10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2007

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number 000-33501

NORTHRIM BANCORP, INC.

(Exact name of registrant as specified in its charter)

Alaska	92-0175752
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3111 C Street Anchorage, Alaska	99503
(Address of principal executive offices)	(Zip Code)

(907) 562-0062
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated o      Accelerated filer þ      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o      No þ

The number of shares of the issuer’s Common Stock outstanding at November 2, 2007 was 6,317,788.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets
- September 30, 2007 (unaudited)	4
- December 31, 2006	4
- September 30, 2006 (unaudited)	4
Consolidated Statements of Income (unaudited)
- Three and nine months ended September 30, 2007 and 2006	5
Consolidated Statements of Comprehensive Income (unaudited)
- Three and nine months ended September 30, 2007 and 2006	6
Consolidated Statements of Cash Flows (unaudited)
- Nine months ended September 30, 2007 and 2006	7
Notes to the Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	31
PART II OTHER INFORMATION
Item 1. Legal Proceedings	32
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3. Defaults Upon Senior Securities	32
Item 4. Submission of Matters to a Vote of Security Holders	32
Item 5. Other Information	33
Item 6. Exhibits	33
SIGNATURES	34
EXHIBIT 10.21
EXHIBIT 10.22
EXHIBIT 10.23
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

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PART I. FINANCIAL INFORMATION

These consolidated financial statements should be read in conjunction with the financial statements, accompanying notes and other relevant information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

ITEM 1. FINANCIAL STATEMENTS

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NORTHRIM BANCORP, INC.

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2007, DECEMBER 31, 2006, AND SEPTEMBER 30, 2006

	September 30,			December 31,			September 30,
	2007			2006			2006
	(unaudited)						(unaudited)
	(Dollars in thousands, except per share data)
ASSETS
Cash and due from banks	$	26,159		$	25,565		$	30,316
Money market investments		78,443			18,717			39,778
Investment securities held to maturity		11,702			11,776			11,778
Investment securities available for sale		77,278			86,993			62,550
Investment in Federal Home Loan Bank stock		1,556			1,556			1,556
Total investment securities		90,536			100,325			75,884
Loans		694,949			717,056			698,076
Allowance for loan losses		(12,074	)		(12,125	)		(12,646	)
Net loans		682,875			704,931			685,430
Purchased receivables, net		23,168			21,183			20,215
Accrued interest receivable		5,629			4,916			5,473
Premises and equipment, net		13,910			12,874			11,888
Goodwill and intangible assets		6,656			6,903			7,024
Other assets		31,496			30,206			25,592
Total Assets	$	958,872		$	925,620		$	901,600
LIABILITIES
Deposits:
Demand	$	208,441		$	206,343		$	196,466
Interest-bearing demand		86,250			89,476			83,178
Savings		51,645			48,330			49,436
Alaska CDs		187,765			207,492			209,290
Money market		187,448			157,345			156,564
Certificates of deposit less than $100,000		58,448			57,601			57,296
Certificates of deposit greater than $100,000		37,612			28,317			24,557
Total deposits		817,609			794,904			776,787
Borrowings		12,698			6,502			5,767
Junior subordinated debentures		18,558			18,558			18,558
Other liabilities		9,703			10,209			8,218
Total liabilities		858,568			830,173			809,330
Minority interest in subsidiaries		29			29			27
SHAREHOLDERS’ EQUITY
Common stock, $1 par value, 10,000,000 shares authorized, 6,317,268; 6,114,247; and 6,109,426 shares issued and outstanding at September 30, 2007, December 31, 2006, and September 30, 2006, respectively		6,317			6,114			6,109
Additional paid-in capital		51,094			46,379			46,177
Retained earnings		42,861			43,212			40,298
Accumulated other comprehensive income — unrealized gain (loss) on securities, net		3			(287	)		(341	)
Total shareholders’ equity		100,275			95,418			92,243
Total Liabilities and Shareholders’ Equity	$	958,872		$	925,620		$	901,600

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
	(unaudited)						(unaudited)
	(Dollar in thousands, except per share data)
Interest Income
Interest and fees on loans	$	16,613		$	16,601		$	50,370		$	48,165
Interest on investment securities:
Assets available for sale		853			638			2,614			1,604
Assets held to maturity		111			87			335			247
Interest on money market investments		893			515			1,506			852
Total Interest Income		18,470			17,841			54,825			50,868
Interest Expense
Interest expense on deposits and borrowings		6,058			5,904			17,923			16,106
Net Interest Income		12,412			11,937			36,902			34,762
Provision for loan losses		725			850			2,513			1,764
Net Interest Income After Provision for Loan Losses		11,687			11,087			34,389			32,998
Other Operating Income
Service charges on deposit accounts		873			494			2,269			1,468
Purchased receivable income		744			579			1,820			1,345
Employee benefit plan income		319			271			890			829
Equity in earnings from mortgage affiliate		202			317			390			472
Equity in loss from Elliott Cove		(20	)		(53	)		(71	)		(192	)
Other income		665			595			1,817			1,660
Total Other Operating Income		2,783			2,203			7,115			5,582
Other Operating Expense
Salaries and other personnel expense		5,110			4,790			15,526			14,226
Occupancy, net		695			626			2,013			1,864
Equipment expense		333			325			1,040			1,023
Marketing expense		468			445			1,396			1,397
Intangible asset amortization expense		28			121			249			362
Other operating expense		1,925			1,354			5,891			4,468
Total Other Operating Expense		8,559			7,661			26,115			23,340
Income Before Income Taxes and Minority Interest		5,911			5,629			15,389			15,240
Minority interest in subsidiaries		85			70			215			218
Income Before Income Taxes		5,826			5,559			15,174			15,022
Provision for income taxes		2,200			2,108			5,677			5,737
Net Income	$	3,626		$	3,451		$	9,497		$	9,285
Earnings Per Share, Basic	$	0.57		$	0.54		$	1.48		$	1.45
Earnings Per Share, Diluted	$	0.56		$	0.53		$	1.46		$	1.43
Weighted Average Shares Outstanding, Basic		6,386,334			6,428,830			6,420,054			6,420,642
Weighted Average Shares Outstanding, Diluted		6,480,057			6,520,261			6,515,894			6,508,240

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
	(unaudited)				(unaudited)
	(Dollars in thousands)				(Dollars in thousands)
Net income	$	3,626	$	3,451	$	9,497	$	9,285
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period		257		351		290		148
Less: reclassification adjustment for realized gains		—		—		—		—
Comprehensive Income	$	3,883	$	3,802	$	9,787	$	9,433

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

	Nine Months Ended
	September 30,
	2007			2006
	(unaudited)
	(Dollars in thousands)
Operating Activities:
Net income	$	9,497		$	9,285
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and amortization of premises and equipment		845			821
Amortization of software		185			292
Intangible asset amortization		249			362
Amortization of investment security premium, net of discount accretion		(435	)		(68	)
Deferred tax (benefit)		(668	)		(1,296	)
Stock-based compensation		415			287
Excess tax benefits from share-based payment arrangements		(57	)		(166	)
Deferral of loan fees and costs, net		(23	)		124
Provision for loan losses		2,513			1,764
Purchased receivable loss		245			—
Gain on sale of other real estate owned		(28	)		—
Distributions in excess of earnings from RML		108			53
Equity in loss from Elliott Cove		71			192
Minority interest in subsidiaries		215			218
(Increase) in accrued interest receivable		(713	)		(1,076	)
(Increase) in other assets		(933	)		(3,252	)
Increase (decrease) of other liabilities		(461	)		4,185
Net Cash Provided by Operating Activities		11,025			11,725
Investing Activities:
Investment in securities:
Purchases of investment securities-available-for-sale		(51,281	)		(14,802	)
Purchases of investment securities-held-to-maturity		—			(10,907	)
Proceeds from sales/maturities of securities-available-for-sale		61,929			5,053
Proceeds from calls/maturities of securities-held-to-maturity		70			65
Investment in purchased receivables, net of repayments		(2,230	)		(8,017	)
Investments in loans:
Sales of loans and loan participations		7,438			18,753
Loans made, net of repayments		12,016			(11,718	)
Proceeds from sale of other real estate owned		140			—
Investment in Elliott Cove		(100	)		(210	)
Repayment of loan to Elliott Cove		20			125
Loan to PWA, net of repayments		—			385
Purchases of premises and equipment		(1,881	)		(2,106	)
Purchases of software		(178	)		(65	)
Net Cash Provided (Used) by Investing Activities		25,943			(23,444	)
Financing Activities:
Increase (decrease) in deposits		22,705			(3,079	)
Increase (decrease) in borrowings		6,196			(2,648	)
Distributions to minority interests		(215	)		(191	)
Proceeds from issuance of common stock		119			231
Excess tax benefits from share-based payment arrangements		57			225
Repurchase of common stock		(2,915	)		(410	)
Cash dividends paid		(2,595	)		(2,005	)
Net Cash Provided (Used) by Financing Activities		23,352			(7,877	)
Net Increase (Decrease) in Cash and Cash Equivalents		60,320			(19,596	)
Cash and cash equivalents at beginning of period		44,282			89,690
Cash and cash equivalents at end of period	$	104,602		$	70,094
Supplemental Information:
Income taxes paid	$	6,572		$	6,390
Interest paid	$	17,786		$	16,139
Cash dividends declared but not paid	$	11		$	0

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 2007 and 2006

1. BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared by Northrim BanCorp, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made to prior year amounts to maintain consistency with the current year with no impact on net income or total shareholders’ equity. Operating results for the interim period ended September 30, 2007, are not necessarily indicative of the results anticipated for the year ending December 31, 2007. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

2. STOCK REPURCHASE

In June 2007, the Board of Directors of the Company amended the stock repurchase plan (“Plan”) to increase the stock in its repurchase program by an additional 305,029, or 5%, of total shares outstanding, bringing the total shares available and authorized for repurchase under the Plan at that time to 342,242. In the three-month period ending September 30, 2007, the Company repurchased 75,000 shares, which brought the total shares repurchased under this program to 663,442 shares since its inception at a total cost of $13.7 million at an average price of $20.70. In the nine-month period ending September 30, 2007, the Company repurchased 112,500 shares at a total cost of $2.9 million, which decreased additional paid-in-capital by $2.8 million. As a result of these stock repurchases, there were 252,242 shares remaining under the Plan at September 30, 2007. The Company intends to continue to repurchase its common stock from time to time depending upon market conditions, but it can make no assurances that it will repurchase all of the shares authorized for repurchase under the Plan.

3. DIVIDENDS

On September 6, 2007, the Company declared a 5% stock dividend and distributed 301,000 shares to its shareholders on October 5, 2007, which increased its additional paid-in-capital by $6.9 million as of September 30, 2007. In addition, for the nine-month period ending September 30, 2007, the Company declared cash dividends of $2.6 million as compared to cash dividends declared of $2.0 million for the nine-month period ending September 30, 2006.

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4. LENDING ACTIVITIES

The following table sets forth the Company’s loan portfolio composition by loan type for the dates indicated:

	September 30, 2007						December 31, 2006						September 30, 2006
	Dollar			Percent			Dollar			Percent			Dollar			Percent
	Amount			of Total			Amount			of Total			Amount			of Total
	(Dollars in thousands)
Commercial	$	297,882			43	%	$	287,155			40	%	$	293,427			42	%
Construction/development		141,268			20	%		153,059			21	%		150,772			22	%
Commercial real estate		213,214			31	%		237,599			33	%		215,664			31	%
Consumer		45,472			7	%		42,140			6	%		41,032			6	%
Loans in process		113			0	%		126			0	%		309			0	%
Unearned loan fees		(3,000	)		0	%		(3,023	)		0	%		(3,128	)		0	%
Total loans	$	694,949			100	%	$	717,056			100	%	$	698,076			100	%

5. ALLOWANCE FOR LOAN LOSSES, NONPERFORMING ASSETS, AND LOANS MEASURED FOR IMPAIRMENT

The Company maintains an Allowance for Loan Losses (the “Allowance”) to reflect inherent losses from its loan portfolio as of the balance sheet date. On a quarterly basis, the Company uses three methods to analyze the Allowance by taking percentage allocations for criticized and classified assets, in addition to a specific allowance for impaired loans, making percentage allocations based upon its internal risk classifications and other specifically identified portions of its loan portfolio, and using ratio analysis and peer comparisons.

The Allowance for Loan Losses is decreased by loan charge-offs and increased by loan recoveries and provisions for loan losses. The Company took a provision for loan losses in the amount of $725,000 for the three-month period ending September 30, 2007 to account for increases in nonperforming loans, loan charge-offs, and the specific allowance for impaired loans. The following table details activity in the Allowance for the periods indicated:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2007		2006			2007		2006
			(Dollars in thousands)
Balance at beginning of period	$	11,841	$	11,581		$	12,125	$	10,706
Charge-offs:
Commercial		146		257			3,006		452
Construction/development		—		—			—		—
Commercial real estate		599		—			599		—
Consumer		2		2			43		71
Total charge-offs		747		259			3,648		523
Recoveries:
Commercial		251		437			1,023		652
Construction/development		—		—			50		—
Commercial real estate		—		28			—		28
Consumer		4		9			11		19
Total recoveries		255		474			1,084		699
Net, (recoveries) charge-offs		492		(215	)		2,564		(176	)
Provision for loan losses		725		850			2,513		1,764
Balance at end of period	$	12,074	$	12,646		$	12,074	$	12,646

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Nonperforming assets consist of nonaccrual loans, accruing loans of 90 days or more past due, restructured loans, and real estate owned. The following table sets forth information with respect to nonperforming assets:

	September 30, 2007		December 31, 2006		September 30, 2006
	(Dollars in thousands)
Nonaccrual loans	$	5,666	$	5,176	$	5,532
Accruing loans past due 90 days or more		2,917		708		2,811
Restructured loans		17		748		—
Total nonperforming loans		8,600		6,632		8,343
Real estate owned		717		717		—
Total nonperforming assets	$	9,317	$	7,349	$	8,343
Allowance for loan losses	$	12,074	$	12,125	$	12,646

At September 30, 2007, December 31, 2006, and September 30, 2006, the Company had loans measured for impairment of $40.6 million, $32 million, and $27.5 million, respectively. A specific allowance of $3.8 million, $4.3 million, and $3.7 million, respectively, was established for these periods. The increase in loans measured for impairment at September 30, 2007, as compared to December 31, 2006, resulted mainly from the addition of two residential construction and land development projects that were not included in loans measured for impairment at December 31, 2006 and September 30, 2006. The increase in loans measured for impairment at December 31, 2006, as compared to September 30, 2006, resulted mainly from the addition of one commercial loan relationship.

6. INVESTMENT SECURITIES

Investment securities, which include Federal Home Loan Bank stock, totaled $90.5 million at September 30, 2007, a decrease of $9.8 million, or 10%, from $100.3 million at December 31, 2006, and an increase of $14.6 million, or 19%, from $75.9 million at September 30, 2006. Investment securities designated as available for sale comprised 85% of the investment portfolio at September 30, 2007, 87% at December 31, 2006, and 82% at September 30, 2006, and are available to meet liquidity requirements. Both available for sale and held to maturity securities may be pledged as collateral to secure public deposits. At September 30, 2007, $23.9 million in securities, or 26%, of the investment portfolio was pledged, as compared to $16 million, or 16%, at December 31, 2006, and $14.7 million, or 19%, at September 30, 2006.

7. OTHER OPERATING INCOME

In December of 2005, the Company, through Northrim Capital Investments Co. (“NCIC”), a wholly-owned subsidiary of Northrim Bank, purchased an additional 40.1% interest in Northrim Benefits Group, LLC (“NBG”), which brought its ownership interest in this company to 50.1%. As a result of this increase in ownership, the Company now consolidates the balance sheet and income statement of NBG into its financial statements and notes the minority interest in this subsidiary as a separate line item on its financial statements. In the three-month periods ending September 30, 2007 and 2006, the Company included employee benefit plan income from NBG of $319,000 and $271,000, respectively, in its Other Operating Income. In the nine-month periods ending September 30, 2007 and 2006, the Company included employee benefit plan income from NBG of $890,000 and $829,000, respectively, in Other Operating Income. These increases are directly related to a growing client base as well as the utilization of additional products and services by existing clients.

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Residential Mortgage, LLC (“RML”) was formed in 1998 and has offices throughout Alaska. During the third quarter of 2004, RML reorganized and became a wholly-owned subsidiary of a newly formed holding company, Residential Mortgage Holding Company, LLC (“RML Holding Company”). In this process, RML Holding Company acquired another mortgage company, Pacific Alaska Mortgage Company. Prior to the reorganization, the Company, through NCIC, owned a 30% interest in the profits and losses of RML. Following the reorganization, the Company’s interest in RML Holding Company decreased to 23.5%. In the three-month period ending September 30, 2007, the Company’s earnings from RML decreased by $115,000 to $202,000 as compared to $317,000 for the three-month period ending September 30, 2006. In the nine-month period ending September 30, 2007, the Company’s earnings from RML Holding Company decreased by $82,000 to $390,000 as compared to $472,000 for the nine-month period ending September 30, 2006. In both the three and nine-month periods ending September 30, 2007, the decrease in earnings resulted from RML’s income decreasing due to the decline in mortgage loan originations.

The Company owns a 46% equity interest in Elliott Cove Capital Management LLC (“Elliott Cove”), an investment advisory services company, through its wholly—owned subsidiary, Northrim Investment Services Company (“NISC”). Elliott Cove began active operations in the fourth quarter of 2002 and has had losses since that time as it continues to build its assets under management. In addition to its ownership interest, the Company provides Elliot Cove with a line of credit that has a commitment amount of $750,000 and an outstanding balance of $597,000 as of September 30, 2007.

The Company’s share of the loss from Elliott Cove for the third quarter of 2007 was $20,000, as compared to a loss of $53,000 in the third quarter of 2006. In the nine-month period ending September 30, 2007, the Company’s share of the loss from Elliott Cove was $71,000 as compared to a loss of $192,000 for the nine-month period ending September 30, 2006. The loss that the Company realized on its investment in Elliott Cove decreased for both the three and nine-month periods ending September 30, 2007 as compared to the same periods in 2006 as Elliott Cove continued to increase its assets under management which caused its income to increase more than its expenses resulting in a lower operating loss.

In the first quarter of 2006, through NISC, the Company purchased a 24% interest in Pacific Wealth Advisors, LLC (“PWA”). PWA is a holding company that owns Pacific Portfolio Consulting, LLC (“PPC”) and Pacific Portfolio Trust Company (“PPTC”). PPC is an investment advisory company with an existing client base while PPTC is a start-up operation. During the three and nine-month periods ending September 30, 2007, the Company incurred losses of $23,000 and $95,000, respectively, on its investment in PWA as compared to losses of $56,000 and $104,000, respectively, for the same periods in 2006. The decrease in the Company’s share of PWA losses for both of these periods is due to increased client fees earned on PWA’s growing client base. The decrease in the Company’s share of losses for the nine-month period ending September 30, 2007 is less than the rate of decrease for the three-month period ending September 30, 2007 primarily because the Company recorded only eight months of losses in 2006 as compared to nine months of losses in 2007. The losses that the Company incurs on its investment in PWA reduce other income during the respective periods. The overall decrease in the loss for the nine-month period results from the fact that increased client fees more than offset the additional month of losses recorded in 2007. The losses from PWA and Elliott Cove were offset by commissions that the Company receives for its sales of Elliot Cove investment products, which are accounted for as other operating income. Furthermore, the Company expects to incur losses over the next several years as PWA builds the customer base of its combined operations.

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8. STOCK INCENTIVE PLAN

The Company has set aside 330,750 shares of authorized stock for the 2004 Stock Incentive Plan (“2004 Plan”) under which it may grant stock options and restricted stock units. The Company’s policy is to issue new shares to cover awards. The total number of shares under the 2004 Plan and previous stock incentive plans at September 30, 2007 was 436,868, which includes 144,336 shares granted under the 2004 Plan leaving 186,414 shares available for future awards. Under the 2004 Plan, certain key employees have been granted the option to purchase set amounts of common stock at the market price on the day the option was granted. Optionees, at their own discretion, may cover the cost of exercise through the exchange, at then fair market value, of already owned shares of the Company’s stock. Options are granted for a 10-year period and vest on a pro rata basis over the initial three years from grant. In addition to stock options, the Company has granted restricted stock units to certain key employees under the 2004 Plan. These restricted stock grants cliff vest at the end of a three-year time period.

The Company recognized expenses of $55,000 and $29,000 on the fair value of restricted stock units and $83,000 and $53,000 on the fair value of stock options for a total of $138,000 and $82,000 in stock-based compensation expense for the three-month periods ending September 30, 2007 and 2006, respectively.

For the nine-month periods ending September 30, 2007 and 2006, the Company recognized expense of $165,000 and $87,000, respectively, on the fair value of restricted stock units and $250,000 and $199,000, respectively, on the fair value of stock options for a total of $415,000 and $287,000, respectively, in stock-based compensation expense.

Proceeds from the exercise of stock options for the three months ended September 30, 2007 and 2006 were $93,000 and $125,000, respectively. For the nine-month periods ending September 30, 2007 and 2006, proceeds from the exercise of stock options were $232,000 and $423,000, respectively. The Company withheld $109,000 and $170,000 to pay for stock option exercises or income taxes that resulted from the exercise of stock options for the three-month periods ending September 30, 2007 and 2006, respectively, and $113,000 and $192,000 for the nine-month periods ending September 30, 2007 and 2006, respectively. The Company recognized tax deductions of $24,000 and $87,000 related to the exercise of these stock options during the quarter ended September 30, 2007 and 2006, respectively, and $57,000 and $225,000 for the nine-month periods ending September 30, 2007 and 2006, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements describe Northrim’s management’s expectations about future events and developments such as future operating results, growth in loans and deposits, continued success of Northrim’s style of banking, and the strength of the local economy. All statements other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this report are forward-looking. We use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions in part to help identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations, and those variations may be both material and adverse. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: the general condition of, and changes in, the Alaska economy; factors that impact our net interest margins; and our ability to maintain asset quality. Further, actual results may be affected by our ability to compete on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in our filings with the SEC. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations. In addition, you should note that we do not intend to update any of the forward-looking statements or the uncertainties that may adversely impact those statements.

OVERVIEW

GENERAL

Northrim BanCorp, Inc. (the “Company”) is a publicly traded bank holding company (Nasdaq: NRIM) with four wholly-owned subsidiaries: Northrim Bank (the “Bank”), a state chartered, full-service commercial bank, Northrim Investment Services Company (“NISC”), which we formed in November 2002 to hold the Company’s equity interest in Elliott Cove Capital Management LLC (“Elliott Cove”), an investment advisory services company; Northrim Capital Trust 1 (“NCT1”), an entity that we formed in May 2003 to facilitate a trust preferred securities offering by the Company, and Northrim Statutory Trust 2 (“NST2”), an entity that we formed in December 2005 to facilitate a trust preferred securities offering by the Company. We also hold a 23.5% interest in the profits and losses of a residential mortgage holding company, Residential Mortgage Holding Company, LLC (“RML Holding Company and mortgage affiliate”), through the Bank’s wholly-owned subsidiary, Northrim Capital Investments Co. (“NCIC”). Residential Mortgage LLC (“RML”), the predecessor of RML Holding Company, was formed in 1998 and has offices throughout Alaska. We also now operate in the Washington and Oregon market areas through Northrim Funding Services (“NFS”), a division of the Bank that we started in the third quarter of 2004. NFS purchases accounts receivable from its customers and provides them with working capital. In addition, through NCIC, we hold a 50.1% interest in Northrim Benefits Group, LLC (“NBG”), an insurance brokerage company that focuses on the sale and servicing of employee benefit plans. Finally, in the first quarter of 2006, through NISC, we purchased a 24% interest in Pacific Wealth Advisors, LLC (“PWA”), an investment advisory and wealth management business located in Seattle, Washington.

SUMMARY OF THIRD QUARTER RESULTS

At September 30, 2007, the Company had assets of $958.9 million and gross portfolio loans of $694.9 million, an increase of 6% and a decrease of less than 1%, respectively, as compared to the balances for these accounts at September 30, 2006. As compared to balances at December 31, 2006, total assets at September 30, 2007 increased by 4% and total loans at September 30, 2007 decreased by 3%. The Company’s net income and diluted earnings per share at September 30, 2007, were $3.6 million and $0.56, respectively, an increase of 5% each, as compared to the same period in 2006. For the quarter ended September 30, 2007, the Company’s net interest income increased $475,000, or 4%, its provision for loan losses decreased $125,000, or 15%, its other operating income increased $580,000, or 26%, and its other operating expenses increased $898,000, or 12%, as compared to the third quarter a year ago.

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RESULTS OF OPERATIONS

NET INCOME

Net income for the quarter ended September 30, 2007, was $3.6 million, or $0.56 per diluted share, increases of 5% each, as compared to net income of $3.5 million and diluted earnings per share of $0.53, respectively, for the third quarter of 2006.

Net income for the nine months ending September 30, 2007, was $9.5 million, an increase of $212,000, or 2%, from $9.3 million for the nine months ending September 30, 2006. Diluted earnings per share increased $0.03 to $1.46, or 2%, for the nine months ending September 30, 2007 as compared to $1.43 for the same period in 2006.

The increase in net income for the three-month period ending September 30, 2007 as compared to the same period a year ago is partially the result of increased earning assets and slightly higher growth of interest income as opposed to interest expense. The provision for loan losses was also lower for the quarter ended September 30, 2007 as compared to the same period in 2006. Additionally, other operating income for the quarter ended September 30, 2007 increased by $580,000, to $2.8 million, as compared to $2.2 million for the same period a year ago. This increase in the third quarter of 2007 is largely due to a $379,000 increase in service charges on deposit accounts, most of which is attributable to the April 2007 implementation of a new non-sufficient funds fee on point-of-sale transactions. Increases in other operating expenses partially offset the increases in net interest income and the increase in other income. Salaries and benefits increased by $320,000, or 7%, for the three-month period ending September 30, 2007 as compared to the same period a year ago, due in large part to salary increases driven by competitive pressures. Due to the tight labor market in the Company’s major markets and ongoing competition for employees, the Company expects further increases in salaries and benefits. Other increases to other operating expenses for the third quarter of 2007 as compared to the third quarter a year ago include a $138,000 increase in amortization of low income housing tax credits, due to the addition of one investment in late September 2006 and one investment in December 2006, a $121,000 increase in operational losses due to larger charge-off activity of deposit service charges and fees, and an $85,000 increase in internet banking expense due to higher fees associated with a new internet banking product. The increase in earnings per diluted share for the third quarter of 2007 as compared to the third quarter of 2006 was due in part to the increase in net income and also due to a decrease in the number of shares of common stock outstanding as a result of the Company’s repurchase of 75,000 shares in the third quarter of 2007. This information has been adjusted for the 5% stock dividend declared on September 6, 2007 and distributed to shareholders on October 5, 2007.

Net income and diluted earnings per share increased moderately for the nine-month period ending September 30, 2007 when compared to net income and diluted earnings per share for the nine-month period ending September 30, 2006. Net interest income for the nine-month period ending September 30, 2007 increased by $2.1 million, or 6%, to $36.9 million as compared to $34.8 million for the same period ending September 30, 2006. This increase in net interest income in the nine-month period ending September 30, 2007 was partially offset by an increase of $749,000, or 42%, in the provision for loan losses for the nine-month period ending September 30, 2007 as compared to the same period in 2006. Other operating income for the nine-month period ended September 30, 2007 increased by $1.5 million, or 27%, to $7.1 million as compared to $5.6 million for the same period in 2006 due largely to increased service charges on deposits and purchased receivable income. The increase in other operating income in the nine-month period ended September 30, 2007 was more than offset by a $2.8 million increase in other operating expenses that was caused mainly by a $1.3 million increase in salary and benefit costs, a $277,000 increase in amortization of low income housing credits, a $249,000 increase in internet banking fees, a $245,000 loss on one purchased receivable account, a $203,000 increase in operational losses due to larger charge-off activity of deposit service charges and fees, and tax and audit fee increases of $96,000 as compared to the same period a year ago. The slight increase in earnings per diluted share for the nine-month period ending September 30, 2007 as compared to the nine- month period ending September 30, 2006 was due in part to the increase in net income and also due to a decrease in the number of shares of common stock outstanding as a result of the Company’s repurchase of 112,500 shares in the nine-month period ending September 30, 2007. This information has been adjusted for the 5% stock dividend declared on September 6, 2007 and distributed to shareholders on October 5, 2007.

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NET INTEREST INCOME

The primary component of income for most financial institutions is net interest income, which represents the institution’s interest income from loans and investment securities minus interest expense, ordinarily on deposits and other interest bearing liabilities. Net interest income for the third quarter of 2007 increased $475,000, or 4%, to $12.4 million from $11.9 million in the third quarter of 2006, as a result of an increase in earning assets and slightly higher growth of interest income as opposed to interest expense. Net interest income for the nine-month period ending September 30, 2007 increased $2.1 million, or 6%, to $36.9 million from $34.8 million in the same period in 2006 due to the same factors that affected net interest income in the three-month period ending September 30, 2007. The following table compares average balances and rates for the third quarter and nine months ending September 30, 2007 and 2006:

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	Three Months Ended September 30,
													Average Yields/Costs
	Average Balances						Change						Tax Equivalent
	2007			2006			$			%			2007			2006			Change
	(Dollars in thousands)
Commercial	$	292,565		$	301,429			($8,864	)		-3	%		9.49	%		9.22	%		0.27	%
Construction/development		141,912			145,786			(3,874	)		-3	%		11.13	%		11.28	%		-0.15	%
Commercial real estate		220,788			224,436			(3,648	)		-2	%		8.60	%		8.26	%		0.34	%
Consumer		44,952			39,893			5,059			13	%		7.50	%		7.79	%		-0.29	%
Other loans		(1,648	)		(1,428	)		(220	)		15	%
Total loans		698,569			710,116			(11,547	)		-2	%		9.44	%		9.29	%		0.15	%
Short-term investments		69,671			39,383			30,288			77	%		5.01	%		5.12	%		-0.11	%
Long-term investments		82,044			72,161			9,883			14	%		4.87	%		4.18	%		0.69	%
Interest-earning assets		850,284			821,660			28,624			3	%		8.63	%		8.64	%		-0.01	%
Nonearning assets		93,892			78,901			14,991			19	%
Total	$	944,176		$	900,561		$	43,615			5	%
Interest-bearing liabilities	$	631,682		$	609,924		$	21,758			4	%		3.80	%		3.83	%		-0.03	%
Demand deposits		199,845			192,398			7,447			4	%
Other liabilities		12,168			7,076			5,092			72	%
Equity		100,481			91,163			9,318			10	%
Total	$	944,176		$	900,561		$	43,615			5	%
Net tax equivalent margin on earning assets														5.81	%		5.79	%		0.02	%

	Nine Months Ended September 30,
													Average Yields/Costs
	Average Balances						Change						Tax Equivalent
	2007			2006			$			%			2007			2006			Change
	(Dollars in thousands)
Commercial	$	295,290		$	296,711			( $1,421	)		0	%		9.49	%		9.00	%		0.49	%
Construction/development		144,506			142,921			1,585			1	%		11.21	%		10.87	%		0.34	%
Commercial real estate		229,171			238,636			(9,465	)		-4	%		8.64	%		8.06	%		0.58	%
Consumer		43,723			37,817			5,906			16	%		7.60	%		7.73	%		-0.13	%
Other loans		(1,542	)		(1,121	)		(421	)		38	%
Total loans		711,148			714,964			(3,816	)		-1	%		9.47	%		9.02	%		0.45	%
Short-term investments		39,245			23,480			15,765			67	%		5.06	%		4.78	%		0.28	%
Long-term investments		84,596			65,636			18,960			29	%		4.81	%		3.90	%		0.91	%
Interest-earning assets		834,989			804,080			30,909			4	%		8.80	%		8.48	%		0.32	%
Nonearning assets		89,103			75,115			13,988			19	%
Total	$	924,092		$	879,195		$	44,897			5	%
Interest-bearing liabilities	$	622,854		$	602,504		$	20,350			3	%		3.84	%		3.57	%		0.27	%
Demand deposits		190,573			181,835			8,738			5	%
Other liabilities		12,142			6,514			5,628			86	%
Equity		98,523			88,342			10,181			12	%
Total	$	924,092		$	879,195		$	44,897			5	%
Net tax equivalent margin on earning assets														5.93	%		5.81	%		0.12	%

Interest-earning assets averaged $850.3 million and $835.0 million for the three and nine-month periods ending September 30, 2007, an increase of $28.6 million and $30.9 million, or 3% and 4%, respectively, over the $821.7 and $804.1 million average for the comparable periods in 2006. The tax equivalent yield on interest-earning assets averaged 8.63% and 8.80%, respectively, for the three and nine-month periods ending September 30, 2007, decreasing 1 basis point and increasing 32 basis points from the respective periods in 2006, from 8.64% and 8.48%, respectively.

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Loans, the largest category of interest-earning assets, decreased by $11.5 million, or 2%, to an average of $698.6 million in the third quarter of 2007 from $710.1 million in the third quarter of 2006. During the nine-month period ending September 30, 2007, loans decreased by $3.8 million, or 1%, to an average of $711.1 million from an average of $715.0 million for the nine-month period ending September 30, 2006. Commercial, construction, and commercial real estate loans decreased by $8.9 million, $3.9 million and $3.6 million on average, respectively, between the third quarters of 2007 and 2006. Consumer loans increased by $5.1 million on average between the third quarters of 2007 and 2006. During the nine-month period ending September 30, 2007, commercial and commercial real estate loans decreased by $1.4 million and $9.5 million, respectively, on average as compared to the nine-month period ending September 30, 2006. Construction and consumer loans increased $1.6 million and $5.9 million, respectively, on average between the nine-month periods ending September 30, 2007 and September 30, 2006. The decline in the loan portfolio resulted from a combination of refinance activity and the payoff of several large commercial real estate loans. We expect the loan portfolio to grow slightly in the future with moderate growth in commercial loans, further declines in commercial real estate, decreases in construction loans, and further increases in consumer loans as we sell more consumer loans to the larger consumer account base that we have developed with the High Performance Checking (“HPC”) product. The decrease in the commercial real estate area is expected to continue due to additional refinance activity and competitive pressures. Residential construction activity in Anchorage, the Company’s largest market, is expected to continue to decline through the remainder of 2007 due to a decline in available building lots and sales activity. While the Company believes it has offset a portion of this effect by acquiring additional residential construction customers, it expects that the real estate markets in Anchorage, the Matanuska-Susitna Valley, and the Fairbanks areas will continue to decrease from the prior year and lead to an overall decline in its construction loans. The tax equivalent yield on the loan portfolio averaged 9.44% for the third quarter of 2007, an increase of 15 basis points from 9.29% over the same quarter a year ago. During the nine-month period ending September 30, 2007, the tax equivalent yield on the loan portfolio averaged 9.47%, an increase of 45 basis points from 9.02% over the same nine-month period in 2006.

Interest-bearing liabilities averaged $631.7 million for the third quarter of 2007, an increase of $21.8 million, or 4%, compared to $609.9 million for the same period in 2006. The average cost of interest-bearing liabilities decreased 3 basis points to 3.80% for the third quarter of 2007 compared to 3.83% for the third quarter of 2006. Interest-bearing liabilities averaged $622.9 million during the nine-month period ending September 30, 2007, an increase of $20.4 million, or 3%, compared to $602.5 million for the same period in 2006. During the nine-month period ending September 30, 2007, the average cost of interest bearing-liabilities increased 27 basis points to 3.84% as compared to 3.57% for the same nine-month period in 2006. The decrease in the average cost of funds in 2007 as compared to 2006 is related in part to the interest rate cut by the Federal Reserve during the third quarter of 2007 and also to a general decline in interest rates that in part was due to the anticipation of this interest rate cut by the Federal Reserve and to other factors that affected interest rates in general during this period.

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The Company’s net interest income as a percentage of average interest-earning assets (net tax-equivalent margin) was 5.81% for the third quarter of 2007 and 5.79% for the same period in 2006. During the nine-month period ending September 30, 2007, the Company’s net tax equivalent margin was 5.93% and 5.81% for the same period in 2006. During the third quarter of 2007, the yield on the Company’s loans increased due to higher yields on its commercial and commercial real estate loans in particular while its funding costs experienced a decrease due a decline in interest rates as noted above. The increase in the loan yields for the third quarter of 2007 was offset in part by a decline in loan volume of $11.5 million on average during this period as compared to the same period of 2006. As loan volume declined in the three-months ending September 30, 2007, investment volume increased by $40.2 million as compared to the same period a year ago. However, the yields on the Company’s short and long-term investments averaged 5.01% and 4.87%, respectively as compared to an average yield on its loans of 9.44% during the third quarter of 2007. This shift from higher yielding to lower yielding assets had a negative effect on the Company’s net tax equivalent margin. In the nine-month period ending September 30, 2007, there was also a decline in average loan volume of $3.8 million versus an increase in short and long-term investments of $15.8 million and $19 million, respectively, as compared to the same nine-month period of 2006. However, there was a larger increase in the Company’s earning assets of 32 basis points in the nine-month period ending September 30, 2007 as compared to the same period a year ago, versus a 1 basis point decline in the third quarter ending September 30, 2007 as compared to the third quarter ending September 30, 2006, as asset yields benefited more in the nine-month period ending September 30, 2007 from increases in interest rates that occurred early in 2006 and held through most of the nine months ending September 30, 2007. During this nine-month period ending September 30, 2007, there was a 27 basis point increase in funding costs that combined to produce a 12 basis point increase in the net tax equivalent margin to 5.93% at September 30, 2007 as compared to 5.81% at September 30, 2006.

OTHER OPERATING INCOME

Other operating income consists of earnings on service charges, fees and other items as well as gains from the sale of securities. Set forth below is the change in Other Operating Income between the three and nine month periods ending September 30, 2007 and 2006:

	Three Months Ended September 30,												Nine Months Ended September 30,
	2007			2006			$ Chg			% Chg			2007			2006			$ Chg			% Chg
	(Dollars in thousands)												(Dollars in thousands)
Service charges on deposit accounts	$	873		$	494		$	379			77	%	$	2,269		$	1,468		$	801			55	%
Purchased receivable income		744			579			165			28	%		1,820			1,345			475			35	%
Employee benefit plan income		319			271			48			18	%		890			829			61			7	%
Electronic banking fees		233			210			23			11	%		642			573			69			12	%
Equity in earnings from mortgage affiliate		202			317			(115	)		-36	%		390			472			(82	)		-17	%
Loan servicing fees		123			120			3			3	%		383			361			22			6	%
Merchant credit card transaction fees		152			171			(19	)		-11	%		371			396			(25	)		-6	%
Equity in loss from Elliott Cove		(20	)		(53	)		33			-62	%		(71	)		(192	)		121			-63	%
Equity in loss from PWA		(23	)		(56	)		33			-59	%		(95	)		(104	)		9			-9	%
Other		180			150			30			20	%		516			434			82			19	%
Total	$	2,783		$	2,203		$	580			26	%	$	7,115		$	5,582		$	1,533			27	%

Total other operating income for the third quarter of 2007 was $2.8 million, an increase of $580,000 from $2.2 million in the third quarter of 2006. During the nine-month period ending September 30, 2007, total other operating income was $7.1 million, an increase of $1.5 million from $5.6 million for the same nine-month period in 2006. These increases are due primarily to increases in income from service charges on deposit accounts and continued growth in the Company’s purchased receivable products.

Service charges on the Company’s deposit accounts increased by $379,000, or 77%, to $873,000 in the third quarter of 2007 from $494,000 in the same period a year ago. During the nine-month period ending September 30, 2007, deposit service charges increased $801,000, or 55%, to $2.3 million compared to $1.5 million in the same nine-month period in 2006. This increase results primarily from the April 2007 implementation of NSF fees on point-of-sale transactions, which represents approximately all of the three and nine-month period increases in service charges.

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Income from the Company’s purchased receivable products increased by $165,000, or 28%, to $744,000 in the third quarter of 2007 from $579,000 in the same period a year ago. During the nine-month period ending September 30, 2007, income from purchased receivable products increased by $475,000, or 35%, to $1.8 million from $1.3 million in the same nine-month period in 2006. The Company uses these products to purchase accounts receivable from its customers and provide them with working capital for their businesses. While the customers are responsible for collecting these receivables, the Company mitigates this risk with extensive monitoring of the customers’ transactions and control of the proceeds from the collection process. The Company earns income from the purchased receivable product by charging finance charges to its customers for the purchase of their accounts receivable and it recognizes the income and fees over the life of the accounts receivable in accordance with the provision of FASB Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases (“SFAS 91”). The income from this product has grown as the Company has used it to purchase more receivables from its customers. The Company expects the income level from this product to show growth on a year-over-year comparative basis as the Company increases this line of business at NFS, as it continues to increase its market share.

During the third quarter of 2007, the Company included employee benefit plan income from NBG of $319,000 in its other operating income, an increase of $48,000, or 18%, compared to the same quarter in 2006. During the nine-month period ending September 30, 2007, income from NBG increased by $61,000, or 7%, from $829,000 to $890,000, as compared to the same period in 2006.

The Company’s electronic banking revenue increased by $23,000 and $69,000 or 11% and 12%, to $233,000 and $642,000, respectively, for the three and nine-month periods ending September 30, 2007 from $210,000 and $573,000, respectively, in the same periods a year ago. The majority of the increase in these revenues came from additional fees collected from increased point of sale transactions. This is a direct result of an increased number of deposit accounts through the marketing of the HPC product and overall continued increased usage of point of sale by the entire customer base.

The Company’s share of the earnings from its 23.5% interest in its mortgage affiliate, RML, decreased by $115,000 to $202,000 during the third quarter of 2007 as compared to $317,000 in the third quarter of 2006. In the nine-month period ended September 30, 2007, the Company’s earnings from its mortgage affiliate decreased by $82,000 to $390,000 as compared to earnings of $472,000 for the nine-month period ended September 30, 2006. In both the three and nine-month periods ending September 30, 2007, the decrease in earnings resulted from RML’s income decreasing more than its expenses as its loan origination volume decreased with the general decline in the residential real estate activity during these periods.

The Company’s share of the loss from Elliott Cove for the third quarter of 2007 was $20,000, as compared to a loss of $53,000 in the third quarter of 2006. In the nine-month period ending September 30, 2007, the Company’s share of the loss from Elliott Cove was $71,000 as compared to a loss of $192,000 for the nine-month period ending September 30, 2006. The loss that the Company realized on its investment in Elliott Cove decreased for both the three and nine-month periods ending September 30, 2007 as compared to the same periods in 2006 as Elliott Cove continued to increase its assets under management which caused its income to increase more than its expenses resulting in a lower operating loss.

The Company’s share of the loss from PWA for the third quarter of 2007 was $23,000, as compared to a loss of $56,000 in the third quarter of 2006. In the nine-month period ending September 30, 2007, the Company’s share of the loss from PWA was $95,000 as compared to a loss of $104,000 for the nine-month period ending September 30, 2006. The decrease in the Company’s share of PWA losses for the quarter ended September 30, 2007 as compared to the same quarter in 2006 is the result of increased client fees earned on PWA’s growing client base. These revenues were partially offset by increased expenses. The Company expects to incur losses on its investment in PWA over the next several years as PWA builds the customer base of its combined operations.

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Other income, as broken out on the table above, increased by $30,000, or 20%, in the third quarter of 2007 to $180,000 from $150,000 for the same period in 2006. During the nine-month period ending September 30, 2007, other income was $516,000, an increase of $82,000, or 19%, from the same nine-month period in 2006. Contributing to nine-month increase was a $28,000 gain on the sale of other real estate owned. Finally, the Company receives commissions for the sale of the Elliott Cove investment products. These commissions are included in other income. During the third quarter of 2007, Elliott Cove commissions increased by $19,000, or 33%, to $77,000 from $58,000 in the same period in 2006. In the nine-month period ending September 30, 2007, Elliott Cove commissions increased by $64,000, or 42%, to $216,000 from $152,000 in the same period in 2006.

EXPENSES

Other Operating Expense

The following table breaks out the components of and changes in Other Operating Expense between the three and nine-month periods ending September 30, 2007 and 2006:

	Three Months Ended September 30,										Nine Months Ended September 30,
	2007		2006		$ Chg			% Chg			2007		2006		$ Chg			% Chg
	(Dollars in thousands)										(Dollars in thousands)
Salaries and other personnel expense	$	5,110	$	4,790	$	320			7	%	$	15,526	$	14,226	$	1,300			9	%
Occupancy, net		695		626		69			11	%		2,013		1,864		149			8	%
Marketing		468		445		23			5	%		1,396		1,397		(1	)		0	%
Equipment, net		333		325		8			2	%		1,040		1,023		17			2	%
Professional and outside services		264		238		26			11	%		769		560		209			37	%
Intangible asset amortization		28		121		(93	)		-77	%		249		362		(113	)		-31	%
Purchased receivable losses		—		—		—			N/A			245		—		245			N/A
Other expense		1,661		1,116		545			49	%		4,877		3,908		969			25	%
Total	$	8,559	$	7,661	$	898			12	%	$	26,115	$	23,340	$	2,775			12	%

Total other operating expense for the third quarter of 2007 was $8.6 million, an increase of $898,000, or 12%, from $7.7 million for the same period in 2006. During the nine-month period ending September 30, 2007, total operating expense was $26.1 million, an increase of $2.8 million, or 12%, from $23.3 million for the same nine-month period in 2006.

Salaries and benefits increased by $320,000 and $1.3 million, or 7% and 9%, respectively, for the three and nine-month periods ending September 30, 2007 as compared to the same periods a year ago, due in large part to salary increases driven by competitive pressures. Due to the tight labor market in the Company’s major markets and ongoing competition for employees, the Company expects further increases in salaries and benefits.

Occupancy expense increased by $69,000 and $149,000, or 11% and 8%, for the three and nine-month periods ending September 30, 2007 as compared to the same periods a year ago, mostly due to increased rental costs at the Company’s headquarters facility.

Marketing expenses increased by $23,000, or 5%, for the three-month period ending September 30, 2007 as compared to the same period a year ago. During the nine-month period ending September 30, 2007, marketing expenses decreased $1,000, or less than 1%, as compared to the same period a year ago as the Company incurred lower marketing costs in the first quarter of 2007 as compared to the first quarter of 2006, which led to consistent nine-month period costs in 2007 as compared to the same period in 2006. The Company has continued to market its HPC consumer products as it has since the third quarter of 2005 and expects to incur similar marketing costs for this product in the fourth quarter of 2007. Moreover, the Company began marketing its HPC for business products in the first quarter of 2007 and expects to incur increased marketing costs for this new product in 2007. The Company also expects that the Bank will increase its deposit accounts and balances as it continues to implement the HPC Program over the next year. Furthermore, the Company expects that the additional deposit accounts will continue to generate increased fee income that will offset a majority of the increased marketing costs associated with the HPC Program.

Professional and outside services increased by $26,000 and $209,000, or 11% and 37%, respectively, for the three and nine-month periods ending September 30, 2007 as compared to the same period a year ago. The majority of the increase for the three-month period ending September 30, 2007 as compared to the same period in 2006 was due to higher audit fees. The increase for the nine-month period ending September 30, 2007 as compared to the same period in 2006 was due to higher accounting and audit fees.

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Other expense, as broken out in the table above, increased by $545,000 and $969,000, or 49% and 25%, respectively, for the three and nine-month periods ending September 30, 2007 as compared to the same periods a year ago. The largest of these increases for the quarter ended September 30, 2007 as compared to the same period in 2006 was a $121,000 increase in operational charge-offs. There was also a $203,000 increase in operational charge-offs for the nine-month period ending September 30, 2007 as compared to the same nine-month period in 2006. These increases are due in part to larger charge-offs of deposit service charges and fees on a larger number of HPC deposit accounts. Other categories contributing to the overall increase in other expenses include amortization expense for the Company’s low income housing partnership, mostly due to the addition of two new investments in the fourth quarter of 2006, and internet banking expenses due to a system conversion in the fourth quarter of 2006. These items caused other expenses for the three-month period ending September 30, 2007 to increase by $138,000 and $85,000, respectively, as compared to other expenses for the period ending September 30, 2006. These items caused other expenses for the nine-month period ending September 30, 2007 to increase $277,000 and $249,000, respectively, as compared to other expenses for the period ending September 30, 2006. Additionally, the Company incurred a $245,000 loss on one of its purchased receivable accounts for the nine-month period ending September 30, 2007.

Income Taxes

The provision for income taxes was $2.2 million and $2.1 million for the third quarters of 2007 and 2006, respectively. The effective tax rates were 38% for each of the third quarters of 2007 and 2006. The Company expects that its tax rate for the rest of 2007 will be approximately similar to the tax rate of the third quarter of this year. The provision for income taxes was $5.7 million for the first nine months of 2007, a decrease of $60,000, or 1% from the same period in 2006. The effective tax rates for the first nine months of 2007 and 2006 were 37% and 38%, respectively, with the difference in tax rates attributable to increases in available tax credits arising from the Company’s investments in low income housing partnerships.

CHANGES IN FINANCIAL CONDITION

ASSETS

Loans and Lending Activities

General: Our loan products include short and medium-term commercial loans, commercial credit lines, construction and real estate loans, and consumer loans. From our inception, we have emphasized commercial, land development and home construction, and commercial real estate lending. These types of lending have provided us with market opportunities and higher net interest margins than other types of lending. However, they also involve greater risks, including greater exposure to changes in local economic conditions, than certain other types of lending.

Loans are the highest yielding component of our earning assets. Average loans declined by $11.5 million, or 2%, to $698.6 million in the third quarter of 2007 as compared to $710.1 million in the same period of 2006. Loans comprised 82% of total average earning assets for the quarter ending September 30, 2007, compared to 86% of total average earning assets for the quarter ending September 30, 2006. The yield on loans averaged 9.44% for the quarter ended September 30, 2007, compared to 9.29% during the same period in 2006.

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The loan portfolio decreased by $3.1 million, or less than 1% from $698.1 million at September 30, 2006 to $694.9 million at September 30, 2007. Loans decreased by $22.1 million, or 3%, from $717.1 million at December 31, 2006, to $694.9 million at September 30, 2007. Commercial loans increased $4.5 million, or 2%, commercial real estate loans decreased $2.5 million, or 1%, construction loans decreased $9.5 million, or 6%, and consumer loans increased $4.4 million, or 11%, from September 30, 2006 to September 30, 2007. In addition, commercial loans increased $10.7 million, or 4%, commercial real estate loans decreased $24.4 million, or 10%, construction loans decreased $11.8 million, or 8%, and consumer loans increased $3.3 million, or 8%, from December 31, 2006 to September 30, 2007. The decline in the loan portfolio resulted from a combination of refinance activity and the payoff of several large commercial real estate loans. We expect the loan portfolio to grow slightly in the future with moderate growth in commercial loans, further declines in commercial real estate, decreases in construction loans, and further increases in consumer loans as we sell more consumer loans to the larger consumer account base that we have developed with the HPC product. The decrease in the commercial real estate area is expected to continue due to additional refinance activity and competitive pressures. Residential construction activity in Anchorage, the Company’s largest market, is expected to continue to decline in 2007 due to a decline in available building lots and sales activity. While the Company believes it has offset a portion of this effect by acquiring additional residential construction customers, it expects that the real estate markets in Anchorage, the Matanuska-Susitna Valley, and the Fairbanks areas will continue to decrease from the prior year and lead to an overall decline in its construction loans.

Loan Portfolio Composition: Loans decreased to $694.9 million at September 30, 2007, from $717.1 million at December 31, 2006 and $698.1 million at September 30, 2006. At September 30, 2007, 50% of the portfolio was scheduled to mature over the next 12 months, and 26% was scheduled to mature between October 1, 2008, and September 30, 2012. Future growth in loans is generally dependent on new loan demand and deposit growth, and is constrained by the Company’s policy of being “well-capitalized.” In addition, the fact that 50% of the loan portfolio is scheduled to mature in the next 12 months poses an added risk to the Company’s efforts to increase its loan totals as it attempts to renew or replace these maturing loans.

The following table sets forth the Company’s loan portfolio composition by loan type for the dates indicated:

	September 30, 2007						December 31, 2006						September 30, 2006
	Dollar			Percent			Dollar			Percent			Dollar			Percent
	Amount			of Total			Amount			of Total			Amount			of Total
	(Dollars in thousands)
Commercial	$	297,882			43	%	$	287,155			40	%	$	293,427			42	%
Construction/development		141,268			20	%		153,059			21	%		150,772			22	%
Commercial real estate		213,214			31	%		237,599			33	%		215,664			31	%
Consumer		45,472			7	%		42,140			6	%		41,032			6	%
Loans in process		113			0	%		126			0	%		309			0	%
Unearned loan fees		(3,000	)		0	%		(3,023	)		0	%		(3,128	)		0	%
Total loans	$	694,949			100	%	$	717,056			100	%	$	698,076			100	%

Nonperforming Loans; Real Estate Owned: Nonperforming assets consist of nonaccrual loans, accruing loans that are 90 days or more past due, restructured loans, and real estate owned. The following table sets forth information with respect to nonperforming assets:

	September 30, 2007			December 31, 2006			September 30, 2006
	(Dollars in thousands)
Nonaccrual loans	$	5,666		$	5,176		$	5,532
Accruing loans past due 90 days or more		2,917			708			2,811
Restructured loans		17			748			—
Total nonperforming loans		8,600			6,632			8,343
Real estate owned		717			717			—
Total nonperforming assets	$	9,317		$	7,349		$	8,343
Allowance for loan losses	$	12,074		$	12,125		$	12,646
Nonperforming loans to portfolio loans		1.24	%		0.92	%		1.20	%
Nonperforming assets to total assets		0.97	%		0.79	%		0.93	%
Allowance to portfolio loans		1.74	%		1.69	%		1.81	%
Allowance to nonperforming loans		140	%		183	%		152	%

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Nonaccrual, Accruing Loans 90 Days or More Past Due and Restructured Loans: The Company’s financial statements are prepared based on the accrual basis of accounting, including recognition of interest income on the Company’s loan portfolio, unless a loan is placed on a nonaccrual basis. For financial reporting purposes, amounts received on nonaccrual loans generally will be applied first to principal and then to interest only after all principal has been collected.

Restructured loans are those for which concessions, including the reduction of interest rates below a rate otherwise available to that borrower, have been granted due to the borrower’s weakened financial condition. Interest on restructured loans will be accrued at the restructured rates when it is anticipated that no loss of original principal will occur and the interest can be collected.

Total nonperforming loans at September 30, 2007, were $8.6 million, or 1.24%, of total portfolio loans, an increase of $2.0 million from $6.6 million at December 31, 2006, and an increase of $257,000 from $8.3 million at September 30, 2006. The increase in the nonperforming loans in the third quarter of 2007 from the end of 2006 was due in large part to a $2.2 million increase in accruing loans that were 90 days or more past due that resulted primarily from three commercial loans, one residential land development loan, and one residential construction loan. The Company plans to continue to devote resources to resolve its nonperforming loans, and it continues to write down assets to their estimated fair market value when they are in a non-performing status, which is accounted for through the calculation of the Allowance for Loan Losses.

At September 30, 2007, December 31, 2006, and September 30, 2006, the Company had loans measured for impairment of $40.6 million, $32.0 million, and $27.5 million, respectively. A specific allowance of $3.8 million, $4.3 million, and $3.7 million, respectively, was established for these periods. The increase in loans measured for impairment at September 30, 2007, as compared to December 31, 2006, resulted mainly from the addition of two construction projects that were not included in loans measured for impairment at December 31, 2006 and September 30, 2006. A portion of the loans associated with these projects had insufficient collateral, which resulted in an impairment and an increase to the Company’s specific allowance for impaired loans. In addition, the specific allowance was decreased in the third quarter ending September 30, 2007 primarily due to the payoff of one loan that had a specific allowance of $599,000 at the time of its payoff. The increase in loans measured for impairment at December 31, 2006, as compared to September 30, 2006, resulted mainly from the addition of one commercial loan relationship.

Potential Problem Loans: At September 30, 2007 the Company had $9.7 million in potential problem loans, as compared to $3.3 million at September 30, 2006 as a result of adding five loans to the listing of potential problem loans and deleting six loans from this list since September 30, 2006. The five loans that were added totaled $9.2 million while the six loans that were deleted totaled $2.8 million. At December 31, 2006, the Company had potential problem loans of $6.4 million. Potential problem loans are loans which are currently performing and are not included in nonaccrual, accruing loans 90 days or more past due, or restructured loans at the end of the applicable period, about which the Company has developed doubts as to the borrower’s ability to comply with present repayment terms and which may later be included in nonaccrual, past due, or restructured loans.

Analysis of Allowance for Loan Losses and Loan Loss Provision: The Company maintains an Allowance for Loan Losses to recognize inherent and probable losses from its loan portfolio. On a quarterly basis, the Company uses three methods to analyze the Allowance by taking percentage allocations for criticized and classified assets in addition to a specific allowance for impaired loans, making percentage allocations based upon its internal risk classifications and other specifically identified portions of its loan portfolio, and using ratio analysis and peer comparisons.

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The Allowance for Loan Losses was $12.1 million, or 1.74% of total portfolio loans outstanding, at September 30, 2007, compared to $12.6 million, or 1.81%, of total portfolio loans at September 30, 2006 and $12.1 million, or 1.69% of portfolio loans, at December 31, 2006. The Allowance for Loan Losses represented 140% of non-performing loans at September 30, 2007, as compared to 152% of nonperforming loans at September 30, 2006 and 183% of nonperforming loans at December 31, 2006.

The Allowance for Loan Losses is decreased for loan charge-offs and increased for loan recoveries and provisions for loan losses. The Company took a provision for loan losses in the amount of $725,000 for the three-month period ending September 30, 2007 to account for increases in non-performing loans, loan charge-offs, and the specific allowance for impaired loans as well as continued softening in the residential construction market. The following table details activity in the Allowance for Loan Losses for the dates indicated:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2007		2006			2007		2006
			(Dollars in thousands)
Balance at beginning of period	$	11,841	$	11,581		$	12,125	$	10,706
Charge-offs:
Commercial		146		257			3,006		452
Construction/development		—		—			—		—
Commercial real estate		599		—			599		—
Consumer		2		2			43		71
Total charge-offs		747		259			3,648		523
Recoveries:
Commercial		251		437			1,023		652
Construction/development		—		—			50		—
Commercial real estate		—		28			—		28
Consumer		4		9			11		19
Total recoveries		255		474			1,084		699
Net, (recoveries) charge-offs		492		(215	)		2,564		(176	)
Provision for loan losses		725		850			2,513		1,764
Balance at end of period	$	12,074	$	12,646		$	12,074	$	12,646

The provision for loan losses for the three-month period ending September 30, 2007 was $725,000 as compared to a provision for loan losses of $850,000 for the three-month period ending September 30, 2006. During the three-month period ending September 30, 2007, there were $492,000 in net loan charge-offs as compared to $215,000 of net loan recoveries for the same period in 2006. Loan charge-offs increased during this same time period from $259,000 for the three-month period ending September 30, 2006 to $747,000 for the three-month period ending September 30, 2007, primarily due to the charge-off of one commercial loan and one commercial real estate loan.

The provision for loan losses for the nine-month period ending September 30, 2007 was $2.5 million as compared to a provision for loan losses of $1.8 million for the nine-month period ending September 30, 2006. During the nine-month period ending September 30, 2007, there were $2.6 million in net loan charge-offs as compared to $176,000 of net loan recoveries for the same period in 2006. Loan charge-offs increased during this same time period from $523,000 for the nine-month period ending September 30, 2006 to $3.6 million for the nine-month period ending September 30, 2007, primarily due to the charge-off of four commercial loans and one commercial real estate loan.

Management believes that, based on its review of the performance of the loan portfolio and the various methods it uses to analyze its Allowance for Loan Losses, at September 30, 2007 the Allowance for Loan Losses was adequate to cover losses in the loan portfolio at the balance sheet date.

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Investment Securities

Investment securities, which include Federal Home Loan Bank stock, totaled $90.5 million at September 30, 2007, a decrease of $9.8 million, or 10%, from $100.3 million at December 31, 2006, and an increase of $14.6 million, or 19%, from $75.9 million at September 30, 2006. Investment securities designated as available for sale comprised 85% of the investment portfolio at September 30, 2007, 87% at December 31, 2006, and 82% at September 30, 2006, and are available to meet liquidity requirements. Both available for sale and held to maturity securities may be pledged as collateral to secure public deposits. At September 30, 2007, $23.9 million in securities, or 26%, of the investment portfolio was pledged, as compared to $16 million, or 16%, at December 31, 2006, and $14.7 million, or 19%, at September 30, 2006.

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LIABILITIES

Deposits

General: Deposits are the Company’s primary source of funds. Total deposits increased $22.7 million to $817.6 million at September 30, 2007, from $794.9 million at December 31, 2006, and increased $40.8 million from $776.8 million at September 30, 2006. The Company’s deposits generally are expected to fluctuate according to the level of the Company’s market share, economic conditions, and normal seasonal trends. As mentioned earlier, as the Bank continues to implement its HPC Program, the Company expects increases in the number of deposit accounts and the balances associated with them. Moreover, as the balances in these HPC accounts and other deposit accounts have increased, the Company has allowed other funds held in the form of certificates of deposit for agencies of the State of Alaska to mature and be replaced by other core deposits.

Certificates of Deposit: The only deposit category with stated maturity dates is certificates of deposit. At September 30, 2007, the Company had $96.1 million in certificates of deposit as compared to certificates of deposit of $81.9 million and $85.9 million, for the periods ending September 30, 2006 and December 31, 2006, respectively. At September 30, 2007, $57.5 million, or 60%, of the Company’s certificates of deposits are scheduled to mature over the next 12 months as compared to $59.4 million, or 69%, of total certificates of deposit, at December 31, 2006, and to $59.8 million, or 73%, of total certificates of deposit at September 30, 2006.

Alaska Certificates of Deposit: The Alaska Certificate of Deposit (“Alaska CD”) is a savings deposit product with an open-ended maturity, interest rate that adjusts to an index that is tied to the two-year United States Treasury Note, and limited withdrawals. The total balance in the Alaska CD at September 30, 2007, was $187.8 million, a decrease of $21.5 million as compared to the balance of $209.3 million at September 30, 2006 and a decrease of $19.7 million from a balance of $207.5 million at December 31, 2006. The Company expects the total balance of the Alaska CD in 2007 to continue to be at lower levels as compared to 2006 as customers move into higher yielding accounts such as term certificates of deposit or other money market accounts.

Alaska Permanent Fund Deposits: The Alaska Permanent Fund Corporation may invest in certificates of deposit at Alaska banks in an aggregate amount with respect to each bank, not to exceed its capital and at specified rates and terms. The depository bank must collateralize the deposit. At September 30, 2007, December 31, 2006 and September 30, 2006, the Company held no certificates of deposit for the Alaska Permanent Fund.

Borrowings

Federal Home Loan Bank: A portion of the Company’s borrowings were from the Federal Home Loan Bank (“FHLB”). At September 30, 2007, the Company’s maximum borrowing line from the FHLB was $113.3 million, approximately 12% of the Company’s assets. At September 30, 2007, there was $1.9 million outstanding on the line and no additional monies committed to secure public deposits. At December 31, 2006 and September 30, 2006, there were outstanding balances on the borrowing line of $2.2 million and $2.3 million, respectively. At December 31, 2006 and September 30, 2006, there were no additional monies committed to secure public deposits. Additional advances are dependent on the availability of acceptable collateral such as marketable securities or real estate loans, although all FHLB advances are secured by a blanket pledge of the Company’s assets.

In addition to the borrowings from the FHLB, the Company had $10.8 million in other borrowings outstanding at September 30, 2007, as compared to $4.3 million in other borrowings outstanding at December 31, 2006. In each time period, the other borrowings consisted of security repurchase arrangements and short-term borrowings from the Federal Reserve Bank for payroll tax deposits.

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Other Short-term Borrowings: At September 30, 2007, the Company had no short-term (original maturity of one year or less) borrowings that exceeded 30% of shareholders’ equity.

Off-Balance Sheet Items – Commitments/Letters of Credit: The Company is a party to financial instruments with off-balance sheet risk. Among the off-balance sheet items entered into in the ordinary course of business are commitments to extend credit and the issuance of letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized on the balance sheet. Certain commitments are collateralized. As of September 30, 2007 and December 31, 2006, the Company’s commitments to extend credit and to provide letters of credit amounted to $192.6 million and $172 million, respectively. Since many of the commitments are expected to expire without being drawn upon, these total commitment amounts do not necessarily represent future cash requirements.

LIQUIDITY AND CAPITAL RESOURCES

Shareholders’ Equity

Shareholders’ equity was $100.3 million at September 30, 2007, compared to $95.4 million at December 31, 2006 and $92.2 million at September 30, 2006. The Company earned net income of $3.6 million during the three-month period ending September 30, 2007, issued 5,967 shares through the exercise of stock options, and repurchased 75,000 shares of its common stock under the Company’s publicly announced repurchase program. On September 6, 2007, the Company declared a 5% stock dividend to shareholders of record as of September 21, 2007. As a result, the Company issued 300,729 of its shares on October 5, 2007, along with a cash dividend of $2,000 to pay for fractional shares. At September 30, 2007, the Company had approximately 6.3 million shares of its common stock outstanding.

Capital Requirements and Ratios

The Company is subject to minimum capital requirements. Federal banking agencies have adopted regulations establishing minimum requirements for the capital adequacy of banks and bank holding companies. The requirements address both risk-based capital and leverage capital. As of September 30, 2007, the Company and the Bank met all applicable capital adequacy requirements.

The FDIC has in place qualifications for banks to be classified as “well-capitalized.” As of June 15, 2007, the most recent notification from the FDIC categorized the Bank as “well-capitalized.” There were no conditions or events since the FDIC notification that have changed the Bank’s classification.

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The following table illustrates the capital requirements for the Company and the Bank and the actual capital ratios for each entity that exceed these requirements as of September 30, 2007:

	Adequately-			Well-			Actual Ratio			Actual Ratio
	Capitalized			Capitalized			BHC			Bank
Tier 1 risk-based capital		4.00	%		6.00	%		13.33	%		11.74	%
Total risk-based capital		8.00	%		10.00	%		14.59	%		12.99	%
Leverage ratio		4.00	%		5.00	%		11.89	%		10.49	%

The capital ratios for the Company exceed those for the Bank primarily because the $18.6 million junior subordinated debenture offerings that the Company completed in the third quarter of 2003 and the fourth quarter of 2005 are included in the Company’s capital for regulatory purposes although such securities are accounted for as a long-term debt in its financial statements. The junior subordinated debentures are not accounted for on the Bank’s financial statements nor are they included in its capital. As a result, the Company has $18.6 million more in regulatory capital than the Bank, which explains most of the difference in the capital ratios for the two entities.

Stock Repurchase Plan

In June 2007, the Board of Directors of the Company amended the stock repurchase plan (“Plan”) to increase the stock in its repurchase program by an additional 305,029, or 5%, of total shares outstanding bringing the total shares available and authorized for repurchase under the Plan at that time to 342,242. In the three-month period ending September 30, 2007, the Company repurchased 75,000 shares, which brought the total shares repurchased under this program to 663,442 shares since its inception at a total cost of $13.7 million at an average price of $20.70. As a result, there were 252,242 shares remaining under the Plan at September 30, 2007. The Company intends to continue to repurchase its common stock from time to time depending upon market conditions, but it can make no assurances that it will repurchase all of the shares authorized for repurchase under the Plan.

Junior Subordinated Debentures

In May of 2003, the Company formed a wholly-owned Delaware statutory business trust subsidiary, Northrim Capital Trust 1 (the “Trust”), which issued $8 million of guaranteed undivided beneficial interests in the Company’s Junior Subordinated Deferrable Interest Debentures (“Trust Preferred Securities”). These debentures qualify as Tier 1 capital under Federal Reserve Board guidelines. All of the common securities of the Trust are owned by the Company. The proceeds from the issuance of the common securities and the Trust Preferred Securities were used by the Trust to purchase $8.2 million of junior subordinated debentures of the Company. The Trust Preferred Securities of the Trust are not consolidated in the Company’s financial statements in accordance with FASB Interpretation No. 46R (“FIN46”); therefore, the Company has recorded its investment in the Trust as an other asset and the subordinated debentures as a liability. The debentures, which represent the sole asset of the Trust, accrue and pay distributions quarterly at a variable rate of 90-day LIBOR plus 3.15% per annum, adjusted quarterly. The interest rate on these debentures was 8.71% at September 30, 2007. The interest cost to the Company on these debentures was $176,000 in the quarter ending September 30, 2007 and $173,000 in the same period in 2006. The Company has entered into contractual arrangements which, taken collectively, fully and unconditionally guarantee payment of: (i) accrued and unpaid distributions required to be paid on the Trust Preferred Securities; (ii) the redemption price with respect to any Trust Preferred Securities called for redemption by the Trust and (iii) payments due upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust. The Trust Preferred Securities are mandatorily redeemable upon maturity of the debentures on May 15, 2033, or upon earlier redemption as provided in the indenture. The Company has the right to redeem the debentures purchased by the Trust in whole or in part, on or after May 15, 2008. As specified in the indenture, if the debentures are redeemed prior to maturity, the redemption price will be the principal amount and any accrued but unpaid interest.

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In December of 2005, the Company formed a wholly-owned Connecticut statutory business trust subsidiary, Northrim Statutory Trust 2 (the “Trust 2”), which issued $10 million of guaranteed undivided beneficial interests in the Company’s Junior Subordinated Deferrable Interest Debentures (“Trust Preferred Securities 2”). These debentures qualify as Tier 1 capital under Federal Reserve Board guidelines. All of the common securities of Trust 2 are owned by the Company. The proceeds from the issuance of the common securities and the Trust Preferred Securities 2 were used by Trust 2 to purchase $10.3 million of junior subordinated debentures of the Company. The Trust Preferred Securities of the Trust 2 are not consolidated in the Company’s financial statements in accordance with FIN46; therefore, the Company has recorded its investment in the Trust 2 as an other asset and the subordinated debentures as a liability. The debentures, which represent the sole asset of Trust 2, accrue and pay distributions quarterly at a variable rate of 90-day LIBOR plus 1.37% per annum, adjusted quarterly. The interest rate on these debentures was 7.06% at September 30, 2007. The interest cost to the Company on these debentures was $173,000 for the quarter ending September 30, 2007 and $181,000 in the same period in 2006. The Company has entered into contractual arrangements which, taken collectively, fully and unconditionally guarantee payment of: (i) accrued and unpaid distributions required to be paid on the Trust Preferred Securities 2; (ii) the redemption price with respect to any Trust Preferred Securities 2 called for redemption by Trust 2 and (iii) payments due upon a voluntary or involuntary dissolution, winding up or liquidation of Trust 2. The Trust Preferred Securities 2 are mandatorily redeemable upon maturity of the debentures on March 15, 2036, or upon earlier redemption as provided in the indenture. The Company has the right to redeem the debentures purchased by Trust 2 in whole or in part, on or after March 15, 2011. As specified in the indenture, if the debentures are redeemed prior to maturity, the redemption price will be the principal amount and any accrued but unpaid interest.

CAPITAL EXPENDITURES AND COMMITMENTS

The Company continued to incur costs related to the construction of the new branch facility in its Fairbanks market in the third quarter of 2007 and it still expects to complete construction in the first quarter of 2008. The land purchase and construction costs are projected to total $4.8 million and will be funded by operations.

The Company also continued to incur costs related to the acquisition of Alaska First Bank & Trust N.A. (“Alaska First”) in the third quarter of 2007. Alaska First’s shareholders approved the merger on August 29, 2007, and final regulatory approval was received on October 19, 2007. The Company acquired all of the outstanding shares of Alaska First for $6.3 million in a cash transaction and merged Alaska First with and into Northrim Bank on October 19, 2007. The Company did not acquire Alaska First’s subsidiary, Hagen Insurance. The Company acquired assets of approximately $57 million and assumed liabilities of approximately $53 million in connection with the acquisition. Loans acquired from Alaska First totaled approximately $13 million and deposits totaled approximately $48 million.

- 29 -

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate, credit, and operations risks are the most significant market risks which affect the Company’s performance. The Company relies on loan review, prudent loan underwriting standards, and an adequate allowance for credit losses to mitigate credit risk.

The Company utilizes a simulation model to monitor and manage interest rate risk within parameters established by its internal policy. The model projects the impact of a 100 basis point increase and a 100 basis point decrease, from prevailing interest rates, on the balance sheet for a period of 12 months.

The Company is currently asset sensitive, meaning that interest-earning assets mature or reprice more quickly than interest-bearing liabilities in a given period. Therefore, a significant increase in market rates of interest could positively impact net interest income. Conversely, a declining interest rate environment may negatively impact net interest income.

Generalized assumptions are made on how investment securities, classes of loans, and various deposit products might respond to interest rate changes. These assumptions are inherently uncertain, and as a result, the model cannot precisely estimate net interest income nor precisely predict the impact of higher or lower interest rates on net interest income. Actual results may differ materially from simulated results due to factors such as timing, magnitude, and frequency of rate changes, customer reaction to rate changes, competitive response, changes in market conditions, the absolute level of interest rates, and management strategies, among other factors.

The results of the simulation model at September 30, 2007, indicate that, if interest rates immediately increased by 100 basis points, the Company would experience an increase in net interest income of approximately $972,000 over the next 12 months. Similarly, the simulation model indicates that, if interest rates immediately decreased by 100 basis points, the Company would experience a decrease in net interest income of approximately $528,000 over the next 12 months.

- 30 -

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Our principal executive and financial officers supervised and participated in this evaluation. Based on this evaluation, our principal executive and financial officers each concluded that the disclosure controls and procedures are effective in timely alerting them to material information required to be included in the periodic reports to the Securities and Exchange Commission. The design of any system of controls is based in part upon various assumptions about the likelihood of future events, and there can be no assurance that any of our plans, products, services or procedures will succeed in achieving their intended goals under future conditions.

Changes in Internal Control over Disclosure and Reporting

There was no change in our internal control over financial reporting that occurred during the quarterly period ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

- 31 -

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the normal course of its business, the Company is a party to various debtor-creditor legal actions, which individually or in the aggregate, could be material to the Company’s business, operations, or financial condition. These include cases filed as a plaintiff in collection and foreclosure cases, and the enforcement of creditors’ rights in bankruptcy proceedings.

ITEM 1A. RISK FACTORS

For information regarding risk factors, please refer to Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. These risk factors have not materially changed.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)-(b) Not applicable

(c) The Company repurchased 75,000 shares of its common stock, in the aggregate, during the third quarter of 2007 for the dates indicated:

							Maximum Number(1) (or Approximate
					Total Number of Shares (or Units)		Dollar Value) of Shares (or Units) that May
	Total Number of Shares		Average Price Paid per		Purchased as Part of Publicly		Yet Be Purchased Under the Plans or
	(or Units) Purchased		Share (or Unit)		Announced Plans or Programs		Programs
Period	(a)		(b)		(c)		(d)
Month No. 1
July 1, 2007 - July 31, 2007		—		—		—		327,242
Month No. 2
August 1, 2007 - August 31, 2007		25,000	$	25.55		25,000		302,242
Month No. 3
September 1, 2007 - September 30, 2007		50,000	$	25.55		50,000		252,242
Total		75,000	$	25.55		75,000		252,242

⁽¹⁾ In August 2004, the Company publicly announced the Board’s authorization to increase the stock in its repurchase program by an additional 304,283, or 5%, of total shares outstanding. As a result, the total shares available under the Plan at that time increased to 385,855 shares. On June 8, 2007 the Company publicly announced the Board’s authorization to increase the stock in its repurchase program by an additional 305,029 shares, or 5% of total shares outstanding, bringing the total shares available and authorized for repurchase under the Plan at that time to 342,242 shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company’s security holders in the quarter ended September 30, 2007.

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ITEM 5. OTHER INFORMATION

9.	Not applicable
10.	There have been no material changes in the procedures for shareholders to nominate directors to the Company’s board.

ITEM 6. EXHIBITS

3.2	Amended Bylaws of Northrim BanCorp, Inc. (1)
10.21	Supplemental Executive Retirement Plan dated July 1, 1994, as amended August 2, 2007, effective as of January 1, 2005.
10.22	Deferred Compensation Plan dated January 1, 1995, as amended August 2, 2007, effective as of January 1, 2005.
10.23	Supplemental Executive Retirement Deferred Compensation Plan dated February 1, 2002, as amended August 2, 2007, effective as of January 1, 2005.
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1	Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

⁽¹⁾ Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2007.

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SIGNATURES

Under the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NORTHRIM BANCORP, INC.

November 7, 2007	By	/s/ R. Marc Langland
			R. Marc Langland
			Chairman, President, and CEO
			(Principal Executive Officer)
November 7, 2007	By	/s/ Joseph M. Schierhorn
			Joseph M. Schierhorn
			Executive Vice President,
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

- 34 -

EX-10.21

EXHIBIT 10.21

NORTHRIM BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Originally Effective as of July 1, 1994

Amended Effective as of January 6, 2000,
January 8, 2004 and January 1, 2005

i

TABLE OF CONTENTS

Page

ARTICLE 1 DEFINITIONS	1
1.1 Account	1
1.2 Beneficiary	1
1.3 Code	1
1.4 Committee	1
1.5 Company	1
1.6 Early Retirement Date	1
1.7 ERISA	2
1.8 Normal Retirement Date	2
1.9 Participant	2
1.10 Plan	2
1.11 Retirement Plan	2
1.12 Trust	2
1.13 Trust Fund	2
1.14 Trustee	2
ARTICLE 2 ELIGIBILITY AND PARTICIPATION	2
ARTICLE 3 PRE-2005 SUPPLEMENTAL RETIREMENT BENEFIT	2
3.1 Pre-2005 Grandfathered Account	2
3.2 Amount	3
3.3 Form of Payment	3
3.4 Benefit Commencement	3
ARTICLE 4 POST-2004 SUPPLEMENTAL RETIREMENT BENEFIT	3
4.1 Post-2004 Account	3
4.2 Six Month Payment Delay for Key Employees	4
4.3 Code Section 409A	4
ARTICLE 5 SURVIVOR BENEFITS	5
5.1 Pre-2005 Grandfathered Account Death Benefit	5
5.2 Post-2004 Account Death Benefit	5
ARTICLE 6 GENERAL PROVISIONS	5
6.1 Right to Amend or Terminate	5
6.2 No Right of Employment	5
6.3 Plan Funding	5
6.4 Unsecured Benefit	6
6.5 Reporting	6
6.6 Trust Agreement	6

Page

6.7 Administration	6
6.8 No Assignment	6
6.9 Binding Effect	6
6.10 Governing Law	7
ARTICLE 7 DUTIES UPON INSOLVENCY	8
7.1 Duty to Inform	8
7.2 Actions Required	8
7.3 Insolvency	8

NORTHRIM BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     The purpose of this Supplemental Executive Retirement Plan (the “Plan”) is to award individuals for their continued commitment to Northrim Bank (“Bank”), and to provide a supplemental retirement benefit, since retirement benefits under Northrim Bank Retirement Plan have been limited in recent years by Congress under the Internal Revenue Code. It is intended that this Plan will assist in retaining and attracting individuals of exceptional ability by providing them with the benefits provided hereunder.

     This Plan will be effective as of July 1, 1994.

ARTICLE 1
DEFINITIONS

     1.1 Account or Accounts means the record-keeping accounts maintained hereunder on the books and records of the Company to record Participant’s benefits, as well as the increase in value attributable to interest earned thereon, all as described hereafter.

     1.2 Beneficiary shall mean the individual(s) designed by the Participant on a form provided by the Committee. If no individual is designated, the Beneficiary shall be: (i) the spouse, if the participant is married on the date of death; or if unmarried, the Participant’s estate.

     1.3 Code shall mean the Internal Revenue Code of 1986, as amended from time to time, or any succession thereto.

     1.4 Committee shall mean the Compensation Committee of the Board of Directors, which shall administer the Plan in accordance with Section 4.7 hereof.

     1.5 Company shall mean Northrim Bank or any successor corporate entity. The Company may delegate authority necessary to administer the Plan to any person or committee.

     1.6 Early Retirement Date shall mean the first day of any month between a Participant’s 55th and 65th birthdays, provided the Participant has then completed at least 5 years of vesting service under the terms of the Company’s Savings Incentive Plan.

1

     1.7 ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, and any regulations issued pursuant thereto.

     1.8 Normal Retirement Date shall mean the Participant’s 65th birthday. No Participant shall be forced to mandatorily retire merely because such Participant attains his or her Normal Retirement Date.

     1.9 Participant shall initially mean those individuals listed on Exhibit “A” to this Plan. Other individuals may be added from time to time with the consent of the Board of Directors of Northrim Bank.

     1.10 Plan shall mean this Supplemental Executive Retirement Plan.

     1.11 Retirement Plan shall mean the Northrim Bank Defined Benefit Retirement Plan and Trust Agreement as may be amended from time to time.

     1.12 Trust shall mean the Rabbi Trust Agreement entered into between the Company and the Trustee, as amended from time to time, if adopted by the Board of Directors of the Company.

     1.13 Trust Fund shall mean the cash and other investments held and administered by the Trustee in accordance with the provisions of the Trust and the Plan.

     1.14 Trustee shall mean the Committee or any duly appointed additional or successor corporate or independent trustee appointed and acting in accordance with Paragraph 4.6 and Article 4 hereof and the Trust Agreement.

ARTICLE 2
ELIGIBILITY AND PARTICIPATION

     Initially, the individuals listed on Exhibit “A” shall be the only eligible Participants under this Plan. The Company may, in its sole discretion, select other eligible Participants from among a select group of the Company’s management or highly compensated employees within the meaning of Sections 201, 301 and 401 of ERISA.

     All such additional Participants, when added, shall be listed on Exhibit “A” to this Plan.

ARTICLE 3
PRE-2005 SUPPLEMENTAL RETIREMENT BENEFIT

     3.1 Pre-2005 Grandfathered Account. Employer contributions shall be credited to a Participant’s respective Accounts in accordance with this Section. Pre-2005 contributions shall be credited to a Pre-2005 Grandfathered Account, and Post-2004 contributions shall be credited to a Post-2004 Account.

     3.2 Amount. Upon attaining Normal Retirement Age, or Early Retirement Age, a supplemental retirement benefit shall be payable under the terms of this Plan. The amount of such payment shall be’ based on a contribution being credited annually pursuant to the terms of this Plan. Such contributions shall be credited on January 1 to an account maintained on behalf of the Participant. The account shall be further credited with interest compounded annually. Interest will be credited for the year, or any portion thereof, as of January 1 based on the Bank’s average yield on the Bank’s total assets, less a three year rolling average of net loan charge-offs expressed as a percentage of average loans outstanding for the respective periods. The amount payable to the Participant will be the sum of the contribution(s) plus accrued interest credited to such Participant’s account.

     The amount of a Participant’s annual contribution and such Participant’s eligibility date for such contribution shall be attached hereto as Exhibit “B”. Such exhibits shall be individualized for each Participant and shall be numbered in consecutive order beginning with B-1.

     3.3 Form of Payment. The supplemental benefit from this Plan, as determined in Section 3.2, shall be paid-in monthly installments as follows:

          (a) A calculation shall be made to convert the account balance payable under Section 3.2 to equal installment payments payable over a period not to exceed fifteen (15) years, in accordance with Participant’s election, or if no election is made, the period shall be fifteen (15) years. The conversion shall be based upon the time period selected and the applicable interest rate in effect as of the date of benefit commencement. For purposes of this paragraph, the applicable interest rate will be fifty (50) basis points over the applicable U.S. Treasury Note Rate. The applicable U.S. Treasury Note Rate will be the preceding twelve (12) month average, preceding the commencement of payments, and will be the nearest quoted rate for a maturity representing two-thirds of the installment pay-out period. For example, if the installment period is fifteen (15) years, the applicable U.S. Treasury Note Rate will be the rate for a note whose term is two-thirds of the fifteen (15) year installment period, i.e., a 10-Year U.S. Treasury Note. The applicable interest rate will, therefore, be fifty (50) basis points over the prior average annual rate for a 10-Year U.S. Treasury Note.

          (b) Notwithstanding the above, the Participant may elect to receive a lump sum payment of the supplemental benefit under this Plan, as determined in Section 3.2. Such election must be irrevocable and made at least 60 days before the date benefits would commence under Section 3.2 or 3.4.

     3.4 Benefit Commencement. A Participant’s Pre-2005 Supplemental Retirement Benefit shall commence as soon as reasonably practicable following 91 days after the Participant’s termination of employment with the Company, provided the Participant has attained Normal Retirement Age or Early Retirement Age.

ARTICLE 4
POST-2004 SUPPLEMENTAL RETIREMENT BENEFIT

     4.1 Post-2004 Account. A Participant’s Post-2004 Account shall be 100% vested and nonforfeitable at all times and shall become payable to the Participant upon the expiration of

the deferral period elected by the Participant’s annual election form. An initial election form for his or her Post-2004 Account may provide that the deferral period will end on a specified date or the date he ceases to be a Participant.

     Any deferral election for his or her Post-2004 Account to a specified future distribution date must be for at least two Plan Years, so that the earliest specified future distribution date that a Participant may elect will be January 1 following two Plan Years of deferral (counting the Participant’s initial Plan Year of eligibility if he or she first becomes a Participant on a date after January 1 of a Plan Year).

     Notwithstanding the foregoing, a Participant or former Participant may later elect at least 12 months prior to the date on which the Participant deferral period for his or her Post-2004 Account would otherwise have ended to change the specified future distribution date on which payments will commence, provided that election changes the specified future distribution date to a date that is at least five (5) years later than the Participant’s deferral period for his or her Post-2004 Account would otherwise have ended.

     All Participants must elect no later than December 31, 2007 to receive their Post-2004 Account at the end of the Participant’s deferral period in a lump sum or in annual installments not to exceed ten (10) years. New Participants after December 31, 2007 must elect at the time they become a Participant to receive their Post-2004 Account at the end of the Participant’s deferral period in a lump sum or in annual installments not to exceed ten (10) years. A Participant may later elect at least twelve (12) months prior to the date on which the Participant’s deferral period for his or her Post-2004 Account would otherwise have ended to change the form of payment the Participant previously elected to a lump sum payment or a specified number of annual installments not to exceed ten (10) years, provided that election also changes the distribution date of the Participant’s Post-2004 Account to a date that is at least five (5) years later than the Participant’s deferral period for is or her Post-2004 Account would otherwise have ended.

     4.2 Six Month Payment Delay for Key Employees. If a Participant is a Key Employee as of the date on which he or she ceases to be employed by the Company (or as of such other date as may be prescribed under Code Section 409A), then in no event shall such Participant’s first payment date be less than six (6) months after the date of such Participant’s cessation of employment. For this purpose a “Key Employee” shall be an employee described in Code Section 416(i), as may be modified by Code Section 409A.

     4.3 Code Section 409A. This Article 4 is intended to comply and shall be interpreted and construed in a manner consistent with the provisions of Code Section 409A, including any rule or regulation promulgated thereunder. The provisions of this Article 4 shall not be deemed applicable to the Pre-2005 Supplemental Retirement Benefits described in Article 3 however, or to constitute a material modification with respect to such “grandfathered” Accounts. In the event that any provision of this Article or Plan would cause an amount deferred hereunder to be subject to tax under the Code prior to the time such amount is paid to a Participant, such provision shall, without the necessity of further action by the Committee, be deemed null and void.

ARTICLE 5
SURVIVOR BENEFITS

     5.1 Pre-2005 Grandfathered Account Death Benefit. If the Participant dies prior to the commencement of such benefits, payments shall commence to the Beneficiary as soon as practicable after the Participant’s death in installments over fifteen (15) years determined as provided in Section 3.3(a), unless the Committee elects to accelerate payments without penalty to the Beneficiary. If the Participant dies after commencement of benefits, benefits shall continue over the remaining schedule to the Beneficiary, unless the Committee elects to accelerate such payments without penalty to the Beneficiary.

     5.2 Post-2004 Account Death Benefit. If a Participant dies prior to the commencement of payments from his or her Post-2004 Account, the Participant’s Beneficiary shall receive the Participant’s Post-2004 Account in the most recent form of payment properly elected by the Participant prior to his or her death in accordance with the terms of this Plan. If the Participant made no form of payment election, the Participant’s Post-2004 Account will be paid to the Beneficiary in ten (10) annual installments, beginning as soon as reasonably practicable after the Participant’s death. If a Participant dies after payments to the Participant have already commenced and the Participant had elected installment payments, the Participant Beneficiary shall receive the remaining annual installment payments that would otherwise have been paid to the Participant. This Paragraph 5.2 also applies to former Participants who still have a Post-2004 Account balance at the time of their death.

ARTICLE 6
GENERAL PROVISIONS

     6.1 Right to Amend or Terminate. The Company may, by written resolution of its Board of Directors, in its sole discretion, terminate, suspend or amend this Plan at any time, in whole or in part. However, no termination, amendment or suspension of the Plan will affect a Participant’s or Beneficiary’s rights to benefits accrued to the date of amendment, and no amendment shall accelerate benefits to the Participants to the detriment of the Company’s creditors.

     Notwithstanding the foregoing, any termination of the Plan by the Board of Directors shall be subject to the provision of Code Section 409A and applicable regulations regarding restrictions on the Board of Director’s right to terminate the Plan and to distribute Post-2004 Accounts.

     6.2 No Right of Employment. Nothing contained herein will confer upon any Participant the right to be retained in the service of the Company, nor will it interfere with the right of the Company to discharge or otherwise deal with any Participant without regard to the existence of the Plan.

     6.3 Plan Funding. Supplemental retirement benefits may be paid either from a Trust Fund established by the Company or from the general or segregated assets of the Company. All Trust Fund assets, as well as non-Trust Fund assets, shall at all times remain subject to the claims of the general creditors of the Company.

     6.4 Unsecured Benefit. The unpaid balance of any account maintained pursuant to this Plan or Trust is an unsecured, general obligation of the Company. No Participant has ownership rights with respect to any asset of the Company or any Trust Fund by reason of his participation in this Plan or any Trust that may be established hereunder.

     6.5 Reporting. The Company is not required to render any report or accounting to any Participant until benefits under this Plan are actually paid.

     6.6 Trust Agreement. If the Company elects to establish a Trust Fund for the payment of supplemental retirement benefits, the Trustee shall receive and hold all contributions to the Trust Fund made by the Company pursuant to the Plan and shall hold, invest, reinvest, and distribute such fund in accordance with the terms and provisions of this Plan and the Trust Agreement. The Company or the Committee may engage the services of qualified, independent investment managers for the purpose of providing some or all of the investment management for this Plan. The Company or the Committee may modify the Trust Agreement from time to time to accomplish the purposes of this Plan and may, with approval, remove any Trustee and select any successor Trustee. No amendment to the Plan, however, will bind the Trustee without its consent.

     6.7 Administration. The Company designates the Compensation Committee to administer, construe and interpret this Plan. The Committee shall perform administrative duties as required herein, and shall serve for such terms as the Company may designate or until a successor has been appointed or until removed by the Company. No Committee member shall vote on a matter that related solely to his entitlement to benefits hereunder.

     The construction and interpretation by the Committee of any provision of this Plan shall be final, conclusive and binding upon all parties, including the Company and its employees. The Committee has the sole discretion to decide all issues under this Plan and any Trust that may be established hereunder. Any decision of the Committee that is not an abuse of discretion or arbitrary and capricious, shall be upheld by a court of law. The Committee may adopt rules and regulations to assist it in the administration of the Plan. No member of the Committee shall be liable for any act performed or determination made, unless attributable to willful misconduct or lack of good faith. The Company shall hold the Committee and its members harmless and indemnify them from liability unless such liability stems from willful misconduct or lack of good faith. All expenses of administration of the Plan shall be borne by the Company and no part thereof shall be payable by a Participant in this Plan.

     6.8 No Assignment. Except as provided below, no rights hereunder are assignable in whole or in part, either by voluntary or involuntary act or by operation of law. Rights hereunder are not subject to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance. Such rights are not subject to the debts, contracts, liabilities, engagements or torts of the Participant or his Beneficiary. Notwithstanding the above, the Participant’s and Beneficiary’s rights hereunder may be assigned to a trust created under the Participant’s Last Will and Testament or similar dispositive instrument.

     6.9 Binding Effect. This Agreement is binding upon the parties hereto, and their respective heirs, executors, administrators, successors and assigns. This Agreement shall bind

the Company, and any successor thereto whether as a result of merger, sale of stock, sale of substantially all the assets, or otherwise.

     6.10 Governing Law. This Agreement shall be governed by the laws of the State of Alaska except as may be preempted or superseded by federal law. Venue shall be the United States District Court, State of Alaska, at Anchorage.

ARTICLE 7
DUTIES UPON INSOLVENCY

     7.1 Duty to Inform. The Board of Directors and/or the Chief Executive Officer of the Company shall have the duty to inform the Trustee (if a Trust is established) of the Company’s bankruptcy or insolvency, as defined in Section 7.3 below.

     7.2 Actions Required. When informed of the Company’s insolvency or bankruptcy by the Board of Directors and/or the Chief Executive Officer, the Trustee shall suspend payments to any Participant or Trust Beneficiary and shall hold assets for the benefit of the Company’s general creditors. Furthermore, if the Trustee receives other written allegations from any other source (with proper written documentation supporting the same) of the Company’s insolvency, the Trustee shall suspend all such payments and hold the Trust assets for the benefit of the Company’s general creditors, and must determine within 30 days whether the Company is in fact insolvent. If the Trustee determines that the Company is not insolvent, the Trustee will resume payments, including any benefits previously suspended. In all cases where the Trustee has actual knowledge of, or has a determination of the Company’s insolvency, the Trustee shall deliver trust assets to satisfy claims of the Company’s general creditors as directed by a court of competent jurisdiction.

     7.3 Insolvency. Insolvency shall mean the complete inability of the Company to meet its obligations to the Company’s creditors in due course.

     This Amended Supplemental Executive Retirement Plan has been duly executed by the Company’s authorized representative this 2nd day of August, 2007 to be effective as of January 1, 2005.

NORTHRIM BANK
By:	/s/ Ronald A. Davis
	Ronald A. Davis
	Its: Chairman of the Compensation Committee

ATTEST:

/s/ Gerri Tokar-Hines

Adopted by the Board of Directors of Northrim Bank on November 3, 1994.

I certify that an amendment to the Plan was approved and adopted by the Board of Directors of Northrim Bank on January 6, 2000.

I certify that an amendment to the Plan was approved and adopted by the Board of Directors of Northrim Bank on January 8, 2004.

I certify that an amendment to the Plan was approved and adopted by the Board of Directors of Northrim Bank on August 2, 2007 effective as of January 1, 2005.

/s/ Mary A. Finkle  

Secretary 

EX-10.22

EXHIBIT 10.22

NORTHRIM BANK

DEFERRED COMPENSATION PLAN

Originally Effective as of January 1, 1995

Amended Effective as of October 3, 1996
and
January 1, 2005

TABLE OF CONTENTS

ARTICLE I INTRODUCTION	1
ARTICLE II ELIGIBILITY	1
ARTICLE III PAYMENT OF DEFERRED AMOUNTS AND INTEREST	1
3.1 Accounts	1
3.2 Salary Deferral	1
3.3 Bonus Deferral	2
3.4 Interest Credited to Accounts	2
3.5 Form and Timing of Payment for Pre-2005 Grandfathered Accounts	2
3.6 Form and Timing of Payment for Post-2004 Accounts	3
3.7 Limit on Payments	4
3.8 Code Section 409A	4
3.9 Status as a Key Employee	4
ARTICLE IV DISABILITY	4
ARTICLE V DEATH BENEFITS	4
ARTICLE VI UNFORESEEABLE EMERGENCY	5
ARTICLE VII AMENDMENT; TERMINATION; ADMINISTRATION	5
ARTICLE VIII MISCELLANEOUS PROVISIONS	6
8.1 Assignment	6
8.2 Taxes	6
8.3 No Employment Agreement	6
8.4 Unfunded	7
8.5 Vesting	7
8.6 Duties Upon Insolvency	7
8.7 Claim Procedures	8
8.8 Change in Control	8
8.9 Entire Agreement	8

NORTHRIM BANK

DEFERRED COMPENSATION PLAN

ARTICLE I
INTRODUCTION

     This Deferred Compensation Plan (the “Plan”) provides competitive fringe benefit planning to key employees of Northrim Bank (the “Employer” or “Company”) by permitting such employees to defer the receipt of compensation. The election to defer must be irrevocable and must be made in accordance with the terms of the Plan. This Plan and the elections made hereunder shall bind the Employer, its successors and assigns. The effective date of the Plan is January 1, 1995.

ARTICLE II
ELIGIBILITY

     As of the Effective Date, all officers of the Employer are eligible to participate in this Plan (“Eligible Employee(s)” or “Participant”). Other key employees may become eligible to participate if so notified by the Compensation Committee, hereinafter “Committee.”

ARTICLE III
PAYMENT OF DEFERRED AMOUNTS AND INTEREST

     3.1 Accounts. Salary and bonus deferrals made under this Article 3 shall be credited to a Participant’s Accounts. Amounts deferred and vested prior to 2005 shall be credited to a Pre-2005 Grandfathered Account. Post-2004 deferrals shall be credited to a Post-2004 Account and administered in accordance with Internal Revenue Code Section 409A.

     All deferrals made hereunder shall be credited to special accounts on the books of the Employer in the name of the Participants, and/or, with consent of the Employer’s Board and the Committee, deposited in a grantor trust on behalf of such Participants. The Committee shall credit such accounts with interest, in accordance with Section 3.4 hereof. Participant’s accounts will be increased by his or her proportionate share of all interest credited to the accounts by the Employer. A Participant is entitled to a statement of his or her accounts, at least annually, within ninety (90) days after the close of the calendar year.

     3.2 Salary Deferral. On or prior to December 31 of each year that this Plan is in effect, any Eligible Employee may elect to defer receipt of at least five percent (5%) to a maximum of one hundred percent (100%) of their salary to be paid in the calendar year following the year of election. The election shall be in writing, on a form provided by the Committee, and shall be irrevocable as to any Salary payable in the next year. Any such election will also be effective with respect to future years’ salary unless revoked by the Participant prior to December 31 of the year preceding the year in which the deferral is to take effect. New

elections may be made in accordance with the terms of this Section 3.2 if made by December 31 of the year preceding the year for which the change is to take effect.

     Notwithstanding the other provisions of this Section 3.2, an Eligible Employee may elect to defer receipt of all or a portion of their remain salary to be paid in the current calendar year if such election is made in writing within thirty (30) days after the Participant is first notified of their eligibility to participate in the Plan by the Committee.

     3.3 Bonus Deferral. On or prior to December 31 of each year that this Plan is in effect, any Eligible Employee may elect to defer receipt of at least five percent (5%) to a maximum of one hundred percent (100%) of their bonus for services to be performed in a succeeding Plan Year. The election shall be in writing, on a form provided by the Committee, and shall be irrevocable as to any bonus payable with respect to services to be performed.

     Any such election will also be effective with respect to future years’ bonuses unless revoked by the Participant prior to December 31 of the year preceding the year in which services are to be performed. Any new election with respect to future years’ bonuses must be filed with the Committee prior to December 31 of the year preceding the year during which the services to which the bonus relates are to be performed.

     Notwithstanding the other provisions of this Section 3.3, an Eligible Employee may elect to defer receipt of all or any portion of their bonus if such election is made in writing within thirty (30) days after the Participant is first notified of their eligibility to participate in the Plan by the Committee.

     3.4 Interest Credited to Accounts. The Committee shall credit all amounts deferred and credited to a Participant’s Accounts as outlined in Sections 3.1 and 3.5 herein, with interest compounded annually. The interest for any given year, or portion thereof, shall be Northrim Bank’s average yield on the Bank’s total assets calculated on January 1, based on the prior year’s performance, less one percentage (l%) point.

     All taxes (including interest and penalties) levied or assessed with respect to the funds or the income thereon, shall be paid by the Employer, unless under other applicable tax law, such taxes are deemed an obligation of the Participant, in which case the Participant will pay.

     3.5 Form and Timing of Payment for Pre-2005 Grandfathered Accounts. Subject to the limitations contained herein, a Participant’s Pre-2005 Grandfathered Account shall be paid in installments or as a lump sum in accordance with the Participant’s deferral election.

     Notwithstanding the above, if installment payments were elected, the Committee may elect, in its sole discretion, to accelerate payments provided an irrevocable request is made in writing at least thirty (30) days prior to the commencement date of the first payment. If an accelerated payment is made, the Participant will also pay to the company a penalty equal to two percent (2%) of the accelerated amount. No such acceleration shall be made to the detriment of a current creditor of the Company. If installment payments are elected, a calculation shall be made to compute a level series of monthly payments based on the Participant’s account balance, the time period selected and the applicable interest rate in effect as of the benefit commencement date. For purposes of this paragraph, the applicable interest rate will be fifty (50) basis points

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over the applicable U.S. Treasury Note Rate. The applicable U.S. Treasure Note Rate will be the preceding twelve (12) months average, preceding the commencement of payments, and will be the nearest quoted rate for a maturity representing two-thirds of the installment pay-out period. For example, if the installment period is fifteen (15) years, the applicable U.S. Treasury Note Rate will be the rate for a note whose term is two-thirds of the fifteen (15) year installment period, i.e., a 10-Year U.S. Treasury Note. The applicable interest rate will, therefore, be fifty (50) basis points over the prior average annual rate for a 10-Year U.S. Treasury Note.

     Any deferral must be for a minimum period of two years. A distribution of a Participant’s account shall begin on the first day of the month following sixty (60) days (or as soon thereafter as administratively possible) after the occurrence of the earliest of: (i) termination of employment (voluntary or involuntary); (ii) disability; or (iii) passage of the period of time stated on the Participant’s deferral election.

     3.6 Form and Timing of Payment for Post-2004 Accounts A Participant’s Post-2004 Account shall be 100% vested and nonforfeitable at all times and shall become payable to the Participant upon the expiration of the election form. A Participant’s election form for his or her Post-2004 Account may provide that the Participant’s deferral period will end on a specified date or the date he ceases to be a Participant.

     Any deferral election for his or her Post-2004 Account to a specified future distribution date must be for at least two Plan Years, so that the earliest specified future distribution date that a Participant may elect will be January 1 following two Plan Years of deferral (counting the Participant’s initial Plan Year of eligibility if he or she first becomes a Participant on the date after January 1 of a Plan Year).

     Notwithstanding the foregoing, a Participant or former Participant may later elect at least 12 months prior to the date on which the Participant’s deferral period for his or her Post-2004 Account would otherwise have ended to change the specified future distribution date on which payments will commence, provided that election changes the specified future distribution date to a date that is at least five (5) years later than the Participant’s deferral period for his or her Post-2004 Account would otherwise have ended.

     All Participants must elect no later than December 31, 2007 to receive their Post-2004 Account at the end of the Participant’s deferral period in a lump sum or in annual installments not to exceed ten (10) years. New Participants after December 31, 2007 must elect at the time they become a Participant to receive their Post-2004 Account at the end of the Participant’s deferral period in a lump sum or in annual installments not to exceed ten (10) years. A Participant may later elect at least twelve (12) months prior to the date on which the Participant’s deferral period for his or her Post-2004 Account would otherwise have ended to change the form of payment the Participant previously elected to a lump sum payment or a specified number of annual installments not to exceed ten (10) years, provided that election also changes the distribution date of the Participant’s Post-2004 Account to a date that is at least five (5) years later than the Participant’s deferral period for his or her Post-2004 Account would otherwise have ended.

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     3.7 Limit on Payments. No amount will be paid under this Article III if such payment will cause the Employer to pay excessive remuneration to such Employee as that term is defined by Section 162(m) of the Internal Revenue Code (“Code”) of 1986. Payments from Pre-2005 Grandfathered Accounts hereunder will be reduced to the extent necessary to avoid the limitations of Section 126(m) and amounts not paid due to such limitations shall be deferred and paid in the following years.

     Payments from Post-2004 Accounts hereunder will be reduced to the extent necessary to avoid the limitations of Section 162(m) and amounts not paid due to such limitations shall be paid no sooner than the form and timing provisions of Code Section 409A as provided in Section 3.6 permit.

     3.8 Code Section 409A. This Plan is intended to comply and shall be interpreted and construed in a manner consistent with the provisions of Code Section 409A, including any rule or regulation promulgated thereunder. The provisions of this Plan shall not be deemed applicable to Pre-2005 Grandfathered Accounts or to constitute a material modification with respect to the administration of such Pre-2005 Grandfathered Accounts. In the event that any provision of the Plan would cause an amount deferred hereunder to be subject to tax under the Code prior to the time such amount is paid to a Participant, such provision shall, without the necessity of further action by the Committee, be deemed null and void.

     3.9 Status as a Key Employee. If a Participant is a Key Employee as of the date on which he or she ceases to be employed by the Company (or as other such date as may be prescribed under Code Section 409A), then in no event shall such Participant’s initial payment be less than six (6) months after the date of such Participant’s cessation of employment. For this purpose, a “Key Employee” shall be an employee described in Code Section 416(i), as may be modified by Code Section 409A.

ARTICLE IV
DISABILITY

     For purposes of determining commencement of payments due to disability, disability shall occur when the Participant is receiving income replacement benefits for at least three (3) months under the Employer’s accident or health plan by reason of medically determined physical or mental impairment which is expected to result in death or last for at least twelve (12) months, or the Committee determines that the Participant is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than twelve (12) months.

ARTICLE V
DEATH BENEFITS

     Any amount due to a Participant which is unpaid upon his or her death shall be paid to the beneficiary designated by the Participant on a form provided by the Committee. The designated beneficiary may be changed from time to time by filing a new beneficiary designation with the Committee. A spouse must consent to a designation if more than fifty percent (50%) of the account will be paid to a beneficiary other than the spouse. The designation last filed shall

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control. If a Participant fails to designate a beneficiary, or if the person or persons designated on the beneficiary designation predecease the Participant, and the beneficiary designation form does not indicate who receives the amount due, the amount owing shall be paid in the following order:

          a. surviving spouse

          b. estate of deceased Participant.

Payments to the beneficiary of a deceased Participant shall be made in the manner described in Article III, as if the beneficiary were the Participant.

ARTICLE VI
UNFORESEEABLE EMERGENCY

     In the event of an unforeseeable emergency, the Participant may withdraw all or part of his or her Accounts and any interest thereon. Provided, that the amount received by the Participant as a result of the revocation or the amount withdrawn shall be limited to the amount necessary to satisfy the unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution.

     “Unforeseeable emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent of the Participant (as defined in Code Section 152(a)), loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant’s control. Whether circumstances constitute such an unforeseeable emergency depends on the facts of each case as determined by the Committee in its discretion. Payment may not be made if the unforeseeable emergency may be relieved:

     (a) Through reimbursement or compensation by insurance or otherwise; or

     (b) By liquidation of the Participant’s assets, to the extent that liquidation itself would not cause severe financial hardship.

     This Article VI also applies to former Participants who incur an unforeseeable emergency and who still have a Plan Account balance.

     If a Participant obtains a payment upon an unforeseeable emergency, the Participant’s deferral election under this Plan shall terminate.

ARTICLE VII
AMENDMENT; TERMINATION; ADMINISTRATION.

     This Plan may be amended or terminated at any time by a written resolution adopted by the Committee, provided that no amendment or termination shall effect the rights of Participants to receive amounts deferred but unpaid as of such termination or amendment.

     The Company designates the Compensation Committee to administer, construe, and interpret this Plan. The Committee shall perform administrative duties as required herein, and

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shall serve for such terms as the Company may designate or until a successor has been appointed or until removed by the Company. No Committee member shall vote on a matter that related solely to his entitlement to benefits hereunder.

     The construction and interpretation by the Committee of any provision of this Plan shall be final, conclusive and binding upon all parties, including the Company and its employees. The Committee has the sole discretion to decide all issues under this Plan and any Trust that may be established hereunder. Any decision of the Committee that is not an abuse of discretion or arbitrary and capricious, shall be upheld by a court of law. The Committee may adopt rules and regulations to assist it in the administration of the Plan. No member of the Committee shall be liable for any act performed or determination made, unless attributable to willful misconduct or lack of good faith. The Company shall hold the Committee and its members harmless and indemnify them from liability unless such liability stems from willful misconduct or lack of good faith. All expenses of administration of the Plan shall be borne by the Company and no part thereof shall be payable by a Participant in this Plan.

     Post-2004 Accounts administered under this Plan are intended to comply and shall be interpreted and construed in a manner consistent with the provisions of Code Section 409A, including any rule or regulation promulgated thereunder. The provisions of this Plan relating to Post-2004 Accounts shall not be deemed applicable to Grandfathered Pre-2005 Accounts or to constitute a material modification of the Plan with respect to such Grandfathered Pre-2005 Accounts. In the event that any provision of the Plan would cause an amount deferred hereunder to be subject to tax under the Internal Revenue Code prior to the time such amount is paid to a Participant, such provision shall, without the necessity of further action by the Committee, be deemed null and void.

ARTICLE VIII
MISCELLANEOUS PROVISIONS.

     8.1 Assignment. No amounts deferred hereunder shall be assignable in whole or in part, either by voluntary or involuntary act or operation of law. Rights hereunder are not subject to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance, and such rights may not be subject to the debts, contracts, liabilities, engagements or torts of the Participant or his beneficiary. All amounts deferred hereunder remain the unrestricted assets of the Employer. Any assets purchased shall remain the sole property of the Employer subject to the claims of its general creditors and shall be available for the Employer’s use for whatever purpose desired. No Participant hereunder shall have any right other than the unsecured promise of the Employer to pay deferred compensation in the future.

     8.2 Taxes. When payments are made pursuant to this Plan, such payments are subject to income tax withholding. Payroll taxes (FICA) are withheld at the time compensation is deferred.

     8.3 No Employment Agreement. Nothing in this Agreement shall be construed as creating a right in the Participant to continued employment with the Employer.

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     8.4 Unfunded. The amounts credited hereunder shall at all times be subject to the general creditors of the Employer. Amounts may, however, be deposited in a grantor trust.

     8.5 Vesting. Amounts deferred hereunder will always be one hundred percent (100%)vested and nonforfeitable.

     8.6 Duties Upon Insolvency. The Employer shall be considered “insolvent” if: (i) Employer is unable to pay its debt as they become due, (ii) the Employer is subject to a pending proceeding as a debtor under the United States Bankruptcy Code, or (iii) the Employer is in FDIC receivership. Upon the occurrence of insolvency, the Board of Directors and the Chief Executive Officer of the Employer shall have the duty to inform the Committee and any Trustee holding Plan assets of the Employer’s insolvency. Upon insolvency, the Committee and the Trustee shall hold the assets of the Trust for the benefit of the Employer’s general creditors. Nothing hereunder shall diminish the rights of Plan Participants or their beneficiaries to pursue their rights as general creditors with respect to benefits due under the Plan.

     Benefit payments will resume to Participants and beneficiaries when the Board of Directors and the Chief Executive Officer inform the Committee and any Trustee that the Employer is no longer insolvent. Provided there are sufficient Employer assets when payments subsequently resume, the first payment following a discontinuance hereunder shall include the aggregate amount of all payments due to the Plan Participants or the beneficiaries under the terms of the Plan for the prior of such discontinuance.

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     8.7 Claim Procedures. Disputes arising hereunder shall be resolved utilizing the claims procedures adopted by the Northrim Bank Savings Incentive Plan. Such procedures are hereby incorporated by reference.

     8.8 Change in Control. Upon a change in control, a rabbi trust in the form attached hereto as Exhibit “A,” will be created and all amounts credited to Participants’ accounts will be deposited in such Trust. For purposes of this Section 8.8, “change in control” means the date on which any one person, or more than one person acting as a group, acquires ownership of stock of thee Employer, that together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation. However, if that person or group already owns more than 50% of the total fair market value or total voting power of the stock of the Employer, the acquisition of additional stock by the same person or group is not considered a Change in Control. Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Employer.

     “Change in Control” also means the date that any unrelated person or group acquires more than 50% of the assets of the Employer that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of the assets of the Employer immediately prior to such acquisition. Gross fair market value means the value of the assets of the Employer, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. Whether a person or group is unrelated to the Employer is determined in accordance with Code Section 409A and applicable IRS guidance.

     8.9 Entire Agreement. This document, the Beneficiary Designation Form and the Election Form shall constitute the entire agreement between the Employer and the Participant. All modifications must be in writing. This document shall be construed by the laws of the State of Alaska to the extent such laws are not preempted by federal law. Venue for any lawsuit shall be the United States District Court of Alaska, at Anchorage.

     This Plan is adopted to be effective as of the first day of January, 1995, by Northrim Bank and was amended effective the third day of October, 1996.

     This Plan, as amended, is adopted to be effective as of January 1, 2005.

NORTHRIM BANK
By:	/s/ Ronald A. Davis
Ronald A. Davis
Its Chairman of the Compensation Committee

Adopted by the Board of Directors of Northrim Bank on August 2, 2007.

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EX-10.23

EXHIBIT 10.23

NORTHRIM BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT
DEFERRED COMPENSATION PLAN

Originally Effective as of
February 1, 2002

Amended Effective as of
January 1, 2005

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TABLE OF CONTENTS

1. DEFINITIONS	2
2. ELIGIBILITY AND PARTICIPATION	3
(a) REQUIREMENTS	3
(b) REEMPLOYMENT	3
3. CONTRIBUTIONS AND BENEFITS	3
(a) CONTRIBUTIONS	3
(b) INTENT	3
(c) DEFINED CONTRIBUTION	3
(d) SUBJECT TO CLAIMS	3
4. ALLOCATION OF FUNDS	4
(a) PRE-2005 GRANDFATHERED ACCOUNT	4
(b) SEPARATE PARTICIPANT ACCOUNTS	4
(c) DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS	4
(d) POST-2004 ACCOUNTS	4
5. DISTRIBUTION OF BENEFITS	4
(a) PRE-2005 GRANDFATHERED ACCOUNT	4
(b) RETIREMENT OF EMPLOYEE	4
(c) DISABILITY OF THE PARTICIPANT	4
(d) DISTRIBUTIONS ON DEATH	5
(e) POST-2004 ACCOUNT	5
(f) DISTRIBUTIONS FOR UNFORESEEABLE EMERGENCY	6
(g) CHANGE IN CONTROL	6
(h) METHOD OF PAYMENT	7
(i) TERMINATION	7
(j) INCOME TAXES ON DISTRIBUTIONS	7
6. BENEFICIARIES; EMPLOYEE DATA	7
7. ADMINISTRATION	8
(a) ADMINISTRATIVE AUTHORITY	8
(b) PAYMENT OF FEES, EXPENSES AND TAXES	8
(c) CLAIMS PROCEDURE	8
8. AMENDMENT	9
(a) RIGHT TO AMEND	9
(b) AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN	9

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9. MISCELLANEOUS.	9
(a) LIMITATIONS ON LIABILITY OF EMPLOYER	9
(b) CONSTRUCTION	9
(c) SPENDTHRIFT PROVISION	10

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NORTHRIM BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT
DEFERRED COMPENSATION PLAN

Originally Effective as of
February 1, 2002

Amended Effective as of
January 1, 2005

RECITALS:

     A. This Northrim Bank Supplemental Executive Retirement Deferred Compensation Plan (the Plan) is adopted by Northrim Bank (the Employer) for a limited number of its executive employees.

     B. It is the desire of the Northrim Bank (the Employer) to provide to certain executive employees (the Employees) a supplemental executive retirement fund so that upon certain conditions, there will be funds available to them on their respective retirement.

     C. This NORTHRIM SUPPLEMENTAL RETIREMENT DEFERRED COMPENSATION PLAN (the Plan) is adopted by the Northrim Bank (the Employer) for such Employees to provide termination of employment and related retirement benefits taxable pursuant to I.R.C. § 451.

     D. It is anticipated that once this Plan is approved, contributions will be made to the Participant Accounts(s) for their respective benefit.

     E. The Plan is intended to be an unfunded defined contribution non-qualified deferred compensation plan maintained by the Employer for the sole benefit of executive employees for the purpose of providing for retirement or deferred compensation benefits. All Participants are considered by the Employer to be in the upper level of “management.”

     F. The Plan is intended to be a top-hat plan [a/k/a “supplemental executive retirement plan], i.e., an unfunded deferred compensation plan maintained for a select group of management or highly compensated employees, under Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974 (ERISA). All provisions of this Plan shall be interpreted consistent with that intent.

     G. It is the intent of the Employer and the Participant’s, that until distributed, a Participant’s Accounts shall at all times remain unfunded and unvested, and subject to the general creditors of the Employer.

     Accordingly, the following Plan is adopted.

     1. DEFINITIONS.

          (a) BENEFICIARY means any person or person designated in accordance with the provisions of Section 6 of the Plan.

          (b) CODE or IRC shall mean the Internal Revenue Code of 1986 and the regulations there under, as amended from time to time.

          (c) EFFECTIVE DATE of this amended and restated plan is January 1, 2005. The Plan’s original Effective Date was February 1, 2002.

          (d) EMPLOYER means Northrim Bank, an Alaska corporation and its successors and assigns or any other corporation or business organization that assumes the Employer’s obligations hereunder.

          (e) NORMAL RETIREMENT AGE shall mean the age referenced in Section 3 below.

          (f) PARTICIPANT means any Employee so designated in accordance with the provisions of Section II who is or may become (or whose Beneficiaries may become) eligible to receive a benefit under the Plan.

          (g) PARTICIPANT ACCOUNT or ACCOUNTS shall mean then current balances (as adjusted pursuant to the terms of this Plan) of the funds that are set aside by the Employer for the Participant pursuant to the Plan, and shall include contribution credits and deemed income, gains, and losses (to the extent realized as determined by the Employer, in its discretion) and credited thereto. The Employer will use key man variable life insurance policies on each Participant to determine the Participant’s Account. The death benefit and cash value of the policies remain the property of the bank until distributed under the provisions of this Plan. A Participant’s or Beneficiary’s Accounts shall be determined as of the date of reference.

          (h) PLAN means this Northrim Bank Supplemental Executive Retirement Deferred Compensation Plan, as amended from time to time.

          (i) UNFORSEEABLE EMERGENCY means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent of the Participant (as defined in IRC § 152(a)), the loss of the Participant’s property due to casualty, or other similar extraordinary and unforseeable circumstances, arising as a result of events beyond a Participant’s control. Whether circumstances constitute such an unforseeable emergency depends on the facts of each case as determined by the Compensation Committee in its discretion. Payment may not be made if the unforseeable emergency may be relieved:

               (i) Through reimbursement or compensation by insurance or otherwise; or

               (ii) By liquidation of the Participant’s assets, to the extent that liquidation itself would not cause severe financial hardship.

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     The definition provided in this Section 1(i) also applies to former Participants who incur an unforeseeable emergency and who still have an Account balance. If a Participant obtains a payment, upon an unforeseeable emergency, the Participant’s deferral election under this Plan shall terminate.

     2. ELIGIBILITY AND PARTICIPATION.

          (a) REQUIREMENTSThe following conditions must be met before an Employee may participate in the Plan:

               (i) An Employee must be at all times a member of a select group of executive management or highly compensated employees.

               (ii) Participation in the Plan is contingent on the Employer determining that it wants to extend benefits under the Plan to the Employee; such determination shall be at all times in the sole and absolute discretion of the Employer.

               (iii) The Employee must elect to participate in the Plan as a Participant.

          (b) REEMPLOYMENTIf a Participant whose employment with the Employer is terminated is subsequently reemployed, he or she may become a Participant in the Plan only in accordance the provisions of Section 2(a), above.

     3. CONTRIBUTIONS AND BENEFITS.

          (a) CONTRIBUTIONS Each year, the Employer shall contribute to each Participant’s Accounts the following amounts:

Participant	Normal Retirement Age		Annual Contribution
R. Marc Langland		70	$	92,511
Christopher N. Knudson		60	$	54,225
Victor P. Mollozzi		60	$	45,000
Joseph M. Schierhorn		60	$	45,000
Robert L. Shake		60	$	45,000
Joseph M. Beedle		60	$	89,527

          (b) INTENT The funds contributed to the Participant’s Accounts are for the purpose of providing the Participant a source of funds for future retirement. The funds are being set aside not as part of his current or past compensation, but rather as an excess supplemental executive employee retirement benefit to be paid to the Participant at some time in the future as further provided within this Plan.

          (c) DEFINED CONTRIBUTION The contribution of the funds to the Participant’s Accounts are intended to be a defined contribution and not provide a defined benefit.

          (d) SUBJECT TO CLAIMS Until distributed, a Participant’s Accounts shall at all times remain subject to the general creditors of the Employer.

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     4. ALLOCATION OF FUNDS.

          (a) PRE-2005 GRANDFATHERED ACCOUNT Employer contributions shall be credited to a Participant’s respective Accounts in accordance with this Section. Pre-2005 contributions shall be credited to a Pre-2005 Grandfathered Account, and Post-2004 contributions shall be credited to a Post-2004 Account. The total of the Participant’s respective Accounts will be adjusted from time to time to reflect (i) distributions; (ii) the performance of the investments; (iii) credited or debited with the increase or decrease in the realized net asset value or credited interest, as applicable, from the designated investments, if any.

          (b) SEPARATE PARTICIPANT ACCOUNTS The Employer shall establish and maintain separate Participant Accounts for each Participant.

          (c) DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS Subject to such limitations as may from time to time be required by the Plan, the Employer or applicable law, the Participant may direct the Employer in writing as to how the funds held in the Participants Accounts are to be invested from time to time. When such written directions are given, the Employer may invest the funds accordingly, but is not so required.

          (d) POST-2004 ACCOUNTS Post-2004 Accounts are intended to comply, and provisions concerning the administration of such Accounts shall be construed in a manner consistent with the provisions of Code Section 409A, including any rule or regulation promulgated thereunder. The provisions governing the administration of Post-2004 Accounts shall not be deemed applicable to Pre-2005 Grandfathered Accounts or to constitute a material modification with respect to these “grandfathered” accounts. In the event that any provision of this Plan would cause an amount hereunder to be subject to tax under the Code prior to the time such amount is paid to a Participant, such provision shall, without the necessity of further action by the Committee, be deemed null and void.

     5. DISTRIBUTION OF BENEFITS.

          (a) PRE-2005 GRANDFATHERED ACCOUNT The Participant’s Pre-2005 Grandfathered Account shall not be distributed until the occurrence of such condition specifically provided below, and each of which shall be construed as a condition precedent to any distribution being required under the terms of this Plan.

          (b) RETIREMENT OF EMPLOYEE For Pre-2005 Grandfathered Accounts, the balance of a Participant’s Accounts shall be distributed to the Participant (or his designated Beneficiary upon the occurrence of both of the following: (i) the Employee’s written notice of retirement or termination of employment; and, (ii) the Employee attaining the Normal Age of Retirement. At the election of the Participant, in lieu of receiving the remaining balance of the Participant’s Accounts, the Participant may receive the insurance policy held by the Employer for the Participant’s Accounts, net of a distribution of cash value sufficient to pay the taxes on the receipt of the policy. Such distribution shall occur unless otherwise agreed to in writing by the Employer and the Participant.

          (c) DISABILITY OF THE PARTICIPANT If a Participant becomes disabled, the Employer will distribute the Participant’s Accounts. “Disability” means the Participant (1) is

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unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (2) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant’s Employer.

     For Pre-2005 Grandfathered Accounts, distribution upon disability shall occur unless otherwise agreed to in writing by the Employer and the Participant.

          (d) DISTRIBUTIONS ON DEATH Upon the death of the Participant, a death benefit shall be paid by the Employer to the Participant’s Beneficiary(-ies). The death benefit shall be equal to the greater of the face amount of the insurance policy shown below or the cash value of the Participant’s Account.

Participant	Death Benefit
R. Marc Langland	$	500,000
Christopher N. Knudson	$	630,000
Victor P. Mollozzi	$	500,000
Joseph M. Schierhorn	$	500,000
Robert L. Shake	$	500,000
Joseph M. Beedle	$	500,000

          (e) POST-2004 ACCOUNT A Participant’s Post-2004 Account shall be 100% vested and non-forfeitable at all times and shall become payable to the Participant on a specified date or the date he ceases to be a Participant.

     All Participants must elect no later than December 31, 2007, to receive their Post-2004 Account at a future specified date in a lump sum or in annual installments not to exceed ten (10) years.

     New Participants after December 31, 2007, must elect at the time they become a Participant to receive their Post-2004 Account at a future specified date in a lump sum or annual installments not to exceed ten (10) years. If the Participant elects a lump sum the Participant may receive the insurance policy held by the Employer for the Participant’s Accounts, net of a distribution of cash value sufficient to pay the taxes on the receipt of the policy.

     A Participant may later elect at least twelve (12) months prior to the date on which the Participant’s distribution for his Post-2004 Account would otherwise commence to change the specified future distribution date on which payments were scheduled to begin, provided that the new specified future distribution date is a date that is at least five (5) years later than the Participant’s original commencement date for distribution of his Post-2004 Account.

     If a Participant is a Key Employee as of the date on which he or she ceases to be employed by the Company (or as of such other date as may be prescribed under Code Section 409A), then in no event shall such Participant’s first payment date be less than six (6) months

5

after the date of such Participant’s cessation of employment. For this purpose a “Key Employee” shall be an employee described in Code Section 416(i), as may be modified by Code Section 409A.

          (f) DISTRIBUTIONS FOR UNFORESEEABLE EMERGENCY.

               (i) In the event of an Unforeseeable Emergency of the Participant, the Participant may apply in writing to the Compensation Committee for the distribution of all or any part of the Participant’s Accounts. The Participant shall set forth the hardship.

               (ii) The Compensation Committee shall consider the circumstances of the request and the best interests of the Participant and his family and shall have the right, in its sole discretion, if applicable, to allow such distribution, or, if applicable, to direct a distribution of part of the amount requested, or to refuse to allow any distribution.

               (iii) Upon a finding of Unforeseeable Emergency, the Employer shall make the appropriate distribution to the Participant from the Participant’s Accounts. In no event shall the aggregate amount of the distribution exceed either the full value of the Participant’s Accounts or the amount determined by the Employer to be necessary to alleviate the Participant’s Unforeseeable Emergency (which Unforeseeable Emergency may be considered to include any taxes due because of the distribution occurring because of this Section), and that it is not reasonable available from other resources of the Participant.

               (iv) A hardship distribution shall be made only with the written consent of the Employer’s board of director’s compensation committee.

          (g) CHANGE IN CONTROL Unless otherwise agreed to in writing by the Employer and the Participant, if there is a change in the control of the Employer, then the entire remaining balance of that Participant’s Accounts shall be distributed to the Participant. For purposes of this Section, a “change of control” shall occur when: any one person, or more than one person acting as a group, acquires ownership of stock of the Employer, that together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation. However, if that person or group already owns more than 50% of the total fair market value or total voting power of the stock of the Employer, the acquisition of additional stock by the same person or group is not considered a Change in Control. Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Employer.

     “Change in Control” also means the date that any unrelated person or group acquires more than the 50% of the assets of the Employer that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of the assets of the Employer immediately prior to such acquisition. Gross fair market value means the value of the assets of the Employer, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. Whether a person or group is unrelated to the Employer is determined in accordance with Code Section 409A and applicable IRS guidance.

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     The Employer shall determine whether a change in control has occurred.

          (h) METHOD OF PAYMENT Unless otherwise agreed to in writing by the Employer and the Participant, all distributions from the Participant’s Accounts shall be made in cash or by a transfer of funds from the Employer to or for the benefit of the Participant, as so directed by the Participant. Any payment due hereunder that is not paid out of the Participant’s Accounts shall be by the Employer from its general assets.

          (i) TERMINATION After all funds held in the Participant Accounts have been distributed pursuant to the above, the interest of the Participant in the Plan shall terminate.

          (j) INCOME TAXES ON DISTRIBUTIONS The Participant shall be solely responsible for the payment of all applicable federal and state income related taxes on amounts distributed to him. At the election of the Participant, the taxes maybe withheld by the Employer at the time of distribution.

     6. BENEFICIARIES; EMPLOYEE DATA The Participant may designate any person or persons (who may be named contingently or successively) to receive such benefits as may be payable under the Plan upon or after the Participant’s death, and such designation may be changed from time to time by the Participant filing a new designation. Each designation will revoke all prior designations by the Employee, and shall be in a form prescribed by the Employer, and will be effective only when filed in writing with the Employer during the Employee’s lifetime. The written designation may take a form similar to attached Exhibit “A.”

          (a) In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Employee, the Employer shall pay any such benefit payment to the Employee’s spouse, if then living, but, if none, then to the Employee’s estate.

          (b) In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively on information supplied by the Employee’s personal representative or administrator. If a question arises as to the existence or identity of anyone entitled to receive a benefit payment, or if a dispute arises with respect to any such payment, then, notwithstanding the foregoing, the Employer, in its sole discretion, may distribute such payment to the Employee’s estate or may take such other action as the Employer deems to be appropriate.

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     7. ADMINISTRATION.

          (a) ADMINISTRATIVE AUTHORITY. Except as otherwise specifically provided herein, the Employer board of director’s compensation committee shall have the sole responsibility for and the sole control of the operation and administration of this Plan and shall have the power and authority to take all action and to make all decisions and interpretations that may be necessary or appropriate in order to administer and operate the Plan, including, without limiting the generality of the foregoing, the power, duty, and responsibility to:

               (i) Resolve and determine all disputes or questions arising under the Plan, including the power to determine the rights of the Employee and Beneficiaries, and their respective benefits, and to remedy any ambiguities, inconsistencies, or omissions in the Plan.

               (ii) Adopt such rules of procedure and regulations as in its opinion may be necessary for the proper and efficient administration of the Plan and as are consistent with the Plan.

               (iii) The Employer may authorize one or more persons to execute any certificate or document on behalf of the Employer, in which event any person notified by the Employer of such authorization shall be entitled to accept and conclusively rely upon any such certificate or document executed by such person as representing action by the Employer until such third person shall have been notified of the revocation of such authority.

          (b) PAYMENT OF FEES, EXPENSES AND TAXES.

               (i) All income taxes generated from a distribution to the Employee (or Beneficiaries), shall be paid either out of the Participant’s Accounts or directly by the Employee-Participant. All income taxes generated as a result of accumulated but not distributed income, if any, shall be paid by the Employer out of its own funds.

               (ii) All other expenses incurred in the administration and operation of the Plan shall be paid by the Employer out of its own funds.

          (c) CLAIMS PROCEDURE Any person claiming a benefit under the Plan (a Claimant) shall present the claim, in writing, to the Employer, and the Employer shall respond in writing. If the claim is denied, the written notice of denial shall state, in a manner calculated to be understood by the claimant:

               (i) The specific reason or reasons for the denial, with specific references to the Plan provisions on which the denial is based; and,

               (ii) A description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or information is necessary.

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     8. AMENDMENT.

          (a) RIGHT TO AMEND The Employer, by written instrument executed by the Employer, shall have the right to amend the Plan at any time and with respect to any provisions hereof, and all parties hereto or claiming any interest hereunder shall be bound by such amendment; provided however, that no such amendment shall deprive a Participant or a Beneficiary of a right provided under the terms of this Plan or the Participant’s Accounts.

          (b) AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN Notwithstanding the above, the Plan may be amended by the Employer at any time, retroactively if required, if found necessary, in the opinion of the Employer, in order to ensure that the Plan is characterized as a top-hat plan of deferred compensation maintained for a single member of management or highly compensated employee as described under ERISA Sections 201(2), 301 (a)(3), and 401 (a)(1) and to conform the Plan to the provisions and requirements of any applicable law (including ERISA and the Code). No such amendment shall be considered prejudicial to any interest of an Employee or a Beneficiary hereunder.

     Notwithstanding the foregoing, any termination of the Plan by the Committee shall be subject to the provisions of Code Section 409A and applicable regulations regarding restrictions on the Board’s right to terminate the Plan and to distribute Post-2004 Accounts.

     9. MISCELLANEOUS.

          (a) LIMITATIONS ON LIABILITY OF EMPLOYER Neither the establishment of the Plan or any modification thereof, nor the creation of any Accounts under the Plan, nor the payment of any benefits under the Plan shall be construed as giving to any other employee or any other person any legal or equitable right against the Employer or any officer thereof, except as provided by law or by any specific Plan provision. The Employer does not in anyway guarantee any Employee’s Accounts from loss, depreciation or decline in value, whether caused by poor investment performance of a deemed investment or the inability to realize upon an investment due to an insolvency affecting an investment vehicle or any other reason. In no event shall the Employer, any employee, officer, or director of the Employer, be liable to any person on Accounts of any claim arising by reason of the Plan or of any instrument or instruments implementing its provisions, or for the failure of the Employee, Beneficiary, or other person to be entitled to any particular tax consequences with respect to the Plan, or any credit or distribution hereunder.

          (b) CONSTRUCTION If any provision of the Plan is held to be illegal or void, such illegality or invalidity shall not affect the remaining provisions of the Plan, but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. For all purposes of the Plan, where the context admits, the singular shall include the plural, and the plural shall include the singular. Headings of Articles and Sections herein are inserted only for convenience of reference and are not to be considered in the construction of the Plan. The laws of the State of Alaska shall govern control and determine all questions of law arising with respect to the Plan and the interpretation and validity of its respective provisions, except where those laws are preempted by the laws of the United States. Participation under the Plan will not give any Employee the right to be retained in the service of the Employer nor any right or claim to any benefit under the Plan unless such right or claim has specifically accrued hereunder.

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               (i) The Plan is intended to be and at all times shall be interpreted and administered so as to qualify as an unfunded non-qualified deferred compensation plan, and no provision of the Plan shall be interpreted so as to give the Employee-Participant any right in any assets held pursuant to this Plan which right is greater than the rights of a general unsecured creditor of the Employer.

          (c) SPENDTHRIFT PROVISIONNo amount payable to the Employee or a Beneficiary under the Plan will, except as otherwise specifically provided by law, shall be subject in any manner to anticipation, alienation, attachment, garnishment, sale, transfer, assignment (either at law or in equity), levy, execution, pledge, encumbrance, charge or any other legal or equitable process, and any attempt to do so will be void; nor will any benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled thereto. Further, the withholding of taxes from Plan benefit payments; the recovery under the Plan of overpayments of benefits previously made to a Employee or Beneficiary, if applicable, the transfer of benefit rights from the Plan to another plan, or the direct deposit of benefit payments to an Accounts in a banking institution (if not actually part of an arrangement constituting an assignment or alienation) shall not be construed as an assignment or alienation.

               (i) In the event that any Employee’s or Beneficiary’s benefits hereunder are garnished or attached by order of any court, the Employer may bring an action or a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid under the Plan. During the pendency of said action, any benefits that become payable shall be held as credits to the Employee’s or Beneficiary’s Accounts or, if the Employer prefers, paid into the court as they become payable, to be distributed by the court to the recipient as the court deems proper at the close of said action.

     This Amended Supplemental Executive Retirement Deferred Compensation Plan has been duly executed by the Company’s authorized representative this 2nd day of August, 2007, to be effective as of January 1, 2005.

WITNESS	NORTHRIM BANK
/s/ Gerri Tokar-Hines	By:	/s/ Ronald A. Davis
Print Name: Gerri Tokar-Hines	Its:	Ronald A. Davis Chairman of the Compensation Committee

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

	I, R. Marc Langland, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Northrim BanCorp, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)	All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2007	/s/ R. Marc Langland
	R. Marc Langland
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

	I, Joseph M. Schierhorn, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Northrim BanCorp, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)	All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2007	/s/ Joseph M. Schierhorn
	Joseph M. Schierhorn
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Northrim BanCorp, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Marc Langland, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

This certification is being furnished solely to comply with the requirements of 18 U.S.C. Section 1350, and shall not be incorporated by reference into any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, or otherwise be deemed to be filed as part of the Report or under such Acts.

/s/ R. Marc Langland  

R. Marc Langland 

Chief Executive Officer 

November 7, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Northrim BanCorp, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph M. Schierhorn, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

This certification is being furnished solely to comply with the requirements of 18 U.S.C. Section 1350, and shall not be incorporated by reference into any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, or otherwise be deemed to be filed as part of the Report or under such Acts.

/s/ Joseph M. Schierhorn  

Joseph M. Schierhorn 

Chief Financial Officer 

November 7, 2007