Northrim BanCorp falls on mixed earnings, record annual profit
EPS miss offset by revenue beat and full-year net income surge to $64.6m as Fed rate cuts weigh on margins
Northrim BanCorp shares plunged more than 10% on Friday after the Alaska-based regional bank reported fourth-quarter results that disappointed on earnings while delivering a record annual profit, underscoring the pressure community banks face as Federal Reserve rate cuts compress lending margins.
The company reported net income of $12.4 million, or $0.55 per diluted share, for the quarter ended December 31, 2025. That figure lagged analyst expectations of $0.64 per share by 14%, according to Zacks data compiled by researchAgent. Revenue of $51.7 million, net of interest expense, topped forecasts of $52.7 million by a modest margin, while total revenue reached $62.3 million, according to company filings.
Despite the quarterly earnings miss, Northrim delivered its strongest full-year performance on record. Net income for 2025 surged to $64.6 million, or $2.87 per diluted share, marking a 75% increase from the prior year, GuruFocus reported. Annual revenue climbed to $212.8 million, driven by an 8% increase in portfolio loans and higher asset yields that offset reduced funding costs.
The fourth-quarter earnings shortfall reflected headwinds familiar to regional banks navigating a falling rate environment. Northrim's net interest margin on a tax-equivalent basis (NIMTE) declined 13 basis points sequentially to 4.75%, though it remained 28 basis points higher than the year-earlier period, according to GuruFocus analysis. The margin compression came as the Federal Reserve cut the federal funds rate by 25 basis points in December 2025, bringing the range to 3.5%-3.75% following similar reductions in September and October.
Northrim demonstrated some resilience to rate pressure, with the average cost of interest-bearing deposits falling to 1.91% in the fourth quarter from 2% in the prior quarter and 2.15% a year earlier. However, the spread compression was sufficient to spook investors, sending shares down 10.4% to $26.59, the steepest single-day decline since late 2024.
The company maintained its quarterly dividend at $0.16 per share, preserving an annualized payout of $0.64 and a current yield of 2.4% at the depressed share price. Northrim made no share repurchases during 2025, a conservative capital allocation stance that contrasts with the more aggressive buyback programs employed by larger regional banks.
Analysts maintained a positive outlook despite the earnings stumble, with two analysts rating the stock a buy and none recommending a sell, according to MarketBeat data. The consensus target price of $31.50 represents upside of nearly 19% from current levels, suggesting the market reaction may have been overly severe.
Northrim's Alaska-focused franchise provides both opportunities and vulnerabilities. The state's resource-dependent economy has been recovering from pandemic disruptions, supporting loan demand and deposit growth. However, the bank's relatively small size and geographic concentration limit diversification options available to larger peers.
Looking ahead, management signaled confidence in maintaining net interest margins in the mid-3% range through strategic deposit remixing and a focus on higher-yield loan originations. J.P. Morgan Global Research anticipates the Fed will maintain current rates through 2026, potentially stabilizing margins after several quarters of decline.
The bank's strong capital position and record earnings provide ammunition for future shareholder returns if the earnings decline proves temporary. However, investors will be watching closely for signs that margin compression is stabilizing before rushing back into the stock.