What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-27 compared with 2025-07-28 · 259 added, 209 removed, 382 unchanged (55% of the section changed)

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the value of securities held in our investment portfolio;

impact of the results of government initiatives, including tariffs, on the regulatory landscape, natural resource extraction industries, and capital markets;

impact of the results of government shutdowns and government initiatives, including tariffs, on the regulatory landscape, natural resource extraction industries, and capital markets;

the impact of declines in the value of commercial and residential real estate markets, high unemployment rates, inflationary pressures and slowdowns in economic growth;

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Update on Economic Conditions

The Alaska Department of Labor (“DOL”) has reported Alaska’s seasonally adjusted unemployment rate in May of 2025 was 4.7% compared to the U.S.

The Alaska Department of Labor (“DOL”) has reported Alaska’s seasonally adjusted unemployment rate in August of 2025 was 4.7% compared to the U.S.

rate of 4.3%.

The rate has held steady in Alaska at 4.7% for eight consecutive months.

The total number of payroll jobs in Alaska, not including uniformed military, increased 1.1% or 3,800 jobs between May of 2024 and May of 2025.

According to the DOL, the Oil and Gas sector had the largest growth rate in new jobs of 8.8% through May of this year compared to the prior year, up 700 direct jobs.

The Construction sector added 700 positions for a year-over-year growth rate of 3.7% through May of 2025.

The larger Health Care sector grew by 1,200 jobs for an annual growth rate of 2.9%.

Transportation, Warehousing and Utilities added 600 jobs for a 2.3% growth rate over the same period.

Professional and Business Services increased 500 jobs year-over-year through May of 2025, up 1.7%.

The Government sector grew by 200 jobs for 0.2% growth, adding 400 State positions while losing 200 Federal jobs in Alaska over the same period.

Declining sectors between May 2024 and May 2025 were Information down 100 jobs or (-2.3%), Manufacturing (primarily seafood processing) shrinking 200 positions (-2.1%), Wholesale Trade lost 100 jobs (-1.5%) and Financial Activities, down 100 jobs (-0.9%).

Alaska’s seasonally adjusted personal income was $57.4 billion in the first quarter of 2025 according to the Federal Bureau of Economic Analysis (“BEA”).

This was an annualized improvement in the first quarter of 6.4% for Alaska, compared to the national average of 6.7%.

The total of 355,900 payroll jobs in Alaska, not including uniformed military, increased 0.8% or 2,900 jobs between August of 2024 and August of 2025.

This matched the year-over-year increase for the U.S.

of 0.8% for the same period.

According to the DOL, the Oil and Gas sector had the largest growth rate in new jobs of 6% through August compared to the prior year, up 500 direct jobs.

The Construction sector added 1,000 positions for a year-over-year growth rate of 4.8% in August of 2025.

The Manufacturing sector, which is dominated by seafood processing, added 900 jobs and grew 5.7% in the same period.

The larger Health Care sector also grew by 900 jobs for an annual growth rate of 2.1%.

Transportation, Warehousing and Utilities added 300 jobs for a 1.1% growth rate.

Professional and Business Services increased 200 jobs year-over-year through August of 2025, up 0.7%.

The Government sector declined by 100 jobs (0.1%).

Government gained 200 State positions, while losing 100 Federal jobs and 200 Local government jobs in Alaska between August of 2024 and August of 2025.

Other declining sectors include:

Information down 300 jobs or (-6.8%);

Leisure/Hospitality declined 100 jobs (-0.2%);

Wholesale Trade lost 100 jobs (-1.5%) and Financial Activities, down 100 jobs (-0.9%).

Alaska’s seasonally adjusted personal income was $59.4 billion in the second quarter of 2025 according to the Federal Bureau of Economic Analysis (“BEA”).

Alaska had an annualized improvement of 9.7% in the first quarter and 5% in the second quarter of 2025.

This is compared to the national average of 6.4% in the first quarter and 5.5% in second quarter of 2025.

Alaska enjoyed an annual personal income improvement of 5.8% in 2024 compared to the U.S.

increase of 5.4%, ranking Alaska 6 th best in the nation.

The $885 million increase in personal income in the first quarter of 2025 in Alaska came from a $352 million increase in net earnings from wages, $440 million growth in government transfer receipts, and a $92 million increase in investment income.

Alaska’s Gross State Product (“GSP”) in the first quarter of 2025 reached $72 billion according to the BEA.

Alaska’s inflation adjusted “real” GSP increased 1.5% in 2024 and decreased -1.8% annualized in the first quarter of 2025.

increase of 5.6%.

Per capita personal income in Alaska is now estimated at $80,208 according to the BEA, ranking it 12 th highest of the 50 U.S.

Alaska’s Gross State Product (“GSP”) in the second quarter of 2025 reached $74.2 billion according to the BEA.

Alaska’s inflation adjusted “real” GSP increased 1.5% in 2024, 1.8% annualized in the first quarter of 2025, and 2% in the second quarter of 2025.

The average U.S.

GDP growth rate was 2.8% for 2025 and -0.5% in the first quarter of 2025.

Alaska’s real GSP decrease in the first quarter of 2025 was primarily caused by a decrease in the Mining, Oil & Gas sector, somewhat offset by improvements in the Construction sector.

GDP growth rate was 2.8% for 2024, annualized -0.6% in the first quarter of 2025 and 3.8% in the second quarter of 2025.

Alaska’s real GSP improvement in the second quarter of 2025 was led by the Mining, Oil & Gas sector;

Transportation & Warehousing;

Professional, Scientific & Technical Services;

and Manufacturing, but was somewhat offset by decreases in Retail Trade and Government.

Alaska exported $5.9 billion in goods to foreign countries in 2024 according to the U.S.

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China is the largest importer of Alaska’s products at $1.5 billion, followed by Australia at $804 million, Japan at $674 million and South Korea at $634 million in 2024.

Fish and related maritime products accounted for the largest volume at $2.1 billion, followed by minerals and ores at $2 billion, and primary metals at $992 million in 2024.

Oil & Gas exports are $380 million because the majority of Alaska’s production is refined and consumed in the United States.

According to the US Bureau of Labor Statistics, the Consumer Price Index (“CPI”) for the U.S.

increased 2.7% between June of 2024 and June of 2025.

In Alaska, the rate of CPI increase was lower at 1.6% for the same time period.

Food and beverage, housing costs, and medical care costs were the largest causes for inflation.Declining motor fuel prices, transportation, recreation and household furnishing costs have helped moderate inflationary pressures in Alaska.

The monthly average price of Alaska North Slope (“ANS”) crude oil has ranged between $76.39 a barrel in January of 2025 and $67.07 in May of the prior year.

The June 2025 average was $72.62.

Fish and related maritime products accounted for the largest volume at $2.1 billion, followed by minerals and ores $2 billion, and primary metals at $992 million in 2024.

Oil & Gas international exports were $380 million because the majority of Alaska’s production is refined and consumed within the United States.

According to the U.S.

Bureau of Labor Statistics, the Consumer Price Index, or CPI, for the U.S.

increased 2.9% between August of 2024 and August of 2025.

In Alaska, the rate of increase was lower at 2.4% for the same time period.

The largest increases since last August came from Apparel (+6.9%), Food and beverage (+3.9%), and Housing (+3.8%).

Slower increases or declining costs in Medical Care (+1.2%), Gasoline (+0.9%), Transportation (-1.2%) and Recreation (-1.7%) through August 2025 have helped moderate inflationary pressures in Alaska relative to the U.S.

The monthly average price of Alaska North Slope (“ANS”) crude oil has ranged between a high of $76.39 a barrel in January of 2025 and a low of $67.07 in May of 2025.

The August 2025 average was $69.29.

The Alaska Department of Revenue (“DOR”) calculated ANS crude oil production was 461 thousand barrels per day (“bpd”) in Alaska’s fiscal year ending June 30, 2024.

Production rose to 469 thousand bpd in fiscal year ending June 30, 2025.

In the Spring 2025 Revenue Forecast published March 12, 2025, the DOR expects production to continue to grow to 663 thousand bpd by fiscal year 2034.

In the Spring 2025 Revenue Forecast published March 12, 2025, the DOR expects production to continue to grow to 663 thousand bpd, or 41% by fiscal year 2034.

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

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

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

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

The Alaska Permanent Fund is seeded annually by the oil wealth the State continues to save each year and has grown significantly over 40 years of successful investment.

As of May 31, 2025 the fund's value was $83.13 billion.

According to the DOR it is scheduled to contribute $3.7 billion to Alaska General Fund in fiscal year 2025 for general government spending and to pay the annual dividend to Alaskan residents.

As of August 31, 2025 the fund’s value was $83.26 billion.

According to the DOR it is scheduled to contribute $3.7 billion to Alaska’s General Fund in fiscal year 2025 for general government spending and over $600 million to pay the annual dividend of $1,000 in October to Alaskan residents.

