Northrim Bancorp Inc: Form 10-Q for the period ended Sep 30, 2026

This discussion should be read in conjunction with the unaudited consolidated financial statements of Northrim BanCorp, Inc. (the “Company”) and the notes thereto presented elsewhere in this report and with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Except as otherwise noted, references to “we”, “our”, “us” or “the Company” refer to Northrim BanCorp, Inc. and its subsidiaries that are consolidated for financial reporting purposes.

Note Regarding Forward Looking-Statements

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 than expected, and (ix) shareholder litigation that could prevent or delay the closing of the merger or otherwise negatively impact our business and operations; changes in banking regulation or actions by bank regulators; potential further increases in inflation, supply-chain constraints, and potential geopolitical instability, including the wars in Ukraine and Iran; financial stress on borrowers (consumers and businesses) as a result of higher rates or an uncertain economic environment; the general condition of, and changes in, the Alaska economy; our ability to maintain or expand our market share or net interest margin; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to current expected credit losses accounting guidance; our ability to maintain asset quality; our ability to implement our marketing and growth strategies; our ability to identify and address cyber-security risks, including security breaches, “denial of service attacks,” “hacking,” and identity theft and increased cyber threats due to artificial intelligence; disease outbreaks; and our ability to execute our business plan. Further, actual results may be affected by competition on price and other factors with other financial institutions; customer acceptance of new products and services; the regulatory environment in which we operate; and general trends in the local, regional and national banking industry and economy. In addition, there are risks inherent in the banking industry relating to collectability of loans and changes in interest rates. Many of these risks, as well as other risks that may have a material adverse impact on our operations and business, are identified in Part II. Item 1A Risk Factors of this report and Part I. Item 1A in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as well as in our other filings with the Securities and Exchange Commission. However, you should be aware that these factors are not an exhaustive list, and you should not assume these are the only factors that may cause our actual results to differ from our expectations. In addition, you should note that forward looking statements are made only as of the date of this report and that we do not intend to update any of the forward-looking statements or the uncertainties that may adversely impact those statements, other than as required by law.

Pending Acquisition

On July 22, 2026, we announced that we, Whitewater Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and PBCO Financial Corporation (“PBCO”), the parent company of People’s Bank of Commerce, entered into an

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.

Update on Economic Conditions

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%.

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 12th highest of the 50 U.S. states.

Alaska’s Gross State Product (“GSP”) in the second quarter of 2026 reached $79.3 billion according to the BEA. This is an 8.6% nominal growth from $73.1 billion in the second quarter of 2025. Alaska’s inflation adjusted “real” GSP decreased 0.3% between the second quarter of 2025 and 2026. A majority of the difference in nominal and real GSP came from price adjustments made to the value of oil, which rose rapidly during the year. Comparing the second quarter 2025 to 2026, the private sector real GSP in Alaska grew slightly by $14 million, but the government sector decreased by $187 million, or 1.8%.

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.

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.

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.

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.

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.

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.

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.

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.

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.

The following is a discussion of our results for the three and nine-months ended September 30, 2026, as compared to the applicable prior periods.

Highlights and Summary of Performance - Third Quarter of 2026

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.

• Net interest margin was 4.96% for the third quarter of 2026, up 13-basis points from the third quarter a year ago.
• 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.
• 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.
• The average cost of interest-bearing deposits was 1.69% at September 30, 2026, down from 2.00% at September 30, 2025.
• 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.

Other financial measures for the periods indicated are shown in the table below:

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.

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.

Summary of Critical Accounting Estimates

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.

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.

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

Net Income

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.

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.

Analysis of Business Segments

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.

(In Thousands)

56

Community Banking

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.

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.

Other operating expenses in the Community Banking segment totaled $21.6 million in the third quarter of 2026, up $1.2 million or 6% from $20.0 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 $993,000 in merger and acquisition expense as a result of the proposed acquisition of PBCO of which $971,000 was professional and other outside services and $22,000 was other operating expense.

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.

Home Mortgage Lending

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.

