NORTHRIM BANCORP INC

Previous wording

This quarterly report on Form 10-Q includes “forward-looking statements,” as that term is defined for purposes of Section 21E of the Securities Exchange Act of 1934, as amended, which are not historical facts. These forward-looking statements describe management’s expectations about future events and developments such as future operating results, growth in loans and deposits, continued success of the Company’s style of banking, and the strength of the local economy. All statements, other than statements of historical fact, regarding our financial position, business strategy, management’s plans and objectives for future operations are forward-looking statements. We use words such as “anticipate,” “believe,” “expect,” “intend” and similar expressions in part to help identify forward-looking statements. Forward-looking statements reflect management’s current plans and expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations, and those variations may be both material and adverse. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: descriptions of Northrim’s financial condition, results of operations, asset based lending volumes, asset and credit quality trends and profitability; the ability of Northrim to execute its business plans; potential further increases in interest rates; the value of securities held in our investment portfolio; the impact of the results of government shutdowns and government initiatives on the regulatory landscape, natural resource extraction industries, and capital markets; the impact of declines in the value of commercial and residential real estate markets, high unemployment rates, tariffs, inflationary pressures and slowdowns in economic growth; risks related to the proposed merger with PBCO Financial Corporation including, among others, (i) failure to complete the merger or unexpected delays related to the merger or either party’s inability to obtain regulatory, shareholder approvals, or satisfy other closing conditions required to complete the merger, (ii) regulatory approvals resulting in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction, (iii) certain restrictions during the pendency of the merger that may impact the parties’ ability to pursue certain business opportunities or strategic transactions, (iv) diversion of management’s attention from ongoing business operations and opportunities, (v) cost savings and any revenue or expense synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (vi) deposit attrition, customer or employee loss, and/or revenue loss as a result of the announcement of the merger, (viii) expenses related to the merger b…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This quarterly report on Form 10-Q includes “forward-looking statements,” as that term is defined for purposes of Section 21E of the Securities Exchange Act of 1934, as amended, which are not historical facts. These forward-looking statements describe management’s expectations about future events and developments such as future operating results, growth in loans and deposits, continued success of the Company’s style of banking, and the strength of the local economy. All statements, other than statements of historical fact, regarding our financial position, business strategy, management’s plans and objectives for future operations are forward-looking statements. We use words such as “anticipate,” “believe,” “expect,” “intend” and similar expressions in part to help identify forward-looking statements. Forward-looking statements reflect management’s current plans and expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations, and those variations may be both material and adverse. Forward-looking statements are subject to various risks and uncertainties that may cause our actual results to differ materially and adversely from our expectations as indicated in the forward-looking statements. These risks and uncertainties include: descriptions of Northrim’s financial condition, results of operations, asset based lending volumes, asset and credit quality trends and profitability; the ability of Northrim to execute its business plans; potential further increases in interest rates; the value of securities held in our investment portfolio; the impact of the results of government shutdowns and government initiatives on the regulatory landscape, natural resource extraction industries, and capital markets; the impact of declines in the value of commercial and residential real estate markets, high unemployment rates, tariffs, inflationary pressures and slowdowns in economic growth; risks related to the proposed merger with PBCO Financial Corporation including, among others, (i) failure to complete the merger or unexpected delays related to the merger or either party’s inability to obtain regulatory, approvals or satisfy other closing conditions required to complete the merger, (ii) regulatory approvals resulting in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction, (iii) certain restrictions during the pendency of the merger that may impact the parties’ ability to pursue certain business opportunities or strategic transactions, (iv) diversion of management’s attention from ongoing business operations and opportunities, (v) cost savings and any revenue or expense synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (vi) deposit attrition, customer or employee loss, and/or revenue loss as a result of the announcement of the merger, (viii) expenses related to the merger being greater …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Northrim will acquire PBCO in an all-stock transaction. Upon the terms and subject to the conditions set forth in the Merger Agreement, (i) PBCO will merge with and into Merger Sub, with Merger Sub surviving the merger (the “Merger”), (ii) immediately following the merger of PBCO and Merger Sub, and as a part of a single integrated transaction, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity (the “Subsidiary Merger”, and together with the Merger, the “Mergers”), and (iii) promptly following such merger, Northrim Bank (the “Bank”) and People’s Bank of Commerce, a wholly owned subsidiary of PBCO, will merge (the “Bank Merger”), with the Bank continuing as the surviving bank. Pursuant to the terms of the Merger Agreement, PBCO shareholders will receive 1.160 shares of Northrim common stock for each PBCO share they own. The combined company will have approximately $4.2 billion in assets and will expand Northrim’s banking footprint into Oregon. The acquisition is expected to close in the fourth quarter of 2026 or early in the first quarter of 2027, subject to satisfaction of customary closing conditions, including receipt of regulatory, and shareholder approvals. The acquisition reflects a significant strategic investment to diversify the Company’s geographic footprint and position the Company for continued growth while preserving its Alaska-based community banking identity.

