UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2021 ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from_____to____ Commission File Number 000-33501 NORTHRIM BANCORP, INC. (Exact name of registrant as specified in its charter) Alaska 92-0175752 (State or other jurisdi ...

Economic Impact and Growth Outlook - The company expects modest growth opportunities in 2021 due to the impacts of COVID-19 and lower oil prices, which have slowed the economy in Alaska [22]. - Alaska's gross state product (GSP) was $50.4 billion in Q3 2020, down from $54.5 billion in Q3 2019, reflecting the economic impact of the pandemic [40]. - The company anticipates a recovery of 8,600 jobs, or approximately 2.8% increase in total employment in Alaska for 2021 [39]. - The company anticipates that the long-term growth of the Alaska economy will be determined by large-scale natural resource development projects [46]. - The company believes that the implementation of the POMV concept is positive for Alaska's financial well-being, despite concerns over low oil prices affecting long-term economic growth [48]. Workforce and Employment - As of December 31, 2020, the company had 438 full-time equivalent employees, with 72% identifying as women and 28% as men [25][26]. - Approximately 45% of the company's employees were working remotely as of December 31, 2020, compared to less than 8% before the pandemic [29]. Financial Performance and Credit Management - The company has allocated more resources to credit management to enhance financial analysis of complex loan relationships and improve credit quality [23]. - The company had $78.9 million, or 5% of portfolio loans, in the tourism sector as of December 31, 2020, indicating significant exposure to industries affected by COVID-19 [36]. - As of December 31, 2020, 45% of the company's revenue was derived from the residential housing market, up from 31% in 2019 and 29% in 2018 [44]. - At December 31, 2020, $780.1 million, or 54%, of the company's loan portfolio was represented by commercial loans in Alaska [44]. - Investment earnings represented 66% of unrestricted revenues in 2020, compared to 52% in 2019 [47]. Regulatory Compliance and Capital Management - The Company and the Bank are required to maintain a common equity Tier 1 capital ratio of 4.5% and a total risk-based ratio of 8.0% [75]. - The conservation buffer, consisting of common equity Tier 1 capital, must be at least 2.5% above the required capital ratios [75]. - As of December 31, 2020, the Company had $10 million more in regulatory capital than the Bank, primarily due to trust preferred securities [84]. - The Company intends to maintain capital ratios for the Bank in 2021 that exceed the FDIC's requirements for the "well-capitalized" classification [83]. - The Company is subject to the Community Reinvestment Act and received a "Satisfactory" rating from the FDIC in its most recent examination [88]. - The Company is in compliance with the USA PATRIOT Act and the Anti-Money Laundering Act as of December 31, 2020 [89]. - The Rules for capital requirements took full effect on January 1, 2019, and both the Company and the Bank have been compliant since January 1, 2015 [78]. - The Bank's ability to pay dividends to the Company is limited to ensure it meets regulatory requirements for being "well-capitalized" [83]. Interest Rate Risk Management - The Company reported total interest-earning assets of $1,952,740,000, with 68.36% maturing within one year [309]. - Interest-bearing liabilities totaled $1,206,283,000, with 94.28% maturing within one year [309]. - The interest sensitivity gap was $746,457,000, indicating a positive gap across all maturity categories [309]. - A 400 basis point increase in interest rates is projected to increase net interest income by $8,214,000 in the first year, representing an 11.66% change [312]. - The estimated impact on net income under a 400 basis point increase scenario shows a decrease of $663,000 in the first year, but an increase of $6,337,000 in the second year, reflecting a 23.85% change [312]. - The Asset and Liability Committee manages interest rate risks through various measures, including income simulations and interest sensitivity analysis [303]. - The Company utilizes derivatives in its Home Mortgage Lending segment to hedge interest rate risks associated with mortgage loan commitments [306]. - Interest rate gap analysis is considered a standard tool for measuring exposure to interest rate risk, but it is not the sole indicator of earnings performance [305]. - The Company’s interest rate risk management strategies are influenced by economic conditions, asset quality, and other considerations [303]. Competition and Market Position - The company faces competition from various financial institutions, including credit unions that have liberalized their lending authority [51]. - Northrim Bank held approximately a 12% share of the Alaska bank deposits as of June 30, 2020 [53]. - Credit unions in Alaska had a 44% share of total deposits held in banks and credit unions as of June 30, 2020 [51]. - The company plans to continue leveraging affiliate relationships to strengthen its customer base and attract new clients [35]. Housing Market and Economic Indicators - Alaska's home mortgage delinquency rate was 6.78% in Q3 2020, lower than the national average of 7.60% [43]. - Approximately 20% of total state revenues of $8.7 billion in the fiscal year ending June 30, 2020, were generated through various taxes and royalties on the oil industry [47]. - The distribution from the Alaska Permanent Fund Corporation was $992 per eligible resident in 2020, totaling approximately $640 million [50].