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.

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.

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.

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.

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.

Specialty Finance

Net income in the Specialty Finance segment decreased $7.2 million or 245% in the third quarter of 2026 compared to the same period a year ago primarily due to a higher provision for credit losses attributable to one Northrim Funding Services relationship in our Specialty Finance segment. As of September 30, 2026, this credit has an outstanding balance of $20.0 million. Management recorded an $8.8 million individual impairment on this loan as of September 30, 2026 due to customer receivable payment disputes related to potential quality control issues with the customer's wholesale products, uncertainty regarding anticipated recoveries associated with multiple pending insurance claims, and the need to liquidate various commercial and residential real estate and equipment collateral. The Company continues to pursue all available contractual, collateral, guaranty, insurance, collection and legal remedies associated with this relationship, but we believe that ultimate collection of amounts owed will take several quarters to resolve.

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.

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.

Net Interest Income/Net Interest Margin

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.

Net interest income for the first nine months of 2026 increased 10% or $10.4 million, to $110.7 million as compared to $100.2 million for the first nine months of 2025. The net interest margin increased 20 basis points to 4.88% in the first nine months of 2026 as compared to 4.68% in the first nine months of 2025. The increase in net interest income in the first nine months 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 and borrowings, which were only partially offset by an increase in interest expense on subordinated debentures and decrease in interest expense on loans held for sale. The increase in net interest margin in the first nine months 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 and higher yields on long term investments, as well as a decrease in the cost of interest-bearing liabilities.

Components of Net Interest Margin

The following table compares average balances and rates as well as margins on earning assets for the three-month periods ended September 30, 2026 and 2025. Average yields or costs are calculated on a tax-equivalent basis.

(Dollars in Thousands)

1Consists of interest bearing deposits in other banks and domestic CDs.

2Consists of investment securities available for sale, investment securities held to maturity, marketable equity securities, and investment in Federal Home Loan Bank stock.

3Interest income includes loan fees. Loan fees recognized during the period and included in the yield calculation totaled $1.6 million and $1.3 million in the third quarter of 2026 and 2025, respectively.

4Nonaccrual loans are included with a zero effective yield. Average nonaccrual loans included in the computation of the average loan balances were $27.1 million and $8.1 million in the third quarter of 2026 and 2025, respectively.

5The Company does not have any fed funds sold or securities purchased with agreements to resell to disclose as part of its total interest-earning assets in the periods presented.

6Tax-equivalent yields/costs assume a federal tax rate of 21% and state tax rate of 7.43% for a combined tax rate of 28.43%.

The following tables set forth the changes in tax equivalent net interest income attributable to changes in volume and to changes in interest rates for the three-month periods ending September 30, 2026 and 2025. Changes attributable to the combined effect of volume and interest rate have been allocated proportionately to the changes due to volume and the changes due to interest rates. The Company did not have any fed funds sold or securities purchased with agreements to resell for the three-month periods ending September 30, 2026 and 2025.

(In Thousands)

61

The following table compares average balances and rates as well as margins on earning assets for the nine-month periods ended September 30, 2026 and 2025. Average yields or costs are calculated on a tax-equivalent basis.

(Dollars in Thousands)

1Consists of interest bearing deposits in other banks and domestic CDs.

2Consists of investment securities available for sale, investment securities held to maturity, marketable equity securities, and investment in Federal Home Loan Bank stock.

3Interest income includes loan fees. Loan fees recognized during the period and included in the yield calculation totaled $4.2 million and $3.6 million in the first nine months of 2026 and 2025, respectively.

4Nonaccrual loans are included with a zero effective yield. Average nonaccrual loans included in the computation of the average loan balances were $18.9 million and $7.8 million in the first nine months of 2026 and 2025, respectively.

5The Company does not have any fed funds sold or securities purchased with agreements to resell to disclose as part of its total interest-earning assets in the periods presented.

6Tax-equivalent yields/costs assume a federal tax rate of 21% and state tax rate of 7.43% for a combined tax rate of 28.43%.

