Northrim BanCorp Inc.
05/01/2026 | Press release | Distributed by Public on 05/01/2026 12:07
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the unaudited consolidated financial statements of Northrim BanCorp, Inc. (the "Company") and the notes thereto presented elsewhere in this report and with the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
Except as otherwise noted, references to "we", "our", "us" or "the Company" refer to Northrim BanCorp, Inc. and its subsidiaries that are consolidated for financial reporting purposes.
Note Regarding Forward Looking-Statements
This quarterly report on Form 10-Q includes "forward-looking statements," as that term is defined for purposes of Section 21E of the Securities Exchange Act of 1934, as amended, which are not historical facts. These forward-looking statements describe management's expectations about future events and developments such as future operating results, growth in loans and deposits, continued success of the Company's style of banking, and the strength of the local economy. All statements, other than statements of historical fact, regarding our financial position, business strategy, management's plans and objectives for future operations are forward-looking statements. We use words such as "anticipate," "believe," "expect," "intend" and similar expressions in part to help identify forward-looking statements. Forward-looking statements reflect management's current plans and expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations, and those variations may be both material and adverse. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: descriptions of Northrim's financial condition, results of operations, asset based lending volumes, asset and credit quality trends and profitability; the ability of Northrim to execute its business plans; potential further increases in interest rates; the value of securities held in our investment portfolio; the impact of the results of government shutdowns and government initiatives 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, tariffs, inflationary pressures and slowdowns in economic growth; changes in banking regulation or actions by bank regulators; potential further increases in inflation, supply-chain constraints, and potential geopolitical instability, including the wars in Ukraine and Iran; financial stress on borrowers (consumers and businesses) as a result of higher rates or an uncertain economic environment; the general condition of, and changes in, the Alaska economy; our ability to maintain or expand our market share or net interest margin; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to current expected credit losses accounting guidance; our ability to maintain asset quality; our ability to implement our marketing and growth strategies; our ability to identify and address cyber-security risks, including security breaches, "denial of service attacks," "hacking," and identity theft and increased cyber threats due to artificial intelligence; disease outbreaks; and our ability to execute our business plan. Further, actual results may be affected by competition on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy. In addition, there are risks inherent in the banking industry relating to collectability of loans and changes in interest rates. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in Part II. Item 1A Risk Factors of this report and Part I. Item 1A in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as well as in our other filings with the Securities and Exchange Commission. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations. In addition, you should note that forward looking statements are made only as of the date of this report and that we do not intend to update any of the forward-looking statements or the uncertainties that may adversely impact those statements, other than as required by law.
Update on Economic Conditions
Alaska's seasonally adjusted unemployment rate was 4.8% at the end of 2025, compared to 4.4% for the United States, according to the Alaska Department of Labor and Workforce Development. Alaska had a total of 323,900 payroll jobs in December of 2025 in Alaska, not including uniformed military. This was an increase of 0.5% or 1,500 jobs from December of 2024.
Alaska's seasonally adjusted aggregate personal income was $59.2 billion in the third quarter of 2025 according to the Federal Bureau of Economic Analysis ("BEA"). Alaska enjoyed an annual personal income improvement of 4.4% between the third quarter of 2024 and the third quarter of 2025. Per capita personal income in Alaska was estimated at $79,850 compared to the U.S. average of $76,513, according to the BEA, ranking Alaska 14th highest of the 50 U.S. states.
Alaska's Gross State Product ("GSP") in the third quarter of 2025 reached $75.3 billion according to the BEA. Alaska's inflation adjusted "real" GSP increased 1.5% in 2024, and 3.8% annualized through the third quarter of 2025. The average U.S. GDP growth rate was 2.8% for 2024, and 4.4% annualized through the third quarter of 2025.
Alaska exported $6.7 billion in goods directly to foreign countries in 2025 according to the U.S. Census Bureau, a 13.4% increase over 2024 totals. South Korea took over the top trade spot by importing $1.1 billion in goods directly from Alaska. This was a 73% increase over 2024. South Korea imports significant quantities of fish, lead and zinc. The rapid growth came from $515 million in gold and silver purchases in 2025. Australia imported over $1 billion in goods, primarily gold, zinc and lead. Australia's growth rate in Alaska products was 30% in 2025. Japan moved up to the third spot with a 38% growth in purchases totaling $927 million in 2025. Japan has been a leading customer of a large variety of fish products from Alaska for decades and also purchases an array of minerals. China slipped from first to fourth place due in part to complex U.S. tariff negotiations. China's imports from Alaska dropped 47% from $1.5 billion in 2024 to $803 million in 2025. Oil & Gas does not contribute a significant amount to international exports ($246 million in 2025) 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 ("CPI") for the U.S. increased 2.4% between February of 2025 and February of 2026. In Alaska, the rate of increase was lower at 1.5% for the same time period. The largest increases since last February came from Apparel (+9.7%), Motor Fuel (+4.9%), Housing (+3.3%), and Recreation (+2%). Slower increases or declining costs in Food and Beverage (+1.7%) Medical Care (+1.2%), Education (-1.3%), and Transportation (-3.3%), helped moderate inflationary pressures in Alaska relative to the U.S. in 2025.
The monthly average price of Alaska North Slope ("ANS") crude oil ranged between $76.39 a barrel in January of 2025 and $62.70 in December 2025. Prices began to rise dramatically in 2026 after conflict began in Venezuela and Iran. ANS was priced at $110 a barrel on March 31, 2026. The Alaska Department of Revenue ("DOR") calculated ANS crude oil production was 468 thousand barrels per day ("bpd") in Alaska's fiscal year ending June 30, 2025. In the Fall 2025 Revenue Forecast published December 19, 2025, the DOR expects production to average 457 thousand bpd in fiscal year 2026 and 518 thousand bpd in fiscal year 2027. Over the next decade it is expected to continue to grow to 621 thousand bpd, or 33% by fiscal year 2036. 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 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 February 28, 2026 the fund's value was $88.8 billion. According to the DOR it is scheduled to contribute $3.8 billion to Alaska's General Fund in fiscal year 2026 and $4 billion in fiscal year 2027 for general government spending and to pay the annual dividend in October to Alaskan residents.