Current wording

Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Northrim will acquire PBCO in an all-stock transaction. Upon the terms and subject to the conditions set forth in the Merger Agreement, (i) PBCO will merge with and into Merger Sub, with Merger Sub surviving the merger (the “Merger”), (ii) immediately following the merger of PBCO and Merger Sub, and as a part of a single integrated transaction, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity (the “Subsidiary Merger”, and together with the Merger, the “Mergers”), and (iii) promptly following such merger, Northrim Bank (the “Bank”) and People’s Bank of Commerce, a wholly owned subsidiary of PBCO, will merge (the “Bank Merger”), with the Bank continuing as the surviving bank. Pursuant to the terms of the Merger Agreement, PBCO shareholders will receive 1.160 shares of Northrim common stock for each PBCO share they own. Northrim's shareholders and PBCO's shareholders approved the acquisition at their respective special meetings on October 20, 2026. The combined company will have approximately $4.2 billion in assets and will expand Northrim’s banking footprint into Oregon. The acquisition is expected to close on or about January 1, 2027, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals. The acquisition reflects a significant strategic investment to diversify the Company’s geographic footprint and position the Company for continued growth while preserving its Alaska-based community banking identity.

Previous wording

Alaska’s seasonally adjusted unemployment rate was 4.6% in May of 2026, compared to 4.3% for the United States, according to the Alaska Department of Labor and Workforce Development. Both rates were unchanged from April of 2026. Alaska had a total of 343,600 payroll jobs in May of 2026 in Alaska, not including uniformed military. This was consistent with May of 2025. Year over year, the private sector grew by 0.9%, while the government sector declined 2.9%. The Federal component lost 1,500 jobs, or -9.8% since May of 2025, the State of Alaska decreased -700 jobs or 2.9% and Local government decreased -0.5%. The largest private sector growth came from Oil & Gas, up 1,000 direct jobs or +11.6%. Transportation, Warehousing and Utilities grew 1,600 jobs or +5.9% and Financial Activities added 200 jobs or +1.9%.

Current wording

Alaska’s seasonally adjusted unemployment rate was 4.3% in August of 2026, compared to 4.1% for the United States, according to the Alaska Department of Labor and Workforce Development. This was an improvement in Alaska from 4.6% in May of 2026. Alaska had a total of 356,100 payroll jobs in August of 2026, not including uniformed military. Year over year, the private sector grew by 800 jobs or 0.3%, while the government sector declined by 2.2%, a loss of 1,700 jobs. The Federal component lost 1,300 jobs, or 8.6% since August of 2025, the State decreased 400 jobs or 1.7%, and Local government was unchanged. The largest private sector growth came from Oil & Gas, up 600 direct jobs or 6.7%. This is the highest paying sector in Alaska. Transportation, Warehousing and Utilities grew 1,300 jobs or 4.4% and Other Services added 300 jobs or 2.4%.

Previous wording

Alaska’s seasonally adjusted aggregate personal income was $60 billion in the first quarter of 2026 according to the Federal Bureau of Economic Analysis (“BEA”). Alaska enjoyed an annual personal income improvement of 2.9% between the first quarter of 2025 and the first quarter of 2026. Based on a population estimate of 736,884 people, the per capita personal income in Alaska was $81,386. This is compared to the U.S. average of $77,816, according to the BEA, ranking Alaska 11 th highest of the 50 U.S. states.

Current wording

Alaska’s seasonally adjusted aggregate personal income was $60.9 billion in the second quarter of 2026 according to the Federal Bureau of Economic Analysis (“BEA”). Alaska enjoyed an annual personal income improvement of 3% between the second quarters of 2025 and 2026. Based on a population estimate of 736,500 people, the per capita personal income in Alaska was $82,747 in the second quarter of 2026. This is compared to the U.S. average of $79,904, according to the BEA, ranking Alaska 12 th highest of the 50 U.S. states.

Previous wording

Alaska exported $6.7 billion in goods directly to foreign countries in 2025 according to the U.S. Census Bureau, a 13.4% increase over 2024 totals. South Korea took over the top trade spot by importing $1.1 billion in goods directly from Alaska. This was a 73% increase over 2024. South Korea imports significant quantities of fish, lead and zinc. The rapid growth came primarily from $515 million in gold and silver purchases in 2025. Australia imported over $1 billion in goods, primarily gold, zinc and lead. Australia’s growth rate in Alaska products was 30% in 2025. Japan moved up to the third spot with a 38% growth in purchases totaling $927 million in 2025. Japan has been a leading customer of a large variety of fish products from Alaska for decades and also purchases an array of minerals. China slipped from first to fourth place due to complex U.S. tariff negotiations. China’s imports from Alaska dropped 47% from $1.5 billion in 2024 to $803 million in 2025. Oil & Gas does not contribute a significant amount to international exports ($246 million in 2025) because the majority of Alaska’s production is refined and consumed within the United States.