According to the Alaska Multiple Listing Services, the average sales price of a single-family home in Anchorage rose 6.2% in 2024 to $510,015, following a 5.2% increase in 2023.

This was the seventh consecutive year of price increases.

Through June of 2025 prices have continued to increase on average 2.6% to $523,059.

Through September of 2025 prices continued to increase on average 3.7% to $529,097.

The average sales price for single family homes in the Matanuska Susitna Borough rose 3.8% in 2024 to $412,859, after increasing 4% in 2023.

This continues a trend of average price increases for more than a decade in the region.

Through June of 2025 prices have continued to increase on average 6.9% to $441,463.

These two markets represent where the vast majority of residential lending activity of Northrim Bank (the “Bank”) occurs.

Through September of 2025 prices continued to increase on average 6.7% to $440,366.

These two markets represent where the vast majority of the residential lending activity of Northrim Bank (the “Bank”) occurs.

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

The first six months of 2025 has seen a 4.8% increase in home sales compared to the first half of 2024 in Anchorage.

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

In the first six months of 2025 the number of units sold has increased 13.1% in the Matanuska Susitna Borough compared to the first half of 2024 according to the Alaska Multiple Listing Services.

The Board of Governors of the Federal Reserve System left its benchmark interest rate target unchanged at 4.25%-4.50% as of both June 30, 2025 and December 31, 2024.

The prime rate of interest is 7.50% as of both June 30, 2025 and December 31, 2024.

Highlights and Summary of Performance - Second Quarter of 2025

The Company reported net income and earnings per diluted share of $11.8 million and $2.09, respectively, for the second quarter of 2025 compared to net income and earnings per diluted share of $9.0 million and $1.62, respectively, for the second quarter of 2024.

The Company reported net income and earnings per diluted share of $25.1 million and $4.47, respectively for the first six months of 2025 compared to net income and earnings per diluted share of $17.2 million and $3.10, respectively, for the first six months of 2024.

The increase in net income for both periods in 2025 compared to the same periods last year is primarily attributable to higher net interest income, an increase in purchased receivable income and increased mortgage banking income, which were only partially offset by higher operating expenses and an increase in the provision for credit losses.

• Net interest margin was 4.66% for the second quarter of 2025, up 42-basis points from the second quarter a year ago.

• Return on average assets (“ROAA”) was 1.48% and return on average equity (“ROAE”) was 16.37% for the second quarter of 2025.

ROAA was 1.31% and ROAE was 14.84% for the second quarter of 2024.

• Portfolio loans were $2.20 billion at June 30, 2025, up 17% from a year ago, primarily due to new customer relationships and expanding market share, as well as retaining certain mortgages originated by Residential Mortgage, a subsidiary of the Bank.

The Company sold $61 million in consumer mortgages in the second quarter of 2025 to reduce the concentration of residential real estate loans and to provide additional liquidity for future commercial and construction loan growth.

• Total deposits were $2.81 billion at June 30, 2025, up 14% from $2.46 billion a year ago.

Non-interest bearing demand deposits increased 10% year-over-year to $777.9 million at June 30, 2025 and represent 28% of total deposits.

• The average cost of interest-bearing deposits was 2.04% at June 30, 2025, down from 2.21% at June 30, 2024.

• Mortgage loan originations were $277.1 million in the second quarter of 2025, up from $181.5 million in the second quarter a year ago.

Mortgage loans funded for sale were $249.7 million in the second quarter of 2025, compared to $152.3 million in the second quarter of 2024.

Other financial measures are shown in the table below:

Three Months Ended June 30, Six Months Ended June 30,

The first nine months of 2025 saw a 4.7% increase in home sales compared to the same nine months of 2024 in Anchorage.

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

In the first nine months of 2025 the number of units sold has increased by 133 sold or 11.1% in the Matanuska Susitna Borough compared to the first nine months of 2024.

The Board of Governors of the Federal Reserve System lowered its benchmark interest rate target to 4.00%-4.25% as of September 30, 2025 from 4.25%-4.50% as of December 31, 2024.

The prime rate of interest has dropped to 7.25% as of September 30, 2025 compared to 7.50% as of December 31, 2024.

Highlights and Summary of Performance - Third Quarter of 2025

The Company reported net income and earnings per diluted share of $27.1 million and $1.20, respectively, for the third quarter of 2025 compared to net income and earnings per diluted share of $8.8 million and $0.39, respectively, for the third quarter of 2024.

The Company reported net income and earnings per diluted share of $52.2 million and $2.32, respectively for the first nine months of 2025 compared to net income and earnings per diluted share of $26.0 million and $1.17, respectively, for the first nine months of 2024.

The increase in net income for both periods in 2025 compared to the same periods last year is primarily attributable to the gain from the sale of certain assets by Pacific Wealth Advisors, as well as higher net interest income, an increase in purchased receivable income and increased mortgage banking income, which were only partially offset by higher operating expenses and provisions for income taxes.

On September 18, 2025, the Company effected a four-for-one forward split of its common stock, a proportionate increase in the number of authorized shares of common stock from 10,000,000 to 40,000,000, and a proportionate decrease in the par value of the common stock from $1.00 per share to $0.25 per share.

The common stock split is part of the Company's ongoing review of optimal trading and spread levels.

The intended purpose of the split is to enhance stock liquidity, make shares more accessible to a broader base of retail investors, and support increased trading activity.

All share, equity award and per share amounts presented throughout this Quarterly Report on Form 10-Q have been retrospectively adjusted to reflect the common stock split.

• Net interest margin was 4.83% for the third quarter of 2025, up 54-basis points from the third quarter a year ago.

• Return on average assets (“ROAA”) was 3.32% and return on average equity (“ROAE”) was 35.66% for the third quarter of 2025.

ROAA was 1.22% and ROAE was 13.69% for the third quarter of 2024.

• Portfolio loans were $2.22 billion at September 30, 2025, up 11% from a year ago, primarily due to new customer relationships and expanding market share, as well as retaining certain mortgages originated by Residential Mortgage, a subsidiary of the Bank.

The Company sold $16 million in consumer mortgages in the third quarter of 2025 to reduce the concentration of residential real estate loans and to provide additional liquidity for future commercial and construction loan growth.

• Total deposits were $2.91 billion at September 30, 2025, up 11% from $2.63 billion a year ago.

Non-interest bearing demand deposits increased 14% year-over-year to $872.1 million at September 30, 2025 and represent 30% of total deposits.

• The average cost of interest-bearing deposits was 2.00% at September 30, 2025, down from 2.24% at September 30, 2024.

• Mortgage loan originations were $234.0 million in the third quarter of 2025, down from $248.0 million in the third quarter a year ago.

Mortgage loans funded for sale were $218.2 million in the third quarter of 2025, compared to $210.0 million in the third quarter of 2024.

Other financial measures for the periods indicated are shown in the table below:

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

2025 2024 2025 2024

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Nonperforming assets:

Nonperforming assets, net of government guarantees were $11.9 million at June 30, 2025 and $11.6 million at December 31, 2024.

Other Real Estate Owned (“OREO”), net of government guarantees was zero at both June 30, 2025 and December 31, 2024.

Repossessed assets were $50,000 as of June 30, 2025 and $297,000 as of December 31, 2024.

Nonperforming loans, net of government guarantees increased $258,000 or 3% to $7.8 million as of June 30, 2025 from $7.5 million as of December 31, 2024, primarily due to the addition of four loans in the first six months of 2025.

Nonperforming purchased receivables increased $249,000 or 7% to $4.0 million as of June 30, 2025 from $3.8 million as of December 31, 2024.

Of the nonperforming assets at June 30, 2025, $4.2 million are attributable to the Community Banking segment, $197,000 are attributable to the Home Mortgage Lending segment, and $7.5 million are attributable to the Specialty Finance segment.

Nonperforming assets, net of government guarantees were $13.6 million at September 30, 2025 and $11.6 million at December 31, 2024.

Other Real Estate Owned (“OREO”), net of government guarantees was zero at both September 30, 2025 and December 31, 2024.

Repossessed assets were $50,000 as of September 30, 2025 and $297,000 as of December 31, 2024.

Nonperforming loans, net of government guarantees increased $3.7 million or 49% to $11.3 million as of September 30, 2025 from $7.5 million as of December 31, 2024, primarily due to the addition of seven loans in the first nine months of 2025.

Nonperforming purchased receivables decreased $1.5 million or 40% to $2.3 million as of September 30, 2025 from $3.8 million as of December 31, 2024 as a result of a paydown received on one relationship.

Of the nonperforming assets, net of government guarantees at September 30, 2025, $5.3 million are attributable to the Community Banking segment, $510,000 are attributable to the Home Mortgage Lending segment, and $7.7 million are attributable to the Specialty Finance segment.

