Northrim takes $8.8 million hit on one customer days before vote on Oregon bank deal

Anchorage-based Northrim BanCorp said Thursday it took an $8.8 million hit on a single customer, a charge that cut its third-quarter profit and nearly doubled its problem assets days before shareholders vote on the bank's first expansion outside Alaska.

The customer owed Northrim $20 million as of Sept. 30, according to the company's SEC filing. The charge will reduce after-tax earnings by about $6.7 million, or 29 cents a share, for the quarter.

The filing doesn't name the customer. It's a client of Northrim Funding Services, the bank's purchased-receivables business in its Specialty Finance segment. Northrim said the customer has been hit by payment disputes over alleged quality-control problems with its wholesale products, weaker collections, uncertain payouts from several pending insurance claims and the need to sell real estate and equipment pledged as collateral.

How much Northrim gets back, and when, "remain uncertain," the filing says, and management expects sorting it out "will take several quarters." Northrim said it has no other credit exposure to borrowers in the same industry.

The quarter

Northrim earned $14.4 million, or 63 cents a share, down from $15.3 million in the second quarter and $27.1 million a year earlier. The year-ago quarter included a gain on the sale of assets by Pacific Wealth Advisors, the company said.

The money Northrim set aside for credit losses jumped to $7.7 million from $1.6 million in the second quarter, mostly because of the one customer. Problem assets, which the bank calls nonperforming assets, rose to $42.9 million from $23 million in June. The bank's reserve for loan losses now covers 82% of its nonperforming loans, down from 117%.

CEO Mike Huston said credit quality in the company's Community Banking portfolio "remains solid," and pointed to record net interest income and deposit growth. Deposits rose 5% in the quarter to $3.05 billion.

The Oregon deal

Northrim shareholders vote Tuesday, Oct. 20 on issuing shares to buy PBCO Financial Corporation, the Oregon holding company for People's Bank of Commerce. The all-stock deal, valued at $167.2 million, would give Northrim its first branches outside Alaska. PBCO shareholders would get 1.16 Northrim shares for each PBCO share.

Northrim's filing doesn't say whether the charge affects the deal's terms or timing. Closing is expected in the first quarter of 2027, pending shareholder and regulatory approval.

Northrim shares fell 3.6% Friday to $23.55.