The following tables set forth the changes in tax equivalent net interest income attributable to changes in volume and to changes in interest rates for the nine-month periods ending September 30, 2026 and 2025. Changes attributable to the combined effect of volume and interest rate have been allocated proportionately to the changes due to volume and the changes due to interest rates. The Company did not have any fed funds sold or securities purchased with agreements to resell for the nine-month periods ending September 30, 2026 and 2025.

(In Thousands)

63

Provision for Credit Losses

The provision or benefit for credit loss is the amount of expense or benefit that, based on our judgment, is required to maintain the ACL at an appropriate level under the Company's Current Expected Credit Losses (“CECL”) model. The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity. The following table presents the major categories of credit loss expense for the three and nine-month periods ended September 30, 2026 and 2025:

(In Thousands)

The increase to the provision for credit losses on loans in the third quarter of 2026 as compared to the same period a year ago was primarily a result of an $8.8 million individual allowance recorded on a single credit at Northrim Funding Services in our Specialty Finance segment, which is discussed above in the Specialty Finance segment section. The increase to the provision for credit losses on unfunded commitments in the third quarter of 2026 as compared to the same period a year ago was primarily due to higher balances of unfunded commitments. The decrease to the provision for credit losses on purchased receivables in the third quarter of 2026 as compared to the same period a year ago was primarily due to a decrease in the quantitive allowance for credit losses on pooled purchased receivables due to a decrease in concentration of these assets.

Fluctuations in the provision for credit losses in the future will be dependent upon changes in economic conditions and forecasts, as well as loan portfolio composition, quality, and duration.

Other Operating Income

Other operating income for the three-month period ended September 30, 2026 decreased $10.5 million, or 34%, to $20.8 million as compared to $31.2 million for the same period in 2025, primarily due to a $13.9 million decrease in gain on sale of certain assets by Pacific Wealth Advisors in the third quarter of 2026 compared to the same quarter a year ago, as well as a $574,000 decrease in purchased receivable income. The fair value of marketable equity securities decreased $371,000 in the third quarter of 2026 compared to the same quarter a year ago. These decreases were partially offset by higher mortgage banking income due to an increase in the fair value of mortgage servicing rights and due to a $1.9 million gain on the sale of VISA B shares in the third quarter of 2026. Bankcard fees and services charges on deposit accounts also increased in the third quarter of 2026 compared to the same period a year ago.

Other operating income for the nine-month period ended September 30, 2026 decreased $8.5 million, or 14%, to $52.4 million as compared to $60.9 million for the same period in 2025, primarily due to a $13.9 million decrease in gain on sale of certain assets by Pacific Wealth Advisors. This was partially offset by a $3.4 million increase in mortgage banking income due to an increase in the fair value of mortgage servicing rights and the $1.9 million gain on the sale of VISA B shares in the first nine months of 2026 compared to the same period a year ago. Bankcard fees and services charges on deposit accounts also increased in the first nine months of 2026 compared to the same period a year ago. The fair value of marketable equity securities decreased $491,000 in the first nine months of 2026 compared to the same period a year ago.

Other Operating Expense

Other operating expense for the third quarter of 2026 increased $2.9 million, or 10%, to $33.2 million as compared to $30.3 million for the same period in 2025. The increase was primarily due to higher professional and other outside services and salaries and other personnel expense. The Company incurred $993,000 in merger and acquisition expense in the third quarter of 2026 as a result of the proposed acquisition of PBCO of which $971,000 was professional and other outside services and $22,000 was other operating expense.

Other operating expense for the nine-month period ended September 30, 2026 increased $4.9 million, or 5%, to $95.8 million as compared to $91.0 million for the same period in 2025. The increase was primarily due to a $3.5 million increase in salaries and other personnel expense, as well as increases in data processing expense and professional and other outside services primarily incurred as a result of the proposed acquisition of PBCO. These increases were partially offset by a decrease in FDIC insurance expense due to improved regulatory capital ratios.

