Small Business Loans Boost Bank Earnings in Q3
Rising small business loan demand is bolstering some Inland Northwest banks in the third quarter, but persistent inflation, high interest rates, and trade tariffs are depressing agricultural and commercial borrowing, according to quarterly earnings reports from banks across the region.
The results from major financial institutions in the Spokane-Coeur d'Alene area reflect a regional economy facing conflicting forces. While strong balance sheets and steady consumer deposits led to solid profits for several institutions, elevated borrowing costs and trade uncertainty are causing commercial and agricultural borrowers to temper expansion plans for next year.
Spokane-Based W.T.B. Financial Corp.
Spokane-based W.T.B. Financial Corp., parent of Washington Trust Bank, reported a third-quarter net income of $30.2 million, or $12.54 per diluted share, up from $27.2 million, or $11.09 per share, in the previous year. This growth was attributed to robust small business activity balancing out caution among larger commercial borrowers, according to the bank's Chief Economist Steve Scranton.
Scranton notes that while discipline in expense management and expanding net interest revenue contributed to the gains, economic uncertainty and inflation concerns persist, creating challenges for Washington Trust Bank and other area banks.
"Given how much rates have gone up over the quarter, many projects requiring term financing, whether for building or buying equipment, aren't as feasible in the higher-rate environment," Scranton said.
He added that ongoing macroeconomic headwinds may lead companies to adopt a cautious approach before taking on new loans.
In 2025, Washington Trust Bank experienced the weakest demand for commercial real estate loans. However, this year, the agriculture industry has been significantly impacted by tariffs and high diesel and material prices, making it harder for agricultural companies to remain profitable and expand.
"Banks are still actively looking to lend, but they're not seeing the same level of customer borrowing demand as in the past," Scranton explained.
Other Lenders in the Region
Other lenders with a presence in the Spokane-Coeur d'Alene market also faced a more constrained lending environment.
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First Interstate BancSystem Inc.: Reported third-quarter net income of $62.2 million, or $0.65 per diluted share, down from $71.4 million, or $0.69 per share, in Q3 2025. Despite lower overall loan balances, the Billings, Montana-based institution expanded its net interest margin by 19 basis points year over year and reduced nonperforming assets by 16.5% to $155 million.
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Columbia Banking System Inc.: Based in Tacoma, Washington, reported third-quarter net income of $220 million, or $0.78 per diluted share, a significant increase from $96 million, or $0.40 per share, in Q3 2025. Performance was driven by a net interest margin expansion to 4.11% and a successful summer customer deposit campaign bringing in over $700 million in new deposits.
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Banner Corp.: Walla Walla-based Banner Corp. reported third-quarter net income of $47.7 million, or $1.36 per diluted share, down from $53.5 million, or $1.54 per share, in the year-earlier quarter. The company's letter to shareholders attributed the decrease to costs related to its Pacific Financial acquisition.