appropriate core deposit and capital base, operational efficiency, diversified sources of other operating income, and improved profitability is the most appropriate means of increasing shareholder value. Our business strategy emphasizes commercial lending products and services through relationship banking with businesses and professional individuals.
Management believes that calculated, sustainable organic and inorganic market share growth coupled with good asset quality, an appropriate core deposit and capital base, operational efficiency, diversified sources of other operating income, and consistent profitability is the most appropriate means of increasing shareholder value.
The Anchorage Economic Development Corporation estimates that, for most Anchorage households, distributions from the Alaska Permanent Fund Corporation exceed other Alaska taxes to which those households are subject. 8 Competition We operate in a highly competitive and concentrated banking environment.
The distribution was $1,702 per eligible resident in 2024 for an aggregate distribution of approximately $1.06 billion. The Anchorage Economic Development Corporation estimates that, for most Anchorage households, distributions from the Alaska Permanent Fund Corporation exceed other Alaska taxes to which those households are subject. Competition We operate in a highly competitive and concentrated banking environment.
We operate in Washington State through Northrim Funding Services (“NFS”), a factoring business that the Bank started in 2004. We offer a wide array of commercial and consumer loan and deposit products, investment products, and electronic banking services over the Internet; • Northrim Investment Services Company (“NISC”) was formed in November 2002.
We offer a wide array of commercial and consumer loan and deposit products, investment products, and electronic banking services over the Internet; • Northrim Investment Services Company (“NISC”) was formed in November 2002.
The total number of payroll jobs in Alaska, not including uniformed military, increased 1.6% or 5,000 jobs between November of 2022 and November of 2023. According to the DOL, Health Care had the largest growth in new jobs in Alaska through November compared to the prior year.
The total number of payroll jobs in Alaska, not including uniformed military, increased 2.4% or 7,700 jobs between November 2023 and November 2024. According to the DOL, Construction had the largest growth in new jobs in Alaska through November compared to the prior year.
If none of these projects moves forward in the next ten years, we believe state revenues will continue to decline with falling oil production from older fields on the North Slope of Alaska. We anticipate the decline in state revenues will likely have a negative effect on Alaska’s economy.
If these projects stall or fail to move forward, we believe state revenues will continue to decline with falling oil production from older fields on the ANS. We anticipate the decline in state revenues would likely have a negative effect on Alaska’s economy.
In addition to the minimum capital standards, the federal banking agencies have issued regulations to implement a system of "prompt corrective action." These regulations apply to the Bank but not the Company.
We believe that the current capital levels of the Company and the Bank are in compliance with the standards under the Rules including the conservation buffer. In addition to the minimum capital standards, the federal banking agencies have issued regulations to implement a system of "prompt corrective action." These regulations apply to the Bank but not the Company.
RML held a 30% investment in Homestate Mortgage, LLC until it dissolved in 2023. • Northrim Building, LLC (“NBL”) is a wholly-owned subsidiary of the Bank that owns and operates the Company’s main office facility at 3111 C Street in Anchorage. • Northrim Building LO, LLC is a wholly-owned subsidiary of the Bank that owns and operates the Company’s community branch facilities at 2270 E. 37th Avenue in Anchorage and 2491 Tongass Avenue in Ketchikan.
Sallyport Commercial Finance CAN, LLC, holds a 100% interest in Sallyport Commercial Finance ULC, located in Canada. • Northrim Building, LLC (“NBL”) is a wholly-owned subsidiary of the Bank that owns and operates the Company’s main office facility at 3111 C Street in Anchorage. • Northrim Building LO, LLC is a wholly-owned subsidiary of the Bank that owns and operates the Company’s community branch facilities at 2270 E. 37th Avenue in Anchorage and 2491 Tongass Avenue in Ketchikan.
Available Information The Company’s annual report on Form 10-K and quarterly reports on Form 10-Q, as well as its current reports on Form 8-K and proxy statement filings (and all amendments thereto), which are filed with the SEC, are accessible free of charge at our website at http://www.northrim.com as soon as reasonably practicable after filing with the SEC.
The Company is also subject to the information, proxy solicitation, insider trading restrictions and other requirements of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act of 1934”), including certain requirements under the Sarbanes-Oxley Act of 2002. 14 Available Information The Company’s annual report on Form 10-K and quarterly reports on Form 10-Q, as well as its current reports on Form 8-K and proxy statement filings (and all amendments thereto), which are filed with the SEC, are accessible free of charge at our website at http://www.northrim.com as soon as reasonably practicable after filing with the SEC.
We estimate that as of 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.
We estimate that as of 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.
These types of lending products have provided us with market opportunities and generally provide higher net interest margins compared to other types of lending such as consumer lending. However, they also involve greater risks, including greater exposure to changes in local economic conditions. Additionally, in 2021 and 2020, we originated a significant amount of Paycheck Protection Program ("PPP") loans.
These types of lending products have provided us with market opportunities and generally provide higher net interest margins compared to other types of lending such as consumer lending. However, they also involve greater risks, including greater exposure to changes in local economic conditions. Our lending operations are guided by loan policies, approval procedures, and amount limitations.
Changes in credit union operating practices have effectively eliminated the “common bond” of membership requirement and liberalized their lending authority to include business and real estate loans on par with commercial banks.
Our non-bank competitors also generally operate under fewer regulatory constraints, and in the case of credit unions, are not subject to income taxes. Changes in credit union operating practices have effectively eliminated the “common bond” of membership requirement and liberalized their lending authority to include business and real estate loans on par with commercial banks.
Under longstanding FRB policy and under the Dodd-Frank Act, a bank holding company is required to act as a source of financial strength for its subsidiary banks. The Company could be required to commit resources to its subsidiary bank in circumstances where it might not do so, absent such requirement.
Under longstanding FRB policy and under the Dodd-Frank Act, a bank holding company is required to act as a source of financial strength for its subsidiary banks.
The Alaska Department of Revenue (“DOR”) calculated ANS crude oil production was 479 thousand barrels per day (“bpd”) in Alaska’s fiscal year ending June 30, 2023. The DOR has forecast production to decline slightly to 470 thousand bpd in Alaska’s fiscal year 2024. That number is projected to grow by the DOR to 663 thousand bpd by fiscal year 2033.
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 and is projected to increase to 467 thousand bpd in Alaska’s fiscal year 2025. The DOR expects production to continue to grow rapidly to 657 thousand bpd by fiscal year 2034.
The Company has grown to be the third largest commercial bank in Alaska in terms of deposits, with $2.5 billion in total deposits and $2.8 billion in total assets at December 31, 2023.
The Company has grown to be the third largest commercial bank in Alaska in terms of deposits, with $2.7 billion in total deposits and $3.0 billion in total assets at December 31, 2024. Effective October 31, 2024, the Company completed its acquisition of Sallyport Commercial Finance, LLC (“SCF”), and its subsidiaries.
The Bank is also subject to the Bank Secrecy Act (the “BSA”) and other anti-money laundering laws and regulations including the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) and the Anti-Money Laundering Act of 2020 (the “AMLA”).
If the injunction on the final rule is lifted, compliance with the majority of the final rule's provisions will not be required until January 1, 2026, and the data reporting requirements of the final rule will not take effect until January 1, 2027. 13 The Bank is also subject to the Bank Secrecy Act (the “BSA”) and other anti-money laundering laws and regulations including the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) and the Anti-Money Laundering Act of 2020 (the “AMLA”).
Consequently, our results of operations and financial condition are dependent upon the general trends in the Alaska economy and, in particular, the residential and commercial real estate markets in Anchorage, Juneau, Fairbanks, the Matanuska-Susitna Valley, the Kenai Peninsula, and to a lesser extent, Ketchikan, Sitka, Kodiak and Nome. 6 Home Mortgage Lending Lending Services: The Company originates 1-4 family residential mortgages, the majority of which are located in Alaska, most of which we sell to the secondary market.
Consequently, our results of operations and financial condition are dependent upon the general trends in the Alaska economy and, in particular, the residential and commercial real estate markets in Anchorage, Juneau, Fairbanks, the Matanuska-Susitna Valley, the Kenai Peninsula, and to a lesser extent, Ketchikan, Sitka, Kodiak and Nome. Alaskans continue to account for substantially all of Northrim’s deposit base.
In the Matanuska Susitna Borough there were 1,632 homes sold in 2023, compared to 2,103 in 2022, a decrease of 22.4%. 7 A material portion of our loans at December 31, 2023, were secured by real estate located in greater Anchorage, Matanuska-Susitna Valley, Fairbanks, and Southeast Alaska.
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%. A material portion of our loans at December 31, 2024, were secured by real estate located in greater Anchorage, Matanuska-Susitna Valley, Fairbanks, and Southeast Alaska.
The Rules reflect, in part, certain standards initially adopted by the Basel Committee on Banking Supervision in December 2010 (which standards are commonly referred to as “Basel III”) as well as requirements contemplated by the Dodd-Frank Act. The Rules recognize three types, or tiers, of capital: common equity Tier 1 capital, additional Tier 1 capital and Tier 2 capital.
The Rules apply to both depository institutions (such as the Bank) and their holding companies (such as the Company). The Rules reflect, in part, certain standards initially adopted by the Basel Committee on Banking Supervision in December 2010 (which standards are commonly referred to as “Basel III”) as well as requirements contemplated by the Dodd-Frank Act.
Residential mortgage choices include several products from AHFC including first-time homebuyer, veteran's and rural community programs; Federal Housing Authority, or "FHA" loans; Veterans Affairs, or "VA" loans; and various conventional mortgages. The Company retains servicing rights on loans sold to AHFC since implementing a loan servicing program in July 2015.
Of the 1-4 family residential mortgages originated by the company in 2024, 79% were located in Alaska. Residential mortgage choices include several products from AHFC including first-time homebuyer, veteran's and rural community programs; Federal Housing Authority, or "FHA" loans; Veterans Affairs, or "VA" loans; and various conventional mortgages.
Of the 472 full-time equivalent employees, 332 were Community Banking employees and 140 were Home Mortgage Lending employees. 4 Among the Company's full-time equivalent employees as of December 31, 2023, 66% identify as women and 34% as men.
Of the 503 full-time equivalent employees, 329 were Community Banking employees, 142 were Home Mortgage Lending employees, and 32 were Specialty Finance employees. Among the Company's full-time equivalent employees as of December 31, 2024, 65% identify as women and 35% as men.
McKinley Bank (1) 5 521,186 3.4 % Denali State Bank (1) 5 420,906 2.7 % Total bank branches 113 $15,487,132 100 % (1) FDIC Summary of Deposits as of June 30, 2023.
McKinley Bank (1) 5 535,180 3.4 % Denali State Bank (1) 5 436,311 2.8 % Total bank branches 113 $15,840,622 100 % (1) FDIC Summary of Deposits as of June 30, 2024.
For over 40 years, Alaska residents have received annual distributions payable in October of each year from the Alaska Permanent Fund Corporation, which is supported by royalties from oil production and earnings from its investments. The distribution was $1,312 per eligible resident in 2023 for an aggregate distribution of approximately $819.2 million.
Alaska’s residents are not subject to any state income or state sales taxes. For over 40 years, Alaska residents have received annual distributions payable in October of each year from the Alaska Permanent Fund Corporation, which is supported by royalties from oil production and earnings from its investments.
The Rules permit holding companies with less than $15 billion in total assets as of December 31, 2009 (which includes the Company) to continue to include trust preferred securities issued prior to May 19, 2010 in Tier 1 capital, generally up to 25% of other Tier 1 capital.
The Rules permit certain holding companies, including the Company, to continue to include trust preferred securities issued prior to May 19, 2010 in Tier 1 capital, generally up to 25% of other Tier 1 capital. The Rules made changes in the methods of calculating certain risk-based assets, which in turn affects the calculation of risk- based ratios.
Average sales prices for single family homes in the Matanuska Susitna Borough rose 4% in 2023 to $397,858, after increasing 9.9% in 2022. 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 Bank’s residential lending activity occurs.
This was the seventh consecutive year of price increases. The average sales price for single family homes in the Matanuska Susitna Borough rose 3.9% in 2024 to $412,907, after increasing 4% in 2023. This continues a trend of average price increases for more than a decade in the region.
Based on the latest information from Rain Coast Data, approximately one million cruise ship tourists have visited Southeast Alaska annually in recent years, including 1.2 million in 2022, except in 2020 and 2021 due to the COVID-19 pandemic.
Based on information from Rain Coast Data, over one million cruise ship tourists have visited Southeast Alaska annually in recent years, including 1.7 million in 2023 and 1.2 million in 2022. Additionally, the Cruise Lines International Association has reported that 1.7 million cruise ship visitors visited Southeast Alaska in 2024.
The Company also originates loans funded for investment, including adjustable rate mortgages, a second home product, jumbo loans, and extended locks which are retained as consumer loans in the Company's loan portfolio. Alaska Economy Our growth and operations are impacted by the economic conditions of Alaska and the specific markets we serve.
The Company retains servicing rights on loans sold to AHFC since implementing a loan servicing program in July 2015. The Company also originates loans funded for investment, including adjustable rate mortgages, a second home product, jumbo loans, and extended locks which are retained as consumer loans in the Company's loan portfolio.
The Bank is regulated by the Federal Deposit Insurance Corporation (the "FDIC") and the State of Alaska Department of Commerce, Community and Economic Development, Division of Banking and Securities.
The Bank is regulated by the Federal Deposit Insurance Corporation (the "FDIC") and the State of Alaska Department of Commerce, Community and Economic Development, Division of Banking and Securities. The Bank has 20 branch locations throughout the State of Alaska. We operate in Washington State through Northrim Funding Services (“NFS”), a factoring business that the Bank started in 2004.
The Company’s affiliated trust company, Pacific Portfolio Trust Company, is regulated as a non-depository trust company under the trust company laws of the State of Washington and is subject to supervision and examination by the Washington State Department of Financial Institutions. 9 The Company’s earnings and activities are affected, among other things, by legislation, by actions of the FRB, the Division, the FDIC and other regulators, by local legislative and administrative bodies, and decisions of courts.
The Company’s earnings and activities are affected, among other things, by legislation, by actions of the FRB, the Division, the FDIC and other regulators, by local legislative and administrative bodies, and decisions of courts.
Financial institution Number of branches Total deposits (in thousands) Market share of total bank deposits Northrim Bank (1) 19 $2,328,743 15.0 % Wells Fargo Bank Alaska (1) 38 6,482,757 41.9 % First National Bank Alaska (1) 27 3,874,988 25.0 % Key Bank (1) 10 1,116,909 7.2 % First Bank (1) 9 741,643 4.8 % Mt.
Financial institution Number of branches Total deposits (in thousands) Market share of total bank deposits Northrim Bank (1) 20 $2,480,330 15.7 % Wells Fargo Bank Alaska (1) 37 6,779,209 42.7 % First National Bank Alaska (1) 27 3,698,631 23.3 % Key Bank (1) 10 1,138,684 7.2 % First Bank (1) 9 772,277 4.9 % Mt.
In its most recent CRA examination, the Bank received a “Satisfactory” rating from the FDIC. On October 24, 2023, the FDIC, the Office of the Comptroller of the Currency (“OCC”), and the FRB jointly issued a final rule to strengthen and modernize the existing CRA regulations.