Income Taxes

For the third quarter of 2026 and first nine months of 2026, Northrim recorded a higher effective tax rate as compared to the same periods in 2025 primarily as a result of a decrease in tax credits and tax exempt interest income as a percentage of pre-tax income in 2026 as compared to 2025. In the third quarter of 2026, Northrim recorded $4.3 million in state and federal income tax expense, for an effective tax rate of 23.14% compared to $7.5 million and 21.71% for the same period in 2025. In the first nine months of 2026, Northrim recorded $13.5 million in state and federal income tax expense, for an effective tax rate of 23.72% compared to $15.7 million and 23.18% for the same period in 2025.

ANALYSIS OF FINANCIAL CONDITION AT SEPTEMBER 30, 2026 COMPARED TO DECEMBER 31, 2025

Balance Sheet Overview

Investment Securities

Investment Securities include investment securities available for sale, investment securities held to maturity, and marketable equity securities, at September 30, 2026 increased to $483.6 million from $455.8 million at December 31, 2025 primarily due to maturities of available for sale securities which were only partially offset by purchases of available for sale securities during the first nine months of 2026.

The table below details portfolio investment balances by portfolio investment type as of the periods indicated:

(In Thousands)

The average estimated duration of the investment portfolio at September 30, 2026, was approximately 2.9 years, as compared to approximately 2.0 years at December 31, 2025. As of September 30, 2026, $70.6 million of available for sale securities with a weighted average yield of 2.18% are scheduled to mature in the next six months, $58.3 million with a weighted average yield of 3.57% are scheduled to mature in six months to one year, and $113.3 million with a weighted average yield of 3.94% are scheduled to mature in the following year, representing a total of $242.3 million or 7% of earning assets that are scheduled to mature in the next 24 months.

Loans and Lending Activities

The following table presents the concentration distribution of the loan portfolio, net of deferred fees and costs, as of the dates indicated:

(In Thousands)

Loans increased by $105.1 million, to $2.40 billion at September 30, 2026 from $2.30 billion at December 31, 2025. There were increases in nearly all loan segments, but the largest increases were in commercial and industrial loans, commercial real estate, and other loans in the first nine months of 2026.

Information about industry concentrations

The Company defines “direct exposure” to the oil and gas industry as companies that it has identified as significantly reliant upon activity related to the oil and gas industry, such as oilfield services, lodging, equipment rental, transportation, and other logistic services specific to the industry. The Company estimates that $127.7 million, or approximately 5% of loans as of September 30, 2026 have direct exposure to the oil and gas industry as compared to $123.4 million, or approximately 5% of loans as of December 31, 2025. The Company's unfunded commitments to borrowers that have direct exposure to the oil and gas industry were $86.5 million and $88.6 million at September 30, 2026 and December 31, 2025, respectively. The portion of the Company's ACL that related to the loans with direct exposure to the oil and gas industry was estimated at $1.6 million as of September 30, 2026 and $1.6 million as of December 31, 2025.

The following table details loan balances by loan segment and class of financing receivable for loans with direct oil and gas exposure as of the dates indicated:

(In Thousands)

The Company monitors other concentrations within the loan portfolio depending on trends in the current and future estimated economic conditions. At September 30, 2026, the Company had $161.3 million, or 7% of portfolio loans, in the Accommodations sector, $132.2 million, or 5% of portfolio loans, in the Healthcare sector, $102.1 million, or 4% of portfolio loans, in the Retail sector, $100.5 million, or 4% of portfolio loans, in the Tourism sector, $94.4 million, or 4% of portfolio loans, in the Aviation (non-tourism) sector, $77.3 million, or 3% of portfolio loans, in the Fishing sector, and $60.4 million, or 3% in the Restaurant sector.

