What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-10 compared with 2024-03-08 · 549 added, 204 removed, 1662 unchanged (31% of the section changed)

49 unchanged sentences

The qualitative factor methodology is based on quantitative metrics, but also includes a high degree of subjectivity and changes in any of the metrics could have a significant impact on our calculation of the allowance.

We identified management’s estimation and application of the forecast of economic conditions used in the calculation of probabilities of default, and management’s qualitative factors used to estimate the expected loss rate in the allowance for credit losses – loans as a critical audit matter.

We identified management’s estimation and application of the forecast of economic conditions used in the calculation of the probability of default and management’s qualitative factors used to estimate the expected loss rate in the allowance for credit losses – loans as a critical audit matter.

The forecast of economic conditions component of the allowance for credit losses - loans is used to compare the conditions that existed during the historical period to current conditions and future expectations, and to make adjustments to the historical data accordingly.

1 unchanged sentence

Auditing management’s judgments regarding the application of forecasted economic conditions and qualitative adjustments involved significant audit effort, as well as especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.

The primary procedures we performed to address the critical audit matters included:

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

Our audit procedures related to the critical audit matter included the following, among others:

• Testing the design, implementation, and operating effectiveness of controls relating to management’s calculation of the allowance for credit losses – loans, including controls over the reasonableness of forecasted economic conditions related to unemployment and qualitative factors used in the estimation of the expected loss rate;

• Obtaining management’s analysis and supporting documentation related to the forecast of economic conditions used to determine the probabilities of default and testing whether forecast of economic conditions and key assumptions used in the calculation of the allowance for credit losses - loans are reasonable and supportable based on the analysis provided by management;

• Evaluating the methodology and the reasonableness of assumptions used by management to estimate the qualitative factors and testing whether these factors were applied to the calculation appropriately;

• Evaluating the relevance and reliability of the data used by management to estimate the forecasted economic conditions and the qualitative factors used in the calculation of the allowance for credit losses – loans;

• Obtaining management’s analysis and supporting documentation related to the forecast of economic conditions used to determine the probability of default and testing whether the forecast of economic conditions and key assumptions used in the calculation of the allowance for credit losses - loans are reasonable and supportable based on the analysis provided by management;

• Evaluating the methodology and the reasonableness of assumptions used by management to estimate the forecast of economic conditions and qualitative factors and testing whether these factors were applied to the calculation appropriately;

• Evaluating the relevance and reliability of the data used by management to estimate the qualitative factors used in the calculation of the allowance for credit losses – loans;

• Developing an independent expectation of the qualitative adjustments using a combination of internal and external data and comparing the expected balance to the Company’s recorded amounts.

68 unchanged sentences

Net Interest Income 113,183 103,256 95,115

Provision (benefit) for credit losses 3,842 1,846 ( 4,099 )

Net Interest Income After Provision (Benefit) for Credit Losses 99,414 93,269 84,926

Provision for credit losses 3,293 3,842 1,846

Net Interest Income After Provision for Credit Losses 109,890 99,414 93,269

Other Operating Income

6 unchanged sentences

465 120 ( 1,119 )

Keyman insurance proceeds — 2,002 —

Gain on sale of marketable equity securities, net 112 — —

Keyman insurance proceeds — — 2,002

Other income 3,116 2,550 2,684

7 unchanged sentences

Insurance expense 2,961 2,519 2,054

OREO (income) expense, net of rental income and gains on sale ( 794 ) 500 ( 432 )

Intangible asset amortization expense — 17 25

OREO (income) expense, net of rental income and gains on sale ( 385 ) ( 794 ) 500

Other operating expense 8,540 7,426 6,520

18 unchanged sentences

Derivatives and hedging activities:

Unrealized holding (losses) gains during the period

( 88 ) 2,409 780

Unrealized holding gains (losses) during the period 411 ( 88 ) 2,409

Income tax (expense) benefit related to unrealized gains and losses

15 unchanged sentences

Other comprehensive (loss), net of tax — — — — ( 25,675 ) ( 25,675 )

Cumulative effect of adoption of ASU 2016-13 — — — 2,400 — 2,400

Net income — — — 30,741 — 30,741

24 unchanged sentences

Depreciation and amortization of premises 3,610 3,294 3,139

Amortization of software 1,153 1,164 1,161

Intangible asset amortization — 17 25

1 unchanged sentence

Unrealized (gain) loss on marketable equity securities ( 465 ) ( 120 ) 1,119

Deferred tax expense (income)

580 2,110 ( 1,298 )

Deferred tax (income) expense ( 152 ) 580 2,110

Stock-based compensation 913 937 742

1 unchanged sentence

Provision (benefit) for credit losses 3,293 3,842 1,846

Additions to home mortgage servicing rights carried at fair value ( 3,616 ) ( 4,623 ) ( 6,088 )

Origination of home mortgage servicing rights carried at fair value ( 4,748 ) ( 3,616 ) ( 4,623 )

Purchases of home mortgage servicing rights carried at fair value ( 2,328 ) — —

Change in fair value of home mortgage servicing rights carried at fair value 201 2,687 ( 288 )

6 unchanged sentences

Net changes in assets and liabilities:

(Increase) decrease in accrued interest receivable ( 2,021 ) ( 3,091 ) 1,133

Decrease (increase) in accrued interest receivable 456 ( 2,021 ) ( 3,091 )

Decrease (increase) in other assets ( 13,503 ) 5,347 6,641

Increase (decrease) in other liabilities 7,185 ( 3,703 ) ( 9,695 )

Net Cash Provided by Operating Activities 38,925 78,123 111,989

(Decrease) increase in other liabilities ( 5,539 ) 7,185 ( 3,703 )

Net Cash (Used) Provided by Operating Activities

( 8,727 ) 38,775 78,072

Investing Activities:

7 unchanged sentences

Proceeds from redemption of FHLB stock 30,002 6,539 21

(Increase) decrease in purchased receivables, net ( 16,848 ) ( 13,007 ) 6,935

(Increase) decrease in loans, net ( 287,893 ) ( 83,839 ) 28,975

Decrease (increase) decrease in purchased receivables, net 10,672 ( 16,848 ) ( 13,007 )

(Increase) in loans, net ( 341,764 ) ( 287,893 ) ( 83,839 )

Proceeds from sale of other real estate owned 392 1,079 5,224

Purchases of software ( 150 ) ( 51 ) ( 170 )

Sallyport Commercial Finance, LLC acquisition, net of cash received ( 40,658 ) — —

Purchases of premises and equipment ( 620 ) ( 6,166 ) ( 3,796 )

16 unchanged sentences

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

Loans made to facilitate sales of other real estate owned $ — $ — $ 1,012

Non-cash lease liability arising from obtaining right of use assets $ 250 $ 423 $ 1,128

Cash dividends declared but not paid $ 101 $ 110 $ 85

Cumulative effect adjustment to retained earnings $ — $ — $ 2,400

Acquisitions:

Assets acquired $ 66,129 $ — $ —

Liabilities assumed ($ 41,275 ) $ — $ —

Pre-existing debt settlement

$ 12,000 $ — $ —

See notes to consolidated financial statements

5 unchanged sentences

The Bank also engages in retail mortgage origination services through its wholly-owned subsidiary, Residential Mortgage Holding Company, LLC, the parent company of Residential Mortgage, LLC (collectively “RML”).

Additionally, the Bank through its wholly-owned subsidiary, Northrim Funding Services (“NFS”), operates a factoring division in Bellevue, Washington.

The Company has an equity investment in Pacific Wealth Advisors, LLC (“PWA”) through its wholly owned subsidiary, Northrim Investment Services Company ("NISC"), and the Company had an equity investment in Homestate Mortgage Company, LLC (“Homestate”) through RML until its dissolution in 2023.

In addition, the Bank also engages in specialty finance activities through a division of the Bank, Northrim Funding Services (“NFS”), which operates a factoring division in Bellevue, Washington, and through the Bank's wholly-owned subsidiary, Sallyport Commercial Finance, LLC (“SCF”), which provides factoring, asset based lending and alternative working capital solutions to small and medium sized enterprises in the United States, Canada, and the United Kingdom.

The Company completed the acquisition of SCF on October 31, 2024.

SCF holds a 100% interest in Sallyport Commercial Finance CAN, LLC, and a 40 % interest in Sallyport Commercial Finance LTD (“SCF LTD”).

Sallyport Commercial Finance ULC (“SCF CAN”), a wholly-owned subsidiary of Sallyport Commercial Finance CAN, LLC, and SCF LTD offer the same products and services as SCF, but they operate in Canada and the United Kingdom, respectively.

Use of Estimates:

4 unchanged sentences

Consolidation:

The Company consolidates affiliates in which we have a controlling interest.

The accompanying consolidated financial statements include the accounts of the Company, the Bank, RML, and NISC.

The accompanying consolidated financial statements include the accounts of the Company, the Bank, RML, SCF, and Northrim Investment Services Company (“NISC”).

Significant intercompany balances have been eliminated in consolidation.