According to the Alaska Multiple Listing Services, the average sales price of a single-family home in Anchorage rose 4.4% in 2025 to $532,339, following an increase of 6.2% in 2024 and 5.2% in 2023. This was the eighth consecutive year of price increases.
The average sales price for single family homes in the Matanuska Susitna Borough rose 6.6% in 2025 to $440,217, after climbing 3.8% in 2024 and 4% in 2023. This continues a trend of average price increases for more than a decade in the region. These two markets represent where the majority of the Bank's residential lending activity occurs.
The Alaska Multiple Listing Services reported a 0.6% decrease in the number of units sold in Anchorage when comparing 2025 to 2024. There were 2,222 homes sold in 2025 and 2,235 sold in 2024. Last year there were 1,766 homes sold in the Matanuska Susitna Borough, compared to 1,632 in 2024, an increase of 8.2%.
The Board of Governors of the Federal Reserve System lowered its benchmark interest rate target to 3.50%-3.75% as of both March 31, 2026 and December 31, 2025. The prime rate of interest was 6.75% as of both March 31, 2026 and December 31, 2025.
Highlights and Summary of Performance - First Quarter of 2026
The Company reported net income and earnings per diluted share of $13.7 million and $0.61, respectively, for the first quarter of 2026 compared to net income and earnings per diluted share of $13.3 million and $0.60, respectively, for the first quarter of 2025. The increase in net income in 2026 compared to the period last year is mostly due to an increase in net interest income and higher mortgage banking income, which were partially offset by a higher provision for credit losses and higher other operating expenses.
•Net interest margin was 4.72% for the first quarter of 2026, up 17-basis points from the first quarter a year ago.
•Portfolio loans were $2.36 billion at March 31, 2026, 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.
•Total deposits were $2.87 billion at March 31, 2026, up 2% from $2.81 billion at December 31, 2025. Non-interest bearing demand deposits increased 11% year-over-year to $826.4 million at March 31, 2026 and represent 29% of total deposits.
•The average cost of interest-bearing deposits was 1.77% at March 31, 2026, down from 2.01% at March 31, 2025.
•Average purchased receivables and loan balances for the Specialty Finance segment were $132.2 million for the first quarter of 2026, compared to average balances of $97.1 million for the first quarter of 2025.
Other financial measures for the periods indicated are shown in the table below:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Return on average assets, annualized | 1.69 | % | 1.76 | % | ||||
| Return on average shareholders' equity, annualized | 16.60 | % | 19.70 | % | ||||
| Dividend payout ratio | 26.25 | % | 26.82 | % | ||||
Nonperforming assets: Nonperforming assets, net of government guarantees were $15.3 million at March 31, 2026 and $11.4 million at December 31, 2025. Other Real Estate Owned ("OREO"), net of government guarantees was $1.0 million at March 31, 2026 and zero at December 31, 2025. Repossessed assets were zero at both March 31, 2026 and December 31, 2025. Nonperforming loans, net of government guarantees increased $2.9 million or 25% to $14.2 million as of March 31, 2026 from $11.3 million as of December 31, 2025, primarily due to the addition of four loans in the first three months of 2026. Nonperforming purchased receivables decreased $67,000 or 100% to zero as of March 31, 2026 from $67,000 as of December 31, 2025 as a result of a paydown received on one relationship. Of the nonperforming assets, net of government guarantees at March 31, 2026, $10.5 million are attributable to the Community Banking segment, $499,000 are attributable to the Home Mortgage Lending segment, and $4.3 million are attributable to the Specialty Finance segment.
Potential problem assets: Potential problem loans are loans which are currently performing in accordance with contractual terms but that have developed negative indications that the borrower may not be able to comply with present payment terms and which may later be included in nonaccrual or past due. These loans are closely monitored and their performance is reviewed by management on a regular basis. All potential problem loans are individually evaluated for the purposes of establishing an allowance for credit losses. At March 31, 2026, management had identified $20.1 million potential problem loans, down slightly from $21.2 million at December 31, 2025. This decrease is primarily due to paydowns which occurred in the first quarter of 2026.
Summary of Critical Accounting Estimates
Our critical accounting estimates are described in detail in Part II. 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, 2025. There have been no material changes to the valuation techniques or assumptions within the models that affect our estimates during the first quarter of 2026.
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 March 31, 2026, if the four-quarter U.S. unemployment rate forecast had been approximately 3% higher and the four-quarter annualized growth rate in the U.S. Gross Domestic Product had been approximately 13% lower, our ACL for loans would have increased $483,000, or 2%. As of March 31, 2026, if the four-quarter national unemployment rate forecast had been approximately 28% higher and the four-quarter annualized growth rate in the U.S. Gross Domestic Product had been approximately 6% lower, which represents management's estimate of long-term mean rates for these economic factors, our ACL for loans would have increased $2.4 million, or 10%. As of March 31, 2026, if the estimated prepayment and curtailment rates are doubled (with a maximum rate of 100%), our ACL for loans would have decreased $2.2 million, or 9%. As of March 31, 2026, if the estimated prepayment and curtailment rates are cut in half, our ACL for loans would have increased $1.8 million, or 7%. These sensitivity analyses include the impact to both the quantitative and qualitative components of our ACL. Changes in quantitative inputs and qualitative loss factors may not occur in the same direction or magnitude across all segments of our loan portfolio and deterioration in some quantitative inputs and qualitative loss factors may offset improvement in others. This sensitivity analysis does not represent a change to our expectations of the economic environment but provides a hypothetical result to assess the sensitivity of the ACL to a change in a key input. This sensitivity analysis does not incorporate changes to management's judgment of qualitative loss factors.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2026 AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2025
Net Income
Net income for the first quarter of 2026 increased $351,000 to $13.7 million as compared to $13.3 million for the same period in 2025. The increase in net income in the first quarter of 2026 as compared to the same quarter a year ago is mostly due to a $3.4 million increase in net interest income and a $2.2 million increase in mortgage banking income. These increases were only partially offset by a $2.5 million increase in other operating expenses and $2.4 million increase in provision for credit losses.
