Financial Performance - The Company reported net income of $7.2 million and diluted earnings per share of $1.20 for Q1 2022, down from $12.2 million and $1.94 in Q1 2021, primarily due to decreased production in the Home Mortgage Lending segment [127]. - Total revenue decreased 15% to $30.1 million in Q1 2022 from $35.4 million in Q1 2021, mainly due to a $6.6 million decrease in mortgage banking income [130]. - Net income for the first quarter of 2022 decreased by $5.0 million to $7.2 million compared to $12.2 million for the same period in 2021 [138]. - Other operating income decreased by $5.1 million, or 32%, to $10.8 million, primarily due to a $6.6 million decrease in mortgage banking income [149]. Interest Income and Expenses - Net interest income for Q1 2022 was $19.3 million, a 1% decrease from $19.5 million in Q1 2021, while net interest income excluding PPP increased 11% to $17.0 million [130]. - Net interest margin decreased by 72 basis points to 3.18% in the first quarter of 2022 compared to 3.90% in the first quarter of 2021 [140]. - Total interest income decreased by $538,000, with a $1,470,000 decrease due to volume and a $932,000 increase due to rate changes [147]. - Interest income from interest-bearing deposits in other banks increased by 346% to $242,000 compared to $38,000 in the same period last year [145]. Loan and Deposit Activity - Loans totaled $1.38 billion at March 31, 2022, down 3% from December 31, 2021, with core portfolio loans excluding PPP increasing 1% to $1.31 billion [130]. - Total loans decreased by $36.5 million, or 2.6%, to $1.377 billion as of March 31, 2022, from $1.414 billion at December 31, 2021, primarily due to decreased SBA PPP loans [154]. - Total deposits decreased by $78.6 million, or 3%, to $2.343 billion as of March 31, 2022, from $2.422 billion at December 31, 2021 [160]. - Demand deposits represented 35% of total deposits at March 31, 2022, down from 37% at December 31, 2021 [160]. Capital and Regulatory Ratios - The capital ratios of the Company and Northrim Bank were well above all regulatory requirements as of March 31, 2022 [130]. - As of March 31, 2022, the Company maintained a total risk-based capital ratio of 14.37%, exceeding the minimum required of 8.00% [174]. - The Tier 1 risk-based capital ratio was reported at 13.64%, above the required minimum of 6.00% [174]. - The Company’s leverage ratio stood at 9.00%, surpassing the minimum requirement of 4.00% [174]. Stock Repurchase and Shareholder Returns - The Company repurchased 133,105 shares of common stock at an average price of $44.50 per share during Q1 2022, with 200,619 shares remaining for repurchase [130]. - The Company repurchased 133,105 shares of its common stock in the first three months of 2022 under its repurchase program [171]. Loan Forgiveness and Modifications - As of March 31, 2022, 99% of PPP round one and 74% of PPP round two loans have been forgiven, totaling $548.3 million [131]. - The total outstanding principal balance of loan modifications due to COVID-19 was $45.1 million as of March 31, 2022, with 81% scheduled to return to normal payments by the end of Q2 2022 [132]. - The company received $56.9 million in loan forgiveness through the SBA in the first quarter of 2022, down from $105.0 million in the same period of 2021 [141]. Asset Quality - Nonperforming assets decreased by 13%, or $2.0 million, to $13.1 million as of March 31, 2022, compared to $15.0 million at December 31, 2021 [133]. - Nonperforming loans, net of government guarantees, decreased by $2.0 million, or 18%, to $8.7 million as of March 31, 2022, from $10.7 million as of December 31, 2021 [135]. - Potential problem loans decreased to $1.7 million as of March 31, 2022, from $2.1 million at December 31, 2021 [136]. - The Company had $10.0 million in troubled debt restructurings (TDRs) at March 31, 2022, compared to $7.3 million at December 31, 2021 [137]. Cash and Liquid Assets - As of March 31, 2022, the Company had cash and cash equivalents of $532.8 million, representing 20% of total assets, down from $645.8 million or 24% as of December 31, 2021 [168]. - Liquid assets totaled $787.0 million, with available borrowing under existing lines of credit at $1.233 billion as of March 31, 2022 [169]. Economic Indicators - Alaska's Gross State Product (GSP) for Q4 2021 was $58 billion, reflecting a 3% increase, with an overall annual growth of 0.3% in 2021 [120].

Financial Performance - Net income attributable to the Company increased 14% to $37.5 million or $6.00 per diluted share for the year ended December 31, 2021, compared to $32.9 million or $5.11 per diluted share for the year ended December 31, 2020[192]. - Net income in the Community Banking segment increased 74% or $11.6 million to $27.2 million in 2021, primarily due to a $7.3 million increase in interest and fee income on PPP loans[193]. - Net income in the Home Mortgage Lending segment decreased 40% or $7.0 million to $10.3 million in 2021, primarily due to a decrease in production volume to $1.118 billion from $1.295 billion in 2020[193]. - Net income for 2021 was $37.5 million, an increase from $32.9 million in 2020, with diluted earnings per share rising to $6.00 from $5.11[212]. Interest Income and Margin - Interest and fee income on PPP loans rose to $15.4 million in 2021 from $8.1 million in 2020, with $426.3 million in PPP loans forgiven in 2021 compared to $65.1 million in 2020[193]. - The net interest margin decreased to 3.58% in 2021 from 4.02% in 2020, attributed to lower average yields on interest-earning assets[198]. - Net interest income for 2021 was $80.83 million, an increase from $70.67 million in 2020, reflecting a growth of approximately 15.3%[209]. - Net interest income increased to $80.8 million in 2021 from $70.7 million in 2020, primarily due to a $7.3 million rise in interest and fee income on PPP loans[214]. - Interest income on PPP loans was $2.9 million in 2021, up from $2.5 million in 2020, while loan fee income on PPP loans surged to $12.5 million from $5.6 million[214]. Credit Losses and Provisions - The provision for credit losses decreased to a benefit of $4.1 million in 2021 from a provision of $2.4 million in 2020, reflecting improved economic assumptions[193]. - The provision for credit loss expense in 2021 was a reversal of $4.1 million, compared to an expense of $2.4 million in 2020, reflecting improved economic assumptions[219]. - The allowance for credit losses totaled 0.83% of total portfolio loans at December 31, 2021, compared to 1.46% at December 31, 2020[193]. - The allowance for credit losses (ACL) was $11.7 million, or 0.83% of portfolio loans, as of December 31, 2021, reflecting the current credit quality and economic conditions[249]. Shareholder Equity and Dividends - The aggregate cash dividends paid by the Company in 2021 rose 6% to $9.4 million from $8.8 million in 2020[198]. - Total shareholders' equity rose to $237.82 million in 2021 from $221.58 million in 2020, marking a growth of 7.3%[207]. - Tangible book value per share increased to $36.88 in 2021 from $32.88 in 2020, reflecting a growth of 12.2%[207]. Operational Efficiency - The efficiency ratio improved to 66.99% in 2021 from 66.47% in 2020, indicating enhanced operational efficiency[210]. - Return on average assets decreased to 1.54% in 2021 from 1.70% in 2020, while return on average equity slightly increased to 15.68% from 15.53%[208]. Loan and Deposit Growth - Total loans amounted to $1,413,886 thousand as of December 31, 2021, reflecting an 8% growth rate over five years[238]. - Loans excluding PPP loans reached $1,295,657 thousand, with a 14% year-over-year increase[238]. - Total deposits increased by 33% to $2.4 billion at December 31, 2021, up from $1.8 billion at December 31, 2020, largely due to funding PPP loans and new client relationships[254]. - Average total deposits for 2021 were $2,125.1 million, compared to $1,638.2 million in 2020[256]. Investment and Liquidity - Investment securities increased by 71% to $455.1 million in 2021 from $266.7 million in 2020, reflecting a strategy to maintain liquidity and mitigate risks[230]. - As of December 31, 2021, the Company had cash and cash equivalents of $645.8 million, representing 24% of total assets, up from $116.0 million (6% of total assets) as of December 31, 2020[265]. - The Company has liquid assets totaling $907.9 million and available borrowing capacity of $1.27 billion as of December 31, 2021[267]. Interest Rate Risk - The company is exposed to interest rate risk, with key sources including re-pricing risk, basis risk, yield curve risk, and option risk[295][296][297]. - The estimated impact on net interest income for a 400 basis points increase in interest rates is $22,226, representing a 31.06% change in the first year[307]. - A 100 basis points increase in interest rates is anticipated to result in a net interest income change of $5,590, or 7.81% in the first year[307]. Other Operating Income and Expenses - Other operating income decreased by 17% to $52.3 million in 2021 from $63.3 million in 2020, with mortgage banking income being the largest component at 81% of total other operating income[221][223]. - Total other operating expenses increased by less than 1% to $89.2 million in 2021, with significant increases in data processing (12%), occupancy (7%), and insurance expenses (30%)[226][227].

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 September 30, 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 jur ...

Economic Performance - Alaska's real Gross State Product (GSP) was $52.1 billion in 2020, a decrease of 4.9% from $54.7 billion in 2019[163]. - Alaska's personal income for 2020 was $47.4 billion, a 3.1% increase from $46 billion in 2019, while U.S. personal income increased by 6.1%[164]. - The Alaska economy began to recover in Q4 2020, with GSP growth continuing at an annualized rate of 5.4% in Q1 2021[161]. Employment and Job Market - Total payroll jobs in Alaska grew by 16,500 from May 2020, representing a 5.7% improvement over the prior 12 months[162]. - The Oil and Gas sector saw a decline of 1,400 jobs to 6,100 in May 2021, marking the only major sector with fewer jobs than in May 2020[162]. Real Estate Market - The average sales price of a single-family home in Anchorage rose by 5.9% in 2020 to $396,779, with a further increase of 8% in the first six months of 2021 compared to the 2020 average[169]. - In 2020, home sales in Anchorage increased by 19.5% to 3,250 units sold, while Matanuska Susitna Borough saw a 9.7% increase to 2,135 units sold[170][171]. Mortgage and Foreclosure Trends - The foreclosure rate in Alaska improved from 0.63% at the end of 2019 to 0.45% at the end of 2020, with a further decline to 0.41% in Q1 2021[167]. - The percentage of delinquent mortgage loans in Alaska increased from 2.9% at the end of 2019 to 6.2% at the end of 2020, but improved to 5.4% in Q1 2021[168]. Financial Performance - As of June 30, 2021, the company reported net income of $8.3 million and diluted earnings per share of $1.33 for Q2 2021, compared to $9.9 million and $1.52 for Q2 2020[177]. - Total revenue for Q2 2021 decreased by 5% to $33.3 million, primarily due to a $3.9 million decrease in mortgage banking income[178]. - Net income for Q2 2021 decreased by $1.6 million to $8.3 million compared to $9.9 million in Q2 2020, primarily due to a $2.3 million decrease in the Home Mortgage Lending segment[182]. - For the first six months of 2021, net income increased by $9.6 million to $20.5 million compared to $10.9 million in the same period of 2020, driven by a $7.0 million increase in the Community Banking segment[183]. Loan and Deposit Trends - Average loans increased by 15% to $1.54 billion in Q2 2021 compared to $1.34 billion in Q2 2020[185]. - Total deposits increased by $321.5 million, or 18%, to $2.146 billion as of June 30, 2021, driven by funding PPP loans and new customer relationships[205]. - Demand deposits rose to $798.2 million, representing 37% of total deposits as of June 30, 2021, up from 35% at December 31, 2020[205]. Government Assistance and PPP Loans - The company funded nearly 5,800 PPP loans totaling $612.6 million, with 745 loans totaling $33 million originated in Q2 2021[176]. - The company received $133.0 million and $238 million in loan forgiveness through the SBA during the three and six-month periods ending June 30, 2021, respectively[184]. Capital and Credit Quality - The total risk-based capital ratio for the Company as of June 30, 2021, was 15.45%, exceeding the minimum requirement of 8.00%[219]. - The Company’s Tier 1 risk-based capital ratio was 14.54% as of June 30, 2021, above the required 6.00%[219]. - The allowance for credit losses (ACL) related to loans with exposure to directly impacted industries was estimated at $4.1 million as of June 30, 2021[203]. Cash Flow and Investments - Net cash provided by operating activities for the first six months of 2021 was $68.5 million, primarily from loan sales[213]. - Net cash used by investing activities during the same period was $152.0 million, mainly due to purchases of available-for-sale securities[213]. - Portfolio investments increased by 38%, or $100.1 million, to $366.8 million as of June 30, 2021, from $266.7 million at December 31, 2020[196].

Economic Performance - In 2020, Alaska's Gross State Product (GSP) was $52.1 billion, a decline of 4.9% from $54.7 billion in 2019, with the U.S. GDP declining by 3.5%[162]. - The unemployment rate in Alaska saw a 7% reduction in total payroll jobs, equating to a loss of 22,300 jobs compared to February 2020, with the leisure and hospitality sector down 23% year over year[161]. - Alaska's personal income for 2020 was $47.4 billion, an increase of 3.1% from $46 billion in 2019, while U.S. personal income rose by 6.1%[163]. - The average price of Alaska North Slope crude oil fell to a low of $16.54 per barrel in April 2020 but stabilized to an average of $55.56 in January 2021[166]. - Alaska's crude oil production averaged 485,300 barrels per day in FY 2020, a decrease of 4.8% from the previous fiscal year, with a forecasted increase to 488,900 bpd in FY 2021[167]. - The foreclosure rate in Alaska was 0.45% at the end of 2020, an improvement from 0.63% at the end of 2019, compared to a national average of 0.56%[168]. - Government transfer payments in Alaska rose by 24.2% or $1.9 billion over 2019 levels, significantly contributing to personal income growth[164]. Company Financial Performance - The company reported net income of $12.2 million and diluted earnings per share of $1.94 for Q1 2021, a significant increase from $1.0 million and $0.16 in Q1 2020[177]. - Total revenue for Q1 2021 increased by 60% to $35.4 million, up from $22.1 million in the same period last year, primarily driven by a $9.0 million increase in mortgage banking income[180]. - Net income for Q1 2021 increased by $11.1 million to $12.2 million compared to $1.0 million in Q1 2020[184]. - Net interest income rose by $3.8 million, or 24%, to $19.5 million in Q1 2021 from $15.7 million in Q1 2020[185]. - Other operating income increased by $9.5 million, or 147%, to $15.9 million in Q1 2021 compared to $6.4 million in Q1 2020, driven by a $9.0 million increase in mortgage banking income[191]. - Other operating expenses rose by $2.5 million, or 14%, to $21.3 million in Q1 2021, primarily due to higher salaries and personnel expenses[192]. - The provision for income taxes increased by $3.1 million, or 1,286%, in Q1 2021 compared to Q1 2020, with an effective tax rate of 22%[193]. Credit and Loan Performance - Nonperforming assets increased by $3.2 million, or 20%, to $19.5 million as of March 31, 2021, compared to $16.3 million at December 31, 2020[179]. - The company recorded a benefit for credit losses of $1.5 million for Q1 2021, compared to a provision of $2.1 million in Q1 2020[180]. - Total credit loss expense decreased to ($1.5 million) in Q1 2021 from $2.1 million in Q1 2020, reflecting improved economic assumptions[190]. - Total loans increased by $104.9 million, or 7%, to $1.549 billion as of March 31, 2021, from $1.444 billion at December 31, 2020, primarily due to increased commercial loans from SBA PPP participation[196]. - The company estimates that $64.7 million, or approximately 4% of loans, had direct exposure to the oil and gas industry as of March 31, 2021, compared to $65.1 million, or approximately 4%, as of December 31, 2020[198]. - The company’s exposure to the tourism sector was $80.0 million, or 5% of portfolio loans, as of March 31, 2021[199]. - The company’s total charge-offs for the three months ended March 31, 2021, were $163,000, while recoveries were $207,000, resulting in net recoveries of $(44,000)[201]. Capital and Funding - The capital ratios of the company were well in excess of all regulatory requirements as of March 31, 2021[177]. - Total risk-based capital ratio was 15.50% and Tier 1 risk-based capital ratio was 14.55% as of March 31, 2021, exceeding regulatory requirements[216]. - The allowance for credit losses (ACL) decreased to $14.764 million as of March 31, 2021, from $21.017 million as of March 31, 2020[201]. - The company had total unfunded commitments to fund loans and letters of credit of $375.7 million as of March 31, 2021[209]. - The company had outstanding advances of $14.7 million from the Federal Home Loan Bank as of March 31, 2021, used to match fund low-income housing projects[204]. - The company's commitments to extend credit and provide letters of credit amounted to $375.7 million as of March 31, 2021[217]. - Commitments to originate loans held for sale were $181.4 million as of March 31, 2021[217]. Cash Flow and Investments - Net cash provided by operating activities was $44.6 million for the first three months of 2021, primarily from loan sales[210]. - Net cash used by investing activities was $178.7 million, mainly due to increases in loans, particularly PPP loans[210]. - Net cash provided by financing activities was $221.8 million, largely due to increases in deposits from funding PPP loans[210]. - As of March 31, 2021, the company had $1.116 billion available for borrowing under existing lines of credit[211]. - The company had $349.9 million in PPP loans eligible for the PPPLF program as of March 31, 2021[211]. Market and Risk Disclosures - The Company implemented ASU 2016-13, which updated the Allowance for Credit Losses Policy, reflecting a shift in credit loss estimation methodology[152]. - The Company anticipates potential impacts from COVID-19 on credit quality and business operations, highlighting the inherent uncertainties in forward-looking statements[151]. - The company’s critical accounting policies include the valuation of goodwill and other intangible assets, with no material changes in valuation techniques during 2021[152]. - There were no material changes in market risk disclosures from the previous annual report as of March 31, 2021[219]. - The company's mix of deposits includes 91% in transaction accounts as of March 31, 2021, contributing to a low cost of funds[202]. - Capital commitments related to branch remodel and relocation in Anchorage are considered immaterial[218].

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].