2 unchanged sentences

As a result, the junior subordinated debentures issued by the Company to Trust 2 are reflected on the Company’s consolidated balance sheet as junior subordinated debentures.

The Company has determined that PWA and Homestate are not variable interest entities and therefore, the Company does not consolidate the balance sheets and income statements of PWA or Homestate into its financial statements.

The Company owns a 22 % interest in PWA and owned a 30 % interest in Homestate prior to its dissolution in 2023, and these investments are accounted for as equity method investments.

Results of PWA and Homestate are included in “Other income” in our Consolidated Statements of Income.

Variable interest entities (“VIEs”):

The Company consolidates affiliates in which we have a controlling interest.

To determine if we have a controlling financial interest in an entity we first evaluate if we are required to apply the variable interest entity model, otherwise the entity is evaluated under the voting interest model.

The Company continuously evaluates its non-majority owned investments in affiliates to determine if they are VIEs.

Where we hold current or potential rights that give us the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance combined with a variable interest that gives us the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, we have a controlling financial interest in that VIE.

Rights held by others to remove the party with power over the VIE are not considered unless one party can exercise those rights unilaterally.

When changes occur to the design of an entity we reconsider whether it is subject to the VIE model.

We continuously evaluate whether we have a controlling financial interest in a VIE.

We hold a controlling financial interest in other entities where we currently hold, directly or indirectly, more than 50% of the voting rights or where we exercise control through substantive participating rights.

We reevaluate whether we have a controlling financial interest in these entities when our voting or substantive participating rights change.

Affiliates are unconsolidated VIEs and other entities in which we do not have a controlling financial interest, but over which we have significant influence, most often because we hold a voting interest of 20% to 50%.

Affiliates are accounted for as equity method investments.

As of December 31, 2024, the Company owns a 100% interest in RML and a 100% interest in SCF and consolidates these entities into its financial statements.

The Company owns a 21 % interest in PWA, a 40 % interest in SCF LTD, and owned a 30 % interest in Homestate prior to its dissolution in 2023, and these investments are accounted for as equity method investments.

The Company does not consolidate the balance sheets and income statements of PWA, Homestate, or SCF LTD into its financial statements.

The Company has determined that PWA and Homestate are not VIEs.

The Company has determined that SCF LTD is a VIE.

However, the Company does not have a controlling interest in SCF LTD and therefore does not consolidate SCF LTD's operations into its financial statements.

The Company's portion of the r esults of PWA, SCF LTD, and Homestate, prior to its dissolution in 2023, are included in “Other income” in our Consolidated Statements of Income.

Investments in low income housing tax credit companies are presented on a one-line basis in the caption “Other assets” in our Consolidated Balance Sheets.

4 unchanged sentences

Management, including the CODM, review operating results by the revenue of different services.

For the year ended December 31, 2023 and 2022, the Company has two operating business lines;

Community Banking and Home Mortgage Lending.

Information about the Company's operating segments is included in Note 25 of the Notes to the Company's Consolidated Financial Statements included in Part II.

Item 8 of this report.

For the year ended December 31, 2024 and 2023, the Company has three operating business lines;

Community Banking, Home Mortgage Lending, and Specialty Finance.

Information about the Company's reportable segments is included in Note 26.

Reclassifications:

23 unchanged sentences

Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes.

Credit-related impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings.

Credit-related impairment is recognized as an allowance for credit losses (“ACL”) on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings.

The ACL may be reversed if conditions change.

18 unchanged sentences

Loan origination fees received in excess of direct origination costs are deferred and accreted to interest income using the interest method in accordance with Accounting Standards Codification (“ASC”) 310 over the life of the loan.

Loan balances are

charged-off to the ACL when management believes that collection of principal is unlikely.

Loan balances are charged-off to the ACL when management believes that collection of principal is unlikely.

Interest income on loans is accrued and recognized on the principal amount outstanding except for loans in a nonaccrual status.

4 unchanged sentences

The Company classifies fair value measurements on loans as level 3 valuations in the fair value hierarchy because of their use of unobservable inputs.

Acquired Loans:

Loans purchased that are of poor credit quality and with more than an insignificant evidence of credit deterioration since their origination or issuance are purchased credit deteriorated (“PCD”) loans.

PCD assets are recorded at their purchase price plus an ACL estimated at the time of acquisition.

Under this approach, there is no provision for credit losses recognized at acquisition;

rather, there is a gross-up of the purchase price of the financial asset for the estimate of expected credit losses and a corresponding ACL recorded.

Changes in estimates of expected credit losses after acquisition are recognized as provision for credit losses in subsequent periods.

In general, interest income recognition for PCD financial assets is consistent with interest income recognition for the similar non-PCD financial asset.

Allowance for Credit Losses - Loans :

Under the current expected credit loss model (“CECL”) adopted by the Company on January 1, 2021, the ACL on loans is a valuation allowance estimated at each balance sheet date that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

Under the current expected credit loss model (“CECL”), the ACL on loans is a valuation allowance estimated at each balance sheet date that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

The Company estimates the ACL on loans based on the underlying assets’ amortized cost basis, which is the amount at which the loan is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs.

7 unchanged sentences

Depending on the nature and size of the pool of financial assets with similar risk characteristics, the Company uses either a DCF method or a weighted average remaining life method to estimate expected credit losses quantitatively.

The weighted average remaining life method uses exposure at default, along with the expected credit losses adjusted for prepayments to calculate the required allowance.

The weighted average remaining life method uses exposure at default, along with the expected credit

losses adjusted for prepayments to calculate the required allowance.

The Company utilizes peer historical loss data to estimate credit losses under the weighted average remaining life method.

9 unchanged sentences

When we identify a loan for individual evaluation, we measure expected credit losses using DCF, except when the sole remaining source of the repayment for the loan is the liquidation of the collateral.

In these cases, we use the current fair value of the

collateral, less selling costs, instead of DCF.

In these cases, we use the current fair value of the collateral, less selling costs, instead of DCF.

The analysis of collateral dependent loans includes external appraisals or in-house evaluations on loans secured by real property, management’s assessment of the current market, recent payment history and an evaluation of other sources of repayment.

9 unchanged sentences

Loans guaranteed by the U.S.

government, including Paycheck Protection Program (“PPP”) loans The Company actively participated in assisting its customers with applications for loans through the program.

Loans funded through the PPP program are fully guaranteed by the U.S.

government, including Paycheck Protection Program (“PPP”) loans The Company actively participated in assisting its customers with applications for loans through the PPP.

Loans funded through the PPP are fully guaranteed by the U.S.

government subject to certain representations and warranties.

21 unchanged sentences

Changes in the ACL are recorded as provision for (or reversal of) credit loss expense.

Acquired Loans and Purchased Receivables:

Loans and purchased receivables acquired that are of poor credit quality and with more than an insignificant evidence of credit deterioration since their origination or original purchase are purchased credit deteriorated (“PCD”) assets.

PCD assets are recorded at their purchase price plus an ACL estimated at the time of acquisition.

Under this approach, there is no provision for credit losses recognized at acquisition;

rather, there is a gross-up of the purchase price of the financial asset for the estimate of expected credit losses and a corresponding ACL recorded.

Changes in estimates of expected credit losses after acquisition are recognized as provision for credit losses in subsequent periods.

In general, interest income recognition for PCD financial assets is consistent with interest income recognition for the similar non-PCD financial asset.

Other Real Estate Owned:

33 unchanged sentences

Servicing Rights:

Mortgage servicing rights (“MSRs”) and commercial servicing rights (“CSRs”) associated with loans originated and sold, where servicing is retained, are measured at fair value and changes in fair value are reported through earnings.

MSRs and commercial servicing rights (“CSRs”) associated with loans originated and sold, where servicing is retained, are measured at fair value and changes in fair value are reported through earnings.

Changes in the fair value of servicing rights occur primarily due to the collection/realization of expected cash flows, as well as changes in valuation inputs and assumptions.

14 unchanged sentences

These assets and liabilities are measured at fair value, and changes in fair value are recorded in earnings.

using derivatives, the Company is exposed to counterparty credit risk, which is the risk that counterparties to the derivative contracts do not perform as expected.

By using derivatives, the Company is exposed to counterparty credit risk, which is the risk that counterparties to the derivative contracts do not perform as expected.

If a counterparty fails to perform, our counterparty credit risk is equal to the amount reported as a derivative asset on our balance sheet, net of cash collateral received.

32 unchanged sentences

Payments are typically received immediately or in the following month.

Revenue within the contracts with customers guidance is recognized when obligations under the terms of a contract with customers are satisfied.

Revenue within the contracts with customers is recognized when obligations under the terms of a contract with customers are satisfied.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

When the amount of consideration is variable, the Company will only recognize

revenue to the extent that it is probable that the cumulative amount recognized will not be subject to a significant reversal in the future.

When the amount of consideration is variable, the Company will only recognize revenue to the extent that it is probable that the cumulative amount recognized will not be subject to a significant reversal in the future.

Substantially all of the Company's contracts with customers have expected durations of one year or less and payments are typically due when or as the services are rendered or shortly thereafter.

