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Derivatives | 6 Months Ended
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Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives Derivatives swaps related to community banking activities: I nterest rate swaps The Company enters into commercial loan interest rate swap agreements with commercial banking customers which are offset with a corresponding swap agreement with a third party financial institution (“counterparty”). The Company has agreements with its counterparties that contain provisions that provide that if the Company fails to maintain its status as a “well-capitalized” institution under applicable regulatory guidelines, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements. These agreements also require that the Company and the counterparty collateralize any fair value shortfalls that exceed $250,000 with eligible collateral, which includes cash and securities backed with the full faith and credit of the federal government. Similarly, the Company could be required to settle its obligations under the agreement if specific regulatory events occur, such as if the Company were issued a prompt corrective action directive or a cease and desist order, or if certain regulatory ratios fall below specified levels. The Company pledged $609,000 as of June 30, 2026 and $596,000 as of December 31, 2025, in available for sale securities to collateralize fair value shortfalls on interest rate swap agreements. At June 30, 2026, the notional amount of interest rate swaps is made up of 27 variable to fixed rate swaps to commercial loan customers totaling $176.7 million with a fair value of negative $8.8 million and 27 fixed to variable rate swaps with a counterparty totaling $176.7 million with a fair value of $8.8 million. Changes in fair value from these 27 interest rate swaps offset each other in the three and six-month periods ending June 30, 2026. The Company recognized no fee income related to interest rate swaps in the three-month periods ending June 30, 2026 and 2025, respectively, and zero and $129,000 in fee income related to interest rate swaps in the six-month periods ending June 30, 2026 and 2025, respectively. Interest rate swap income is recorded in other operating income on the Consolidated Statements of Income. None of these interest rate swaps are designated as hedging instruments. The Company has an interest rate swap to hedge the variability in cash flows arising out of a portion of its junior subordinated debentures, which is floating rate debt, 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 $10.0 million of junior subordinated debentures held under Northrim Statutory Trust 2 (“Trust 2”) at 3.72% through its maturity date. The floating rate that the dealer pays is equal to the three month CME SOFR plus tenor spread adjustment 0.26% plus 1.37%, which reprices quarterly on the payment date. This rate was 5.30% as of June 30, 2026. The Company pledged $130,000 in cash to collateralize initial margin and fair value exposure of our counterparty on this interest rate swap as of June 30, 2026 and December 31, 2025. The fair value of this interest rate swap was $1.5 million as of both June 30, 2026 and December 31, 2025, which is included in other assets on the Consolidated Balance Sheet. Changes in the fair value of this interest rate swap are reported in other comprehensive income on the Consolidated Statements of Income. The unrealized gain, net of tax on this interest rate swap was $1.1 million as of June 30, 2026 and December 31, 2025. Derivatives related to home mortgage banking activities: Interest rate lock commitments and retail interest rate contracts The Company also uses derivatives to hedge the risk of changes in the fair values of interest rate lock commitments. The Company enters into commitments to originate residential mortgage loans at specific rates; the value of these commitments are detailed in the table below as “interest rate lock commitments”. The Company also hedges the interest rate risk associated with its residential mortgage loan commitments, which are referred to as “retail interest rate contracts” in the table below. Market risk with respect to commitments to originate loans arises from changes in the value of contractual positions due to changes in interest rates. RML had commitments to originate mortgage loans held for sale totaling $87.0 million and $45.7 million at June 30, 2026 and December 31, 2025, respectively. The fair value of these interest rate lock commitments was $1.5 million and $923,000 at June 30, 2026 and December 31, 2025, respectively. Changes in the value of RML's interest rate derivatives are recorded in mortgage banking income on the Consolidated Statements of Income. None of these derivatives are designated as hedging instruments. The following table presents the fair value of derivatives not designated as hedging instruments at June 30, 2026 and December 31, 2025:
(In Thousands) | Asset Derivatives
|  | June 30, 2026 | December 31, 2025
| Balance Sheet Location | Fair Value | Fair Value
Interest rate swaps | Other assets | $8,754 |  | $7,999 |
Interest rate lock commitments | Other assets | 1,519 |  | 923 |
Total |  | $10,273 |  | $8,922 |
(In Thousands) | Liability Derivatives
|  | June 30, 2026 | December 31, 2025
| Balance Sheet Location | Fair Value | Fair Value
Interest rate swaps | Other liabilities | $8,754 |  | $7,999 |
Retail interest rate contracts | Other liabilities | 76 |  | 50 |
Total |  | $8,830 |  | $8,049 |
The following table presents the net gains (losses) of derivatives not designated as hedging instruments for periods indicated below:
|  | Three Months Ended June 30, | Six Months Ended June 30,
(In Thousands) | Income Statement Location | 2026 | 2025 | 2026 | 2025
Retail interest rate contracts | Mortgage banking income | ($61) |  | ($26) |  | $9 |  | ($335) |
Interest rate lock commitments | Mortgage banking income | (68) |  | (93) |  | 545 |  | 787 |
Total |  | ($129) |  | ($119) |  | $554 |  | $452 |
Our derivative transactions with counterparties under International Swaps and Derivative Association master agreements include “right of set-off” provisions. “Right of set-off” provisions are legally enforceable rights to offset recognized amounts and there may be an intention to settle such amounts on a net basis. We do not offset such financial instruments for financial reporting purposes. The following table summarizes the derivatives that have a right of offset as of June 30, 2026 and December 31, 2025:
June 30, 2026 |  |  |  | Gross amounts not offset in the Statement of Financial Position
(In Thousands) | Gross amounts of recognized assets and liabilities | Gross amounts offset in the Statement of Financial Position | Net amounts of assets and liabilities presented in the Statement of Financial Position | Financial Instruments | Collateral Posted | Net Amount
Asset Derivatives |  |  |  |  |  |
Interest rate swaps | $8,754 | $— |  | $8,754 | $— |  | $— |  | $8,754 |
Liability Derivatives |  |  |  |  |  |
Interest rate swaps | $8,754 | $— |  | $8,754 | $— |  | $8,754 | $— |
Retail interest rate contracts | 76 |  | — |  | 76 |  | — |  | — |  | 76 |
December 31, 2025 |  |  |  | Gross amounts not offset in the Statement of Financial Position
(In Thousands) | Gross amounts of recognized assets and liabilities | Gross amounts offset in the Statement of Financial Position | Net amounts of assets and liabilities presented in the Statement of Financial Position | Financial Instruments | Collateral Posted | Net Amount
Asset Derivatives |  |  |  |  |  |
Interest rate swaps | $7,999 | $— |  | $7,999 | $— |  | $— |  | $7,999 |
Liability Derivatives |  |  |  |  |  |
Interest rate swaps | $7,999 | $— |  | $7,999 | $— |  | $7,999 | $— |
Retail interest rate contracts | 50 |  | — |  | 50 |  | — |  | — |  | 50 |

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