v3.25.2
Business Combinations
 6 Months Ended
Jun. 30, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Business Combinations Business Combinations
On October 31, 2024, the Company completed the acquisition of 100% of the equity interest in Sallyport Commercial Finance, LLC (“SCF” or “Sallyport”) in a cash transaction that is valued at approximately $53.9 million. The primary reason for the acquisition was to expand the Company's presence in the specialty finance industry. SCF provides factoring, asset based lending, and alternative working capital solutions to small and medium sized enterprises in the United States, and, to a lesser extent, in Canada and the United Kingdom through its subsidiaries. SCF will operate as a wholly-owned subsidiary of the Bank, and is expected to complement the products currently offered by Northrim Funding Services, a factoring division of the Bank.
The consideration transferred or transferable to the former owners of SCF and the assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting and were recorded at their estimated fair values as of the October 31, 2024 acquisition date. The Company paid $47.9 million in cash on October 31, 2024 when the acquisition was completed. The Company had pre-existing loans to SCF which totaled $12.0 million. The fair value of these loans approximated their carrying value, and as a result of the acquisition, the loans were effectively settled at their carrying value, resulting in no gain or loss. The fair value of the loans were considered as part of the total purchase consideration in the transaction. Estimated fair values recorded in the transaction are subject to change for up to one year after the closing date of the acquisition. The application of the acquisition method of accounting resulted in the initial recognition of goodwill in the amount of $35.0 million. No other intangibles were identified. In February 2025, in accordance with the terms of the purchase agreement, the Company determined the final value of consideration transferred to the former owners of SCF. The final value of consideration transferred decreased $144,000 to $47.7 million from $47.9 million, which decreased goodwill to $34.9 million.
The former owners of SCF (the “sellers”) will receive additional cash proceeds (the “earn-out payments”) of up to $6.0 million. The earn-out payments of $2.0 million per year are payable on each of the first three anniversaries of the closing date. The purchase agreement provides for the these earn-out payments to be paid to the sellers in future periods, provided that certain principal employees of SCF, including certain of the sellers, have not been terminated for cause or terminated their employment for good reason. The earn-out payments have not been included in acquisition consideration and are being expensed as compensation expense during the periods in which they are being earned based on management's determination that payment of these amounts is probable.
A summary of the net assets acquired and the estimated fair value adjustments are presented below:
(In Thousands)October 31, 2024
Cost basis net assets$29,638 
Cash payment made(47,855)
Pre-existing debt effectively settled(12,000)
Fair value adjustments:
   Net loans(1,260)
   Net purchased receivables(3,524)
Goodwill($35,001)
The $35.0 million of goodwill recorded in connection with the acquisition of SCF represents the excess purchase price over the estimated fair value of the net assets acquired, and resulted from the expected decrease in funding costs and, to a lesser extent, expected operational efficiencies. All of the goodwill is expected to be deductible for tax purposes.
A summary of the assets acquired and liabilities assumed at their estimated fair values are presented below:
(In Thousands)October 31, 2024
Assets Acquired:
Cash and equivalents$7,197 
Loans, net9,158 
Purchased receivables, net48,034 
Premises and equipment
54 
Right-of-use assets44 
Other assets1,642 
     Total assets acquired$66,129 
Liabilities Assumed:
Borrowings$40,207 
Lease liability47 
Other liabilities1,021 
     Total liabilities assumed$41,275 
The fair value of assets acquired and liabilities assumed approximates book value as of the acquisition date as all loans and borrowings have variable interest rates. Purchased receivables have an average life of less than 45 days. Some of the assets acquired exhibited evidence of credit deterioration at the acquisition date. These assets were designated as purchased credit deteriorated (“PCD”) assets in accordance with U.S. GAAP. The following table presents PCD loan and purchased receivable activity at the date of acquisition:
(In Thousands)LoansPurchased Receivables
Unpaid principal balance$10,418 $51,558 
ACL at acquisition(1,260)(3,524)
Total$9,158 $48,034 
Based on an evaluation in accordance with Rule 3-05 and Rule 11-01(b) of Regulations S-X, the acquisition of SCF does not meet the significance thresholds requiring separate financial statement disclosure.
The operations of SCF are included in our operating results from October 31, 2024, and added revenue of $2.6 million, non-interest expense of $1.5 million, and net income of $943,000, before taxes, for the year ended December 31, 2024. SCF’s results of operations prior to the acquisition are not included in our operating results. Additionally, deal-related costs of $1.1 million for the year ended December 31, 2024 have been incurred and expensed in connection with the acquisition of Sallyport and recognized within professional and outside services expense on the Consolidated Statements of Income.
The following tables present unaudited pro forma results of operations for the three and six-month periods ended June 30, 2024 as if the acquisition of SCF had occurred on January 1, 2024. The proforma results have been prepared for comparative purposes only and are not necessarily indicative of the results that would have been obtained had the acquisition actually occurred on January 1, 2024, primarily due to the Company's lower cost of funding as compared to SCF.
(In Thousands, except per share data)Three Months Ended June 30, 2024
(Unaudited)
Company
SCF1
Pro Forma Adjustments3
Pro Forma Combined
Net interest and other income$36,630 $4,795 $41,425 
Net income9,020 1,103 (314)9,809 
Earnings Per Share, Basic$1.64 $1.78 
Earnings Per Share, Diluted$1.62 $1.76 
Weighted Average Shares Outstanding, Basic5,500,588 5,500,588 
Weighted Average Shares Outstanding, Diluted5,558,580 5,558,580 
(In Thousands, except per share data)Six Months Ended June 30, 2024
(Unaudited)
Company
SCF2
Pro Forma Adjustments3
Pro Forma Combined
Net interest and other income$70,921 $9,993 $80,914 
Net income17,219 2,133 (606)18,746 
Earnings Per Share, Basic$3.13 $3.41 
Earnings Per Share, Diluted$3.10 $3.37 
Weighted Average Shares Outstanding, Basic5,500,083 5,500,083 
Weighted Average Shares Outstanding, Diluted5,562,025 5,562,025 
1SCF represents unaudited results from April 1 to June 30 for 2024.
2SCF represents unaudited results from January 1 to June 30 for 2024.
3Proforma adjustments include a provision for income taxes using the Company's statutory rate.