On October 24, 2023, the FDIC, the Office of the Comptroller of the Currency (“OCC”), and the FRB jointly issued a final rule to strengthen and modernize the existing CRA regulations. Under the final rule, the agencies will evaluate a bank’s CRA performance based upon the varied activities that it conducts and the communities in which it operates.
Significant changes in the Alaska economy and the markets we serve eventually could have a positive or negative impact on the Company.
These activities are guided by policies that outline risk management, documentation, and approval limits. Alaska Economy Our growth and operations are impacted by the economic conditions of Alaska and the specific markets we serve. Significant changes in the Alaska economy and the markets we serve eventually could have a positive or negative impact on the Company.
Both the Company and the Bank are required to maintain minimum levels of regulatory capital. In July 2013, federal banking regulators (including the FDIC and the FRB) adopted new capital requirement rules (the “Rules”). The Rules apply to both depository institutions (such as the Bank) and their holding companies (such as the Company).
The Company could be required to commit resources to its subsidiary bank in circumstances where it might not do so, absent such requirement. 11 Both the Company and the Bank are required to maintain minimum levels of regulatory capital, under capital requirement rules (the “Rules”) of federal banking regulators (including the FDIC and the FRB).
Professional & Business Services and Trade, Transportation & Utilities both added 700 jobs year over year through November of 2023. The Government sector grew by 500 jobs for 0.6% growth due to more federal positions in Alaska, which offset declines in Alaska state government jobs.
Professional and Business Services increased 700 jobs year over year through November 2024, up 2.5%. The Government sector grew by 1,200 jobs for 1.5% growth, adding 100 Federal jobs, 800 State and 300 Local government positions in Alaska over the same period.
Northrim Bank and Residential Mortgage are easily accessible to approximately 90% of the Alaska's population through our geographically dispersed 19 branches and 12 mortgage origination offices. 2 The Company has three direct wholly-owned subsidiaries: • Northrim Bank (the “Bank”), a state chartered, full-service commercial bank headquartered in Anchorage, Alaska.
SCF provides factoring, asset based lending, and alternative working capital lending to businesses throughout the United States and, through its subsidiaries and affiliates, to businesses in Canada and the United Kingdom. 2 The Company has three direct wholly-owned subsidiaries: • Northrim Bank (the “Bank”), a state chartered, full-service commercial bank headquartered in Anchorage, Alaska.
Alaska’s real GSP improvement in the third quarter of 2023 was aided by gains in the Transportation & Warehousing and Construction sectors. The BEA also calculated Alaska’s seasonally adjusted personal income at $52.3 billion in the third quarter of 2023.
The BEA also calculated Alaska’s seasonally adjusted personal income at $55.7 billion in the third quarter of 2024. This was an annualized improvement in the third quarter of 3.3% for Alaska, compared to the national average of 3.2%. Alaska enjoyed an annual personal income improvement of 3.8% in 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOperational, Strategic and Business Risk Factors • Changes and instability in economic conditions, geopolitical matters and financial markets, including contraction of economic activity, could adversely impact our business, results of operations and financial condition. • Current economic conditions in the State of Alaska pose challenges for us and could adversely affect our financial condition and results of operations. • Our concentration of operations in the Anchorage, Matanuska-Susitna Valley, Fairbanks and Southeast areas of Alaska makes us more sensitive to downturns in those areas. • Our allowance for credit losses may be insufficient. • We are subject to lending concentration risks. • Our commercial real estate lending may expose us to increased lending risks. • Residential mortgage lending is a market sector that experiences significant volatility and is influenced by many factors beyond our control. • Our information systems or those of our third-party vendors may be subject to an interruption or breach in security, including as a result of cyber-attacks. • A failure in or breach of the Company's operational systems, information systems, or infrastructure, or those of the Company's third party vendors and other service providers, may result in financial losses, or loss of customers. • Our business is highly reliant on third party vendors. • We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements. • Our business, financial condition and results of operations are subject to risk from changes in customer behavior. • Consumers may decide not to use banks to complete their financial transactions. • If we do not comply with the agreements governing servicing of loans, if these agreements change materially, or if others allege non-compliance, our business and results of operations may be harmed. • Certain hedging strategies that we use to manage interest rate risk may be ineffective to offset any adverse changes in the fair value of these assets due to changes in interest rates and market liquidity. • We may be unable to attract and retain key employees and personnel. • Our internal controls may be ineffective. • Liquidity risk could impair our ability to fund operations and jeopardize our financial conditions. • A failure of a significant number of our borrowers, guarantors and related parties to perform in accordance with the terms of their loans would have an adverse impact on our results of operations.
Biggest changeWe may be adversely affected by risks associated with potential acquisitions. • We may incur impairment of goodwill. • Our allowance for credit losses may be insufficient. • We are subject to lending concentration risks. • Our commercial real estate lending may expose us to increased lending risks. • Residential mortgage lending is a market sector that experiences significant volatility and is influenced by many factors beyond our control. • Our information systems or those of our third-party vendors may be subject to an interruption or breach in security, including as a result of cyber-attacks. • A failure in or breach of the Company's operational systems, information systems, or infrastructure, or those of the Company's third party vendors and other service providers, may result in financial losses, or loss of customers. 15 • Our business is highly reliant on third party vendors. • We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements. • Our business, financial condition and results of operations are subject to risk from changes in customer behavior. • Consumers may decide not to use banks to complete their financial transactions. • If we do not comply with the agreements governing servicing of loans, if these agreements change materially, or if others allege non-compliance, our business and results of operations may be harmed. • Certain hedging strategies that we use to manage interest rate risk may be ineffective to offset any adverse changes in the fair value of these assets due to changes in interest rates and market liquidity. • We may be unable to attract and retain key employees and personnel. • Our internal controls may be ineffective. • Liquidity risk could impair our ability to fund operations and jeopardize our financial conditions. • A failure of a significant number of our borrowers, guarantors and related parties to perform in accordance with the terms of their loans would have an adverse impact on our results of operations.
Some additional factors that may cause the price of our common stock to fluctuate include: •general conditions in the financial markets and real estate markets. 28 •macro-economic and political conditions in the U.
Some additional factors that may cause the price of our common stock to fluctuate include: 28 •general conditions in the financial markets and real estate markets. •macro-economic and political conditions in the U.
S. and the financial markets generally. •variations in the operating results of the Company and our competitors. •events affecting other companies that the market deems comparable to the Company. •changes in securities analysts' estimates of our future performance and the future performance of our competitors. •announcements by the Company or our competitors of mergers, acquisitions and strategic partnerships. •additions or departure of key personnel. •the presence or absence of short selling of our common stock. •future sales or other issuances by us of our common stock.
S. and the financial markets generally. •variations in the operating results of the Company and our competitors. •events affecting other companies that the market deems comparable to the Company. •changes in securities analysts' estimates of our future performance and the future performance of our competitors. •announcements by the Company or our competitors of mergers, acquisitions and strategic partnerships. •additions or departure of key personnel. •the presence or absence of short selling of our common stock. •future sales or other issuances by us of our common stock or other securities.
General Risk Factors • Natural disasters and adverse weather could negatively affect real estate property values and Bank operations. • The soundness of other financial institutions could adversely affect us. • The financial services business is intensely competitive and our success will depend on our ability to compete effectively. • We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so could materially adversely affect our performance. • Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations. • Climate change, severe weather, natural disasters, and other external events could significantly impact our business. • Increasing, complex and evolving regulatory, stakeholder, and other third party expectations on ESG matters could adversely affect our reputation, our access to capital and the market price of our securities.
General Risk Factors • Natural disasters and adverse weather could negatively affect real estate property values and Bank operations. • The soundness of other financial institutions could adversely affect us. • The financial services business is intensely competitive and our success will depend on our ability to compete effectively. • We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so could materially adversely affect our performance. • Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations. 16 • Climate change, severe weather, natural disasters, and other external events could significantly impact our business. • Increasing, complex and evolving regulatory, stakeholder, and other third party expectations on ESG matters could adversely affect our reputation, our access to capital and the market price of our securities.
We may also face the following risks in connection with events: 18 ▪ Ineffective monetary policy could cause rapid changes in interest rates and asset values that would have a materially adverse impact on our profitability and overall financial condition. ▪ Market developments and economic stagnation may affect consumer confidence levels and may cause adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit facilities. ▪ Regulatory scrutiny of the industry could increase, leading to harsh regulation of our industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation. ▪ Further erosion in the fiscal condition of the U.S.
We may also face the following risks in connection with events: ▪ Ineffective monetary policy could cause rapid changes in interest rates and asset values that would have a materially adverse impact on our profitability and overall financial condition. ▪ Market developments and economic stagnation may affect consumer confidence levels and may cause adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit facilities. ▪ Regulatory scrutiny of the industry could increase, leading to harsh regulation of our industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation. ▪ Further erosion in the fiscal condition of the U.S.
A security breach or other significant disruption could: disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our customers; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of ours or our customers, including account numbers and other financial information; result in a violation of applicable privacy, data breach and other laws, subjecting the Bank to additional regulatory scrutiny and exposing the Bank to civil litigation, governmental fines and possible financial liability; require significant management attention and resources to remedy the damages that result; or harm our reputation or cause a decrease in the number of customers that choose to do business with us or reduce the level of business that our customers do with us.
A security breach or other significant disruption could: disrupt the proper functioning of our 21 networks and systems and therefore our operations and/or those of certain of our customers; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of ours or our customers, including account numbers and other financial information; result in a violation of applicable privacy, data breach and other laws, subjecting the Bank to additional regulatory scrutiny and exposing the Bank to civil litigation, governmental fines and possible financial liability; require significant management attention and resources to remedy the damages that result; or harm our reputation or cause a decrease in the number of customers that choose to do business with us or reduce the level of business that our customers do with us.
These policies and procedures, however, may not prevent unexpected losses that could materially affect our financial condition and results of operations. 23 Regulatory, Legislative, Legal and Reputational Risks We operate in a highly regulated environment and changes of or significant increases in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us.
These policies and procedures, however, may not prevent unexpected losses that could materially affect our financial condition and results of operations. Regulatory, Legislative, Legal and Reputational Risks We operate in a highly regulated environment and changes of or significant increases in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us.
The loss of these vendor relationships, or a failure of these vendors' systems, could disrupt the services we provide to our customers and cause us to incur significant expense in connection with replacing these services. 21 We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements.
The loss of these vendor relationships, or a failure of these vendors' systems, could disrupt the services we provide to our customers and cause us to incur significant expense in connection with replacing these services. We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements.
Certain characteristics of digital asset transactions, such as the speed with which such transactions can be conducted, the ability to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers notwithstanding the various risks posed by such transactions as illustrated by the current and ongoing market volatility.
Certain characteristics of digital asset transactions, such as the speed with which such transactions can be 22 conducted, the ability to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers notwithstanding the various risks posed by such transactions as illustrated by the current and ongoing market volatility.
Our exposure to credit loss, if any, is the outstanding amount of the loan if the collateral is proved to be of no value. These areas rely primarily upon the natural resources industries, particularly oil production, as well as tourism and government and U.S. military spending for their economic success.
Our exposure to credit loss, if any, is the outstanding amount of the loan if the collateral is proved to be of no value. These areas rely primarily upon the natural resources industries, 18 particularly oil production, as well as tourism and government and U.S. military spending for their economic success.
A deterioration in economic conditions in the United States and our regional markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.
A deterioration in economic conditions in the United States and our regional markets could result in an increase in loan 17 delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.
This would result in an increase in our non-performing assets if more borrowers fail to perform according to loan terms and if we take possession of real estate properties. Additionally, if real estate values decline, the value of real estate collateral securing 19 our loans could be significantly reduced.
This would result in an increase in our non-performing assets if more borrowers fail to perform according to loan terms and if we take possession of real estate properties. Additionally, if real estate values decline, the value of real estate collateral securing our loans could be significantly reduced.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition. Liquidity risk could impair our ability to fund operations and jeopardize our financial conditions. Liquidity is essential to our business.
Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition. 23 Liquidity risk could impair our ability to fund operations and jeopardize our financial conditions. Liquidity is essential to our business.
Although forecasts have varied, many economists are projecting that, while indicators of U.S. economic performance, such as income growth, may be strong and levels of inflation may continue to decrease, the U.S. economy may be flat or experience a modest decrease in gross domestic output in 2024 while inflation is expected to remain elevated relative to historic levels in the coming quarters.
Although forecasts have varied, many economists are projecting that, while indicators of U.S. economic performance, such as income growth, may be strong and levels of inflation may continue to decrease, the U.S. economy may be flat or experience a modest decrease in gross domestic output in 2025 while inflation is expected to remain elevated relative to historic levels in the coming quarters.
In addition, the amount we spend and the number of shares we are able to repurchase under our stock repurchase program may further be affected by a number of other factors, including the stock price and blackout periods in which we are restricted from repurchasing shares.
In addition, the amount we spend and the number of shares, if any, we are able to repurchase under our stock repurchase program may further be affected by a number of other factors, including the stock price and blackout periods in which we are restricted from repurchasing shares.
The prospects for the enactment of major banking reform legislation under the new Congress are unclear at this time. Moreover, the turnover of the Presidential Administration in 2021 resulted in certain changes in the leadership and senior staffs of the federal banking agencies and the Treasury Department.
The prospects for the enactment of major banking reform legislation under the new Congress are unclear at this time. Moreover, the turnover of the Presidential Administration in 2025 resulted in certain changes in the leadership and senior staffs of the federal banking agencies and the Treasury Department.
Zins in the amounts of $2.4 million, $2 million, $2 million and $2 million, respectively, we may not be able to timely replace these key employees with a person of comparable ability and experience should the need to do so arise, causing losses in excess of the insurance proceeds.
Zins in the amounts of $2 million each, we may not be able to timely replace these key employees with a person of comparable ability and experience should the need to do so arise, causing losses in excess of the insurance proceeds.
A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.
A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. In addition, following the 2024 U.S.
In part due to repeated debt-limit political standoffs and last-minute resolutions, in 2023 a rating agency downgraded the U.S. long-term foreign-currency issuer default rating to AA+ from AAA .
In part due to repeated debt-limit political standoffs and last-minute resolutions, in 2023 a rating agency downgraded the U.S. long-term foreign-currency issuer default rating to AA+ from AAA and reiterated the AA+ rating in August 2024 .
Inflation has continued rising in 2023 at levels not seen for over 40 years. Inflationary pressures are currently expected to continue in 2024. Inflation could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations increasing our credit risk.
Inflation has continued to be heightened in 2024 at levels not seen for over 40 years. Inflationary pressures are currently expected to continue in 2025. Inflation could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations increasing our credit risk.
Approximately 72% of the Bank’s loan portfolio at December 31, 2023 consisted of loans secured by commercial and residential real estate mostly located in Alaska. Additionally, all of the Company's loans held for sale are secured by residential real estate.
Approximately 75% of the Bank’s loan portfolio at December 31, 2024 consisted of loans secured by commercial and residential real estate mostly located in Alaska. Additionally, all of the Company's loans held for sale are secured by residential real estate.
Regulatory, Legislative and Legal Risk Factors • We operate in a highly regulated environment and changes of or significant increases in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us. • We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. • Fiscal challenges facing U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations. • Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Anti-Money Laundering Act of 2020, Real Estate Settlement Procedures Act, Truth-in-Lending Act or other laws and regulations could result in fines, sanctions or other adverse consequences. • Deposit insurance premiums could increase further in the future. 15 • Recent volatility in the banking sector, triggered by the failures of Silicon Valley Bank, Signature Bank and First Republic Bank, may result in legislative initiatives, agency rulemaking activities, or changes in agency policies and priorities that could subject the Company and the Bank to enhanced government regulation and supervision. • Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business.
