##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended:
    December 31,
    2009o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    Number: 0-33501
  Northrim Bancorp,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Alaska(State of
    Incorporation)

92-0175752(I.R.S. Employer
    Identification No.)  3111 C Street,
 Anchorage, Alaska 99503
 (Address of principal executive
    offices) (Zip Code)
  (Registrants
    telephone number)
    (907)
    562-0062
  Securities registered pursuant to Section 12(b) of the
    Act:
 Common Stock, $1.00 par value
 (Title of Class)
  The NASDAQ Stock Market, LLC
 (Name of Exchange on Which
    Listed)
  Securities registered pursuant to Section 12(g) of the
    Act: N/A
  o þ
   o þ
   þ o
  Regulation S-T o o
   Regulation S-K Form 10-K Form 10-K.  Yes o þ
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
       DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





Northrim
    BanCorp, Inc.Form 10-K
    Annual Report
    December 31, 2009
    Table of Contents
   
 Part IItem 1.

Business

1Item 1A.

Risk Factors

8Item 1B.

Unresolved Staff Comments

12Item 2.

Properties

13Item 3.

Legal Proceedings

13Item 4.

Reserved

13Part IIItem 5.

Market for the Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

14Item 6.

Selected Financial Data

16Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations

18Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk

40Item 8.

Financial Statements and Supplementary Data

43Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure

79Item 9A.

Controls and Procedures

79Item 9B.

Other Information

81Part IIIItem 10.

Directors, Executive Officers and Corporate
    Governance

81Item 11.

Executive Compensation

81Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters

81Item 13.

Certain Relationships and Related Transactions,
    and Director Independence

81Item 14.

Principal Accounting Fees and Services

82Part IVItem 15.

Exhibits, Financial Statement Schedules

82Index to Exhibits

83Signatures

86EX-21.1EX-23.1EX-24.1EX-31.1EX-31.2EX-32.1EX-32.2   i




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##### Table of Contents



Part I  Item 1.
    Business    General
  Northrim
    BanCorp, Inc.
    Subsidiaries
    
    Northrim Bank (the Bank), a state chartered,
    full-service commercial bank headquartered in Anchorage. The
    Bank is regulated by the Federal Deposit Insurance Corporation
    and the State of Alaska Department of Community and Economic
    Development, Division of Banking, Securities and Corporations.
    The Bank has 11 branch locations; seven in Anchorage, two in
    Fairbanks, and one each in Eagle River and Wasilla. We also
    operate in the Washington and Oregon market areas through
    Northrim Funding Services (NFS), a division of the
    Bank that was formed in 2004. We offer a wide array of
    commercial and consumer loan and deposit products, investment
    products, and electronic banking services over the Internet;
    Northrim Capital Investments Co. (NCIC), is a
    wholly-owned subsidiary of the Bank, which holds a 24% interest
    in the profits and losses of a residential mortgage holding
    company, Residential Mortgage Holding Company LLC (RML
    Holding Company). The predecessor of RML Holding Company,
    Residential Mortgage LLC, was formed in 1998 and has offices
    throughout Alaska. RML Holding Company also has an interest in
    real estate markets in the states of Washington and South
    Carolina through joint ventures. In March and December of 2005,
    NCIC purchased ownership interests totaling 50.1% in Northrim
    Benefits Group, LLC (NBG), an insurance brokerage
    company that focuses on the sale and servicing of employee
    benefit plans;
    Northrim Building LLC (NBL) is a wholly-owned
    subsidiary of the Bank that owns and operates the Companys
    main office facility at 3111 C Street in Anchorage;
    Northrim Investment Services Company (NISC) was
    formed in November 2002 to hold the Companys 48% equity
    interest in Elliott Cove Capital Management LLC, (Elliott
    Cove), an investment advisory services company. In the
    first quarter of 2006, through NISC, we purchased a 24% interest
    in Pacific Wealth Advisors, LLC (PWA), an investment
    advisory, trust and wealth management business located in
    Seattle, Washington;
    Northrim Capital Trust 1 (NCT1), an entity that
    we formed in May of 2003 to facilitate a trust preferred
    securities offering by the Company; and
    Northrim Statutory Trust 2 (NST2), an entity
    that we formed in December of 2005 to facilitate a trust
    preferred securities offering by the Company.  Recent
    Acquisitions
   1




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##### Table of Contents



Segments
    Overview
    and Business Strategy
    
    Anchorage: We have two major financial centers in
    Anchorage, four smaller branches, and one supermarket branch. We
    continue to explore for future branching opportunities in this
    market.
    Fairbanks: We opened our financial center in
    Fairbanks, Alaskas second largest city, in mid-1996. This
    branch has given us a strong foothold in Interior Alaska, and
    management believes that there is significant potential to
    increase our share of that market. In the second quarter of
    2008, we opened another branch in Fairbanks that is located
    within a large newly developed retail area.
    Eagle River: We also serve Eagle River, a
    community outside of Anchorage. In January of 2002, we moved
    from a supermarket branch into a full-service branch to provide
    a higher level of service to this growing market.
    Wasilla: Wasilla is a rapidly growing market in
    the Matanuska Valley outside of Anchorage where we completed
    construction of a new financial center in December of 2002 and
    moved from our supermarket branch and loan production office
    into this new facility.    
    Providing Customer First Service: We believe that
    we provide a high level of customer service. Our guiding
    principle is to serve our market areas by operating with a
    Customer First Service philosophy, affording our
    customers the highest priority in all aspects of our operations.
    To achieve this objective, our management emphasizes the hiring
    and retention of competent and highly motivated employees at all
    levels of the organization. We had 295 full-time equivalent
    employees at December 31, 2009. None of our employees are
    covered by a collective bargaining agreement. We consider our
    relations with our employees to be satisfactory. Management
    believes that a well-trained and highly motivated core of
    employees allows maximum personal contact with customers in
    order to understand and fulfill customer needs and preferences.
    This Customer First Service philosophy is combined
    with our emphasis on personalized, local decision making.
    High Performance Checking: In the first part of
    2005, we launched our High Performance Checking
    (HPC) product consisting of several consumer
    checking accounts tailored to the needs of specific segments of
    our market, including a totally free checking product. We
    supported the new products with a targeted marketing program and
    extensive branch sales promotions. Through the concentrated
    efforts of our branch employees, we increased the number of our
    deposit accounts and the balances in them. In the fourth quarter
    of 2006, we introduced HPC for our business checking accounts.
    In 2007 through 2009, we continued to market the HPC products
    through a targeted mailing program and branch promotions, which
    helped us to increase the number of these accounts. In 2010, we
    plan to continue to support the HPC consumer and business
    checking products with a similar marketing and sales program in
    an effort to continue to expand our core deposits.
    Emphasizing Business and Professional Lending: We
    endeavor to provide commercial lending products and services,
    and to emphasize relationship banking with businesses and
    professional individuals. Management believes that our focus on
    providing financial services to businesses and professional
    individuals has increased and may continue to increase lending
    and core deposit volumes.
    Providing Competitive and Responsive Real Estate Lending:We are a significant land development and residential
    construction lender and an active lender in the commercial real
    estate market in our Alaskan markets. We believe that our
    willingness to provide these services in a professional and
    responsive manner has contributed significantly to our growth.
    Because of our relatively small size, our experienced senior
    management can be more involved with serving customers and
    making credit decisions, allowing us to compete more favorably
    for lending relationships. In 2010, we will continue to make 2




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a substantial effort to decrease our loans measured for
    impairment and other real estate owned (OREO), many
    of which consist of residential construction and land
    development loans. As a result of these efforts and continued
    projected slowness in the residential real estate market, we
    expect our loan balances in the residential construction sector
    to remain stable in 2010.  
    Pursuing Strategic Opportunities for Additional Growth:We believe that our Bank of America branch acquisition
    in 1999 significantly strengthened our local market position and
    enabled us to further capitalize on expansion opportunities
    resulting from the demand for a locally based banking
    institution providing a high level of service. Not only did the
    acquisition increase our size, number of branch offices, and
    lending capacity, but it also expanded our consumer lending,
    further diversifying our loan portfolio. Although to a lesser
    degree than the Bank of America branch acquisition, we believe
    that the Alaska First acquisition also strengthened our position
    in the Anchorage market. We expect to continue seeking similar
    opportunities to further our growth while maintaining a high
    level of credit quality. We plan to affect our growth strategy
    through a combination of growth at existing branch locations,
    new branch openings, primarily in Anchorage, Wasilla and
    Fairbanks, and strategic banking and non-banking acquisitions in
    the future.
    Developing a Sales Culture: In 2003, we conducted
    extensive sales training throughout the Company and developed a
    comprehensive approach to sales. In 2007 through 2009, the
    Company continued with its sales calling and training efforts
    and plans to continue with the program in 2010. Our goal
    throughout this process is to increase and broaden the
    relationships that we have with new and existing customers and
    to continue to increase our market share within our existing
    markets.
    Improving Credit Quality: In 2007, we formed a
    Quality Assurance department to provide independent, detailed
    financial analysis of our largest, most complex loans. In
    addition, this department, along with the Chief Lending Officer
    and others in the Loan Administration department, has developed
    processes to analyze and manage various concentrations of credit
    within the overall loan portfolio. The Loan Administration
    department has also enhanced the procedures and processes for
    the analysis and reporting of problem loans along with the
    development of strategies to resolve them. In 2010, we plan to
    continue with these initiatives. In addition, we will continue
    to devote resources towards the reduction of our nonperforming
    assets and substandard loans.    Deposit Services:
    
    An indexed money market deposit account;
    A
    Jump-Up
    certificate of deposit (CD) that allows additional
    deposits with the opportunity to increase the rate to the
    current market rate for a similar term CD;
    An indexed CD that allows additional deposits, quarterly
    withdrawals without penalty, and tailored maturity
    dates; and
    Arrangements to courier noncash deposits from our customers to
    their branch.  Lending Services:
  Other Customer Services: 24-hour drive-up, drive-up
  Elliott
    Cove Capital Management LLC
   3




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start-up
    Northrim
    Funding Services
    Alaska
    Economy
           4




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Competition
        Number of





Market Share ofFinancial institution

Branches


Total Deposits


Deposits(Dollars in Thousands)Northrim Bank


8
(1)

$
708,054



19
%Wells Fargo Bank Alaska


14



1,588,960



44
%First National Bank Alaska


10



879,092



24
%Key Bank


4



489,795



13
%Total


36


$
3,665,901



100
%   (1)
    Does not reflect our Fairbanks or Wasilla branches  Supervision
    and Regulation
   5




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out-of-state out-of-state
     6




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7




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Available
    Information
  Form 10-K Form 10-Q, Form 8-K http://www.northrim.com
  http://www.sec.gov
  Item 1A.
    Risk
    Factors   8




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We may be
    Adversely Impacted by the Unprecedented Volatility in the
    Financial Markets.
    