Potential problem assets:

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These loans are closely monitored and their performance is reviewed by management on a regular basis.

At June 30, 2025, management had identified $28.0 million potential problem loans, up from $1.6 million at December 31, 2024.

All potential problem loans are individually evaluated for the purposes of establishing an allowance for credit losses.

At September 30, 2025, management had identified $28.7 million potential problem loans, up from $1.6 million at December 31, 2024.

This increase is primarily due to the addition of three relationships which management consider to be isolated, customer specific events that do not impact the ACL beyond the individual analysis of these credits.

RESULTS OF OPERATIONS

Net income for the second quarter of 2025 increased $2.8 million to $11.8 million as compared to $9.0 million for the same period in 2024.

The increase in net income in the second quarter of 2025 as compared to the same quarter a year ago is largely attributable to a $6.5 million increase in net interest income, a $4.7 million increase in purchased receivable income, and a $1.5 million increase in mortgage banking income.

These increases were only partially offset by a $7.3 million increase in other operating expenses and a $2.1 million increase in the provision for credit losses.

Net income for the first six months of 2025 increased $7.9 million to $25.1 million as compared to $17.2 million for the same period in 2024.

The increase in net income in the first six months of 2025 as compared to the same period a year ago is largely attributable to a $11.4 million increase in net interest income, a $9.5 million increase in purchased receivable income, and a $1.7 million increase in mortgage banking income.

These increases were only partially offset by a $11.8 million increase in other operating expenses and a $0.5 million increase in the provision for credit losses.

Net income for the third quarter of 2025 increased $18.2 million to $27.1 million as compared to $8.8 million for the same period in 2024.

The increase in net income in the third quarter of 2025 as compared to the same quarter a year ago is largely attributable to a $14.2 million gain on sale of certain assets by Pacific Wealth Advisors, as well as a $6.5 million increase in net interest income and a $6.2 million increase in purchased receivable income.

These increases were only partially offset by a $3.6 million increase in other operating expenses and $4.7 million increase in provision for income taxes.

Net income for the first nine months of 2025 increased $26.1 million to $52.2 million as compared to $26.0 million for the same period in 2024.

The increase in net income in the first nine months of 2025 as compared to the same period a year ago is largely attributable to a $17.9 million increase in net interest income, a $15.7 million increase in purchased receivable income, a $14.2 million gain on sale of certain assets by Pacific Wealth Advisors, and a $2.0 million increase in mortgage banking income.

These increases were only partially offset by a $15.4 million increase in other operating expenses and a $8.1 million increase in the provision for income taxes.

Analysis of Business Segments

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The following table summarizes net income from our segments.

Additional information about segment performance is presented in Note 10 included in Part I - Item 1 “Financial Statements” of this report.

(In Thousands) Three Months Ended June 30, 2025 Three Months Ended June 30, 2024 Six Months Ended June 30, 2025 Six Months Ended June 30, 2024

Additional information about segment performance is presented in Note 10 to the Financial Statements included in Part I - Item 1 of this report.

(In Thousands) Three Months Ended September 30, 2025 Three Months Ended September 30, 2024 Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024

Community Banking $22,256 $7,087 $40,787 $21,527

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Community Banking

Net income in the Community Banking segment increased $645,000 or 9% in the second quarter of 2025 compared to the same period a year ago primarily due to an increase in net interest income which totaled $30.0 million in the second quarter of 2025, and $24.3 million in the second quarter of 2024.

Net interest income increased $5.7 million or 23% in the second quarter of 2025 as compared to the second quarter of 2024 mostly due to higher interest income on loans.

This increase was only partially offset by lower interest income on investments and higher interest expense on deposits and borrowings.

The provision for credit losses in the Community Banking segment was $1.3 million in the second quarter of 2025 compared to a benefit to the provision for credit losses of $184,000 in the same quarter a year ago.

The increase to the provision for credit losses in the Community Banking segment in the second quarter of 2025 as compared to the same quarter a year ago was primarily a result of increased loan balances as well as an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors.

Other operating expenses in the Community Banking segment totaled $21.8 million in the second quarter of 2025, up $3.7 million or 20% from $18.1 million in the second quarter a year ago.

The increase in the second quarter of 2025 as compared to the same quarter a year ago was mostly due to increases in salaries and other personnel expense, including $667,000 in higher salary expense, $873,000 increase in group medical expenses, as well as increases in profit share expense and payroll taxes.

Additionally, marketing expense increased due to timing of annual charitable contributions.

Net income in the Community Banking segment increased $4.1 million or 28% in the first six months of 2025 as compared to the same period a year ago primarily due to increases in net interest income primarily due to higher interest income due to higher earning-asset balances and higher yields.

Additionally, there was a decrease in the provision for loan losses due to a decrease in estimated loss rates resulting from changes in the Company's loss rate regression models for commercial, commercial real estate, and construction loans that was only partially offset by higher loan balances and an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors.

Other operating income also increased primarily due to higher merchant fees and an increase in commercial servicing rights resulting from higher balances.

These changes were only partially offset by higher other operating expenses, primarily due to higher salaries and other personnel expenses, data processing expenses, marketing expenses, OREO expenses net of gains on sale.

Net income in the Community Banking segment increased $15.2 million or 214% in the third quarter of 2025 compared to the same period a year ago primarily due to the gain on sale of certain assets by Pacific Wealth Advisors of $14.2 million, as well as an increase in net interest income which totaled $32.3 million in the third quarter of 2025, and $25.9 million in the third quarter of 2024.

Net interest income increased $6.4 million or 25% in the third quarter of 2025 as compared to the third quarter of 2024 mostly due to higher interest income on loans and deposits in banks as well as lower interest expense.

This increase was only partially offset by lower interest income on investments.

The provision for credit losses in the Community Banking segment was $1.6 million in the third quarter of 2025 compared to a provision for credit losses of $1.5 million in the same quarter a year ago.

The increase to the provision for credit losses in the Community Banking segment in the third quarter of 2025 as compared to the same quarter a year ago was primarily a result of increased loan balances as well as an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors.

Other operating expenses in the Community Banking segment totaled $20.0 million in the third quarter of 2025, up $1.2 million or 7% from $18.7 million in the third quarter a year ago.

The increase in the third quarter of 2025 as compared to the same quarter a year ago was mostly due to increases in salaries and other personnel expense, including $641,000 in higher salary expense and a $260,000 increase in group medical expenses, which were only partially offset by a $293,000 decrease in profit share expense.

Additionally, data processing expense and insurance expense increased in the quarter ended September 30, 2025 as compared to the same quarter last year.

Net income in the Community Banking segment increased $19.3 million or 89% in the first nine months of 2025 as compared to the same period a year ago primarily due to the gain on sale of certain assets by Pacific Wealth Advisors of $14.2 million in the third quarter of 2025, as well as increases in net interest income primarily due to higher interest income due to higher earning-asset balances and higher yields.

Home Mortgage Lending

Net income in the Home Mortgage Lending segment increased $563,000 or 41% in the second quarter of 2025 compared to the same period a year ago primarily due higher net interest income due to higher balances of both consumer mortgage loans held for sale and consumer mortgage loans held for investment, as well as higher mortgage banking income due to higher mortgage loans funded for sale.

During the second quarter of 2025, mortgage loans funded for sale were $249.7 million, compared to $152.3 million in the second quarter of 2024.

These increases were partially offset by increases in the provision for credit losses and other operating expenses.

The provision for credit losses in the Home Mortgage Lending segment was $639,000 in the second quarter of 2025 compared to a provision for credit loses of $64,000 in the second quarter of 2024.

The increase in the provision for credit losses in the second quarter of 2025 in the Home Mortgage Lending segment as compared to the same quarter a year ago was primarily a result of increased loan balances.

Other operating expenses in the Home Mortgage Lending segment totaled $7.6 million in the second quarter of 2025 compared to $6.7 million in the second quarter a year ago.

The increase in the second quarter of 2025 as compared to the same quarter a year ago was mostly due to increases in salaries and other personnel expense due to higher commissions paid to mortgage originators due to higher volume.

The Arizona, Colorado, and Pacific Northwest mortgage expansion markets were responsible for 22% of Residential Mortgage's $216 million total production in the second quarter of 2025 and 22% of $182 million total production in the second quarter of 2024.

Net income in the Home Mortgage Lending segment increased $579,000 or 45% in the third quarter of 2025 compared to the same period a year ago primarily due to a decrease in the provision for credit losses in the Home Mortgage Lending segment, as well as higher mortgage servicing revenue.

During the third quarter of 2025, mortgage loans funded for sale were $218.2 million, compared to $210.0 million in the third quarter of 2024.

These increases were partially offset by decreases in the net interest income and other operating expenses.

The provision for credit losses in the Home Mortgage Lending segment was $158,000 in the third quarter of 2025 compared to $571,000 in the third quarter of 2024.

