What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-03-10 compared with 2024-03-08 · 108 added, 102 removed, 304 unchanged (41% of the section changed)

2 unchanged sentences

We are a publicly traded bank holding company headquartered in Anchorage, Alaska.

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.

We began banking operations in Anchorage in December 1990, and formed the Company as an Alaska corporation in connection with our reorganization into a holding company structure;

1 unchanged sentence

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.

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.

Effective October 31, 2024, the Company completed its acquisition of Sallyport Commercial Finance, LLC (“SCF”), and its subsidiaries.

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.

The Company has three direct wholly-owned subsidiaries:

1 unchanged sentence

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 19 branch locations in Alaska;

eight in Anchorage, one in Wasilla, two in Juneau, two in Fairbanks, one in Ketchikan, one in Sitka, one in Eagle River, one in Nome, one in Soldotna, and one in Kodiak.

Additionally, we have a loan production office in Homer.

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.

4 unchanged sentences

• 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:

The Bank has four direct wholly-owned subsidiaries:

• Northrim Capital Investments Co.

(“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”).

RML held a 30% investment in Homestate Mortgage, LLC until it dissolved in 2023.

• SCF is a wholly-owned subsidiary of the Bank.

SCF provides factoring, asset based lending and alternative working capital solutions to small and medium sized enterprises in the United States and, through its subsidiaries, in Canada and the United Kingdom.

SCF holds a 100% interest in Sallyport Commercial Finance CAN, LLC, a holding company, and a 40% interest in Sallyport Commercial Finance LTD, located in the United Kingdom.

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.

1 unchanged sentence

37th Avenue in Anchorage and 2491 Tongass Avenue in Ketchikan.

The Company operates in two primary segments:

Community Banking and Home Mortgage Lending.

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.

8 unchanged sentences

Our strategy is one of value-added growth.

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.

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.

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.

Our business strategy emphasizes commercial lending products and services through relationship banking with businesses and professional individuals in our Community Banking segment, mortgage origination and sale, mortgages held for investment, and mortgage servicing activities through our Mortgage Banking segment, and factoring, asset based lending, and

alternative working capital lending through our Specialty Finance segment.

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.

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”).

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.

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.

17 unchanged sentences

The Company recently added the Juneteenth National Independence Day and Indigenous People's Day to our lineup of paid holidays for employees.

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.

This pay increase was done outside of the normal annual salary review process in order to appropriately respond, in a timely manner, to inflationary and competitive wage pressures.

Effective January 1, 2023, the Company increased its sick leave benefit from 32 to 40 hours per year and removed the legacy 3-day wait period to use this benefit.

In 2024, the Company overhauled employee healthcare options for employees that included new benefit plans that provided additional coverage options.

This included a new essential core option at no cost for employee only coverage.

Beginning in 2025, the Company increased its 401(k) match for Community Banking employees to 100% of employee deferrals up to 6% annually.

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.

1 unchanged sentence

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.

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.

In addition, Northrim provides for a strong work/life balance, including generous paid time off and paid parental leave.

3 unchanged sentences

None of our employees are covered by a collective bargaining agreement.

Of the 472 full-time equivalent employees, 332 were Community Banking employees and 140 were Home Mortgage Lending employees.

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.

17 unchanged sentences

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.

The Coronavirus Aid, Relief.

and Economic Security ("CARES") Act established several new temporary U.S.

Small Business Administration (“SBA”) loan programs to assist U.S.

small businesses through the COVID-19 pandemic.

PPP provided loans to small businesses who were affected by economic conditions as a result of COVID-19 and included loan forgiveness of all or a portion of the loan, subject to certain eligibility requirements and conditions.

Our lending operations are guided by loan policies, approval procedures, and amount limitations.

7 unchanged sentences

Finally, our Internal Audit independently reviews loans for regulatory compliance and conformance to the Bank's policies and procedures.

Purchase of accounts receivable:

We provide short-term working capital to customers primarily in our Alaska markets as well as Washington, Oregon and some other states by purchasing their accounts receivable through NFS.

Our purchased receivable activity is guided by policies that outline risk management, documentation, and approval limits.

In 2024, we expect NFS to continue to operate in these markets and to continue to contribute to the Company’s profitability.

Deposit Services :

6 unchanged sentences

• 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;

5 unchanged sentences

Mobile Web and Mobile APP Banking, consumer online account opening, Personal Finance, Online Documents, Consumer Debit Cards, Business Debit Cards, My Rewards for consumer debit cards, retail lockbox services, card controls, Consumer Credit Cards, Business Credit Cards, Corporate Purchase Cards, Integrated Payables, home equity advantage access cards, telebanking, and automated teller services.