Economic Impact of COVID-19 - Northrim BanCorp reported a total of $120.4 million in loan modifications due to COVID-19 as of September 30, 2020, with 75 modifications made [131]. - The company experienced a significant increase in personal income for Alaska, rising by $2.6 billion or 24% in Q2 2020 compared to Q1 2020, largely due to government transfer payments [125]. - The total direct aid to Alaska from government spending due to COVID-19 reached approximately $5.6 billion, equivalent to 12% of the state's Gross State Product (GSP) of $45.6 billion [124]. - The company identified exposure to various industries affected by COVID-19, including Tourism (6%), Oil and Gas (6%), and Healthcare (7%) as of September 30, 2020 [133]. - Alaska's unemployment rate peaked at 13.5% in April 2020, but improved to 7.4% by August 2020 [122]. Financial Performance - The Company reported net income of $11.9 million and diluted earnings per share of $1.84 for Q3 2020, a 57% increase from $7.5 million and $1.11 in Q3 2019 [135]. - Total revenue for Q3 2020 increased by 49% to $39.9 million, up from $26.8 million in Q3 2019, primarily driven by a $10.4 million increase in mortgage banking income [137]. - Nonperforming assets decreased by $2.1 million, or 10%, to $17.9 million as of September 30, 2020, compared to $19.9 million at December 31, 2019 [139]. - Cash dividends paid were $0.35 per common share in Q3 2020, a 6% increase from $0.33 in Q3 2019 [137]. - Other operating income for the first nine months of 2020 increased by $18.0 million, or 65%, to $45.6 million, primarily due to a $20.0 million increase in mortgage banking income [155]. Loan and Credit Metrics - The provision for loan losses rose to $567,000 for Q3 2020, compared to a benefit of $2.1 million in Q3 2019, reflecting management's assessment of risks associated with the COVID-19 pandemic [137]. - The delinquency rate for mortgage loans in Alaska rose from 3.23% in Q1 2020 to 7.69% in Q2 2020, compared to the U.S. rate of 4% and 7.97% respectively [129]. - The Company has identified potential problem loans of $7.6 million as of September 30, 2020, down from $9.0 million at December 31, 2019 [141]. - The Allowance for Loan Losses increased to $21.683 million at the end of the period, up from $19.137 million at the end of the previous year [174]. - The provision for loan losses was $567,000 for the three months ended September 30, 2020, compared to a negative provision of $2.075 million for the same period in 2019 [174]. Asset and Deposit Growth - Total deposits increased by $433.8 million, or 32%, to $1.806 billion as of September 30, 2020, compared to $1.372 billion as of December 31, 2019 [175]. - Total interest-bearing deposits increased by 24% to $1,077.2 million in Q3 2020 from $870.4 million in Q3 2019 [147]. - Demand deposits rose to $697.4 million, representing 38% of total deposits as of September 30, 2020, up from 33% at December 31, 2019 [175]. - Total unfunded commitments to fund loans and letters of credit were $361.2 million as of September 30, 2020 [184]. - The Company had $261.1 million in PPP loans eligible to be pledged for the PPPLF program as of September 30, 2020 [186]. Market and Industry Exposure - Direct exposure to the oil and gas industry decreased to $66.0 million, or approximately 4% of loans, as of September 30, 2020, down from $79.2 million, or approximately 8%, at December 31, 2019 [166]. - The Company had $62.6 million, or 4% of portfolio loans, in the tourism sector, and $54.2 million, or 4%, in the aviation sector as of September 30, 2020 [168]. - The Company’s unfunded commitments to borrowers with direct exposure to the oil and gas industry were $63.6 million as of September 30, 2020, compared to $31.1 million at December 31, 2019 [166]. Capital and Regulatory Compliance - The Company met all applicable capital adequacy requirements for a "well-capitalized" institution, with total risk-based capital at 15.36% as of September 30, 2020 [189]. - The Company expects to continue receiving dividends from the Bank during the remainder of 2020, as it meets capital adequacy requirements [183]. - The maximum borrowing line from the Federal Home Loan Bank (FHLB) was $937.3 million, approximately 45% of the Bank's assets, as of September 30, 2020 [177].