The decrease in the provision for credit losses in the third quarter of 2025 in the Home Mortgage Lending segment as compared to the same quarter a year ago was primarily a result of decreased loan balances.

Other operating expenses in the Home Mortgage Lending segment totaled $7.4 million in the third quarter of 2025 compared to $7.6 million in the third quarter a year ago.

The decrease in the third quarter of 2025 as compared to the same quarter a year ago was mostly due to decreases in salaries and other personnel expense due to lower commissions paid to mortgage originators due to lower volume.

The Arizona, Colorado, and Pacific Northwest mortgage expansion markets were responsible for 16% of Residential Mortgage's $218 million total production in the third quarter of 2025 and 20% of $248 million total production in the third quarter a year ago.

The Company reclassified $100 million in consumer mortgages held for investment to held for sale in the first quarter of 2025 and recorded unrealized losses of $1.2 related to this portfolio in the first quarter of 2025.

In the second quarter of 2025, the Company sold $61 million of the $100 million that was reclassified to loans held for sale in the first quarter of 2025 for a total realized loss $545,000.

As of June 30, 2025, Northrim serviced 6,458 loans in its $1.55 billion home-mortgage-servicing portfolio, a 41% increase from the $1.10 billion serviced a year ago.

Net income in the Home Mortgage Lending segment increased $1.2 million or 79% in the first six months of 2025 as compared to the same period a year ago primarily due to higher net interest income due to higher balances of both consumer mortgage loans held for sale and consumer mortgage loans held for investment, as well as higher mortgage banking income due to higher mortgage loans funded for sale.

These increases were only partially offset by a higher provision for credit losses due to loan growth and higher other operating expenses primarily due to higher originator commissions.

In the second quarter of 2025, the Company sold $61 million of the $100 million that was reclassified to loans held for sale in the first quarter of 2025 for a total realized loss of $545,000.

In the third quarter of 2025, the Company sold $16 million of the $100 million that was reclassified to loans held for sale in the first quarter of 2025 for a total realized loss of $37,000.

As of September 30, 2025, Northrim serviced 6,475 loans in its $1.60 billion home-mortgage-servicing portfolio, a 37% increase from the $1.17 billion serviced a year ago.

Net income in the Home Mortgage Lending segment increased $1.8 million or 64% in the first nine months of 2025 as compared to the same period a year ago primarily due to higher net interest income due to higher balances of both consumer mortgage loans held for sale and consumer mortgage loans held for investment, as well as higher mortgage banking income due to higher mortgage loans funded for sale.

These increases were only partially offset by higher other operating expenses primarily due to higher originator commissions.

Specialty Finance

4 unchanged sentences

The composition of revenues for the Specialty Finance segment are primarily purchased receivable income, but also includes interest income from loans and other fee income.

Net income in the Specialty Finance segment increased $1.6 million or 279% in the second quarter of 2025 compared to the same period a year ago primarily due to the acquisition of Sallyport in the fourth quarter of 2024.

Total pre-tax income for Sallyport for the second quarter of 2025 was $1.3 million.

Net income in the Specialty Finance segment increased $2.6 million or 207% in the first six months of 2025 as compared to the same period a year ago primarily due to the acquisition of Sallyport.

Total pre-tax income for Sallyport for the first six months of 2025 was $2.6 million.

Average purchased receivables and loan balances at Sallyport were $71.0 million for the second quarter of 2025 and a yield of 27.23% compared to average balances of $59.9 million for the first quarter of 2025 and a yield of 35.8%.

The yield in the first quarter of 2025 included the recognition of $899,000 in fee income collected during the quarter related to two nonperforming receivables that was previously deferred and the collection of a $350,000 line termination fee.

Net income in the Specialty Finance segment increased $2.5 million or 541% in the third quarter of 2025 compared to the same period a year ago primarily due to the acquisition of Sallyport in the fourth quarter of 2024.

Total pre-tax income for Sallyport for the third quarter of 2025 was $2.1 million.

Net income in the Specialty Finance segment increased $5.1 million or 297% in the first nine months of 2025 as compared to the same period a year ago primarily due to the acquisition of Sallyport.

Total pre-tax income for Sallyport for the first nine months of 2025 was $4.7 million.

Average purchased receivables and loan balances at Sallyport were $68.4 million for the third quarter of 2025 and a yield of 32.9% compared to average balance of $71.0 million for the second quarter of 2025 with a yield of 27.23%, and average balance of $59.9 million for the first quarter of 2025 and a yield of 35.8%.

The yield in the third quarter of 2025 included the recognition of $879,000 in one-time fees collected during the quarter.

The yield excluding this items for the third quarter of 2025 was 27.7%.

The yield excluding these items for the first quarter of 2025 was 27.4%.

Net Interest Income/Net Interest Margin

Net interest income for the second quarter of 2025 increased 24% or $6.5 million, to $33.6 million as compared to $27.1 million for the second quarter of 2024.

The net interest margin increased 42 basis points to 4.66% in the second quarter of 2025 as compared to 4.24% in the second quarter of 2024.

The increase in net interest income in the second quarter of 2025 compared to the same period in 2024 was primarily the result of increased interest on loans and interest bearing deposits in other banks which was only partially offset by a decrease in interest income on investments, as well as an increase in interest expense on interest-bearing deposits and borrowings.

The increase in net interest margin in the second quarter of 2025 as compared to the same period of 2024 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets and higher yields on those assets which were only partially offset by an increase in borrowings.

Net interest income for the first six months of 2025 increased 21% or $11.4 million, to $64.9 million as compared to $53.5 million for the first six months of 2024.

The net interest margin increased 41 basis points to 4.61% in the first six months of 2025 as compared to 4.20% in the first six months of 2024.

The increase in net interest income in the first six of 2025 compared to the same period in 2024 was primarily the result of increased interest on loans which was only partially offset by a decrease in interest income on investments and interest bearing deposits in other banks, as well as an increase in interest expense on interest-bearing deposits and borrowings.

The increase in net interest margin in the first six months of 2025 as compared to the same period of 2024 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets and higher yields on those assets, as well as a decrease in the cost of interest-bearing liabilities.

Net interest income for the third quarter of 2025 increased 23% or $6.5 million, to $35.3 million as compared to $28.8 million for the third quarter of 2024.

The net interest margin increased 54 basis points to 4.83% in the third quarter of 2025 as compared to 4.29% in the third quarter of 2024.

The increase in net interest income in the third quarter of 2025 compared to the same period in 2024 was primarily the result of increased interest on loans, loans held for sale, and interest bearing deposits in other banks which was only partially offset by a decrease in interest income on investments, as well as an increase in interest expense on interest-bearing deposits and borrowings.

The increase in net interest margin in the third quarter of 2025 as compared to the same period of 2024 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets and higher yields on those assets as well as a decrease in the cost of interest-bearing liabilities.

Net interest income for the first nine months of 2025 increased 22% or $17.9 million, to $100.2 million as compared to $82.3 million for the first nine months of 2024.

The net interest margin increased 45 basis points to 4.68% in the first nine months of 2025 as compared to 4.23% in the first nine months of 2024.

The increase in net interest income in the first nine of 2025 compared to the same period in 2024 was primarily the result of increased interest on loans, loans held for sale, and interest bearing deposits in other banks, which were only partially offset by a decrease in interest income on investments, as well as an increase in interest expense on interest-bearing liabilities.

The increase in net interest margin in the first nine months of 2025 as compared to the same period of 2024 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets and higher yields on those assets, as well as a decrease in the cost of interest-bearing liabilities.

Components of Net Interest Margin

The following table compares average balances and rates as well as margins on earning assets for the three-month periods ended June 30, 2025 and 2024.

The following table compares average balances and rates as well as margins on earning assets for the three-month periods ended September 30, 2025 and 2024.

Average yields or costs are calculated on a tax-equivalent basis.

(Dollars in Thousands) Three Months Ended June 30,

(Dollars in Thousands) Three Months Ended September 30,

Interest income/ Average Tax Equivalent

31 unchanged sentences

3 Interest income includes loan fees.

Loan fees recognized during the period and included in the yield calculation totaled $1.2 million and $1.2 million in the second quarter of 2025 and 2024, respectively.

Loan fees recognized during the period and included in the yield calculation totaled $1.3 million and $1.1 million in the third quarter of 2025 and 2024, respectively.

4 Nonaccrual loans are included with a zero effective yield.

Average nonaccrual loans included in the computation of the average loan balances were $8.1 million and $5.0 million in the second quarter of 2025 and 2024, respectively .

Average nonaccrual loans included in the computation of the average loan balances were $8.1 million and $5.0 million in the third quarter of 2025 and 2024, respectively .

5 The Company does not have any fed funds sold or securities purchased with agreements to resell to disclose as part of its total interest-earning assets in the periods presented.