Analysis of Business Segments
Our business segments are defined as Community Banking, Home Mortgage Lending, and Specialty Finance. The following table summarizes net income from our segments. 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 March 31, 2026 | Three Months Ended March 31, 2025 | |||||||||
| Community Banking | $10,500 | $10,788 | |||||||||
| Home Mortgage Lending | 1,086 | 804 | |||||||||
| Specialty Finance | 2,089 | 1,732 | |||||||||
|
Net income
|
$13,675 | $13,324 | |||||||||
Community Banking
Net income in the Community Banking segment decreased $288,000 or 3% in the first quarter of 2026 compared to the same period a year ago primarily due to an increase in the provision for credit losses and salaries and other personnel expense which were only partially offset by an increase in net interest income which totaled $31.8 million in the first quarter of 2026, and $28.2 million in the first quarter of 2025. Net interest income increased $3.7 million or 13% in the first quarter of 2026 as compared to the first quarter of 2025 mostly due to higher interest income on loans and deposits in banks as well as lower interest expense on deposits.
The provision for credit losses in the Community Banking segment was $153,000 in the first quarter of 2026 compared to a benefit to the provision for credit losses of $1.8 million in the same quarter a year ago. The increase to the provision for credit losses in the Community Banking segment in the first quarter of 2026 as compared to the same quarter a year ago was primarily a result of the fact that there were changes in the Company's loss rate regression models for commercial, commercial real estate, and construction loans in the first quarter of 2025.
Other operating expenses in the Community Banking segment totaled $20.4 million in the first quarter of 2026, up $1.8 million or 10% from $18.6 million in the first quarter a year ago. The increase in the first quarter of 2026 as compared to the same quarter a year ago was mostly due to a $1.6 million increase in salaries and other personnel expense, which includes $771,000 in higher salary expense and a $296,000 increase in group medical expenses, as well as increases in occupancy expense, marketing expense, professional fees, and data processing expense. These increases were partially offset by a decrease in insurance expense. Insurance expense decreased due to a decrease in FDIC insurance expense resulting primarily from higher capital ratios. The issuance of subordinated debentures in the fourth quarter of 2025 positively impacted the Company's risk based capital ratios which benefited the FDIC's calculation for insurance expense.
Home Mortgage Lending
Net income in the Home Mortgage Lending segment increased $282,000 or 35% in the first quarter of 2026 compared to the same period a year ago primarily due to higher mortgage servicing revenue, which was only partially offset by an increase in the provision for credit losses, higher other operating expenses, and lower net interest income in the Home Mortgage Lending segment. During the first quarter of 2026, mortgage loans funded for sale were $123.4 million, compared to $108.5 million in the first quarter of 2025.
The provision for credit losses in the Home Mortgage Lending segment was $562,000 in the first quarter of 2026 compared to a benefit to the provision for credit losses of $307,000 in the first quarter of 2025. The increase in the provision for credit losses in the first quarter of 2026 in the Home Mortgage Lending segment as compared to the same quarter a year ago was primarily a result of higher growth in loan balances.
Other operating expenses in the Home Mortgage Lending segment totaled $7.2 million in the first quarter of 2026 compared to $6.5 million in the first quarter a year ago. The increase in the first quarter of 2026 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 35% of Residential Mortgage's $152 million total production in the first quarter of 2026 and 20% of $122 million total production in the first quarter a year ago.
As of March 31, 2026, Northrim serviced 6,637 loans in its $1.64 billion home-mortgage-servicing portfolio, an 11% increase from the $1.48 billion serviced a year ago.
Specialty Finance
Net income in the Specialty Finance segment increased $357,000 or 21% in the first quarter of 2026 compared to the same period a year ago primarily due to increased purchased receivable balances.
Average purchased receivables and loan balances for the Specialty Finance segment were $132.2 million for the first quarter of 2026, compared to average balances of $97.1 million for the first quarter of 2025.
Net Interest Income/Net Interest Margin
Net interest income for the first quarter of 2026 increased 11% or $3.4 million, to $34.7 million as compared to $31.3 million for the first quarter of 2025. The net interest margin increased 17 basis points to 4.72% in the first quarter of 2026 as compared to 4.55% in the first quarter of 2025. The increase in net interest income in the first quarter of 2026 compared to the same period in 2025 was primarily the result of increased interest on loans, loans held for sale, interest bearing deposits in other banks, and long term investments, as well as a decrease in interest expense on deposits, which were only partially offset by an increase in interest expense on borrowings. The increase in net interest margin in the first quarter of 2026 as compared to the same period of 2025 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets as well as a decrease in the cost of interest-bearing deposits.
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 March 31, 2026 and 2025. Average yields or costs are calculated on a tax-equivalent basis.