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.

Other Services Provided Through Affiliates:

3 unchanged sentences

No individual or single group of related accounts is considered material in relation to our total assets or total revenues, or to the total assets, deposits or revenues of the Bank, or in relation to our overall business.

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.

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).

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.

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.

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 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.

We estimate that as of December 31, 2024 the Company had $138.0 million, or 6% of total portfolio loans, in the Healthcare sector;

1 unchanged sentence

$104.3 million, or 5% in the Accommodations sector;

$75.0 million, or 4% in the Fishing 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.

2 unchanged sentences

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.

Total deposits were $2.68 billion at December 31, 2024, up 8% from $2.49 billion a year ago.

At December 31, 2024, 73% of total deposits were held in business accounts and 27% of deposit balances were held in consumer accounts.

Northrim had approximately 34,000 deposit customers with an average balance of $61,000 as of December 31, 2024.

Northrim had 26 customers with balances over $10 million as of December 31, 2024, which accounted for $612.9 million, or 24%, of total deposits.

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.

The Company originates 1-4 family residential mortgages, most of which we sell to the secondary market.

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;

4 unchanged sentences

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.

Specialty Finance

Purchase of accounts receivable, asset based lending, and alternative working capital solutions:

We provide short and medium-term working capital to customers in Alaska, multiple states in the continental United States, and to a lessor extent in Canada and the United Kingdom through subsidiaries of SCF by purchasing their accounts receivable and by providing asset based lending and other alternative working capital products through our Specialty Finance segment, which includes activities at NFS and SCF.

Our mission is to provide access to capital through tailored funding solutions to fuel growth and provide entrepreneurs opportunities to create value.

We believe that business activities in this segment will generate profitability, including through periods of macroeconomic disruption, by cultivating relationships with an approach based on a thorough understanding of each of our customers' business operations, opportunities, and challenges.

These activities are guided by policies that outline risk management, documentation, and approval limits.

Alaska Economy

2 unchanged sentences

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.

The economy of Alaska is no longer entirely dependent upon natural resource industries.

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%.

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 sector added 1,300 positions for a year over year growth rate of 3.3%.

The Oil & Gas sector had the largest percentage growth rate at 5.6% or 400 new jobs.

Leisure and Hospitality added 800 jobs for a 2.6% growth rate.

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.

Alaska’s Gross State Product (“GSP”) in the third quarter of 2023, was estimated to be $67.7 billion in current dollars, according to the Federal Bureau of Economic Analysis ("BEA").

Alaska’s inflation adjusted “real” GSP grew 3.6% at annualized rates in the third quarter of 2023, compared to the average U.S.

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%.

Alaska’s real GSP improvement in the third quarter of 2023 was aided by gains in the Transportation & Warehousing and Construction sectors.

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.

The Construction sector added 2,100 positions for a year over year growth rate of 12.7% in November 2024.

The larger Health Care sector grew by 1,500 jobs for an annual growth rate of 3.7%.

The Oil & Gas sector increased by 9.2% or 700 new direct jobs.

Transportation, Warehousing and Utilities added 1,000 jobs for a 4.5% growth rate.

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.

Declining sectors between November 2023 and November 2024 were Manufacturing (primarily seafood processing) shrinking 500 jobs (-6.6%), Information, down 100 jobs (-2.2%), and Retail lost 100 jobs (-0.3%).

Alaska’s Gross State Product (“GSP”) in the third quarter of 2024, exceeded $70 billion for the first time, and is estimated to be $70.1 billion, according to the Federal Bureau of Economic Analysis (“BEA”).

Alaska’s inflation adjusted “real” GSP increased 6.5% in 2023, placing Alaska fifth best of all 50 states.

In the third quarter of 2024 Alaska GSP increased at an annualized rate of 2.2%, compared to the average U.S.

growth rate of 3.1%.

Alaska’s real GSP improvement in the third quarter of 2024 was primarily caused by growth in the Health Care, Trade, Transportation and Warehousing sectors.

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 of 2.2% for Alaska over the second quarter of 2023, compared to the national average of 3.5%.

The monthly average price of Alaska North Slope (“ANS”) crude oil was in a range between $75.64 and $95.05 in 2023.

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.

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.

The $445 million increase in personal income in the third quarter in Alaska came from a $310 million increase in net earnings from wages, $145 million growth in government transfer receipts (which grew in all 50 states), and a $10 million decrease in investment income.

The monthly average price of Alaska North Slope (“ANS”) crude oil was at an annual high of $89.05 in April 2024 and most recently averaged $72.50 in November 2024.

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.