Current wording

Alaska exported $6.7 billion in goods directly to foreign countries in 2025 according to the U.S. Census Bureau, a 13.4% increase over 2024 totals. South Korea took over the top trade spot by importing $1.1 billion in goods directly from Alaska. This was a 73% increase over 2024. South Korea imports significant quantities of fish, lead and zinc. The rapid growth was driven by $515 million in gold and silver purchases in 2025. Australia imported over $1 billion in goods, primarily gold, zinc and lead. Australia’s growth rate in Alaska products was 30% in 2025. Japan moved up to the third spot with a 38% growth in purchases totaling $927 million in 2025. Japan has been a leading customer of a large variety of fish products from Alaska for decades and also purchases an array of minerals. China slipped from first to fourth place due to complex U.S. tariff negotiations. China’s imports from Alaska dropped 47% from $1.5 billion in 2024 to $803 million in 2025. Oil & Gas does not contribute a significant amount to international exports ($246 million in 2025) because the majority of Alaska’s production is refined and consumed within the United States.

Previous wording

According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (“CPI”) for the U.S. increased 3.8% between April of 2025 and April of 2026. In Alaska, the rate of increase was higher at 4.3% for the same time period. The largest increases since last April came from Motor Fuel (+33.1%), Apparel (+15%), Recreation (+5.3%), and Housing (+4.8%). There were declining costs in New and Used Vehicles (-2.8%), and Education (-2%), to help moderate inflationary pressures in Alaska.

Current wording

According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (“CPI”) for the Alaska increased 3.3% between August of 2025 and August of 2026. This was slightly better than the U.S. rate of 3.3% for the same time period. The largest increases in Alaska since last August came from Motor Fuel (+28%), Nonalcoholic beverages and beverage materials (+15.8%), Recreation (+8.5%), Housing and Food (+1.6%). There were declining costs in New and Used Vehicles (-2.7%), Household Furnishings (-1.6%), Medical Care (-1.3%) and Education (-1.1%), to help moderate inflationary pressures in Alaska.

Previous wording

The monthly average price of Alaska North Slope (“ANS”) crude oil ranged between $76.39 a barrel in January of 2025 and $62.70 in December 2025. Prices began to rise dramatically in 2026 after conflicts began in Venezuela and Iran. ANS was priced at a monthly average price of $111.17 in April of 2026 and $114.66 a barrel in May of 2026. ANS has been earning a consistent premium over Brent and West Texas crude prices. The Alaska Department of Revenue (“DOR”) calculated ANS crude oil production was 468 thousand barrels per day (“bpd”) in Alaska’s fiscal year ending June 30, 2025. In the Fall 2025 Revenue Forecast published December 19, 2025, the DOR expects production to average 457 thousand bpd in fiscal year 2026 and 518 thousand bpd in fiscal year 2027. Over the next decade it is expected to continue to grow to 621 thousand bpd, or

Current wording

The monthly average price of Alaska North Slope (“ANS”) crude oil grew rapidly from $68.89 a barrel in September of 2025 to $105.54 in September of 2026. Prices began to rise dramatically in 2026 after conflicts began in Venezuela and Iran. ANS reached a monthly average high of $114.66 in May of 2026. ANS has been earning a consistent premium over Brent and West Texas crude prices. Actual oil prices have been much higher than government forecasts recently. The Alaska Department of Revenue (“DOR”) is now expecting an additional $545 million in state general fund revenue in FY 2026 and $510 million in FY 2027.

Previous wording

33% by fiscal year 2036. This is primarily a result of new production coming on-line in and around the NPR-A region west of Prudhoe Bay. A partnership between Santos and Repsol is constructing the new Pikka field and ConocoPhillips is developing the large new Willow field. There are also several smaller new fields in Alaska’s North Slope that are contributing to the State of Alaska’s production growth estimate.

Current wording

The Alaska DOR estimated ANS crude oil production of 459 thousand barrels per day (“bpd”) in Alaska’s fiscal year ending June 30, 2026. In the Spring 2026 Revenue Forecast published March 13, 2026, the DOR expects production to grow rapidly to 519 thousand bpd in fiscal year 2027, climb past 600 thousand bpd in fiscal year 2032, and beyond 650 thousand bpd in 2034. Over the next decade, oil production is forecasted to grow by 40% or 185 thousand bpd. This is primarily a result of new production coming on-line in and around the NPR-A region west of Prudhoe Bay. A partnership between Santos and Repsol is constructing the new Pikka field which began continuous production in June this year. ConocoPhillips is developing the large new Willow field, expected to begin production in 2029. There are also several smaller new fields in Alaska’s North Slope that are contributing to the State of Alaska’s production growth estimate.

Previous wording

The Alaska Permanent Fund is seeded annually by the natural resource wealth the State continues to save each year and has grown significantly over 40 years of successful investment. As of May 31, 2026 the fund’s value was $92.2 billion. According to the DOR it is scheduled to contribute $3.8 billion to Alaska’s General Fund in fiscal year 2026 and $4 billion in fiscal year 2027 for general government spending and to pay the annual dividend in October to Alaskan residents.

