What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-05 compared with 2020-03-06 · 127 added, 54 removed, 276 unchanged (40% of the section changed)

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The Company has grown to be the third largest commercial bank in Alaska and in Anchorage in terms of deposits, with $1.8 billion in total deposits and $2.1 billion in total assets at December 31, 2020.

Through our sixteen banking branches and twelve mortgage origination offices, we are accessible to approximately 90% of the Alaska population.

Through our sixteen banking branches and twelve mortgage origination offices, we are accessible to approximately 90% of the Alaskan population.

The Company has three direct wholly-owned subsidiaries:

• Northrim Bank (the “Bank”), a state chartered, full-service commercial bank headquartered in Anchorage, Alaska.

The Bank is regulated by the Federal Deposit Insurance Corporation (the "FDIC") and the State of Alaska Department of Commerce, Community and Economic Development, Division of Banking, Securities and Corporations.

The Bank is regulated by the Federal Deposit Insurance Corporation (the "FDIC") and the State of Alaska Department of Commerce, Community and Economic Development, Division of Banking, Securities

and Corporations.

The Bank has sixteen branch locations in Alaska;

eight in Anchorage, one in Wasilla, two in Juneau, one in Fairbanks, one in Ketchikan, one in Sitka, one in Eagle River, and one in Soldotna.

Additionally, we have a loan production office in Kodiak.

We operate in Washington State through Northrim Funding Services (“NFS”), a factoring business that the Bank started in 2004.

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Community Banking and Home Mortgage Lending.

Measures of the revenues, profit or loss, and total assets for each of the Company's segments are included in this report, Item 8.

Measures of the revenues, profit or loss, and total assets for each of the Company's segments are included in this report, Part II.

"Financial Statements and Supplementary Data", which is incorporated herein by reference.

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We retain servicing for home mortgages that we originate and sell to the Alaska Housing Finance Corporation.

We believe that there is opportunity to increase the Company’s loan portfolio, particularly in the commercial portion of the portfolio, in the Company’s current market areas through existing and new customers.

We believe that there is

opportunity to increase the Company’s loan portfolio, particularly in the commercial portion of the portfolio, in the Company’s current market areas through existing and new customers.

Management believes that our real estate construction and term real estate loan departments have developed a strong level of expertise and will continue to compete favorably in our markets.

We have also targeted the acquisition of new customers in professional fields including physicians, dentists, accountants, and attorneys.

In addition to lending products, in many cases commercial customers also require multiple deposit and affiliate services that add franchise value to the Company.

While we expect that opportunities for growth in 2020 will be modest mainly due to the lower oil prices compared to pre-2014 levels, which has led to a slower economy in Alaska, we believe that these strategies will continue to benefit the Company, and we intend to continue to grow our balance sheet through increasing our market share.

In addition to lending products, in many cases commercial customers also require multiple deposit and affiliated services that add franchise value to the Company.

While we expect that opportunities for growth in 2021 will be modest mainly due to the impacts of the COVID-19 pandemic and the lower oil prices compared to pre-2020 levels, which has led to a slower economy in Alaska, we believe that these strategies will continue to benefit the Company, and we intend to continue to grow our balance sheet through increasing our market share.

The Company benefits from solid capital and liquidity positions, and management believes that this provides a competitive advantage in the current business environment.

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Our guiding principle is to serve our market areas by operating with a “Superior Customer First Service” philosophy, affording our customers the highest priority in all aspects of our operations.

We believe that our successful execution of this philosophy has created a strong core deposit franchise that provides a stable, low cost funding source for expanded growth in all of our lending areas.

We believe that our adherence to this philosophy has created a strong core deposit franchise that provides a stable, low cost funding source for expanded growth in all of our lending areas.

We have devoted significant resources to future deposit product development, expansion of electronic services for both personal and business customers, and enhancement of information security related to these services.

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Continued success in maintaining or further improving the credit quality of our loan portfolio and managing our level of other real estate owned is a significant aspect of the Company’s strategy for attaining sustainable, long-term market growth to produce increased shareholder value.

Human Capital Resources

We believe that we provide a high level of customer service.

To achieve our objective of providing “Superior Customer First Service”, management emphasizes the hiring and retention of competent and highly motivated employees at all levels of the organization.

To achieve our objective of providing “Superior Customer First Service”, in managing its human capital resources, management emphasizes the hiring and retention of competent and highly motivated employees at all levels of the organization.

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.

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The Company continues to enhance our company-wide employee training program which focuses on Northrim culture, Superior Customer First Service, general sales skills, and various technical areas.

The Company complies with all applicable state and local laws governing nondiscrimination in employment in every location in which the Company operates.

All applicants and employees are treated with the same high level of respect regardless of their gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability or protected veteran status.

Employee Profile and Diversity

We consider our relations with our employees to be highly satisfactory.

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Of the 438 full-time equivalent employees, 312 were Community Banking employees and 126 were Home Mortgage Lending employees.

Among the Company's full-time equivalent employees as of December 31, 2020, 72% identify as women and 28% as men.

Approximately 35% of the workforce identify as a member of a racial minority, 5% identify as individuals with a disability, and 2% identify as veterans.

In executive and senior management positions, 52% identify as women and 48% as men as of December 31, 2020.

Approximately 4% of those in executive and senior management positions identify as a member of a racial minority, 4% identify as individuals with a disability, and 4% identify as veterans.

We work every day to create an open and respectful environment where everyone can actively contribute, have equal access to opportunities and resources, be themselves, and realize their potential.

As an Equal Opportunity Employer, we emphasize inclusion through hiring and compensation practices and consider a pool of diverse candidates for open positions and internal advancement opportunities.

To address issues related to pay discrimination, we do not ask potential candidates

about their current or previous compensation during the hiring process, and we incorporate equal and fair pay reviews into every employment compensation decision.

To reinforce our corporate culture of respect, diversity, and inclusion, each of our employees completes anti-harassment training annually.

Support of Human Capital in Response to COVID-19

In response to COVID-19 related state and local government orders to stay at home, since April of 2020 a portion of the Company's employees have worked remotely directly due to the pandemic.

As of December 31, 2020, approximately 45% of the Company's employees are working remotely either on a full- or part-time basis directly due to COVID-19.

These employees primarily hold non-customer facing positions within the Company.

Prior to the pandemic, less than 8% of the Company's employees worked remotely.

The increase in the number of employees that work remotely has had no material impact on the Company's operations.

In addition to remote work arrangements, the Company has expanded other flexible work options including variable work hours, condensed work weeks, and part-time hours to assist employees with managing personal matters during the pandemic caused by COVID-19.

Lastly, the Company expanded tele-health and employee assistance program benefits to help employees manage their physical and emotional health during the pandemic.

Products and Services

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We also believe we have a significant niche in construction and land development lending in Anchorage, Fairbanks, the Matanuska-Susitna Valley, the Kenai Peninsula, and Southeast Alaska.

(See “Loans” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.)

(See “Loans” in Part II.

Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.)

Purchase of accounts receivable:

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• Insured cash sweep and business sweep;

• Consumer online banking, mobile app, and mobile deposit;

• Business online banking, business mobile app, and business mobile deposit;

• Instantly issued debit cards for business and consumer accounts at account opening.

Other Services :

In addition to our traditional deposit and lending services, we offer our customers several convenience services:

Consumer Online Banking, Mobile App and Mobile Deposit, Mobile Web and Text Banking, Business Online Banking, Business Mobile App and Business Mobile Deposit, consumer online account opening, Personal Finance, Online Documents, Consumer Debit Cards, Business Debit Cards, instantly issued debit cards at account opening, My Rewards for consumer debit cards, card controls, Consumer Credit Cards, Business Credit Cards, Business Employee Purchase Cards, home equity advantage access cards, telebanking, and automated teller services.

Other special services include personalized checks at account opening, overdraft protection from a savings account, extended banking hours and commercial drive-up banking at many locations, automatic transfers and payments, People Pay (a peer-to-peer payment functionality), external transfers, Bill Pay, wire transfers, direct payroll deposit, electronic tax payments, Automated Clearing House origination and receipt, remote deposit capture, account reconciliation and positive pay, merchant services, cash management programs and sweep options to meet the specialized needs of business customers, annuity products, and long term investment portfolios.

Mobile Web and Text Banking, consumer online account opening, Personal Finance, Online Documents, Consumer Debit Cards, Business Debit Cards, My Rewards for consumer debit cards, retail lockbox services, card controls, Consumer Credit Cards, Business Credit Cards, Business Employee Purchase Cards, home equity advantage access cards, telebanking, and

automated teller services.

Other services include personalized checks at account opening, overdraft protection from a savings account, extended banking hours and commercial drive-up banking at many locations, automatic transfers and payments, People Pay (a peer-to-peer payment functionality), external transfers, Bill Pay, wire transfers, direct payroll deposit, electronic tax payments, Automated Clearing House origination and receipt, remote deposit capture, account reconciliation and positive pay, merchant services, cash management programs and sweep options to meet the needs of business customers, annuity products, and long term investment portfolios.

Other Services Provided Through Affiliates and Former Affiliates Whom We Continue To Work With:

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No individual or single group of related accounts is considered material in relation to our total assets or total revenues, or to the total assets, deposits or revenues of the Bank, or in relation to our overall business.

Based on classification by North American Industry Classification System ("NAICS"), there are no segments that exceed 10% of portfolio loans, except for real estate (see Note 5 , Loans and Credit Quality, of the Notes to Consolidated Financial Statements included in Item 8 of this report for a breakout of real estate loans).

In addition to its review of NAICS codes, the Company has also identified concentrations in one specialized industry.

We estimate that as of December 31, 2019 approximately 8% of portfolio loans have direct exposure to the oil and gas industry in Alaska.

Based on classification by North American Industry Classification System ("NAICS"), there are no segments that exceed 10% of portfolio loans, except for real estate (see Note 5, Loans and Credit Quality, of the Notes to Consolidated Financial Statements included in Part II.

Item 8 of this report for a breakout of real estate loans).

In addition to its review of NAICS codes, the Company has also identified concentrations in various industries that may be adversely impacted by the COVID-19 pandemic and the decline in oil prices.

We estimate that as of December 31, 2020 the Company had $78.9 million, or 5% of portfolio loans, in the tourism sector, $56.1 million, or 4% of portfolio loans, in the aviation (non-tourism) sector, $96.9 million, or 7% of total loans, in the healthcare sector, $65.1 million, or 4%, in the oil and gas sector, $17.4 million, or 1%, in retail loans and $31.0 million, or 2% in the restaurant sector, and $37.2 million, or 3% in the accommodations sector.

At December 31, 2020, the Company had $78.9 million, or 7% of portfolio loans excluding PPP loans, in the tourism sector, $56.1 million, or 5% of portfolio loans excluding PPP loans, in the aviation (non-tourism) sector, $96.9 million, or 8% of total loans excluding PPP loans, in the healthcare sector, $65.1 million, or 6% of total loans excluding PPP loans, in the oil and gas sector, $17.4 million, or 2% of total loans excluding PPP loans, in retail loans and $31.0 million, or 3% of total loans excluding PPP loans in the restaurant sector, and $37.2 million, or 3% of total loans excluding PPP loans in the accommodations sector.

Additionally, approximately 43% of our loan portfolio at December 31, 2020 is attributable to 35 large borrowing relationships.

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Key sectors of the Alaska economy are the oil industry, government and military spending, and the fishing, mining, tourism, air cargo, transportation, and construction industries, as well as health services.

Recent Economic Developments

After three consecutive years of a mild recession, the Alaska economy began to show a positive change in the fourth quarter of 2018, with improvements continuing throughout 2019 and the first part of 2020 until the COVID-19 pandemic caused a significant and sudden negative impact on the economy in Alaska.

The State Department of Labor reported a year-over-year loss of 24,100 jobs, or 7.7% in December 2020 compared to December of 2019 following moderate growth of 1,900 jobs, or 0.6%, in December of 2019 compared to December of 2018.

The Alaska Department of Labor predicts a recovery of 8,600 jobs, or an approximately 2.8% increase in total employment in 2021.

The Company anticipates this relatively slow growth rate will have an impact on our ability to grow organically in the next few years.

Alaska’s annualized and seasonally adjusted gross state product (“GSP”) was $50.4 billion in the third quarter of 2020, compared to $54.5 billion in the third quarter of 2019, according to the Federal Bureau of Economic Analysis ("BEA") in a report released on December 23, 2020.

Alaska’s real GSP increased by 0.7% in 2018 and 0.6% in 2019.

2020 has been very erratic primarily due to the impact of COVID-19.

According to the BEA, Alaska’s GSP declined 6% at a seasonally adjusted annualized rate in the first quarter of 2020 and declined 33.8% in second quarter.

However, in the third quarter of 2020 the GSP in Alaska improved 32.2% at an annualized rate.

This is very similar to the nationwide averages for the U.S.

which, according to the BEA, saw a decline of 5% in the first quarter of 2020, a loss of 31.4% in the second quarter and a positive improvement of 33.4% in the third quarter.

In the third quarter of 2020 in Alaska, the largest improvements came from Transportation and Warehousing, Government, Health Care and Accommodation and Food Services.

Alaska’s seasonally adjusted personal income for the third quarter of 2020 was $48.6 billion compared to $46 billion in the third quarter of 2019, according to a report released by the BEA on December 17, 2020.

In a typical year, the majority of personal income is derived from wage earnings.

Additionally, some people receive government transfer payments, such as social security, Medicare and Medicaid.

Personal income is further supported by earnings from dividends, interest and rents.

In the second quarter of 2020, Alaska’s personal income rose by $2.6 billion compared to the prior year as government transfer payments rose by $4.9 billion, according to the BEA, mainly from COVID-19 stimulus payments.

This was somewhat offset by a $2.2 billion reduction in wage income and a $139 million decrease in investment and rental income.

In the third quarter of 2020, these two major segments of income reversed.

Wage earnings improved by $2.6 billion and government transfer payments decreased by $3.5 billion compared to the prior quarter.

Investment and rental income was relatively unchanged, down $55 million.

The net effect of all this movement is that personal income is $2.6 billion or 5.6% higher in the third quarter of 2020 in Alaska than where it was in the third quarter of 2019, according to the BEA.

Alaska’s home mortgage delinquency and foreclosure levels continue to be better than most of the nation.

According to the Mortgage Bankers Association, Alaska’s foreclosure rate was 0.49% at the end of the third quarter of 2020.

The comparable national average rate was 0.59% for the same time period 2020.

The national rate continues to improve, while the Alaska rate remains relatively lower.

The survey also reported that the percentage of delinquent mortgage loans in Alaska was 6.78% for the third quarter of 2020.

The comparable delinquency rate for the entire country was higher at 7.60% for the same time period in 2020.

A material portion of our loans at December 31, 2020, were secured by real estate located in greater Anchorage, Matanuska-Susitna Valley, Fairbanks, and Southeast Alaska.

In 2020, 45% of our revenue was derived from the residential housing market in the form of loan fees and interest on residential construction and land development loans and income from RML as compared to 31% and 29% in 2019 and 2018, respectively.

Real estate values generally are affected by economic and other conditions in the area where the real estate is located, fluctuations in interest rates, changes in tax and other laws, and other matters outside of our control.

A decline in real estate values in the greater Anchorage, Matanuska-Susitna Valley, Fairbanks, and Southeast Alaska areas could significantly reduce the value of the real estate collateral securing our real estate loans and could increase the likelihood of defaults under these loans.

At December 31, 2020, $780.1 million, or 54%, of our loan portfolio was represented by commercial loans in Alaska.

Long Term Economic Factors

We believe the long-term growth of the Alaska economy will most likely be determined by large scale natural resource development projects.

Several multi-billion dollar projects can potentially advance in the moderate-term.

Some of these projects include copper, gold and molybdenum production at the Donlin mine and continued exploration in the National Petroleum Reserve Alaska and potential oil exploration in the Arctic National Wildlife Refuge.

Some of these projects include copper, gold and molybdenum production at the proposed Donlin mine and continued exploration in the National Petroleum Reserve Alaska.

Because of their size, we believe each of these projects faces tremendous challenges.

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We continue to be encouraged by announcements from several oil exploration companies announcing new oil fields on the North Slope resulting from increased exploration activity that began in 2018 that could lead to future increases in oil production over time.

After three consecutive years of a mild recession, the Alaska economy began to show a positive change in the fourth quarter of 2018, with improvements continuing throughout 2019.

The State Department of Labor reported growth of 1,900 jobs, or 0.6%, in December of 2019 compared to December of 2018.

After 37 months of year-over-year declines, Alaska had 15 consecutive months of year-over-year job increases as of December 2019.

The Alaska Department of Labor predicts a recovery of another 1,100 jobs, or an approximately 0.3% increase in total employment in 2020.

While this is an improvement compared to the job losses that occurred in 2016-2018, the Company anticipates this relatively slow growth rate will have an impact on our ability to grow organically in the next few years.

Alaska’s home mortgage delinquency and foreclosure levels continue to be better than most of the nation.

According to the Mortgage Bankers Association, Alaska’s foreclosure rate was 0.71% at the end of the third quarter of 2019.

The comparable national average rate was 0.84% for the same time period 2019.

The national rate continues to improve, while the Alaska rate remains relatively lower.

The survey also reported that the percentage of delinquent mortgage loans in Alaska was 3.16% for the third quarter of 2019.

The comparable delinquency rate for the entire country was higher at 4.09%.

We believe our exposure to the tourism industry diversifies the Company's customer base.

We believe our exposure to the tourism industry diversifies the Company's customer base in the long-term.

We believe this helps mitigate the effect that the decline in natural resource industries, specifically the oil industry, in Alaska has had on the Company's operations.

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Based on the latest information from Rain Coast Data, approximately one million cruise ship tourists have visited Southeast Alaska annually in recent years and in 2019, this increased 7% to 1.2 million.

A material portion of our loans at December 31, 2019 , were secured by real estate located in greater Anchorage, Matanuska-Susitna Valley, Fairbanks, and Southeast Alaska.

In 2019, 31% of our revenue was derived from the residential housing market in the form of loan fees and interest on residential construction and land development loans and income from RML as compared to 29% and 30% in 2018 and 2017, respectively.

At December 31, 2019 , $412.7 million , or 39% , of our loan portfolio was represented by commercial loans in Alaska.

However, in 2020, there was essentially no cruise ship activity due to the COVID-19 pandemic and we are uncertain if, or when, cruise ship activity will return to historical levels.

Alaska’s residents are not subject to any state income or state sales taxes.

For over 30 years, Alaska residents have received annual distributions payable in October of each year from the Alaska Permanent Fund Corporation, which is supported by royalties from oil production.

The distribution was $1,600 per eligible resident in 2019 for an aggregate distribution of approximately $1 billion.

The distribution was $992 per eligible resident in 2020 for an aggregate distribution of approximately $640 million.

The Anchorage Economic Development Corporation estimates that, for most Anchorage households, distributions from the Alaska Permanent Fund Corporation exceed other Alaska taxes to which those households are subject (primarily real estate taxes).

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Currently, there are seven commercial banks operating in Alaska.

At June 30, 2019 , the date of the most recently available information, Northrim Bank had approximately a 12% share of the Alaska bank deposits, 17% in the Anchorage area, 14% in Juneau, 14% in Sitka, 11% in Matanuska-Susitna, 6% in Ketchikan, and 5% in Fairbanks.

At June 30, 2020, the date of the most recently available information, Northrim Bank had approximately a 12% share of the Alaska bank deposits, 17% in the Anchorage area, 18% in Juneau, 15% in Matanuska-Susitna, 13% in Sitka, 10% in Fairbanks, 6% in Ketchikan, and 1% in the Kenai Peninsula.

The following table sets forth market share data for the banks and credit unions having a presence in Alaska as of June 30, 2020, the most recent date for which comparative deposit information is available.

Financial institution

Number of branches

Total deposits (in thousands)

Market share of total financial institution deposits

Market share of total bank deposits

Financial institution Number of branches Total deposits (in thousands) Market share of total financial institution deposits Market share of total bank deposits

Northrim Bank (1)

16 $1,752,109 7 % 12.3 %

Wells Fargo Bank Alaska (1)

43 7,152,819 28 % 50.3 %

First National Bank Alaska (1)

27 2,912,046 12 % 20.4 %

13 1,082,449 4 % 7.6 %

First Bank (1)

9 590,622 2 % 4.2 %

McKinley Bank (1)

5 424,901 2 % 3.0 %

Denali State Bank (1)

5 312,196 1 % 2.2 %

Total bank branches 118 $14,227,142 56 % 100 %

Credit unions (2)

79 $10,968,880 44 % NA

Total financial institution branches 197 $25,196,022 100 % 100 %

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These include limitations on the ability of the Bank to pay dividends to the Company, numerous federal and state consumer protection laws imposing requirements on the making, enforcement, and collection of consumer loans, and restrictions on and regulation of the sale of mutual funds and other uninsured investment products to customers.

Regulation of banks and the financial services industry has been undergoing major changes in recent years, including the enactment in 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and several provisions were significantly changed by enactment of the Economic Growth Regulatory Relief and Consumer Protection Act in May 2018.

The Dodd-Frank Act significantly modifies and expands legal and regulatory requirements imposed on banks and other financial institutions.

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and (vi) restrictions and prohibitions on the ability of banking entities to engage in proprietary trading and to invest in or have certain relationships with hedge funds and private equity funds.

The Trump administration and various members of Congress from time to time have expressed a desire to modify or repeal parts of the Dodd-Frank Act.

We cannot predict whether any modification or repeal will be enacted or, if so, any effect they would have on our business, operation or financial condition or on the financial services industry in general.

The Trump Administration and various members of Congress previously expressed a desire to modify or repeal parts of the Dodd-Frank Act.

We cannot predict whether the Biden administration will support any modification or repeal of any portion of the Dodd-Frank Act or whether any modification or repeal will be enacted or, if so, any effect they would have on our business, operation or financial condition or on the financial services industry in general.

In December 2013, the Federal Reserve, the Office of the Comptroller of the Currency, the FDIC, the Securities and Exchange Commission (“SEC”), and the Commodities Futures Trading Commission issued final rules to implement certain provisions of the Dodd-Frank Act commonly known as the “Volcker Rule.” The Volcker Rule, as amended on August 20, 2019, generally prohibits U.S.

banks from engaging in proprietary trading and restricts those banking entities from sponsoring, investing in, or having certain relationships with hedge funds and private equity funds.

The prohibitions under the Volcker Rule are subject to a number of statutory exemptions, restrictions, and definitions.

The Volcker Rule has not had a material impact on the Company’s Consolidated Financial Statements, but we continue to evaluate its application to our current and future operations.

The Gramm-Leach-Bliley Act (the “GLB Act”), which was enacted in 1999, allows bank holding companies to elect to become financial holding companies, subject to certain regulatory requirements.

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The activities or acquisitions of bank holding companies, such as the Company, that are not financial holding companies, are limited to those which constitute banking, managing or controlling banks or which are closely related activities.

A bank holding company is required to obtain the prior approval of the FRB for the acquisition of more than 5% of the outstanding shares of any class of voting securities or substantially all of the assets of any bank or bank holding company.

A bank holding company is required to obtain the prior approval of the FRB for

the acquisition of more than 5% of the outstanding shares of any class of voting securities or substantially all of the assets of any bank or bank holding company.

Nonbank acquisitions and activities of a bank holding company are also generally limited to the acquisition of up to 5% of the outstanding shares of any class of voting securities of a company unless the FRB has previously determined that the nonbank activities are closely related to banking, or prior approval is obtained from the FRB.

The GLB Act also included extensive consumer privacy provisions.

These provisions, among other things, require full disclosure of the Company’s privacy policy to consumers and mandate offering the consumer the ability to “opt out” of having non-public personal information disclosed to third parties.

Pursuant to these provisions, the federal banking regulators adopted privacy regulations.

These provisions, among other things, limit the ability of banks and other financial institutions to disclose nonpublic consumer information to non-affiliated third parties.

The regulations require disclosure of privacy policies and allow consumers to prevent certain personal information from being shared with non-affiliated third parties.

The Fair and Accurate Credit Transaction Act (“FACT Act”) requires financial institutions to develop and implement an identity theft prevention program to detect, prevent and mitigate identity theft “red flags” to reduce the risk that customer information will be misused to conduct fraudulent financial transactions.

As a result of the Dodd-Frank Act, the rule-making authority for the privacy provisions of the GLB Act has been transferred to the CFPB.

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The percentage weights range from 0% to 1,250%.

An asset's risk-

weighted value will generally be its percentage weight multiplied by the asset's value as determined under generally accepted accounting principles.

An asset's risk-weighted value will generally be its percentage weight multiplied by the asset's value as determined under generally accepted accounting principles.

In addition, certain off-balance-sheet items are converted to balance-sheet credit equivalent amounts, and each amount is then assigned to one of the risk categories.

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Both the Company and the Bank were required to begin compliance with the Rules on January 1, 2015.

The conservation buffer started to be phased in beginning in 2016 took full effect on January 1, 2019.

The conservation buffer took full effect on January 1, 2019.

Certain calculations under the Rules will also have phase-in periods.

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The intent of the CBLR is to simplify but not weaken capital requirements for qualifying community banks.

Management is still assessing whether or not the Bank will opt into these new capital rules.

Management has not elected to opt in to these new capital rules.

However, the guidelines allow the Company to opt in to the simplification in the future should our assessment change.

In addition to the minimum capital standards, the federal banking agencies have issued regulations to implement a system of "prompt corrective action." These regulations apply to the Bank but not the Company.

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In its most recent CRA examination, the Bank received a “Satisfactory” rating from the FDIC.

The Company is also subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”).

Among other things, the USA PATRIOT Act requires the Company and the Bank to adopt and implement specific policies and procedures designed to prevent and defeat money laundering.

The Company is also subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) and the Anti-Money Laundering Act of 2020 (the “AMLA”).

Among other things, the USA PATRIOT Act and AMLA require the Company and the Bank to adopt and implement specific policies and procedures designed to prevent and defeat money laundering.

Management believes the Company is in compliance with the USA PATRIOT Act as in effect on December 31, 2020.

In addition, the Company and its affiliates are subject to a broad array of financial and state consumer protection laws and regulations.

Among other things, these laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions deal with their customers.

The AMLA was passed on January 1, 2021 and regulatory agencies are in the process of finalizing rules and regulations required by the passage of the AMLA.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act into law.

The CARES Act established several new temporary U.S.

Small Business Administration (“SBA”) loan programs to assist U.S.

small businesses through the COVID-19 pandemic.

One of the new loan programs is the PPP, an expansion of the SBA’s 7(a) loan program and the Economic Injury Disaster Loan Program.

The PPP provides loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during this emergency.

Eligible borrowers need to make a good faith certification that the uncertainty of current economic conditions make requesting assistance necessary to support ongoing operations.

Pursuant to the provisions of Section 1106 of the CARES Act, borrowers may apply to the Bank for loan forgiveness of all or a portion of the loan, subject to certain eligibility requirements and conditions.

The Bank is an SBA lender and began accepting applications under the CARES Act via its online application process on April 3, 2020.

As of December 31, 2020, the Bank had 2,498 PPP loans totaling $310.5 million outstanding.

A number of other federal and state consumer protection laws extensively govern the Bank’s relationship with its customers.

These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, Telephone Consumer Protection Act, the Service Members Civil Relief Act and these laws’ respective state-law counterparts, as well as state and territorial usury laws and laws regarding unfair and deceptive acts and practices.

These and other laws subject the Bank to substantial regulatory oversight and, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive practices, and restrict the Bank’s ability to raise interest rates.

Available Information

The Company’s annual report on Form 10-K and quarterly reports on Form 10-Q, as well as its current reports on Form 8-K and proxy statement filings (and all amendments thereto), which are filed with the Securities and Exchange Commission (“SEC”), are accessible free of charge at our website at http://www.northrim.com as soon as reasonably practicable after filing with the SEC.

The Company’s annual report on Form 10-K and quarterly reports on Form 10-Q, as well as its current reports on Form 8-K and proxy statement filings (and all amendments thereto), which are filed with the SEC, are accessible free of charge at our website at http://www.northrim.com as soon as reasonably practicable after filing with the SEC.

By making this reference to our website, the Company does not intend to incorporate into this report any information contained in the website.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business