| (Dollars in Thousands) | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
| Interest income/ | Average Tax Equivalent | ||||||||||||||||||||||||||||||||||
| Average Balances | Change | expense | Change |
Yields/Costs6
|
|||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | 2026 | 2025 | Change | |||||||||||||||||||||||||
|
Interest-bearing deposits in other banks1
|
$123,643 | $37,969 | $85,674 | 226 | % | $1,145 | $416 | $729 | 175 | % | 3.71 | % | 4.44 | % | (0.73) | % | |||||||||||||||||||
|
Taxable long-term investments2
|
466,386 | 523,753 | (57,367) | (11) | % | 4,007 | 3,870 | 137 | 4 | % | 3.44 | % | 2.97 | % | 0.47 | % | |||||||||||||||||||
| Loans held for sale | 74,144 | 46,223 | 27,921 | 60 | % | 1,080 | 677 | 403 | 60 | % | 5.83 | % | 5.86 | % | (0.03) | % | |||||||||||||||||||
|
Loans3,4
|
2,305,181 | 2,173,425 | 131,756 | 6 | % | 39,064 | 36,977 | 2,087 | 6 | % | 6.86 | % | 6.89 | % | (0.03) | % | |||||||||||||||||||
|
Interest-earning assets5
|
2,969,354 | 2,781,370 | 187,984 | 7 | % | 45,296 | 41,940 | 3,356 | 8 | % | 6.17 | % | 6.10 | % | 0.07 | % | |||||||||||||||||||
| Nonearning assets | 311,415 | 293,415 | 18,000 | 6 | % | ||||||||||||||||||||||||||||||
| Total | $3,280,769 | $3,074,785 | $205,984 | 7 | % | ||||||||||||||||||||||||||||||
| Interest-bearing demand | $1,222,073 | $1,152,543 | $69,530 | 6 | % | $4,929 | $5,431 | ($502) | (9) | % | 1.64 | % | 1.91 | % | (0.27) | % | |||||||||||||||||||
| Savings deposits | 244,982 | 251,335 | (6,353) | (3) | % | 309 | 362 | (53) | (15) | % | 0.51 | % | 0.58 | % | (0.07) | % | |||||||||||||||||||
| Money market deposits | 197,907 | 193,966 | 3,941 | 2 | % | 728 | 807 | (79) | (10) | % | 1.49 | % | 1.69 | % | (0.20) | % | |||||||||||||||||||
| Time deposits | 402,139 | 404,750 | (2,611) | (1) | % | 3,031 | 3,335 | (304) | (9) | % | 3.06 | % | 3.34 | % | (0.28) | % | |||||||||||||||||||
| Total interest-bearing deposits | 2,067,101 | 2,002,594 | 64,507 | 3 | % | 8,997 | 9,935 | (938) | (9) | % | 1.77 | % | 2.01 | % | (0.24) | % | |||||||||||||||||||
| Borrowings | 81,702 | 37,081 | 44,621 | 120 | % | 1,238 | 329 | 909 | 276 | % | 6.13 | % | 3.55 | % | 2.58 | % | |||||||||||||||||||
| Total interest-bearing liabilities | 2,148,803 | 2,039,675 | 109,128 | 5 | % | 10,235 | 10,264 | (29) | - | % | 1.93 | % | 2.04 | % | (0.11) | % | |||||||||||||||||||
| Non-interest bearing demand deposits | 732,454 | 697,534 | 34,920 | 5 | % | ||||||||||||||||||||||||||||||
| Other liabilities | 65,492 | 63,348 | 2,144 | 3 | % | ||||||||||||||||||||||||||||||
| Equity | 334,020 | 274,228 | 59,792 | 22 | % | ||||||||||||||||||||||||||||||
| Total | $3,280,769 | $3,074,785 | $205,984 | 7 | % | ||||||||||||||||||||||||||||||
| Net interest income (tax equivalent) | $35,061 | $31,676 | $3,385 | 11 | % | ||||||||||||||||||||||||||||||
|
Net interest margin (tax equivalent)
|
4.77 | % | 4.61 | % | 0.16 | % | |||||||||||||||||||||||||||||
|
Reconciliation to reported net interest income:
|
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|
Adjustments for taxable equivalent basis
|
($400) | ($379) | ($21) | 6 | % | ||||||||||||||||||||||||||||||
|
Net interest income and margin, as reported
|
$34,661 | $31,297 | $3,364 | 11 | % | 4.72 | % | 4.55 | % | 0.17 | % | ||||||||||||||||||||||||
| Average loans to average interest-earning assets | 77.63 | % | 78.14 | % | |||||||||||||||||||||||||||||||
| Average loans to average total deposits | 82.34 | % | 80.49 | % | |||||||||||||||||||||||||||||||
| Average non-interest deposits to average total deposits | 26.16 | % | 25.83 | % | |||||||||||||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 138.19 | % | 136.36 | % | |||||||||||||||||||||||||||||||
1Consists of interest bearing deposits in other banks and domestic CDs.
2Consists of investment securities available for sale, investment securities held to maturity, marketable equity securities, and investment in Federal Home Loan Bank stock.
3Interest income includes loan fees. Loan fees recognized during the period and included in the yield calculation totaled $1.2 million and $1.1 million in the first quarter of 2026 and 2025, respectively.
4Nonaccrual loans are included with a zero effective yield. Average nonaccrual loans included in the computation of the average loan balances were $13.2 million and $7.6 million in the first quarter of 2026 and 2025, respectively.
5The 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.
6Tax-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 March 31, 2026 and 2025. 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 March 31, 2026 and 2025.
| (In Thousands) | Three Months Ended March 30, 2026 vs. 2025 | ||||||||||
| Increase (decrease) due to | |||||||||||
| Volume | Rate | Total | |||||||||
| Interest Income: | |||||||||||
| Short-term investments | $782 | ($53) | $729 | ||||||||
| Taxable long-term investments | (394) | 531 | 137 | ||||||||
| Loans held for sale | 407 | (4) | 403 | ||||||||
| Loans | 2,229 | (142) | 2,087 | ||||||||
| Total interest income | $3,024 | $332 | $3,356 | ||||||||
| Interest Expense: | |||||||||||
| Interest-bearing demand | $314 | ($816) | ($502) | ||||||||
| Savings deposits | (9) | (44) | (53) | ||||||||
| Money market deposits | 16 | (95) | (79) | ||||||||
| Time deposits | (22) | (282) | (304) | ||||||||
| Interest-bearing deposits | 299 | (1,237) | (938) | ||||||||
| Borrowings | 568 | 341 | 909 | ||||||||
| Total interest expense | $867 | ($896) | ($29) | ||||||||
Provision for Credit Losses
The provision or benefit for credit loss is the amount of expense or benefit that, based on our judgment, is required to maintain the Allowance for Credit Losses ("ACL") at an appropriate level under the Company's Current Expected Credit Losses ("CECL") model. 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-month periods ended March 31, 2026 and 2025:
| Three Months Ended March 31, | ||||||||
| (In Thousands) | 2026 | 2025 | ||||||
|
Credit loss (benefit) expense on loans held for investment
|
$1,286 | ($1,132) | ||||||
|
Credit loss (benefit) expense on unfunded commitments
|
(322) | (323) | ||||||
| Credit loss expense on available for sale debt securities | - | - | ||||||
| Credit loss expense on held to maturity securities | - | - | ||||||
| Credit loss expense on purchased receivables | (4) | 46 | ||||||
|
Total credit loss (benefit) expense
|
$960 | ($1,409) | ||||||
The increase to the provision for credit losses on loans in the first quarter of 2026 as compared to the same period a year ago was primarily a result of higher growth loan balances as well as an increase in individually evaluated loans. The decrease to the provision for unfunded commitments in the first quarter of 2026 primarily due to changes in the loss rate on 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 March 31, 2026 increased $1.8 million, or 14%, to $14.9 million as compared to $13.0 million for the same period in 2025, primarily due to a $2.2 million increase in mortgage banking income in the first quarter of 2026 compared to the same quarter a year ago. The fair value of marketable equity securities decreased $206,000 in the first quarter of 2026 compared to the same quarter a year ago.
Other Operating Expense
Other operating expense for the first quarter of 2026 increased $2.5 million, or 9%, to $30.6 million as compared to $28.2 million for the same period in 2025. The increase was primarily due to a $2.3 million increase in salaries and other personnel expense, which was partially offset by a decrease in insurance expense. The increase in salaries and other personnel expense was primarily due to higher salaries and higher commissions paid to mortgage originators due to higher volume. The decrease in insurance expense was primarily due to the decrease in FDIC insurance expense resulting primarily from higher capital ratios noted above.
Income Taxes
For the first quarter of 2026, Northrim recorded a lower effective tax rate as compared to the same period in 2025 primarily as a result of an increase in tax credits and tax exempt interest income as a percentage of pre-tax income in 2026 as compared to 2025. In the first quarter of 2026, Northrim recorded $4.3 million in state and federal income tax expense, for an effective tax rate of 23.85% compared to $4.3 million and 24.19% for the same period in 2025.
ANALYSIS OF FINANCIAL CONDITION AT MARCH 31, 2026 COMPARED TO DECEMBER 31, 2025
Balance Sheet Overview
Investment Securities
Investment Securities include investment securities available for sale, investment securities held to maturity, and marketable equity securities, at March 31, 2026 increased 1% to $460.3 million from $455.8 million at December 31, 2025 primarily due to purchases of available for sale securities during the first three months of 2026.
The table below details portfolio investment balances by portfolio investment type as of the periods indicated:
| March 31, 2026 | December 31, 2025 | |||||||||||||
| Dollar Amount | Percent of Total | Dollar Amount | Percent of Total | |||||||||||
| (In Thousands) | ||||||||||||||
| Balance | % of total | Balance | % of total | |||||||||||
| U.S. Treasury and government sponsored entities | $382,020 | 83.0 | % | $388,737 | 85.2 | % | ||||||||
| U.S. Agency mortgage-backed securities | 4,708 | 1.0 | % | 4,798 | 1.1 | % | ||||||||
| Corporate bonds | 36,728 | 8.0 | % | 31,702 | 7.0 | % | ||||||||
| Collateralized loan obligations | 26,741 | 5.8 | % | 22,174 | 4.9 | % | ||||||||
| Preferred stock | 10,145 | 2.2 | % | 8,392 | 1.8 | % | ||||||||
| Total | $460,342 | $455,803 | ||||||||||||
The average estimated duration of the investment portfolio at March 31, 2026, was approximately 2.2 years. As of March 31, 2026, $109.0 million of available for sale securities with a weighted average yield of 1.55% are scheduled to mature in the next six months, $68.3 million with a weighted average yield of 2.15% are scheduled to mature in six months to one year, and $84.8 million with a weighted average yield of 3.41% are scheduled to mature in the following year, representing a total of $262.1 million or 9% 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:
| March 31, 2026 | December 31, 2025 | |||||||||||||
| Dollar Amount | Percent of Total | Dollar Amount | Percent of Total | |||||||||||
| (In Thousands) | ||||||||||||||
| Commercial & industrial loans | $462,998 | 19.6 | % | $450,826 | 19.6 | % | ||||||||
| Commercial real estate: | ||||||||||||||
| Owner occupied properties | 435,148 | 18.4 | % | 433,157 | 18.9 | % | ||||||||
| Non-owner occupied and multifamily properties | 765,781 | 32.6 | % | 763,180 | 33.2 | % | ||||||||
| Residential real estate: | ||||||||||||||
| 1-4 family residential properties secured by first liens | 264,662 | 11.2 | % | 243,185 | 10.6 | % | ||||||||
| 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens | 71,207 | 3.0 | % | 67,116 | 2.9 | % | ||||||||
| 1-4 family residential construction loans | 38,679 | 1.6 | % | 39,059 | 1.7 | % | ||||||||
| Other construction, land development and raw land loans | 176,715 | 7.5 | % | 173,589 | 7.6 | % | ||||||||
| Obligations of states and political subdivisions in the US | 32,312 | 1.4 | % | 32,434 | 1.4 | % | ||||||||
| Agricultural production, including commercial fishing | 50,133 | 2.1 | % | 47,445 | 2.1 | % | ||||||||
| Consumer loans | 9,205 | 0.4 | % | 9,763 | 0.4 | % | ||||||||
| Other loans | 51,862 | 2.2 | % | 35,745 | 1.6 | % | ||||||||
| Total loans | $2,358,702 | $2,295,499 | ||||||||||||
Loans increased by $63.2 million, to $2.36 billion at March 31, 2026 from $2.30 billion at December 31, 2025, primarily as a result of increases 1-4 family residential loans secured by first liens, other loans, and commercial and industrial loans in the first three month of 2026.
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 $127.8 million, or approximately 5% of loans as of March 31, 2026 have direct exposure to the oil and gas industry as compared to $123.4 million, or approximately 5% of loans as of December 31, 2025. The Company's unfunded commitments to borrowers that have direct exposure to the oil and gas industry were $79.6 million and $88.6 million at March 31, 2026 and December 31, 2025, 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 $2.0 million as of March 31, 2026 and $1.6 million as of December 31, 2025.