Current wording

The Alaska Permanent Fund is seeded annually by the natural resource wealth the State continues to save each year and has grown significantly over 40 years of successful investment. As of August 31, 2026 the fund’s value was $89 billion. According to the DOR it is scheduled to contribute $3.8 billion to Alaska’s General Fund in fiscal year 2026 and $4 billion in fiscal year 2027 for general government spending and to pay the annual dividend in October to Alaskan residents. The 2026 dividend of $1,200 to residents is distributed in October and is expected to provide an approximate $750 million stimulus to the economy in the fourth quarter.

Previous wording

According to the Alaska Multiple Listing Services, the average sales price of a single-family home in Anchorage rose 4.4% in 2025 to $532,339, following an increase of 6.2% in 2024 and 5.2% in 2023. This was the eighth consecutive year of price increases. In the first six months of 2026, prices are up 6.5% on average to $567,221.

Current wording

According to the Alaska Multiple Listing Services, the average sales price of a single-family home in Anchorage rose 6.3% to $565,746 in the first nine months of 2026. This followed increases of 4.4% in 2025, 6.2% in 2024 and 5.2% in 2023. This is the ninth consecutive year of price increases.

Previous wording

The average sales price for single family homes in the Matanuska Susitna Borough rose 6.6% in 2025 to $440,217, after climbing 3.8% in 2024 and 4% in 2023. In the first half of 2026 average prices in the Matanuska Susitna Borough are up 2.9%. This continues a trend of average price increases for more than a decade in the region. These two markets represent where the majority of the Bank’s residential lending activity occurs.

Current wording

The average sales price for single family homes in the Matanuska Susitna Borough rose 3.1% in the first nine months of 2026 to $453,686. Average home prices increased 6.6% in 2025, after climbing 3.8% in 2024 and 4% in 2023. This continues a trend of average price increases for more than a decade in the region. These two markets represent where the majority of the Bank’s residential lending activity occurs.

Previous wording

The Alaska Multiple Listing Services reported a 1% increase in the number of units sold in Anchorage when comparing January to June 2026 to the same period in 2025. The number of homes sold in the Matanuska Susitna Borough in the first half of 2026 is 1.9% lower than January to June 2025.

Current wording

The Alaska Multiple Listing Services reported a 0.3% increase in the number of units sold in Anchorage when comparing January to September 2026 to the same period in 2025. The number of homes sold in the Matanuska Susitna Borough in the nine months of 2026 is 1% higher than January to September 2025.

Previous wording

The Board of Governors of the Federal Reserve System lowered its benchmark interest rate target to 3.50%-3.75% as of both June 30, 2026 and December 31, 2025. The prime rate of interest was 6.75% as of both June 30, 2026 and December 31, 2025.

Current wording

The Board of Governors of the Federal Reserve System raised its benchmark interest rate target to 3.75%-4.00% as of September 30, 2026 from 3.50%-3.75% at December 31, 2025. The prime rate of interest was 7.00% as of September 30, 2026, up from 6.75% at December 31, 2025.

Previous wording

Highlights and Summary of Performance - Second Quarter of 2026

Current wording

Highlights and Summary of Performance - Third Quarter of 2026

Previous wording

The Company reported net income and earnings per diluted share of $15.3 million and $0.68, respectively, for the second quarter of 2026 compared to net income and earnings per diluted share of $11.8 million and $0.52, respectively, for the second quarter of 2025. The Company reported net income and earnings per diluted share of $29.0 million and $1.29, respectively, for the firstsix months of 2026 compared to net income and earnings per diluted share of $25.1 million and $1.12, respectively, for the firstsix months of 2025. The increase in net income for the second quarter of 2026 compared to the same quarter last year was mostly due to an increase in net interest income. The increase in net income for the first six months of 2026 compared to the same period a year ago was primarily due to an increase in net interest income and mortgage banking income, which were partially offset by an increase in the provision for credit losses and other operating expenses.

Current wording

The Company reported net income and earnings per diluted share of $14.4 million and $0.63, respectively, for the third quarter of 2026 compared to net income and earnings per diluted share of $27.1 million and $1.20, respectively, for the third quarter of 2025. The Company reported net income and earnings per diluted share of $43.4 million and $1.92, respectively, for the first nine months of 2026 compared to net income and earnings per diluted share of $52.2 million and $2.32, respectively, for the first nine months of 2025. The decrease in net income for the third quarter of 2026 compared to the same quarter last year was mostly due to an increase in provision for credit losses, as well as a decrease in gain from the sale of certain assets by Pacific Wealth Advisors. The decrease in net income for the first nine months of 2026 compared to the same period a year ago was primarily due to an increase in provision for credit losses and decrease in gain from the sale of certain assets by Pacific Wealth Advisors, which were partially offset by increases in net interest income and mortgage banking income. The increase in the provision for credit losses in 2026 is primarily tied to a single loan relationship at Northrim Funding Services in the Specialty Finance segment.

Previous wording

•Net interest margin was 4.96% for the second quarter of 2026, up 30-basis points from the second quarter a year ago.

Current wording

•Net interest margin was 4.96% for the third quarter of 2026, up 13-basis points from the third quarter a year ago.

