Northrim writes down $8.8 million on one loan days before vote on Oregon bank deal

Anchorage-based Northrim BanCorp said in an Oct. 15 SEC filing that it recorded an $8.8 million impairment on a single $20 million loan in its Specialty Finance segment. The charge cut third-quarter profit and nearly doubled the company's nonperforming assets.

The impairment will reduce after-tax earnings by about $6.7 million, or 29 cents per diluted share, for the quarter ended Sept. 30, Northrim said.

The disclosure comes days before Northrim shareholders vote Tuesday, Oct. 20, on whether to issue shares to buy PBCO Financial Corporation, the Oregon holding company for People's Bank of Commerce. The proposed deal would give Northrim its first branches outside Alaska.

The borrower, not named in the filing, is a customer of Northrim Funding Services, the bank's purchased-receivables financing unit. Northrim cited payment disputes over alleged quality-control issues with the customer's wholesale products, a deterioration in expected collections, uncertain recoveries from pending insurance claims and the need to sell real estate and equipment collateral. The amount and timing of any recovery "remain uncertain," the filing says, and management expects resolution "will take several quarters." Northrim said it had no other credit exposure to the borrower's industry as of Sept. 30.

Net income fell to $14.4 million, or 63 cents per diluted share, from $15.3 million in the second quarter and $27.1 million a year earlier. The provision for credit losses rose to $7.7 million from $1.6 million, mostly because of the one loan. Nonperforming assets climbed to $42.9 million, or 1.20% of total assets, from $23 million, or 0.67%, in June. The loan-loss allowance now covers 82% of nonperforming loans net of guarantees, down from 117%.

CEO Mike Huston said credit quality across the company's Community Banking portfolio "remains solid." Deposits rose 5% in the quarter to $3.05 billion.

Under the all-stock deal, PBCO shareholders would receive 1.16 Northrim shares for each PBCO share, a transaction valued at $167.2 million. Neither filing says whether the impairment affects the deal's terms or timetable. Closing is expected in the first quarter of 2027, subject to shareholder and regulatory approvals.

Northrim shares fell 3.6% Friday to $23.55.