KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to Northrim BanCorp, Inc. (NASDAQ:NRIM)("Northrim" or "the company"). Additionally, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 to its subsidiary, Northrim Bank. The Outlook for all long-term ratings is Stable.
Northrim's ratings are supported by the company's strong earnings power, which is upheld by a low-cost deposit franchise and higher-yielding commercial loan portfolio that are additive to the above average NIM. Furthermore, the earnings profile has benefited from meaningful noninterest income contribution, partly offsetting a more expensive operating base, combined with a history of low credit costs. As such, the company has reported a core ROA of 1.7% through 9M25 as the margin continues to benefit from organic loan growth and the remixing of earning assets towards higher yielding loans. Furthermore, the recent acquisition of Sallyport Commercial Finance, LLC ("SCF") in 4Q24 has further supported noninterest income contributions by bolstering the specialty finance segment. The ratings recognize the decrease in capital levels in recent years driven by strong organic loan growth, elevated share repurchases, and the acquisition of SCF with CET1 falling to 9.4% as of 2Q25. That said, the company sold its minority interest in Pacific Wealth Advisors for a pre-tax gain of $14.2 million in 3Q25, contributing 20 bps to CET1, which, combined with moderated loan growth and strong earnings retention, resulted in CET1 improvement to 10.3% at 3Q25. While we note that investor CRE and C&D concentration relative to total risk-based capital tracks above peers at 351% and 85%, respectively, we do not believe it poses concern given the portfolio's granularity, conservative underwriting, and low historical loss content. Furthermore, concentration levels should decline over time as management continues to rebuild capital metrics. Management indicated that they are targeting core capital more in line with historical levels with an 11% CET1 ratio over the longer term and plans to suspend share repurchases or dividend increases in the near-term which should support internal capital accretion. Elsewhere, Northrim's outperformance in asset quality has been supported by management's prudent underwriting and overall conservative operating philosophy has resulted in minimal NCOs, averaging just 1 bps over the past five years. That said, classified loans, net of government guarantees, increased through 9M25 largely related to a handful of commercial relationships, though these appear to be isolated credits with no indication of systemic problems within the commercial portfolio; classified loans remain well contained overall at 1.7% of loans, which is below peer level. The company's favorable deposit franchise is primarily core deposit funded with minimal reliance on wholesale funding sources, combined with a conservative average loan-to-deposit ratio of 80% as of 3Q25. The company benefits from a less competitive footprint with only seven banks maintaining a physical presence in Alaska, and NRIM has steadily increased its deposit market share within its operating footprint reaching 18% as of 2Q25, up from 10% in 2017. As such, the cost of funds tracks well below similarly rated peers at 1.47% for 3Q25.
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Methodologies
- Financial Institutions: Bank & Bank Holding Company Global Rating Methodology
- ESG Global Rating Methodology
Disclosures
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
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About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan's Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
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