Previous wording

•Portfolio loans were $2.39 billion at June 30, 2026, up 4% from December 31, 2025, primarily due to new customer relationships and expanding market share, as well as retaining certain mortgages originated by Residential Mortgage, a subsidiary of the Bank.

Current wording

•Portfolio loans were $2.40 billion at September 30, 2026, up 5% from December 31, 2025, primarily due to new customer relationships and expanding market share, as well as retaining certain mortgages originated by Residential Mortgage, LLC (“Residential Mortgage”), a subsidiary of the Bank.

Previous wording

•Total deposits were $2.92 billion at June 30, 2026, up 4% from $2.81 billion at December 31, 2025. Non-interest bearing demand deposits increased 6% year-over-year to $826.3 million at June 30, 2026 and represent 28% of total deposits.

Current wording

•Total deposits were $3.05 billion at September 30, 2026, up 8% from $2.81 billion at December 31, 2025. Non-interest bearing demand deposits increased 4% year-over-year to $833.7 million at September 30, 2026 and represent 27% of total deposits.

Previous wording

•The average cost of interest-bearing deposits was 1.71% at June 30, 2026, down from 2.04% at June 30, 2025.

Current wording

•The average cost of interest-bearing deposits was 1.69% at September 30, 2026, down from 2.00% at September 30, 2025.

Previous wording

•Average purchased receivables and loan balances for the Specialty Finance segment were $141.5 million for the second quarter of 2026, compared to average balances of $124.1 million for the second quarter of 2025.

Current wording

•Average purchased receivables and loan balances for the Specialty Finance segment were $164.3 million for the third quarter of 2026, compared to average balances of $127.8 million for the third quarter of 2025.

Previous wording

Nonperforming assets: Nonperforming assets, net of government guarantees were $23.0 million at June 30, 2026 and $11.4 million at December 31, 2025. Other Real Estate Owned (“OREO”), net of government guarantees was $1.2 million at June 30, 2026 and zero at December 31, 2025. Repossessed assets were zero at both June 30, 2026 and December 31, 2025. Nonperforming loans, net of government guarantees increased $10.5 million or 93% to $21.8 million as of June 30, 2026 from $11.3 million as of December 31, 2025, primarily due to the addition of three loans to a single borrower in the first six months of 2026. Nonperforming purchased receivables decreased $67,000 or 100% to zero as of June 30, 2026 from $67,000 as of December 31, 2025 as a result of a paydown received on one relationship. Of the nonperforming assets, net of government guarantees at June 30, 2026, $18.6 million are attributable to the Community Banking segment, $494,000 are attributable to the Home Mortgage Lending segment, and $3.9 million are attributable to the Specialty Finance segment. The increase in nonperforming assets was primarily in the Community Banking segment and was mostly attributable to one relationship which includes both commercial real estate and commercial loans which are well-collateralized.

Current wording

Nonperforming assets: Nonperforming assets, net of government guarantees were $42.9 million at September 30, 2026 and $11.4 million at December 31, 2025. Other Real Estate Owned (“OREO”), net of government guarantees was $1.8 million at September 30, 2026 and zero at December 31, 2025. Repossessed assets were zero at both September 30, 2026 and December 31, 2025. Nonperforming loans, net of government guarantees increased $30.0 million or 265% to $40.8 million as of September 30, 2026 from $11.3 million as of December 31, 2025, primarily due to the addition of four loans to two borrowers in the first nine months of 2026. Nonperforming purchased receivables increased $315,000 or 470% to $382,000 as of September 30, 2026 from $67,000 as of December 31, 2025 as a result of two new nonperforming purchased receivables as well as a paydown received on one relationship. Of the nonperforming assets, net of government guarantees at September 30, 2026, $17.5 million are attributable to the Community Banking segment, $1.8 million are attributable to the Home Mortgage Lending segment, and $23.7 million are attributable to the Specialty Finance segment. The increase in nonperforming assets in the Community Banking segment was mostly attributable to one relationship which includes both commercial real estate and commercial loans which are well-collateralized. The increase in nonperforming assets in the Specialty Finance segment was mostly attributable to one Northrim Funding Services relationship.

Previous wording

Potential problem assets: Potential problem loans are loans which are currently performing in accordance with contractual terms but that have developed negative indications that the borrower may not be able to comply with present payment terms and which may later be included in nonaccrual or past due. These loans are closely monitored and their performance is reviewed by management on a regular basis. All potential problem loans are individually evaluated for the purposes of establishing an allowance for credit losses. At June 30, 2026, management had identified $11.5 million potential problem loans, down from $21.2 million at December 31, 2025. This decrease is primarily due to the transfer of three loans to a single borrower to nonaccrual status, as well as paydowns which occurred in the first six months of 2026.

Current wording

Potential problem assets: Potential problem loans are loans which are currently performing in accordance with contractual terms but that have developed negative indications that the borrower may not be able to comply with present payment terms and which may later be included in nonaccrual or past due. These loans are closely monitored and their performance is reviewed by management on a regular basis. All potential problem loans are individually evaluated for the purposes of establishing an allowance for credit losses. At September 30, 2026, management had identified $11.2 million in potential problem loans, down from $21.2 million at December 31, 2025. This decrease is primarily due to the transfer of three loans to a single borrower to nonaccrual status, as well as paydowns which occurred in the first nine months of 2026.