Regulatory, Legislative and Legal Risk Factors • We operate in a highly regulated environment and changes of or significant increases in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us. • We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. • Fiscal challenges facing U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations. • Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Anti-Money Laundering Act of 2020, Real Estate Settlement Procedures Act, Truth-in-Lending Act or other laws and regulations could result in fines, sanctions or other adverse consequences. • Deposit insurance premiums could increase further in the future. • Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business.
Ballard, our Executive Vice President and Chief Financial Officer; and Amber Zins, our Executive Vice President and Chief Operating Officer of Northrim Bank. While we maintain keyman life insurance on the lives of Messrs. Schierhorn, Huston, Ballard and Ms.
Ballard, our Executive Vice President and Chief Financial Officer; Amber Zins, our Executive Vice President and Chief Operating Officer of the Bank and Jason Criqui, our Executive Vice President and Chief Banking Officer of the Bank. While we maintain keyman life insurance on the lives of Messrs. Huston, Ballard, and Criqui and Ms.
The terms and costs of these activities could materially and adversely affect our business, financial condition, results of operations and the trading price of our common stock. We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. Last Congress, Democrats controlled the White House and both Chambers of Congress.
The terms and costs of these activities could materially and adversely affect our business, financial condition, results of operations and the trading price of our common stock. We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.
At December 31, 2023, approximately 72% of loans are secured by real estate and 4% are unsecured. Approximately 24% are for general commercial uses, including professional, retail, and small businesses, and are secured by non-real estate assets. Repayment is expected from the borrowers’ cash flow or, secondarily, the collateral.
At December 31, 2024, approximately 75% of loans are secured by real estate and 3% are unsecured. Approximately 22% are for general commercial uses, including professional, retail, and small businesses, and are secured by non-real estate assets. Repayment is expected from the borrowers’ cash flow or, secondarily, the collateral.
If any of these effects continue or become more pronounced, loan losses will increase more than we expect and our financial condition and results of operations would be adversely impacted. Our commercial real estate lending may expose us to increased lending risks. Approximately 49% of the Bank’s loan portfolio at December 31, 2023 consisted of commercial real estate loans.
If any of these effects continue or become more pronounced, loan losses will increase more than we expect and our financial condition and results of operations would be adversely impacted. Our commercial real estate lending may expose us to increased lending risks.
We will be dependent for the foreseeable future on the services of Joseph M. Schierhorn, our Chairman of the Board, President, Chief Executive Officer, and Chief Operating Officer of the Company; Michael Huston, our President of Northrim Bank; Jed W.
We will be dependent for the foreseeable future on the services of Michael Huston, our President, Chief Executive Officer, and Chief Operating Officer and President of the Bank; Jed W.
Regulators have significant discretion and authority to prevent or remedy practices that they deem to be unsafe or unsound, or violations of laws or regulations by financial institutions and holding companies in the performance of their supervisory and enforcement duties. The exercise of regulatory authority may have a negative impact on our financial condition and results of operations.
Regulators have significant discretion and authority to prevent or remedy practices that they deem to be unsafe or unsound, or violations of laws or regulations by financial institutions and holding companies in the performance of their supervisory and enforcement duties.
There can be no assurance that the Company will continue to repurchase stock. During 2023, the Company repurchased 208,673 shares of common stock at an average price of $43.34 per share under its previously announced share repurchase program.
There can be no assurance that the Company will continue to repurchase stock. During 2024, the Company repurchased 15,034 shares of common stock at an average price of $52.46 per share under its previously announced share repurchase program.
In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2011, S&P lowered its long term sovereign credit rating on the U.S. from AAA to AA+. In 2023, Congress narrowly averted two separate government shutdowns by passing continuing resolutions.
In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2011, S&P lowered its long term sovereign credit rating on the U.S. from AAA to AA+.
We expect to see additional volatility in the financial markets due to the uncertainty caused by recent high-profile bank failures involving Silicon Valley Bank, Signature Bank and First Republic Bank, disruption in global supply chains, uncertainty over the U.S. government debt ceiling and changing FRB policy.
We expect to see additional volatility in the financial markets due to the uncertainty caused by disruption in global supply chains, uncertainty over the U.S. government debt ceiling and changing FRB policy.
We use derivative instruments to economically hedge the interest rate risk in our residential mortgage loan commitments. Our hedging strategies are susceptible to prepayment risk, basis risk, market volatility and changes in the shape of the yield curve, among other factors. In addition, hedging strategies rely on assumptions and projections regarding assets and general market factors.
Our hedging strategies are susceptible to prepayment risk, basis risk, market volatility and changes in the shape of the yield curve, among other factors. In addition, hedging strategies rely on assumptions and projections regarding assets and general market factors.
Additional legislation and regulations that could significantly affect our authority and operations may be enacted or adopted in the future, which could have a material adverse effect on our financial condition and results of operations.
Significant changes in SEC regulations can dramatically shift resources and costs to ensure adequate compliance. Additional legislation and regulations that could significantly affect our authority and operations may be enacted or adopted in the future, which could have a material adverse effect on our financial condition and results of operations.
The extent of the future impact of these events on economic and business conditions cannot be predicted; however, prolonged or acute fluctuations could have a material and adverse impact upon our financial condition and results of operation. Our allowance for credit losses may be insufficient. We maintain allowances for credit losses on loans, securities and off-balance sheet credit exposures.
The extent of the future impact of these events on economic and business conditions cannot be predicted; however, prolonged or acute fluctuations could have a material and adverse impact upon our financial condition and results of operation.
Such risks, including those set forth in the summary of material risks in this Part I. Item 1A. should be carefully considered before purchasing our securities.
Risk Factors Summary An investment in the Company's common stock is subject to risks inherent to the Company's business. Such risks, including those set forth in the summary of material risks in this Part I. Item 1A. should be carefully considered before purchasing our securities.
The credit quality of these loans may also deteriorate more than expected which may result in losses that exceed the estimates that are currently included in our allowance for loan losses, which could adversely affect our financial condition and results of operations.
The credit quality of these loans may also deteriorate more than expected which may result in losses that exceed the estimates that are currently included in our allowance for loan losses, which could adversely affect our financial condition and results of operations. 20 Residential mortgage lending is a market sector that experiences significant volatility and is influenced by many factors beyond our control.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Anti-Money Laundering Act of 2020, Real Estate Settlement Procedures Act, Truth-in-Lending Act or other laws and regulations could result in fines, sanctions or other adverse consequences.
The potential impact of any reduction in federal spending on our customers, and the Bank, cannot be predicted as this time. 25 Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Anti-Money Laundering Act of 2020, Real Estate Settlement Procedures Act, Truth-in-Lending Act or other laws and regulations could result in fines, sanctions or other adverse consequences.
Interest Rate and Inflation Risk Factors • Changes in market interest rates could adversely impact the Company. • The impact of interest rates on our mortgage banking business can have a significant impact on revenues. • Inflationary pressures and rising prices may affect our results of operations and financial condition. • Rising interest rates have decreased the value of our held-to-maturity securities portfolio, and we would realize losses if we were required to sell such securities to meet liquidity needs.
Interest Rate and Inflation Risk Factors • Changes in market interest rates could adversely impact the Company. • The impact of interest rates on our mortgage banking business can have a significant impact on revenues. • Inflationary pressures and rising prices may affect our results of operations and financial condition.
Any contraction of economic activity, including an economic recession, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings. In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the FRB.
In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the FRB.
Additionally, our business is affected significantly by the fiscal and monetary policies of the U.S. federal government and its agencies, including the FRB. We cannot accurately predict the full effects of recent or future legislation or the various other governmental, regulatory, monetary and fiscal initiatives which have been and may be enacted on the financial markets and on the Company.
We cannot accurately predict the full effects of recent or future legislation or the various other governmental, regulatory, monetary and fiscal initiatives which have been and may be enacted on the financial markets and on the Company.
It remains uncertain whether the FOMC will further increase the target range for the federal funds rate to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels, begin to reduce the federal funds rate or leave the rate at its current elevated level for a lengthy period of time.
Although the FOMC lowered rates slightly in 2024, and as of December 31, 2024, the target range for the federal funds rate had been decreased to 4.25% to 4.50%, it remains uncertain whether the FOMC may return to increase the target range for the federal funds rate to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels, begin to reduce the federal funds rate or leave the rate at its current level for a lengthy period of time.
Commercial construction and commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers. Consequently, an adverse development with respect to one commercial loan or one credit relationship exposes us to significantly greater risk of loss compared to an adverse development with respect to a consumer loan.
Consequently, an adverse development with respect to one commercial loan or one credit relationship exposes us to significantly greater risk of loss compared to an adverse development with respect to a consumer loan.
As customer, public, legislative and regulatory expectations and requirements regarding operational and information security have increased, our operations systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and breakdowns. 20 Our customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, payment card numbers, bank account information or other personal information or to introduce viruses or other malware through “trojan horse” programs to our customers’ computers.
Our customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, payment card numbers, bank account information or other personal information or to introduce viruses or other malware through “trojan horse” programs to our customers’ computers.
The Company continues to evaluate the potential impact that regulatory proposals may have on our liquidity and capital management strategies, including Basel III and those required under the Dodd-Frank Act.
Whether we resume, and the amount and timing of such stock repurchases is subject to capital availability and periodic determinations by our Board of Directors. The Company continues to evaluate the potential impact that regulatory proposals may have on our liquidity and capital management strategies, including Basel III and those required under the Dodd-Frank Act.
Although agendas are expected to vary substantially in each chamber, congressional committees with jurisdiction over the banking sector have pursued, and likely will continue to pursue, oversight in a variety of areas, including addressing climate-related risks, promoting diversity and equality within the banking industry and addressing other ESG matters, improving competition in the banking sector and enhancing oversight of bank mergers and acquisitions, and establishing a regulatory framework for digital assets and markets.
Although agendas are expected to vary substantially from the agenda of the prior Democratic administration, congressional committees with jurisdiction over the banking sector may continue to pursue, oversight in a variety of areas, including improving competition in the banking sector and changes to the oversight of bank mergers and acquisitions, and establishing a regulatory framework for digital assets and markets.
Residential mortgage lending in general has experienced substantial volatility in recent periods primarily due to changes in interest rates and other market forces beyond our control.
The Company earns revenue from the residential mortgage lending activities primarily in the form of gains on the sale of mortgage loans that we originate and sell to the secondary market. Residential mortgage lending in general has experienced substantial volatility in recent periods primarily due to changes in interest rates and other market forces beyond our control.
If a sufficiently large number of depositors sought to withdraw their deposits for whatever reason, we may be unable to obtain the necessary funding at favorable term. A failure of a significant number of our borrowers, guarantors and related parties to perform in accordance with the terms of their loans would have an adverse impact on our results of operations.
A failure of a significant number of our borrowers, guarantors and related parties to perform in accordance with the terms of their loans would have an adverse impact on our results of operations.
The potential impact of any changes in agency personnel, policies and priorities on the financial services sector, including the Bank, cannot be predicted at this time. 24 Fiscal challenges facing the U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.
Fiscal challenges facing the U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.
Any such downturn in economic output, especially domestically and in the Alaska and other markets in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations. As a result of the economic and geopolitical factors discussed above, financial institutions also face heightened credit risk, among other forms of risk.
Any such downturn in economic output, especially domestically and in the Alaska and other markets in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations. Current economic conditions in the State of Alaska pose challenges for us and could adversely affect our financial condition and results of operations.
If any of the following risks actually occur, the Company’s financial condition and results of operations could be materially and adversely affected.
If any of the following risks actually occur, the Company’s financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of the Company’s common stock could decline significantly, and you could lose all or part of your investment.
Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change, including mandatory substantive and/or disclosure requirements regarding climate change. Such initiatives have been pursued with rigor under the current Presidential Administration.
Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change, including mandatory substantive and/or disclosure requirements regarding climate change. The Financial Stability Oversight Council published a report in 2021 identifying climate-related financial risk as an “emerging threat” to financial stability.
As a result, Democrats were able to set the policy agenda both legislatively and in the regulatory agencies that have rulemaking and supervisory authority over the financial services industry generally and the Bank specifically. These dynamics shifted after the 2022 midterm elections. While Democrats retained control of the U.S. Senate, the party has a slim majority of 51 seats.
Following the 2024 elections, Republicans control the White House and both Chambers of Congress. As a result, Republicans will be able to set the policy agenda both legislatively and in the regulatory agencies that have rulemaking and supervisory authority over the financial services industry generally and the Bank specifically.
These changes have impacted the rulemaking, supervision, examination and enforcement priorities and policies of the agencies and likely will continue to do so over the next several years.
These changes are likely to impact the rulemaking, supervision, examination and enforcement priorities and policies of the agencies and likely will continue to do so over the next several years. The potential impact of any changes in agency personnel, policies and priorities on the financial services sector, including the Bank, cannot be predicted at this time.
We may not have any remedies available to us against third parties for such losses, or the remedies might not be as broad as the remedies available to the Alaska Housing Finance Corporation against us. 22 Certain hedging strategies that we use to manage interest rate risk may be ineffective to offset any adverse changes in the fair value of these assets due to changes in interest rates and market liquidity.
Certain hedging strategies that we use to manage interest rate risk may be ineffective to offset any adverse changes in the fair value of these assets due to changes in interest rates and market liquidity. We use derivative instruments to economically hedge the interest rate risk in our residential mortgage loan commitments.
Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies. Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity.
Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity. Any contraction of economic activity, including an economic recession, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings.
While we have taken actions to maximize our funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. 17 Operational, Strategic and Business Risks Changes and instability in economic conditions, geopolitical matters and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition.
Operational, Strategic and Business Risks Changes and instability in economic conditions, geopolitical matters and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition. Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies.
Removed
If this were to happen, the value of the Company’s common stock could decline significantly, and you could lose all or part of your investment. 14 Risk Factors Summary An investment in the Company's common stock is subject to risks inherent to the Company's business.
Added
Operational, Strategic and Business Risk Factors • Changes and instability in economic conditions, geopolitical matters and financial markets, including contraction of economic activity, could adversely impact our business, results of operations and financial condition. • Current economic conditions in the State of Alaska pose challenges for us and could adversely affect our financial condition and results of operations. • Our concentration of operations in the Anchorage, Matanuska-Susitna Valley, Fairbanks and Southeast areas of Alaska makes us more sensitive to downturns in those areas. • We pursue a strategy of supplementing internal growth by acquiring other financial companies or their assets and liabilities that we believe will help us fulfill our strategic objectives and enhance our earnings.
Removed
In January 2022, due to elevated levels of inflation and corresponding pressure to raise interest rates, the FRB announced after several periods of historically low federal funds rates and yields on Treasury notes that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time.
Added
We pursue a strategy of supplementing internal growth by acquiring other financial companies or their assets and liabilities that we believe will help us fulfill our strategic objectives and enhance our earnings. We may be adversely affected by risks associated with potential acquisitions.
Removed
The FOMC since has increased 16 the target range eleven times throughout 2022 and 2023. As of December 31, 2023, the target range for the federal funds rate had been increased to 5.25% to 5.50%.