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) | March 31, 2026 | December 31, 2025 | ||||||
| Commercial & industrial loans | $117,596 | $113,036 | ||||||
| Commercial real estate: | ||||||||
| Owner occupied properties | 4,908 | 4,996 | ||||||
| Non-owner occupied and multifamily properties | 4,072 | 4,207 | ||||||
| Other loans | 1,182 | 1,203 | ||||||
| Total | $127,758 | $123,442 | ||||||
The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions. At March 31, 2026, the Company had $150.9 million, or 6% of portfolio loans, in the Accommodations sector, $133.2 million, or 6% of portfolio loans, in the Healthcare sector, $121.3 million, or 5% of portfolio loans, in the Tourism sector, $101.4 million, or 4% of portfolio loans, in the Retail sector, $92.1 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector, $62.5 million, or 3% in the Restaurant sector, and $60.7 million, or 3% of portfolio loans, in the Fishing 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 March 31, 2026:
| (In Thousands) | Tourism | Aviation (non-tourism) | Healthcare | Retail | Fishing | Restaurant | Accommodations | Total | ||||||||||||||||||
| ACL | $659 | $805 | $957 | $925 | $268 | $482 | $1,028 | $5,124 | ||||||||||||||||||
Credit Quality and Nonperforming Assets
The following table sets forth information regarding our nonperforming loans and total nonperforming assets as of the periods indicated:
| March 31, | December 31, | |||||||||||||
| (In Thousands) | 2026 | 2025 | ||||||||||||
|
Nonaccrual loans - Community Banking
|
$10,006 | $9,066 | ||||||||||||
|
Nonaccrual loans - Home Mortgage Lending
|
499 | 514 | ||||||||||||
|
Nonaccrual loans - Specialty Finance
|
4,276 | 2,388 | ||||||||||||
|
Nonaccrual loans - Total
|
14,781 | 11,968 | ||||||||||||
|
Total nonperforming loans - Community Banking
|
10,006 | 9,066 | ||||||||||||
|
Total nonperforming loans - Home Mortgage Lending
|
499 | 514 | ||||||||||||
|
Total nonperforming loans - Specialty Finance
|
4,276 | 2,388 | ||||||||||||
|
Total nonperforming loans - Total
|
14,781 | 11,968 | ||||||||||||
|
Nonperforming loans guaranteed by gov't - Community Banking
|
567 | 639 | ||||||||||||
|
Nonperforming loans guaranteed by gov't - Total
|
567 | 639 | ||||||||||||
|
Net nonperforming loans - Community Banking
|
9,439 | 8,427 | ||||||||||||
|
Net nonperforming loans - Home Mortgage Lending
|
499 | 514 | ||||||||||||
|
Net nonperforming loans - Specialty Finance
|
4,276 | 2,388 | ||||||||||||
|
Net nonperforming loans - Total
|
14,214 | 11,329 | ||||||||||||
|
Other real estate owned - Community Banking
|
1,036 | - | ||||||||||||
|
Other real estate owned - Total
|
1,036 | - | ||||||||||||
|
Nonperforming purchased receivables - Specialty Finance
|
- | 67 | ||||||||||||
|
Net nonperforming assets - Community Banking
|
10,475 | 8,427 | ||||||||||||
|
Net nonperforming assets - Home Mortgage Lending
|
499 | 514 | ||||||||||||
|
Net nonperforming assets - Specialty Finance
|
4,276 | 2,455 | ||||||||||||
|
Net nonperforming assets - Total
|
$15,250 | $11,396 | ||||||||||||
|
Adversely classified loans, net of gov't guarantees - Community Banking
|
$29,395 | $29,447 | ||||||||||||
|
Adversely classified loans, net of gov't guarantees - Home Mortgage Lending
|
667 | 687 | ||||||||||||
|
Adversely classified loans, net of gov't guarantees - Specialty Finance
|
4,276 | 3,364 | ||||||||||||
|
Adversely classified loans, net of gov't guarantees - Total
|
$34,338 | $33,498 | ||||||||||||
|
Special mention loans, net of gov't guarantees - Community Banking
|
$7,985 | $10,481 | ||||||||||||
|
Special mention loans, net of gov't guarantees - Total
|
$7,985 | $10,481 | ||||||||||||
|
Nonperforming loans, net of government guarantees / portfolio loans
|
0.60 | % | 0.49 | % | ||||||||||
| Nonperforming loans, net of government guarantees / portfolio loans, net of gov't guarantees | 0.64 | % | 0.53 | % | ||||||||||
|
Nonperforming assets, net of government guarantees / total assets
|
0.45 | % | 0.35 | % | ||||||||||
| Nonperforming assets, net of government guarantees / total assets net of gov't guarantees | 0.48 | % | 0.36 | % | ||||||||||
| Loans 30-89 days past due and accruing, net of government guarantees / portfolio loans | 0.09 | % | 0.07 | % | ||||||||||
|
Loans 30-89 days past due and accruing, net of government guarantees /
|
||||||||||||||
| portfolio loans, net of government guarantees | 0.10 | % | 0.08 | % | ||||||||||
|
Allowance for credit losses for loans / portfolio loans
|
1.05 | % | 1.03 | % | ||||||||||
|
Allowance for credit losses for loans / portfolio loans, net of gov't guarantees
|
1.12 | % | 1.10 | % | ||||||||||
| Allowance for credit losses for loans / nonperforming loans, net of gov't guarantees | 175 | % | 210 | % | ||||||||||
|
Net loan charge-offs (recoveries) year-to-date - Community Banking
|
($39) | $1,429 | ||||||||||||
|
Net loan charge-offs (recoveries) year-to-date - Specialty Finance
|
250 | 364 | ||||||||||||
|
Net loan charge-offs (recoveries) year-to-date - Total
|
$211 | $1,793 | ||||||||||||
| Net loan charge-offs (recoveries) year-to-date / average loans, year-to-date annualized | 0.04 | % | 0.08 | % | ||||||||||
|
Allowance for credit losses for purchased receivables / purchased receivables
|
- | % | - | % | ||||||||||
|
Net purchased receivable charge-offs (recoveries) year-to-date / average
|
||||||||||||||
|
purchased receivables, year-to-date annualized
|
(0.02) | % | 2.15 | % | ||||||||||
Allowance for Credit Losses
The following table sets forth information regarding changes in the ACL as of the periods indicated:
| Three Months Ended March 31, | |||||||||||
| (In Thousands) | 2026 | 2025 | |||||||||
| Balance at beginning of period | $23,737 | $22,020 | |||||||||
| Charge-offs: | |||||||||||
| Commercial & industrial loans | (250) | (37) | |||||||||
| Consumer loans | (2) | (13) | |||||||||
| Total charge-offs | (252) | (50) | |||||||||
| Recoveries: | |||||||||||
| Commercial & industrial loans | 37 | 74 | |||||||||
| Residential real estate: | |||||||||||
|
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens |
3 | 7 | |||||||||
| Agricultural production, including commercial fishing | 1 | 2 | |||||||||
| Consumer loans | - | 1 | |||||||||
| Total recoveries | 41 | 84 | |||||||||
| Net (charge-offs), recoveries | (211) | 34 | |||||||||
|
Provision for credit losses
|
1,286 | (1,132) | |||||||||
| Balance at end of period | $24,812 | $20,922 | |||||||||
The following table sets forth information regarding changes in the ACL for unfunded commitments as of the periods indicated:
| Three Months Ended March 31, | |||||||||||
| (In Thousands) | 2026 | 2025 | |||||||||
| Balance at beginning of period | $2,668 | $2,310 | |||||||||
| (Benefit) provision for credit losses | (322) | (323) | |||||||||
| Balance at end of period | $2,346 | $1,987 | |||||||||
The following table sets forth information regarding changes in the ACL for purchased receivables as of the periods indicated:
| Three Months Ended March 31, | ||||||||
| (In Thousands) | 2026 | 2025 | ||||||
| Balance at beginning of period | $- | $3,649 | ||||||
| Charge-offs | - | - | ||||||
| Recoveries | 5 | - | ||||||
|
Net (charge-offs), recoveries
|
5 | - | ||||||
|
(Benefit) provision for purchased receivables
|
(5) | 46 | ||||||
| Balance at end of period | $- | $3,695 | ||||||
The ACL for loans held for investment at March 31, 2026 increased $1.1 million from December 31, 2025 primarily due to increased loan balances and an increase in the ACL for individually evaluated loans. 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
Deposits are the Company's primary source of funds. Total deposits increased $60.7 million, or 2%, to $2.87 billion as of March 31, 2026 compared to $2.81 billion as of December 31, 2025, 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:
| March 31, 2026 | December 31, 2025 | |||||||||||||
| (In thousands) | Balance | % of total | Balance | % of total | ||||||||||
| Demand deposits | $826,445 | 29 | % | $721,925 | 26 | % | ||||||||
| Interest-bearing demand | 1,215,182 | 42 | % | 1,242,546 | 44 | % | ||||||||
| Savings deposits | 243,667 | 8 | % | 250,006 | 9 | % | ||||||||
| Money market deposits | 197,402 | 7 | % | 195,793 | 7 | % | ||||||||
| Time deposits | 391,050 | 14 | % | 402,759 | 14 | % | ||||||||
| Total deposits | $2,873,746 | $2,813,029 | ||||||||||||
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 March 31, 2026 and 86% of total deposits at December 31, 2025.
The only deposit category with stated maturity dates is certificates of deposit. At March 31, 2026, the Company had $391.1 million in certificates of deposit as compared to certificates of deposit of $402.8 million at December 31, 2025. At March 31, 2026, $365.6 million, or 93%, of the Company's certificates of deposits are scheduled to mature over the next 12 months as compared to $369.2 million, or 92%, of total certificates of deposit at December 31, 2025. The aggregate amount of certificates of deposit in amounts of $250,000 and greater at March 31, 2026 and December 31, 2025, was $196.0 million and $208.2 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 March 31, 2026:
| Time Certificates of Deposit | ||||||||
| of $250,000 or More | ||||||||
| Percent of Total Deposits | ||||||||
| (In Thousands) | Amount | |||||||
| Amounts maturing in: | ||||||||
| Three months or less | $81,602 | 42 | % | |||||
| Over 3 through 6 months | 37,201 | 19 | % | |||||
| Over 6 through 12 months | 61,552 | 31 | % | |||||
| Over 12 months | 15,651 | 8 | % | |||||
| Total | $196,006 | 100 | % | |||||
At March 31, 2026, 75% of total deposits were held in business accounts and 25% of deposit balances were held in consumer accounts. Northrim had approximately 33,000 deposit customers with an average balance of $64,000 as of March 31, 2026. Northrim had 33 customers with balances over $10 million as of March 31, 2026 which accounted for $721.0 million, or 25%, of total deposits.
Uninsured deposits totaled approximately $1.14 billion or 40% of total deposits as of March 31, 2026 compared to $1.1 billion or 38% of total deposits as of December 31, 2025. There was no unusual deposit activity during the first three months of 2026.
Borrowings
FHLB: The Bank is a member of the Federal Home Loan Bank of Des Moines (the "FHLB"). As a member, the Bank is eligible to obtain advances from the FHLB. 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 March 31, 2026, 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 $469.9 million as of March 31, 2026. The Company has outstanding advances of $12.7 million as of March 31, 2026 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%.
Federal Reserve Bank: 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 March 31, 2026. There were no discount window advances outstanding at either March 31, 2026 or December 31, 2025.
Other Short-term Borrowings: The Company is subject to provisions under Alaska state law, which generally limit the amount of outstanding debt to 15% of total assets or $500.5 million at March 31, 2026 and $490.6 million at December 31, 2025.
At March 31, 2026 and December 31, 2025, 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 March 31, 2026 or December 31, 2025.