Previous wording

Our critical accounting estimates are described in detail in Part II. Item 7, Management’s Discussion and Analysis, and in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to the valuation techniques or assumptions within the models that affect our estimates during the second quarter of 2026.

Current wording

Our critical accounting estimates are described in detail in Part II. Item 7, Management’s Discussion and Analysis, and in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to the valuation techniques or assumptions within the models that affect our estimates during the third quarter of 2026.

Previous wording

Allowance for Credit Losses Policy: Management performs a hypothetical sensitivity analysis of our Allowance for Credit Losses (“ACL”) quarterly to understand the impact of a change in a key input on our ACL. As of June 30, 2026, if the four-quarter U.S. unemployment rate forecast had been approximately 3% higher and the four-quarter annualized growth rate in the U.S. Gross Domestic Product had been approximately 12% lower, our ACL for loans would have increased $519,000, or 2%. As of June 30, 2026, if the four-quarter national unemployment rate forecast had been approximately 29% higher and the four-quarter annualized growth rate in the U.S. Gross Domestic Product had been approximately 3% lower, which represents management's estimate of long-term mean rates for these economic factors, our ACL for loans would have increased $2.2 million, or 9%. As of June 30, 2026, if the estimated prepayment and curtailment rates are doubled (with a maximum rate of 100%), our ACL for loans would have decreased $2.1 million, or 9%. As of June 30, 2026, if the estimated prepayment and curtailment rates are cut in half, our ACL for loans would have increased $1.7 million, or 7%. These sensitivity analyses include the impact to both the quantitative and qualitative components of our ACL. Changes in quantitative inputs and qualitative loss factors may not occur in the same direction or magnitude across all segments of our loan portfolio and deterioration in some quantitative inputs and qualitative loss factors may offset improvement in others. This sensitivity analysis does not represent a change to our expectations of the economic environment but provides a hypothetical result to assess the sensitivity of the ACL to a change in a key input. This sensitivity analysis does not incorporate changes to management’s judgment of qualitative loss factors.

Current wording

Allowance for Credit Losses Policy: Management performs a hypothetical sensitivity analysis of our Allowance for Credit Losses (“ACL”) quarterly to understand the impact of a change in a key input on our ACL. As of September 30, 2026, if the four-quarter U.S. unemployment rate forecast had been approximately 4% higher and the four-quarter annualized growth rate in the U.S. Gross Domestic Product had been approximately 16% lower, our ACL for loans would have increased $373,000, or 2%. As of September 30, 2026, if the four-quarter national unemployment rate forecast had been approximately 35% higher and the four-quarter annualized growth rate in the U.S. Gross Domestic Product had been approximately 7% lower, which represents management's estimate of long-term mean rates for these economic factors, our ACL for loans would have increased $2.5 million, or 11%. As of September 30, 2026, if the estimated prepayment and curtailment rates are doubled (with a maximum rate of 100%), our ACL for loans would have decreased $2.1 million, or 9%. As of September 30, 2026, if the estimated prepayment and curtailment rates are cut in half, our ACL for loans would have increased $1.7 million, or 7%. These sensitivity analyses include the impact to both the quantitative and qualitative components of our ACL. Changes in quantitative inputs and qualitative loss factors may not occur in the same direction or magnitude across all segments of our loan portfolio and deterioration in some quantitative inputs and qualitative loss factors may offset improvement in others. This sensitivity analysis does not represent a change to our expectations of the economic environment but provides a hypothetical result to assess the sensitivity of the ACL to a change in a key input. This sensitivity analysis does not incorporate changes to management’s judgment of qualitative loss factors.

Previous wording

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AS COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2025

Current wording

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2026 AS COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025

Previous wording

Net income for the second quarter of 2026 increased $3.6 million to $15.3 million as compared to $11.8 million for the same period in 2025. The increase in net income in the second quarter of 2026 as compared to the same quarter a year ago is mostly due to a $3.5 million increase in net interest income.

Current wording

Net income for the third quarter of 2026 decreased $12.7 million to $14.4 million as compared to $27.1 million for the same period in 2025. The decrease in net income in the third quarter of 2026 as compared to the same quarter a year ago is mostly due to a $13.9 million decrease in gain on sale of assets by Pacific Wealth Advisors, as well as a $6.0 million increase in the provision for credit losses. These changes were partially offset by an increase in net interest income in the third quarter of 2026 as compared to the same quarter a year ago.

Previous wording

Net income for the firstsix months of 2026 increased $3.9 million to $29.0 million as compared to $25.1 million for the same period in 2025. The increase in net income in the firstsix months of 2026 as compared to the same period a year ago is mostly due to a $6.9 million increase in net interest income and a $1.9 million increase in mortgage banking income, which were partially offset by a $2.0 million increase in the provision for credit losses and a $2.0 million increase in other operating expenses.