6 Tax-equivalent yields/costs assume a federal tax rate of 21% and state tax rate of 7.43% for a combined tax rate of 28.43%.

The following tables set forth the changes in consolidated net interest income attributable to changes in volume and to changes in interest rates for the three-month periods ending June 30, 2025 and 2024.

Changes attributable to the combined effect of volume and interest rate have been allocated proportionately to the changes due to volume and the changes due to interest rates.

The Company did not have any fed funds sold or securities purchased with agreements to resell for the three-month periods ending June 30, 2025 and 2024.

(In Thousands) Three Months Ended June 30, 2025 vs.

The Company did not have any fed funds sold or securities purchased with agreements to resell for the three-month periods ending September 30, 2025 and 2024.

(In Thousands) Three Months Ended September 30, 2025 vs.

Increase (decrease) due to

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Total interest expense $978 ($920) $58

The following table compares average balances and rates as well as margins on earning assets for the six-month periods ended June 30, 2025 and 2024.

The following table compares average balances and rates as well as margins on earning assets for the nine-month periods ended September 30, 2025 and 2024.

Average yields or costs are calculated on a tax-equivalent basis.

(Dollars in Thousands) Six Months Ended June 30,

(Dollars in Thousands) Nine Months Ended September 30,

Interest income/ Average Tax Equivalent

31 unchanged sentences

3 Interest income includes loan fees.

Loan fees recognized during the period and included in the yield calculation totaled $2.3 million and $2.2 million in the first six months of 2025 and 2024, respectively.

Loan fees recognized during the period and included in the yield calculation totaled $3.6 million and $3.3 million in the first nine months of 2025 and 2024, respectively.

4 Nonaccrual loans are included with a zero effective yield.

Average nonaccrual loans included in the computation of the average loan balances were $7.8 million and $5.4 million in the first six months of 2025 and 2024, respectively .

Average nonaccrual loans included in the computation of the average loan balances were $7.9 million and $5.3 million in the first nine months of 2025 and 2024, respectively .

5 The Company does not have any fed funds sold or securities purchased with agreements to resell to disclose as part of its total interest-earning assets in the periods presented.

6 Tax-equivalent yields/costs assume a federal tax rate of 21% and state tax rate of 7.43% for a combined tax rate of 28.43%.

The following tables set forth the changes in consolidated net interest income attributable to changes in volume and to changes in interest rates for the six-month periods ending June 30, 2025 and 2024.

The following tables set forth the changes in consolidated net interest income attributable to changes in volume and to changes in interest rates for the nine-month periods ending September 30, 2025 and 2024.

Changes attributable to the combined effect of volume and interest rate have been allocated proportionately to the changes due to volume and the changes due to interest rates.

The Company did not have any fed funds sold or securities purchased with agreements to resell for the six-month periods ending June 30, 2025 and 2024.

(In Thousands) Six Months Ended June 30, 2025 vs.

The Company did not have any fed funds sold or securities purchased with agreements to resell for the nine-month periods ending September 30, 2025 and 2024.

(In Thousands) Nine Months Ended September 30, 2025 vs.

Increase (decrease) due to

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The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity.

The following table presents the major categories of credit loss expense for the three and six-month periods ended June 30, 2025 and 2024:

Three Months Ended June 30, Six Months Ended June 30,

The following table presents the major categories of credit loss expense for the three and nine-month periods ended September 30, 2025 and 2024:

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

(In Thousands) 2025 2024 2025 2024

8 unchanged sentences

$1,716 $2,063 $2,283 $2,092

The increase to the provision for credit losses on loans in the second quarter of 2025 and in in the first six months of 2025 as compared to the same periods a year ago was primarily a result of increased loan balances as well as an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors.

The increase to the provision for unfunded commitments in the second quarter of 2025 and in the first six months of 2025 compared to the same periods a year ago was primarily due to an increase in estimated loss rates which was only partially offset by changes in mix of unfunded commitments.

The increase to the provision for credit losses on loans in the third quarter of 2025 and in the first nine months of 2025 as compared to the same periods a year ago was primarily a result of increased loan balances as well as an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors.

Qualitative factors have increased in 2025 for an increase in adversely classified loans as well as for a slight increase in concentration risk for loans to large borrowers.

The decrease to the provision for unfunded commitments in the third quarter of 2025 and increase in the first nine months of 2025 compared to the same periods a year ago was primarily due to changes in mix of unfunded commitments.

Fluctuations in the provision for credit losses in the future will be dependent upon changes in economic conditions and forecasts, as well as loan portfolio composition, quality, and duration.

Other Operating Income

Other operating income for the three-month period ended June 30, 2025 increased $7.1 million, or 74%, to $16.6 million as compared to $9.6 million for the same period in 2024, primarily due to a $4.7 million increase in purchased receivable income, as well as a $1.5 million increase in mortgage banking income in the second quarter of 2025 compared to the same quarter a year ago.

The fair value of marketable equity securities also increased $138,000 in the second quarter of 2025 compared to the same quarter a year ago.

The increase in purchased receivable income in the three-month period ended June 30, 2025 as compared to the same period in 2024 was primarily due to the acquisition of Sallyport in the fourth quarter of 2024.

Other operating income for the six-month period ended June 30, 2025 increased $12.3 million, or 70%, to $29.7 million as compared to $17.4 million for the same period in 2024, primarily due to a $9.5 million increase in purchased receivable income, as well as a $1.7 million increase in mortgage banking income in the first six-months of 2025 compared to the same period a year ago.

The increase in purchased receivable income in the first six-months of 2025 compared to the same period a year ago was primarily due to the acquisition of Sallyport in the fourth quarter of 2024.

Other operating income for the three-month period ended September 30, 2025 increased $19.7 million, or 170%, to $31.2 million as compared to $11.6 million for the same period in 2024, primarily due to the gain on sale of certain assets by Pacific Wealth Advisors of $14.2 million, as well as a $6.2 million increase in purchased receivable income and $226,000 increase in mortgage banking income in the third quarter of 2025 compared to the same quarter a year ago.

The fair value of marketable equity securities decreased $496,000 in the third quarter of 2025 compared to the same quarter a year ago.

The increase in purchased receivable income in the three-month period ended September 30, 2025 as compared to the same period in 2024 was primarily due to the acquisition of Sallyport in the fourth quarter of 2024.

Other operating income for the nine-month period ended September 30, 2025 increased $31.9 million, or 110%, to $60.9 million as compared to $29.0 million for the same period in 2024, primarily due to a $15.7 million increase in purchased receivable income, as well as the $14.2 million gain on sale of certain assets by Pacific Wealth Advisors and a $2.0 million increase in mortgage banking income in the first nine-months of 2025 compared to the same period a year ago.

The increase in purchased receivable income in the first nine-months of 2025 compared to the same period a year ago was primarily due to the acquisition of Sallyport in the fourth quarter of 2024.

Other Operating Expense

Other operating expense for the second quarter of 2025 increased $7.3 million, or 29%, to $32.5 million as compared to $25.2 million for the same period in 2024.

Other operating expense for the six-month period ended June 30, 2025 increased $11.8 million, or 24%, to $60.7 million as compared to $48.8 million for the same period in 2024.

Other operating expense for the third quarter of 2025 increased $3.6 million, or 13%, to $30.3 million as compared to $26.7 million for the same period in 2024.

Other operating expense for the nine-month period ended September 30, 2025 increased $15.4 million, or 20%, to $91.0 million as compared to $75.6 million for the same period in 2024.

The increases in both periods were primarily due to increases in salaries and other personnel expense, compensation expense for Sallyport acquisition payments, and an increase in data processing expense.

Total other operating expense increased $2.1 million in the Specialty Finance segment in the second quarter of 2025 compared to the second quarter of 2024 from the addition of Sallyport on October 31, 2024.

For the second quarter of 2025, Northrim recorded a higher effective tax rate as compared to the same period in 2024 as a result of a decrease in tax credits and tax exempt interest income as a percentage of pre-tax income in 2025.

In the second quarter of 2025, Northrim recorded $4.0 million in state and federal income tax expense, for an effective tax rate of 25.30% compared to $2.5 million and 21.95% for the same period in 2024.

In the six-month period ended June 30, 2025, Northrim recorded $8.2 million in state and federal income tax expense, for an effective tax rate of 24.72% compared to $4.8 million and 21.94% for the same period in 2024.

The addition of Sallyport on October 31, 2024 was responsible for a significant portion of the increase in total other operating expenses, including $2.4 million in the in the third quarter of 2025 compared to the third quarter of 2024 and $7.5 million in the first nine months of 2025 compared to the same period in the prior year.

On July 4, 2025, the President of the United States signed and enacted the One Big Beautiful Bill Act (“OBBBA”) into law.

Except for certain provisions, the OBBBA is effective for tax years beginning on or after January 1, 2025.

The tax and spending legislation permanently extends key business tax breaks originally enacted under the 2017 Tax Cuts and Jobs Act.

The Company does not expect changes in the law to have a material impact on income tax expense.

For the third quarter of 2025, Northrim recorded a lower effective tax rate as compared to the same period in 2024 primarily as a result of change in mix of how pretax income is allocated to states with varying tax rates as well as an increase in estimated tax deductions related to low income housing tax credit investments.

In the third quarter of 2025, Northrim recorded $7.5 million in state and federal income tax expense, for an effective tax rate of 21.71% compared to $2.8 million and 24.17% for the same period in 2024.

In the nine-month period ended September 30, 2025, Northrim recorded $15.7 million in state and federal income tax expense, for an effective tax rate of 23.18% compared to $7.7 million and 22.71% for the same period in 2024.

The increase in the effective tax rate for the first nine months of 2025 compared to the same period in 2024 is due to a decrease in tax credits and tax exempt interest income as a percentage of pre-tax income in 2025.

ANALYSIS OF FINANCIAL CONDITION

1 unchanged sentence

Investment Securities

Investment Securities include investment securities available for sale, investment securities held to maturity, and marketable equity securities, at June 30, 2025 decreased 9% to $474.9 million from $524.1 million at December 31, 2024 primarily due to maturities and calls of available for sale securities during the first six months of 2025.

The table below details portfolio investment balances by portfolio investment type for the periods indicated:

June 30, 2025 December 31, 2024

Investment Securities include investment securities available for sale, investment securities held to maturity, and marketable equity securities, at September 30, 2025 decreased 11% to $464.3 million from $524.1 million at December 31, 2024 primarily due to maturities and calls of available for sale securities during the first nine months of 2025.

The proceeds of these maturities and calls were invested in loans.

The table below details portfolio investment balances by portfolio investment type as of the periods indicated:

September 30, 2025 December 31, 2024

Dollar Amount Percent of Total Dollar Amount Percent of Total

7 unchanged sentences

Total $464,260 $524,086

The average estimated duration of the investment portfolio at June 30, 2025, was approximately 2.4 years.

As of June 30, 2025, $55.7 million of available for sale securities with a weighted average yield of 1.40% are scheduled to mature in the next six months, $106.8 million with a weighted average yield of 1.28% are scheduled to mature in six months to one year, and $145.0 million with a weighted average yield of 1.96% are scheduled to mature in the following year, representing a total of $307.5 million or 11% of earning assets that are scheduled to mature in the next 24 months.

The average estimated duration of the investment portfolio at September 30, 2025, was approximately 2.16 years.

As of September 30, 2025, $80.7 million of available for sale securities with a weighted average yield of 1.15% are scheduled to mature in the next six months, $103.9 million with a weighted average yield of 1.44% are scheduled to mature in six months to one year, and $124.8 million with a weighted average yield of 2.69% are scheduled to mature in the following year, representing a total of $309.4 million or 10% of earning assets that are scheduled to mature in the next 24 months.

Loans and Lending Activities

The following table presents the concentration distribution of the loan portfolio, net of deferred fees and costs, as of the dates indicated:

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Dollar Amount Percent of Total Dollar Amount Percent of Total

14 unchanged sentences

Total loans $2,218,970 $2,129,263

Loans increased by $72.9 million, to $2.202 billion at June 30, 2025 from $2.129 billion at December 31, 2024, primarily as a result of increases in commercial real estate and commercial and industrial loans.

These increases were only partially offset by the sale of 1-4 family residential loans secured by first liens in the first six month of 2025.

Loans increased by $89.7 million, to $2.22 billion at September 30, 2025 from $2.13 billion at December 31, 2024, primarily as a result of increases in commercial real estate and commercial and industrial loans.

These increases were only partially offset by the sale of 1-4 family residential loans secured by first liens in the first nine month of 2025 as well as decreases in other construction, land development and raw land loans.

Information about industry concentrations

The Company defines “direct exposure” to the oil and gas industry as companies that it has identified as significantly reliant upon activity related to the oil and gas industry, such as oilfield services, lodging, equipment rental, transportation, and other logistic services specific to the industry.

The Company estimates that $105.9 million, or approximately 5% of loans as of June 30, 2025 have direct exposure to the oil and gas industry as compared to $99.7 million, or approximately 5% of loans as of December 31, 2024.

The Company's unfunded commitments to borrowers that have direct exposure to the oil and gas industry were $76.9 million and $45.8 million at June 30, 2025 and December 31, 2024, respectively.

The portion of the Company's ACL that related to the loans with direct exposure to the oil and gas industry was estimated at $1.4 million as of June 30, 2025 and $1.1 million as of December 31, 2024.

The Company estimates that $125.3 million, or approximately 6% of loans as of September 30, 2025 have direct exposure to the oil and gas industry as compared to $99.7 million, or approximately 5% of loans as of December 31, 2024.

The Company's unfunded commitments to borrowers that have direct exposure to the oil and gas industry were $79.2 million and $45.8 million at September 30, 2025 and December 31, 2024, respectively.

The portion of the Company's ACL that related to the loans with direct exposure to the oil and gas industry was estimated at $1.8 million as of September 30, 2025 and $1.1 million as of December 31, 2024.

The following table details loan balances by loan segment and class of financing receivable for loans with direct oil and gas exposure as of the dates indicated:

(In Thousands) June 30, 2025 December 31, 2024

(In Thousands) September 30, 2025 December 31, 2024

Commercial & industrial loans $114,623 $87,935

5 unchanged sentences

The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions.

At June 30, 2025, the Company had $141.2 million, or 6% of portfolio loans, in the Healthcare sector, $127.2 million, or 6% of portfolio loans, in the Tourism sector, $121.0 million, or 5% of portfolio loans, in the Accommodations sector, $93.4 million, or 4% of portfolio loans, in the Retail sector, $84.2 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector, $76.2 million, or 3% of portfolio loans, in the Fishing sector, and $59.5 million, or 3% in the Restaurant sector.

The portion of the Company's ACL that related to the loans with exposure to these industries is estimated at the following amounts as of June 30, 2025:

At September 30, 2025, the Company had $139.4 million, or 6% of portfolio loans, in the Healthcare sector, $134.1 million, or 6% of portfolio loans, in the Accommodations sector, $117.3 million, or 5% of portfolio loans, in the Tourism sector, $96.4 million, or 4% of portfolio loans, in the Retail sector, $79.5 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector, $75.2 million, or 3% of portfolio loans, in the Fishing sector, and $55.3 million, or 2% in the Restaurant sector.

The portion of the Company's ACL that related to the loans with exposure to these industries is estimated at the following amounts as of September 30, 2025:

(In Thousands) Tourism Aviation (non-tourism) Healthcare Retail Fishing Restaurant Accommodations Total

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Credit Quality and Nonperforming Assets

The following table sets forth information regarding our nonperforming loans and total nonperforming assets for the periods indicated:

June 30, December 31,

The following table sets forth information regarding our nonperforming loans and total nonperforming assets as of the periods indicated:

September 30, December 31,

(In Thousands) 2025 2024

22 unchanged sentences

Gross loan recoveries for the quarter ($142) ($200)

Net loan (recoveries) charge-offs for the quarter $140 ($51)

Net loan (recoveries) charge-offs year-to-date $106 ($215)

Net loan (recoveries) charge-offs for the quarter / average loans, for the quarter 0.01 % — %

Net loan (recoveries) charge-offs year-to-date / average loans,

Net loan charge-offs (recoveries) for the quarter $1,192 ($51)

Net loan charge-offs (recoveries) year-to-date $1,299 ($215)

Net loan charge-offs (recoveries) for the quarter / average loans, for the quarter 0.05 % — %

Net loan charge-offs (recoveries) year-to-date / average loans,

year-to-date annualized 0.08 % — %

Allowance for credit losses for purchased receivables / purchased receivables 1.75 % 4.69 %

Net purchased receivable (recoveries) charge-offs for the quarter ($19) $—

Net purchased receivable charge-offs (recoveries) year-to-date $262 $—

Net purchased receivable (recoveries) charge-offs for the quarter / average purchased receivables,

for the quarter (0.02) % — %

Net purchased receivable charge-offs (recoveries) year-to-date / average purchased receivables,

year-to-date annualized 0.35 % — %

Allowance for Credit Losses

The following table sets forth information regarding changes in the ACL for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,

The following table sets forth information regarding changes in the ACL as of the periods indicated:

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

(In Thousands) 2025 2024 2025 2024

5 unchanged sentences

Commercial & industrial loans 105 104 184 181

Commercial real estate:

Owner occupied properties 30 — 30 —

Residential real estate:

3 unchanged sentences

Consumer loans 1 — 4 1

Other loans — — — —

Total recoveries 142 111 241 204

Net, recoveries (140) 26 (106) 68

(Benefit) provision for credit losses

Net (charge-offs), recoveries (1,192) 96 (1,298) 164

Provision for credit losses

1,964 1,738 2,635 2,094

Balance at end of period $23,357 $19,528 $23,357 $19,528

The following table sets forth information regarding changes in the ACL for unfunded commitments for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,

The following table sets forth information regarding changes in the ACL for unfunded commitments as of the periods indicated:

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

(In Thousands) 2025 2024 2025 2024

2 unchanged sentences

Balance at end of period $1,922 $2,416 $1,922 $2,416

The ACL for loans held for investment at June 30, 2025 increased $565,000 from December 31, 2024 primarily due to increases in loan balances as well as an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors.

The following table sets forth information regarding changes in the ACL for purchased receivables as of the periods indicated:

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

(In Thousands) 2025 2024 2025 2024

Balance at beginning of period $3,432 $— $3,649 $—

Adjustment related to PCD collections payable to sellers 1

(1,513) — (1,513) —

Charge-offs — — (281) —

Recoveries 20 — 20 —

Net (charge-offs), recoveries

(Benefit) provision for purchased receivables

Balance at end of period $1,924 $— $1,924 $—

1 Represents a reduction in the allowance for credit losses on a purchased credit deteriorated purchased receivable acquired in 2024 in connection with the Sallyport acquisition.

Collections received during the period presented above are contractually payable to the sellers under the purchase agreement if collected within one year of the acquisition of Sallyport.

Accordingly, the decrease in the allowance was offset by the recognition of a liability to the sellers, and no benefit was recognized in the provision for credit losses.

The ACL for loans held for investment at September 30, 2025 increased $1.3 million from December 31, 2024 primarily due to increases in loan balances as well as an increase in estimated loss rates due to less favorable economic forecasts and trends in qualitative factors.

Qualitative factors have increased in 2025 for an increase in adversely classified loans as well as for a slight increase in concentration risk for loans to large borrowers.

While management believes that it uses the best information available to determine the ACL, unforeseen market conditions and other events could result in adjustment to the ACL, and net income could be significantly affected if circumstances differed substantially from the assumptions used in making the final determination of the ACL.

Deposits are the Company’s primary source of funds.

Total deposits increased $129.0 million, or 5%, to $2.81 billion as of June 30, 2025 compared to $2.68 billion as of December 31, 2024, primarily due to new deposit relationships and normal seasonal fluctuations.

Total deposits increased $226.3 million, or 8%, to $2.91 billion as of September 30, 2025 compared to $2.68 billion as of December 31, 2024, primarily due to new deposit relationships and normal seasonal fluctuations.

The following table summarizes the Company's composition of deposits as of the periods indicated:

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

(In thousands) Balance % of total Balance % of total

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Total deposits $2,906,463 $2,680,189

The Company’s mix of deposits continues to contribute to a low cost of funds with balances in transaction accounts representing 86% of total deposits at June 30, 2025 and 84% of total deposits at December 31, 2024.

The Company’s mix of deposits continues to contribute to a low cost of funds with balances in transaction accounts representing 86% of total deposits at September 30, 2025 and 84% of total deposits at December 31, 2024.

The only deposit category with stated maturity dates is certificates of deposit.

At June 30, 2025, the Company had $390.9 million in certificates of deposit as compared to certificates of deposit of $418.4 million at December 31, 2024.

At June 30, 2025, $356.9 million, or 91%, of the Company’s certificates of deposits are scheduled to mature over the next 12 months as compared to $369.7 million, or 88%, of total certificates of deposit at December 31, 2024.

The aggregate amount of certificates of deposit in amounts of $250,000 and greater at June 30, 2025 and December 31, 2024, was $195.6 million and $217.1 million, respectively.

The following table sets forth the amount outstanding of deposits in amounts of $250,000 and greater by time remaining until maturity and percentage of total deposits as of June 30, 2025:

At September 30, 2025, the Company had $400.3 million in certificates of deposit as compared to certificates of deposit of $418.4 million at December 31, 2024.

At September 30, 2025, $361.1 million, or 90%, of the Company’s certificates of deposits are scheduled to mature over the next 12 months as compared to $369.7 million, or 88%, of total certificates of deposit at December 31, 2024.

The aggregate amount of certificates of deposit in amounts of $250,000 and greater at September 30, 2025 and December 31, 2024, was $207.8 million and $217.1 million, respectively.

The following table sets forth the amount outstanding of deposits in amounts of $250,000 and greater by time remaining until maturity and percentage of total deposits as of September 30, 2025:

Time Certificates of Deposit

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Total $207,788 100 %

At June 30, 2025, 75% of total deposits were held in business accounts and 25% of deposit balances were held in consumer accounts.

Northrim had approximately 34,000 deposit customers with an average balance of $60,000 as of June 30, 2025.

Northrim had 27 customers with balances over $10 million as of June 30, 2025 which accounted for $731.1 million, or 27%, of total deposits.

Uninsured deposits totaled approximately $1.02 billion or 36% of total deposits as of June 30, 2025 compared to $1.1 billion or 40% of total deposits as of December 31, 2024.

There was no unusual deposit activity during the first six months of 2025.

At September 30, 2025, 76% of total deposits were held in business accounts and 24% of deposit balances were held in consumer accounts.

Northrim had approximately 34,000 deposit customers with an average balance of $63,000 as of September 30, 2025.

Northrim had 31 customers with balances over $10 million as of September 30, 2025 which accounted for $725.7 million, or 26%, of total deposits.

Uninsured deposits totaled approximately $1.19 billion or 41% of total deposits as of September 30, 2025 compared to $1.1 billion or 40% of total deposits as of December 31, 2024.

There was no unusual deposit activity during the first nine months of 2025.

The Bank is a member of the Federal Home Loan Bank of Des Moines (the “FHLB”).

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FHLB advances are dependent on the availability of acceptable collateral such as marketable securities or real estate loans, although all FHLB advances are secured by a blanket pledge of the Bank’s assets.

At June 30, 2025, our maximum borrowing line from the FHLB was approximately 45% of the Bank’s assets, subject to the FHLB’s collateral requirements.

Based on the Company's current collateral pledged to the FHLB, less outstanding advances, the Company's borrowing line is $343.3 million as of June 30, 2025.

The Company has outstanding advances of $13.0 million as of June 30, 2025 which were originated to match fund low income housing projects that qualify for long term fixed interest rates.

At September 30, 2025, our maximum borrowing line from the FHLB was approximately 45% of the Bank’s assets, subject to the FHLB’s collateral requirements.

Based on the Company's current collateral pledged to the FHLB, less outstanding advances, the Company's borrowing line is $438.5 million as of September 30, 2025.

The Company has outstanding advances of $12.9 million as of September 30, 2025 which were originated to match fund low income housing projects that qualify for long term fixed interest rates.

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 $50.0 million advance from the FHLB outstanding as of June 30, 2025 at an interest rate of 4.48% which matures in August 2025.

Federal Reserve Bank:

The Federal Reserve Bank of San Francisco (the “Federal Reserve Bank”) is holding $65.0 million of securities as collateral to secure the Company's ability to take advances through the discount window on June 30, 2025.

There were no discount window advances outstanding at either June 30, 2025 or December 31, 2024.

The Federal Reserve Bank of San Francisco (the “Federal Reserve Bank”) is holding $70.0 million of securities as collateral to secure the Company's ability to take advances through the discount window on September 30, 2025.

There were no discount window advances outstanding at either September 30, 2025 or December 31, 2024.

Other Short-term Borrowings:

The Company is subject to provisions under Alaska state law, which generally limit the amount of outstanding debt to 35% of total assets or $1.13 billion at June 30, 2025 and $1.06 billion at December 31, 2024.

At June 30, 2025 and December 31, 2024, the Company had no short-term (original maturity of one year or less) borrowings that exceeded 30% of shareholders’ equity.

The Company is subject to provisions under Alaska state law, which generally limit the amount of outstanding debt to 35% of total assets or $1.15 billion at September 30, 2025 and $1.06 billion at December 31, 2024.

At September 30, 2025 and December 31, 2024, the Company had no short-term (original maturity of one year or less) borrowings that exceeded 30% of shareholders’ equity.

Long-term Borrowings.

The Company had no long-term borrowing outstanding other than the FHLB advances noted above as of June 30, 2025 or December 31, 2024.

The Company had no long-term borrowing outstanding other than the FHLB advances noted above as of September 30, 2025 or December 31, 2024.

Liquidity and Capital Resources

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Other available sources of liquidity for the bank holding company include the issuance of debt and the issuance of common or preferred stock.

As of June 30, 2025, the Company has 10.0 million authorized shares of common stock, of which approximately 5.5 million are issued and outstanding, leaving approximately 4.5 million shares available for issuance.

As of September 30, 2025, the Company has 40.0 million authorized shares of common stock, of which approximately 22.1 million are issued and outstanding, leaving approximately 17.9 million shares available for issuance.

Additionally, the Company has 2.5 million authorized shares of preferred stock available for issuance.

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The primary sources of demands on our liquidity are customer demands for withdrawal of deposits and borrowers’ demands that we advance funds against unfunded lending commitments.

The Company had cash and cash equivalents of $141.3 million, or 4% of total assets at June 30, 2025 compared to $62.7 million, or 2% of total assets as of December 31, 2024.

The increase in cash and cash equivalents since the end of 2024 is primarily due to an increase in deposits and borrowings.

The Company had other comprehensive income, net of tax, of $2.0 million for the six-month period ending June 30, 2025 primarily due to unrealized holding gains on available for sale securities.

Accumulated unrealized losses, net of income taxes on available for sale securities, which are recorded in total shareholders' equity, are $3.6 million as of June 30, 2025.

Accumulated unrealized losses, net of income taxes on held to maturity securities, which are not recorded in shareholders' equity, are $509,000 as of June 30, 2025.

The Company had cash and cash equivalents of $212.7 million, or 6% of total assets at September 30, 2025 compared to $62.7 million, or 2% of total assets as of December 31, 2024.

The increase in cash and cash equivalents since the end of 2024 is primarily due to an increase in deposits.

The Company had other comprehensive income, net of tax, of $1.6 million for the nine-month period ending September 30, 2025 primarily due to unrealized holding gains on available for sale securities.

Accumulated unrealized losses, net of income taxes on available for sale securities, which are recorded in total shareholders' equity, are $1.8 million as of September 30, 2025.

Accumulated unrealized losses, net of income taxes on held to maturity securities, which are not recorded in shareholders' equity, are $191,000 as of September 30, 2025.

Management does not believe that liquidation of these securities, which would result in realized losses, will occur prior to maturity of these securities.

As of both June 30, 2025 and December 31, 2024, the weighted average maturity of available for sale securities is 2.4 years.

At June 30, 2025, $162.5 million available for sale securities mature within one year, $145.0 million mature within one to two years, and $27.0 million mature within two to three years.

Our total unfunded commitments to fund loans and letters of credit at June 30, 2025 were $535.3 million.

As of September 30, 2025, the weighted average maturity of available for sale securities is 2.16 years as compared to 2.40 years as of December 31, 2024.

At September 30, 2025, $184.6 million available for sale securities mature within one year, $124.8 million mature within one to two years, and $35.0 million mature within two to three years.

Our total unfunded commitments to fund loans and letters of credit at September 30, 2025 were $547.6 million.

We do not expect that all of these loans are likely to be fully drawn upon at any one time.

At June 30, 2025, certificates of deposit totaling $356.9 million are scheduled to mature over the next 12 months and may be withdrawn from the Bank.

At September 30, 2025, certificates of deposit totaling $361.1 million are scheduled to mature over the next 12 months and may be withdrawn from the Bank.

Similar to loans, we do not expect that these maturing certificates of deposit, or other non-maturity deposits, to be withdrawn from the Bank in a manner that will strain liquidity;

however, unforeseen future circumstances or events may cause higher than anticipated withdrawal of deposits or draws of unfunded commitments to fund new loans.

Management believes that cash requirements to fund future non-deposit and non-borrowing liabilities, including operating lease liabilities and other liabilities, as of June 30, 2025, are not material to the Company's liquidity position as of June 30, 2025.

Management believes that cash requirements to fund future non-deposit and non-borrowing liabilities, including operating lease liabilities and other liabilities, as of September 30, 2025, are not material to the Company's liquidity position as of September 30, 2025.

The Company has other available sources of liquidity to fund unforeseen liquidity requirements.

These include borrowings available through our correspondent banking relationships and our credit lines with the Federal Reserve Bank and the FHLB.

At June 30, 2025, our liquid assets, which include investments and loans maturing within a year, were $1.15 billion.

At September 30, 2025, our liquid assets, which include investments and loans maturing within a year, were $1.16 billion.

Our funds available for borrowing under our existing lines of credit based on loans currently pledged and investments available to be pledged as collateral were $580.2 million.

Given these sources of liquidity and our expectations for customer demands for cash and for our operating cash needs, we believe our sources of liquidity to be sufficient for the foreseeable future.

As shown in the Consolidated Statements of Cash Flows included in Part I - Item 1 “Financial Statements” of this report, net cash provided by operating activities was $12.1 million for the first six months of 2025, primarily due to net proceeds from the sale of loans held for sale and cash provided by net income, which was only partially offset by cash used in connection with the origination of loans held for sale.

As shown in the Consolidated Statements of Cash Flows included in Part I - Item 1 “Financial Statements” of this report, net cash provided by operating activities was $104.8 million for the first nine months of 2025, primarily due to net proceeds from the sale of loans held for sale and cash provided by net income, which was only partially offset by cash used in connection with the origination of loans held for sale.

Net cash used by investing activities was $160.4 million for the same period, primarily due to an increase in loans and purchased receivables which were only partially offset by maturities and calls of available for sale securities.

Net cash provided by financing activities in the first six months of 2025 was $161.9 million, primarily due to increases in deposits and borrowings which was only partially offset by cash dividends paid to shareholders.

Net cash provided by financing activities in the first nine months of 2025 was $205.5 million, primarily due to increases in deposits which were only partially offset by cash dividends paid to shareholders.

Throughout our history, the Company has periodically repurchased for cash a portion of its shares of common stock in the open market.

At June 30, 2025, there are no shares remaining under the repurchase program, and we did not repurchase any shares in the first or second quarters of 2025.

At September 30, 2025, there are no shares remaining under the repurchase program, and we did not repurchase any shares in the first, second, or third quarters of 2025.

The Company currently has no plans to repurchase shares of its common stock in 2025.

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The requirements address both risk-based capital and leverage capital.

We believe as of June 30, 2025, that the Company and the Bank met all applicable capital adequacy requirements for a “well-capitalized” institution by regulatory standards.

We believe as of September 30, 2025, that the Company and the Bank met all applicable capital adequacy requirements for a “well-capitalized” institution by regulatory standards.

The table below illustrates the capital requirements in effect for the periods noted for the Company and the Bank and the actual capital ratios for each entity that exceed these requirements.

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The trust preferred securities are not accounted for on the Bank’s financial statements nor are they included in its capital.

As a result, the Company has $10 million more in regulatory capital than the Bank at June 30, 2025, which explains most of the difference in the capital ratios for the two entities.

As a result, the Company has $10 million more in regulatory capital than the Bank at September 30, 2025, which explains most of the difference in the capital ratios for the two entities.

Minimum Required Capital Well-Capitalized Actual Ratio Company Actual Ratio Bank

June 30, 2025

September 30, 2025

Total risk-based capital 8.00% 10.00% 11.56% 10.75%

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Item 7, Management’s Discussion and Analysis, and in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

There have been no material changes to the valuation techniques or assumptions within the models that affect our estimates during the first or second quarters of 2025.

There have been no material changes to the valuation techniques or assumptions within the models that affect our estimates during the first, second or third quarters of 2025.

Allowance for Credit Losses Policy :

Management performs a hypothetical sensitivity analysis of our ACL quarterly to understand the impact of a change in a key input on our ACL.

As of June 30, 2025, if the four-quarter U.S.

As of September 30, 2025, if the four-quarter U.S.

unemployment rate forecast had been approximately 5% higher and the four-quarter annualized growth rate in the U.S.

Gross Domestic Product had been approximately 29% lower, our ACL for loans would have increased $620,000, or 3%.

As of June 30, 2025, if the four-quarter national unemployment rate forecast had been approximately 30% higher and the four-quarter annualized growth rate in the U.S.

As of September 30, 2025, if the four-quarter national unemployment rate forecast had been approximately 29% higher and the four-quarter annualized growth rate in the U.S.

Gross Domestic Product had been approximately 50% higher, which represents management's estimate of long-term mean rates for these economic factors, our ACL for loans would have increased $1.4 million, or 6%.

As of June 30, 2025, if the estimated prepayment and curtailment rates are doubled (with a maximum rate of 100%), our ACL for loans would have decreased $2.0 million, or 9%.

As of June 30, 2025, if the estimated prepayment and curtailment rates are cut in half, our ACL for loans would have increased $1.5 million, or 7%.

As of September 30, 2025, if the estimated prepayment and curtailment rates are doubled (with a maximum rate of 100%), our ACL for loans would have decreased $2.0 million, or 9%.

As of September 30, 2025, if the estimated prepayment and curtailment rates are cut in half, our ACL for loans would have increased $1.5 million, or 7%.

These sensitivity analyses include the impact to both the quantitative and qualitative components of our ACL.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our assessment of market risk as of June 30, 2025 indicates that there are no material changes in the quantitative and qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2024.

Our assessment of market risk as of September 30, 2025 indicates that there are no material changes in the quantitative and qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis