What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-03 compared with 2023-11-03 · 174 added, 291 removed, 844 unchanged (36% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

September 30,

2024 December 31,

12 unchanged sentences

Mortgage servicing rights, at fair value 20,055 19,564

Other real estate owned, net 150 —

Premises and equipment, net 40,836 40,693

18 unchanged sentences

Preferred stock, $ 1 par value, 2,500,000 shares authorized, none issued or outstanding

Common stock, $ 1 par value, 10,000,000 shares authorized, 5,548,436 and 5,700,728 issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Common stock, $ 1 par value, 10,000,000 shares authorized, 5,499,578 and 5,513,459 issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 9,012 9,605

6 unchanged sentences

Consolidated Statements of Income

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(In Thousands, Except Per Share Data) 2024 2023

13 unchanged sentences

Net Interest Income 26,447 25,032

Provision (benefit) for credit losses 1,190 ( 353 ) 2,957 ( 40 )

Net Interest Income After Provision (Benefit) for Credit Losses 25,160 26,664 73,567 67,867

Provision for credit losses

Net Interest Income After Provision for Credit Losses

26,298 24,672

Other Operating Income

4 unchanged sentences

Unrealized gain (loss) on marketable equity securities

12 33 ( 445 ) ( 1,199 )

Keyman life insurance proceeds — — — 2,002

Other income 688 781

22 unchanged sentences

NORTHRIM BANCORP, INC.

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended September 30, Nine Months Ended September 30,

Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

(In Thousands) 2024 2023

2 unchanged sentences

Securities available for sale:

Unrealized holding gains (losses) arising during the period $ 1,320 ($ 17,518 ) $ 5,025 ($ 41,535 )

Derivatives and hedging activities:

Unrealized holding gains arising during the period

$ 292 $ 8,119

Income tax benefit related to unrealized (gains) and losses ( 557 ) 4,786 ( 1,606 ) 11,115

Other comprehensive income (loss), net of tax 1,402 ( 12,048 ) 4,040 ( 27,982 )

Comprehensive income (loss) $ 9,776 ($ 1,923 ) $ 22,821 ($ 5,836 )

Derivatives and hedging activities:

Unrealized holding gains (losses) arising during the period

Income tax expense related to unrealized (gains)

( 160 ) ( 2,223 )

Other comprehensive income, net of tax

Comprehensive income

$ 8,603 $ 10,427

See notes to consolidated financial statements

9 unchanged sentences

Repurchase of common stock ( 28 ) ( 28 ) ( 1,299 ) — — ( 1,327 )

Other comprehensive loss, net of tax — — — — ( 11,004 ) ( 11,004 )

Other comprehensive gain, net of tax

— — — — 5,597 5,597

Net income — — — 4,830 — 4,830

3 unchanged sentences

Stock-based compensation expense — — 225 — — 225

Repurchase of common stock ( 62 ) ( 62 ) ( 2,439 ) — — ( 2,501 )

Other comprehensive loss, net of tax — — — — ( 2,958 ) ( 2,958 )

4 unchanged sentences

Stock-based compensation expense — — 254 — — 254

Other comprehensive loss, net of tax — — — — ( 12,048 ) ( 12,048 )

Exercise of stock options and vesting of restricted stock units, net — — ( 12 ) — — ( 12 )

Repurchase of common stock ( 63 ) ( 63 ) ( 2,648 ) — — ( 2,711 )

Other comprehensive gain, net of tax

— — — — 1,402 1,402

Net income — — — 8,374 — 8,374

4 unchanged sentences

Exercise of stock options and vesting of restricted stock units, net 21 21 ( 269 ) — — ( 248 )

Repurchase of common stock ( 56 ) ( 56 ) ( 2,449 ) — — ( 2,505 )

Other comprehensive gain, net of tax

12 unchanged sentences

Stock-based compensation expense — — 208 — — 208

Repurchase of common stock ( 28 ) ( 28 ) ( 1,299 ) — — ( 1,327 )

Other comprehensive gain, net of tax

— — — — 5,597 5,597

Net income — — — 4,830 — 4,830

Balance as of March 31, 2023 5,673 $ 5,673 $ 16,625 $ 225,611 ($ 23,484 ) $ 224,425

Cash dividend on common stock ($ 0.60 per share)

— — — ( 3,432 ) — ( 3,432 )

Stock-based compensation expense — — 225 — — 225

Repurchase of common stock ( 62 ) ( 62 ) ( 2,439 ) — — ( 2,501 )

Other comprehensive loss, net of tax — — — — ( 2,958 ) ( 2,958 )

Net income — — — 5,577 — 5,577

Balance as of June 30, 2023 5,611 $ 5,611 $ 14,411 $ 227,756 ($ 26,442 ) $ 221,336

Cash dividend on common stock ($ 0.60 per share)

— — — ( 3,384 ) — ( 3,384 )

Stock-based compensation expense — — 254 — — 254

Exercise of stock options and vesting of restricted stock units, net 1 1 ( 27 ) — — ( 26 )

3 unchanged sentences

Net income — — — 8,199 — 8,199

Balance as of September 30, 2023 5,548 $ 5,548 $ 12,005 $ 232,746 ($ 25,040 ) $ 225,259

Balance as of March 31, 2024 5,500 $ 5,500 $ 9,012 $ 240,848 ($ 16,033 ) $ 239,327

See notes to consolidated financial statements

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In Thousands) 2024 2023

6 unchanged sentences

Amortization of investment security premium, net of discount accretion 111 130

Unrealized loss on marketable equity securities 445 1,199

Unrealized (gain) loss on marketable equity securities ( 314 ) 223

Stock-based compensation 208 140

Deferred loan fees and amortization, net of costs ( 316 ) 15

Provision (benefit) for credit losses

Provision for credit losses 149 360

Additions to home mortgage servicing rights carried at fair value ( 517 ) ( 463 )

5 unchanged sentences

Gain on sale of other real estate owned ( 392 ) —

Impairment on other real estate owned 123 —

Proceeds from keyman life insurance — ( 2,002 )

Net changes in assets and liabilities:

1 unchanged sentence

Decrease in other assets 2,345 1,222

Increase (Decrease) in other liabilities 1,127 ( 5,123 )

(Decrease) in other liabilities ( 3,226 ) ( 6,718 )

Net Cash (Used) Provided by Operating Activities ( 5,545 ) 4,349

2 unchanged sentences

Purchases of investment securities available for sale — ( 6,000 )

Purchases of marketable equity securities ( 324 ) ( 3,933 )

Purchases of FHLB stock ( 266 ) ( 6 )

Purchases of investment securities held to maturity — ( 16,750 )

Proceeds from sales/calls/maturities of securities available for sale 45,640 13,285

Proceeds from redemption of FHLB stock 10 70

(Increase) decrease in purchased receivables, net ( 14,584 ) 2,202

(Increase) decrease in loans, net ( 218,121 ) 11,230

Increase in purchased receivables, net

( 856 ) ( 1,196 )

Increase in loans, net

( 21,280 ) ( 33,630 )

Proceeds from sale of other real estate owned 392 —

Proceeds from keyman life insurance — 2,002

Purchases of software — ( 90 )

Purchases of premises and equipment ( 1,040 ) ( 1,131 )

Net Cash (Used) by Investing Activities ( 210,723 ) ( 275,367 )

Net Cash Provided (Used) by Investing Activities

22,600 ( 28,698 )

Financing Activities:

Increase in deposits 40,719 17,704

Increase (decrease) in borrowings 49,686 ( 309 )

(Decrease) in deposits

( 50,972 ) ( 90,938 )

(Decrease) in borrowings ( 106 ) ( 104 )

Repurchase of common stock ( 788 ) ( 1,327 )

Cash dividends paid ( 3,355 ) ( 3,421 )

Net Cash Provided (Used) by Financing Activities 73,712 ( 4,380 )

Net Cash Used by Financing Activities

( 55,221 ) ( 95,790 )

Net Change in Cash and Cash Equivalents ( 38,166 ) ( 120,139 )

2 unchanged sentences

Supplemental Information:

Income taxes paid $ 2,031 $ 640

Interest paid $ 9,173 $ 4,650

Noncash commitments to invest in Low Income Housing Tax Credit Partnerships $ 14,273 $ —

Transfer of loans to other real estate owned $ — $ 273

13 unchanged sentences

The Company has evaluated subsequent events and transactions for potential recognition or disclosure.

Operating results for the interim period ended September 30, 2023 are not necessarily indicative of the results anticipated for the year ending December 31, 2023.

Operating results for the interim period ended March 31, 2024 are not necessarily indicative of the results anticipated for the year ending December 31, 2024.

These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

6 unchanged sentences

Accounting pronouncements implemented in 2024

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02").

The amendments in ASU 2022-02 eliminate the accounting guidance for troubled debt restructurings ("TDRs") by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Specifically, rather than applying the recognition and measurement guidance for TDRs which includes an assessment of whether the creditor has granted a concession, an entity must evaluate whether the modification represents a new loan or a continuation of an existing loan.

The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

Additionally, for public business entities, ASU 2022-02 requires that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6.

The Company adopted ASU 2022-02 on January 1, 2023.

The Company elected to adopt the updated guidance on TDR recognition and measurement prospectively;

therefore the guidance is applied to modifications occurring after the date of adoption.

The amendments on TDR disclosures and vintage disclosures must be adopted prospectively.

The adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial position or results of operations.

Accounting pronouncements to be implemented in future periods

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323):

In March 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”).

1 unchanged sentence

The amendments in ASU 2023-02 allow entities to elect to account for equity investments made primarily for the purpose of receiving income tax credits using the proportional amortization method, regardless of the tax credit program through which the investment earns income tax credits, if certain conditions are met.

ASU 2023-02 provides amendments to paragraph ASC 323-740-25-1, which sets forth the conditions needed to apply the proportional amortization

ASU 2023-02 provides amendments to paragraph Accounting Standards Codification (“ASC”) 323-740-25-1, which sets forth the conditions needed to apply the proportional amortization method.

The amendments make certain limited changes to those conditions to clarify their application to a broader group of tax credit investment programs.

1 unchanged sentence

The amendments in this ASU 2023-02 also eliminate certain LIHTC-specific guidance to align the accounting more closely for LIHTCs with the accounting for other equity investments in tax credit structures and require that the delayed equity contribution guidance in paragraph ASC 323-740-25-3 applies only to tax equity investments accounted for using the proportional amortization method.

ASU 2023-02 is effective for the Company for fiscal years beginning after December 15, 2023 and must be applied on either a modified retrospective or a retrospective basis.

The Company does not have any equity investments made primarily for the purpose of receiving income tax credits except for LIHTC structures, which it accounts for using the proportional amortization method.

The Company adopted ASU 2023-02 on January 1, 2024.

The adoption of ASU 2023-02 did not have a material impact on the Company's consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

Under current GAAP, public entities are required to report a measure of segment profit or loss.

The amendments in ASU 2023-07 do not change or remove this requirement, nor does it change how an entity identifies its operating segments.

The amendments in ASU 2023-07 improve reportable segment disclosure requirement, primarily through enhanced disclosures about significant segment expenses.

The Company adopted ASU 2023-07 on January 1, 2024.

The adoption of ASU 2023-07 did not have a material impact on the Company's consolidated financial statements.

Accounting pronouncements to be implemented in future periods

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures (“ASU 2023-09”).

The amendments in ASU 2023-09 improve transparency of income tax disclosures related to rate reconciliation and income taxes paid disclosures by requiring consistent categories and greater disaggregation of information in rate reconciliation, and by requiring disclosure of income taxes paid disaggregated by jurisdiction.

The amendments in ASU 2023-09 allow investors to better assess, in their capital allocation decisions, how an entity's worldwide operations and related tax risks and tax planning and operations opportunities affect its income tax rate and prospects for future cash flow.