Current wording

Net income for the first nine months of 2026 decreased $8.7 million to $43.4 million as compared to $52.2 million for the same period in 2025. The decrease in net income in the first nine months of 2026 as compared to the same period a year ago is mostly due to a $13.9 million decrease in gain on sale of assets by Pacific Wealth Advisors, an $8.0 million increase in the provision for credit losses, and a $4.9 million increase in other operating expenses. These were partially offset by a $10.4 million increase in net interest income and a $3.4 million increase in mortgage banking income.

Previous wording

Our business segments are defined as Community Banking, Home Mortgage Lending, and Specialty Finance. The following table summarizes net income from our segments. Additional information about segment performance is presented in Note 10 to the Financial Statements included in Part I - Item 1 of this report.

Current wording

Our business segments are defined as Community Banking, Home Mortgage Lending, and Specialty Finance. The following table summarizes net income (loss) from our segments. Additional information about segment performance is presented in Note 10 to the Financial Statements included in Part I - Item 1 of this report.

Previous wording

Net income in the Community Banking segment increased $4.0 million or 52% in the second quarter of 2026 compared to the same period a year ago primarily due to an increase in net interest income, which totaled $33.2 million in the second quarter of 2026, and $30.0 million in the second quarter of 2025, as well as a decrease in other operating expenses and the provision for credit losses. Net interest income increased $3.3 million or 11% in the second quarter of 2026 as compared to the second quarter of 2025 mostly due to higher interest income on loans, investments, and deposits in banks as well as lower interest expense on deposits.

Current wording

Net income in the Community Banking segment decreased $7.1 million or 32% in the third quarter of 2026 compared to the same period a year ago primarily due to a $13.9 million decrease in gain from sale of certain assets by Pacific Wealth Advisors, as well as an increase in other operating expenses. This was partially offset by an increase in net interest income which totaled $35.8 million in the third quarter of 2026, as compared to $32.3 million in the third quarter of 2025. Net interest income increased $3.5 million or 11% in the third quarter of 2026 as compared to the third quarter of 2025 mostly due to higher interest income on loans and investments, as well as lower interest expense on deposits.

Previous wording

The provision for credit losses in the Community Banking segment was $503,000 in the second quarter of 2026 compared to a provision for credit losses of $1.3 million in the same quarter a year ago. The decrease to the provision for credit losses in the Community Banking segment in the second quarter of 2026 as compared to the same quarter a year ago was primarily a result of larger increases in qualitative factors in the second quarter of 2025 when adversely classified assets, net of government guarantees increased 75% to $32.1 million. Adversely classified assets, net of government guarantees are $28.9 million in the Community Banking segment at June 30, 2026.

Current wording

The benefit to the provision for credit losses in the Community Banking segment was $134,000 in the third quarter of 2026 compared to a provision for credit losses of $1.6 million in the same quarter a year ago. The decrease to the provision for credit losses in the Community Banking segment in the third quarter of 2026 as compared to the same quarter a year ago was primarily a result of decreased estimated loss rates due to more favorable economic forecasts.

Previous wording

Net income in the Community Banking segment increased $3.7 million or 20% in the firstsix months of 2026 as compared to the same period a year ago primarily due to increases in net interest income primarily due to higher interest income due to higher earning-asset balances and higher yields. This increase was only partially offset by an increase the provision for credit losses due to higher loan balances and a higher estimated loss rate due to an increase in estimated loss rates due to trends in qualitative factors, as well as an increase in the provision for income taxes.

Current wording

Net income in the Community Banking segment decreased $3.4 million or 8% in the first nine months of 2026 as compared to the same period a year ago primarily due to a $13.9 million decrease in gain from sale of certain assets by Pacific Wealth Advisors, as well as an increase in other operating expenses. These were partially offset by an increase in net interest income primarily due to higher interest income due to higher earning-asset balances and higher yields over the same period.

Previous wording

Net income in the Home Mortgage Lending segment decreased $322,000 or 17% in the second quarter of 2026 compared to the same period a year ago primarily due to higher other operating expenses and lower mortgage servicing revenue, which was only partially offset by a decrease in the provision for credit losses in the Home Mortgage Lending segment due to lower loan growth. During the second quarter of 2026, mortgage loans funded for sale were $239.1 million, compared to $249.7 million in the second quarter of 2025.

Current wording

Net income in the Home Mortgage Lending segment increased $1.6 million or 88% in the third quarter of 2026 compared to the same period a year ago primarily due to higher mortgage servicing revenue resulting primarily from and increase in the fair value of mortgage servicing rights, as well as a lower provision for credit losses in the Home Mortgage Lending segment. These changes were only partially offset by a decrease in production revenue. During the third quarter of 2026, mortgage loans funded for sale were $189.0 million, compared to $218.2 million in the third quarter of 2025.

Previous wording

The provision for credit losses in the Home Mortgage Lending segment was $279,000 in the second quarter of 2026 compared to a provision for credit losses of $639,000 in the second quarter of 2025. The decrease in the provision for credit losses in the second quarter of 2026 in the Home Mortgage Lending segment as compared to the same quarter a year ago was primarily a result of a lower increase in loan balances primarily due to the the sale of mortgage loans.

