NORTHRIM BANCORP INCNRIM

NORTHRIM BANCORP INC Income Taxes Disclosure

10-KFiled Mar 6, 20263 min read
Income Taxes
    Components of the provision for income taxes for the periods indicated are as follows: 
(In Thousands)Current Tax Expense (Benefit)Deferred Expense (Benefit)Total Expense
2025:   
Federal$12,493 ($1,068)$11,425 
State5,329 (438)4,891 
Amortization of investment in low income housing tax credit partnerships3,595 — 3,595 
Total$21,417 ($1,506)$19,911 
2024:   
Federal$3,995 ($102)$3,893 
State2,453 (50)2,403 
Amortization of investment in low income housing tax credit partnerships3,727 — 3,727 
Total$10,175 ($152)$10,023 
2023:   
Federal$1,120 $388 $1,508 
State944 192 1,136 
Amortization of investment in low income housing tax credit partnerships3,570 — 3,570 
Total$5,634 $580 $6,214 

    The actual expense for 2025, 2024, and 2023, differs from the “expected” tax expense (computed by applying the U.S. Federal Statutory Tax Rate of 21% for the years ended December 31, 2025, 2024 and 2023) as follows: 
202520242023
(In Thousands)
Amount
PercentAmountPercentAmountPercent
US Federal statutory rate
$17,749 21.0 %$9,869 21.0 %$6,638 21.0 %
State and local income taxes (net of federal income tax effect)1
3,864 4.6 %1,898 4.0 %897 2.8 %
Tax Credits
Low income housing tax credits
(3,098)(3.7)%(3,571)(7.6)%(3,627)(11.5)%
Nontaxable or nondeductible items
Tax-exempt interest on investment securities and loans(470)(0.6)%(456)(1.0)%(459)(1.5)%
Other
Amortization of investment in low income housing tax credit partnerships, net2,390 2.8 %3,105 6.6 %3,192 10.1 %
Other(524)(0.6)%(822)(1.7)%(427)(1.4)%
Total$19,911 23.6 %$10,023 21.3 %$6,214 19.7 %
1The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category is Alaska.
    
    The components of the net deferred tax asset for the periods indicated are as follows:
(In  Thousands)202520242023
Deferred Tax Asset:   
     Allowance for credit losses$6,650 $6,284 $5,347 
     Loan fees, net of costs347 660 649 
     Interest income, nonaccrual loans331 413 356 
     Deferred compensation1,684 1,772 1,674 
     Equity compensation918 502 466 
     Operating lease liabilities1,689 1,996 2,585 
     Accrued liabilities2,319 1,967 941 
     Unrealized loss, net of gains on available for sale investment securities
191 3,295 6,918 
     Unrealized loss, net of gains on marketable equity securities
— — 126 
     Other— 234 280 
Total Deferred Tax Asset$14,129 $17,123 $19,342 
Deferred Tax Liability:   
     Intangible amortization($3,523)($3,112)($2,746)
     Mortgage servicing rights(7,341)(8,024)(6,065)
     Depreciation and amortization(555)(1,051)(1,463)
    Operating lease right-of-use assets(1,681)(1,990)(2,585)
    Unrealized gain, net of loss on marketable equity securities
(53)(6)— 
     Other(301)(763)(719)
Total Deferred Tax Liability($13,454)($14,946)($13,578)
          Net Deferred Tax Asset$675 $2,177 $5,764 
    A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.  The primary source of recovery of the deferred tax asset will be future taxable income.  Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax asset.  The deferred tax asset is included in "Other assets" in the Consolidated Balance Sheets.
    As of December 31, 2025, the Company had no unrecognized tax benefits.
The tax years subject to examination by federal taxing authorities and by the State of Alaska are the years ending December 31, 2025, 2024, 2023, and 2022.
The amount of cash income taxes paid by the Company for the periods indicated were as follows:
(In Thousands)
202520242023
Federal
$12,400$4,451$1,500
Alaska
4,875 2,130 475 
Other State and Local
316 139 56 
Total
$17,591$6,720$2,031

Historical Timeline

Fiscal YearFiled
2025Mar 6, 2026Showing above
2024Mar 10, 2025
2023Mar 8, 2024
2022Mar 7, 2023
2021Mar 4, 2022
2020Mar 5, 2021
2019Mar 6, 2020
2018Mar 13, 2019
2017Mar 13, 2018
2016Mar 13, 2017
2015Mar 11, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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