17 unchanged sentences

Our policy is to recognize interest and penalties on unrecognized tax benefits in “Other operating expense" in the Consolidated Statements of Income.

Foreign Currency Translation:

Assets, liabilities and operations of foreign subsidiaries, which includes subsidiaries owned by SCF, are recorded based on the functional currency of each entity.

The Company has determined that the functional currency of foreign subsidiaries is the local currency.

The assets, liabilities and operations are translated, for consolidation purposes, from the local currency to the U.S.

dollar reporting currency at period-end rates for assets and liabilities and generally at average

rates for results of operations.

Related translation adjustments are reported as a component of other comprehensive income, whereas gains and losses resulting from foreign currency transactions are included in results of operations in other operating income.

Foreign currency translation adjustments were not material in 2024.

Earnings Per Share:

14 unchanged sentences

Comprehensive Income:

Comprehensive income consists of net income, net unrealized gains (losses) on securities available for sale after the tax effect, and net unrealized gains (losses) on derivative and hedging activities after the tax effect.

Comprehensive income consists of net income, net unrealized gains (losses) on securities available for sale after the tax effect, net unrealized gains (losses) on derivative and hedging activities after the tax effect, and foreign currency transaction adjustments after the tax effect.

Concentrations:

Substantially all of the Company’s business is derived from the Anchorage, Matanuska-Susitna Valley, Fairbanks, Kenai Peninsula, Kodiak, Nome, and Southeast areas of Alaska.

As such, the Company’s growth and operations depend upon the economic conditions of Alaska and these specific markets.

These areas rely primarily upon the natural resources industries, particularly oil production, as well as tourism, government and U.S.

A significant portion of the Company’s business is derived from operations in Alaska.

As such, the Company’s growth and operations depend upon the economic conditions of Alaska.

Alaska relies primarily upon the natural resources industries, particularly oil production, as well as tourism, government and U.S.

military spending for their economic success.

2 unchanged sentences

As a result, local or regional economic downturns, or downturns that disproportionately affect one or more of the key industries in regions served by the Company, may have a more pronounced effect upon its business than they might on an institution that is less geographically concentrated.

The extent of the

future impact of these events on economic and business conditions cannot be predicted;

The extent of the future impact of these events on economic and business conditions cannot be predicted;

however, prolonged or acute fluctuations could have a material and adverse impact upon the Company’s results of operation and financial condition.

14 unchanged sentences

Accounting pronouncements implemented in 2024

In March 2022, the Financial Accounting Standards Board (“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 method.

ASU 2023-02 provides amendments to Accounting Standards Codification (“ASC”) paragraph 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 does not believe that the adoption of ASU 2023-02 will have a material impact on the Company's consolidated financial statements.

The Company adopted ASU 2023-02 on January 1, 2024, and the adoption 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 is operating segments.

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

ASU 2023-07 is effective for the Company for fiscal years beginning after December 15, 2023 and must be applied on a retrospective basis.

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

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 requirements, primarily through enhanced disclosures about significant segment expenses.

The Company adopted ASU 2023-07 on January 1, 2024, and the adoption 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”).

2 unchanged sentences

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.

The Company intends to adopt ASU 2023-09 prospectively and does not believe that the adoption 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 and not required to understand or apply the guidance.

In other instances, the references were used in prior Concepts 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 intends to adopt ASU 2024-02 prospectively and does not believe that the adoption will have a material impact on the Company's consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”).

This updated mandates that public business entities provide detailed disclosures in the notes to the financial statements, breaking down specific expense categories such as purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities included in each relevant expense cation.

The objective is to enhance transparency, enabling investors to gain a clearer understanding of the nature and impact of these expenses on the Company's financial performance.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and may be applied on a prospective or retrospective basis.

The Company intends to adopt ASU 2024-03 prospectively and does not believe that the adoption will have a material impact on the Company's consolidated financial statements.

NOTE 2 - Business Combinations

On October 31, 2024, the Company completed the acquisition of 100 % of the equity interest in SCF in a cash transaction that is valued at approximately $ 53.9 million.

The primary reason for the acquisition was to expand the Company's presence in the specialty finance industry.

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

SCF will operate as a wholly-owned subsidiary, and is expected to complement the products currently offered by Northrim Funding Services, a factoring division of Northrim Bank.

The consideration transferred or transferable to the former owners of SCF and the assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting and were recorded at their estimated fair values as of the October 31, 2024 acquisition date.

The Company paid $ 47.9 million in cash on October 31, 2024 when the acquisition was completed.

The Company had pre-existing loans to SCF which totaled $ 12 million.

The fair value of these loans approximate their carrying value, and as a result of the acquisition, the loans were effectively settled at their carrying value, resulting in no gain or loss.

The fair value of the loans were considered as part of the total purchase consideration in the transaction.

Estimated fair values recorded in the transaction are subject to change for up to one year after the closing date of the acquisition.

The application of the acquisition method of accounting resulted in the recognition of goodwill in the amount of $ 35.0 million.

No other intangibles were identified.

The former owners of SCF (the “sellers”) will receive additional cash proceeds (the “earn-out payments”) of up to $ 6 million.

The earn-out payments of $ 2 million per year are payable on each of the first three anniversaries of the closing date.

The purchase agreement provides for the these earn-out payments to be paid to the sellers in future periods, provided that certain principal employees of SCF, including certain of the sellers, have not been terminated for cause or terminated their employment for good reason.

The earn-out payments have not been included in acquisition consideration and will be expensed when incurred as compensation expense in future periods.

A summary of the net assets acquired and the estimated fair value adjustments are presented below:

(In Thousands) October 31, 2024

Cost basis net assets $ 29,638

Cash payment made ( 47,855 )

Pre-existing debt effectively settled ( 12,000 )

Fair value adjustments:

Net loans ( 1,260 )

Net purchased receivables ( 3,524 )

Goodwill ($ 35,001 )

The $ 35.0 million of goodwill recorded in connection with the acquisition represents the excess purchase price over the estimated fair value of the net assets acquired, and resulted from the expected decrease in funding costs and, to a lesser extent, expected operational efficiencies.

All of the goodwill is expected to be deductible for tax purposes.

A summary of the assets acquired and liabilities assumed at their estimated fair values are presented below:

(In Thousands) October 31, 2024

Assets Acquired:

Cash and equivalents $ 7,197

Loans, net 9,158

Purchased receivables, net 48,034

Premises and equipment, net 54

Right-of-use assets 44

Other assets 1,642

Total assets acquired $ 66,129

Liabilities Assumed:

Borrowings $ 40,207

Lease liability 47

Other liabilities 1,021

Total liabilities assumed $ 41,275

The fair value of assets acquired and liabilities assumed approximates book value as of the acquisition date as all loans and borrowings have variable interest rates.

Purchased receivables have an average life of less than 45 days.

Some of the assets acquired exhibited evidence of credit deterioration at the acquisition date.

These assets were designated as PCD assets in accordance with U.S.

The following table presents PCD loan and purchased receivable activity at the date of acquisition:

(In Thousands) Loans Purchased Receivables

Unpaid principal balance $ 10,418 $ 51,558

ACL at acquisition ( 1,260 ) ( 3,524 )

Total $ 9,158 $ 48,034

Based on an evaluation in accordance with Rule 3-05 and Rule 11-01(b) of Regulations S-X, the acquisition of SCF does not meet the significance thresholds requiring separate financial statement disclosure.

The operations of SCF are included in our operating results from October 31, 2024, and added revenue of $ 2.6 million, non-interest expense of $ 1.5 million, and net income of $ 943,000 , before taxes, for the year ended December 31, 2024.

SCF’s results of operations prior to the acquisition are not included in our operating results.

Additionally, deal-related costs of $ 1.1 million for the year ended December 31, 2024 have been incurred and expensed in connection with the acquisition of Sallyport and recognized within professional and outside services expense on the Consolidated Statements of Income .

The following table presents unaudited pro forma results of operations for the years ended December 31, 2024 and 2023 as if the acquisition of SCF had occurred on January 1, 2023.

The proforma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2023, primarily due to the Company's lower cost of funding as compared to SCF.

(In Thousands, except per share data) December 31, 2024

Company SCF 1

Pro Forma Adjustments 2

Pro Forma Combined

Net interest and other income $ 155,224 $ 12,900 $ 168,124

Net income 36,971 4,224 ( 1,201 ) 39,994

Earnings Per Share, Basic $ 6.72 $ 7.27

Earnings Per Share, Diluted $ 6.62 $ 7.16

Weighted Average Shares Outstanding, Basic 5,502,797 5,502,797

Weighted Average Shares Outstanding, Diluted 5,583,983 5,583,983

December 31, 2023

Net interest and other income $ 129,631 $ 15,399 $ 145,030

Net income 25,394 7,258 ( 2,063 ) 30,589

Earnings Per Share, Basic $ 4.53 $ 5.46

Earnings Per Share, Diluted $ 4.49 $ 5.40

Weighted Average Shares Outstanding, Basic 5,601,471 5,601,471

Weighted Average Shares Outstanding, Diluted 5,661,460 5,661,460

1 SCF represents results from January 1 to October 31 for 2024 and represents results from January 1 to December 31, for 2023.

