Northrim earnings declined in the third quarter of 2026 as higher credit-loss provisions outweighed record net interest income. The Alaska-based bank reported net income of $14.4 million, or $0.63 per diluted share, on October 15, compared with $27.1 million, or $1.20 per share, a year earlier. Its quarterly dividend increased to $0.17 per share from $0.16.
Key Takeaways
- A single Specialty Finance relationship drove the increase in credit-loss provisions.
- Net interest income rose 10% year over year, but reported and adjusted earnings declined.
- The quarterly dividend increased by one cent, while the planned PBCO acquisition remained pending.
Table of Contents
- Northrim earnings reflect higher credit costs
- Stronger interest income did not translate into higher profit
- Dividend rises as balance-sheet growth continues
- PBCO acquisition remains subject to approvals
- Conclusion
Northrim earnings reflect higher credit costs
Northrim’s third-quarter 2026 results announcement showed a $7.7 million provision for credit losses, compared with $1.6 million in the preceding quarter and $1.7 million a year earlier. Management attributed the increase primarily to one credit at Northrim Funding Services, within its Specialty Finance segment.
The relationship had an outstanding balance of $20.0 million at September 30. Northrim recorded an $8.8 million individual impairment after assessing customer payment disputes, uncertainty over insurance recoveries and the need to liquidate collateral.
Management said collection could take several quarters and that the company was pursuing contractual, collateral, insurance and legal remedies. Northrim said it had no additional exposure in the customer’s industry at quarter-end.
| Item | Details |
|---|---|
| Portfolio loans at September 30, 2026 | $2.40 billion. |
| Total deposits at September 30, 2026 | $3.05 billion. |
| Tax-equivalent net interest margin | 5.02%, versus 5.01% in Q2 2026 and 4.88% in Q3 2025. |
| Average cost of interest-bearing deposits | 1.69%, versus 1.71% in Q2 2026 and 2.00% in Q3 2025. |
Stronger interest income did not translate into higher profit
Net interest income reached $38.9 million, up from $37.1 million in the second quarter and $35.3 million a year earlier. Chief Executive Officer Mike Huston said record net interest income, deposit growth and a tax-equivalent net interest margin above 5% supported operating performance before credit provisions.
The year-earlier earnings comparison also included a gain from an asset sale. Adjusted diluted earnings per share, a non-GAAP measure that excludes specified gains and acquisition-related costs, declined to $0.60 from $0.72 a year earlier and $0.68 in the preceding quarter.
The distinction matters: stronger interest income improved the bank’s earnings base, but the higher credit provision reduced the profit ultimately available to shareholders.
Dividend rises as balance-sheet growth continues
The third-quarter dividend of $0.17 per share was one cent higher than both the preceding quarter and the third quarter of 2025, an increase of 6.25%. The higher payment accompanied growth in loans and deposits, rather than an increase in quarterly net income.
Portfolio loans rose 8% year over year and deposits increased 5%. Meanwhile, the average cost of interest-bearing deposits declined from its year-earlier level, helping support the interest margin.
PBCO acquisition remains subject to approvals
Northrim continued working toward its proposed acquisition of PBCO Financial Corporation, the parent of People’s Bank of Commerce. The all-stock agreement, announced in July 2026, provides 1.16 Northrim shares for each PBCO share.
Management expects the transaction to close in the first quarter of 2027, subject to shareholder and regulatory approvals and other closing conditions. The combination is intended to expand Northrim into Southern Oregon and the Willamette Valley and create a company with more than $4 billion in assets.
Conclusion
The next developments to watch are recoveries on the impaired Specialty Finance relationship and approvals for the proposed PBCO merger. Management expects the credit workout to take several quarters and is targeting the acquisition’s completion in the first quarter of 2027.
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