This is primarily a result of new production coming on-line in and around the NPR-A region west of Prudhoe Bay.

A partnership between Santos and Repsol is constructing the new Pikka field and ConocoPhillips is developing the large new Willow field.

There are also a number of smaller new fields in Alaska’s North Slope that are contributing to the State of Alaska’s production growth estimates.

According to the Alaska Multiple Listing Services, the average sales price of a single family home in Anchorage rose 6.2% in 2024 to $509,994, following a 5.2% increase in 2023.

This was the sixth consecutive year of price increases.

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 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.

These two markets represent where the vast majority of the Bank’s residential lending activity occurs.

However, the Alaska Multiple Listing Services reported a large decrease in the number of units sold in both communities.

There were 2,162 housing units sold in Anchorage in 2023, down 24.1% compared to 2,849 in 2022.

In the Matanuska Susitna Borough there were 1,632 homes sold in 2023, compared to 2,103 in 2022, a decrease of 22.4%.

The Alaska Multiple Listing Services reported a 3.4% increase in the number of units sold in Anchorage when comparing 2024 to 2023.

There was virtually no change in the number of homes sold in the Matanuska Susitna Borough, with only four fewer homes sold in 2024 than in 2023 or 0.2%.

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.

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.

Real estate values generally are affected by economic and other conditions in the area where the real estate is located, fluctuations in interest rates, changes in tax and other laws, and other matters outside of our control.

1 unchanged sentence

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.

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.

Two significant oil production projects, Willow and Pikka, have been sanctioned and are under development, however the Willow project still faces legal challenges.

Because of their size, we believe each of these projects faces tremendous challenges.

We believe various political decisions need to be made by government regulators, issues need to be resolved in the court system, and multi-billion dollar financial commitments need to be made by the private sector if these large natural resource projects are to advance.

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.

Two significant oil production projects, Willow and Pikka, have been sanctioned and are under development, with first oil expected from Pikka in 2026 and from Willow in 2029.

Both of these projects should continue to generate activity on the North Slope with an estimated $1.5 billion in oil and gas construction spending on these projects forecasted for 2025.

We believe the companies developing these projects will continue to provide significant capital investment, as long as oil prices remain sufficient to justify the economics of the projects and the tax environment remains stable.

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.

The oil industry plays a significant role in the economy of Alaska, but revenues for the State of Alaska are less dependent on the oil industry than they have been historically due to the implementation of a percent of market value (“POMV”) concept that has balanced and created more certainty in state revenue streams.

5 unchanged sentences

However, we believe Alaska's economy is less sensitive to oil price volatility within a six- to twelve-month time frame than Alaska's state government budget.

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

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 our exposure to the tourism industry diversifies the Company's customer base in the long-term.

1 unchanged sentence

Southeast Alaska is the primary destination for cruise ships that visit Alaska.

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.

On December 29, 2023 the Juneau Empire reported that 1.65 million cruise ship passengers visited Alaska in 2023, and the totals for 2024 and 2025 are expected to be similar to 2023.

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.

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 distribution was $1,312 per eligible resident in 2023 for an aggregate distribution of approximately $819.2 million.

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.

We operate in a highly competitive and concentrated banking environment.

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.

Many of our competitors have substantially greater resources and capital than we do and offer products and services that are not offered by us.

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.

Our non-bank competitors also generally operate under fewer regulatory constraints, and in the case of credit unions, are not subject to income taxes.

6 unchanged sentences

Currently, there are seven commercial banks operating in Alaska.

At 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.

The following table sets forth market share data for the banks and credit unions having a presence in Alaska as of June 30, 2023, the most recent date for which comparative deposit information is available.

At 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.

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.

Financial institution Number of branches Total deposits (in thousands) Market share of total bank deposits

15 unchanged sentences

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”).

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 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 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.

1 unchanged sentence

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.

The Bank's subsidiary, SCF, is subject to supervision and regulation by the California Department of Financial Protection and Innovation.

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.

These include limitations on the ability of the Bank to pay dividends to the Company, numerous federal and state consumer protection laws imposing requirements on the making, enforcement, and collection of consumer loans, and restrictions on and regulation of the sale of mutual funds and other uninsured investment products to customers.

The FDIC provides insurance coverage for certain deposits held by the Bank through the Deposit Insurance Fund, which the FDIC maintains by assessing depository institutions an insurance premium.

The Bank is assessed deposit insurance premiums by the FDIC using a risk-based assessment rate and an adjusted average total assets.

A depository institution’s deposit insurance may be terminated by the FDIC upon a finding that the institution’s financial condition is unsafe or unsound, or that the institution has engaged in unsafe or unsound practices, or has violated any applicable rule, regulation, or order or condition enacted or imposed by a regulatory agency.

In November 2023, the FDIC implemented a special assessment to recover the loss to the Deposit Insurance Fund following the closures of Silicon Valley Bank, Signature Bank and First Republic Bank earlier in the year.

The assessment was based on reported uninsured deposits as of December 31, 2022.

The FDIC could cease collection early or extend the special assessment period as they deem necessary depending on whether the amount the FDIC collects from the special assessment is higher or lower than the actual or estimated FDIC losses.

The Dodd-Frank Act significantly modified and expanded the legal and regulatory requirements imposed on banks and other financial institutions.

5 unchanged sentences

(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;

(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.

11 unchanged sentences

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.

In addition, capital rules may affect the Company's ability to pay dividends.

Subject to certain limitations and restrictions, a bank holding company, with prior approval of the FRB, may acquire an out-of-state bank.

5 unchanged sentences

It is the policy of the FRB that bank holding companies should pay cash dividends on common stock only out of net income available over the past year and only if the prospective rate of earnings retention is consistent with the organization’s current and expected future capital needs, asset quality and overall financial condition.

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 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.

Additionally, the Alaska Corporations Code generally prohibits the Company from making any distributions to the Company's shareholders unless the amount of the retained earnings of the Company immediately before the distribution equals or exceeds the amount of the proposed distribution.

6 unchanged sentences

The Company could be required to commit resources to its subsidiary bank in circumstances where it might not do so, absent such requirement.

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”).

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).

The Rules apply to both depository institutions (such as the Bank) and their holding companies (such as the Company).

20 unchanged sentences

The Rules set forth the manner in which certain capital elements are determined, including but not limited to, requiring certain deductions related to mortgage servicing rights and deferred tax assets.

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.

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 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.

Following the enactment of certain federal legislation in 2018, the federal banking regulators (including the FDIC and FRB) proposed a rule intended to simplify capital rules for certain community banks and their holding companies, the Community Bank Leverage Ratio (“CBLR”).

Qualifying community banking organizations can elect to opt-into the CBLR and be under a new capital requirement rather than the current capital framework.

To be eligible to make this election, the community banking organization would have to have less than $10 billion in assets, have a community bank leverage ratio of at least 9.00% and meet certain other criteria (including limits on off-balance sheet exposures and trading assets and liabilities).

The CBLR would generally be the ratio of the organization's total bank equity capital to average assets, subject to certain adjustments.

The intent of the CBLR is to simplify but not weaken capital requirements for qualifying community banks.

Management has not elected to opt in to these new capital rules.

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.

16 unchanged sentences

The FDIC and the Division may each accept the results of an examination by the other in lieu of conducting an independent examination.

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.

Such priority creditors would include the FDIC, which succeeds to the position of insured depositors to the extent it has made payments to such depositors.

4 unchanged sentences

A financial institution’s CRA rating can affect an institution’s future business.

For example, a federal banking agency will take CRA performance into consideration when acting on an institution’s application to establish or move a branch, to merge or to acquire assets or assume liabilities of another institution.

In its most recent CRA examination, the Bank received a “Satisfactory” rating from the FDIC.

5 unchanged sentences

In addition, the final rule emphasizes smaller loans and investments that can have a high impact and be more responsive to the needs of low and moderate income communities.

The final rule will take effect on April 1, 2024;

however, 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.

Industry organizations have challenged the final rule in court, and on March 29, 2024, the United States District Court for the Northern District of Texas granted an injunction and stay of the final rule.

The final outcome of such challenge is uncertain.

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.

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”).

The BSA is intended to require financial institutions to develop policies, procedures, and practices to prevent and deter money laundering.

The regulations implementing the BSA require financial institutions to establish risk-based procedures for conducting ongoing customer due diligence and procedures for understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile.

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.

The USA PATRIOT Act is designed to deny terrorists and criminals the ability to obtain access to the United States’ financial system and has significant implications for depository institutions, brokers, dealers, and other businesses involved in the transfer of money.

The USA PATRIOT Act mandates that financial service companies implement additional policies and procedures and take heightened measures designed to address any or all of the following matters:

1 unchanged sentence

Further, on January 1, 2021, Congress passed the National Defense Authorization Act (the “NDAA”), which included the enactment of AMLA, and which enacted the most significant overhaul of the BSA and related anti-money laundering laws since the USA PATRIOT Act.

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.

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.

On September 29, 2022, FinCEN issued a final regulation implementing the BSA amendments included in the NDAA with respect to beneficial ownership reporting.

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.

2 unchanged sentences

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.

Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes.

If we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial penalties.

14 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-K

Item 1. Business