Current wording

The benefit to the provision for credit losses in the Home Mortgage Lending segment was $575,000 in the third quarter of 2026 compared to a provision for credit losses of $158,000 in the third quarter of 2025. The decrease in the provision for credit losses in the third quarter of 2026 in the Home Mortgage Lending segment as compared to the same quarter a year ago was primarily a result of lower loan balances, as well as a decrease in estimated loss rates due to more favorable economic forecasts.

Previous wording

Other operating expenses in the Home Mortgage Lending segment totaled $8.1 million in the second quarter of 2026 compared to $7.6 million in the second quarter a year ago. The increase in the second quarter of 2026 as compared to the same quarter a year ago was mostly due to increases in salaries and other personnel expense due to higher group medical expenses.

Current wording

Other operating expenses in the Home Mortgage Lending segment totaled $7.7 million in the third quarter of 2026 compared to $7.4 million in the third quarter a year ago. The increase in the third quarter of 2026 as compared to the same quarter a year ago was mostly due to increases in salaries and other personnel expense due to higher commissions and group medical expenses.

Previous wording

The Arizona, Colorado, and Pacific Northwest mortgage expansion markets were responsible for 27% of Residential Mortgage's $222 million total production in the second quarter of 2026 and 22% of $216 million total production in the second quarter a year ago.

Current wording

The Arizona, Colorado, and Pacific Northwest mortgage expansion markets were responsible for 22% of Residential Mortgage's $232 million total production in the third quarter of 2026 and 16% of $218 million total production in the third quarter a year ago.

Previous wording

As of June 30, 2026, Northrim serviced 6,657 loans in its $1.66 billion home-mortgage-servicing portfolio, a 7% increase from the $1.55 billion serviced a year ago.

Current wording

As of September 30, 2026, Northrim serviced 6,725 loans in its $1.70 billion home-mortgage-servicing portfolio, a 6% increase from the $1.60 billion serviced a year ago.

Previous wording

Net income in the Home Mortgage Lending segment decreased slightly, $40,000 or 1% in the firstsix months of 2026. An increase in other operating income due to higher mortgage loans funded for sale was offset by increases in other operating expenses primarily due to higher originator commissions and an increase in the the provision for credit losses as compared to the same period a year ago.

Current wording

Net income in the Home Mortgage Lending segment increased $1.6 million or 35% in the first nine months of 2026. An increase in other operating income due to an increase in the fair value of mortgage servicing rights as well as a decrease in the the provision for credit losses was offset by an increase in other operating expenses primarily due to higher commissions and group medical expenses as compared to the same period a year ago.

Previous wording

Net income in the Specialty Finance segment decreased $116,000 or 6% in the second quarter of 2026 compared to the same period a year ago primarily due to higher other operating expenses, which were only partially offset by increased purchased receivable balances.

Current wording

Net income in the Specialty Finance segment decreased $7.0 million or 103% in the first nine months of 2026 compared to the same period a year ago primarily due to higher provision for credit losses in the Specialty Finance segment, which was only partially offset by increased purchased receivable balances.

Previous wording

Average purchased receivables and loan balances for the Specialty Finance segment were $141.5 million for the second quarter of 2026, compared to average balances of $124.1 million for the second quarter of 2025.

Current wording

Average purchased receivables and loan balances for the Specialty Finance segment were $164.3 million for the third quarter of 2026, compared to average balances of $127.8 million for the third quarter of 2025.

Previous wording

Net interest income for the second quarter of 2026 increased 11% or $3.5 million, to $37.1 million as compared to $33.6 million for the second quarter of 2025. The net interest margin increased 30 basis points to 4.96% in the second quarter of 2026 as compared to 4.66% in the second quarter of 2025. The increase in net interest income in the second quarter of 2026 compared to the same period in 2025 was primarily the result of increased interest on loans, interest bearing deposits in other banks, and long term investments, as well as a decrease in interest expense on deposits and borrowings, which were only partially offset by an increase in interest expense on subordinated debentures. The increase in net interest margin in the second quarter of 2026 as compared to the same period of 2025 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets, as well as a decrease in the cost of interest-bearing deposits and higher average yields on interest-earning assets.

Current wording

Net interest income for the third quarter of 2026 increased 10% or $3.5 million, to $38.9 million as compared to $35.3 million for the third quarter of 2025. The net interest margin increased 13 basis points to 4.96% in the third quarter of 2026 as compared to 4.83% in the third quarter of 2025. The increase in net interest income in the third quarter of 2026 compared to the same period in 2025 was primarily the result of increased interest on loans and long term investments, as well as a decrease in interest expense on deposits, which were only partially offset by an increase in interest expense on borrowings and decreases in interest income on loans held for sale and interest income on interest bearing deposits in other banks. The increase in net interest margin in the third quarter of 2026 as compared to the same period of 2025 was primarily due to a favorable change in the mix of earning-assets towards higher loan balances as a percentage of total earning-assets, as well as a decrease in the cost of interest-bearing deposits and higher average yields on long term investments.