Economic Impact - The unemployment rate in Alaska surged from 5.6% in March to 13.5% in April 2020, slightly moderating to 12.6% in May 2020[124]. - The tourism and hospitality sectors in Alaska experienced a significant decline, with leisure and hospitality jobs dropping by 39.7%, resulting in a loss of 15,300 jobs in May 2020[124]. - Alaska's gross state product (GSP) was reported at $54 billion in Q1 2020, with a real GSP decrease of 4% annualized for the quarter, outperforming the national average decline of 5%[128]. - Alaska's personal income grew by 3.7% in 2019, with total income increasing from $44.4 billion at the end of 2018 to $46.1 billion in Q1 2020[129]. - The delinquency rate for mortgage loans in Alaska was 3.23% in Q1 2020, up from 2.85% at the end of 2019, while the national average was higher at 4%[131]. Company Financial Performance - The Company reported net income of $9.9 million and diluted earnings per share of $1.52 for Q2 2020, a 132% increase from $4.3 million and $0.62 in Q2 2019[136]. - Total revenue for Q2 2020 increased by 37% to $35.0 million, driven by a $9.3 million increase in mortgage banking income[138]. - Net interest income rose by 9% to $17.5 million in Q2 2020 compared to $16.0 million in Q2 2019, while net interest margin decreased to 3.98% from 4.71%[143]. - Other operating income rose by $8.0 million, or 83%, to $17.5 million in Q2 2020 compared to $9.6 million in Q2 2019, driven by a $9.3 million increase in mortgage banking income[154]. - Other operating expenses increased by $2.9 million, or 14%, to $22.7 million in Q2 2020, primarily due to higher salaries and data processing costs[155]. Loan and Credit Metrics - The Company reported a total of $357.522 million in loan modifications due to COVID-19, with $64.298 million in interest-only modifications and $293.224 million in full payment deferrals[133]. - The Company booked a loan loss provision of $404,000 for Q2 2020, up from $300,000 in Q2 2019, reflecting increased risks due to COVID-19 and oil price declines[135]. - Nonperforming assets increased by 4% to $20.8 million as of June 30, 2020, compared to $19.9 million at December 31, 2019[138]. - The Company had identified potential problem loans of $3.6 million as of June 30, 2020, down from $9.0 million at December 31, 2019[139]. - The Company had a net charge-off of $768,000 for the three months ended June 30, 2020, compared to a recovery of $9,000 for the same period in 2019[171]. Capital and Liquidity - The Company maintains capital ratios exceeding the FDIC's "well-capitalized" requirements, with a total risk-based capital ratio of 15.24% as of June 30, 2020, compared to the required minimum of 8.00%[188]. - The Company's Tier 1 risk-based capital ratio stands at 13.99% as of June 30, 2020, significantly above the required minimum of 6.00%[188]. - Total deposits increased by $365 million, or 27%, to $1.737 billion as of June 30, 2020, compared to $1.372 billion as of December 31, 2019[172]. - The Company had total unfunded commitments to fund loans and letters of credit of $335.4 million as of June 30, 2020[181]. - The maximum borrowing line from the FHLB was $901.1 million, approximately 45% of the Bank's assets, as of June 30, 2020[175]. Market and Economic Conditions - The average monthly Alaska North Slope (ANS) crude oil prices fell from $65.48 in January to a low of $16.54 in April 2020, before recovering to an average of $41.78 in June[125]. - The Federal Reserve's actions, including a 1.5% decrease in the Fed Funds rate, have significantly reduced borrowers' interest expenses and added liquidity to the credit markets[126]. - The Company is in the process of developing and validating models for estimating credit losses, with a focus on forward-looking economic scenarios[120]. - The Company has completed substantially all loss forecasting models for estimating credit losses under the CECL framework, with an estimated impact of a $5.0 million to $6.0 million decrease in the allowance for credit losses if adopted early[121]. - Direct exposure to the oil and gas industry decreased to $70.2 million, or approximately 5% of loans, as of June 30, 2020, down from $79.2 million, or approximately 8%, at December 31, 2019[163].

Financial Performance - The Company reported net income of $1.0 million and diluted earnings per share of $0.16 for Q1 2020, a decrease from $4.3 million and $0.62 in Q1 2019, primarily due to increased provision for loan losses and operating expenses [149]. - Total revenue for Q1 2020 decreased by 5% to $22.1 million from $23.3 million in Q1 2019, primarily due to a $1.4 million decrease in gain (loss) on marketable equity securities [151]. - Net income for Q1 2020 decreased by $3.3 million, or 76%, to $1.0 million compared to $4.3 million in Q1 2019, mainly due to an increase in the provision for loan losses [157]. - Net interest income for Q1 2020 decreased slightly by $79,000, or less than 1%, to $15.7 million compared to $15.8 million in Q1 2019 [158]. - Other operating income decreased by $1.1 million, or 15%, to $6.4 million in Q1 2020 compared to $7.5 million in Q1 2019, primarily due to a decrease in gains on marketable equity securities [165]. Loan Loss Provisions - The Company increased its loan loss reserves by $2.1 million for Q1 2020, compared to a $750,000 provision for loan losses in Q1 2019 [151]. - Provision for loan losses increased to $2.1 million in Q1 2020 from $750,000 in Q1 2019, reflecting increased risks due to COVID-19 and oil price reductions [163]. - The Company’s allowance for loan losses increased to $21.017 million as of March 31, 2020, from $20.209 million as of March 31, 2019 [181]. - The provision for loan losses was $2.060 million for the three months ended March 31, 2020, compared to $750,000 for the same period in 2019 [181]. Economic Conditions - The COVID-19 pandemic is expected to negatively impact the previously positive economic growth trends in Alaska, with significant declines in tourism and oil prices anticipated [142]. - The Alaska economy showed positive job growth with an increase of 1,300 jobs (0.4%) in February 2020 compared to February 2019, marking 14 consecutive months of year-over-year job increases prior to COVID-19 [137]. - Alaska's personal income grew by 3.7% in 2019, increasing from $43.8 billion in 2018 to $45.4 billion in 2019, driven mainly by wage improvements [141]. - The Federal Open Market Committee cut the target federal funds rate by 150 basis points to a range of 0-0.25% in March 2020, aiming to stabilize the economy [146]. Asset and Loan Management - Total portfolio investments decreased by 3%, or $7.5 million, to $276.6 million as of March 31, 2020, from $284.1 million at December 31, 2019 [168]. - Portfolio loans increased by $38.5 million, or 4%, to $1.082 billion at March 31, 2020, driven by growth in commercial and real estate loans [171]. - Total loans amounted to $1.081 billion as of March 31, 2020, compared to $1.043 billion at December 31, 2019 [172]. - The Company had $63.7 million, or 6% of portfolio loans, in the tourism sector as of March 31, 2020 [174]. Capital and Funding - The Company met all applicable capital adequacy requirements for a "well-capitalized" institution as of March 31, 2020, with total risk-based capital at 14.50% [196]. - The Company had $793.4 million available for borrowing under existing lines of credit as of March 31, 2020 [193]. - The Company had outstanding advances of $8.9 million as of March 31, 2020, with fixed interest rates ranging from 2.61% to 3.25% [185]. - Total unfunded commitments to fund loans and letters of credit at March 31, 2020 were $321.2 million [191]. Dividend and Stock Activity - The Company paid cash dividends of $0.34 per common share in Q1 2020, up 13% from $0.30 in Q1 2019 [152]. - The Company suspended its previously announced stock repurchasing activity as of March 31, 2020, while maintaining capital ratios well in excess of regulatory requirements [151]. - The Company repurchased 192,709 shares of its common stock in the first three months of 2020 [195]. Nonperforming Assets - Nonperforming assets decreased by $386,000, or 2%, to $19.6 million as of March 31, 2020, compared to $19.9 million at December 31, 2019 [153]. - Potential problem loans decreased to $4.5 million as of March 31, 2020, from $9.0 million at December 31, 2019 [153].

