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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, 2022
   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 of incorporation or organization)
 (I.R.S. Employer Identification No.)
3111 C Street
Anchorage, Alaska 99503
(Address of principal executive offices)    (Zip Code) 

(907) 562-0062

(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
TITLE OF EACH CLASSTRADING SYMBOLNAME OF EXCHANGE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   
ý Yes  ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
ý Yes  ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:  
Large Accelerated Filer ¨  Accelerated Filer ý    Non-accelerated Filer ¨
Smaller Reporting Company Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      
Yes  ý No

The number of shares of the issuer’s Common Stock, par value $1 per share, outstanding at May 6, 2022 was 5,816,565.



TABLE OF CONTENTS
   
Part  IFINANCIAL INFORMATION 
Item 1.Financial Statements (unaudited)
Item 2.
Item 3.
Item 4.
Part IIOTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

1


PART I. FINANCIAL INFORMATION
These consolidated financial statements should be read in conjunction with the consolidated financial statements, accompanying notes and other relevant information included in Northrim BanCorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 1. FINANCIAL STATEMENTS
2


CONSOLIDATED FINANCIAL STATEMENTS
NORTHRIM BANCORP, INC.
Consolidated Balance Sheets
(Unaudited)
 March 31,
2022
December 31,
2021
(In Thousands, Except Share Data)
ASSETS  
Cash and due from banks$19,326 $20,805 
Interest bearing deposits in other banks513,482 625,022 
Investment securities available for sale, at fair value488,347 426,684 
Marketable equity securities7,997 8,420 
Investment securities held to maturity, at amortized cost24,750 20,000 
Investment in Federal Home Loan Bank stock3,828 3,107 
Loans held for sale49,980 73,650 
Loans1,377,387 1,413,886 
Allowance for credit losses, loans(11,310)(11,739)
Net loans1,366,077 1,402,147 
Purchased receivables, net8,552 6,987 
Mortgage servicing rights, at fair value15,422 13,724 
Other real estate owned, net5,638 5,638 
Premises and equipment, net37,416 37,164 
Operating lease right-of-use assets10,432 11,001 
Goodwill15,017 15,017 
Other intangible assets, net986 992 
Other assets58,910 54,361 
Total assets$2,626,160 $2,724,719 
LIABILITIES  
Deposits:  
Demand$812,545 $887,824 
Interest-bearing demand674,393 692,683 
Savings351,681 348,164 
Money market329,261 314,996 
Certificates of deposit less than $250,00099,556 100,851 
Certificates of deposit $250,000 and greater75,630 77,113 
Total deposits2,343,066 2,421,631 
Borrowings14,404 14,508 
Junior subordinated debentures10,310 10,310 
Operating lease liabilities10,402 10,965 
Other liabilities22,146 29,488 
Total liabilities2,400,328 2,486,902 
SHAREHOLDERS' EQUITY  
Preferred stock, $1 par value, 2,500,000 shares authorized, none issued or outstanding
  
Common stock, $1 par value, 10,000,000 shares authorized, 5,881,708 and 6,014,813 issued and outstanding at March 31, 2022 and December 31, 2021, respectively
5,882 6,015 
Additional paid-in capital25,559 31,162 
Retained earnings208,801 204,046 
Accumulated other comprehensive loss, net of tax(14,410)(3,406)
Total shareholders' equity225,832 237,817 
Total liabilities and shareholders' equity$2,626,160 $2,724,719 
See notes to consolidated financial statements
3


NORTHRIM BANCORP, INC.
Consolidated Statements of Income
(Unaudited)
Three Months Ended
March 31,
(In Thousands, Except Per Share Data)20222021
Interest and Dividend Income
Interest and fees on loans and loans held for sale$18,268 $19,424 
Interest on investment securities available for sale1,135 778 
Dividends on marketable equity securities112 87 
Interest on investment securities held to maturity273 246 
Dividends on Federal Home Loan Bank stock28 23 
Interest on deposits in other banks242 38 
Total Interest and Dividend Income20,058 20,596 
Interest Expense
Interest expense on deposits575 949 
Interest expense on borrowings86 60 
Interest expense on junior subordinated debentures93 94 
Total Interest Expense754 1,103 
Net Interest Income19,304 19,493 
(Benefit) provision for credit losses(150)(1,488)
Net Interest Income After (Benefit) Provision for Credit Losses19,454 20,981 
Other Operating Income
Mortgage banking income6,982 13,622 
Keyman life insurance proceeds2,002  
Bankcard fees804 740 
Purchased receivable income402 532 
Service charges on deposit accounts374 290 
Unrealized (loss) on marketable equity securities(422)(84)
Other income681 796 
Total Other Operating Income10,823 15,896 
Other Operating Expense
Salaries and other personnel expense14,106 14,728 
Data processing expense1,992 2,035 
Occupancy expense1,726 1,660 
Professional and outside services722 624 
Insurance expense566 314 
Marketing expense425 404 
Intangible asset amortization expense6 9 
OREO (income) expense, net rental income and gains on sale(12)(36)
Other operating expense1,570 1,589 
Total Other Operating Expense21,101 21,327 
Income Before Provision for Income Taxes9,176 15,550 
Provision for income taxes1,950 3,369 
Net Income $7,226 $12,181 
Earnings Per Share, Basic$1.22 $1.96 
Earnings Per Share, Diluted$1.20 $1.94 
Weighted Average Shares Outstanding, Basic5,938,037 6,219,871 
Weighted Average Shares Outstanding, Diluted5,997,351 6,277,177 
See notes to consolidated financial statements
4


NORTHRIM BANCORP, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)
2010
Three Months Ended March 31,
(In Thousands)20222021
Net income$7,226 $12,181 
Other comprehensive income (loss), net of tax:  
   Securities available for sale:  
         Unrealized holding (losses) arising during the period($16,302)($1,518)
Derivatives and hedging activities:
     Unrealized holding gains arising during the period927 1,260 
Income tax benefit related to unrealized gains and losses4,371 77 
Other comprehensive (loss), net of tax(11,004)(181)
Comprehensive (loss) income($3,778)$12,000 
 
See notes to consolidated financial statements

5


NORTHRIM BANCORP, INC.
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
 Common StockAdditional Paid-in Capital Retained EarningsAccumulated Other Comprehensive Income (Loss), net of Tax Total
 Number of SharesPar Value
(In Thousands)
Balance as of January 1, 20216,251 $6,251 $41,808 $173,498 $18 $221,575 
Cash dividend on common stock ($0.37 per share)
— — — (2,313)— (2,313)
Stock-based compensation expense— — 280 — — 280 
Exercise of stock options and vesting of restricted stock units, net17 17 (295)— — (278)
Repurchase of common stock(61)(61)(2,151)— — (2,212)
Other comprehensive income, net of tax— — — — (181)(181)
Cumulative effect of adoption of ASU 2016-13— — — 2,400 — 2,400 
Net income— — — 12,181 — 12,181 
Balance as of March 31, 20216,207 $6,207 $39,642 $185,766 ($163)$231,452 
Cash dividend on common stock ($0.37 per share)
— — — (2,320)— (2,320)
Stock-based compensation expense— — 229 — — 229 
Other comprehensive income, net of tax— — — — (488)(488)
Net income— — — 8,345 — 8,345 
Balance as of June 30, 20216,207 $6,207 $39,871 $191,791 ($651)$237,218 
Cash dividend on common stock ($0.38 per share)
— — — (2,384)— (2,384)
Stock-based compensation expense— — 232 — — 232 
Repurchase of common stock(30)(30)(1,174)— — (1,204)
Other comprehensive loss, net of tax— — — — (265)(265)
Net income— — — 8,877 — 8,877 
Balance as of September 30, 20216,177 $6,177 $38,929 $198,284 ($916)$242,474 
Cash dividend on common stock ($0.38 per share)
— — — (2,352)— (2,352)
Stock-based compensation expense— — 332 — — 332 
Exercise of stock options and vesting of restricted stock units, net26 26 (169)— — (143)
Repurchase of common stock(188)(188)(7,930)— — (8,118)
Other comprehensive income, net of tax— — — — (2,490)(2,490)
Net income— — — 8,114 — 8,114 
Balance as of December 31, 20216,015 $6,015 $31,162 $204,046 ($3,406)$237,817 
 See notes to consolidated financial statements





6


NORTHRIM BANCORP, INC.
Consolidated Statements of Changes in Shareholders’ Equity
(Continued)
(Unaudited)
 Common StockAdditional Paid-in Capital Retained EarningsAccumulated Other Comprehensive Income (Loss), net of Tax Total
 Number of SharesPar Value
(In Thousands)
Balance as of January 1, 20226,015 $6,015 $31,162 $204,046 ($3,406)$237,817 
Cash dividend on common stock ($0.41 per share)
— — — (2,471)— (2,471)
Stock-based compensation expense— — 187 — — 187 
Repurchase of common stock(133)(133)(5,790)— — (5,923)
Other comprehensive loss, net of tax— — — — (11,004)(11,004)
Net income— — — 7,226 — 7,226 
Balance as of March 31, 20225,882 $5,882 $25,559 $208,801 ($14,410)$225,832 
See notes to consolidated financial statements
7


NORTHRIM BANCORP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
(In Thousands)20222021
Operating Activities:  
Net income$7,226 $12,181 
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:  
Depreciation and amortization of premises and equipment798 789 
Amortization of software293 284 
Intangible asset amortization6 9 
Amortization of investment security premium, net of discount accretion174 73 
Unrealized loss on marketable equity securities422 84 
Deferred tax (benefit) expense 958 
Stock-based compensation187 280 
Deferred loan fees and amortization, net of costs(2,162)6,042 
(Benefit) for credit losses(150)(1,488)
Additions to home mortgage servicing rights carried at fair value(987)(1,448)
Change in fair value of home mortgage servicing rights carried at fair value(711)1,009 
Change in fair value of commercial servicing rights carried at fair value134 23 
Gain on sale of loans(3,921)(11,795)
Proceeds from the sale of loans held for sale171,166 342,808 
Origination of loans held for sale(143,575)(300,963)
Gain on sale of other real estate owned (31)
Proceeds from keyman life insurance(2,002) 
Net changes in assets and liabilities:  
(Increase) in accrued interest receivable(319)(264)
Decrease in other assets1,149 2,718 
(Decrease) in other liabilities(7,883)(6,686)
Net Cash Provided (Used) by Operating Activities19,845 44,583 
Investing Activities:  
Investment in securities:  
Purchases of investment securities available for sale(78,139)(104,220)
Purchases of marketable equity securities (505)
Purchases of FHLB stock(726)(569)
Purchases of investment securities held to maturity(4,750)(10,000)
Proceeds from sales/calls/maturities of securities available for sale 46,442 
Proceeds from redemption of FHLB stock5 4 
(Increase) decrease in purchased receivables, net(1,565)2,104 
Decrease (increase) in loans, net38,399 (111,146)
Proceeds from sale of other real estate owned 31 
 Proceeds from keyman life insurance2,002  
Purchases of software (9)
Purchases of premises and equipment(1,050)(858)
Net Cash (Used) by Investing Activities(45,824)(178,726)
Financing Activities:  
(Decrease) increase in deposits(78,565)226,336 
(Decrease) in borrowings(104)(68)
Repurchase of common stock(5,923)(2,212)
Proceeds from the issuance of common stock 5 
Cash dividends paid(2,448)(2,293)
Net Cash (Used) Provided by Financing Activities(87,040)221,768 
Net Change in Cash and Cash Equivalents(113,019)87,625 
Cash and Cash Equivalents at Beginning of Period645,827 115,965 
Cash and Cash Equivalents at End of Period$532,808 $203,590 
8


Supplemental Information:  
Interest paid$726 $1,105 
Transfer of loans to other real estate owned$ $274 
Non-cash lease liability arising from obtaining right of use assets$ $79 
Cash dividends declared but not paid$23 $20 
Cumulative effect adjustment to retained earnings$ $2,400 
 
See notes to consolidated financial statements
9


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies
The accompanying unaudited consolidated financial statements and corresponding footnotes have been prepared by Northrim BanCorp, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended. The year-end Consolidated Balance Sheet data was derived from the Company's audited financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Company owns a 100% interest in Residential Mortgage Holding Company, LLC, the parent company of Residential Mortgage, LLC (collectively "RML") and consolidates their balance sheets and income statement into its financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Company determined that it operates in two primary operating segments: Community Banking and Home Mortgage Lending. The Company has evaluated subsequent events and transactions for potential recognition or disclosure. Operating results for the interim period ended March 31, 2022 are not necessarily indicative of the results anticipated for the year ending December 31, 2022. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The Company’s significant accounting policies are discussed in Note 1 to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes in our application of these accounting policies in 2022.
Reclassification of Prior Period Presentation
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or total shareholders' equity.
Recent Accounting Pronouncements
Accounting pronouncements to be implemented in future periods    
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Report of Financial Reporting ("ASU 2020-04"). ASU 2020-04 was issued to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. The last expedient is a one-time election to sell or transfer debt securities classified as held to maturity. The expedients are in effect from March 12, 2020, through December 31, 2022. The Company will be able to use the expedients in this guidance to manage through the transition away from LIBOR, specifically for our loan portfolio, derivative contracts, and bond portfolio.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, ("ASU 2021-01"). The amendments in ASU 2021-01 are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments clarify certain optional expedients and exceptions in Topic 848 for contract modifications apply to derivatives that are affected by the discounting transition.
10



LIBOR is a widely-referenced benchmark rate, which is published in five currencies and a range of tenors, and seeks to estimate the cost at which banks can borrow on an unsecured basis from other banks. The administrator of LIBOR, ICE Benchmark Administration, ceased the publication of one-week and two-month LIBOR, as well as all non-US Dollar LIBOR tenors as of January 1, 2022. 1-month, 3-month, 6-month, and 12-month US Dollar LIBOR will continue to be published through and will remain available for use in legacy contracts or as otherwise enumerated by financial regulators until June 30, 2023. The Company has some assets and liabilities referenced to 1-month, 3-month, and 12-month US Dollar LIBOR, such as commercial loans, derivatives, debt securities, and junior subordinated debentures. As of March 31, 2022, we had approximately $180.5 million of assets, including $102.4 million in commercial loans and $78.1 million in debt securities, and $10.0 million of liabilities in the form of our junior subordinated debentures linked to USD LIBOR. These amounts exclude derivative assets and liabilities on our consolidated balance sheet. As of March 31, 2022, the notional amount of our USD LIBOR-linked interest rate derivative contracts was $151.6 million. Of this amount, $70.8 million in notional value represent commercial loan interest rate swap agreements with commercial banking customers. An additional $70.8 million in notional value represent corresponding swap agreements with third party financial institutions that offset the commercial loan swaps. Swap agreements with third party institutions are $80.8 million, including an interest rate swap agreement for $10.0 million in notional value related to our junior subordinated debentures. Each of the USD LIBOR-linked amounts referenced above are expected to vary in future periods as current contracts expire with potential replacement contracts using an alternative reference rate.

In an effort to mitigate the risks associated with a transition away from LIBOR, our Asset Liability Committee has undertaken initiatives to: (i) develop more robust fallback language and disclosures related to the LIBOR transition, (ii) develop a plan to seek to amend legacy contracts to reference such fallback language or alternative reference rates, (iii) enhance systems to support commercial loans, securities, and derivatives linked to the Secured Overnight Financing Rate and other alternative reference rates, (iv) develop and evaluate internal guidance, policies and procedures focused on the transition away from LIBOR to alternative reference rate products, and (v) prepare and disseminate internal and external communications regarding the LIBOR transition.

ASU 2021-01 does not have a material impact on the Company's consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). The amendments in ASU 2022-02 eliminate the accounting guidance for troubled debt restructurings ("TDRs") by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs which includes an assessment of whether the creditor has granted a concession, an entity must evaluate whether the modification represents a new loan or a continuation of an existing loan. The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, for public business entities, ASU 2022-02 requires that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost in the vintage disclosures required by paragraph 326-20-50-6. ASU 2022-02 is effective for the Company for fiscal years beginning after December 15, 2022. The Company may elect to apply the updated guidance on TDR recognition and measurement by using a modified retrospective transition method, which would result in a cumulative-effect adjustment to retained earnings, or to adopt the amendments prospectively. The Company intends to elect to adopt the updated guidance on TDR recognition and measurement prospectively; therefore the guidance will be applied to modifications occurring after the date of adoption. The amendments on TDR disclosures and vintage disclosures must be adopted prospectively. The Company does not believe that ASU 2022-02 will have a material impact on the Company's consolidated financial statements.




2. Cash and Cash Equivalents
The Company is no longer required to maintain cash balances or deposits with the Federal Reserve Bank of San Francisco ("Federal Reserve Bank") sufficient to meet its statutory reserve requirements and for purposes of settling financial transactions and charges for the Federal Reserve Bank services.
The Company is required to maintain a $300,000 and $250,000 balance with a correspondent bank for outsourced servicing of ATMs as of March 31, 2022 and December 31, 2021, respectively.
11



As of March 31, 2022 and December 31, 2021, the Company was required to maintain a $100,000 and $30,000 balance with a correspondent bank to collateralize the initial margin and the fair value exposure, respectively, of its interest rate swap to hedge the variability in cash flows arising out of its junior subordinated debentures.

3. Investment Securities
Marketable Equity Securities
The Company held marketable equity securities with fair values of $8.0 million and $8.4 million at March 31, 2022 and December 31, 2021, respectively. The gross realized and unrealized gains (losses) recognized on marketable equity securities in other operating income in the Company's Consolidated Statements of Income were as follows:
Three Months Ended March 31,
(In Thousands)20222021
Unrealized loss on marketable equity securities($422)($84)
Gain on sale of marketable equity securities, net  
   Total($422)($84)

Debt securities
Debt securities have been classified in the financial statements as available for sale or held to maturity. The following table summarizes the amortized cost, estimated fair value, and the Allowance for Credit Losses ("ACL") of debt securities and the corresponding amounts of gross unrealized gains and losses of available-for-sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held to maturity securities at the periods indicated:
(In Thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
March 31, 2022    
Securities available for sale    
U.S. Treasury and government sponsored entities$415,485 $103 ($19,633)$ $395,955 
Municipal securities820  (5) 815 
Corporate bonds32,716 167 (377) 32,506 
Collateralized loan obligations59,432  (361) 59,071 
Total securities available for sale$508,453 $270 ($20,376)$ $488,347 
(In Thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
March 31, 2022
Securities held to maturity
Corporate bonds$24,750 $ ($1,873)$22,877 
   Allowance for credit losses — — — 
Total securities held to maturity, net of ACL$24,750 $ ($1,873)$22,877 
12


(In Thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
December 31, 2021    
Securities available for sale    
U.S. Treasury and government sponsored entities$345,514 $333 ($4,367)$ $341,480 
Municipal securities820 20   840 
Corporate bonds32,721 302 (77) 32,946 
Collateralized loan obligations51,431 9 (22) 51,418 
Total securities available for sale$430,486 $664 ($4,466)$ $426,684 
(In Thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
December 31, 2021
Securities held to maturity
Corporate bonds$20,000 $ ($836)$19,164 
   Allowance for credit losses — — — 
Total securities held to maturity, net of ACL$20,000 $ ($836)$19,164 

Gross unrealized losses on available for sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2022 and December 31, 2021 were as follows:

Less Than 12 MonthsMore Than 12 MonthsTotal
(In Thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
March 31, 2022:
Securities available for sale
     U.S. Treasury and government sponsored entities$301,435 ($14,981)$72,868 ($4,652)$374,303 ($19,633)
     Corporate bonds7,838 (377)  7,838 (377)
     Collateralized loan obligations54,079 (361)  54,079 (361)
     Municipal securities815 (5)