Added
As part of our general growth strategy, we periodically expand our business through acquisitions such as the acquisition of SCF in October 2024. Although our business strategy emphasizes organic expansion, from time to time in the ordinary course of business, we also engage in discussions with potential acquisition targets.
Removed
Our interest rate spread, net interest margin and net interest income increased during this period of rising interest rates as our interest earning assets generally reprice more quickly than our interest earning liabilities.
Added
There can be no assurance that we will successfully identify suitable acquisition candidates, complete acquisitions and successfully integrate acquired operations into our existing operations, or expand into new markets.
Removed
Rising interest rates have decreased the value of our held-to-maturity securities portfolio, and we would realize losses if we were required to sell such securities to meet liquidity needs .
Added
The consummation of any future acquisitions may dilute shareholder value or may have an adverse effect upon our operating results while the operations of the acquired business are being integrated into our operations. In addition, once integrated, acquired operations may not achieve levels of profitability comparable to those achieved by Northrim’s existing operations, or otherwise perform as expected.
Removed
As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the trading value of previously issued government and other fixed income securities has declined significantly.
Added
Further, transaction-related expenses may adversely affect our earnings. These adverse effects on our earnings and results of operations may have a negative impact on the value of our common stock.
Removed
These securities make up a majority of the securities portfolio of most banks in the U.S., including ours, resulting in unrealized losses embedded in the held-to-maturity portion of U.S. banks’ securities portfolios. The book value of the Company's held-to-maturity securities portfolio was $36.8 million at both December 31, 2023 and 2022.
Added
Acquiring banks, bank branches or businesses involves risks commonly associated with acquisitions, including: • we may be exposed to potential asset quality issues or unknown or contingent liabilities of the banks, businesses, assets, and liabilities we acquire.
Removed
Unrealized losses on the held-to-maturities portfolio amounted to $3.3 million and $4.1 million at December 31, 2023 and 2022, respectively. The fair value of the Company's held-to-maturity securities portfolio was $33.4 million and $32.6 million at December 31, 2023 and 2022, respectively.
Added
If these issues or liabilities exceed our estimates, our results of operations and financial condition may be materially negatively affected; • potential diversion of our management’s time and attention; • prices at which acquisitions can be made fluctuate with market conditions.
Removed
While we do not currently intend to sell these securities, if we were required to sell such securities to meet liquidity needs, we may incur losses, which could impair our capital, financial condition, and results of operations and, in the event that our other funding sources are insufficient, could require us to raise additional capital.
Added
We have experienced times during which acquisitions could not be made in specific markets at prices we considered acceptable and expect that we will experience this situation in the future; • the acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity into our company to make the transaction economically successful.
Removed
Throughout 2022 and 2023, the FOMC raised the target range for the federal funds rate on eleven separate occasions, citing factors including the hardships caused by the ongoing Russia-Ukraine conflict, continued global supply chain disruptions and imbalances, and increased inflationary pressure.
Added
This integration process is complicated and time-consuming and can also be disruptive to the clients of the acquired business.
Removed
Of note, because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral, which, in turn, can adversely affect the value of our loan and investment portfolios.
Added
If the integration process is not conducted successfully and with minimal adverse effect on the acquired business and its clients, we may not realize the anticipated economic benefits of particular acquisitions within the expected time frame, and we may lose clients or employees of the acquired business.
Removed
Adverse economic developments, specifically including inflation-related impacts, may have a negative effect on the ability of our borrowers to make timely repayments of their loans or to finance future home purchases. According to the Federal Reserve's October 2023 Financial Stability Report, commercial real estate values remained elevated relative to fundamentals, even as prices continued to decline.
Added
We may also experience greater than anticipated client losses even if the integration process is successful; • to finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute the interests of our existing shareholders; • we have completed various acquisitions over the years that enhanced our rate of growth.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAt the management level, the Chief Information Officer and Information Security Officer receive regular reports from the Company’s systems department, both historical and real-time, about the Company’s cybersecurity status.
Biggest changeWe maintain relevant expertise within the Company's management team to manage cybersecurity risks. At the management level, the Chief Information Officer and Information Security Officer receive regular reports from the Company’s systems department, both historical and real-time, about the Company’s cybersecurity status.
Senior management meets regularly with the Company’s risk-management team and internal and external auditors to evaluate the effectiveness of the Company’s systems, controls, and management processes with respect to cybersecurity risks. The results of key assessments are reported in summary to the Board of Directors periodically.
Senior management meets regularly with the Company’s risk-management team and internal and external auditors to evaluate the effectiveness of the Company’s systems, controls, and management processes with respect to cybersecurity risks. The results of key assessments are reported in summary to our Board of Directors periodically.
The Company has established written policies and procedures to ensure that significant cybersecurity incidents are immediately investigated, addressed through the coordination of various internal departments, and publicly reported (to the extent required by applicable 32 law).
The Company has established written policies and procedures to ensure that significant cybersecurity incidents are immediately investigated, addressed through the coordination of various internal departments, and publicly reported (to the extent required by applicable law).
If management determines a material cybersecurity incident has occurred, the Company’s policies require management to promptly inform the Audit Committee with follow-up information to the full Board of Directors.
If 32 management determines a material cybersecurity incident has occurred, the Company’s policies require management to promptly inform the Audit Committee with follow-up information to the full Board of Directors.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePioneer Avenue, Suite 209, Homer, AK Loan Production Leased 34 The following sets forth information about our Home Mortgage Lending branch locations, operated by RML: Locations Leased/Owned Main Office at Calais 100 Calais Drive, Anchorage, AK Leased ReMax/Dynamic Office 3350 Midtown Place, Suite 101, Anchorage, AK Leased Fairbanks Office 324 Old Steese Highway, Suite 7, Fairbanks, AK Leased Juneau Office 8800 Glacier Highway, #232, Juneau, AK Leased Kodiak Office 2695 Mill Bay Road, Kodiak, AK Leased Soldotna Office 44384 Sterling Highway, Suite 102, Soldotna, AK Leased Wasilla Northrim Branch 850 E USA Circle, Suite B, Wasilla, AK Leased Centerpoint Office 3801 Centerpoint Drive, Suite 100, Anchorage, AK Leased Glendale Office 17505 N. 79th Avenue, Suite 411, Glendale, AZ Leased Meridian Office 2541 E.
Biggest changePioneer Avenue, Suite 211, Homer, AK Traditional Leased 34 The following sets forth information about our Home Mortgage Lending branch locations, operated by RML: Locations Leased/Owned Main Office at Calais 100 Calais Drive, Anchorage, AK Leased ReMax/Dynamic Office 3350 Midtown Place, Suite 101, Anchorage, AK Leased Keller Williams Office 3035 C Street, Suite 103, Anchorage, AK Leased Fairbanks Office 324 Old Steese Highway, Suite 7, Fairbanks, AK Leased Juneau Office 8800 Glacier Highway, #232, Juneau, AK Leased Kodiak Office 2695 Mill Bay Road, Kodiak, AK Leased Soldotna Office 44384 Sterling Highway, Suite 102, Soldotna, AK Leased Wasilla Northrim Branch 850 E USA Circle, Suite B, Wasilla, AK Leased Glendale Office 17505 N. 79th Avenue, Suite 411, Glendale, AZ Leased Meridian Office 2541 E.
Dimond Boulevard, Suite No. 02, Anchorage, AK Traditional Leased Seventh Avenue Branch 517 West Seventh Avenue, Suite 300, Anchorage, AK Traditional Leased Eastside Community Branch 7905 Creekside Center Drive, Suite 100, Anchorage, AK Traditional Leased West Anchorage Branch 2709 Spenard Road, Anchorage, AK Traditional Owned Eagle River Branch 12812 Old Glenn Highway, Suite C03, Eagle River, AK Traditional Leased Fairbanks West Community Branch 3637 Airport Way, Suite 110, Fairbanks, AK Traditional Leased Fairbanks Financial Center 360 Merhar Avenue, Fairbanks, AK Traditional Owned Wasilla Financial Center 850 E.
Dimond Boulevard, Suite No. 02, Anchorage, AK Traditional Leased Seventh Avenue Branch 517 West Seventh Avenue, Suite 300, Anchorage, AK Traditional Leased Eastside Community Branch 7905 Creekside Center Drive, Suite 100, Anchorage, AK Traditional Leased West Anchorage Branch 2709 Spenard Road, Anchorage, AK Traditional Leased Eagle River Branch 12812 Old Glenn Highway, Suite C03, Eagle River, AK Traditional Leased Fairbanks West Community Branch 3637 Airport Way, Suite 110, Fairbanks, AK Traditional Leased Fairbanks Financial Center 360 Merhar Avenue, Fairbanks, AK Traditional Owned Wasilla Financial Center 850 E.
USA Circle, Suite A, Wasilla, AK Traditional Owned Soldotna Financial Center 44384 Sterling Highway, Suite 101, Soldotna, AK Traditional Leased Juneau Financial Center 2094 Jordan Avenue, Juneau, AK Traditional Leased Juneau Downtown Branch 301 North Franklin Street, Juneau, AK Traditional Leased Sitka Financial Center 315 Lincoln Street, Suite 206, Sitka, AK Traditional Leased Ketchikan Financial Center 2491 Tongass Avenue, Ketchikan, AK Traditional Owned Nome Financial Center 306 W. 5th Avenue, Suite C, Nome, AK Traditional Leased Kodiak Financial Center 2695 Mill Bay Road, Kodiak, AK Traditional Owned Homer Loan Production Office 601 E.
USA Circle, Suite A, Wasilla, AK Traditional Owned Soldotna Financial Center 44384 Sterling Highway, Suite 101, Soldotna, AK Traditional Leased Juneau Financial Center 2094 Jordan Avenue, Juneau, AK Traditional Leased Juneau Downtown Branch 301 North Franklin Street, Juneau, AK Traditional Leased Sitka Financial Center 315 Lincoln Street, Suite 206, Sitka, AK Traditional Leased Ketchikan Financial Center 2491 Tongass Avenue, Ketchikan, AK Traditional Owned Nome Financial Center 306 W. 5th Avenue, Suite C, Nome, AK Traditional Leased Kodiak Financial Center 2695 Mill Bay Road, Kodiak, AK Traditional Owned Homer Financial Center 601 E.
Gala Street, Suite 200, Meridian, ID Leased Portland Office 5933 NE Win Sivers Drive, Suite 205, Office 244, Portland, OR Leased Vancouver Office 1706 D Street, Suite A, Vancouver, WA Leased
Gala Street, Suite 200, Meridian, ID Leased Portland Office 5933 NE Win Sivers Drive, Suite 205, Office 244, Portland, OR Leased Scottsdale Office 7047 E.
Added
Greenway Parkway, Suite 220, Scottsdale, AZ Leased Vancouver Office 1706 D Street, Suite A, Vancouver, WA Leased The following sets forth information about our Specialty Finance locations, operated by NFS and SCF: Locations Leased/Owned Northrim Funding Services 170 120th Avenue NE, Bellevue, WA Leased Sallyport - Canadian Office 2233 Argentia Road, East Tower, Suite 302, Mississauga, L5N 2X7, Ontario, Canada Leased Sallyport - California Office 4580 E.
Added
Thousand Oaks Blvd., Suite 380, Westlake Village, CA Leased Sallyport - Texas Office 14100 Southwest Fwy, Suite 210, Sugar Land, TX Leased

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The Company from time to time may be involved with disputes, claims and litigation related to the conduct of its banking business. Management does not expect that the resolution of these matters will have a material effect on the Company’s business, financial position, results of operations or cash flows. ITEM 4.
Biggest changeITEM 3. LEGAL PROCEEDINGS The Company from time to time may be involved with disputes, claims and litigation related to the conduct of its banking business. Management does not expect that the resolution of these matters will have a material effect on the Company’s business, financial position, results of operations or cash flows. 35 ITEM 4.
MINE SAFETY DISCLOSURES Not applicable. 35 PART II
MINE SAFETY DISCLOSURES Not applicable. 36 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+3 added−4 removed2 unchanged
Biggest changeAdditional information regarding the Company’s equity plans is presented in Note 21 of the Notes to Consolidated Financial Statements included in Part II. Item 8 of this report.
Biggest changeEquity Compensation Plan Information The following table sets forth information regarding securities authorized for issuance under the Company’s equity plans as of December 31, 2024. Additional information regarding the Company’s equity plans is presented in Note 22 of the Notes to Consolidated Financial Statements included in Part II. Item 8 of this report.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the NASDAQ Global Select Stock Market under the symbol, “NRIM.” At March 8, 2024, the number of shareholders of record of our common stock was 206.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the NASDAQ Global Select Stock Market under the symbol, “NRIM.” At March 10, 2025, the number of shareholders of record of our common stock was 194.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Equity compensation plans approved by security holders 1 157,484 $23.29 218,461 Total 157,484 $23.29 218,461 1 Consists of the Company's 2023 Stock Incentive Plan, which replaced the 2020 Stock Incentive Plan (the "2020 Plan") We do not have any equity compensation plans that have not been approved by our shareholders. 36 Stock Performance Graph The graph shown below depicts the total return to shareholders during the period beginning after December 31, 2018, and ending December 31, 2023.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Equity compensation plans approved by security holders 1 148,014 $19.98 131,134 Total 148,014 $19.98 131,134 1 Consists of the Company's 2023 Stock Incentive Plan, which replaced the 2020 Stock Incentive Plan (the “2020 Plan”) We do not have any equity compensation plans that have not been approved by our shareholders. 37 Stock Performance Graph The graph shown below depicts the total return to shareholders during the period beginning after December 31, 2019, and ending December 31, 2024.
Small Cap Banks Index, comprised of publicly traded banks with a market capitalization between $58 million to $20.5 billion and average of $1.7 billion, which are located in the United States.
Small Cap Banks Index, comprised of publicly traded banks with a market capitalization between $133 million to $19.3 billion and average of $2.0 billion, which are located in the United States.
The graph assumes that the value of the investment in the Company’s common stock and each of the two indices was $100 on December 31, 2018, and that all dividends were reinvested. Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Northrim BanCorp, Inc. 100.00 120.60 111.94 148.29 193.85 213.99 Russell 3000 100.00 131.02 158.39 199.03 160.80 202.54 S&P U.S.
The graph assumes that the value of the investment in the Company’s common stock and each of the two indices was $100 on December 31, 2019, and that all dividends were reinvested. Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Northrim BanCorp, Inc. 100.00 92.82 122.96 160.74 177.44 251.82 Russell 3000 100.00 120.89 151.91 122.73 154.59 191.39 S&P U.S.
The Company intends to continue to repurchase its stock from time to time depending upon market conditions, but we can make no assurances that we will continue this program. Equity Compensation Plan Information The following table sets forth information regarding securities authorized for issuance under the Company’s equity plans as of December 31, 2023.
The Company may to continue to repurchase its stock from time to time depending upon market conditions, but we can make no assurances that we will continue this program and the Board of Directors has not presently authorized any repurchases of its common stock for 2025.
Removed
Repurchase of Securities The Company repurchased 55,786 shares during the three-month period ended December 31, 2023 at an average price of $44.90 per share.
Added
Repurchase of Securities At December 31, 2024, there were 110,000 shares available for repurchase under the previously announced stock repurchase program, which lapsed on December 31, 2024, leaving zero shares currently available for repurchase. The Company repurchased 15,034 shares in 2024 and 208,673 shares in 2023.