ASU 2023-09 is effective for the Company for fiscal years beginning after December 15, 2024 and may be applied on a prospective or retrospective basis.

The Company does not believe that the adoption of ASU 2023-09 will have a material impact on the Company's consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements ("ASU 2024-02").

ASU 2024-02 contains amendments to the Codification that remove references to various Concepts Statements.

In most instances, the references are extraneous an not required to understand or apply the guidance.

In other instances, the references were used in prior Statements to provide guidance in certain topical areas.

FASB Concepts Statement are nonauthoritative.

Removing all references to Concepts Statements in the guidance is intended to simplify the Codification and draw a distinction between authoritative and nonauthoritative literature.

ASU 2024-02 is effective for the Company for fiscal years beginning after December 15, 2024 and may be applied on a prospective or retrospective basis.

The Company does not believe that the adoption of ASU 2024-02 will have a material impact on the Company's consolidated financial statements.

Investment Securities

Marketable Equity Securities

The Company held marketable equity securities with fair values of $ 10.6 million and $ 10.7 million at September 30, 2023 and December 31, 2022, respectively.

The Company held marketable equity securities with fair values of $ 13.5 million and $ 13.2 million at March 31, 2024 and December 31, 2023, respectively.

The gross realized and unrealized gains (losses) recognized on marketable equity securities in other operating income in the Company's Consolidated Statements of Income were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In Thousands) 2024 2023

6 unchanged sentences

(In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value

September 30, 2023

March 31, 2024

Securities available for sale

Treasury and government sponsored entities $ 548,304 $ 228 ($ 23,751 ) $ — $ 524,781

Municipal securities 820 — ( 11 ) — 809

Corporate bonds 9,013 46 ( 389 ) — 8,670

2 unchanged sentences

(In Thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

September 30, 2023

March 31, 2024

Securities held to maturity

16 unchanged sentences

Total securities held to maturity, net of ACL $ 36,750 $ — ($ 3,337 ) $ 33,413

Gross unrealized losses on available for sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022 were as follows:

Gross unrealized losses on available for sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2024 and December 31, 2023 were as follows:

Less Than 12 Months More Than 12 Months Total

(In Thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

September 30, 2023

March 31, 2024

Securities available for sale

2 unchanged sentences

Collateralized loan obligations 11,653 ( 96 ) 14,845 ( 149 ) 26,498 ( 245 )

Municipal securities — — 809 ( 11 ) 809 ( 11 )

Total $ 36,464 ($ 354 ) $ 509,184 ($ 24,031 ) $ 545,648 ($ 24,385 )

8 unchanged sentences

Consideration is given to the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.

At September 30, 2023, the Company had 82 available for sale securities in an unrealized loss position without an ACL.

At September 30, 2023, the Company had five held to maturity securities in an unrealized loss position without an ACL.

At March 31, 2024, the Company had 64 available for sale securities in an unrealized loss position without an ACL.

At March 31, 2024, the Company had five held to maturity securities in an unrealized loss position without an ACL.

Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.

The fair value is expected to recover as the securities

approach their maturity date or repricing date or if market yields for such investments decline.

Accordingly, as of September 30, 2023, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, primarily changes in interest rates, and therefore no losses have been recognized in the Company's Consolidated Statements of Income.

At September 30, 2023 and December 31, 2022, carrying amounts of $ 168.4 million and $ 59.3 million in securities were pledged for deposits and borrowings, respectively.

The amortized cost and estimated fair values of debt securities at September 30, 2023, are distributed by contractual maturity as shown below.

The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

Accordingly, as of March 31, 2024, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, primarily changes in interest rates, and therefore no losses have been recognized in the Company's Consolidated Statements of Income.

At March 31, 2024 and December 31, 2023, carrying amounts of $ 172.6 million and $ 180.1 million in securities were pledged for deposits and borrowings, respectively.

The amortized cost and estimated fair values of debt securities at March 31, 2024, are distributed by contractual maturity as shown below.

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

5 unchanged sentences

Corporate bonds

Within 1 year $ 2,000 $ 1,981

1-5 years $ 19,013 $ 18,436

5 unchanged sentences

Total $ 59,201 $ 59,028

Municipal securities

Within 1 year $ 820 $ 809

Total $ 820 $ 809

There were no proceeds from sales of investment securities for the three or nine-month periods ending September 30, 2023 and 2022.

A summary of interest income for the three and nine-month periods ending September 30, 2023 and 2022, on available for sale investment securities are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

There were no proceeds from sales of investment securities for the three-month periods ending March 31, 2024 and 2023.

A summary of interest income for the three-month periods ending March 31, 2024 and 2023, on available for sale investment securities are as follows:

Three Months Ended March 31,

(In Thousands) 2024 2023

7 unchanged sentences

Loans Held for Sale

Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of September 30, 2023 and December 31, 2022.

Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of March 31, 2024 and December 31, 2023.

The Company designates loans held for sale as either carried at fair value or the lower of cost or fair value at loan level at origination.

Loans Held for Investment

The following table presents amortized cost and unpaid principal balance of loans, categorized by the segments used in the Company's Current Expected Credit Losses (“CECL”) methodology to assess credit risk, for the periods indicated:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(In Thousands) Amortized Cost Unpaid Principal Difference Amortized Cost Unpaid Principal Difference

15 unchanged sentences

$ 1,793,602 $ 1,819,375 ($ 8,240 ) $ 1,772,227 $ 1,798,053 ($ 8,556 )

The difference between the amortized cost and unpaid principal balance is net deferred origination fees totaling $ 8.3 million at September 30, 2023 and $ 8.6 million at December 31, 2022.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 8.0 million and $ 5.5 million at September 30, 2023 and December 31, 2022, respectively, and is included in other assets in the Consolidated Balance Sheets.

Amortized cost in the above table includes $ 3.2 million and $ 7.1 million as of September 30, 2023 and December 31, 2022, respectively, in Paycheck Protection Program loans administered by the U.S.

Small Business Administration ("SBA") within the Commercial & industrial loan segment.

The difference between the amortized cost and unpaid principal balance is net deferred origination fees totaling $ 8.2 million at March 31, 2024 and $ 8.6 million at December 31, 2023.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 8.4 million and $ 7.4 million at March 31, 2024 and December 31, 2023, respectively, and is included in other assets in the Consolidated Balance Sheets.

Amortized cost in the above table includes $ 1.9 million and $ 2.8 million as of March 31, 2024 and December 31, 2023, respectively, in Paycheck Protection Program loans administered by the U.S.

Small Business Administration within the Commercial & industrial loan segment.

Allowance for Credit Losses

The table below presents activity in the ACL related to loans held for investment for the periods indicated.

The ACL for loans held for investment increased $ 2.7 million from December 31, 2022 primarily due to higher non-government guaranteed loan balances as well as a decrease in estimated prepayment rates in the Company's discounted cash flow model given the current economic environment.

These changes were only partially offset by a decrease in the Company's forecasted future unemployment rates.

Three Months Ended September 30, Beginning Balance Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

Commercial & industrial loans $ 3,418 ($ 55 ) ($ 91 ) $ 181 $ 3,453

Commercial real estate:

Owner occupied properties 2,807 ( 15 ) — — 2,792

Non-owner occupied and multifamily properties 3,260 ( 36 ) — — 3,224

Residential real estate:

1-4 family residential properties secured by first liens 3,206 334 — — 3,540

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 423 78 — 5 506

1-4 family residential construction loans 206 ( 31 ) — — 175

Other construction, land development and raw land loans 1,996 480 — — 2,476

Obligations of states and political subdivisions in the US 88 ( 11 ) — — 77

Agricultural production, including commercial fishing 162 2 — — 164

Consumer loans 74 4 — 1 79

Other loans 5 — — — 5

Total $ 15,645 $ 750 ($ 91 ) $ 187 $ 16,491

Commercial & industrial loans $ 2,961 ($ 1,344 ) ($ 45 ) $ 1,325 $ 2,897

Commercial real estate:

Owner occupied properties 2,573 132 — 55 2,760

Non-owner occupied and multifamily properties 3,107 120 — — 3,227

Residential real estate:

1-4 family residential properties secured by first liens 620 73 — 5 698

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 327 30 — 9 366

1-4 family residential construction loans 231 50 — — 281

Other construction, land development and raw land loans 1,462 15 — — 1,477

Obligations of states and political subdivisions in the US 59 4 — — 63

Agricultural production, including commercial fishing 127 13 — — 140

Consumer loans 64 3 ( 3 ) 2 66

Other loans 6 1 — — 7

Total $ 11,537 ($ 903 ) ($ 48 ) $ 1,396 $ 11,982

Nine Months Ended September 30, Beginning Balance Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

Three Months Ended March 31, Beginning Balance Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

27 unchanged sentences

Total $ 13,838 $ 259 ($ 14 ) $ 74 $ 14,157

The following table shows gross charge-offs by grade and by year of loan origination for the periods indicated:

Nine Months Ended September 30,

The following table shows gross charge-offs by year of loan origination for the periods indicated:

Three Months Ended March 31,

(In Thousands) 2024 2023 2022 2021 2020 Prior Total

Commercial & industrial loans $ — $ — $ 49 $ — $ — $ 91 $ 140

Consumer loans — 1 — — — 13 14

Agricultural production, including commercial fishing $ — $ — $ 25 $ — $ — $ — $ 25

Total $ — $ — $ 25 $ — $ — $ — $ 25

26 unchanged sentences

Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below.

September 30, 2023 2023 2022 2021 2020 2019 Prior Total

March 31, 2024 2024 2023 2022 2021 2020 Prior Total

(In Thousands)

116 unchanged sentences

Due Current Total Greater Than 90 Days Past Due Still Accruing

September 30, 2023

March 31, 2024

Commercial & industrial loans $ — $ — $ 297 $ 297 $ 396,697 $ 396,994 $ —

28 unchanged sentences

Nonaccrual loans:

Nonaccrual loans net of government guarantees totaled $ 5.0 million and $ 6.4 million at September 30, 2023 and December 31, 2022, respectively.

Nonaccrual loans net of government guarantees totaled $ 5.3 million and $ 5.0 million at March 31, 2024 and December 31, 2023, respectively.

The following table presents loans on nonaccrual status and loans on nonaccrual status for the periods presented for which there was no related ACL.

All loans with no ACL are individually evaluated for credit losses in the Company's CECL methodology.

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(In Thousands) Nonaccrual Nonaccrual With No ACL Nonaccrual Nonaccrual With No ACL

12 unchanged sentences

Net nonaccrual loans $ 5,260 $ 4,651 $ 5,002 $ 4,898

There was no interest on nonaccrual loans reversed through interest income during three and nine-month periods ending September 30, 2023.

There was no interest on nonaccrual loans reversed through interest income during the three-month period ending September 30, 2022 and $ 2,000 interest on nonaccrual loans reversed through interest income during the nine-month period ending September 30, 2022.

There was no interest earned on nonaccrual loans with a principal balance during the three and nine-month periods ending September 30, 2023 and September 30, 2022.

However, the Company recognized interest income of $ 200,000 and $ 1.2 million in the three-month periods ending September 30, 2023 and 2022, respectively, and $ 584,000 and $ 2.1 million in the nine-month periods ending September 30, 2023 and 2022, respectively, related to interest collected on nonaccrual loans whose principal had been paid down to zero.

There was no interest on nonaccrual loans reversed through interest income during three-month periods ending March 31, 2024 or March 31, 2023.

There was no interest earned on nonaccrual loans with a principal balance during the three-month periods ending March 31, 2024 and March 31, 2023.

However, the Company recognized interest income of $ 202,000 and $ 179,000 in the three-month periods ending March 31, 2024 and 2023, respectively, related to interest collected on nonaccrual loans whose principal had been paid down to zero.

Loan Modifications:

3 unchanged sentences

The Company may provide multiple types of concessions on one loan.

As discussed in Note 1, the Company adopted ASU 2022-02 effective January 1, 2023.

ASU 2022-02 eliminates the accounting guidance for loans classified as TDRs.

TDRs totaled $ 5.1 million at December 31, 2022.

The following table shows the amortized cost basis of the loans that were both experiencing financial difficulty and modified as of the dates indicated, by class and type of modification.

There were no loans experiencing both financial difficulty and modified in the three-month period ending March 31, 2023.

The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below:

Three Months Ended September 30, 2023

Term Modification Term and payment modifications Total Modifications Percentage of Class of Financing Receivable

(In Thousands)

Commercial real estate:

Owner occupied properties $ — $ 271 $ 271 0.08 %

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 119 — 119 0.43 %

1-4 family residential construction loans 109 — 109 0.34 %

Other construction, land development and raw land loans 968 577 1,545 1.29 %

Total $ 1,196 $ 848 $ 2,044 0.12 %

Nine Months Ended September 30, 2023

Term Modification Payment Modification Term and payment modifications

Total Modifications Percentage of Class of Financing Receivable

Three Months Ended March 31, 2024

Term Modification Payment Modification Term and payment modifications Total Modifications Percentage of Class of Financing Receivable

(In Thousands)

Commercial & industrial loans $ 5,396 $ — $ 265 $ 5,661 1.43 %

Commercial real estate:

Owner occupied properties — — 271 271 0.08 %

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 119 — — 119 0.43 %

1-4 family residential construction loans 109 — — 109 0.34 %

Other construction, land development and raw land loans 968 — 577 1,545 1.29 %

Total $ 5,396 $ — $ 265 $ 5,661 0.31 %

1 unchanged sentence

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of the dates indicated:

Three Months Ended September 30, 2023

Principal Forgiveness Weighted-Average Interest Rate Reduction Weighted-Average Term Extension (months)

(In Thousands)

Commercial real estate:

Owner occupied properties — — % 5

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens — — % 5

1-4 family residential construction loans — — % 5

Other construction, land development and raw land loans — — % 5

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Principal Forgiveness Weighted-Average Interest Rate Reduction Weighted-Average Term Extension (months)

1 unchanged sentence

Commercial & industrial loans $ — 8 % 7

Commercial real estate:

Owner occupied properties — — % 5

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens — — % 5

1-4 family residential construction loans — — % 5

Other construction, land development and raw land loans — — % 5

The Company monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table presents the payment performance of such loans as of the dates indicated:

September 30, 2023

30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Total Past Due

The following table presents the amortized cost basis of loans that had a payment default during the period indicated and were modified in the twelve months before default to borrowers experiencing financial difficulty:

Three Months Ended March 31, 2024

Term modification

(In Thousands)

Commercial real estate:

Owner occupied properties $ — $ — $ 271 $ 271

Residential real estate:

3 unchanged sentences

Total $ 1,189

The following table presents the amortized cost basis of loans that had a payment default during the three-months ended September 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:

September 30, 2023

Term modification Term and payment modification

The Company monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table presents the payment performance of loans that have been modified in the last twelve months:

March 31, 2024

Greater Than 89 Days Past Due Total Past Due Current

(In Thousands)

Commercial & industrial loans $ — $ — $ 7,633 $ 7,633

Commercial real estate:

7 unchanged sentences

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

The provisions of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act included an election to not apply the guidance on accounting for TDRs to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency.

The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019.

The Company has elected to adopt these provisions of the CARES Act.

As of September 30, 2023, the Company has no loan modifications related to COVID-19, which are not classified as TDRs.

At December 31, 2022, the Company had made the following types of loan modifications related to COVID-19 with a principal balance outstanding of:

Loan Modifications due to COVID-19 as of December 31, 2022

(Dollars in thousands) Interest Only Full Payment Deferral Total

Portfolio loans $ 999 $ — $ 999

Number of modifications 1 — 1

Purchased Receivables

Purchased receivables are carried at their principal amount outstanding, net of an ACL, and have a maturity of less than one year .

There were no purchased receivables past due at September 30, 2023 or December 31, 2022, and there were no restructured purchased receivables at September 30, 2023 or December 31, 2022.

There were no purchased receivables past due at March 31, 2024 or December 31, 2023, and there were no restructured purchased receivables at March 31, 2024 or December 31, 2023.

Income on purchased receivables is accrued and recognized on the principal amount outstanding using an effective interest method except when management believes doubt exists as to the collectability of the income or principal.

There were no nonperforming purchased receivables as of September 30, 2023 or December 31, 2022.

There was no activity and no balance in the ACL for purchased receivables as of September 30, 2023 or December 31, 2022.

There was one nonperforming purchased receivable with a balance of $ 183,000 as of March 31, 2024 and $ 808,000 as of December 31, 2023 for which management is not accruing income.

There was no activity and no balance in the ACL for purchased receivables as of March 31, 2024 or December 31, 2023.

The following table summarizes the components of net purchased receivables for the dates indicated:

(In Thousands) September 30, 2023 December 31, 2022

(In Thousands) March 31, 2024 December 31, 2023

Purchased receivables $ 37,698 $ 36,842

3 unchanged sentences

Mortgage servicing rights

The following table details the activity in the Company's mortgage servicing rights ("MSR") for the three and nine-month periods ended September 30, 2023 and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

The following table details the activity in the Company's mortgage servicing rights (“MSR”) for the three-month periods ended March 31, 2024 and 2023:

Three Months Ended March 31,

(In Thousands) 2024 2023

4 unchanged sentences

( 314 ) ( 583 )

( 310 ) ( 410 ) ( 1,464 ) ( 915 )

Balance, end of period $ 20,055 $ 18,303

1 unchanged sentence

(2) Represents changes due to collection/realization of expected cash flows over time.

The following table details information related to our serviced mortgage loan portfolio as of September 30, 2023 and December 31, 2022:

(In Thousands) September 30, 2023 December 31, 2022

The following table details information related to our serviced mortgage loan portfolio as of March 31, 2024 and December 31, 2023:

(In Thousands) March 31, 2024 December 31, 2023

Balance of mortgage loans serviced for others $ 1,060,007 $ 1,044,516

2 unchanged sentences

MSR as a percentage of serviced loans 1.89 % 1.87 %

The Company recognized servicing fees of $ 937,000 and $ 858,000 during the three-month periods ending September 30, 2023 and 2022, respectively, and $ 2.7 million and $ 2.4 million during the nine-month periods ending September 30, 2023 and 2022, respectively, which includes contractually specified servicing fees and ancillary fees as a component of other noninterest income in the Company's Consolidated Statements of Income.

The Company recognized servicing fees of $ 1.0 million and $ 905,000 during the three-month periods ending March 31, 2024 and 2023, respectively, which includes contractually specified servicing fees and ancillary fees as a component of other noninterest income in the Company's Consolidated Statements of Income.

The following table outlines the weighted average key assumptions used in measuring the fair value of MSRs and the sensitivity of the current fair value of MSRs to immediate adverse changes in those assumptions as of the dates indicated.

1 unchanged sentence

(In Thousands)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Fair value of MSRs

25 unchanged sentences

Commercial servicing rights

The commercial servicing rights asset ("CSR") has a carrying value of $ 2.1 million at September 30, 2023 and December 31, 2022, respectively, and is included in other assets and carried at fair value on the Company's Consolidated Balance Sheets.

Total commercial loans serviced for others were $ 283.7 million and $ 285.3 million at September 30, 2023 and December 31, 2022, respectively.

Key assumptions used in measuring the fair value of the CSR as of September 30, 2023 and December 31, 2022 include a constant prepayment rate of 10.19 % and a discount rate of 12.00 %.

The commercial servicing rights asset (“CSR”) has a carrying value of $ 2.1 million at March 31, 2024 and $ 2.2 million December 31, 2023, respectively, and is included in other assets and carried at fair value on the Company's Consolidated Balance Sheets.

Total commercial loans serviced for others were $ 271.2 million and $ 282.2 million at March 31, 2024 and December 31, 2023, respectively.

Key assumptions used in measuring the fair value of the CSR as of March 31, 2024 and December 31, 2023 include a constant prepayment rate of 11.76 % and a discount rate of 9.50 %.

The Company's lease commitments consist primarily of agreements to lease land and office facilities that it occupies to operate several of its retail branch locations that are classified as operating leases and are recognized on the balance sheet as right-of-use (“ROU”) assets and lease liabilities.

As of September 30, 2023, the Company has operating lease ROU assets of $ 9.7 million and operating lease liabilities of $ 9.7 million.

As of March 31, 2024, the Company has operating lease ROU assets of $ 8.9 million and operating lease liabilities of $ 8.9 million.

As of December 31, 2023, the Company had operating lease ROU assets of $ 9.1 million and operating lease liabilities of $ 9.1 million.

The Company did not have any agreements that are classified as finance leases as of September 30, 2023 or December 31, 2022.

The Company did not have any agreements that are classified as finance leases as of March 31, 2024 or December 31, 2023.

The following table presents additional information about the Company's operating leases for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In Thousands) 2024 2023

Operating lease cost (1)

$ 708 $ 693 $ 2,109 $ 2,046

Short term lease cost (1)

7 unchanged sentences

(In Thousands) Operating Leases

2023 (Three months) $ 662

2024 (Nine months) $ 2,071

Thereafter 3,878

4 unchanged sentences

The Company enters into commercial loan interest rate swap agreements with commercial banking customers which are offset with a corresponding swap agreement with a third party financial institution (“counterparty”).

The Company has agreements with its counterparties that contain provisions that provide that if the Company fails to maintain its status as a “well-capitalized” institution under regulatory guidelines, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

The Company has agreements with its counterparties that contain provisions that provide that if the Company fails to maintain its status as a “well-capitalized” institution under applicable regulatory guidelines, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

These agreements also require that the Company and the counterparty collateralize any fair value shortfalls that exceed $ 250,000 with eligible collateral, which includes cash and securities backed with the full faith and credit of the federal government.

Similarly, the Company could be required to settle its obligations under the agreement if specific regulatory events occur, such as if the Company were issued a prompt corrective action directive or a cease and desist order, or if certain regulatory ratios fall below specified levels.

The Company pledged $ 552,000 as of September 30, 2023 and $ 553,000 as of December 31, 2022, in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements.

The Company had interest rate swaps related to commercial loans with an aggregate notional amount of $ 219.8 million and $ 226.2 million at September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023, the notional amount of interest rate swaps is made up of 20 variable to fixed rate swaps to commercial loan customers totaling $ 109.9 million, and 20 fixed to variable rate swaps with a counterparty totaling $ 109.9 million.

Changes in fair value from these 20 interest rate swaps offset each other in the first nine months of 2023.

The Company recognized no fee income related to interest rate swaps in the three-month periods ending September 30, 2023 and 2022, respectively, and $ 61,000 and $ 90,000 in fee income related to interest rate swaps in the nine-month periods ending September 30, 2023 and 2022, respectively.

The Company pledged $ 564,000 as of March 31, 2024 and $ 566,000 as of December 31, 2023, in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements.

The Company had interest rate swaps related to commercial loans with an aggregate notional amount of $ 216.4 million and $ 218.0 million at March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024, the notional amount of interest rate swaps is made up of 20 variable to fixed rate swaps to commercial loan customers totaling $ 108.2 million, and 20 fixed to variable rate swaps with a counterparty totaling $ 108.2 million.

Changes in fair value from these 20 interest rate swaps offset each other in the first three months of 2024.

The Company recognized $ 63,000 fee income related to interest rate swaps in the three-month periods ending March 31, 2024 and no fee income related to interest rate swaps in the first quarter of 2023, respectively.

Interest rate swap income is recorded in other operating income on the Consolidated Statements of Income.

3 unchanged sentences

The interest rate swap effectively fixes the Company's interest payments on the $ 10.0 million of junior subordinated debentures held under Northrim Statutory Trust 2 at 3.72 % through its maturity date.

As of September 30, 2023, the floating rate that the dealer pays is equal to the three month Secured Overnight Financing Rate, also known as SOFR, plus 1.63 % which reprices quarterly on the payment date.

This rate was 7.04 % as of September 30, 2023.

The Company pledged $ 130,000 in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of September 30, 2023 and $ 130,000 as of December 31, 2022.

The floating rate that the dealer pays was equal to the three month LIBOR plus 1.37 % through September 15, 2023.

The floating rate that the dealer pays is now equal to the three month CME SOFR plus tenor spread adjustment 0.26 % plus 1.37 %, which reprices quarterly on the payment date.

This rate was 6.96 % as of March 31, 2024.

The Company pledged $ 130,000 in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of March 31, 2024 and December 31, 2023.

Changes in the fair value of this interest rate swap are reported in other comprehensive income on the Consolidated Statements of Income.

The unrealized gain, net of tax on this interest rate swap was $ 1.5 million as of September 30, 2023 and the unrealized gain, net of tax was $ 1.0 million as of December 31, 2022.

The unrealized gain, net of tax on this interest rate swap was $ 1.2 million as of March 31, 2024 and the unrealized gain, net of tax was $ 1.0 million as of December 31, 2023.

Derivatives related to home mortgage banking activities

4 unchanged sentences

Market risk with respect to commitments to originate loans arises from changes in the value of contractual positions due to changes in interest rates.

RML had commitments to originate mortgage loans held for sale totaling $ 50.1 million and $ 29.1 million at September 30, 2023 and December 31, 2022, respectively.

RML had commitments to originate mortgage loans held for sale totaling $ 56.2 million and $ 22.9 million at March 31, 2024 and December 31, 2023, respectively.

Changes in the value of RML's interest rate derivatives are recorded in mortgage banking income on the Consolidated Statements of Income.

None of these derivatives are designated as hedging instruments.

The following table presents the fair value of derivatives not designated as hedging instruments at September 30, 2023 and December 31, 2022:

The following table presents the fair value of derivatives not designated as hedging instruments at March 31, 2024 and December 31, 2023:

(In Thousands) Asset Derivatives

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Balance Sheet Location Fair Value Fair Value

1 unchanged sentence

Interest rate lock commitments Other assets 765 342

Retail interest rate contracts Other assets 145 —

Total $ 13,214 $ 10,812

(In Thousands) Liability Derivatives

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Balance Sheet Location Fair Value Fair Value

3 unchanged sentences

The following table presents the net gains (losses) of derivatives not designated as hedging instruments for periods indicated below:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In Thousands) Income Statement Location 2024 2023

5 unchanged sentences

We do not offset such financial instruments for financial reporting purposes.

The following table summarizes the derivatives that have a right of offset as of September 30, 2023 and December 31, 2022:

September 30, 2023 Gross amounts not offset in the Statement of Financial Position

The following table summarizes the derivatives that have a right of offset as of March 31, 2024 and December 31, 2023:

March 31, 2024 Gross amounts not offset in the Statement of Financial Position

(In Thousands) Gross amounts of recognized assets and liabilities Gross amounts offset in the Statement of Financial Position Net amounts of assets and liabilities presented in the Statement of Financial Position Financial Instruments Collateral Posted Net Amount

1 unchanged sentence

Interest rate swaps $ 12,449 $ — $ 12,449 $ — $ — $ 12,449

Retail interest rate contracts 145 — 145 — — 145

Liability Derivatives

Interest rate swaps $ 12,449 $ — $ 12,449 $ — $ 12,449 $ —

Retail interest rate contracts 11 — 11 — — 11

December 31, 2023 Gross amounts not offset in the Statement of Financial Position

22 unchanged sentences

majority of inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.

However, as of September 30, 2023, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives.

However, as of March 31, 2024, the Company has assessed the significance of the impact of these adjustments on the overall valuation of its interest rate positions and has determined that they are not significant to the overall valuation of its interest rate derivatives.

As a result, the Company has classified its interest rate derivative valuations in Level 2 of the fair value hierarchy.

17 unchanged sentences

Estimated fair values as of the periods indicated are as follows:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(In Thousands) Carrying Amount Fair Value Carrying Amount Fair Value

8 unchanged sentences

Loans held for sale 43,818 43,818 31,974 31,974

Accrued interest receivable 13,261 13,261 11,958 11,958

Interest rate swaps 14,087 14,087 11,836 11,836

Retail interest rate contracts 145 145 — —

Level 3 inputs:

8 unchanged sentences

Deposits $ 2,434,083 $ 2,430,784 $ 2,485,055 $ 2,482,937

Accrued interest payable 390 390 202 202

Borrowings 13,569 11,558 13,675 11,872

5 unchanged sentences

(In Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

September 30, 2023

March 31, 2024

Available for sale securities

Treasury and government sponsored entities $ 524,781 $ 279,650 $ 245,131 $ —

Municipal securities 809 — 809 —

Corporate bonds 8,670 8,670 — —

28 unchanged sentences

Total other liabilities $ 10,483 $ — $ 10,483 $ —

The following tables provide a reconciliation of the assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three and nine-month periods ended September 30, 2023 and 2022:

(In Thousands) Beginning balance Change included in earnings Purchases and issuances Sales and settlements Ending balance Net change in unrealized gains (losses) relating to items held at end of period

Three Months Ended September 30, 2023

Interest rate lock commitments $ 851 ($ 267 ) $ 2,021 ($ 2,087 ) $ 518 $ 518

Mortgage servicing rights 18,248 ( 310 ) 1,458 — 19,396 —

Commercial servicing rights 2,139 ( 39 ) 18 — 2,118 —

Total $ 21,238 ($ 616 ) $ 3,497 ($ 2,087 ) $ 22,032 $ 518

Three Months Ended September 30, 2022

Interest rate lock commitments $ 2,567 ($ 370 ) $ 2,976 ($ 4,819 ) $ 354 $ 354

Mortgage servicing rights 16,301 145 1,263 — 17,709 —

Commercial servicing rights 1,069 ( 75 ) 73 — 1,067 —

Total $ 19,937 ($ 300 ) $ 4,312 ($ 4,819 ) $ 19,130 $ 354

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Interest rate lock commitments $ 342 ($ 275 ) $ 2,513 ($ 1,815 ) $ 765 $ 765

2 unchanged sentences

Total $ 22,106 ($ 429 ) $ 3,058 ($ 1,815 ) $ 22,920 $ 765

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Interest rate lock commitments $ 440 ($ 174 ) $ 1,497 ($ 1,078 ) $ 685 $ 685

2 unchanged sentences

Total $ 21,204 ($ 1,018 ) $ 2,050 ($ 1,078 ) $ 21,158 $ 685

There were no changes in unrealized gains and losses for the three and nine-month periods ending September 30, 2023 and 2022 included in other comprehensive income for recurring Level 3 fair value measurements.

As of and for the periods ending September 30, 2023 and December 31, 2022, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.

There were no changes in unrealized gains and losses for the three-month periods ending March 31, 2024 and 2023 included in other comprehensive income for recurring Level 3 fair value measurements.

As of and for the periods ending March 31, 2024 and December 31, 2023, except for certain assets as shown in the following table, no impairment or valuation adjustment was recognized for assets recognized at fair value on a nonrecurring basis.

For loans individually measured for credit losses, the Company classifies fair value measurements using observable inputs, such as external appraisals, as Level 2 valuations in the fair value hierarchy, and unobservable inputs, such as in-house evaluations, as Level 3 valuations in the fair value hierarchy.

(In Thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

September 30, 2023

Other real estate owned $ 150 $ — $ 150 $ —

March 31, 2024

Loans individually measured for credit losses $ 525 $ — $ — $ 525

Total $ 525 $ — $ — $ 525

2 unchanged sentences

Total $ — $ — $ — $ —

The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three and nine-month periods ended September 30, 2023 and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

The following table presents the (gains) losses resulting from nonrecurring fair value adjustments for the three-month periods ended March 31, 2024 and 2023:

Three Months Ended March 31,

(In Thousands) 2024 2023

Other real estate owned $ 123 $ — $ 123 $ —

Loans individually measured for credit losses $ 184 $ 27

Total loss from nonrecurring measurements $ 184 $ 27

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

The following tables provide a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a recurring and nonrecurring basis at September 30, 2023 and December 31, 2022:

Financial Instrument Valuation Technique - Recurring Basis

Unobservable Input Weighted Average Rate Range

September 30, 2023

March 31, 2024

Interest rate lock commitment External pricing model Pull through rate 92.45 %

11 unchanged sentences

Unobservable Input Weighted Average Rate Range

September 30, 2023

Other real estate owned Fair value of collateral Estimated capital costs to complete improvements 45 %

March 31, 2024

Loans individually measured for credit losses In-house valuation of collateral Discount rate 35 %

Segment Information

2 unchanged sentences

The Community Banking segment's principal business focus is the offering of loan and deposit products to business and consumer customers in its primary market areas.

As of September 30, 2023, the Community Banking segment operated 19 branches throughout Alaska.

As of March 31, 2024, the Community Banking segment operated 20 branches throughout Alaska.

The Home Mortgage Lending segment's principal business focus is the origination and sale of mortgage loans for 1-4 family residential properties.

Summarized financial information for the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables:

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

(In Thousands) Community Banking Home Mortgage Lending Consolidated

4 unchanged sentences

Other operating income 3,813 4,031 7,844

Other operating expense 16,945 5,951 22,896

Income before provision for income taxes 9,512 754 10,266

Provision for income taxes 1,710 182 1,892

Net income $ 7,802 $ 572 $ 8,374

Three Months Ended September 30, 2022

(In Thousands) Community Banking Home Mortgage Lending Consolidated

Interest income $ 26,900 $ 659 $ 27,559

Interest expense 1,232 16 1,248

Net interest income 25,668 643 26,311

Benefit for credit losses ( 353 ) — ( 353 )

Other operating income 2,938 5,734 8,672

Salaries and other personnel expense

10,878 4,539 15,417

Other operating expense 6,674 1,547 8,221

Total other operating expense

17,552 6,086 23,638

Income before provision for income taxes 10,279 225 10,504

1 unchanged sentence

Net income $ 8,037 $ 162 $ 8,199

Nine Months Ended September 30, 2023

(In Thousands) Community Banking Home Mortgage Lending Consolidated

Interest income $ 89,509 $ 6,514 $ 96,023

Interest expense 18,007 1,492 19,499

Net interest income 71,502 5,022 76,524

Provision for credit losses 2,957 — 2,957

Other operating income 9,564 10,326 19,890

Other operating expense 52,168 18,020 70,188

Income (loss) before provision for income taxes 25,941 ( 2,672 ) 23,269

Provision for income taxes 5,216 ( 728 ) 4,488

Net income (loss) $ 20,725 ($ 1,944 ) $ 18,781

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(In Thousands) Community Banking Home Mortgage Lending Consolidated

4 unchanged sentences

Other operating income 2,900 2,008 4,908

Salaries and other personnel expense

10,704 4,780 15,484

Other operating expense 6,713 1,312 8,025

Total other operating expense

17,417 6,092 23,509

Income before provision for income taxes 9,875 ( 3,804 ) 6,071

1 unchanged sentence

Net income $ 7,560 ($ 2,730 ) $ 4,830

September 30, 2023

March 31, 2024

(In Thousands) Community Banking Home Mortgage Lending Consolidated

6 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements