Northrim's profit falls to $14.4 million as one $20.0 million credit lifts the provision

Northrim BanCorp reported third-quarter 2026 net income of $14.4 million, or $0.63 per diluted share, down 46.77% from $27.1 million, or $1.20 a share, a year earlier and below the $15.3 million, or $0.68 a share, of the second quarter. The decline came from a $7.7 million provision for credit losses tied to one $20.0 million specialty finance credit, which cut income before provision for income taxes to $18.75 million, below the $26.47 million of pre-provision pre-tax net revenue, and from a year-earlier quarter that included a $14.21 million gain on the sale of certain assets.

Results cover the three months ended September 30, 2026 and were furnished as Exhibit 99.1 to a Form 8-K filed under Item 2.02 for results of operations and Item 2.06 for material impairments. Dollar tables in the release are stated in thousands unless noted, and the comparison base matters: the third quarter of 2025 included a $14.21 million gain on the sale of certain assets by Pacific Wealth Advisors, an item the company strips from the adjusted figures it also reports. On that adjusted basis, net income was $13.45 million and diluted earnings per share were $0.60, against $16.2 million and $0.72 a year earlier. For the first nine months of 2026, net income was $43.43 million against $52.17 million, and net interest income was $110.68 million against $100.24 million.

One $20.0 million relationship drove the provision

Provision expense of $7.7 million dwarfed the $1.6 million recorded in the second quarter and the $1.7 million booked a year earlier, splitting into $7.9 million for loans, $101,000 for unfunded commitments and a $239,000 benefit on purchased receivables. The increase traces to one borrower at Northrim Funding Services in the Specialty Finance segment, which had an outstanding balance of $20.0 million at September 30, 2026 and carried an $8.8 million individual impairment. Management cited disputes over customer receivable payments tied to potential quality control problems in the customer's wholesale products, uncertainty about recoveries on multiple pending insurance claims, and the need to liquidate commercial and residential real estate and equipment collateral. Chief Executive Mike Huston said: “Our earnings this quarter were reduced by a higher provision for credit losses tied to a single relationship in our Specialty Finance segment.”

Nonperforming assets, net of government guarantees, rose to $42.9 million from $23.0 million at June 30, 2026 and $13.6 million a year earlier, with $23.7 million of the third-quarter total in Specialty Finance. Charge-offs stayed small at $30,000, so the strain sits in reserves: the allowance for credit losses on loans equaled 82% of nonperforming loans, down from 117% three months earlier and 208% a year ago, and 1.46% of portfolio loans against 1.13% and 1.12%. Management said ultimate collection “will take several quarters to resolve.”

A record quarter for net interest income

Net interest income rose 5% from the second quarter and 10% from a year earlier to $38.9 million, the highest of the five quarters the release reports. The net interest margin on a tax-equivalent basis, or NIMTE, was 5.02%, up from 5.01% and 4.88%, as the yield on the investment portfolio improved to 4.22% from 3.79% and 3.09% and the average rate on newly booked loans held near 7.08%. Total deposits of $3.05 billion rose 5% from June 30, 2026 and 5% from a year earlier, with demand deposits of $833.7 million down 4% year over year, while the average cost of interest-bearing deposits eased to 1.69% from 1.71% and 2.00%. Huston tied the quarter to that mix: “Record net interest income, strong deposit growth and a net interest margin above 5%” drove the increase in pre-provision net revenue. Pre-provision pre-tax net revenue was $26.47 million, above the second quarter's $21.85 million but below the $36.29 million of a year earlier.

Mortgage banking and merger costs below the operating line

Other operating income of $20.8 million, or 35% of revenue, included a $1.9 million gain on the sale of VISA shares and mortgage banking income of $8.75 million, up from $7.14 million in the second quarter and $7.27 million a year earlier. Mortgage loans funded for sale were $189.0 million against $239.1 million and $218.2 million, but the Home Mortgage Lending segment earned $3.49 million as the fair value of mortgage servicing rights rose $1.6 million and the serviced portfolio reached $1.70 billion. Specialty Finance swung to a net loss of $4.28 million after profits in each of the previous four quarters. Operating expenses of $33.2 million included $993,000 of merger and acquisition costs tied to PBCO, and the efficiency ratio was 55.62%.

Alaska share, capital and uninsured deposits

Northrim held 17.71% of Alaska deposits at June 30, 2026, up from 17.53% a year earlier on data the release attributes to the FDIC. Total assets reached $3.58 billion, up 8% from a year earlier, and portfolio loans of $2.40 billion rose 8%, with loans excluding consumer mortgages at $2.16 billion. Shareholders' equity was $356.1 million, equal to $16.01 of book value and $13.72 of tangible book value per share, and Tier 1 capital was 11.04% of risk-adjusted assets. The quarterly dividend rose to $0.17 from $0.16, and the company repurchased no shares, saying it has no plans to do so this year. Uninsured deposits of $1.38 billion were 45% of the total, up from 38% at December 31, 2025.

A merger vote and the fourth-quarter report

The all-stock agreement to acquire PBCO Financial Corporation, announced July 22, 2026, would exchange 1.16 Northrim shares for each PBCO share and is expected to close in the first quarter of 2027. The registration statement was declared effective September 17, 2026 and the joint proxy statement/prospectus was mailed to shareholders beginning on or about September 18, 2026, so the shareholder votes and regulatory approvals are the dated items ahead. The release gives no fourth-quarter guidance, and its next scheduled disclosure is the fourth-quarter and full-year 2026 report, while the impaired credit depends on collateral and insurance recoveries.