Removed
Total Number of Shares (or Units) Purchased Average Price Paid per Shares (or Unit) Total Number of Shares (or Units) Purchased as Part of the Publicly Announced Plans or Programs Maximum Number (1) (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs Period (a) (b) (c) (d) Month No. 1 October 1, 2023 - October 31, 2023 22,000 $40.00 22,000 110,113 Month No. 2 November 1, 2023 - November 30, 2023 28,854 $47.42 28,854 81,259 Month No. 3 December 1, 2023 - December 31, 2023 4,932 $52.04 4,932 76,327 Total 55,786 $44.90 55,786 76,327 (1) At December 31, 2023, there were 76,327 shares available for repurchase under the previously announced stock repurchase program.
Added
There were no stock repurchases by the Company during the three-month period ending December 31, 2024.
Removed
The Company repurchased 208,673 shares in 2023 and 333,724 shares in 2022. On January 26, 2024, the Company announced that its Board of Directors had authorized the repurchase of up to an additional 110,000 shares of common stock.
Added
SmallCap Banks 100.00 90.82 126.43 111.47 112.03 132.44 38 ITEM 6. [RESERVED]
Removed
SmallCap Banks 100.00 125.46 113.94 158.62 139.85 140.55 37 ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

143 edited+23 added−17 removed57 unchanged
Biggest changeTrends in Miscellaneous Financial Data (1) Years Ended December 31, (In thousands, except per share data and shares outstanding amounts) 2023 2022 2021 2020 2019 2018 Five Year Compound Growth Rate (Unaudited) Net interest income $103,256 $95,115 $80,827 $70,665 $64,442 $61,208 11 % Provision (benefit) for credit losses 3,842 1,846 (4,099) 2,432 (1,175) (500) NM Other operating income 26,375 34,077 52,263 63,328 37,346 32,167 (4) % Compensation expense, RML acquisition payments — — — — 468 — NM Other operating expense 94,181 88,852 89,196 89,114 76,370 69,800 6 % Income before provision for income taxes 31,608 38,494 47,993 42,447 26,125 24,075 6 % Provision for income taxes 6,214 7,753 10,476 9,559 5,434 4,071 9 % Net income $25,394 $30,741 $37,517 $32,888 $20,691 $20,004 5 % Year End Balance Sheet Assets $2,807,497 $2,674,318 $2,724,719 $2,121,798 $1,643,996 $1,502,988 13 % Loans 1,789,497 1,501,785 1,413,886 1,444,050 1,043,371 984,346 13 % Deposits 2,485,055 2,387,211 2,421,631 1,824,981 1,372,351 1,228,088 15 % Shareholders' equity 234,718 218,629 237,817 221,575 207,117 205,947 3 % Common shares outstanding 5,513,459 5,700,728 6,014,813 6,251,004 6,558,809 6,883,216 (4) % Average Balance Sheet Assets $2,690,347 $2,641,008 $2,432,599 $1,936,047 $1,555,707 $1,493,385 12 % Earning assets 2,492,240 2,469,383 2,260,778 1,758,839 1,386,557 1,346,449 13 % Loans 1,643,943 1,415,125 1,478,318 1,339,908 1,010,098 971,548 11 % Deposits 2,364,245 2,354,881 2,125,080 1,638,216 1,276,407 1,227,272 14 % Shareholders' equity 227,244 224,773 239,214 211,721 208,602 201,022 2 % Basic common shares outstanding 5,601,471 5,765,088 6,180,801 6,354,687 6,708,622 6,877,573 (4) % Diluted common shares outstanding 5,661,460 5,829,412 6,249,313 6,431,367 6,808,209 6,981,557 (4) % Per Common Share Data Basic earnings $4.53 $5.33 $6.07 $5.18 $3.08 $2.91 9 % Diluted earnings $4.49 $5.27 $6.00 $5.11 $3.04 $2.86 9 % Book value per share $42.57 $38.35 $39.54 $35.45 $31.58 $29.92 7 % Tangible book value per share (2) $39.68 $35.55 $36.88 $32.88 $29.12 $27.57 8 % Cash dividends per share $2.40 $1.82 $1.50 $1.38 $1.26 $1.02 19 % 39 Years Ended December 31, (In thousands, except per share data and shares outstanding amounts) 2023 2022 2021 2020 2019 2018 Five Year Compound Growth Rate (Unaudited) Performance Ratios Return on average assets 0.94 % 1.16 % 1.54 % 1.70 % 1.33 % 1.34 % (7) % Return on average equity 11.17 % 13.68 % 15.68 % 15.53 % 9.92 % 9.95 % 2 % Equity/assets 8.36 % 8.18 % 8.73 % 10.44 % 12.60 % 13.70 % (9) % Tangible common equity/tangible assets (3) 7.84 % 7.62 % 8.19 % 9.76 % 11.73 % 12.76 % (9) % Net interest margin 4.14 % 3.85 % 3.58 % 4.02 % 4.65 % 4.55 % (2) % Net interest margin (tax equivalent) (4) 4.21 % 3.89 % 3.60 % 4.05 % 4.70 % 4.60 % (2) % Non-interest income/total revenue 20.35 % 26.38 % 39.27 % 47.26 % 36.69 % 34.45 % (10) % Efficiency ratio (5) 72.64 % 68.76 % 66.99 % 66.47 % 75.43 % 74.68 % (1) % Dividend payout ratio 53.59 % 34.17 % 25.02 % 26.66 % 40.79 % 35.08 % 9 % Asset Quality Nonperforming loans, net of government guarantees $5,002 $6,430 $10,672 $10,048 $13,951 $14,694 (19) % Nonperforming assets, net of government guarantees 5,810 6,430 15,031 16,289 19,946 22,619 (24) % Nonperforming loans, net of government guarantees/portfolio loans 0.28 % 0.43 % 0.75 % 0.70 % 1.34 % 1.49 % (28) % Net charge-offs (recoveries)/average loans — % (0.08) % 0.07 % 0.03 % (0.07) % 0.15 % (100) % Allowance for credit losses/portfolio loans 0.97 % 0.92 % 0.83 % 1.46 % 1.83 % 1.98 % (13) % Nonperforming assets, net of government guarantees/assets 0.21 % 0.24 % 0.55 % 0.77 % 1.21 % 1.50 % (33) % Other Data Effective tax rate (6) 20 % 20 % 22 % 23 % 21 % 17 % 3 % Number of banking offices (7) 20 19 18 17 16 16 5 % Number of employees (FTE) (8) 472 469 451 438 431 430 2 % 1 These unaudited schedules provide selected financial information concerning the Company that should be read in conjunction with Part II Item 7.
Biggest changeTrends in Miscellaneous Financial Data (1) Years Ended December 31, (In thousands, except per share data and shares outstanding amounts) 2024 2023 2022 2021 2020 2019 Five Year Compound Growth Rate (Unaudited) Net interest income $113,183 $103,256 $95,115 $80,827 $70,665 $64,442 12 % Provision (benefit) for credit losses 3,293 3,842 1,846 (4,099) 2,432 (1,175) NM Other operating income 42,041 26,375 34,077 52,263 63,328 37,346 2 % Compensation expense, RML acquisition payments — — — — — 468 NM Other operating expense 104,937 94,181 88,852 89,196 89,114 76,370 7 % Income before provision for income taxes 46,994 31,608 38,494 47,993 42,447 26,125 12 % Provision for income taxes 10,023 6,214 7,753 10,476 9,559 5,434 13 % Net income $36,971 $25,394 $30,741 $37,517 $32,888 $20,691 12 % Year End Balance Sheet Assets $3,041,869 $2,807,497 $2,674,318 $2,724,719 $2,121,798 $1,643,996 13 % Loans 2,129,263 1,789,497 1,501,785 1,413,886 1,444,050 1,043,371 15 % Deposits 2,680,189 2,485,055 2,387,211 2,421,631 1,824,981 1,372,351 14 % Shareholders' equity 267,116 234,718 218,629 237,817 221,575 207,117 5 % Common shares outstanding 5,518,210 5,513,459 5,700,728 6,014,813 6,251,004 6,558,809 (3) % Average Balance Sheet Assets $2,861,012 $2,690,347 $2,641,008 $2,432,599 $1,936,047 $1,555,707 13 % Earning assets 2,647,615 2,492,240 2,469,383 2,260,778 1,758,839 1,386,557 14 % Loans 1,910,156 1,643,943 1,415,125 1,478,318 1,339,908 1,010,098 14 % Deposits 2,520,449 2,364,245 2,354,881 2,125,080 1,638,216 1,276,407 15 % Shareholders' equity 251,499 227,244 224,773 239,214 211,721 208,602 4 % Basic common shares outstanding 5,502,797 5,601,471 5,765,088 6,180,801 6,354,687 6,708,622 (4) % Diluted common shares outstanding 5,583,983 5,661,460 5,829,412 6,249,313 6,431,367 6,808,209 (4) % Per Common Share Data Basic earnings $6.72 $4.53 $5.33 $6.07 $5.18 $3.08 17 % Diluted earnings $6.62 $4.49 $5.27 $6.00 $5.11 $3.04 17 % Book value per share $48.41 $42.57 $38.35 $39.54 $35.45 $31.58 9 % Tangible book value per share (2) $39.17 $39.68 $35.55 $36.88 $32.88 $29.12 6 % Cash dividends per share $2.46 $2.40 $1.82 $1.50 $1.38 $1.26 14 % 40 Years Ended December 31, (In thousands, except per share data and shares outstanding amounts) 2024 2023 2022 2021 2020 2019 Five Year Compound Growth Rate (Unaudited) Performance Ratios Return on average assets 1.29 % 0.94 % 1.16 % 1.54 % 1.70 % 1.33 % (1) % Return on average equity 14.70 % 11.17 % 13.68 % 15.68 % 15.53 % 9.92 % 8 % Equity/assets 8.78 % 8.36 % 8.18 % 8.73 % 10.44 % 12.60 % (7) % Tangible common equity/tangible assets (3) 7.23 % 7.84 % 7.62 % 8.19 % 9.76 % 11.73 % (9) % Net interest margin 4.28 % 4.14 % 3.85 % 3.58 % 4.02 % 4.65 % (2) % Net interest margin (tax equivalent) (4) 4.33 % 4.21 % 3.89 % 3.60 % 4.05 % 4.70 % (2) % Non-interest income/total revenue 27.08 % 20.35 % 26.38 % 39.27 % 47.26 % 36.69 % (6) % Efficiency ratio (5) 67.60 % 72.64 % 68.76 % 66.99 % 66.47 % 75.43 % (2) % Dividend payout ratio 36.63 % 53.59 % 34.17 % 25.02 % 26.66 % 40.79 % (2) % Asset Quality Nonperforming loans, net of government guarantees $7,533 $5,002 $6,430 $10,672 $10,048 $13,951 (12) % Nonperforming assets, net of government guarantees 11,598 5,810 6,430 15,031 16,289 19,946 (10) % Nonperforming loans, net of government guarantees/portfolio loans 0.35 % 0.28 % 0.43 % 0.75 % 0.70 % 1.34 % (24) % Net charge-offs (recoveries)/average loans (0.01) % — % (0.08) % 0.07 % 0.03 % (0.07) % (32) % Allowance for credit losses/portfolio loans 1.03 % 0.97 % 0.92 % 0.83 % 1.46 % 1.83 % (11) % Nonperforming assets, net of government guarantees/assets 0.38 % 0.21 % 0.24 % 0.55 % 0.77 % 1.21 % (21) % Other Data Effective tax rate 21 % 20 % 20 % 22 % 23 % 21 % — % Number of banking offices (6) 20 20 19 18 17 16 5 % Community Banking employees (FTE) 329 325 329 315 305 304 2 % Home Mortgage Lending employees (FTE) 142 140 133 130 126 120 3 % Specialty Finance employees (FTE) 32 7 7 6 7 7 36 % Total number of employees (FTE) 503 472 469 451 438 431 3 % 1 These unaudited schedules provide selected financial information concerning the Company that should be read in conjunction with Part II Item 7.
Taxable long-term investments consist of U.S. treasury and government sponsored entities, corporate bonds, collateral loan obligations, municipal securities, marketable equity securities, and Federal Home Loan Bank stock. 4 Consists of interest bearing deposits in other banks and domestic CDs. 5 The Company does not have any fed funds sold or securities purchased with agreements to resell to disclose as part of its total interest-earning assets in the periods presented. 6 Tax-equivalent yield/costs assume a federal tax rate of 21% and a state tax rate of 7.43% for a combined tax rate of 28.43%. 45 The following table sets forth the changes in consolidated net interest income attributable to changes in volume and to changes in interest rates.
Taxable long-term investments consist of U.S. treasury and government sponsored entities, corporate bonds, collateral loan obligations, municipal securities, marketable equity securities, and Federal Home Loan Bank stock. 4 Consists of interest bearing deposits in other banks and domestic CDs. 5 The Company does not have any fed funds sold or securities purchased with agreements to resell to disclose as part of its total interest-earning assets in the periods presented. 6 Tax-equivalent yield/costs assume a federal tax rate of 21% and a state tax rate of 7.43% for a combined tax rate of 28.43%. 45 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.
Peers differ by loan segment; a bank is included in the peer group for each loan segment under the following circumstances: • The percentage the balance of the loan segment compared to total loans over a five year look back period is within 1.5 standard deviations of the Company's data; • The percentage of total charge offs for the loan segment over a five year look back period is within 1 standard deviation of the Company's data; and • 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 1 standard deviation of the Company's data.
Peers differ by loan segment; a bank is included in the peer group for each loan segment in 2023 under the following circumstances: • The percentage the balance of the loan segment compared to total loans over a five year look back period is within 1.5 standard deviations of the Company's data; • The percentage of total charge offs for the loan segment over a five year look back period is within 1 standard deviation of the Company's data; and • 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 1 standard deviation of the Company's data.
Similar to loans, we do not expect that these maturing certificates of deposit, or other non-maturity deposits, to be withdrawn from the Bank in a manner that will strain liquidity; however, unforeseen future circumstances or events may cause higher than anticipated withdrawal of deposits or draws of unfunded commitments to fund new loans.
Similar to loans, we do not expect that these maturing certificates of deposit, or other non-maturity deposits, to be withdrawn from the Bank in a manner that will strain liquidity; however, 59 unforeseen future circumstances or events may cause higher than anticipated withdrawal of deposits or draws of unfunded commitments to fund new loans.
Management believes that tax-equivalent net interest margin is a useful financial measure because it enables investors to evaluate net interest margin 40 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.
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.
These securities carried an interest rate of 90-day LIBOR plus 1.37% per annum that was initially set at 5.86% adjusted quarterly until the cessation of LIBOR in 2023. As of December 31, 2023, these securities now carry an interest rate of 90-day CME SOFR plus tenor spread adjustment of 0.26% plus 1.37% per annum, adjusted quarterly.
These securities carried an interest rate of 90-day LIBOR plus 1.37% per annum that was initially set at 5.86% adjusted quarterly until the cessation of LIBOR in 2023. As of December 31, 2024, these securities now carry an interest rate of 90-day CME SOFR plus tenor spread adjustment of 0.26% plus 1.37% per annum, adjusted quarterly.
The Company has identified the following pools of financial assets with similar risk characteristics for measuring expected credit losses under CECL, which are unchanged as of December 31, 2023: Commercial & industrial - Commercial loans are loans for commercial, corporate and business purposes.