2 Proforma adjustments include a provision for income taxes using the Company's statutory rate.

NOTE 3 – Cash and Due from Banks

The Company is required to maintain a $ 300,000 balance with a correspondent bank for outsourced servicing of ATMs at both December 31, 2023 and 2022.

The Company is required to maintain a $ 100,000 and $ 30,000 balance with a correspondent bank to collateralize the initial margin and the fair value exposure of one of its interest rate swaps, respectively, at December 31, 2024 and 2023.

22 unchanged sentences

Treasury and government sponsored entities $ 444,370 $ 294 ($ 11,733 ) $ — $ 432,931

Municipal securities 820 — ( 4 ) — 816

Corporate bonds 9,009 9 ( 223 ) — 8,795

28 unchanged sentences

Corporate bonds — — 4,786 ( 223 ) 4,786 ( 223 )

Municipal securities — — 816 ( 4 ) 816 ( 4 )

Collateralized loan obligations — — 4,993 ( 2 ) 4,993 ( 2 )

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 December 31, 2023 and 2022, there were two and 38 available for sale securities in an unrealized loss position without an ACL, respectively, that have been in a loss position for less than twelve months.

At December 31, 2024 and 2023, there were four and two available for sale securities in an unrealized loss position without an ACL, respectively, that have been in a loss position for less than twelve months.

There were 40 and 72 available for sale securities without an ACL with unrealized losses at December 31, 2024 and 2023, respectively, that have been at a loss position for more than twelve months.

At December 31, 2023 and 2022, there were zero and three held to maturity securities in an unrealized loss position without an ACL, respectively, that have been in a loss position for less than twelve months.

At December 31, 2023 and 2022, there were five and two held to maturity securities in an unrealized loss position without an ACL, respectively, that have been in a loss position for more than twelve months.

At both December 31, 2024 and 2023, there were zero held to maturity securities in an unrealized loss position without an ACL that have been in a loss position for less than twelve months.

At December 31, 2024 and 2023, there were three and five held to maturity securities in an unrealized loss position without an ACL, respectively, that have been in a loss position for more than twelve months.

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 December 31, 2023, management believes that the unrealized

losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore no losses have been recognized in the Company's Consolidated Statements of Income.

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

At December 31, 2024 and 2023, $ 177.4 million and $ 180.1 million in securities were pledged for deposits and borrowings, respectively.

15 unchanged sentences

Total $ 36,827 $ 36,891 6.30 %

Municipal securities

Within 1 year $ 820 $ 816 2.12 %

Total $ 820 $ 816 2.12 %

The proceeds and resulting gains and losses, computed using specific identification, from sales of investment securities for the years ending December 31, 2024, 2023, and 2022, respectively, are as follows:

34 unchanged sentences

$ 2,107,243 $ 2,138,450 ($ 9,187 ) $ 1,772,227 $ 1,798,053 ($ 8,556 )

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

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 7.4 million and $ 5.5 million at December 31, 2023 and 2022, respectively, and was included in other assets in the Consolidated Balance Sheets.

Amortized cost in the above table includes $ 2.8 million and $ 7.1 million as of December 31, 2023 and 2022, respectively, in PPP loans administered by the U.S.

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

At December 31, 2023, approximately 72 % of the Company’s loans, excluding PPP loans, are secured by real estate and 4 % are unsecured.

Approximately 24 % are for general commercial uses, including professional, retail, and small businesses.

Repayment is expected from the borrowers’ cash flow or, secondarily, the collateral.

The Company’s exposure to credit loss, if any, is the outstanding amount of the loan if the collateral is determined to be of no value.

The difference between the amortized cost and unpaid principal balance is primarily net deferred origination fees totaling $ 9.2 million at December 31, 2024 and $ 8.6 million at December 31, 2023.

Allowance for Credit Losses

The activity in the ACL related to loans held for investment for the periods indicated is as follows:

Beginning Balance Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

Beginning Balance Impact of SCF acquisition Credit Loss Expense (Benefit) Charge-offs Recoveries Ending Balance

(In Thousands)

29 unchanged sentences

Total $ 13,838 $ 3,394 ($ 435 ) $ 473 $ 17,270

As of December 31, 2023 the ACL increased to $ 17.3 million, or 0.97 % of portfolio loans and 1.02 % of portfolio loans, net of government guarantees from $ 13.8 million, or 0.92 % of portfolio loans and 0.99 % of portfolio loans, net of government guarantees at December 31, 2022.

The Company primarily uses a DCF method to estimate the ACL for loans and generally does not record an ACL for the government guaranteed portion of loans.

The increase in the ACL for loans at December 31, 2023, as compared to December 31, 2022 is primarily due to an increase in non-government guaranteed loan balances as well as a decrease in estimated loan prepayment rates in the DCF model.

This was only partially offset by a improvement in the Company's forecasted economic factors as of December 31, 2023 as compared to the forecast at December 31, 2022.

Credit Quality Information

176 unchanged sentences

Nonaccrual loans net of government guarantees totaled $ 7.5 million and $ 5.0 million at December 31, 2024 and December 31, 2023, respectively.

The following table presents loans on nonaccrual status and loans on nonaccrual status for which there was no related ACL:

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

December 31, 2024 December 31, 2023

3 unchanged sentences

Owner occupied properties 224 224 271 260

Non-owner occupied and multifamily properties — — 274 274

Residential real estate:

7 unchanged sentences

Net nonaccrual loans $ 7,516 $ 6,976 $ 5,002 $ 4,898

Interest income which would have been earned on nonaccrual loans for 2023, 2022, and 2021 amounted to $ 499,000 , $ 434,000 , and $ 744,000 , respectively.

There was $ 8,000 and $ 10,000 in interest on nonaccrual loans reversed through interest income in 2023 and 2022, respectively.

There was no interest earned on nonaccrual loans with a principal balance during 2023 or 2022.

However, the Company recognized interest income of $ 656,000 , $ 2.2 million, and $ 1.6 million in 2023, 2022, and 2021, respectively, related to interest collected on nonaccrual loans whose principal has been paid down to zero.

Interest income which would have been recognized on nonaccrual loans for 2024, 2023, and 2022 amounted to $ 371,000 , $ 499,000 , and $ 434,000 , respectively.

There was zero and $ 8,000 in interest on nonaccrual loans reversed through interest income in 2024 and 2023, respectively.

There was no interest recognized on nonaccrual loans with a principal balance during 2024 or 2023.

However, the Company recognized interest income of $ 241,000 , $ 656,000 , and $ 2.2 million in 2024, 2023, and 2022, respectively, related to interest collected on nonaccrual loans whose principal has been paid down to zero.

Loans are classified as collateral dependent when it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due, and repayment is expected to be provided substantially through the sale of the collateral.

5 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.

The following tables show 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.

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:

December 31, 2023

Twelve Months Ended December 31, 2024

Term Modification Payment Modification Term and payment modifications

2 unchanged sentences

Commercial & industrial loans $ 4,671 $ — $ 404 $ 5,075 1.16 %

Residential real estate:

1-4 family residential properties secured by first liens — 372 — 372 0.14 %

Total $ 4,671 $ 372 $ 404 $ 5,447 0.26 %

Twelve Months Ended December 31, 2023

Term Modification Payment Modification Term and payment modifications

Total Modifications Percentage of Class of Financing Receivable

(In Thousands)

Commercial & industrial loans $ 956 $ 1,985 $ — $ 2,941 0.71 %

Commercial real estate:

6 unchanged sentences

The Company has no outstanding commitments to the borrowers included in the previous table.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2023:

December 31, 2023

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the years indicated:

Twelve Months Ended December 31, 2024

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

1 unchanged sentence

Commercial & industrial loans $ — 8 % 10

Twelve Months Ended December 31, 2023

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

(In Thousands)

Commercial & industrial loans $ — — % 20

Commercial real estate:

9 unchanged sentences

(In Thousands)

Commercial real estate:

Owner occupied properties $ — $ — $ 224 $ 224

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens — — 466 466

Other construction, land development and raw land loans — — 1,527 1,527

Total $ — $ — $ 2,217 $ 2,217

December 31, 2023

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

(In Thousands)

Commercial & industrial loans $ — $ — $ 956 $ 956

18 unchanged sentences

Total $ 665 $ 321

December 31, 2023

Term modification Term and payment modification

(In Thousands)

Commercial & industrial loans $ 956 $ —

Commercial real estate:

Owner occupied properties — 260

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens 115 —

1-4 family residential construction loans 109 —

Other construction, land development and raw land loans 968 577

Total $ 2,148 $ 837

Loans to Related Parties

6 unchanged sentences

Repayments 55 122 81

Loans removed due to Board member retirement 1,846 — —

Balance, end of year $ 892 $ 2,395 $ 1,996

The Company had $ 120,000 of unfunded loan commitments to these directors or their related interests on December 31, 2023 and $ 110,000 of unfunded loan commitments on December 31, 2022.

The Company had $ 120,000 of unfunded loan commitments to these directors or their related interests on both December 31, 2024 and December 31, 2023.

