UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2004

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

Commission File Number 000-33501

NORTHRIM BANCORP, INC.

(Exact name of registrant as specified in its charter)

(907) 562-0062

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).

Yes [X] No [  ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

The number of shares of the issuer’s Common Stock outstanding at November 5, 2004 was 6,087,470.

TABLE OF CONTENTS

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NORTHRIM BANCORP, INC.

NORTHRIM BANCORP, INC.

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.

See notes to the consolidated financial statements

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NORTHRIM BANCORP, INC.

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. 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. Operating results for the interim period ended September 30, 2004, are not necessarily indicative of the results anticipated for the year ending December 31, 2004. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

2. STOCK REPURCHASE

In September 2002, the Board of Directors of the Company approved a plan whereby the Company would periodically repurchase for cash up to approximately 5%, or 306,372, of its shares of common stock in the open market. The Company purchased 224,800 shares of its stock under this program through September 30, 2004, at a total cost of $3.1 million. However, the Company has not repurchased any of these shares in 2004. In August of 2004, the Board of Directors of the Company amended the stock repurchase plan and increased the number of shares available under the program by 5% of total shares outstanding, or 304,283 shares. The Company intends to continue to repurchase its stock from time to time depending upon market conditions, but it can make no assurances that it will continue this program or that it will repurchase all of the authorized shares.

3. ACCOUNTING PRONOUNCEMENTS

None.

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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:

The following table details activity in the Allowance for Loan Losses for the dates indicated:

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:

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At September 30, 2004, December 31, 2003, and September 30, 2003, the Company had loans measured for impairment of $7.9 million, $13.2 million, and $15.6 million, respectively. A specific allowance of $576,000, $580,000, and $1.1 million, respectively, was established for these periods. The decrease in loans measured for impairment at September 30, 2004, as compared to September 30, 2003, and December 31, 2003, resulted in large part from the concentrated collection activities of the Company.

5. INVESTMENT SECURITIES

Investment securities, which include Federal Home Loan Bank stock, totaled $65.1 million at September 30, 2004, a decrease of $8.1 million, or 11%, from $73.2 million at December 31, 2003, and an increase of $2.2 million, or 4%, from $62.9 million at September 30, 2003. Investment securities designated as available for sale comprised 96% of the investment portfolio at September 30, 2004, 97% at December 31, 2003, and 96% at September 30, 2003, 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, 2004, $20.8 million in securities, or 32%, of the investment portfolio was pledged, as compared to $16.8 million, or 23%, at December 31, 2003, and $27 million, or 43%, at September 30, 2003.

6. OTHER OPERATING INCOME

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 Northrim Bank’s wholly-owned subsidiary, Northrim Capital Investments Co. (“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%. The Company’s share of the earnings from RML Holding Company and its predecessor, RML, decreased by $1 million to $15,000 during the third quarter of 2004 as compared to $1 million in the third quarter of 2003, primarily due to decreased refinance activity, coupled with strong competition for mortgages and key personnel.

The Company owns a 47% 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 start-up losses since that time as it continues to build its assets under management. In July of 2003, the Company made a commitment to loan $625,000 to Elliott Cove. The amount loaned on this commitment at December 31, 2003 was $475,000. In the second quarter of 2004, the Company converted the loan into an additional equity interest in Elliott Cove. At the time of the conversion, the

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amount outstanding on this loan was $625,000. During the first, second, and third quarters of 2004, other investors made additional investments in Elliott Cove. In addition, the Company made a separate commitment to loan Elliott Cove $500,000. The balance outstanding on this commitment at September 30, 2004 was $400,000. Finally, in the third quarter of 2004, the Company made an additional $250,000 investment in Elliott Cove. As a result of the additional investments in Elliott Cove by other investors and the Company’s conversion of its $625,000 loan and its additional investment, its interest in Elliott Cove increased from 43% to 47% between December 31, 2003 and September 30, 2004.

7. DEPOSIT ACTIVITIES

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, 2004, the Company held $30 million in certificates of deposit for the Alaska Permanent Fund, collateralized by letters of credit issued by the Federal Home Loan Bank (“FHLB”).

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