The Company has identified the following pools of financial assets with similar risk characteristics for measuring expected credit losses under CECL, which are unchanged as of December 31, 2024 and December 31, 2023: Commercial & industrial - Commercial loans are loans for commercial, corporate and business purposes.
The Company utilizes the DCF method to quantitatively estimate credit losses for this pool. 62 Residential real estate - This category of loans consists of the following loan types: 1-4 family residential properties secured by first liens - This category of loans includes term loans secured by first liens on residential real estate.
The Company utilizes the DCF method to quantitatively estimate credit losses for this pool. Residential real estate - This category of loans consists of the following loan types: 1-4 family residential properties secured by first liens - This category of loans includes term loans secured by first liens on residential real estate.
The Company's policies related to these estimates can be found in Note 1 in the Notes to Consolidated Financial Statements in Part II. Item 8 of this report. 64
The Company's policies related to these estimates can be found in Note 1 in the Notes to Consolidated Financial Statements in Part II. Item 8 of this report.
There can be no assurance that changes in circumstances, estimates or assumptions may result in additional impairment of all, or some portion of, goodwill or other intangible assets. The Company performed its annual goodwill impairment testing at December 31, 2023 and 2022 in accordance with the policy described in Note 1 to the financial statements included in Part II.
There can be no assurance that changes in circumstances, estimates or assumptions may result in additional impairment of all, or some portion of, goodwill or other intangible assets. The Company performed its annual goodwill impairment testing at December 31, 2024 and 2023 in accordance with the policy described in Note 1 to the financial statements included in Part II.
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. 44 The following table sets forth for the periods indicated information with regard to average balances of assets and liabilities, as well as the total dollar amounts of interest income from interest-earning assets and interest expense on interest-bearing liabilities.
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. 44 The following table sets forth for the periods indicated information with regard to average balances of assets and liabilities, as well as the total dollar amounts of interest income from interest-earning assets and interest expense on interest-bearing liabilities.
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 Company’s assets. At December 31, 2023, our maximum borrowing line from the FHLB was approximately 45% of the Bank’s assets, subject to the FHLB’s collateral requirements.
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 Company’s assets. At December 31, 2024, our maximum borrowing line from the FHLB was approximately 45% of the Bank’s assets, subject to the FHLB’s collateral requirements.
The trust preferred securities are not accounted for on the Bank’s financial statements nor are they included in its capital. As a result, the Company has $10 million more in regulatory capital than the Bank at December 31, 2023 and 2022, respectively, which explains most of the difference in the capital ratios for the two entities.
The trust preferred securities are not accounted for on the Bank’s financial statements nor are they included in its capital. As a result, the Company has $10 million more in regulatory capital than the Bank at December 31, 2024 and 2023, respectively, which explains most of the difference in the capital ratios for the two entities.
Other available sources of liquidity for the bank holding company include the issuance of debt and the issuance of common or preferred stock. As of December 31, 2023, the Company has 10.0 million authorized shares of common stock, of which approximately 5.5 million are issued and outstanding, leaving approximately 4.5 million shares available for issuance.
Other available sources of liquidity for the bank holding company include the issuance of debt and the issuance of common or preferred stock. As of December 31, 2024, the Company has 10.0 million authorized shares of common stock, of which approximately 5.5 million are issued and outstanding, leaving approximately 4.5 million shares available for issuance.
The PD measures the probability that a loan will default within a given time horizon and is an assumption derived from regression models which determine the relationship between historical defaults and certain economic variables. The Company's regression models for PD utilize the Company's actual historical loan level default data.
The PD measures the probability that a loan will default within a given time horizon and is an assumption derived from regression models which determine the relationship between historical defaults and certain economic variables. The Company's regression models for PD utilize peer historical loan level default data.
Our underwriting policies and procedures for loans to facilitate the sale of OREO are no different than our standard loan policies and procedures. 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.
Our underwriting policies and procedures for loans to facilitate the sale of OREO are no different than our standard loan policies and procedures. 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.
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.
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.
Given that the Bank currently meets and the Bank anticipates that it will continue to meet, all applicable capital adequacy requirements for a “well-capitalized” institution by regulatory standards, the Company expects to continue to receive dividends from the Bank during 2024.
Given that the Bank currently meets and the Bank anticipates that it will continue to meet, all applicable capital adequacy requirements for a “well-capitalized” institution by regulatory standards, the Company expects to continue to receive dividends from the Bank during 2025.
This sensitivity analysis does not represent a change to our expectations of the economic environment but provides a hypothetical result to assess the sensitivity of the ACL to a change in a key input. This sensitivity analysis does not incorporate changes to management’s judgment of qualitative loss factors.
This sensitivity analysis does not represent a change to our expectations of the economic environment but provides a hypothetical result to assess the sensitivity of the ACL to a change in key inputs. This sensitivity analysis does not incorporate changes to management’s judgment of qualitative loss factors.
The table below illustrates the capital requirements in effect in 2023 for the Company and the Bank and the actual capital ratios for each entity that exceed these requirements. Management intends to maintain capital ratios for the Bank in 2024 exceeding the FDIC’s requirements for the “well-capitalized” classification.
The table below illustrates the capital requirements in effect in 2024 for the Company and the Bank and the actual capital ratios for each entity that exceed these requirements. Management intends to maintain capital ratios for the Bank in 2025 exceeding the FDIC’s requirements for the “well-capitalized” classification.
Federal banking agencies have adopted regulations establishing minimum requirements for the capital adequacy of banks and bank holding companies. The 60 requirements address both risk-based capital and leverage capital. We believe as of December 31, 2023, that the Company and the Bank met all applicable capital adequacy requirements for a “well-capitalized” institution by regulatory standards.
Federal banking agencies have adopted regulations establishing minimum requirements for the capital adequacy of banks and bank holding companies. The requirements address both risk-based capital and leverage capital. We believe as of December 31, 2024, that the Company and the Bank met all applicable capital adequacy requirements for a “well-capitalized” institution by regulatory standards.
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. See the “Loans and Lending Activity” section under “Financial Condition” and Note 5 of the Notes to Consolidated Financial Statements included in Part II.
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. 46 See the “Loans and Lending Activity” section under “Financial Condition” and Note 6 of the Notes to Consolidated Financial Statements included in Part II.
The following table sets forth information regarding changes in the ACL for unfunded commitments for the years indicated: (In Thousands) 2023 2022 2021 Balance at beginning of period $1,970 $1,096 $187 Provision for credit losses 448 874 (320) Balance at end of period $2,418 $1,970 $1,096 While management believes that it uses the best information available to determine the ACL, unforeseen market conditions and other events could result in an 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.
The following table sets forth information regarding changes in the ACL for unfunded commitments for the years indicated: (In Thousands) 2024 2023 2022 Balance at beginning of period $2,418 $1,970 $1,096 Provision for credit losses (108) 448 874 Balance at end of period $2,310 $2,418 $1,970 While management believes that it uses the best information available to determine the ACL, unforeseen market conditions and other events could result in an 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.
Assumptions used include market discount rates, anticipated prepayment speeds, escrow calculations, delinquency rates and ancillary fee income net of servicing costs. A sensitivity analysis of our servicing rights was performed as of December 31, 2023. See Note 7 to the financial statements included in Part II. Item 8 of this report for the results of this analysis.
Assumptions used include market discount rates, anticipated prepayment speeds, escrow calculations, delinquency rates and ancillary fee income net of servicing costs. 64 A sensitivity analysis of our servicing rights was performed as of December 31, 2024. See Note 8 to the financial statements included in Part II. Item 8 of this report for the results of this analysis.
Management believes that cash requirements to fund future non-deposit liabilities, including operating lease liabilities, other liabilities, or borrowings as of December 31, 2023, are not material to the Company's liquidity position as of December 31, 2023. 59 The Company has other available sources of liquidity to fund unforeseen liquidity needs.
Management believes that cash requirements to fund future non-deposit liabilities, including operating lease liabilities, other liabilities, or borrowings as of December 31, 2024, are not material to the Company's liquidity position as of December 31, 2024. The Company has other available sources of liquidity to fund unforeseen liquidity needs.
See reconciliation to shareholders' equity to total assets, the most comparable GAAP measurement below. 4 Tax-equivalent net interest margin is a non-GAAP performance measurement in which interest income on non-taxable investments and loans is presented on a tax-equivalent basis using a combined federal and state statutory rate of 28.43% in 2018 through 2023.
See reconciliation to shareholders' equity to total assets, the most comparable GAAP measurement below. 41 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%.
Other Accounting Policies and Estimates: The Company evaluates its estimates, including those that materially affect the financial statements and are related to investments, mortgage servicing rights, derivative instruments, fair value measurements, and intangible assets on an on-going basis.
Other Accounting Policies and Estimates: The Company evaluates its estimates, including those that materially affect the financial statements and are related to investments, derivative instruments, fair value measurements, and intangible assets on an on-going basis.
We believe that the positive inputs to the qualitative assessment noted above outweigh the negative inputs for both of the Company's operating segments, and we therefore concluded that it is more likely than not that the fair value of the Company exceeds its carrying value at December 31, 2023 and that no potential impairment existed at that time.
We believe that the positive inputs to the qualitative assessment noted above outweigh the negative inputs for all of the Company's operating segments, and we therefore concluded that it is more likely than not that the fair value of the Company exceeds its carrying value at December 31, 2024 and that no potential impairment existed at that time.
Item 8 of this report. At December 31, 2023, the Company performed its annual impairment test by performing a qualitative assessment.
Item 8 of this report. At December 31, 2024, the Company performed its annual impairment test by performing a qualitative assessment.
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. 2 Nonaccrual loans are included with a zero effective yield.
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. 2 Nonaccrual loans are included with a zero effective yield.
The securities have a maturity date of March 15, 2036, and are callable by the Company on or after March 15, 2011. These securities are treated as Tier 1 capital by the Company’s regulators for capital adequacy calculations. The interest cost to the Company of these securities was $692,000 in 2023.
The securities have a maturity date of March 15, 2036, and are callable by the Company on or after March 15, 2011. These securities are treated as Tier 1 capital by the Company’s regulators for capital adequacy calculations. The interest cost to the Company on these securities was $717,000 in 2024 and $693,000 in 2023.
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%. The Company paid $330,000 and $339,000 in interest on these advances in 2023 and 2022, respectively.
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%. The Company paid $389,000 and $330,000 in interest on these advances in 2024 and 2023, respectively.
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. 43 Net Interest Income / Net Interest Margin Net interest income is the difference between interest income from loan and investment securities portfolios and interest expense on customer deposits and borrowings.
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. Net Interest Income / Net Interest Margin Net interest income is the difference between interest income from loan and investment securities portfolios and interest expense on customer deposits and borrowings.
The Company is subject to provisions under Alaska state law which generally limits the amount of outstanding debt to 35% of total assets or $975.9 million at December 31, 2023 and $929.3 million at December 31, 2022. Junior Subordinated Debentures On December 16, 2005, the Company’s subsidiary, NST2, issued trust preferred securities in the principal amount of $10 million.
The Company is subject to provisions under Alaska state law which generally limits the amount of outstanding debt to 35% of total assets or $1.1 billion at December 31, 2024 and $975.9 million at December 31, 2023. Junior Subordinated Debentures On December 16, 2005, the Company’s subsidiary, NST2, issued trust preferred securities in the principal amount of $10 million.
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. 3 Consists of investment securities available for sale, investment securities held to maturity, marketable equity securities, and investment in Federal Home Loan Bank stock.
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. 3 Consists of investment securities available for sale, investment securities held to maturity, marketable equity securities, and investment in Federal Home Loan Bank stock.
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.
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.
The Company utilizes the DCF method to quantitatively estimate credit losses for this pool. Obligations of states and political subdivisions in the US - This category of loans includes all loans made to states, counties municipalities, school districts, drainage and sewer districts, and Indian tribes in the U.S.
The Company utilizes the weighted average remaining life method to quantitatively estimate credit losses for this pool. Obligations of states and political subdivisions in the US - This category of loans includes all loans made to states, counties municipalities, school districts, drainage and sewer districts, and Indian tribes in the U.S.
Significant negative inputs to the qualitative assessment included the muted pace of growth in the Alaska economy and a decline in home mortgage originations.
Significant negative inputs to the qualitative assessment included the muted pace of growth in the Alaska economy and a decline in home mortgage originations compared to historical activity.
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 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.
Interest income and cost of funds, or interest expense, and mortgage banking income are affected significantly by general economic conditions, particularly changes in market interest rates, by government policies and the actions of regulatory authorities, and by competition in our markets. We earned net income of $25.4 million in 2023, compared to net income of $30.7 million in 2022.
Interest income and cost of funds, or interest expense, and mortgage banking income are affected significantly by general economic conditions, particularly changes in market interest rates, by government policies and the actions of regulatory authorities, and by competition in our markets. We earned net income of $37.0 million in 2024, compared to net income of $25.4 million in 2023.
The Company has outstanding advances of $13.7 million and $14.1 million as of December 31, 2023 and 2022, respectively, which were originated to match fund low income housing projects that qualify for long term fixed interest rates.
The Company has outstanding advances of $13.2 million and $13.7 million as of December 31, 2024 and 2023, respectively, which were originated to match fund low income housing projects that qualify for long term fixed interest rates.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II. Item 7 of our Annual Report on Form 10-K for fiscal year ended December 31, 2022.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II. Item 7 of our Annual Report on Form 10-K for fiscal year ended December 31, 2023.
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.
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, 2023 and 2022, $180.1 million and $59.3 million in securities were pledged for deposits and borrowings, respectively. 49 The following tables set forth the composition of our investment portfolio at December 31 for the years indicated: (In Thousands) Amortized Cost Fair Value Securities Available for Sale: 2023: U.S.
At December 31, 2024 and 2023, $177.4 million and $180.1 million in securities were pledged for deposits and borrowings, respectively. 49 The following tables set forth the composition of our investment portfolio at December 31 for the years indicated: (In Thousands) Amortized Cost Fair Value Securities Available for Sale: 2024: U.S.
At December 31, 2023, the securities had an interest rate of 7.02%. The Company entered into an interest rate swap in the third quarter of 2017 to hedge the variability in cash flows arising out of its junior subordinated debentures, by swapping the cash flows with an interest rate swap which receives floating and pays fixed.
At December 31, 2024, the securities had an interest rate of 5.99%. The Company entered into an interest rate swap in the third quarter of 2017 to hedge the variability in cash flows arising out of its junior subordinated debentures, by swapping the cash flows with an interest rate swap which receives floating and pays fixed.
As interest rates continued to increase in 2023, Northrim took a proactive, targeted approach to increase deposit rates. Borrowings 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.
As interest rates continued to increase in 2024, Northrim took a proactive, targeted approach to increase deposit rates and retain deposit customers. Borrowings 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.
The table below shows the cumulative effect the repurchase of common shares since the inception of the Company on diluted earnings per share: Years Ending: Diluted EPS as Reported Diluted EPS without Stock Repurchase 2023 $4.49 $3.23 2022 $5.27 $3.92 2021 $6.00 $4.79 2020 $5.11 $4.22 2019 $3.04 $2.59 Regulatory Capital Requirements: We are subject to minimum capital requirements.
The table below shows the cumulative effect the repurchase of common shares since the inception of the Company on diluted earnings per share: Years Ending: Diluted EPS as Reported Diluted EPS without Stock Repurchase 2024 $6.62 $4.67 2023 $4.49 $3.23 2022 $5.27 $3.92 2021 $6.00 $4.79 2020 $5.11 $4.22 60 Regulatory Capital Requirements: We are subject to minimum capital requirements.
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 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.
Therefore, management has flexibility in selecting the methodology. However, the expected credit losses must be estimated over a financial asset's contractual term, adjusted for prepayments, utilizing quantitative and qualitative factors. The estimate of current expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.
However, the expected credit losses must be estimated over a financial asset's contractual term, adjusted for prepayments, utilizing quantitative and qualitative factors. The estimate of current expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.
Significant positive inputs to the qualitative assessment included the Company’s increasing net income as compared to historical trends; the Company's increasing market share for deposits in our markets; results of regulatory examinations; peer comparisons of the Company's net interest margin; trends in the Company’s cash flows; improvements in the Alaskan economy in 2023; increases in the Company's market share of mortgage originations; and increases in the Company's stock price.
Significant positive inputs to the qualitative assessment included the Company’s increasing net income as compared to historical trends; the Company's increasing market share for deposits in our markets; results of regulatory examinations; peer comparisons of the Company's net interest margin; trends in the Company’s cash flows; improvements in the Alaskan economy in 2024; increases in the Company's market share of mortgage originations; increases in purchased receivable income following the acquisition of SCF, and increases in the Company's stock price.
The primary sources of demands on our liquidity are customer demands for withdrawal of deposits and borrowers’ demands that we advance funds against unfunded lending commitments. The Company had cash and cash equivalents of $118.5 million, or 4% of total assets at December 31, 2023 compared to $259.4 million, or 10% of total assets as of December 31, 2022.
The primary sources of demands on our liquidity are customer demands for withdrawal of deposits and borrowers’ demands that we advance funds against unfunded lending commitments. The Company had cash and cash equivalents of $62.7 million, or 2% of total assets at December 31, 2024 compared to $118.5 million, or 4% of total assets as of December 31, 2023.
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. 48 Our investment portfolio consists primarily of government sponsored entity securities, corporate securities, collateralized loan obligations, and municipal securities.
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. Our investment portfolio consists primarily of government sponsored entity securities, corporate securities, and collateralized loan obligations.
Net of the impact of the interest rate swap, interest expense on these securities was $379,000 in 2023 and $379,000 in 2022. The Company also had interest expense of $21,000 in 2023 and $9,000 in 2022 on common securities related to junior subordinated debt.
Net of the impact of the interest rate swap, interest expense on these securities was $381,000 in 2024 and $379,000 in 2023. The Company also had interest expense of $22,000 in 2024 and $21,000 in 2023 on common securities related to junior subordinated debt.
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.
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.
The Company determines a reasonable and supportable forecast and applies that forecast to the regression model to estimate defaults over the forecast period. Management leverages economic projections from a reputable and independent third-party to inform its loss driver forecasts over the Company's four quarter forecast period.
The Company determines a reasonable and supportable forecast and applies that forecast to the regression model to estimate defaults over the forecast period. Management leverages economic projections from the Federal Reserve to inform its loss driver forecasts over the Company's four quarter forecast period.
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. • The aggregate cash dividends paid by the Company in 2023 rose 28% to $13.6 million from $10.6 million paid in 2022.
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. 39 • The aggregate cash dividends paid by the Company in 2024 rose 1% to $13.8 million from $13.6 million paid in 2023.
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.
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.
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 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.
Changes in net interest income are influenced by yields and the level and relative mix of interest-earning assets and interest-bearing liabilities. Net interest income in 2023 was $103.3 million, compared to $95.1 million in 2022.
Changes in net interest income are influenced by yields and the level and relative mix of interest-earning assets and interest-bearing liabilities. Net interest income in 2024 was $113.2 million, compared to $103.3 million in 2023.
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. 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.
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. 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.
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.
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.
In addition to the quantitative portion of the ACL derived using either the DCF or weighted average remaining life method, the Company also considers the effects of the following qualitative factors in its calculation of expected losses in the loan portfolio: • Lending strategy, policies, and procedures; • Quality of internal loan review; • Lending management and staff; • Trends in underlying collateral values; • Competition, legal, and regulatory changes; • Economic and business conditions including fluctuations in the price of Alaska North slope crude oil; • Inflation and monetary policy in the United States; • Changes in trends, volume and severity of adversely classified loans, nonaccrual loans, and delinquencies; • Concentration of credit; and • Changes in the nature and volume of the loan portfolio. 63 Management performs a hypothetical sensitivity analysis of our ACL quarterly to understand the impact of a change in a key input on our ACL.
The Company utilizes the weighted average remaining life method to quantitatively estimate credit losses for this pool. 63 In addition to the quantitative portion of the ACL derived using either the DCF or weighted average remaining life method, the Company also considers the effects of the following qualitative factors in its calculation of expected losses in the loan portfolio: • Lending strategy, policies, and procedures; • Quality of internal loan review; • Lending management and staff; • Trends in underlying collateral values; • Competition, legal, and regulatory changes; • Economic and business conditions including fluctuations in the price of Alaska North slope crude oil; • Inflation and monetary policy in the United States; • Changes in trends, volume and severity of adversely classified loans, nonaccrual loans, and delinquencies; • Concentration of credit; and • Changes in the nature and volume of the loan portfolio.
Valuation of goodwill and other intangibles: Management performs an impairment analysis for the intangible assets with indefinite lives on an annual basis as of December 31. Additionally, goodwill and other intangible assets with indefinite lives are evaluated on an interim basis when events or circumstances indicate impairment potentially exists. The impairment analysis requires management to make subjective judgments.
Valuation of goodwill and other intangibles: Management performs an impairment analysis for the intangible assets with indefinite lives at each reportable segment on an annual basis as of December 31. Additionally, goodwill and other intangible assets with indefinite lives are evaluated on an interim basis when events or circumstances indicate impairment potentially exists.
As of December 31, 2023 and 2022, management utilizes and forecasts U.S. unemployment as the sole loss driver for all of the loan pools that utilize the DCF method. The Company's regression models for PD as of these time periods utilize peer historical loan level default data.
As of December 31, 2023, management utilized and forecasted U.S. unemployment as the sole loss driver for all of the loan pools that utilize the DCF method. The Company's regression models for PD as of December 31, 2023 utilize peer historical loan level default data.
Events and factors that may significantly affect the estimates include, among others, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures, technology, changes in discount rates and specific industry and market conditions.
The impairment analysis requires management to make subjective judgments. Events and factors that may significantly affect the estimates include, among others, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures, technology, changes in discount rates and specific industry and market conditions.
We do not expect that all of these loans are likely to be fully drawn upon at any one time. At December 31, 2023, certificates of deposit totaling $268.5 million and $56.8 million, respectively, contractually mature in 2024 and 2025, and may be withdrawn from the Bank.
We do not expect that all of these loans are likely to be fully drawn upon at any one time. At December 31, 2024, certificates of deposit totaling $369.7 million and $36.4 million, respectively, contractually mature in 2025 and 2026, and may be withdrawn from the Bank.
(In Thousands) 2023 2022 2021 2020 2019 2018 Net interest income (9) $103,256 $95,115 $80,827 $70,665 $64,442 $61,208 Other operating income 26,375 34,077 52,263 63,328 37,346 32,167 Total revenue 129,631 129,192 133,090 133,993 101,788 93,375 Other operating expense 94,181 88,852 89,196 89,114 76,838 69,800 Less intangible asset amortization 17 25 37 48 60 70 Adjusted other operating expense $94,164 $88,827 $89,159 $89,066 $76,778 $69,730 Efficiency ratio 72.64 % 68.76 % 66.99 % 66.47 % 75.43 % 74.68 % 9 Amount represents net interest income before provision for loan losses.
(In Thousands) 2024 2023 2022 2021 2020 2019 Net interest income (9) $113,183 $103,256 $95,115 $80,827 $70,665 $64,442 Other operating income 42,041 26,375 34,077 52,263 63,328 37,346 Total revenue 155,224 129,631 129,192 133,090 133,993 101,788 Other operating expense 104,937 94,181 88,852 89,196 89,114 76,838 Less intangible asset amortization — 17 25 37 48 60 Adjusted other operating expense $104,937 $94,164 $88,827 $89,159 $89,066 $76,778 Efficiency ratio 67.60 % 72.64 % 68.76 % 66.99 % 66.47 % 75.43 % 9 Amount represents net interest income before provision for credit losses.
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 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 paid $241,000 in interest expense on this BTFP advance in 2023. 58 Other Short and Long-term Borrowings: The Company had no short or long-term borrowings outstanding other than the FHLB advances noted above as of December 31, 2023 or 2022.
The Company paid $241,000 in interest expense on this BTFP advance in 2023. The Federal Reserve Bank ended the BTFP on March 11, 2024. Other Short and Long-term Borrowings: The Company had no short or long-term borrowings outstanding other than the FHLB advances noted above as of December 31, 2024 or 2023.
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 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.
Advances are available through the BTFP until March 11, 2024. Given these sources of liquidity and our expectations for customer demands for cash and for our operating cash needs, we believe our sources of liquidity to be sufficient in the foreseeable future. As shown in the Consolidated Statements of Cash Flows included in Part II.
Given these sources of liquidity and our expectations for customer demands for cash and for our operating cash needs, we believe our sources of liquidity to be sufficient in the foreseeable future. As shown in the Consolidated Statements of Cash Flows included in Part II.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of this report. 41 Reconciliation of total shareholders' equity to tangible common shareholders’ equity (Non-GAAP) and total assets to tangible assets: (In Thousands) 2023 2022 2021 2020 2019 2018 Total shareholders' equity $234,718 $218,629 $237,817 $221,575 $207,117 $205,947 Total assets 2,807,497 2,674,318 2,724,719 2,121,798 1,643,996 1,502,988 Total shareholders' equity to total assets ratio 8.36 % 8.18 % 8.73 % 10.44 % 12.60 % 13.70 % (In Thousands) 2023 2022 2021 2020 2019 2018 Total shareholders' equity $234,718 $218,629 $237,817 $221,575 $207,117 $205,947 Less: goodwill and other intangible assets, net 15,967 15,984 16,009 16,046 16,094 16,154 Tangible common shareholders' equity $218,751 $202,645 $221,808 $205,529 $191,023 $189,793 Total assets $2,807,497 $2,674,318 $2,724,719 $2,121,798 $1,643,996 $1,502,988 Less: goodwill and other intangible assets, net 15,967 15,984 16,009 16,046 16,094 16,154 Tangible assets $2,791,530 $2,658,334 $2,708,710 $2,105,752 $1,627,902 $1,486,834 Tangible common equity to tangible assets ratio 7.84 % 7.62 % 8.19 % 9.76 % 11.73 % 12.76 % Reconciliation of tangible book value per share (Non-GAAP) to book value per share (In thousands, except per share data) 2023 2022 2021 2020 2019 2018 Total shareholders' equity $234,718 $218,629 $237,817 $221,575 $207,117 $205,947 Divided by common shares outstanding 5,513,459 5,700,728 6,014,813 6,251,004 6,558,809 6,883,216 Book value per share $42.57 $38.35 $39.54 $35.45 $31.58 $29.92 (In thousands, except per share data) 2023 2022 2021 2020 2019 2018 Total shareholders' equity $234,718 $218,629 $237,817 $221,575 $207,117 $205,947 Less: goodwill and intangible assets, net 15,967 15,984 16,009 16,046 16,094 16,154 Tangible book value $218,751 $202,645 $221,808 $205,529 $191,023 $189,793 Divided by common shares outstanding 5,513,459 5,700,728 6,014,813 6,251,004 6,558,809 6,883,216 Tangible book value per share $39.68 $35.55 $36.88 $32.88 $29.12 $27.57 42 Reconciliation of tax-equivalent net interest margin (Non-GAAP) to net interest margin (In Thousands) 2023 2022 2021 2020 2019 2018 Net interest income (9) $103,256 $95,115 $80,827 $70,665 $64,442 $61,208 Divided by average interest-bearing assets 2,492,240 2,469,383 2,260,778 1,758,839 1,386,557 1,346,449 Net interest margin 4.14 % 3.85 % 3.58 % 4.02 % 4.65 % 4.55 % (In Thousands) 2023 2022 2021 2020 2019 2018 Net interest income (9) $103,256 $95,115 $80,827 $70,665 $64,442 $61,208 Plus: reduction in tax expense related to tax-exempt interest income 1,576 939 489 613 722 726 $104,832 $96,054 $81,316 $71,278 $65,164 $61,934 Divided by average interest-bearing assets 2,492,240 2,469,383 2,260,778 1,758,839 1,386,557 1,346,449 Tax-equivalent net interest margin 4.21 % 3.89 % 3.60 % 4.05 % 4.70 % 4.60 % Reconciliation of efficiency ratio exclusive of intangible asset amortization (non-GAAP) to efficiency ratio.
Reconciliation of total shareholders' equity to tangible common shareholders’ equity (Non-GAAP) and total assets to tangible assets: (In Thousands) 2024 2023 2022 2021 2020 2019 Total shareholders' equity $267,116 $234,718 $218,629 $237,817 $221,575 $207,117 Total assets 3,041,869 2,807,497 2,674,318 2,724,719 2,121,798 1,643,996 Total shareholders' equity to total assets ratio 8.78 % 8.36 % 8.18 % 8.73 % 10.44 % 12.60 % (In Thousands) 2024 2023 2022 2021 2020 2019 Total shareholders' equity $267,116 $234,718 $218,629 $237,817 $221,575 $207,117 Less: goodwill and other intangible assets, net 50,968 15,967 15,984 16,009 16,046 16,094 Tangible common shareholders' equity $216,148 $218,751 $202,645 $221,808 $205,529 $191,023 Total assets $3,041,869 $2,807,497 $2,674,318 $2,724,719 $2,121,798 $1,643,996 Less: goodwill and other intangible assets, net 50,968 15,967 15,984 16,009 16,046 16,094 Tangible assets $2,990,901 $2,791,530 $2,658,334 $2,708,710 $2,105,752 $1,627,902 Tangible common equity to tangible assets ratio 7.23 % 7.84 % 7.62 % 8.19 % 9.76 % 11.73 % Reconciliation of tangible book value per share (Non-GAAP) to book value per share (In thousands, except per share data) 2024 2023 2022 2021 2020 2019 Total shareholders' equity $267,116 $234,718 $218,629 $237,817 $221,575 $207,117 Divided by common shares outstanding 5,518,210 5,513,459 5,700,728 6,014,813 6,251,004 6,558,809 Book value per share $48.41 $42.57 $38.35 $39.54 $35.45 $31.58 42 (In thousands, except per share data) 2024 2023 2022 2021 2020 2019 Total shareholders' equity $267,116 $234,718 $218,629 $237,817 $221,575 $207,117 Less: goodwill and intangible assets, net 50,968 15,967 15,984 16,009 16,046 16,094 Tangible book value $216,148 $218,751 $202,645 $221,808 $205,529 $191,023 Divided by common shares outstanding 5,518,210 5,513,459 5,700,728 6,014,813 6,251,004 6,558,809 Tangible book value per share $39.17 $39.68 $35.55 $36.88 $32.88 $29.12 Reconciliation of tax-equivalent net interest margin (Non-GAAP) to net interest margin (In Thousands) 2024 2023 2022 2021 2020 2019 Net interest income (9) $113,183 $103,256 $95,115 $80,827 $70,665 $64,442 Divided by average interest-bearing assets 2,647,615 2,492,240 2,469,383 2,260,778 1,758,839 1,386,557 Net interest margin 4.28 % 4.14 % 3.85 % 3.58 % 4.02 % 4.65 % (In Thousands) 2024 2023 2022 2021 2020 2019 Net interest income (9) $113,183 $103,256 $95,115 $80,827 $70,665 $64,442 Plus: reduction in tax expense related to tax-exempt interest income 1,521 1,576 939 489 613 722 $114,704 $104,832 $96,054 $81,316 $71,278 $65,164 Divided by average interest-bearing assets 2,647,610 2,492,240 2,469,383 2,260,778 1,758,839 1,386,557 Tax-equivalent net interest margin 4.33 % 4.21 % 3.89 % 3.60 % 4.05 % 4.70 % Reconciliation of efficiency ratio exclusive of intangible asset amortization (non-GAAP) to efficiency ratio.
Commercial real estate - This category of loans consists of the following loan types: Owner occupied - This category includes non-farm, non-residential real estate loans for a variety of commercial property types and purposes, including owner occupied commercial real estate loans primarily secured by commercial office or industrial buildings, warehouses or retail buildings where the owner of the building occupies the property.
The Company utilizes the DCF method to quantitatively estimate credit losses for this pool. 62 Commercial real estate - This category of loans consists of the following loan types: Owner occupied - This category includes non-farm, non-residential real estate loans for a variety of commercial property types and purposes, including owner occupied commercial real estate loans primarily secured by commercial office or industrial buildings, warehouses or retail buildings where the owner of the building occupies the property.
Based on the Company's current collateral pledged to the FHLB, less outstanding advances, the Company's borrowing line is $348.0 million as of December 31, 2023.
Based on the Company's current collateral pledged to the FHLB, less outstanding advances, the Company's borrowing line is $331.1 million as of December 31, 2024.
This is a decrease from $29.1 million in 2022. Management does not believe that liquidation of these securities, which would result in realized losses, will occur prior to maturity of these securities. As of December 31, 2023, the weighted average maturity of available for sale securities is 2.8 years compared to 3.3 years at December 31, 2022.
Management does not believe that liquidation of these securities, which would result in realized losses, will occur prior to maturity of these securities. As of December 31, 2024, the weighted average maturity of available for sale securities is 2.4 years compared to 2.8 years at December 31, 2023.
The following table details loan balances by loan segment and class of financing receivable for loans with direct oil and gas exposure as of the dates indicated: (In Thousands) December 31, 2023 December 31, 2022 Commercial & industrial loans $77,917 $66,864 Commercial real estate: Owner occupied properties 11,410 9,108 Non-owner occupied and multifamily properties 5,434 6,013 Other loans 1,357 1,431 Total loans $96,118 $83,416 The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions.
The following table details loan balances by loan segment and class of financing receivable for loans with direct oil and gas exposure as of the dates indicated: (In Thousands) December 31, 2024 December 31, 2023 Commercial & industrial loans $87,935 $77,917 Commercial real estate: Owner occupied properties 5,611 11,410 Non-owner occupied and multifamily properties 4,828 5,434 Other loans 1,282 1,357 Total loans $99,656 $96,118 The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions.
The following table presents the amount of common shares repurchased and the weighted average price paid per share for the periods indicated: Years Ending: Common Shares Repurchased Weighted Average Price 2023 208,673 $43.34 2022 333,724 $42.42 2021 279,276 $41.30 2020 327,000 $30.51 2019 347,676 $36.15 At December, 31, 2023, there were 76,327 shares available under the previously announced stock repurchase program.
The following table presents the amount of common shares repurchased and the weighted average price paid per share for the periods indicated: Years Ending: Common Shares Repurchased Weighted Average Price 2024 15,034 $52.46 2023 208,673 $43.34 2022 333,724 $42.42 2021 279,276 $41.30 2020 327,000 $30.51 At December, 31, 2024, there were 110,000 shares available under the previously announced stock repurchase program, which lapsed on December 31, 2024, leaving zero shares currently available for repurchase.
Gain on marketable equity securities increased in 2023 as compared to 2022 due to increased fair value on this portfolio.
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.
The Company received proceeds from the guarantee in the third quarter of 2023 which were recorded as a gain on sale of OREO. 54 The following summarizes OREO activity for the periods indicated: (In Thousands) 2023 2022 2021 Balance, beginning of the year $— $5,638 $7,289 Transfers from loans 273 — 274 Proceeds from the sale of other real estate owned (1,079) (5,224) (2,610) Gain (loss) on sale of other real estate owned, net 929 (414) 685 Impairment on other real estate owned (123) — — Balance, end of year — — 5,638 Government guarantees — — (1,279) Balance, end of year, net of government guarantees $— $— $4,359 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.
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. 54 The following summarizes OREO activity for the periods indicated: (In Thousands) 2024 2023 2022 Balance, beginning of the year $— $— $5,638 Transfers from loans — 273 — Proceeds from the sale of other real estate owned (392) (1,079) (5,224) Gain (loss) on sale of other real estate owned, net 392 929 (414) Impairment on other real estate owned — (123) — Balance, end of year — — — Government guarantees — — — Balance, end of year, net of government guarantees $— $— $— The Company did not make any loans to facilitate the sale of OREO in 2024, 2023, or 2022.
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.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−3 removed16 unchanged
Biggest changeEstimated maturity or repricing at December 31, 2023 (In Thousands) Within 1 year 1-5 years >5 years Total Interest -Earning Assets: Interest bearing deposits in other banks $91,073 $— $— $91,073 Investments securities and FHLB Stock 288,435 402,384 — 690,819 Loans 805,033 785,623 201,328 1,791,984 Loans held for sale 31,974 — — 31,974 Total interest-earning assets $1,216,515 $1,188,007 $201,328 $2,605,850 Percent of total interest-earning assets 46.68 % 45.59 % 7.73 % 100.00 % Interest-Bearing Liabilities: Interest-bearing demand accounts $927,291 $— $— $927,291 Money market accounts 221,492 — — 221,492 Savings accounts 255,338 — — 255,338 Certificates of deposit 271,622 58,312 1,317 331,251 Securities sold under repurchase agreements — — — — Borrowings 940 3,999 8,736 13,675 Junior subordinated debentures — — 10,310 10,310 Total interest-bearing liabilities $1,676,683 $62,311 $20,363 $1,759,357 Percent of total interest-bearing liabilities 95.30 % 3.54 % 1.16 % 100.00 % Interest sensitivity gap ($460,168) $1,125,696 $180,965 $846,493 Cumulative interest sensitivity gap ($460,168) $665,528 $846,493 Cumulative interest sensitivity gap as a percentage of total interest-earning assets (17.7) % 25.5 % 32.5 % As stated previously, certain shortcomings, including those described below, are inherent in the method of analysis presented in the foregoing table.
Biggest changeEstimated maturity or repricing at December 31, 2024 (In Thousands) Within 1 year 1-5 years >5 years Total Interest -Earning Assets: Interest bearing deposits in other banks $20,635 $— $— $20,635 Investments securities and FHLB Stock 166,940 325,639 36,838 529,417 Loans 906,342 973,225 251,367 2,130,934 Loans held for sale 59,957 — — 59,957 Total interest-earning assets $1,153,874 $1,298,864 $288,205 $2,740,943 Percent of total interest-earning assets 42.10 % 47.39 % 10.51 % 100.00 % Interest-Bearing Liabilities: Interest-bearing demand accounts $1,108,404 $— $— $1,108,404 Money market accounts 196,290 — — 196,290 Savings accounts 250,900 — — 250,900 Certificates of deposit 372,338 44,465 1,567 418,370 Securities sold under repurchase agreements 9,800 — — 9,800 Borrowings 441 1,874 10,930 13,245 Junior subordinated debentures — — 10,310 10,310 Total interest-bearing liabilities $1,938,173 $46,339 $22,807 $2,007,319 Percent of total interest-bearing liabilities 96.56 % 2.31 % 1.14 % 100.01 % Interest sensitivity gap ($784,299) $1,252,525 $265,398 $733,624 Cumulative interest sensitivity gap ($784,299) $468,226 $733,624 Cumulative interest sensitivity gap as a percentage of total interest-earning assets (28.6) % 17.1 % 26.8 % As stated previously, certain shortcomings, including those described below, are inherent in the method of analysis presented in the foregoing table.
Although analysis of interest rate gap (the difference between the repricing of interest-earning assets and interest-bearing liabilities during a given period of time) is one standard tool for the measurement of exposure to interest rate risk, we believe that because interest rate gap analysis does not address all factors that can affect earnings performance it should not be used as the primary indicator of exposure to interest rate risk and the related volatility of net interest income in a changing interest rate environment.
Although analysis of interest rate gap (the difference between the repricing of interest-earning assets and interest-bearing liabilities during a given period of time) is one standard tool for the measurement of exposure to interest rate risk, we believe that because interest rate gap analysis does not address all factors that can affect earnings performance it should not be 65 used as the primary indicator of exposure to interest rate risk and the related volatility of net interest income in a changing interest rate environment.
Additional information regarding the Company’s customer interest rate swap program is presented in Note 19 of the Notes to Consolidated Financial Statements included in Part II.
Additional information regarding the Company’s customer interest rate swap program is presented in Note 20 of the Notes to Consolidated Financial Statements included in Part II. Item 8 of this report.
While the analysis above sets forth the estimated maturity or repricing and the resulting interest rate gap of our interest-earning assets and interest-bearing liabilities, the following tables show the estimated impact on net interest income and net income at one and two year time horizons with instantaneous parallel rate shocks of up 100, 200, 300 and 400 basis points and down 100, 200, 300 and 400 basis point.
Moreover, the ability of many borrowers to service their adjustable-rate debt may decrease in the event of an increase in market interest rates. 66 While the analysis above sets forth the estimated maturity or repricing and the resulting interest rate gap of our interest-earning assets and interest-bearing liabilities, the following tables show the estimated impact on net interest income and net income at one and two year time horizons with instantaneous parallel rate shocks of up 100, 200, 300 and 400 basis points and down 100, 200, 300 and 400 basis point.
Market risks such as foreign currency exchange risk and commodity price risk do not arise in the normal course of the Company's business.
Market risks such as foreign currency exchange risk and commodity price risk do not arise in the normal course of the Company's business, except for our limited foreign currency exposure in Canada and the United Kingdom through the recent acquisition of SCF.
Item 8 of this report. 65 The following table sets forth the estimated maturity or repricing, and the resulting interest rate gap, of our interest-earning assets (which exclude nonaccrual loans and net unearned loan fees) and interest-bearing liabilities at December 31, 2023.
The following table sets forth the estimated maturity or repricing, and the resulting interest rate gap, of our interest-earning assets (which exclude nonaccrual loans and net unearned loan fees) and interest-bearing liabilities at December 31, 2024. The amounts shown below could be significantly affected by external factors such as changes in prepayment assumptions, early withdrawals of deposits, and competition.
The trends in the estimated impact on net income under the stated interest rate scenarios differ from the table above primarily due to the inclusion of the estimated impact of changes in other operating income and expense related to mortgage banking activities: 1st Year Change in net income from base scenario Percentage change 2nd Year Change in net income from base scenario Percentage change (In Thousands) Scenario: Up 400 basis points $4,190 11.49 % $16,506 35.68 % Up 300 basis points $3,152 8.64 % $12,341 26.68 % Up 200 basis points $2,131 5.85 % $8,251 17.84 % Up 100 basis points $1,162 3.19 % $4,276 9.24 % Down 100 basis points ($915) (2.51) % ($4,448) (9.61) % Down 200 basis points ($262) (0.72) % ($7,304) (15.79) % Down 300 basis points $840 2.30 % ($9,799) (21.18) % Down 400 basis points $211 0.58 % ($13,487) (29.15) % 67
The trends in the estimated impact on net income under the stated interest rate scenarios differ from the table above primarily due to the inclusion of the estimated impact of changes in other operating income and expense related to mortgage banking activities: 1st Year Change in net income from base scenario Percentage change 2nd Year Change in net income from base scenario Percentage change (In Thousands) Scenario: Up 400 basis points ($409) (0.95) % $18,564 34.53 % Up 300 basis points ($407) (0.94) % $13,648 25.39 % Up 200 basis points ($393) (0.91) % $8,843 16.45 % Up 100 basis points ($329) (0.76) % $4,212 7.83 % Up 50 basis points ($170) (0.39) % $2,126 3.96 % Down 50 basis points $375 0.87 % ($2,013) (3.75) % Down 100 basis points $1,290 2.99 % ($3,488) (6.49) % Down 200 basis points $2,661 6.16 % ($6,896) (12.83) % Down 300 basis points $4,403 10.19 % ($9,906) (18.43) % Down 400 basis points $6,628 15.34 % ($12,157) (22.61) % 67
Removed
The amounts shown below could be significantly affected by external factors such as changes in prepayment assumptions, early withdrawals of deposits, and competition.
Added
Due to the various assumptions used for this modeling and potential balance sheet strategies management may implement to mitigate interest rate risk, no assurance can be given that projections will reflect actual results.
Removed
Moreover, the ability of many borrowers to service their adjustable-rate debt may decrease in the event of an increase in market interest rates.
Added
The following table shows the estimated impact on net interest income under the stated interest rate scenarios: 1st Year Change in net interest income from base scenario Percentage change 2nd Year Change in net interest income from base scenario Percentage change (In Thousands) Scenario: Up 400 basis points $6,210 4.77 % $30,227 21.04 % Up 300 basis points $4,531 3.48 % $22,322 15.54 % Up 200 basis points $2,867 2.20 % $14,558 10.13 % Up 100 basis points $1,265 0.97 % $7,014 4.88 % Up 50 basis points $659 0.51 % $3,566 2.74 % Down 50 basis points ($837) (0.64) % ($3,861) (2.96) % Down 100 basis points ($1,731) (1.33) % ($7,779) (5.41) % Down 200 basis points ($3,360) (2.58) % ($15,457) (10.76) % Down 300 basis points ($4,518) (3.47) % ($22,630) (15.75) % Down 400 basis points ($5,066) (3.89) % ($28,843) (20.08) % The following table shows the estimated impact on net income under the stated interest rate scenarios.
Removed
Due to the various assumptions used for this modeling and potential balance sheet strategies management may implement to mitigate interest rate risk, no assurance can be given that projections will reflect actual results. 66 The following table shows the estimated impact on net interest income under the stated interest rate scenarios: 1st Year Change in net interest income from base scenario Percentage change 2nd Year Change in net interest income from base scenario Percentage change (In Thousands) Scenario: Up 400 basis points $11,643 10.09 % $27,745 21.21 % Up 300 basis points $8,744 7.58 % $20,758 15.87 % Up 200 basis points $5,868 5.08 % $13,870 10.61 % Up 100 basis points $3,058 2.65 % $7,131 5.45 % Down 100 basis points ($5,095) (4.41) % ($9,737) (7.44) % Down 200 basis points ($8,180) (7.09) % ($17,345) (13.26) % Down 300 basis points ($10,690) (9.26) % ($24,512) (18.74) % Down 400 basis points ($15,418) (13.36) % ($33,230) (25.41) % The following table shows the estimated impact on net income under the stated interest rate scenarios.

Other NRIM 10-K year-over-year comparisons