Junior Subordinated Debentures
At March 31, 2026 and December 31, 2025, the Company had trust preferred securities in the principal amount of $10 million. These securities carry an interest rate of 90-day CME SOFR plus tenor spread adjustment of 0.26% plus 1.37% per annum, adjusted quarterly. The securities have a maturity date of March 15, 2036, and are callable by the Company on or after March 15, 2011. These securities are treated as Tier 1 capital by the Company's regulators for capital adequacy calculations. At March 31, 2026 and December 31, 2025, the securities had an interest rate of 5.31% and 5.35%, respectively. The Company entered into an interest rate swap in the third quarter of 2017 to hedge the variability in cash flows arising out of its junior subordinated debentures, by swapping the cash flows with an interest rate swap which receives floating and pays fixed. The Company has designated this interest rate swap as a hedging instrument. The interest rate swap effectively fixes the Company's interest payments on the $10 million of junior subordinated debentures held under NST2 at 3.72% through its maturity date. Net of the impact of the interest rate swap, interest expense on these securities was $93,000 in the first quarter of 2026 and $92,000 in the first quarter of 2025. The Company also had interest expense of $4,000 in the first quarter of 2026 and $5,000 in the first quarter of 2025 on common securities related to this junior subordinated debt.
Subordinated Debentures
At March 31, 2026 and December 31, 2025, the Company had $60.0 million in aggregate principal amount of its 6.875% Fixed-to-Floating Rate Subordinated Notes due 2035 (the "Subordinated Notes"). The Subordinated Notes mature on December 1, 2035 and currently carry interest at a fixed rate of 6.875% per year. The interest cost to the Company on the Subordinated Notes was $1.0 million in the first quarter of 2026. The Company incurred debt issuance costs of $1.4 million which will be amortized through December 1, 2035. The amortization expense amounted to $35,000 in the first quarter of 2026. The Subordinated Notes are intended to qualify as Tier 2 capital of the Company for regulatory capital purposes.
Liquidity and Capital Resources
The Company is a single bank holding company and its primary ongoing source of liquidity is from dividends received from the Bank. Such dividends arise from the cash flow and earnings of the Bank. Banking regulations and regulatory authorities may limit the amount of, or require the Bank to obtain certain approvals before paying, dividends to the Company. Given that the Bank currently meets, and the Bank anticipates that it will continue to meet, all applicable capital adequacy requirements for a "well-capitalized" institution by regulatory standards, the Company expects to continue to receive dividends from the Bank during the remainder of 2026. 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 March 31, 2026, the Company has 40.0 million authorized shares of common stock, of which approximately 22.2 million are issued and outstanding, leaving approximately 17.8 million shares available for issuance. Additionally, the Company has 2.5 million authorized shares of preferred stock available for issuance.
The Bank manages its liquidity through its Asset and Liability Committee. The Bank's primary source of funds are customer deposits. These funds, together with loan repayments, loan sales, maturity and sale of investment securities, borrowed funds, and retained earnings are used to make loans, to acquire securities and other assets, and to fund deposit flows and continuing operations. 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 $154.9 million, or 5% of total assets at March 31, 2026 compared to $145.9 million, or 4% of total assets as of December 31, 2025. The increase in cash and cash equivalents since the end of 2025 is primarily due to an increase in deposits. The Company had other comprehensive loss, net of tax, of $394,000 for the three-month period ending March 31, 2026 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 $927,000 as of March 31, 2026. Accumulated unrealized losses, net of income taxes on held to maturity securities, which are not recorded in shareholders' equity, are $763,000 as of March 31, 2026. 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 March 31, 2026, the weighted average maturity of available for sale securities is 2.2 years as compared to 2.0 years as of December 31, 2025. At March 31, 2026, $177.3 million available for sale securities mature within one year, $84.8 million mature within one to two years, and $65.6 million mature within two to three years. Our total unfunded commitments to fund loans and letters of credit at March 31, 2026 were $625.4 million. We do not expect that all of these loans are likely to be fully drawn upon at any one time. At March 31, 2026, certificates of deposit totaling $365.6 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 March 31, 2026, are not material to the Company's liquidity position as of March 31, 2026.
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 March 31, 2026, our liquid assets, which include investments and loans maturing within a year, were $1.06 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 $606.2 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 $27.2 million for the first three months of 2026, 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 $75.7 million for the same period, primarily due to an increase in loans and purchases of long term investments which were only partially offset by maturities and calls of available for sale and held to maturity securities. Net cash provided by financing activities in the first three months of 2025 was $57.5 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 March 31, 2026, there are no shares remaining under the repurchase program, and we did not repurchase any shares in the first quarter of 2026. The Company currently has no plans to repurchase shares of its common stock in 2026.
Capital Requirements and Ratios
We are subject to minimum capital requirements. Federal banking agencies have adopted regulations establishing minimum requirements for the capital adequacy of banks and bank holding companies. The requirements address both risk-based capital and leverage capital. We believe as of March 31, 2026, 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. Management intends to maintain capital ratios for the Bank in 2026, exceeding the FDIC's requirements for the "well-capitalized" classification. Some capital ratios for the Company exceed those for the Bank primarily because the $10 million trust preferred securities offering and the $60 million in Subordinated Notes are included in the Company's capital for regulatory purposes, although they are accounted for as a long-term debt in our consolidated financial statements. These items are not accounted for on the Bank's financial statements nor are they included in its capital. As a result, the Company has $70 million more in regulatory capital than the Bank at March 31, 2026, 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 | ||||||||||||||||||||
| March 31, 2026 | |||||||||||||||||||||||
| Total risk-based capital | 8.00% | 10.00% | 14.14% | 13.07% | |||||||||||||||||||
| Tier 1 risk-based capital | 6.00% | 8.00% | 10.95% | 12.10% | |||||||||||||||||||
| Common equity tier 1 capital | 4.50% | 6.50% | 10.59% | 12.10% | |||||||||||||||||||
| Leverage ratio | 4.00% | 5.00% | 9.13% | 10.08% | |||||||||||||||||||
See Note 23 of the Consolidated Financial Statements in Part II. Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2025 for a detailed discussion of the capital ratios. The requirements for "well-capitalized" come from the Prompt Corrective Action rules. See Part I. Item 1 - Business - Supervision and Regulation in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. These rules apply to the Bank but not to the Company. Under the rules of the Federal Reserve Bank, a bank holding company such as the Company is generally defined to be "well capitalized" if its Tier 1 risk-based capital ratio is 8.0% or more and its total risk-based capital ratio is 10.0% or more.
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