    We expect to face increased regulation of our industry,
    including as a result of the Stabilization Act. Compliance with
    such regulation may increase our costs and limit our ability to
    pursue business opportunities.
    Competition in our industry could intensify as a result of the
    increasing consolidation of financial services companies in
    connection with current market conditions.
    We have been required to pay significantly higher FDIC premiums
    because market developments have significantly depleted the
    insurance fund of the FDIC and reduced the ratio of reserves to
    insured deposits. We may have to pay even higher premiums in the
    future. We may have to pay even higher premiums in the future.  Further
    Declines in the Residential Housing Market would have a Negative
    Impact on Our Residential Housing Market Income.
    Our Loan
    Loss Allowance may not be Adequate to Cover Future Loan Losses,
    which may Adversely affect Our Earnings.
   9




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We have a
    Significant Concentration in Real Estate Lending. The Sustained
    Downturn in Real Estate Within Our Markets has had and is
    Expected to Continue to have a Negative Impact on Our Results of
    Operations.
      Real
    Estate Values may Continue to Decrease Leading to Additional and
    Greater than Anticipated Loan Charge-Offs and Valuation Write
    Downs on Our other Real Estate Owned (OREO)
    Properties.
    Our
    Deposit Insurance Premium could be Substantially Higher in the
    Future, which could have a Material Adverse Effect on Our Future
    Earnings.
  and/or
     10




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##### Table of Contents



Changes
    in Market Interest Rates could Adversely Impact the
    Company.
    Our
    Financial Performance Depends on our Ability to Manage Recent
    and Possible Future Growth.
    Our
    Concentration of Operations in the Anchorage, Matanuska Valley,
    and Fairbanks, Areas of Alaska Makes US More Sensitive to
    Downturns in Those Areas.
    We are
    Subject to Extensive Regulation, which Undergoes Frequent and
    Often Significant Changes.
   11




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The
    Financial Services Business is Intensely Competitive and Our
    Success will Depend on Our Ability to Compete
    Effectively.
    We may be
    Unable to Attract and Retain Key Employees and
    Personnel.
    A Failure
    of a Significant Number or Our Borrowers, Guarantors and Related
    Parties to Perform in Accordance with the Terms of their Loans
    would have an Adverse Impact on Our Results of
    Operations.
    Item 1B.
    Unresolved
    Staff Comments   12




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Item 2.
    Properties    Locations

Type

Leased/OwnedMidtown Financial Center: Northrim Headquarters
    3111 C Street, Anchorage, AK

Traditional

Land leased;
    building ownedSouthSide Financial Center
    8730 Old Seward Highway, Anchorage, AK

Traditional

Land leased;
    building owned36th Avenue Branch
    811 East 36th Avenue, Anchorage, AK

Traditional

OwnedHuffman Branch
    1501 East Huffman Road, Anchorage, AK

Supermarket

LeasedJewel Lake Branch
    9170 Jewel Lake Road, Anchorage, AK

Traditional

LeasedSeventh Avenue Branch
    517 West Seventh Avenue, Suite 300, Anchorage, AK

Traditional

LeasedWest Anchorage Branch/Small Business Center
    2709 Spenard Road, Anchorage, AK

Traditional

OwnedEagle River Branch
    12812 Old Glenn Highway, Eagle River, AK

Traditional

LeasedDowntown Fairbanks Branch
    714 Fourth Avenue, Suite 100, Fairbanks, AK

Traditional

LeasedFairbanks Financial Center
    360 Merhar Avenue, Fairbanks, AK

Traditional

OwnedWasilla Financial Center
    850 E. USA Circle, Suite A, Wasilla, AK

Traditional

Owned   Item 3.
    Legal
    Proceedings    Item 4.
    Reserved 13




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##### Table of Contents



Part II  Item 5.
    Market
    for Registrants Comment Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities      First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2009High

$
11.70


$
15.23


$
15.83


$
17.30Low

$
6.86


$
9.65


$
13.31


$
14.922008High

$
23.01


$
20.13


$
17.28


$
16.14Low

$
17.75


$
18.11


$
14.15


$
10.05     Repurchase
    of Securities
    Equity
    Compensation Plan Information
  Notes to Consolidated Financial Statements
  Number of SecuritiesNumber of Securities to be

Weighted-Average Exercise

Remaining Available forIssued Upon Exercise of

Price of Outstanding

Future Issuance UnderOutstanding Options,

Options, Warrants and

Equity Compensation PlansWarrants and Rights

Rights

(Excluding SecuritiesPlan Category

(a)

(b)

Reflected in Column (a))Equity compensation plans

473,755


$13.40



23,232approved by security holdersTotal

473,755


$13.40



23,232  14




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Stock
    Performance Graph
    Total
    Return Performance
  
  Period EndingIndex

12/31/04

12/31/05

12/31/06

12/31/07

12/31/08

12/31/09Northrim BanCorp, Inc.

100.00

101.15

122.82

105.63

53.03

89.57Russell 3000

100.00

106.12

122.80

129.11

80.94

103.88SNL Bank $1B-$5B

100.00

98.29

113.74

82.85

68.72

49.26  15




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Item 6. Selected
    Financial Data  2009

2008

2007

2006

2005Unaudited(In thousands Except Per Share Amounts)Net interest income

$46,421

$45,814

$49,830

$47,522

$43,908Provision for loan losses

7,066

7,199

5,513

2,564

1,170Other operating income

13,537

11,399

9,954

7,766

4,933Other operating expense

41,810

40,439

35,063

31,476

29,577Income before income taxes

11,082

9,575

19,208

21,248

18,094Income taxes

2,967

3,122

7,260

7,978

6,924Net Income

8,115

6,453

11,948

13,270

11,170Less: Net income attributable to noncontrolling interest

388

370

290

296

Net income attributable to Northrim Bancorp

$7,727

$6,083

$11,658

$12,974

$11,170Earnings per share:Basic

$1.22

$0.96

$1.82

$2.02

$1.70Diluted

1.20

0.95

1.80

1.99

1.64Cash dividends per share

0.40

0.66

0.57

0.45

0.40Assets

$1,003,029

$1,006,392

$1,014,714

$925,620

$895,580Loans

655,039

711,286

714,801

717,056

705,059Deposits

853,108

843,252

867,376

794,904

779,866Long-term debt

4,897

15,986

1,774

2,174

2,574Junior subordinated debentures

18,558

18,558

18,558

18,558

18,558Shareholders equity

111,020

104,648

101,391

95,418

84,474Book value per share

$17.42

$16.53

$16.09

$15.61

$13.86Tangible book value per share

$16.01

$15.06

$14.51

$14.48

$12.65Net interest margin (tax equivalent)

5.33%

5.26%

5.89%

5.89%

5.66%Efficiency
    ratio(1)

69.19%

70.07%

58.09%

56.06%

59.80%Return on assets

0.79%

0.62%

1.24%

1.46%

1.33%Return on equity

7.08%

5.85%

11.70%

14.45%

13.17%Equity/assets

11.07%

10.40%

10.00%

10.31%

9.44%Dividend payout ratio

33.18%

68.93%

30.54%

21.43%

22.92%Nonperforming loans/portfolio loans

2.67%

3.66%

1.59%

0.92%

0.86%Net charge-offs/average loans

1.00%

0.86%

0.86%

0.16%

0.18%Allowance for loan losses/portfolio loans

2.00%

1.81%

1.64%

1.69%

1.52%Nonperforming assets/assets

3.47%

3.84%

1.56%

0.79%

0.69%Tax rate

27%

34%

38%

38%

38%Number of banking offices

11

11

10

10

10Number of employees (FTE)

295

290

302

277

272   (1)
    In managing our business, we review the efficiency ratio
    exclusive of intangible asset amortiztion (see definition in
    table below), which is not defined in accounting principles
    generally accepted in the United States (GAAP). The
    efficiency ratio is calculated by dividing noninterest expense,
    exclusive of intangible asset amortization, by the sum of net
    interest income and noninterest income. Other companies may
    define or calculate this data differently. We believe this
    presentation provides investors with a more accurate picture of
    our operating efficiency. In this presentation, noninterest
    expense is adjusted for intangible asset amortization. For
    additional information see the Noninterest Expense
    section in Item 7. Managements Discussion and
    Analysis of Financial Condition and Results of Operation
    of this report. 16




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Reconciliation
    of Selected Financial Data to GAAP Financial Measures
    (2)
  Years Ended December 31,

2009

2008

2007

2006

2005Net interest
    income(1)

$46,421

$45,814

$49,830

$47,522

$43,908Noninterest income

13,537

11,399

9,954

7,766

4,933Noninterest expense

41,810

40,439

35,063

31,476

29,577Less intangible asset amortization

323

347

337

482

368Adjusted noninterest expense

$41,487

$40,092

$34,726

$30,994

$29,209Efficiency ratio

69.19%

70.07%

58.09%

56.06%

59.80%   (1)
    Amount represents net interest income before provision for loan
    losses.(2)
    These unaudited schedules provide selected financial information
    concerning the Company that should be read in conjunction with
    Item 7. Managements Discussion and Analysis of
    Financial Condition and Results of Operations of this
    report. 17




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Item 7. Managements
    Discussion and Analysis of Financial
    Condition and Results of Operations    Note
    Regarding Forward-Looking Statements
  Form 10-K
  Recent
    Developments
      Critical
    Accounting Estimates
     18




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Allowance for loan losses (the
    Allowance):
              Goodwill and other intangibles:
   19




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Valuation of other real estate owned:
    Results
    of Operations
  Net
    Income
      Net
    Interest Income
     20




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Years Ended December 31,

2009

2008

2007Average

Interest



Average

Interest



Average

Interestoutstanding

earned/

Yield/

outstanding

earned/

Yield/

outstanding

earned/

Yield/balance

paid(1)

rate

balance

paid(1)

rate

balance

paid(1)

rate(In Thousands)Assets:Loans(2)

$688,347

$48,830

7.09%

$702,117

$53,287

7.59%

$710,959

$66,463

9.35%Securities

144,713

4,499

3.11%

134,705

5,493

4.08%

98,578

4,619

4.69%Short term investments

43,041

161

0.37%

40,082

936

2.34%

39,726

1,985

5.00%Total interest-earning assets

876,101

53,490

6.11%

876,904

59,716

6.81%

849,263

73,067

8.60%Noninterest-earning assets

105,578





108,140





92,065Total assets

$981,679





$985,044





$941,328Liabilities and Shareholders Equity:Deposits:Interest-bearing demand accounts

$115,065

$170

0.15%

$97,171

$578

0.59%

$85,192

$1,188

1.39%Money market accounts

127,651

740

0.58%

187,779

3,306

1.76%

186,722

7,378

3.95%Savings accounts

169,812

1,240

0.73%

187,225

3,444

1.84%

234,780

8,756

3.73%Certificates of deposit

173,777

3,651

2.10%

145,153

4,851

3.34%

95,961

4,080

4.25%Total interest-bearing deposits

586,305

5,801

0.99%

617,328

12,179

1.97%

602,655

21,402

3.55%Borrowings

35,935

1,268

3.53%

41,567

1,723

4.15%

30,337

1,835

6.05%Total interest-bearing liabilities

622,240

7,069

1.14%

658,895

13,902

2.11%

632,992

23,237

3.67%Demand deposits and other noninterest-bearing liabilities

250,342





222,247





208,671Total liabilities

872,582





881,142





841,663Shareholders equity

109,097





103,902





99,665Total liabilities and shareholders equity

$981,679





$985,044





$941,328Net interest income



$46,421





$45,814





$49,830Net interest
    margin(3)





5.30%





5.22%





5.87%   (1)
    
    Interest income included loan fees.(2)
    
    Nonaccrual loans are included with
    a zero effective yield.(3)
    
    The net interest margin on a tax
    equivalent basis was 5.33%, 5.26%, and 5.89%, respectively, for
    2009, 2008, and 2007. 21




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##### Table of Contents



2009 compared to 2008

2008 compared to 2007Increase (decrease) due to

Increase (decrease) due toVolume

Rate

Total

Volume

Rate

TotalInterest Income:Loans

$(1,029)

$(3,428)

$(4,457)

$(817)

$(12,359)

$(13,176)Securities

452

(1,446)

(994)

1,352

(478)

874Short term investments

75

(850)

(775)

18

(1,066)

(1,048)Total interest income

$(502)

$(5,724)

$(6,226)

$553

$(13,903)

$(13,350)Interest Expense:Deposits:Interest-bearing demand accounts

$132

$(540)

$(408)

$198

$(808)

$(610)Money market accounts

(829)

(1,737)

(2,566)

42

(4,114)

(4,072)Savings accounts

(294)

(1,911)

(2,205)

(1,517)

(3,795)

(5,312)Certificates of deposit

1,363

(2,562)

(1,199)

1,325

(554)

771Total interest on deposits

372

(6,750)

(6,378)

48

(9,271)

(9,223)Borrowings

(216)

(238)

(454)

689

(577)

(112)Total interest expense

$156

$(6,988)

$(6,832)

$737

$(9,848)

$(9,335)   Other
    Operating Income
    Years Ended December 31,

2009

2008

2007

2006

2005(In Thousands)Other Operating IncomeDeposit service charges

$2,983

$3,283

$3,116

$1,975

$1,800Equity in earnings from RML

2,349

595

454

649

493Purchased receivable income

2,106

2,560

2,521

1,855

993Employee benefit plan income

1,739

1,451

1,194

1,113

Electronic banking fees

1,542

1,193

914

790

632Rental income

850

463

134

108

100Loan service fees

508

476

516

531

374Merchant credit card transaction fees

406

451

509

531

444Equity in loss from Elliott Cove

(115)

(106)

(93)

(230)

(424)Other transaction fees

308

380

267

227

214Other income

188

462

312

217

298Operating sources

12,864

11,208

9,844

7,766

4,924Gain on sale of securities available for sale, net

220

146





9Gain on sale of other real estate owned, net

453

45

110



Other sources

$673

$191

110



9Total other operating income

$13,537

$11,399

$9,954

$7,766

$4,933  22




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##### Table of Contents



point-of-sale point-of-sale point-of-sale
        point-of-sale point-of-sale point-of-sale
   23




---



##### Table of Contents



start-up
    Other
    Operating Expense
    Years Ended December 31,

2009

2008

2007

2006

2005(In Thousands)Other Operating ExpenseSalaries and other personnel expense

$22,174

$20,996

$20,700

$19,277

$17,656Occupancy, net

3,687

3,399

2,957

2,611

2,517OREO expense, including impairment

1,572

2,558

(20)

(5)

Insurance expense

2,715

1,779

465

378

451Marketing

1,317

1,558

1,617

1,641

1,657Professional and outside services

1,336

1,498

1,167

840

923Equipment

1,218

1,233

1,350

1,350

1,371Prepayment penalty on long term debt

718







Intangible asset amortization

323

347

337

482

368Other expenses

6,750

7,071

6,490

4,902

4,634Total other operating expense

$41,810

$40,439

$35,063

$31,476

$29,577    24




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##### Table of Contents



25




---



##### Table of Contents



Provision
    for Loan Losses
    Income
    Taxes
    Financial
    Condition
  Assets
  Loans and Lending Activities
  General:
 26




---



##### Table of Contents



Nonperforming Assets:
  December 31,

2009

2008

2007

2006

2005(In Thousands)Nonperforming loansNonaccrual loans

$12,738

$20,593

$9,673

$5,176

$5,090Accruing loans past due 90 days or more

1,000

5,411

1,665

708

981Troubled debt restructuring

3,754





748

Total nonperforming loans

17,492

26,004

11,338

6,632

6,071Real estate owned

17,355

12,617

4,445

717

105Total nonperforming assets

$34,847

$38,621

$15,783

$7,349

$6,176Allowance for loan losses to portfolio loans

2.00%

1.81%

1.64%

1.69%

1.52%Allowance for loan losses to nonperforming loans

75%

50%

104%

183%

176%Nonperforming loans to portfolio loans

2.67%

3.66%

1.59%

0.92%

0.86%Nonperforming assets to total assets

3.47%

3.84%

1.56%

0.79%

0.69%   Nonaccrual, Accruing Loans 90 Days or More Past Due, and
    Troubled Debt Restructuring (TDR):
      Loans Measured for Impairment, Other Real Estate Owned and
    Potential Problem Loans:
 27




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##### Table of Contents



multi-unit
  49-unit
        December 31,

2009

2008

2007(In Thousands)Balance, beginning of the year


$12,617



$4,445



$717Transfers from loans


12,441



9,395



4,486Investment in other real estate owned


1,699



3,273



Proceeds from the sale of other real estate owned


(9,120)



(2,583)



(1,300)Gain on sale of other real estate owned, net


453



45



110Deferred gain on sale of other real estate owned


90







432Impairment on other real estate owned


(825)



(1,958)



Balance, End of Year


$17,355



$12,617



$4,445   Analysis of Allowance for Loan Losses:
   28




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##### Table of Contents



29




---



##### Table of Contents



December 31,

2009

2008

2007

2006

2005% of Total



% of Total



% of Total



% of Total



% of TotalBalance applicable to:

Amount

Loans(1)

Amount

Loans(1)

Amount

Loans(1)

Amount

Loans(1)

Amount

Loans(1)(Dollars in Thousands)Commercial

$3,962

38%

$5,558

41%

$6,496

40%

$8,208

40%

$6,913

41%Construction

1,365

9%

1,736

14%

940

19%

330

21%

246

19%Real estate term

565

46%

306

38%

1,661

34%

964

33%

1,214

35%Home equity lines and other consumer

50

7%

61

7%

16

7%

6

6%

37

5%Unallocated

7,166

0%

5,239

0%

2,622

0%

2,617

0%

2,296

0%Total

$13,108

100%

$12,900

100%

$11,735

100%

$12,125

100%

$10,706

100%   (1)
    
    Represents percentage of this
    category of loans to total loans.    December 31,

2009

2008

2007

2006

2005(In Thousands)Balance at beginning of period


$12,900



$11,735



$12,125



$10,706



$10,764Charge-offs:Commercial loans


(3,372)



(4,187)



(4,291)



(2,545)



(1,552)Construction loans


(1,308)



(1,004)



(2,982)







(100)Real estate loans


(2,478)



(1,402)



(599)







Home equity and other consumer loans


(509)



(132)



(45)



(72)



(63)Total charge-offs


(7,667)



(6,725)



(7,917)



(2,617)



(1,715)Recoveries:Commercial loans


736



577



1,723



1,086



418Construction loans


7



61



50







15Real estate loans


11



3







355



15Home equity and other consumer loans


55



50



21



31



39Total recoveries


809



691



1,794



1,472



487Charge-offs net of recoveries


(6,858)



(6,034)



(6,123)



(1,145)



(1,228)Allowance aquired with Alaska First acquisition










220







Provision for loan losses


7,066



7,199



5,513



2,564



1,170Balance at end of period


$13,108



$12,900



$11,735



$12,125



$10,706Ratio of net charge-offs to average loans outstanding during the
    period


1.00%



0.86%



0.86%



0.16%



0.18%  30




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##### Table of Contents



period-to-period,
  Credit Authority and Loan Limits:
  loan-to-one-borrower
  Loan Policy:
  Loans Receivable:
  Loan Portfolio Composition:
  December 31,

2009

2008

2007

2006

2005Percent



Percent



Percent



Percent



PercentAmount

of total

Amount

of total

Amount

of total

Amount

of total

Amount

of total(Dollars in Thousands)Commercial loans


$248,205



37.89%



$293,249



41.23%



$284,956



39.87%



$287,281



40.06%



$287,617



40.79%Real estate loans:Construction


62,573



9.55%



100,438



14.12%



138,070



19.32%



153,059



21.35%



131,532



18.66%Real estate term


301,816



46.08%



268,864



37.80%



243,245



34.03%



237,599



33.14%



252,395



35.80%Home equity lines and other consumer


45,243



6.91%



51,447



7.23%



51,274



7.17%



42,140



5.88%



36,519



5.18%Total


657,837



100.43%



713,998



100.39%



717,545



100.38%



720,079



100.42%



708,063



100.43%Less:Unearned purchase discount






0.00%







0.00%







0.00%







0.00%







0.00%Unearned loan fees net of origination costs


(2,798)



-0.43%



(2,712)



-0.39%



(2,744)



-0.38%



(3,023)



-0.42%



(3,004)



-0.43%Net loans


$655,039



100.00%



$711,286



100.00%



$714,801



100.00%



$717,056



100.00%



$705,059



100.00%  31




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##### Table of Contents



MaturityWithin



Over1 Year

1-5 Years

5 Years

Total(In Thousands)Commercial


$100,365



$102,233



$45,607



$248,205Construction


57,815



4,758







62,573Real estate term


28,608



97,168



176,040



301,816Home equity lines and other consumer


1,130



9,355



34,758



45,243Total


$187,918



$213,514



$256,405



$657,837Fixed interest rate


$92,136



$87,440



$45,739



$225,315Floating interest rate


95,782



126,074



210,666



432,522Total


$187,918



$213,514



$256,405



$657,837   Commercial Loans:
  Construction Loans:
  Land Development:
  One-to-Four-Family
    Residences: one-to-four-family one-to-four-family
    Commercial Construction:
  Commercial Real Estate:
 32




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##### Table of Contents



Home Equity Lines and Other Consumer Loans:
  Purchased Loans:
  Off-Balance Sheet Arrangements  Commitments and
    Contingent Liabilities:
      Investments
    and Investment Activities
  General:
    Investment Portfolio Composition:
  Securities Available For Sale: and/or
  Securities Held To Maturity:
 33




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##### Table of Contents



Amortized

FairCost

Value(In thousands)Securities Available for Sale:2009:U.S. Treasury

$500

$502U.S. Government Sponsored Entities

140,871

141,498Muncipal Securities

6,184

6,270U.S. Agency Mortgage-backed Securities

85

87Corporate Bonds

28,242

29,802Total

$175,882

$178,1592008:U.S. TreasuryU.S. Government Sponsored Entities

$110,882

$112,584Muncipal Securities

5,054

4,881U.S. Agency Mortgage-backed Securities

345

361Corporate Bonds

23,203

23,184Total

$139,484

$141,0102007:U.S. Treasury

$4,977

$4,982U.S. Government Sponsored Entities

134,370

134,738U.S. Agency Mortgage-backed Securities

466

465Corporate Bonds

7,813

7,824Total

$147,626

$148,009Securities Held to Maturity:2009:Municipal Securities

$7,285

$7,516Total

$7,285

$7,5162008:Municipal Securities

$9,431

$9,502Total

$9,431

$9,5022007:Municipal Securities

$11,701

$11,748Total

$11,701

$11,748   other-than-temporary other-than-temporary other-than-temporary
 34




---



##### Table of Contents



Fair Value, Maturities and Weighted Average
    Yields:
  MaturityWithin





Over1 Year

1-5 Years

5-10 Years

10 Years

Total(Dollars In Thousands)Securities Available for Sale:U.S. TreasuryBalance

$


$502



$



$



$502Weighted Average Yield

0.00%


0.80%



0.00%



0.00%



0.00%U.S. Government Sponsored EntitiesBalance

20,010


118,531



2,957







141,498Weighted Average Yield

0.76%


2.65%



3.00%



0.00%



2.39%Municipal SecuritiesBalance




1,179



2,875



2,216



6,270Weighted Average Yield

0.00%


3.49%



4.93%



4.75%



4.60%U.S. Agency Mortgage-backed SecuritiesBalance








87







87Weighted Average Yield

0.00%


0.00%



4.57%



0.00%



4.57%Corporate BondsBalance




28,385



1,417







29,802Weighted Average Yield

0.00%


4.51%



4.82%



0.00%



4.53%TotalBalance

$20,010


$147,418



$4,461



$0



$171,889Weighted Average Yield

0.76%


2.99%



4.12%



4.75%



2.80%Securities Held to Maturity:Municipal SecuritiesBalance

$1,437


$4,164



$1,915



$



$7,516Weighted Average Yield

3.76%


3.95%



4.38%



0.00%



4.02%     Purchased
    Receivables
  General:
    Policy and Authority Limits:
 35




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##### Table of Contents



Liabilities
  Deposits
  General:
  Average Balances and Rates:
  December 31,

2009

2008

2007

2006

2005Average

Average

Average

Average

Average

Average

Average

Average

Average

Averagebalance

rate paid

balance

rate paid

balance

rate paid

balance

rate paid

balance

rate paid(Dollars in Thousands)Interest-bearing demand accounts


$115,065



0.15%



$97,171



0.59%



$85,192



1.39%



$78,872



1.05%



$65,890



0.56%Money market accounts


127,651



0.58%



187,779



1.76%



186,722



3.95%



151,871



3.99%



139,331



2.78%Savings accounts


169,812



0.73%



187,225



1.84%



234,780



3.73%



254,209



3.98%



207,277



3.02%Certificates of deposit


173,777



2.10%



145,153



3.34%



95,961



4.25%



94,595



3.51%



138,284



2.52%Total interest-bearing accounts


586,305



0.99%



617,328



1.97%



602,655



3.55%



579,547



3.51%



550,782



2.54%Noninterest-bearing demand accounts


241,547







212,447







196,313







185,958







182,535Total average deposits


$827,852







$829,775







$798,968







$765,505







$733,317   Certificates of Deposit:
  Alaska Certificates of Deposit:
  Alaska Permanent Fund:
  Borrowings
  FHLB:
  Federal Reserve Bank:
 36




---



##### Table of Contents



Other Long-term Borrowings:
  Other Short-term Borrowings:
      Contractual
    Obligations
    Payments Due by PeriodWithin





OverDecember 31, 2009

1 Year

1-3 Years

3-5 Years

5 Years

Total(In Thousands)Certificates of deposit

$100,099


$44,251



$479



$22



$144,851Short-term debt obligations

7,423














7,423Long-term debt obligations

132


287



4,478







4,897Junior subordinated












18,558



18,558debenturesOperating lease obligations

888


1,450



863



4,735



7,936Other long-term liabilities

412














412Total

$108,954


$45,988



$5,820



$23,315



$184,077   Payments Due by PeriodWithin





OverDecember 31, 2008

1 Year

1-3 Years

3-5 Years

5 Years

Total(In Thousands)Certificates of deposit

$144,726


$27,815



$804



$22



$173,367Short-term debt obligations

14,120














14,120Long-term debt obligations

1,517


3,056



2,502



8,911



15,986Junior subordinated












18,558



18,558debenturesOperating lease obligations

844


1,563



845



5,089



8,341Other long-term liabilities

1,811










1,811Total

$163,018


$32,434



$4,151



$32,580



$232,183  37




---



##### Table of Contents



90-day 90-day
  Stockholders
    Equity
    Liquidity
    and Capital Resources
           38




---



##### Table of Contents



DilutedDiluted EPS

EPS withoutYears Ending:

as Reported

Stock Repurchase2009

$1.20

$1.082008

$0.95

$0.852007

$1.80

$1.642006

$1.99

$1.832005

$1.64

$1.56   90-day
  90-day
          Adequately -


Well -


Actual


ActualDecember 31, 2009

Capitalized


Capitalized


Ratio BHC


Ratio BankTier 1 risk-based capital


4.00%



6.00%



13.98%



13.05%Total risk-based capital


8.00%



10.00%



15.24%



14.30%Leverage ratio


4.00%



5.00%



12.13%



11.33%   39




---



##### Table of Contents



Effects of Inflation and Changing Prices:
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk      12-month
       40




---



##### Table of Contents



Estimated maturity or repricing at December 31, 2009Within 1 year

1-5 Years

35 years

Total(In Thousands)Interest -Earning Assets:Overnight investments

$47,326


$



$



$47,326Investment securities

62,726


113,967



10,754



187,447Loans:Commercial

188,510


51,043



2,132



241,685Real estate construction

59,852


1,968







61,820Real estate term

159,146


133,391



4,574



297,111Installment and other consumer

17,325


15,424



11,735



44,484Total interest-earning assets

$534,885


$315,793



$29,195



$879,873Percent of total interest-earning assets

61%


36%



3%



100%Interest-Bearing Liabilities:Interest-bearing demand accounts

$134,899


$



$



$134,899Money market accounts

125,339










125,339Savings accounts

171,487










171,487Certificates of deposit

98,027


46,801



23



144,851Short-term borrowings

7,423










7,423Long-term borrowings

999


3,898







4,897Junior subordinated debentures

18,558










18,558Total interest-bearing liabilities

$556,732


$50,699



$23



$607,454Percent of total interest-bearing liabilities

92%


8%



0%



100%Interest sensitivity gap

$(21,847)


$265,094



$29,172



$272,419Cumulative interest sensitivity gap

$(21,847)


$243,247



$272,419Cumulative interest sensitivity gap as a percentage of total
    assets

-2%


24%



27%    41




---



##### Table of Contents



12-month
 42




---



##### 



Item 8. Financial
    Statements And Supplementary Data
  Form 10-K
   
 Report of the Independent Registered Public
    Accounting Firm

44Consolidated Balance Sheets at December 31, 2009
    and 2008

45For the Years Ended December 2009, 2008 and 2007:Consolidated Statements of Income

46Consolidated Statements of Changes in
    Shareholders Equity and Comprehensive Income

47Consolidated Statements of Cash Flows

48Notes to Consolidated Financial Statements

49   43




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm



The Board of Directors of

Northrim BanCorp, Inc.:



We have audited the accompanying consolidated balance sheets of
    Northrim BanCorp, Inc. and subsidiaries (the Company) as of
    December 31, 2009 and 2008, and the related consolidated
    statements of income, shareholders equity and
    comprehensive income, and cash flows for each of the years in
    the three-year period ended December 31, 2009. These
    consolidated financial statements are the responsibility of the
    Companys management. Our responsibility is to express an
    opinion on these consolidated financial statements based on our
    audits.



We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. An audit includes examining, on a
    test basis, evidence supporting the amounts and disclosures in
    the financial statements. An audit also includes assessing the
    accounting principles used and significant estimates made by
    management, as well as evaluating the overall financial
    statement presentation. We believe that our audits provide a
    reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred
    to above present fairly, in all material respects, the financial
    position of Northrim BanCorp, Inc. and subsidiaries as of
    December 31, 2009 and 2008, and the results of their
    operations and their cash flows for each of the years in the
    three-year period ended December 31, 2009, in conformity
    with U.S. generally accepted accounting principles.



We also have audited, in accordance with the standards of the
    Public Company Accounting Oversight Board (United States),
    Northrim BanCorp, Inc.s internal control over financial
    reporting as of December 31, 2009, based on criteria
    established in Internal Control  Integrated Framework
    issued by the Committee of Sponsoring Organizations of the
    Treadway Commission (COSO), and our report dated March 15,
    2010 expressed an unqualified opinion on the effectiveness of
    the Companys internal control over financial reporting.



KPMG LLC SIGNATURE





Anchorage, Alaska

March 15, 2010


44




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##### Table of Contents



Consolidated
    Financial Statements      2009

2008(In Thousands Except Share Amounts)AssetsCash and due from banks

$19,395

$30,925Overnight investments

47,326

6,905Domestic certificates of deposit



9,500Investment securities held to maturity

7,285

9,431Investment securities available for sale

178,159

141,010Investment in Federal Home Loan Bank stock

2,003

2,003Total Portfolio Investments

187,447

152,444Loans

655,039

711,286Allowance for loan losses

(13,108)

(12,900)Net Loans

641,931

698,386Purchased receivables

7,261

19,075Accrued interest receivable

3,986

4,812Premises and equipment, net

28,523

29,733Goodwill and intangible assets

8,996

9,320Other real estate owned

17,355

12,617Other assets

40,809

32,675Total Assets

$1,003,029

$1,006,392LiabilitiesDeposits:Demand

$276,532

$244,391Interest-bearing demand

134,899

101,065Savings

66,647

58,214Alaska CDs

104,840

108,101Money market

125,339

158,114Certificates of deposit less than $100,000

64,652

76,738Certificates of deposit greater than $100,000

80,199

96,629Total Deposits

853,108

843,252Borrowings

12,320

30,106Junior subordinated debentures

18,558

18,558Other liabilities

8,023

9,792Total Liabilities

892,009

901,708Shareholders EquityCommon stock, $1 par value, 10,000,000 shares
    authorized, 6,371,455 and 6,331,372 shares issued and
    outstanding at December 31, 2009 and 2008, respectively

6,371

6,331Additional paid-in capital

52,139

51,458Retained earnings

51,121

45,958Accumulated other comprehensive
    income-net
    unrealized gains/losses on available for sale on investment
    securities

1,341

901Total Northrim Bancorp Shareholders Equity

110,972

104,648Noncontrolling interest

48

36Total Shareholders Equity

111,020

104,684Commitments and contingencies



Total Liabilities and Shareholders Equity

$1,003,029

$1,006,392    45




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##### Table of Contents



NORTHRIM
    BANCORP, INC.
 Consolidated Statements of Income
   2009

2008

2007(In Thousands Except Per Share Amounts)Interest IncomeInterest and fees on loans

$48,830

$53,287

$66,463Interest on investment securities-available for sale

4,134

5,066

4,120Interest on investment securities-held to maturity

365

427

499Interest on overnight investments

103

429

2Interest on domestic certificates of deposit

58

507

1,983Total Interest Income

53,490

59,716

73,067Interest ExpenseInterest expense on deposits and borrowings

7,069

13,902

23,237Net Interest Income

46,421

45,814

49,830Provision for loan losses

7,066

7,199

5,513Net Interest Income After Provision for Loan Losses

39,355

38,615

44,317Other Operating IncomeService charges on deposit accounts

2,983

3,283

3,116Equity in earnings from mortgage affiliate

2,349

595

454Purchased receivable income

2,106

2,560

2,521Employee benefit plan income

1,739

1,451

1,194Electronic banking income

1,542

1,193

914Equity in loss from Elliott Cove

(115)

(106)

(93)Other income

2,933

2,423

1,848Total Other Operating Income

13,537

11,399

9,954Other Operating ExpenseSalaries and other personnel expense

22,174

20,996

20,700Occupancy

3,687

3,399

2,957Insurance expense

2,715

1,779

465OREO expense net, including impairment

1,572

2,558

(20)Professional and outside services

1,336

1,498

1,167Marketing expense

1,317

1,558

1,617Equipment expense

1,218

1,233

1,350Prepayment penalty on long term debt

718



Intangible asset amortization expense

323

347

337Other expense

6,750

7,071

6,490Total Other Operating Expense

41,810

40,439

35,063Income Before Income Taxes

11,082

9,575

19,208Provision for income taxes

2,967

3,122

7,260Net Income

8,115

6,453

11,948Less: Net income attributable to the noncontrolling interest

388

370

290Net income attributable to Northrim Bancorp

$7,727

$6,083

$11,658Earnings Per Share, Basic

$1.22

$0.96

$1.82Earnings Per Share, Diluted

$1.20

$0.95

$1.80Weighted Average Shares Outstanding, Basic

6,345,948

6,358,595

6,400,974Weighted Average Shares Outstanding, Diluted

6,417,057

6,388,681

6,485,972    46




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##### Table of Contents



Consolidated Statements of Changes in
    AccumulatedCommon Stock

Additional



OtherNumber

Par

Paid-in

Retained

Comprehensive

Noncontrollingof Shares

Value

Capital

Earnings

Income

Interest

Total(In Thousands)Balance as of January 1, 2007

6,114

$6,114

$46,379

$43,212

$(287)

$29

$95,447Cash dividend declared







(3,560)





(3,560)Stock dividend

301

301

6,941

(7,242)





Stock option expense





578







578Exercise of stock options

23

23

50







73Excess tax benefits from share-based payment arrangements





108







108Treasury stock buy-back

(138)

(138)

(3,258)







(3,396)Distributions to noncontrolling interest











(295)

(295)Comprehensive income:Change in unrealized holding (gain/loss) on available for sale
    investment securities, net of related income tax effect









512



512Net Income attributable to the noncontrolling interest











290

290Net Income attributable to Northrim Bancorp







11,658





11,658Total Comprehensive Income













12,170Balance as of December 31, 2007

6,300

$6,300

$50,798

$44,068

$225

$24

$101,415Cash dividend declared







(4,193)





(4,193)Stock option expense





597







597Exercise of stock options

31

31

(3)







28Excess tax benefits from share-based payment arrangements





66







66Distributions to noncontrolling interest











(358)

(358)Comprehensive income:Change in unrealized holding (gain/loss) on available for sale
    investment securities, net of related income tax effect









676



676Net Income attributable to the noncontrolling interest











370

370Net Income attributable to Northrim Bancorp







6,083





6,083Total Comprehensive Income













6,759Balance as of December 31, 2008

6,331

$6,331

$51,458

$45,958

$901

$36

$104,684Cash dividend declared







(2,564)





(2,564)Stock option expense





648







648Exercise of stock options

40

40

7







47Excess tax benefits from share-based payment arrangements





26







26Distributions to noncontrolling interest











(376)

(376)Comprehensive income:Change in unrealized holding (gain/loss) on available for sale
    investment securities, net of related income tax effect









440



440Net Income attributable to the noncontrolling interest











388

388Net Income attributable to Northrim Bancorp







7,727





7,727Total Comprehensive Income













8,167Balance as of December 31, 2009

6,371

$6,371

$52,139

$51,121

$1,341

$48

$111,020    47




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##### Table of Contents



Consolidated Statements of Cash Flows
  2009

2008

2007(In Thousands)Operating Activities:Net income

$8,115

$6,453

$11,948Adjustments to Reconcile Net Income to Net Cash Provided by
    Operating Activities:Security gains

(220)

(146)

Depreciation and amortization of premises and equipment

1,635

1,384

1,123Amortization of software

160

176

240Intangible asset amortization

323

347

337Amortization of investment security premium, net of discount
    accretion

300

72

(500)Deferred tax (benefit)

(1,496)

(3,638)

(393)Stock-based compensation

648

597

578Excess tax benefits from share-based payment arrangements

(26)

(66)

(108)Deferral of loan fees and costs, net

86

(32)

(279)Provision for loan losses

7,066

7,199

5,513Gain on sale of loans held for sale

(64)



Purchases of loans held for sale

(75 096)



Proceeds from the sale of loans held for sale

75,160



Purchased receivable recovery (loss)

166

193

245(Gain) loss on sale of other real estate owned

(453)

(45)

(110)Impairment on other real estate owned

825

1,958

Distributions (proceeds) in excess of earnings from RML

(492)

49

118Equity in loss from Elliott Cove

115

106

93Loss on prepayment of borrowings

718



(Increase) decrease in accrued interest receivable

826

420

(316)(Increase) decrease in other assets

(6,503)

1,985

(2,283)Increase (decrease) of other liabilities

(1,811)

(748)

(22)Net Cash Provided by Operating Activities

9,982

16,264

16,184Investing Activities:Investment in securities:Purchases of investment securities 
    available-for-sale

(158,405)

(134,237)

(136,393)Purchases of investment securities 
    held-to-maturity

(1,217)

(1,001)

Proceeds from maturities of securities 
    available-for-sale

114,375

119,093

100,126Proceeds from sales of securities 
    available-for-sale

7,551

23,371

Proceeds from calls/maturities of securities 
    held-to-maturity

3,360

3,265

70Proceeds from maturities of domestic certificates of deposit

14,500

55,500

12,345Purchases of domestic certificates of deposit

(5,000)

(65,000)

(12,345)(Investment in) cash proceeds from purchased receivables, net

11,648

169

1,501Investments in loans:Loan participations

4,516

8,477

8,886Loans made, net of repayments

32,346

(20,359)

(2,502)Proceeds from sale of other real estate owned

9,120

2,583

266Investment in other real estate owned

(1,699)

(3,273)

Alaska First acquisition, net of cash received





12,699Investment in Elliott Cove



(100)

(100)Loan to Elliott Cove, net of repayments

(121)

108

(48)Purchases of premises and equipment

(425)

(15,496)

(3,861)Purchases of software, net of disposals

(103)

(106)

(183)Net Cash Provided (Used) by Investing Activities

30,446

(27,006)

(19,539)Financing Activities:Increase (decrease) in deposits

9,856

(24,124)

24,786Proceeds from borrowings



15,124

5,546Paydowns on borrowings

(18,504)

(1,788)

(401)Distributions to noncontrolling interest

(376)

(358)

(295)Proceeds from issuance of common stock

47

28

73Excess tax benefits from share-based payment arrangements

26

66

108Repurchase of common stock





(3,396)Cash dividends paid

(2,586)

(4,182)

(3,542)Net Cash Provided (Used) by Financing Activities

(11,537)

(15,234)

22,879Net Increase (Decrease) by Cash and Cash Equivalents

28,891

(25,976)

19,524Cash and cash equivalents at beginning of period

37,830

63,806

44,282Cash and Cash Equivalents at End of Year

$66,721

$37,830

$63,806Supplemental Information:Income taxes paid

$5,536

$5,657

$8,740Interest paid

$7,578

$13,708

$23,105Transfer of loans to other real estate owned

$12,441

$9,395

$4,486Loans made to facilitate sales of other real estate owned

$2,597

$0

$1,105Cash dividends declared but not paid

$26

$39

$28    48




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##### Table of Contents



Notes to
    Consolidated Financial Statements



NOTE 1  Summary of Significant Accounting
    Policies



Northrim BanCorp, Inc. (the Company), is a publicly
    traded bank holding company and is the parent company of
    Northrim Bank, a commercial bank that provides personal and
    business banking services through locations in Anchorage, Eagle
    River, Wasilla, and Fairbanks, Alaska, and a factoring division
    in Washington. The bank differentiates itself with a
    Customer First Service philosophy. Affiliated
    companies include Elliott Cove Capital Management, LLC
    (Elliott Cove), Residential Mortgage Holding
    Company, LLC (RML Holding Company) Northrim Benefits
    Group, LLC (NBG), and Pacific Wealth Advisors, LLC
    (PWA).



Method of accounting:The Company prepares its
    consolidated financial statements in conformity with accounting
    principles generally accepted in the United States and
    prevailing practices within the banking industry. The Company
    utilizes the accrual method of accounting which recognizes
    income and gains when earned and expenses and losses when
    incurred. The preparation of consolidated financial statements
    in conformity with accounting principles generally accepted in
    the United States (GAAP) requires management to make
    estimates and assumptions that affect the reported amounts of
    assets and liabilities, the disclosure of contingent assets and
    liabilities at the date of the consolidated financial
    statements, and the reported amounts of income, gains, expenses,
    and losses during the reporting periods. Actual results could
    differ from those estimates. Significant estimates include the
    allowance for loan losses, valuation of goodwill and other
    intangibles, and valuation of other real estate owned
    (OREO). The consolidated financial statements
    include the financial information for Northrim BanCorp, Inc. and
    its majority-owned subsidiaries that include Northrim Bank,
    Northrim Building Company (NBL), and NISC. All
    intercompany balances have been eliminated in consolidation. The
    Company accounts for its investments in RML Holding Company,
    Elliott Cove, and PWA using the equity method. Minority interest
    relates to the minority ownership in NBG.



Segments:Management has determined that the
    Company operates as a single operating segment. This
    determination is based on the fact that the chief executive
    officer reviews financial information and assesses resource
    allocation on a consolidated basis. Additionally, the aggregate
    revenue earned through, and total assets of, the insurance
    brokerage, mortgage lending and wealth management activities are
    less than 10% of the Companys consolidated total revenue
    and total assets.



Cash and Cash Equivalents:For purposes of
    reporting cash flows, cash and cash equivalents include cash on
    hand, amounts due from banks, interest-bearing deposits with
    other banks, bankers acceptances, commercial paper,
    securities purchased under agreement to resell, federal funds
    sold, and securities with maturities of less than 90 days
    at acquisition.



Investment Securities:Securities available for
    sale are stated at fair value with unrealized holding gains and
    losses, net of tax, excluded from earnings and reported as a
    separate component of other comprehensive income, unless an
    unrealized loss is deemed other than temporary. Gains and losses
    on available for sale securities sold are determined on a
    specific identification basis.



Held to maturity securities are stated at cost, adjusted for
    amortization of premium and accretion of discount on a
    level-yield basis. The Company has the ability and intent to
    hold these securities to maturity.



A decline in the market value of any available for sale or held
    to maturity security below cost that is deemed other than
    temporary results in a charge to earnings and the establishment
    of a new cost basis for the security. Unrealized investment
    securities losses are evaluated at least quarterly on a specific
    identification basis to determine whether such declines in value
    should be considered other than temporary and
    therefore be subject to immediate loss recognition in income.
    Although these evaluations involve significant judgment, an
    unrealized loss in the fair value of a debt security is
    generally deemed to be temporary when the fair value of the
    security is below the carrying value primarily due to changes in
    interest rates, there has not been significant deterioration in
    the financial condition of the issuer. The Company does not
    intend to sell, nor is it more likely than not that it will be
    required to sell, securities whose market value is less than
    carrying value. Because the Company has the intent and ability
    to hold these investments until a market price recovery or
    maturity, these investments are not considered other than
    temporarily impaired. Other factors that may be considered in
    determining whether a decline in the value is other than
    temporary include ratings by recognized rating agencies;
    actions of commercial banks or other lenders relative to the
    continued extension of credit facilities to the issuer of the
    security; the financial condition, capital strength and
    near-term prospects of the issuer, and recommendations of
    investment advisors or market analysts.



Loans, Recognition of Interest Income and Loan Fees:Loans are carried at their principal amount outstanding,
    net of unamortized fees and direct loan origination costs.
    Interest income on loans is accrued and recognized on the
    principal amount outstanding except for loans in a non accrual
    status. Loans are placed on non accrual when management believes
    doubt exists as to the collectibility of the interest or
    principal. Cash payments received on non accrual loans are
    directly applied to the principal balance. Generally, a loan may
    be returned to accrual status when the delinquent principal and
    interest are brought current in accordance with the terms of the
    loan agreement and certain ongoing performance criteria have
    been met.


49




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##### Table of Contents



Allowance for Loan Losses:
              Purchased Receivables:
  Premises and Equipment:
  Intangible Assets:
  Other Real Estate Owned:
 50




---



##### Table of Contents



Other Assets:
    Advertising:
  Income Taxes:
  Earnings Per Share:
    2009

2008

2007(In Thousands)Net income

$7,727

$6,083

$11,658Basic weighted average common shares outstanding

6,346

6,359

6,401Dilutive effect of potential common shares from awards granted
    under equity incentive program

71

30

85Diluted weighted average common shares outstanding

6,417

6,389

6,486Earnings per common shareBasic

$1.22

$0.96

$1.82Diluted

$1.20

$0.95

$1.80    51




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##### Table of Contents



Stock Option Plans:
  Comprehensive Income:
  Concentrations:
    Recent
    Accounting Pronouncements
  810-10-65-1, Consolidation Noncontrolling
    Interests in Consolidated Financial Statements
  Accounting for
    Transfers of Financial Assets 2009-01 Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities
  Amendments to
    FASB Interpretation 46(R) (as amended) 2009-01 Consolidation of Variable Interest Entities
 52




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##### Table of Contents



NOTE 2 
    Cash and Due from Banks
    NOTE 3 
    Overnight Investments
    December 31,

2009

2008(In Thousands)Interest bearing deposits at Federal Home Loan Bank (FHLB)

$255

$348Interest bearing deposits at Federal Reserve Bank (FRB)

47,071

6,557Total

$47,326

$6,905   one-day
  NOTE 4 
    Investment
    Securities    Gross

GrossAmortized

Unrealized

Unrealized

FairCost

Gains

Losses

Value(In Thousands)2009:Securities available for saleU.S. Treasury

$500

$2

$

$502U.S. Government Sponsored Entities

147,055

1,073

360

147,768U.S. Agency Mortgage-backed Securities

85

2



87Corporate bonds

28,242

1,576

16

29,802Total

$175,882

$2,653

$376

$178,159Securities held to maturityMunicipal securities

$7,285

$231



$7,516Federal Home Loan Bank stock

$2,003

$

$

$2,0032008:Securities available for saleU.S. Government Sponsored Entities

$115,936

$1,702

$173

$117,465U.S. Agency Mortgage-backed Securities

344

22

5

361Corporate bonds

23,203

251

270

23,184Total

$139,483

$1,975

$448

$141,010Securities Held to MaturityMunicipal Securities

$9,431

$98

$27

$9,502Federal Home Loan Bank Stock

$2,003

$

$

$2,003  53




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##### Table of Contents



Less Than 12 Months

More Than 12 Months

TotalUnrealized



Unrealized



UnrealizedFair Value

Losses

Fair Value

Losses

Fair Value

Losses(In Thousands)2009:Securities Available for SaleU.S. Government Sponsored Entities

$57,595

$360

$

$

$57,595

$360Corporate Bonds

1,417

16





1,417

16Total

$59,012

$376

$

$

$59,012

$376   December 31,

Less Than 12 Months

More Than 12 Months

TotalUnrealized



Unrealized



UnrealizedFair Value

Losses

Fair Value

Losses

Fair Value

Losses(In Thousands)2008:Securities Available for SaleU.S. Government Sponsored Entities

$4,881

$173

$

$

$4,881

$173Corporate Bonds

14,021

270





14,021

270U.S. Agency Mortgage-backed Securities

14

1

106

4

120

5Total

$18,916

$444

$106

$4

$19,022

$448Securities Held to MaturityMunicipal Securities

$2,646

$27

$

$

$2,646

$27   available-for-sale other-than-temporarily
 54




---



##### Table of Contents



WeightedAmortized



AverageCost

Fair Value

Yield(In Thousands)US Treasury and government sponsored entities
    Within 1 year

$20,000

$20,010

0.76%1-5 years

119,518

120,212

2.65%5-10 years

5,855

5,832

3.00%Over 10 years

2,182

2,216

0.00%Total

$147,555

$148,270

2.39%U.S. Agency Mortgage-backed Securities
    Within 1 year

$

$

0.00%1-5 years





0.00%5-10 years

85

87

4.57%Over 10 years





0.00%Total

$85

$87

4.57%Corporate bonds Within 1 year

$

$

0.00%1-5 years

26,809

28,385

4.51%5-10 years

1,433

1,417

4.82%Over 10 years





0.00%Total

$28,242

$29,802

4.53%Municipal securities
    Within 1 year

$1,419

$1,437

3.76%1-5 years

4,014

4,164

3.95%5-10 years

1,852

1,915

4.38%Over 10 years





0.00%Total

$7,285

$7,516

4.02%     Gross

GrossDecember 31,

Proceeds

Gains

Losses(In Thousands)2009:Available for sale securities

$
7,550

$220

$Held to maturity securities

$


$

$2008:Available for sale securities

$
23,371

$146

$Held to maturity securities

$


$

$2007:Available for sale securities

$
8,900

$

$Held to maturity securities

$


$

$  55




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##### Table of Contents



December 31,

2009

2008

2007(In Thousands)U.S. Treasury

$2

$23

$363U.S. Government Sponsored Entities

2,505

4,202

3,666U.S. Agency Mortgage-backed Securities

6

18

20Other

1,369

651

71Total taxable interest income

3,882

4,894

4,120Municipal Securities

252

172

Total tax-exempt interest income

252

172

Total

$4,134

$5,066

$4,120     other-than-temporary other-than-temporary other-than-temporary
  NOTE 5 
    Loans    December 31,

2009

2008(In Thousands)Commercial

$248,205

$293,249Real estate construction

62,573

100,438Real estate term

301,816

268,864Home equity lines and other consumer

45,243

51,447Sub-total

657,837

713,998Less: Unearned origination fees, net of origination costs

(2,798)

(2,712)Total loans

655,039

711,286Allowance for loan losses

(13,108)

(12,900)Net Loans

$641,931

$698,386  56




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##### Table of Contents



MaturityWithin

Within





Over

Over1 Year

1 Year

1-5 Years

1-5 Years

5 Years

5 YearsDecember 31, 2009

Fixed

Float

Fixed

Float

Fixed

Float

Total(In Thousands)Commercial

$31,707

$65,118

$34,816

$64,770

$5,578

$39,696

$241,685Construction

34,927

22,135

1,988

2,770





61,820Real estate term

20,696

6,245

41,060

54,287

13,759

161,064

297,111Real estate for sale













Home equity lines and other consumer

851

280

6,850

2,475

25,499

8,529

44,484Total

$88,181

$93,778

$84,714

$124,302

$44,836

$209,289

$645,100     December 31,

2009

2008(In Thousands)Balance, beginning of the year

$890

$2,041Loans made

631

818Repayments or change to nondirector status

547

1,969Balance, end of year

$974

$890  57




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##### Table of Contents



NOTE 6 
    Allowance
    for Loan Losses    December 31,

2009

2008

2007(In Thousands)Balance, beginning of the year

$12,900

$11,735

$12,125Allowance aquired with stock purchase





220Provision charged to operations

7,066

7,199

5,513Charge-offs:Commercial

(3,372)

(4,187)

(4,291)Construction

(1,308)

(1,004)

(2,982)Real estate

(2,478)

(1,402)

(599)Installment and other consumer

(509)

(132)

(45)Total Charge-offs

(7,667)

(6,725)

(7,917)Recoveries:Commercial

736

577

1,723Construction

7

61

50Real estate

11

3

Installment and other consumer

55

50

21Total Recoveries

809

691

1,794Charge-offs net of recoveries

(6,858)

(6,034)

(6,123)Balance, End of Year

$13,108

$12,900

$11,735   charge-offs.
  NOTE 7 
    Premises
    and Equipment  The following summarizes the components of premises and
    equipment:    December 31,

Useful Life

2009

2008(In Thousands)Land



$3,201

$3,201Vehicle

3 years

61

61Furniture and equipment

3-7 years

9,056

8,861Tenant improvements

2-15 years

6,409

6,469Buildings

39 years

24,247

24,070Total Premises and Equipment



42,974

42,662Accumulated depreciation and amortization



(14,451)

(12,929)Total Premises and Equipment, Net



$28,523

$29,733  58




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##### Table of Contents



NOTE 8 
    Other
    Real Estate Owned    NOTE 9 
    Other
    Assets    December 31,

2009

2008(In Thousands)Intangible assets:Goodwill

$7,524

$7,524Core deposits intangible

810

1,019NBG customer relationships

662

777Total

$8,996

$9,320Prepaid expenses

$6,873

$893Software

396

437Deferred taxes, net

14,951

13,762Note receivable from Elliott Cove

677

557Investment in Elliott Cove

(34)

82Investment in PWA

1,778

1,825Investment in RML Holding Company

4,652

4,161Investment in Low Income Housing Partnerships

6,158

6,940Bank owned life insurance

2,719

2,458Taxes receivable

342

217Other assets

2,297

1,343Total

$40,809

$32,675        59




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##### Table of Contents



Year Ending December 31:(In Thousands)2010

$3002011

2762012

2522013

2282014

204Thereafter

212Total

$1,472   start-up
     60




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##### Table of Contents



December 31,

2009

2008(Unaudited)(In Thousands)AssetsCash

$8,495

$7,366Loans held for sale

67,745

77,643Other assets

11,562

9,981Total Assets

$87,802

$94,990LiabilitiesLines of credit

$63,975

$73,390Other liabilities

5,884

4,865Total Liabilities

69,859

78,255Shareholders Equity

17,943

16,735Total Liabilities and Shareholders Equity

$87,802

$94,990Income/expenseGross income

$27,059

$17,188Total expense

18,326

13,930Joint venture allocations

379

635Net Income

$9,112

$3,893     NOTE 10 
    Deposits      Year Ending December 31:(In Thousands)2010

$100,0992011

34,1082012

10,1432013

3472014

132Thereafter

22Total

$144,851  61




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##### Table of Contents



NOTE 11 
    Borrowings                Year Ending December 31:(In Thousands)2010

$7,5552011

1402012

1472013

1572014

4,321Thereafter

Total

$12,320  62




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##### Table of Contents



NOTE 12 
    Junior
    Subordinated Debentures  90-day
  90-day
  NOTE 13 
    Interest
    Expense    December 31,

2009

2008

2007(In Thousands)Interest-bearing demand accounts

$170

$578

$1,188Money market accounts

740

3,306

7,378Savings accounts

1,240

3,444

8,756Certificates of deposit greater than $100,000

1,968

2,361

1,583Certificates of deposit less than $100,000

1,683

2,490

2,497Borrowings

1,268

1,723

1,835Total

$7,069

$13,902

$23,237  63




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##### Table of Contents



NOTE 14 
    Income
    Taxes      Current Tax

Deferred

TotalDecember 31,



Expense

(Benefit)

Expense(In Thousands)2009:

Federal

$3,703

$(1,274)

$2,429State

760

(222)

538Total



$4,463

$(1,496)

$2,9672008:

Federal

$5,360

$(2,822)

$2,538State

1,400

(816)

584Total



$6,760

$(3,638)

$3,1222007:

Federal

$6,026

$(303)

$5,723State

1,627

(90)

1,537Total



$7,653

$(393)

$7,260     December 31,

2009

2008

2007(In Thousands)Computed expected income tax expense

$3,743

$3,222

$6,621State income taxes, net

350

380

999Low income housing credits

(769)

(695)

(545)Other

(357)

215

185Total

$2,967

$3,122

$7,260  64




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##### Table of Contents



December 31,

2009

2008

2007(In Thousands)Deferred Tax Asset:Allowance for loan losses

$10,676

$9,855

$7,873Loan fees, net of costs

1,150

1,115

1,126Depreciation and amortization

884

814

902Other real estate owned

1,279

907

Other

4,158

4,824

3,165Total Deferred Tax Asset

$18,147

$17,515

$13,066Deferred Tax Liability:Unrealized gain on
    available-for-sale
    investment securities

$(936)

$(629)

$(158)Intangible amortization

(1,630)

(1,504)

(1,350)Other

(630)

(1,620)

(963)Total Deferred Tax Liability

$(3,196)

$(3,753)

$(2,471)Net Deferred Tax Asset

$14,951

$13,762

$10,595      65




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##### Table of Contents



NOTE 15 
    Comprehensive
    Income    TaxBefore Tax

(Expense)December 31,

Amount

Benefit

Net Amount(In Thousands)2009:Unrealized net holding gains on investment securities arising
    during 2009

$967

$(397)

$570Plus: Reclassification adjustment for net realized gains
    included in net income

(220)

90

(130)Net unrealized gains

$747

$(307)

$4402008:Unrealized net holding gains on investment securities arising
    during 2008

$1,290

$(528)

$762Plus: Reclassification adjustment for net realized gains
    included in net income

(146)

60

(86)Net unrealized gains

$1,144

$(468)

$6762007:Unrealized net holding gains on investment securities arising
    during 2007

$871

$(359)

$512Plus: Reclassification adjustment for net realized gains
    included in net income





Net unrealized gains

$871

$(359)

$512   NOTE 16 
    Employee
    Benefit Plans         66




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##### Table of Contents



NOTE 17 
    Common
    Stock      NOTE 18 
    Options  10-year
    Shares

Weighted

Range ofUnder

Average

ExerciseOption

Exercise Price

PriceDecember 31, 2006 outstanding

460,973

$12.73

$6.02-$25.94Granted  2007

64,445

16.93Forfeited

(4,349)

17.34Exercised

(32,624)

8.90December 31, 2007 outstanding

488,445

$13.50

$7.17-$25.94Granted  2008

58,127

5.71Forfeited

(5,021)

13.31Exercised

(47,657)

7.56December 31, 2008 outstanding

493,894

$13.16

$7.17-$25.94Granted  2009

41,166

5.21Forfeited

(1,103)

12.70Exercised

(60,202)

5.89December 31, 2009 outstanding

473,755

$13.40

$7.17-$25.94  67




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##### Table of Contents



WeightedNumber of

AverageShares

Exercise PriceOutstanding at January 1, 2009

431,150

$15.08Changes during the period:Granted

13,177

16.28Forfeited

(1,103)

12.70Exercised

(46,313)

7.66Outstanding at December 31, 2009

396,911

$15.99Options exercisable at December 31, 2009

350,787

$15.83Unexercisable options at December 31, 2009

46,124

$17.22     WeightedNumber of

AverageShares

Fair ValueOutstanding at January 1, 2009

62,744

$18.23Changes during the period:Granted

27,989

16.28Vested

(13,889)

25.15Forfeited



Outstanding at December 31, 2009

76,844

$16.27          68




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##### Table of Contents



GrantedStock Options:

Nov. 2009

Nov. 2008

Nov. 2007Expected option life (years)

8.4

8.4

8.3Risk free rate

3.30%

4.70%

4.37%Dividends per Share

$0.40

$0.40

$0.66Expected volatility factor

29.77%

30.21%

34.12%       Years Ended December 31,

2009

2008

2007(Dollars in Thousands)Options:Weighted-average grant-date fair value of stock options granted:

$4.73

$3.74

$7.55Total fair value of shares vested during the period:

260

296

342Total intrinsic value of options exercised:

351

382

406Restricted stock units:Weighted-average grant-date fair value of stock options granted:

$16.28

$12.74

$23.00       Average PeriodUnamortized

to ExpenseExpense

(years)(Dollars in Thousands)Stock options

$210

1.4Restricted stock

495

2.0Total

$705

1.7    69




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##### Table of Contents



NOTE 19 
    Commitments
    and Contingent Liabilities    Year Ending December 31:(In Thousands)2010

$8882011

8102012

6402013

4362014

427Thereafter

4,735Total

$7,936     Year Ending December 31:(In Thousands)2010

$7552011

7682012

1382013

1382014

Thereafter

Total

$1,799       Off-Balance Sheet Financial Instruments:
 70




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##### Table of Contents



December 31,

2009

2008(In Thousands)Off-balance sheet commitments:Commitments to extend credit

$166,704

$134,455Standby letters of credit

16,913

12,752       NOTE 20 
    Regulatory
    Matters     71




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##### Table of Contents



Consolidated

Actual

Adequately-Capitalized

Well-CapitalizedAmount

Ratio

Amount

Ratio

Amount

Ratio(In Thousands)As of December 31, 2009:Total Capital (to risk-weighted assets)

$131,976

15.24%

$69,279


3
    8.0%

$86,598

3
    10.0%Tier I Capital (to risk-weighted assets)

$121,202

13.98%

$34,679


3
    4.0%

$52,018

3
    6.0%Tier I Capital (to average assets)

$121,202

12.13%

$39,968


3
    4.0%

$49,960

3
    5.0%As of December 31, 2008:Total Capital (to risk-weighted assets)

$123,430

13.90%

$71,039


3
    8.0%

$88,799

3
    10.0%Tier I Capital (to risk-weighted assets)

$112,310

12.65%

$35,514


3
    4.0%

$53,271

3
    6.0%Tier I Capital (to average assets)

$112,310

11.54%

$38,937


3
    4.0%

$48,672

3
    5.0%  Northrim Bank

Actual

Adequately-Capitalized

Well-CapitalizedAmount

Ratio

Amount

Ratio

Amount

Ratio(In Thousands)As of December 31, 2009:Total Capital (to risk-weighted assets)

$122,625

14.30%

$68,601

3
    8.0%

$85,752

3
    10.0%Tier I Capital (to risk-weighted assets)

$111,879

13.05%

$34,292

3
    4.0%

$51,439

3
    6.0%Tier I Capital (to average assets)

$111,879

11.33%

$39,498

3
    4.0%

$49,373

3
    5.0%As of December 31, 2008:Total Capital (to risk-weighted assets)

$115,537

13.04%

$70,882

3
    8.0%

$88,602

3
    10.0%Tier I Capital (to risk-weighted assets)

$104,438

11.79%

$35,444

3
    4.0%

$53,165

3
    6.0%Tier I Capital (to average assets)

$104,438

10.77%

$38,782

3
    4.0%

$48,478

3
    5.0%   NOTE 21 
    Fair
    Value Measurements    Level 1:
  Level 2:
  Level 3:
 72




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##### Table of Contents



Cash and Overnight Investments:
  Investment Securities:
  Loans:
  Purchased Receivables:
  Deposit Liabilities:
  Borrowings:
  Junior Subordinated Debentures:
  Assets subject to non recurring adjustment to fair value:
  Commitments to Extend Credit and Standby Letters of
    Credit:
 73




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##### Table of Contents



Limitations:
  December 31,

2009

2008Carrying

Fair

Carrying

FairAmount

Value

Amount

Value(In Thousands)Financial Assets:Cash and money market investments

$66,721

$66,721

$37,830

$37,830Domestic certificates of deposit





9,500

9,500Investment securities

187,447

187,678

152,444

152,515Net loans

641,931

616,476

698,386

650,270Purchased receivables

7,261

7,261

19,075

19,075Accrued interest receivable

3,986

3,986

4,812

4,812Financial Liabilities:Deposits

$853,108

$841,629

$843,252

$845,560Accrued interest payable

394

394

903

903Borrowings

12,320

11,674

30,106

30,517Junior subordinated debentures

18,558

10,111

18,558

8,211Unrecognized Financial Instruments:Commitments to extend credit(a)

$166,704

$1,667

$134,455

$1,345Standby letters of credit(a)

16,913

169

12,752

128   (a)
    
    Carrying amounts reflect the
    notional amount of credit exposure under these financial
    instruments. 74




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##### Table of Contents



Quoted Prices inActive Markets for

Signifcant Other

SignificantIdentical Assets

Observable Inputs

UnobservableTotal

(Level 1)

(Level 2)

Inputs (Level 3)(In Thousands)2009:Available for sale securitiesU.S. Treasury

$502



$502

U.S. Government Sponsored Entities

147,768



147,768

U.S. Agency Mortgage-backed Securities

87



87Corporate bonds

29,802



29,802

Total

$178,159



$178,159

2008:Available for sale securitiesU.S. Government Sponsored Entities

$117,465



$117,465

U.S. Agency Mortgage-backed Securities

361



361Corporate bonds

23,184



23,184

Total

$141,010



$141,010

     Quoted Prices inActive Markets for

Signifcant OtherIdentical Assets

Observable Inputs

Significant Unobservable

Total (gains)Total

(Level 1)

(Level 2)

Inputs (Level 3)

losses(In Thousands)2009:Loans measured for
    impairment1

$
15,691






$
11,533


$
4,158


$
(622
)Other real estate
    owned2


7,330











7,330



825Total

$
23,021






$
11,533


$
11,488


$
2032008:Loans measured for
    impairment1

$
35,062






$
21,075


$
13,987


$
(160
)Other real estate
    owned2


10,520











10,520



1,958Total

$
45,582






$
21,075


$
24,507


$
1,798   1
    
    Relates to certain impaired
    collateral dependant loans. The impairment was measured based on
    the fair value of collateral, in accordance with the provisions
    of SFAS 114.2
    
    Relates to certain impaired other
    real estate owned. This impairment arose from an adjustment to
    the Companys estimate of the fair market value of these
    properties based on changes in estimated costs to complete the
    projects. 75




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##### Table of Contents



NOTE 22 
    Quarterly
    Results of Operations (Unaudited)  2009 Quarter Ended

Dec. 31

Sept. 30

June 30

March 31(In Thousands Except Per Share Amounts)Total interest income

$13,344

$13,404

$13,455

$13,287Total interest expense

1,507

1,662

1,789

2,111Net interest income

11,837

11,742

11,666

11,176Provision for loan losses

2,200

1,374

2,117

1,375Other operating income

2,945

3,360

3,650

3,582Other operating expense

9,891

10,867

10,532

10,520Income before income taxes

2,691

2,861

2,667

2,863Provision for income taxes

649

810

681

827Net Income

2,042

2,051

1,986

2,036Less: Net income attributable to the noncontrolling interest

96

102

109

81Net income attributable to Northrim

$1,946

$1,949

$1,877

$1,955BancorpEarnings per share, basic

$0.31

$0.31

$0.29

$0.31Earnings per share, diluted

$0.30

$0.30

$0.29

$0.31   2008 Quarter Ended

Dec. 31

Sept. 30

June 30

March 31(In Thousands Except Per Share Amounts)Total interest income

$13,864

$14,607

$14,887

$16,358Total interest expense

2,807

3,511

3,421

4,163Net interest income

11,057

11,096

11,466

12,195Provision for loan losses

1,500

2,000

1,999

1,700Other operating income

2,924

3,202

2,835

2,438Other operating expense

10,661

9,895

10,402

9,481Income before income taxes

1,820

2,403

1,900

3,452Provision for income taxes

775

751

367

1,229Net Income

1,045

1,652

1,533

2,223Less: Net income attributable to the noncontrolling interest

99

102

94

75Net income attributable to Northrim Bancorp

$946

$1,550

$1,439

$2,148Earnings per share, basic

$0.15

$0.24

$0.23

$0.34Earnings per share, diluted

$0.14

$0.24

$0.23

$0.34   NOTE 23 
    Disputes
    and Claims   76




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##### Table of Contents



NOTE 24 
    Parent
    Company Financial Information    Balance Sheets for December 31,

2009

2008

2007(In Thousands)AssetsCash

$5,220

$5,160

$3,951Investment in Northrim Bank

120,509

114,623

112,184Investment in NISC

1,866

2,025

1,795Investment in NCT1

248

248

248Investment in NST2

310

310

310Due from NISC

479

382

530Due from Northrim Building





312Due from Northrim Bank

111

14

Other assets

1,088

678

1,001Total Assets

$129,831

$123,440

$120,331LiabilitiesJunior subordinated debentures

$18,558

$18,558

$18,558Other liabilities

301

234

382Total Liabilities

18,859

18,792

18,940Shareholders EquityCommon stock

6,371

6,331

6,300Additional paid-in capital

52,139

51,458

50,798Retained earnings

51,121

45,958

44,068Accumulated other comprehensive income

1,341

901

225Total Shareholders Equity

110,972

104,648

101,391Total Liabilities and Shareholders Equity

$129,831

$123,440

$120,331   Statements of Income For Years
    Ended:

2009

2008

2007(In Thousands)IncomeInterest income

$70

$115

$518Net income from Northrim Bank

9,247

7,813

13,365Net loss from NISC

(67)

(24)

(95)Other income



30

Total Income

9,250

7,934

13,788ExpenseInterest expense

585

998

1,421Administrative and other expenses

2,137

1,765

1,691Total Expense

2,722

2,763

3,112Net Income Before Income Taxes

6,528

5,171

10,676Income tax expense (benefit)

(1,199)

(912)

(982)Net Income

$7,727

$6,083

$11,658   77




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##### Table of Contents



Statements of Cash Flows For Years
    Ended:

2009

2008

2007(In Thousands)Operating Activities:Net income

$7,727

$6,083

$11,658Adjustments to Reconcile Net Income to Net Cash:Equity in undistributed earnings from subsidiaries

(9,180)

(7,789)

(13,270)Stock-based compensation

648

597

578Changes in other assets and liabilities

(535)

611

(1,027)Net Cash Used from Operating Activities

(1,340)

(498)

(2,061)Investing Activities:Investment in Northrim Bank, NISC, NCT1 & NST2

3,891

5,795

140Net Cash Used by Investing Activities

3,891

5,795

140Financing Activities:Dividends paid to shareholders

(2,564)

(4,182)

(3,542)Proceeds from issuance of trust preferred securities





Proceeds from issuance of common stock and excess tax benefits

73

94

181Repurchase of common stock





(3,396)Net Cash Provided by Financing Activities

(2,491)

(4,088)

(6,757)Net Increase by Cash and Cash Equivalents

60

1,209

(8,678)Cash and Cash Equivalents at beginning of period

5,160

3,951

12,629Cash and Cash Equivalents at end of period

$5,220

$5,160

$3,951  78




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Conclusion
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
    Changes
    in Internal Controls
    Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f)
    Internal Control
     Integrated Framework
     79




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
                  
     80




---



##### Table of Contents



Item 9B.
    Other
    Information   Part III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Executive
    Officers/Age

Occupation*R. Marc Langland, 68

Chairman, President, & CEO of the Company, Chairman &
    CEO of the Bank; Director, Alaska Air Group; Director, Usibelli
    Coal Mine, Inc.*Christopher N. Knudson, 56

Executive Vice President and Chief Operating Officer of the
    Company and the BankJoseph M. Schierhorn, 52

Executive Vice President and Chief Financial Officer of the
    Company and the BankJoseph M. Beedle, 58

Executive Vice President of the Company and President of the BankSteven L. Hartung, 63

Executive Vice President of the Company and Executive Vice
    President and Quality Assurance Officer of the Bank     Directors/Age

OccupationLarry S. Cash, 58

President and CEO, RIM Architects LLC (Alaska, Guam, Hawaii and
    California) since 1986Mark G. Copeland, 67

Owner and sole member of Strategic Analysis, LLC, a management
    consulting firmRonald A. Davis, 77

Former Vice President, Acordia of Alaska Insurance (full service
    insurance agency) and Former CEO and Administrator, Tanana
    Valley ClinicAnthony Drabek, 62

President and CEO, Natives of Kodiak, Inc. (Alaska Native
    Corporation) since 1989, Chairman and President, Koncor Forest
    Products Co.; Secretary/Director, Atikon Forest Products Co.Richard L. Lowell, 69

Former President, Ribelin Lowell & Company (insurance
    brokerage firm)Irene Sparks Rowan, 68

Former Director, Klukwan, Inc. (Alaska Native Corporation) and
    its subsidiariesJohn C. Swalling, 60

President and Director, Swalling & Associates, P.C.
    (accounting firm) since 1991David G. Wight, 69

Former President and CEO, Alyeska Pipeline Service Company, and
    Director, Storm Cat Energy     Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stock Holders    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence   81




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##### Table of Contents



Item 14.
    Principal
    Accounting Fees and Services   Part IV  Item 15.  Exhibits and
    Financial Statement Schedules
    Form 10-K:
           82




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##### Table of Contents



Exhibits  3.1

Articles of Amendment to the Amended and Restated Articles of
    Incorporation (Incorporated by reference to Exhibit 3.3 of
    the Companys
    Form 10-Q
    for the quarter ended June 30, 2009, filed with the SEC on
    August 10, 2009.)3.2

Amended and Restated Articles of Incorporation (Incorporated by
    reference to Exhibit 3.1 of the Companys
    Form 8-A
    filed with the SEC on January 14, 2002.)3.3

Amended and Restated Bylaws (Incorporated by reference to
    Exhibit 3.4 of the Companys Current Report on
    Form 8-K
    filed with the SEC on November 24, 2009.)4.1

Pursuant to Item 601 (b)(4)(iii)(A) of
    Regulation S-K,
    copies of instruments defining rights of holders of long-term
    debt and preferred securities are not filed. The Company agrees
    to furnish a copy thereof to the Securities and Exchange
    Commission upon request.4.2

Indenture dated as of December 16, 2005 (Incorporated by
    reference to Exhibit 4.3 of the Companys
    Form 10-K
    for the year ended December 31, 2005, filed with the SEC on
    March, 16, 2006.)4.3

Form of Junior Subordinated Debt Security due 2036 (Incorporated
    by reference to Exhibit 4.4 of the Companys
    Form 10-K
    for the year ended December 31, 2005, filed with the SEC of
    March, 16, 2006.)10.1

Employee Stock Option and Restricted Stock Award Plan
    (Incorporated by reference to Exhibit 10.1 of the
    Companys
    Form 8-A,
    filed with the SEC on January 14, 2002.)10.2

2000 Employee Stock Incentive Plan (Incorporated by reference to
    Exhibit 10.2 of the Companys
    Form 8-A,
    filed with the SEC on January 14, 2002.)10.3

Supplemental Executive Retirement Plan dated July 1, 1994,
    as amended January 8, 2004 (Incorporated by reference to
    Exhibit 10.8 of the Companys
    Form 10-K
    for the year ended December 31, 2003, filed with the SEC on
    March 15, 2004.)10.4

Supplemental Executive Retirement Deferred Compensation Plan
    (Incorporated by reference to Exhibit 10.9 of the
    Companys
    Form 10-K
    for the year ended December 31, 2002, filed with the SEC on
    March 19, 2003.)10.5

2004 Stock Incentive Plan (Incorporated by reference to
    Exhibit 10.10 of the Companys
    Form 10-K
    for the year ended December 31, 2003, filed with the SEC on
    March 15, 2004.)10.6

Capital Securities Purchase Agreement dated December 14,
    2005 (Incorporated by reference to Exhibit 10.12 of the
    Companys
    Form 10-K
    for the year ended December 31, 2005, filed with the SEC on
    March 16, 2006.)10.7

Amended and Restated Declaration of Trust Northrim
    Statutory Trust 2 dated as of December 16, 2005
    (Incorporated by reference to Exhibit 10.13 of the
    Companys
    Form 10-K
    for the year ended December 31, 2005, filed with the SEC on
    March 16, 2006.)10.8

Supplemental Executive Retirement Plan dated July 1, 1994,
    as amended January 1, 2005 (Incorporated by reference to
    Exhibit 10.21 to the Companys
    Form 10-Q
    for the quarter ended September 30, 2007, filed with the
    SEC on November 8, 2007.)10.9

Deferred Compensation Plan dated January 1, 1995, as
    amended January 1, 2005(Incorporated by reference to
    Exhibit 10.22 to the Companys
    Form 10-Q
    for the quarter ended September 30, 2007, filed with the
    SEC on November 8, 2007.)10.10

Supplemental Executive Retirement Deferred Compensation Plan
    dated February 1, 2002, as amended January 1, 2005
    (Incorporated by reference to Exhibit 10.23 to the
    Companys
    Form 10-Q
    for the quarter ended September 30, 2007, filed with the
    SEC on November 8, 2007.)10.11

Supplemental Executive Retirement Plan dated July 1, 1994,
    as amended May 1, 2008, effective as of January 1,
    2005 (Incorporated by reference to Exhibit 10.25 to the
    Companys Current Report on
    Form 8-K,
    filed with the SEC on May 8, 2008.)10.12

Deferred Compensation Plan dated January 1, 1995, as
    amended May 1, 2008 effective as of January 1, 2005
    (Incorporated by reference to Exhibit 10.26 to the
    Companys Current Report on
    Form 8-K,
    filed with the SEC on May 8, 2008.)10.13

Supplemental Executive Retirement Deferred Compensation Plan
    dated February 1, 2002, as amended May 1, 2008
    effective as of January 1, 2005 (Incorporated by reference
    to Exhibit 10.27 of the Companys Current Report on
    Form 8-K,
    filed with the SEC on May 8, 2008.)10.14

Northrim Bank Executive Incentive Plan dated November 3,
    1994, as amended effective as of May 14, 2009 (Incorporated
    by reference to Exhibit 10.29 to the Companys Current
    Report on
    Form 8-K
    filed with the SEC on May 20, 2009.)10.15

Amendment to Amended and Restated Employment Agreement with
    Joseph M. Beedle, dated August 24, 2009 (Incorporated by
    reference to Exhibit 10.30 to the Companys Current
    Report on
    Form 8-K,
    filed with the SEC on August 26, 2009.)10.16

Employment Agreement with R. Marc Langland dated January 1,
    2010 (Incorporated by reference to Exhibit 10.31 to the
    Companys Current Report on
    Form 8-K,
    filed with the SEC on January 7, 2010.)10.17

Employment Agreement with Christopher N. Knudson dated
    January 1, 2010 (Incorporated by reference to
    Exhibit 10.32 to the Companys Current Report on
    Form 8-K,
    filed with the SEC on January 7, 2010.)10.18

Employment Agreement with Joseph M. Schierhorn dated
    January 1, 2010 (Incorporated by reference to
    Exhibit 10.33 to the Companys Current Report on
    Form 8-K,
    filed with the SEC on January 7, 2010.)10.19

Employment Agreement with Joseph M. Beedle dated January 1,
    2010 (Incorporated by reference to Exhibit 10.34 to the
    Companys Current Report on
    Form 8-K,
    filed with the SEC on January 7, 2010.) 83




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##### Table of Contents



10.20

Employment Agreement with Steven L. Hartung dated
    January 1, 2010 (Incorporated by reference to
    Exhibit 10.35 to the Companys Current Report on
    Form 8-K,
    filed with the SEC on January 7, 2010.)16.1

Letter of KPMG LLP (Incorporated by reference to Exhibit 16.1 to
    the Companys Current Report on Form 8-K, filed with the
    SEC on February 3, 2010.)21.1

Subsidiaries23.1

Consent of KPMG LLP24.1

Power of Attorney31.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200232.2

Certification of the Chief Financial Officer pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002  84




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##### Table of Contents



Annual
    Report on
    Form 10-K
        92-0175752
   (907) 562-0062
            Rule 12b-2
         Rule 12b-2
   Regulation S-K Form 10-K.
         Form 10-K Form 10-K.
 85




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##### Table of Contents



Signatures    Northrim BanCorp, Inc.
  By
    /s/  R.
    Marc Langland          
       
   
   Form 10-K,
  Larry S. Cash


R. Marc LanglandMark G. Copeland


Richard L. LowellRonald A. Davis


Irene Sparks RowanAnthony Drabek


John C. SwallingChristopher N. Knudson


David G. Wight   By
    /s/  R.
    Marc Langland      86




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##### Table of Contents



Investor
    Information
  Annual
    Meeting
  Date:

Thursday, May 20, 2010Time:

9 a.m.Location:

Hilton Anchorage Hotel
    500 West Third Avenue
    Anchorage, AK 99501   Stock
    Symbol
    Auditor
      Transfer
    Agent and Registrar
  1-800-937-5449
  Legal
    Counsel
    Information
    Requests
    
    Visit our home page, www.northrim.com, and click on the
    For Investorssection for stock information
    and copies of earnings and dividend releases.
    If you would like to be added to Northrims investor
    e-mail list
    or have investor information mailed to you, send a request to
    investors@nrim.com or call our Corporate Secretary at
    (907) 261-3301.  Written requests should be mailed to the following
    address:
    99524-1489
  (907) 562-0062
 (907) 562-1758
 E-mail:
 http://www.northrim.com
 87