Pledged Loans

At December 31, 2023, there were no loans pledged as collateral to secure public deposits or available borrowing lines.

At December 31, 2022, $ 44.3 million of loans were pledged as collateral to secure available borrowing lines and there were no loans pledged as collateral to secure public deposits..

At December 31, 2024, there were $ 666.7 million loans pledged as collateral to secure public deposits or available borrowing lines.

At December 31, 2023, no loans were pledged as collateral to secure available borrowing lines and there were no loans pledged as collateral to secure public deposits.

NOTE 7 - 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 are no purchased receivables past due at December 31, 2023 or 2022.

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

There was one nonperforming purchased receivable with a balance of $ 808,000 as of December 31, 2023 for which management is not accruing income and no nonperforming purchased receivables as of December 31, 2022.

There were four nonperforming purchased receivables with a balance of $ 3.8 million as of December 31, 2024 for which management is not accruing income and one nonperforming purchased receivable with a balance of $ 808,000 as of December 31, 2023.

The $ 3.6 million ACL at December 31, 2024 is associated with the $ 3.8 million nonperforming and past due purchased receivable balances.

There are no purchased receivables past due at December 31, 2023, and there was no ACL associated with purchased receivables as of December 31, 2023.

The following table summarizes the components of net purchased receivables at December 31, for the years indicated:

6 unchanged sentences

Balance at beginning of year $ — $ — $ —

Impact of adopting ASC 326 — — ( 73 )

Impact of acquisition of Sallyport Commercial Finance, LLC 3,524 — —

Charge-offs — — —

1 unchanged sentence

Charge-offs net of recoveries — — —

Benefit for purchased receivables — — —

Provision for purchased receivables

Balance at end of year $ 3,649 $ — $ —

4 unchanged sentences

Balance, beginning of period $ 19,564 $ 18,635 $ 13,724

Purchased MSRs 2,328 — —

Additions for new MSR capitalized 4,748 3,616 4,623

43 unchanged sentences

Commercial servicing rights

CSRs have a carrying value of $ 2.2 million and $ 2.1 million at December 31, 2023 and 2022, respectively, and total commercial loans serviced for others were $ 282.2 million and $ 285.3 million at December 31, 2023 and 2022, respectively.

CSRs have a carrying value of $ 2.2 million at both December 31, 2024 and 2023, and total commercial loans serviced for others were $ 279.7 million and $ 282.2 million at December 31, 2024 and 2023, respectively.

Key assumptions used in measuring the fair value of CSRs as of December 31, 2024 and 2023 include an average conditional prepayment rate of 11.38 % and 11.76 % and a discount rate of 12.00 % and 9.50 %, respectively.

25 unchanged sentences

NOTE 11 – Leases

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”) asset and lease liabilities.

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

As of December 31, 2024, the Company has operating lease ROU assets of $ 7.5 million and operating lease liabilities of $ 7.5 million.

23 unchanged sentences

Goodwill $ 50,018 $ 15,017

Core deposit intangible — 17

Trade name intangible 950 950

Total $ 50,968 $ 15,967

The Company performed goodwill impairment testing at December 31, 2023 and December 31, 2022 in accordance with the policy described in Note 1 to the Company's Consolidated Financial Statements included in Part II.

Item 8 of this report.

The Company recorded amortization expense of its intangible assets of $ 17,000 , $ 25,000 , and $ 37,000 for the years ended December 31, 2023, 2022, and 2021, respectively.

Accumulated amortization for intangible assets was $ 6.1 million and $ 6.0 million at December 31, 2023 and 2022, respectively.

NOTE 13 - Other Assets

3 unchanged sentences

Investment in Low Income Housing Partnerships $ 24,266 $ 27,992

Due from Federal Home Loan Bank of Des Moines 14,600 —

Interest rate swaps not designated as hedging instruments, at fair value 13,011 10,470

Deferred taxes, net 5,764 11,367

Accrued interest receivable 11,502 11,958

2 unchanged sentences

Commercial servicing rights, at fair value 2,194 2,200

Equity method investments 1,260 1,925

Deferred taxes, net 2,177 5,764

Taxes receivable 1,984 1,726

Equity method investments 1,159 1,260

Software 744 740

30 unchanged sentences

At December 31, 2024 and 2023, the Company held $ 2.9 million and $ 3.9 million, respectively, in deposits for related parties, including directors, executive officers, and their affiliates.

At December 31, 2023 and 2022, the Company reclassified $ 259,000 and $ 1.3 million, respectively, in overdrafts from deposits to loans.

At December 31, 2024 and 2023, the Company reclassified $ 547,000 and $ 259,000 , respectively, in overdrafts from deposits to loans.

NOTE 15 - Borrowings

The Company has a maximum line of credit with the FHLB approximating 45 % of eligible assets, however the Company is subject to provisions under Alaska state law, which generally limit the amount of the Bank's outstanding debt to 35 % of total assets or $ 975.9 million at December 31, 2023 and $ 929.3 million at December 31, 2022.

The Company has a maximum line of credit with the FHLB approximating 45 % of eligible assets, however the Company is subject to provisions under Alaska state law, which generally limit the amount of the Bank's outstanding debt to 35 % of total assets or $ 1.06 billion at December 31, 2024 and $ 975.9 million at December 31, 2023.

FHLB advances are subject to collateral criteria that require the Company to pledge assets under a blanket pledge arrangement as collateral for its borrowings from the FHLB.

3 unchanged sentences

These advances have original terms of either 18 or 20 years with 30 year amortization periods and fixed interest rates ranging from 1.23 % to 3.25 %.

Additionally, the Company has a short-term $ 9.8 million advance from the FHLB outstanding as of December 31, 2024 at an interest rate of 4.62 % which resets daily.

The Federal Reserve Bank is holding $ 70 million of securities as collateral to secure available borrowing lines through the discount window of $ 68.5 million at December 31, 2024.

1 unchanged sentence

The Company paid less than $ 1,000 in interest in 2024 and 2023 on this agreement.

The Federal Reserve Bank is holding $ 20 million of investment securities as collateral to secure the Company's ability to take advances through the Federal Reserve Bank's Bank Term Funding Program (“BTFP”) as of December 31, 2023.

There were no BTFP advances outstanding at December 31, 2023.

Securities sold under agreements to repurchase were zero for both December 31, 2024 and 2023.

1 unchanged sentence

(In Thousands)

2025 $ 10,241

Thereafter 10,930

Total $ 23,045

The Company recognized interest expense of $ 1.8 million, $ 339,000 , and $ 320,000 on borrowings and securities sold under repurchase agreements in 2023, 2022, and 2021, respectively.

The Company recognized interest expense of $ 1.0 million, $ 1.8 million, and $ 339,000 on borrowings and securities sold under repurchase agreements in 2024, 2023, and 2022, respectively.

The average interest rates paid on long-term debt in the same periods was 3.13 %, 2.93 %, and 2.92 %, respectively.

27 unchanged sentences

Balance at December 31, 2023 ($ 17,415 ) $ 978 ($ 16,437 )

Other comprehensive income (loss), net of tax expense of $( 5,023 )

Other comprehensive income (loss), net of tax benefit of $( 3,739 )

9,119 294 9,413

17 unchanged sentences

The Bank's net liability under this plan is dependent upon market gains and losses on assets held in the plan.

The Bank recognized a decrease in its liability of $ 10,000 in 2023, a decrease in its liability of $ 51,000 in 2022, and an increase in its liability of $ 173,000 in 2021.

The Bank recognized an increase in its liability of $ 24,000 in 2024, a decrease in its liability of $ 10,000 in 2023, and a decrease in its liability of $ 51,000 in 2022.

These changes are included in "Salaries and other personnel expense" in the Consolidated Statements of Income.

At both December 31, 2024 and 2023, the balance of the accrued liability for this plan was included in "Other liabilities" and totaled $ 1.8 million.

In November of 2011, the Bank implemented a Profit Sharing Plan.

All employees of the Bank employed on the last day of the calendar year are eligible and will participate in the Profit Sharing Plan.

All employees of the Bank employed on the last day of the calendar year or retired during the year are eligible and will participate in the Profit Sharing Plan.

The aggregate amount to be paid to employees under the Profit Sharing Plan is determined using Company-wide performance goals that are established by the Compensation Committee of the Board of Directors.

If the performance goals are met for the year, profit sharing for the period

is calculated based on a formula that is also approved by the Compensation Committee each year.

If the performance goals are met for the year, profit sharing for the period is calculated based on a formula that is also

approved by the Compensation Committee each year.

The Compensation Committee has complete discretion to designate an employee as ineligible for profit sharing, or to adjust the amount of profit share payments by individual employee or in aggregate.

2 unchanged sentences

The balance of the accrued liability for this plan was included in "Other liabilities".

SCF employees are currently offered benefits under the Professional Employer Organization ("PEO"), TriNet.

Under the PEO arrangement, SCF employees are eligible to participate in a safe harbor retirement plan that matches 100 % up to 3 % of compensation, and then anything over 3 % compensation is matched at 50 % up to 5 % of eligible compensation.

SCF employees are intended to align to Bank's benefits package in 2025, subject to the termination of the PEO arrangement.

NOTE 19 - Commitments and Contingencies

28 unchanged sentences

Mortgage loans sold to investors may be sold with servicing rights released, for which the Company makes only standard legal representations and warranties as to meeting certain underwriting and collateral documentation standards.

In the past two years, the Company has had to repurchase eighteen loans due to deficiencies in underwriting or loan documentation and has not realized significant losses related to these loans.

In the past two years, the Company has had to repurchase ten loans due to deficiencies in underwriting or loan documentation and has not realized significant losses related to these loans.

Management believes that any liabilities that may result from such recourse provisions are not significant.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

Credit risk arises in these transactions from the possibility that a customer may not be able to repay the Company upon default of performance.

Credit risk arises in these transactions from the possibility that a customer may not be able to repay

the Company upon default of performance.

Collateral held for standby letters of credit is based on an individual evaluation of each customer’s creditworthiness.

4 unchanged sentences

Capital Expenditures and Commitments:

At December 31, 2023, the Company has $ 625,000 capital commitments related to new branch construction.

At December 31, 2024, the Company has $ 423,000 capital commitments related to new branch construction and renovations.

There were no other material changes outside of the ordinary course of business to any of our material contractual obligations during 2024.

20 unchanged sentences

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

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 paid 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 7.02 % as of December 31, 2023.

This rate was 5.99 % as of December 31, 2024 and 7.02 % as of December 31, 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 December 31, 2024 and 2023, respectively.

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

The unrealized gain on this interest rate swap was $ 1.4 million and the unrealized loss on this interest rate swap was $ 1.5 million as of December 31, 2023 and 2022, respectively.

The unrealized gain, net of tax on this interest rate swap was $ 1.3 million as of December 31, 2024 and the unrealized gain, net of tax on this interest rate swap was $ 1.0 million as of December 31, 2023.

Interest rate swaps related to home mortgage lending activities

2 unchanged sentences

the value of these commitments are detailed in the table below as “interest rate lock commitments”.

The Company also hedges the interest rate risk associated with its residential mortgage loan commitments, which are referred to as "retail interest rate contracts" in the table below.

In addition, the Company hedges the interest rate risk associated with its residential mortgage loan commitments, which are referred to as "retail interest rate contracts" in the table below.

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

29 unchanged sentences

Interest rate swaps $ 13,011 $ — $ 13,011 $ — $ — $ 13,011

Retail interest rate contracts 49 — 49 — — 49

Liability Derivatives

5 unchanged sentences

Interest rate swaps $ 10,470 $ — $ 10,470 $ — $ — $ 10,470

Retail interest rate contracts — — — — — —

Liability Derivatives

Interest rate swaps $ 10,470 $ — $ 10,470 $ — $ 10,470 $ —

Retail interest rate contracts 13 — 13 — — 13

NOTE 21 - Common Stock

8 unchanged sentences

Under the 2020 Stock Incentive Plan and previous plans, certain key employees have been granted the option to purchase set amounts of common stock at the market price on the day the option was granted.

Optionees, at their own discretion, may pay cash to cover the cost of exercise, may cover the cost of exercise through the exchange at the then fair value of already owned shares of the Company’s stock, or they may cover the cost of exercise through net settlement of a portion of the stock options exercised in satisfaction of the exercise price and applicable tax withholding requirements.

the stock options exercised in satisfaction of the exercise price and applicable tax withholding requirements.

The two latter options are referred to as cashless stock option exercises.

7 unchanged sentences

Treasury yield curve in effect at the time of grant.

The following assumptions were used to determine the fair value of stock options as of the grant date to determine compensation expense for the years ended December 31, 2023, 2022, and 2021:

Stock Options:

2023 2022 2021

Grant date fair value NA NA $ 10.27

Expected life of options NA NA 8 years

Risk-free interest rate NA NA 1.33 %

Dividend yield rate NA NA 3.86 %

Price volatility NA NA 36.46 %

There were no stock options granted in 2024, 2023, or 2022.

The following table summarizes stock option activity during 2024:

11 unchanged sentences

In each of 2024, 2023, and 2022 the Company received no cash for cash stock option exercises.

In 2023, 2022, and 2021 the Company net settled $ 445,000 , $ 475,000 , and $ 1.4 million respectively, for cashless stock option exercises.

The Company withheld $ 534,000 , $ 559,000 , and $ 1.7 million to pay for stock option exercises or income taxes that resulted from the exercise of stock options in 2023, 2022, and 2021, respectively.

In 2024, 2023, and 2022 the Company net settled $ 699,000 , $ 445,000 , and $ 475,000 respectively, for cashless stock option exercises.

The Company withheld $ 851,000 , $ 534,000 , and $ 559,000 to pay for stock option exercises or income taxes that resulted from the exercise of stock options in 2024, 2023, and 2022, respectively.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 33,000 , $ 74,000 , and $ 108,000 , respectively, in stock option compensation expense.

As of December 31, 2023, there was approximately $ 36,000 of total unrecognized compensation expense related to non-vested options, which is expected to be recognized over the weighted-average vesting period of 0.9 years.

As of December 31, 2024, there was no unrecognized compensation expense related to non-vested options.

Restricted Stock Units:

12 unchanged sentences

For the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 670,000 , $ 751,000 , and $ 634,000 , respectively, in restricted stock unit compensation expense.

As of December 31, 2023, there was approximately $ 955,000 of total unrecognized compensation expense related to non-vested options, which is expected to be recognized over the weighted-average vesting period of 2.0 years.

As of December 31, 2024, there was approximately $ 1.4 million of total unrecognized compensation expense related to non-vested units, which is expected to be recognized over the weighted-average vesting period of 3.2 years.

Performance Stock Units:

Under the 2023 Plan and previous plans, the Company grants performance stock units to certain key employees periodically.

Under the 2023 Plan, the Company grants performance stock units to certain key employees periodically.

Recipients of performance stock units do not pay any cash consideration to the Company for the shares and receive all dividends with respect to such shares when the shares vest.

7 unchanged sentences

Outstanding at December 31, 2024 16,323 $ 44.99 1.84

The Company recognized $ 111,000 for the year ended December 31, 2023 in performance stock unit compensation expense and zero for the years ended December 31, 2022 and 2021.

As of December 31, 2023, there was approximately $ 318,000 of total unrecognized compensation expense related to non-vested options, which is expected to be recognized over the weighted-average vesting period of 2.2 years.

The Company recognized $ 209,000 and $ 111,000 for the years ended December 31, 2024 and 2023 in performance stock unit compensation expense and zero for the year ended December 31, 2022.

As of December 31, 2024, there was approximately $ 414,000 of total unrecognized compensation expense related to non-vested units, which is expected to be recognized over the weighted-average vesting period of 1.8 years.

NOTE 23 - Regulatory Matters

72 unchanged sentences

Accrued liabilities 1,967 941 1,286

Unrealized loss on available for sale investment securities 7,057 11,976 1,270

Unrealized loss on marketable equity securities 176 178 —

Unrealized loss, net of gains on available for sale investment securities

3,295 6,918 11,965

Unrealized loss, net of gains on marketable equity securities

Other 234 280 285

5 unchanged sentences

Operating lease right-of-use assets ( 1,990 ) ( 2,585 ) ( 2,806 )

Unrealized gain on available for sale investment securities ( 139 ) ( 11 ) ( 189 )

Unrealized gain on marketable equity securities ( 50 ) ( 18 ) ( 159 )

Unrealized gain, net of loss on marketable equity securities

Other ( 763 ) ( 719 ) ( 1,029 )

6 unchanged sentences

As of December 31, 2024, the Company had no unrecognized tax benefits.

The tax years subject to examination by federal taxing authorities are the years ending December 31, 2023, 2022, 2021, and 2020.

The tax years subject to examination by the State of Alaska are the years ending December 31, 2023, 2022, 2021, 2020, 2019 and 2018.

The tax years subject to examination by federal taxing authorities and by the State of Alaska are the years ending December 31, 2024, 2023, 2022, and 2021.

NOTE 25 - Fair Value Measurements

10 unchanged sentences

Derivative instruments:

The fair value of the interest rate lock commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate.

The pull-through rate assumptions are considered Level 3 valuation inputs and are significant to the interest rate lock commitment valuation;

16 unchanged sentences

Those factors are balanced with the level of internal expertise, internal experience and market information available, versus external expertise available such as qualified appraisers, brokers, auctioneers and equipment specialists.

The Company uses external sources to estimate fair value for projects that are not fully constructed as of the date of valuation.

These projects are generally valued as if complete, with an appropriate allowance for cost of completion, including contingencies developed from external sources such as vendors, engineers and contractors.

The Company believes that recording other real estate owned that is not fully constructed based on as if complete values is more appropriate than recording other real estate owned that is not fully constructed using as is values.

We concluded that as-is-complete values are appropriate for these types of projects based on the accounting guidance for capitalization of project costs and subsequent measurement of the value of real estate.

GAAP specifically states that estimates and cost allocations must be reviewed at the end of each reporting period and reallocated based on revised estimates.

The Company adjusts the carrying value of other real estate owned in accordance with this guidance for increases in estimated cost to complete that exceed the fair value of the real estate at the end of each reporting period.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.

13 unchanged sentences

Investment securities available for sale 209,836 209,836 327,040 327,040

Investment in Federal Home Loan Bank Stock 2,980 2,980 3,816 3,816

Loans held for sale 59,957 59,957 31,974 31,974

Accrued interest receivable 11,958 11,958 9,937 9,937

Interest rate swaps 14,788 14,788 11,836 11,836

10 unchanged sentences

Borrowings 23,045 19,991 13,675 11,872

Accrued interest payable 202 202 54 54

Interest rate swaps 13,011 13,011 10,470 10,470

17 unchanged sentences

Commercial servicing rights 2,194 — — 2,194

Retail interest rate contracts 49 — 49 —

Total other assets $ 43,886 $ — $ 14,788 $ 29,098

Interest rate swaps $ 13,011 $ — $ 13,011 $ —

Retail interest rate contracts 13 — 13 —

Total other liabilities $ 13,011 $ — $ 13,011 $ —

14 unchanged sentences

Interest rate swaps $ 10,470 $ — $ 10,470 $ —

Retail interest rate contracts 13 — 13 —

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

43 unchanged sentences

NOTE 26 - Segment Information

The Company's operations are managed along two operating segments:

Community Banking and Home Mortgage Lending.

The Company's operations are managed along three reportable operating segments:

Community Banking, Home Mortgage Lending, and Specialty Finance.

The Company reevaluated our reportable operating segments in 2024 concurrent with the acquisition of SCF, which resulted in the addition of the Specialty Finance segment.

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 December 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:

The Home Mortgage Lending segment's principal business focus is the origination and sale of mortgage loans for 1-4 family residential properties, mortgage loan servicing for a portion of mortgage loans sold, and investment in certain 1-4 family residential mortgage loans on our balance sheet.

The Specialty Finance segment's principal business focus is factoring, asset based lending and alternative working capital solutions to small and medium sized enterprises, and includes SCF and Northrim Funding Services, which was previously reported in the Community Banking segment prior to the acquisition of SCF.

The Company's reportable segments are determined by the Chief Financial Officer and the Chief Executive Officer, whom collectively are the designated chief operating decision maker.

The reportable segments are determined based on information provided about the Company's products and services offered.

They are also distinguished by the level of information provided to the chief operating decision maker, who uses the information to review performance of various components of the business, which are then aggregated if operating performance, products and services, and customers are similar.

The chief operating decision maker evaluates the financial performance of the Company's business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the performance of the Company's segments and in the determination of allocating resources.

Segment pretax net income or loss is used to assess the performance of the community banking segment by monitoring the margin between interest income and interest expense and the efficiency ratio specific to the segment.

Segment pretax net income or loss is used to assess the performance of the home mortgage lending segment by monitoring the premium received on loan sales, the margin between interest income and interest expense, and the profitability of home mortgage servicing activities.

Segment pretax net income or loss is used to assess the performance of the specialty finance segment by monitoring the yield of purchased receivable fees.

Accounting policies for segments are the same as those described in Note 1 to the Consolidated Financial Statements.

Interest expense is allocated to each segment based on average cash utilized to fund the operations of the segment and the average cost of interest-bearing liabilities for the consolidated entity.

Indirect salary expense for activities such as general management, accounting and finance, human resources, compliance, information technology, risk management, and internal audit are allocated based on the average percentage of employee time spent working in each specific segment.

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

December 31, 2024

(In Thousands) Community Banking Home Mortgage Lending Consolidated

(In Thousands) Community Banking Home Mortgage Lending Specialty Finance Consolidated

Interest income $ 136,495 $ 16,477 $ 947 $ 153,919

Interest expense 34,391 5,249 1,096 40,736

Net interest income 95,958 7,298 103,256

Net interest income (loss) 102,104 11,228 ( 149 ) 113,183

Provision for credit losses 2,276 892 125 3,293

Net interest income after provision for credit losses

99,828 10,336 ( 274 ) 109,890

Net realized gains on mortgage loans sold — 13,994 — 13,994

Change in fair value of mortgage loan commitments, net — 172 — 172

Total production revenue — 14,166 — 14,166

Mortgage servicing revenue — 9,155 — 9,155

Change in fair value of mortgage servicing rights:

Due to changes in model inputs of assumptions — 1,334 — 1,334

Other — ( 1,535 ) — ( 1,535 )

Total mortgage servicing revenue, net — 8,954 — 8,954

Other mortgage banking revenue — 882 — 882

Total mortgage banking income — 24,002 — 24,002

Purchased receivable income — — 7,146 7,146

Other operating income 10,960 — ( 67 ) 10,893

Total other operating income

10,960 24,002 7,079 42,041

Salaries and other personnel expense 44,864 20,968 2,015 67,847

Data processing expense 9,918 966 102 10,986

Occupancy expense 5,534 1,927 148 7,609

Professional and outside services 2,284 827 1,240 4,351

Marketing expense 2,518 499 11 3,028

Insurance expense 2,690 101 170 2,961

Other operating expense 5,277 2,336 542 8,155

Total other operating expense 73,085 27,624 4,228 104,937

Income (loss) before provision for income taxes 37,703 6,714 2,577 46,994

3 unchanged sentences

Loans held for sale $ — $ 59,957 $ — $ 59,957

1-4 family residential properties secured by first liens $ — $ 270,966 $ — $ 270,966

Purchased receivables, net $ — $ — $ 74,078 $ 74,078

Goodwill $ 7,525 $ 7,492 $ 35,001 $ 50,018

December 31, 2024

(In Thousands) Community Banking Home Mortgage Lending Consolidated

(In Thousands) Community Banking Home Mortgage Lending Specialty Finance Consolidated

Interest income

$ 136,495 $ 16,477 $ 947 $ 153,919

Mortgage banking income - external revenue

— 24,002 — 24,002

Mortgage banking income - intersegment revenues

— 3,623 — 3,623

Purchased receivable income

— — 7,146 7,146

Other operating income

10,960 — ( 67 ) 10,893

147,455 44,102 8,026 199,583

Reconciliation of revenue

Elimination of intersegment revenues

— ( 3,623 ) — ( 3,623 )

Total consolidated revenues

$ 147,455 $ 40,479 $ 8,026 $ 195,960

Interest expense

34,391 5,249 1,096 40,736

Provision for credit losses

2,276 892 125 3,293

Segment gross profit

110,788 34,338 6,805 151,931

Salaries and other personnel expense $ 44,864 $ 20,968 $ 2,015 $ 67,847

Data processing expense 9,918 966 102 10,986

Occupancy expense 5,534 1,927 148 7,609

Professional and outside services 2,284 827 1,240 4,351

Marketing expense 2,518 499 11 3,028

Insurance expense 2,690 101 170 2,961

Intersegment expense

3,623 — — 3,623

Other segment items (2)

5,277 2,336 542 8,155

Segment expense

76,708 27,624 4,228 108,560

Reconciliation of expense

Elimination of intersegment expense

($ 3,623 ) $ — $ — ( 3,623 )

Total consolidated expense

$ 73,085 $ 27,624 $ 4,228 $ 104,937

Income before provision for income taxes

$ 37,703 $ 6,714 $ 2,577 $ 46,994

1 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.

All expenses are allocated to a segment.

2 Other segment items for each reportable segment include:

Community banking:

OREO (income) expense, net of rental income and gains on sale, director fees, operational charge offs net of recoveries, loan collection and collateral costs, and other miscellaneous operating costs related to community banking activities.

Home mortgage lending:

OREO (income) expense, net of rental income and gains on sale related home mortgage loans, director fees related at Residential Mortgage, loan collection and collateral costs related to home mortgage loans, and other miscellaneous operating costs related to home mortgage lending activities.

Specialty finance:

miscellaneous operating costs related to specialty finance activities.

December 31, 2023

(In Thousands) Community Banking Home Mortgage Lending Specialty Finance Consolidated

Interest income $ 121,855 $ 9,693 $ 403 $ 131,951

Interest expense 26,300 2,395 — 28,695

Net interest income 95,555 7,298 403 103,256

Provision for credit losses 3,842 — — 3,842

Net interest income after provision for credit losses

91,713 7,298 403 99,414

Net realized gains on mortgage loans sold — 7,828 — 7,828

Change in fair value of mortgage loan commitments, net — ( 102 ) — ( 102 )

Total production revenue — 7,726 — 7,726

Mortgage servicing revenue — 7,368 — 7,368

Change in fair value of mortgage servicing rights:

Due to changes in model inputs of assumptions — ( 922 ) — ( 922 )

Other — ( 1,765 ) — ( 1,765 )

Total mortgage servicing revenue, net — 4,681 — 4,681

Other mortgage banking revenue — 356 — 356

Total mortgage banking income — 12,763 — 12,763

Purchased receivable income — — 4,482 4,482

Other operating income 9,130 — — 9,130

Total other operating income

9,130 12,763 4,482 26,375

Salaries and other personnel expense 42,795 17,873 1,073 61,741

Data processing expense 9,091 692 38 9,821

Occupancy expense 5,432 1,839 123 7,394

Professional and outside services 2,305 751 72 3,128

Marketing expense 2,465 462 2 2,929

Insurance expense 2,423 96 — 2,519

Other operating expense 4,742 1,784 123 6,649

Total other operating expense 69,253 23,497 1,431 94,181

Income (loss) before provision for income taxes 31,590 ( 3,436 ) 3,454 31,608

3 unchanged sentences

Loans held for sale $ — $ 31,974 $ — $ 31,974

1-4 family residential properties secured by first liens $ — $ 203,738 $ — $ 203,738

Purchased receivables, net $ — $ — $ 36,842 $ 36,842

Goodwill $ 7,525 $ 7,492 $ — $ 15,017

December 31, 2023

(In Thousands) Community Banking Home Mortgage Lending Consolidated

(In Thousands) Community Banking Home Mortgage Lending Specialty Finance Consolidated

Interest income

$ 121,855 $ 9,693 $ 403 $ 131,951

Mortgage banking income - external revenue

— 12,763 — 12,763

Mortgage banking income - intersegment revenue

— 4,693 — 4,693

Purchased receivable income

— — 4,482 4,482

Other operating income

9,130 — — 9,130

130,985 27,149 4,885 163,019

Reconciliation of revenue

Elimination of intersegment revenues

— ( 4,693 ) — ( 4,693 )

Total consolidated revenues

$ 130,985 $ 22,456 $ 4,885 $ 158,326

Interest expense

26,300 2,395 — 28,695

Provision for credit losses

3,842 — — 3,842

Segment gross profit

100,843 20,061 4,885 125,789

Salaries and other personnel expense $ 42,795 $ 17,873 $ 1,073 $ 61,741

Data processing expense 9,091 692 38 9,821

Occupancy expense 5,432 1,839 123 7,394

Professional and outside services 2,305 751 72 3,128

Marketing expense 2,465 462 2 2,929

Insurance expense 2,423 96 — 2,519

Intersegment expense

4,693 — — 4,693

Other segment items (2)

4,742 1,784 123 6,649

Segment expense

73,946 23,497 1,431 98,874

Reconciliation of expense

Elimination of intersegment expense

($ 4,693 ) $ — $ — ( 4,693 )

Total consolidated expense

$ 69,253 $ 23,497 $ 1,431 $ 94,181

Income before provision for income taxes

$ 31,590 ($ 3,436 ) $ 3,454 $ 31,608

1 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.

All expenses are allocated to a segment.

2 Other segment items for each reportable segment include:

Community banking:

Home mortgage lending:

Specialty finance:

miscellaneous operating costs related to specialty finance activities.

December 31, 2022

(In Thousands) Community Banking Home Mortgage Lending Specialty Finance Consolidated

Interest income $ 96,045 $ 2,250 $ 2,033 $ 100,328

Interest expense 5,156 57 — 5,213

Net interest income 90,889 2,193 2,033 95,115

Benefit for credit losses

Provision for credit losses 1,846 — — 1,846

Net interest income after provision for credit losses

89,043 2,193 2,033 93,269

Net realized gains on mortgage loans sold — 13,873 — 13,873

Change in fair value of mortgage loan commitments, net — ( 1,035 ) — ( 1,035 )

Total production revenue — 12,838 — 12,838

Mortgage servicing revenue — 7,944 — 7,944

Change in fair value of mortgage servicing rights:

Due to changes in model inputs of assumptions — 1,615 — 1,615

Other — ( 1,327 ) — ( 1,327 )

Total mortgage servicing revenue, net — 8,232 — 8,232

Other mortgage banking revenue — 502 — 502

Total mortgage banking income — 21,572 — 21,572

Purchased receivable income — — 2,002 2,002

Other operating income 10,503 — — 10,503

Total other operating income 10,503 21,572 2,002 34,077

Salaries and other personnel expense 37,963 19,304 905 58,172

Data processing expense 8,104 618 204 8,926

Occupancy expense 4,993 1,819 103 6,915

Professional and outside services 2,026 895 72 2,993

Marketing expense 2,317 427 3 2,747

Insurance expense 1,986 68 — 2,054

Other operating expense 5,107 1,819 119 7,045

Income before provision for income taxes 33,651 14,342 47,993

Total other operating expense 62,496 24,950 1,406 88,852

Income (loss) before provision for income taxes

37,050 ( 1,185 ) 2,629 38,494

Provision for income taxes 7,293 ( 288 ) 748 7,753

Net income $ 27,183 $ 10,334 $ 37,517

Net income (loss)

$ 29,757 ($ 897 ) $ 1,881 $ 30,741

Total assets $ 2,523,092 $ 131,232 $ 19,994 $ 2,674,318

Loans held for sale $ — $ 27,538 $ — $ 27,538

1-4 family residential properties secured by first liens $ — $ 203,738 $ — $ 203,738

Purchased receivables, net $ — $ — $ 19,994 $ 19,994

Goodwill $ 7,525 $ 7,492 $ — $ 15,017

December 31, 2022

(In Thousands) Community Banking Home Mortgage Lending Specialty Finance Consolidated

Interest income

$ 96,045 $ 2,250 $ 2,033 $ 100,328

Mortgage banking income - external revenue

— 21,572 — 21,572

Mortgage banking income - intersegment revenue

— 1,370 — 1,370

Purchased receivable income

— — 2,002 2,002

Other operating income

10,503 — — 10,503

106,548 25,192 4,035 135,775

Reconciliation of revenue

Elimination of intersegment revenues

— ( 1,370 ) — ( 1,370 )

Total consolidated revenues

$ 106,548 $ 23,822 $ 4,035 $ 134,405

Interest expense

5,156 57 — 5,213

Provision for credit losses

1,846 — — 1,846

Segment gross profit

99,546 23,765 4,035 127,346

Salaries and other personnel expense $ 37,963 $ 19,304 $ 905 $ 58,172

Data processing expense 8,104 618 204 8,926

Occupancy expense 4,993 1,819 103 6,915

Professional and outside services 2,026 895 72 2,993

Marketing expense 2,317 427 3 2,747

Insurance expense 1,986 68 — 2,054

Intersegment expense

1,370 — — 1,370

Other segment items (2)

5,107 1,819 119 7,045

Segment expense

63,866 24,950 1,406 90,222

Reconciliation of expense

Elimination of intersegment expense

($ 1,370 ) $ — $ — ( 1,370 )

Total consolidated expense

$ 62,496 $ 24,950 $ 1,406 $ 88,852

Income before provision for income taxes

$ 37,050 ($ 1,185 ) $ 2,629 $ 38,494

1 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.

All expenses are allocated to a segment.

2 Other segment items for each reportable segment include:

Community banking:

Home mortgage lending:

Specialty finance:

miscellaneous operating costs related to specialty finance activities.

NOTE 27 - Parent Company Information

27 unchanged sentences

Unrealized gain (loss) on marketable equity securities 465 120 ( 1,119 )

Other income — — 151

Total Income $ 39,197 $ 28,227 $ 32,552

16 unchanged sentences

Changes in other assets and liabilities ( 60 ) ( 1,380 ) ( 1,268 )

Net Cash Used from Operating Activities ( 2,061 ) ( 1,398 ) ( 2,234 )

Net Cash Provided (Used) by Operating Activities 219 ( 2,061 ) ( 1,398 )

Investing Activities:

2 unchanged sentences

Investment in Northrim Bank, NISC & NST2 ( 6,157 ) 14,628 24,323

Net Cash Provided by Investing Activities 12,331 20,877 32,417

Net Cash (Used) Provided by Investing Activities ( 1,148 ) 12,331 20,877

Financing Activities:

2 unchanged sentences

Repurchase of common stock ( 789 ) ( 9,044 ) ( 14,157 )

Net Cash Used from Financing Activities ( 22,098 ) ( 24,142 ) ( 19,379 )

Net Cash Used by Financing Activities ( 13,739 ) ( 22,098 ) ( 24,142 )

Net change in Cash and Cash Equivalents ( 14,668 ) ( 11,828 ) ( 4,663 )

1 unchanged sentence

Cash and Cash Equivalents at end of year $ 4,387 $ 19,055 $ 30,883

NOTE 28 - Subsequent Events

As of December 31, 2024, the consideration transferred or transferable to the former owners of SCF and the assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting and were recorded at their estimated fair values as of the October 31, 2024.

In February 2025, in accordance with the terms of the purchase agreement, the Company determined the final value of consideration transferred to the former owners of SCF.

The final value of consideration transferred decreased $ 144,000 to $ 47.7 million from $ 47.9 million, which decreased goodwill to $ 34.9 million from $ 35.0 million.

The Company recorded this adjustment in February 2025, which is within the measurement period for business combinations, in accordance with GAAP.

The Company does not consider the adjustment to the provisional amounts recorded for the acquisition of SCF to be significant to the Company's operations, and it does not have a material impact on the Company's consolidated financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OF ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data