Economic Outlook - The company expects modest growth opportunities in 2020 due to lower oil prices impacting the Alaskan economy [18]. - The Alaska economy showed a job growth of 1,900 jobs, or 0.6%, in December 2019 compared to December 2018, indicating a recovery trend [34]. Employment and Workforce - As of December 31, 2019, the company had 431 full-time equivalent employees, with 311 in Community Banking and 120 in Home Mortgage Lending [22]. Loan Portfolio and Credit Quality - Approximately 8% of the loan portfolio has direct exposure to the oil and gas industry in Alaska, with 40% attributable to 31 large borrowing relationships [28]. - The company emphasizes managing credit quality, allocating more resources to credit management to enhance financial analysis of complex loan relationships [20]. - Alaska's foreclosure rate was 0.71% at the end of Q3 2019, lower than the national average of 0.84% [35]. Revenue Sources - The company derived 31% of its revenue from the residential housing market in 2019, up from 29% in 2018 [37]. Market Position and Competition - As of June 30, 2019, Northrim Bank held approximately 12% of the total bank deposits in Alaska, with a market share of 17% in Anchorage and 14% in both Juneau and Sitka [41]. - The company competes with seven commercial banks in Alaska, with Wells Fargo Bank Alaska leading with a 30% market share of total deposits [41]. - Credit unions in Alaska accounted for a 44% share of total deposits held in banks and credit unions as of June 30, 2019 [43]. - The company faces competition from non-bank financial institutions that can offer higher deposit rates due to fewer regulatory constraints [40]. Regulatory Environment - The company is subject to regulatory capital requirements, including a common equity Tier 1 capital ratio of 4.5% and a total risk-based ratio of 8.0% [63]. - The Dodd-Frank Act has permanently increased the maximum amount of deposit insurance coverage to $250,000 per depositor [48]. - The company operates under the supervision of the Federal Reserve Board and the Alaska Department of Commerce, with the FDIC insuring its deposits [45]. - The Company intends to maintain capital ratios for the Bank in 2020 that exceed the FDIC's requirements for the "well-capitalized" classification [72]. - The Company's capital ratios exceed those for the Bank by $10 million at December 31, 2019, primarily due to trust preferred securities included in the Company's regulatory capital [73]. - The Bank received a "Satisfactory" rating from the FDIC in its most recent Community Reinvestment Act examination [77]. Financial Performance and Projections - The estimated total interest-earning assets at December 31, 2019, amounted to $1,462,061,000, with 63.4% maturing within one year [280]. - The total interest-bearing liabilities at December 31, 2019, were $939,656,000, with 90.5% maturing within one year [280]. - The interest sensitivity gap at December 31, 2019, was $522,405,000, indicating a positive gap across all maturity categories [280]. - The Company is exposed to interest rate risks, which are managed by the Asset and Liability Committee through various measures including income simulations [274]. - The Company uses derivatives in the Home Mortgage Lending segment to hedge interest rate risk associated with residential mortgage loan commitments [278]. - Estimated net interest income increase of $10,233 thousand (15.87%) in the first year with a 400 basis points rate hike [282]. - Projected net income increase of $1,708 thousand (11.17%) in the first year with a 400 basis points rate hike [282]. - Estimated net interest income decrease of $4,771 thousand (7.40%) in the first year with a 100 basis points rate cut [282]. - Projected net income decrease of $3,269 thousand (21.40%) in the first year with a 100 basis points rate cut [282]. - Net interest income increase of $21,346 thousand (33.38%) in the second year with a 400 basis points rate hike [282]. - Net income increase of $10,896 thousand (73.34%) in the second year with a 400 basis points rate hike [282]. - Net interest income decrease of $7,870 thousand (12.31%) in the second year with a 100 basis points rate cut [282]. - Net income decrease of $5,832 thousand (39.25%) in the second year with a 100 basis points rate cut [282]. - Company acknowledges potential balance sheet strategies to mitigate interest rate risk [281]. - Projections are subject to various assumptions and may not reflect actual results [281]. Customer Acquisition and Services - The company has targeted new customer acquisitions in professional fields such as physicians and attorneys, enhancing franchise value through multiple services [18]. - The company plans to continue expanding electronic services and enhancing information security for deposit products [19]. Branch Network - The company has 16 branches, contributing to its competitive positioning in the Alaskan banking market [43]. - The total financial institution branches in Alaska amount to 214, with credit unions having 93 branches [43]. Compliance - The Company believes it is in compliance with the USA PATRIOT Act as of December 31, 2019 [78].

Financial Performance - The Company reported net income of $7.5 million and diluted earnings per share of $1.11 for Q3 2019, compared to $5.3 million and $0.75 for Q3 2018, reflecting a year-over-year increase of 41.5% in net income [135]. - Total revenue for Q3 2019 increased by 9% to $26.8 million from $24.5 million in Q3 2018 [138]. - Net income for Q3 2019 increased by $2.2 million, or 43%, to $7.5 million compared to $5.3 million in Q3 2018 [142]. - Net interest income for Q3 2019 rose by $487,000, or 3%, to $16.3 million from $15.8 million in Q3 2018 [143]. - Other operating income for the three months ended September 30, 2019, increased by $1.8 million, or 21%, to $10.5 million, primarily due to higher mortgage origination volume [155]. - Total interest income for the three months ended September 30, 2019, increased by $1,257,000, or 12%, compared to the same period in 2018, driven by increases in loans and long-term investments [147]. Asset Quality - Nonperforming assets decreased by $1.1 million, or 5%, to $21.5 million as of September 30, 2019, compared to $22.6 million at December 31, 2018 [137]. - Total nonperforming loans decreased to $15.5 million as of September 30, 2019, down from $16.6 million at September 30, 2018 [139]. - Potential problem loans decreased to $9.8 million as of September 30, 2019, compared to $17.1 million at December 31, 2018 [139]. - Total nonperforming assets, net of government guarantees, were $21.5 million as of September 30, 2019, down from $24.1 million at September 30, 2018 [139]. - The provision for loan losses was a benefit of $2.1 million for the third quarter of 2019, attributed to improvements in qualitative factors and a decrease in nonaccrual loans [152]. - The Company maintained an Allowance for Loan Losses of $19.1 million as of September 30, 2019, down from $20.2 million at the end of the previous year [173]. Loan and Deposit Growth - The Company anticipates continued growth in loans and deposits, supported by improvements in the local economy and job growth [122]. - Portfolio loans increased by $52.2 million, or 5%, to $1.037 billion as of September 30, 2019, from $984.3 million at December 31, 2018, primarily due to increased commercial loans [163]. - Total loans reached $1.036 billion as of September 30, 2019, compared to $984.3 million at December 31, 2018, reflecting a growth in commercial and real estate loans [164]. - Total deposits increased by $122.9 million, or 10%, to $1.351 billion as of September 30, 2019, compared to $1.228 billion at December 31, 2018 [174]. - Demand deposits were $460.3 million, representing 33% of total deposits as of September 30, 2019, compared to $421.0 million, or 34%, at December 31, 2018 [174]. - Certificates of deposit increased to $155.4 million as of September 30, 2019, from $113.3 million at December 31, 2018, with 46% maturing within the next 12 months [175]. Interest Income and Expenses - Net interest income rose by 3% in Q3 2019 and by 7% in the first nine months of 2019 compared to the same periods in 2018, driven by higher average earning asset balances [138]. - Net interest margin for Q3 2019 was 4.60%, a decrease of 9 basis points from 4.69% in Q3 2018 [143]. - Total interest expense for the first nine months of 2019 was $2,090,000, an increase of 110% compared to the same period in 2018 [151]. - Average loans to average interest-earning assets ratio was 72.53% for Q3 2019, down from 73.60% in Q3 2018 [145]. - Average loans to average interest-earning assets ratio improved to 73.64% for the nine months ended September 30, 2019, compared to 72.15% in 2018 [148]. Capital and Commitments - The Company met all applicable capital adequacy requirements for a "well-capitalized" institution, with total risk-based capital at 15.82% [188]. - Total unfunded commitments to fund loans and letters of credit were $260.2 million as of September 30, 2019 [183]. - The Company had outstanding advances of $8.9 million from the FHLB, with fixed interest rates ranging from 2.61% to 3.25% [177]. - Funds available for borrowing under existing lines of credit were $789.3 million as of September 30, 2019 [185]. - The Company issued 4,256 shares of common stock and repurchased 347,676 shares in the first nine months of 2019 [187]. Economic Indicators - Alaska's personal income grew by 4.3% annualized in Q1 2019, reaching $45.5 billion, with significant contributions from wages and proprietors' income [127]. - Alaska's gross state product (GSP) increased by 3.9% annualized in Q1 2019, marking the fourth consecutive quarter of improvement [126]. - The average monthly oil price for Alaska North Slope (ANS) was $63.83 in September 2019, with an annual average forecast of $68.90 per barrel for FY 2019 [129]. - Direct exposure to the oil and gas industry accounted for $66.3 million, or approximately 6% of total loans as of September 30, 2019, up from $62.3 million, also 6%, at December 31, 2018 [165]. - The Company’s unfunded commitments to borrowers with direct exposure to the oil and gas industry were $29.1 million as of September 30, 2019, down from $32.5 million at December 31, 2018 [165].

Financial Performance - The Company reported net income of $4.3 million and diluted earnings per share of $0.62 for Q2 2019, down from $5.8 million and $0.84 in Q2 2018, reflecting a year-over-year decline primarily due to increased employee benefits and expenses from new branches [132]. - Net income for Q2 2019 decreased by $1.6 million, or 27%, to $4.3 million compared to $5.8 million in Q2 2018 [140]. - The provision for loan losses contributed to the decrease in net income for both periods [140]. - Net cash used by operating activities was $17.8 million for the first half of 2019 [181]. Revenue and Income - Total revenue for Q2 2019 increased by 10% to $25.5 million compared to $23.3 million in Q2 2018, driven by a 6% increase in net interest income [133]. - The Company experienced a year-over-year increase in net interest income of 9% for the first half of 2019 compared to the same period in 2018 [133]. - Net interest income for Q2 2019 increased by $968,000, or 6%, to $16.0 million compared to $15.0 million in Q2 2018 [141]. - Net interest income for the first half of 2019 increased by $2.5 million, or 8%, to $31.7 million compared to $29.3 million in the first half of 2018 [141]. - Other operating income for the first half of 2019 increased by $1.3 million, or 8%, to $17.1 million, driven by gains on marketable equity securities and interest rate swap income [153]. Asset Quality - Nonperforming assets increased by $1.3 million, or 6%, to $23.9 million as of June 30, 2019, compared to $22.6 million at December 31, 2018 [135]. - The Company identified potential problem loans of $10.1 million as of June 30, 2019, down from $17.1 million at December 31, 2018, indicating improved credit quality [137]. - Nonaccrual loans averaged $18.5 million in Q2 2019 compared to $17.5 million in Q2 2018 [144]. - The allowance for loan losses was $20.518 million at the end of the period on June 30, 2019, compared to $20.108 million at the end of the same period in 2018 [170]. Loans and Deposits - Total loans increased by $31.4 million, or 3%, to $1.016 billion at June 30, 2019, primarily due to increased commercial loans [160]. - Total loans increased to $1.015 billion as of June 30, 2019, up from $984 million as of December 31, 2018, representing a growth of approximately 3.2% [161]. - Total deposits rose by $60.1 million, or 5%, to $1.288 billion as of June 30, 2019, compared to $1.228 billion as of December 31, 2018 [171]. - Demand deposits accounted for 34% of total deposits at both June 30, 2019, and December 31, 2018, while interest-bearing demand deposits increased to 22% from 20% [171]. Capital and Commitments - The Company met all applicable capital adequacy requirements for a "well-capitalized" institution, with total risk-based capital at 16.28% as of June 30, 2019 [185][187]. - The Company had commitments to extend credit and provide letters of credit amounting to $249.8 million as of June 30, 2019 [188]. - The Company had commitments to originate loans held for sale of $107.3 million as of June 30, 2019 [188]. - Funds available for borrowing under existing lines of credit were $760.4 million as of June 30, 2019 [182]. Stock Repurchase - The Company repurchased 149,373 shares of common stock in Q2 2019 at an average price of $34.79, with 192,193 shares remaining under the repurchase authorization [133]. - The Company repurchased 155,483 shares of its common stock under the repurchase program in the first six months of 2019 [184]. Economic Indicators - Alaska's per capita income rose by 4.4% to $59,687 in 2018, with total income increasing to $44 billion from $42.3 billion in 2017 [130]. - The seasonally adjusted unemployment rate in Alaska was reported at 6.4% in May 2019, showing a slight improvement from 6.5% over the previous nine months [128]. - Alaska's real gross state product (GSP) was $54.9 billion in Q4 2018, showing a recovery with growth rates of 1.7%, 2.9%, and 4.9% in the second, third, and fourth quarters respectively [129].

Financial Performance - The Company reported net income of $4.3 million and diluted earnings per share of $0.62 for Q1 2019, compared to $4.1 million and $0.58 for Q1 2018, reflecting a 4.9% increase in net income [127]. - Total revenue for Q1 2019 increased by 7% to $23.3 million from $21.7 million in Q1 2018 [128]. - Net income attributable to the Company for Q1 2019 increased by $250,000, or 6%, to $4.3 million compared to $4.1 million in Q1 2018 [135]. - Other operating income for Q1 2019 increased by $71,000, or 1%, to $7.5 million, driven by a $534,000 gain on marketable securities [142]. - Other operating expenses rose by $285,000, or 2%, to $17.1 million, primarily due to a $717,000 increase in salaries and personnel expenses [144]. - The provision for income taxes increased by $292,000, or 34%, in Q1 2019, with an effective tax rate rising to 21% from 18% in the same period of 2018 [145]. Interest Income and Loans - Net interest income rose by 11% to $15.8 million in Q1 2019, driven by higher yields on loans and investments [128]. - The net interest margin improved to 4.83% in Q1 2019, up from 4.28% in Q1 2018 [128]. - Net interest income for Q1 2019 rose by $1.5 million, or 11%, to $15.8 million, with a net interest margin increase of 55 basis points to 4.83% [136]. - Total loans remained essentially unchanged at $982.3 million as of March 31, 2019, compared to $984.3 million at December 31, 2018, with a decrease in real estate term loans [149]. - Loan production decreased to $92.4 million in Q1 2019 from $109.1 million in Q1 2018, primarily due to rising interest rates and low housing inventory levels [142]. Asset Quality - Nonperforming assets increased by $2.9 million, or 13%, to $25.5 million as of March 31, 2019, compared to $22.6 million at December 31, 2018 [130]. - Potential problem loans decreased to $9.6 million as of March 31, 2019, down from $17.1 million at December 31, 2018 [132]. - The provision for loan losses was $750,000 in Q1 2019, attributed to an increase in nonperforming loans and large borrower concentration [140]. - The ratio of the Allowance to total nonperforming loans, net of government guarantees, was 109% at March 31, 2019, compared to 110% at March 31, 2018 [140]. - The Allowance for Loan Losses increased to $20.2 million as of March 31, 2019, from $19.5 million at the beginning of the period [157]. Deposits and Funding - The Company’s total deposits remained stable at $1.228 billion as of March 31, 2019, compared to $1.228 billion as of December 31, 2018 [158]. - Demand deposits accounted for 34% of total deposits at both March 31, 2019, and December 31, 2018 [158]. - The Company’s certificates of deposit increased to $121.2 million as of March 31, 2019, compared to $113.3 million as of December 31, 2018 [160]. - 50% of the Company’s certificates of deposit are scheduled to mature over the next 12 months as of March 31, 2019 [160]. - The Company had outstanding advances of $7.2 million from the Federal Home Loan Bank as of March 31, 2019 [161]. Capital and Commitments - The Company met all applicable capital adequacy requirements for a "well-capitalized" institution, with total risk-based capital at 16.86% as of March 31, 2019 [174]. - The Company had capital commitments of approximately $624,000 at March 31, 2019, with $503,000 allocated for a new branch in Soldotna, Alaska [176]. - The Company’s commitments to extend credit and provide letters of credit not reflected on its balance sheet amounted to $253.0 million as of March 31, 2019 [175]. - Funds available for borrowing under existing lines of credit were $742.4 million as of March 31, 2019 [169]. Market and Economic Conditions - Alaska's tourism industry generated $4.5 billion in economic output in 2017, with a projected growth of 16% in cruise passengers for 2019 [123]. - Oil production is expected to generate over $2.1 billion in unrestricted state revenue for FY 2019, up from $1.9 billion in FY 2018 [125]. - The average seasonally adjusted unemployment rate in Alaska was stable at 6.5% through February 2019, indicating modest job growth [122].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) þ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2018 o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from_____to____ Commission File Number 000-33501 NORTHRIM BANCORP, INC. (Exact name of registrant as specified in its charter) Alaska 92-0175752 (State or other jurisdiction ...