NORTHRIM BANCORP INC (NRIM) stock intrinsic value fair value estimate & owner earnings analysis

Northrim BanCorp is the holding company for Northrim Bank, a 20-branch community and commercial bank headquartered in Anchorage and the third-largest bank in Alaska by deposits ($2.8 billion at the end of 2025). Alongside traditional banking, the company runs a residential mortgage origination business (Residential Mortgage LLC) that originates home loans and sells most of them into the secondary market, and, since October 2024, a commercial factoring and asset-based lending business (Sallyport Commercial Finance) serving businesses across the United States, with smaller affiliated operations in Canada and the United Kingdom. Note for readers comparing this to older data: Northrim completed a 4-for-1 stock split in 2025, so all per-share figures here are stated on the current, split-adjusted share count. The mortgage business is genuinely profitable but very lumpy: the cash tied up funding loans waiting to be sold can swing by well over $100 million from one year to the next depending on how fast the pipeline turns over — 2020's refinancing boom actually strained cash flow even though it was a record profit year, because loans were being originated faster than they could be sold; 2021 and 2022 saw the opposite as that backlog was sold down. We normalized for this by looking at owner earnings across a full mortgage cycle — 2019 through 2025 — rather than any single year, and used the middle (median) year of that window, about $0.96 per share, as the starting point for our estimate. That anchor is well below 2025's actual result, which was flattered both by the mortgage business and by a one-time gain from Northrim's sale of its interest in a Seattle wealth-management affiliate (Pacific Wealth Advisors) — a gain we excluded as non-recurring. Base case: We assume the core Alaska banking franchise keeps growing roughly in line with its multi-year deposit growth record (deposits have grown from $1.3 billion to $2.8 billion over the past decade), tempered for likely margin and expense pressure, call it around 5% per year for the next ten years, with the mortgage business's ups and downs continuing to average out around the anchor level. Beyond ten years, we assume the core deposit franchise — which has posted a profit every single year for at least a decade, including through the mortgage-market disruptions of 2019-2020 and the 2022-2023 rate shock — continues to sustain roughly that level of earning power, without assuming further growth we can't point to a specific cause for. This produces a value of about $23.67 per share. Bull case: Sallyport, the factoring acquisition, is real and already operating, and mortgage volumes have already shown they can recover (2025 was a strong rebound year). If Sallyport scales successfully and the mortgage business stays in a favorable phase of its cycle, earnings power could grow closer to 10% per year for a decade before settling at that higher level. That produces a value of about $35.01 per share. Bear case: Alaska's economy carries real exposure to oil prices and tourism — the company itself flags loan concentrations of roughly 15% combined in tourism, lodging, and aviation-related businesses, sectors it specifically identifies as vulnerable to a decline in oil prices. Sallyport is also a young addition (acquired less than a year before this analysis), operating in the U.S., Canada and the U.K., without yet having a multi-year track record inside Northrim. If Alaska's economy softens and Sallyport underperforms or needs credit reserves as it's integrated, we'd expect a couple of years of decline before earnings power stabilizes at a lower, but still solidly positive, level. That produces a value of about $13.72 per share — still comfortably above zero; we see no realistic path to this business being worth less than its liabilities. Putting a price on it: given the combination of a genuinely stable, decades-old core deposit franchise with the added unpredictability of the mortgage cycle and a recent, not-yet-fully-proven acquisition, the margin-of-safety price sits at a meaningful cushion below our base-case estimate, at around $16 per share, which also sits close to our bear-case estimate. One item we could not fully reconcile from the filings: a handful of smaller mortgage-servicing and other-asset line items in the cash flow statement left a modest (roughly 5-7%) gap versus an independent build-up from net income in a couple of years; we don't believe this changes the picture, but we note it for completeness.