The portion of the Company's ACL that related to the loans with exposure to these industries is estimated at the following amounts as of September 30, 2026:

(In Thousands)

67

Credit Quality and Nonperforming Assets

The following table sets forth information regarding our nonperforming loans and total nonperforming assets as of the periods indicated:

(In Thousands)

68

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 $29.5 million or 260% 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, up from $8.4 million at December 31, 2025; $1.8 million are attributable to the Home Mortgage Lending segment, up from $514,000 at December 31, 2025; and $23.7 million are attributable to the Specialty Finance segment, up from $2.5 million at December 13, 2025. 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. See the Results of Operations section in Item 2 of this report for a discussion of changes in the provision for credit losses by segment.

Allowance for Credit Losses

The following table sets forth information regarding changes in the ACL as of the periods indicated:

(In Thousands)

The following table sets forth information regarding changes in the ACL for unfunded commitments as of the periods indicated:

(In Thousands)

70

The following table sets forth information regarding changes in the ACL for purchased receivables as of the periods indicated:

(In Thousands)

1Represents a reduction in the ACL on a PCD purchased receivable acquired in 2024 in connection with the acquisition of Sallyport Commercial Finance, LLC (“SCF”). Collections received during the period presented above are contractually payable to the sellers under the purchase agreement if collected within one year of the acquisition of SCF. Accordingly, the decrease in the allowance was offset by the recognition of a liability to the sellers, and no benefit was recognized in the provision for credit losses.

The ACL for loans held for investment at September 30, 2026 increased $9.6 million from December 31, 2025 primarily due to a higher provision for credit losses attributable to one Northrim Funding Services relationship, in the Specialty Finance segment. As of September 30, 2026, this credit has an outstanding balance of $20.0 million. Management recorded an $8.8 million individual impairment on this loan as of September 30, 2026 due to customer receivable payment disputes related to potential quality control issues with the customer's wholesale products, uncertainty regarding anticipated recoveries associated with multiple pending insurance claims, and the need to liquidate various commercial and residential real estate and equipment collateral. The Company continues to pursue all available contractual, collateral, guaranty, insurance, collection and legal remedies associated with this relationship, but we believe that ultimate collection of amounts owed will take several quarters to resolve. While management believes that it uses the best information available to determine the ACL, unforeseen market conditions and other events could result in adjustment to the ACL, and net income could be significantly affected if circumstances differed substantially from the assumptions used in making the final determination of the ACL.

Deposits

Deposits are the Company’s primary source of funds. Total deposits increased $238.3 million, or 8%, to $3.05 billion as of September 30, 2026 compared to $2.81 billion as of December 31, 2025, primarily due to new deposit relationships and normal seasonal fluctuations. The following table summarizes the Company's composition of deposits as of the periods indicated:

(In thousands)

The Company’s mix of deposits continues to contribute to a low cost of funds with balances in transaction accounts representing 88% of total deposits at September 30, 2026 and 86% of total deposits at December 31, 2025.

The only deposit category with stated maturity dates is certificates of deposit. At September 30, 2026, the Company had $378.4 million in certificates of deposit as compared to certificates of deposit of $402.8 million at December 31, 2025. At September 30, 2026, $362.9 million, or 96%, of the Company’s certificates of deposits are scheduled to mature over the next 12 months as compared to $369.2 million, or 92%, of total certificates of deposit at December 31, 2025. The aggregate amount of certificates of deposit in amounts of $250,000 and greater at September 30, 2026 and December 31, 2025, was $193.0 million and $208.2 million, respectively. The following table sets forth the amount outstanding of deposits in amounts of $250,000 and greater by time remaining until maturity and percentage of total deposits as of September 30, 2026:

(In Thousands)

At September 30, 2026, 78% of total deposits were held in business accounts and 22% of deposit balances were held in consumer accounts. Northrim had approximately 33,000 deposit customers with an average balance of $71,000 as of September 30, 2026. Northrim had 35 customers with balances over $10 million as of September 30, 2026 which accounted for $834.4 million, or 26%, of total deposits.

Uninsured deposits totaled approximately $1.38 billion or 45% of total deposits as of September 30, 2026 compared to $1.1 billion or 38% of total deposits as of December 31, 2025. There was no unusual deposit activity during the first nine months of 2026.

Borrowings

FHLB: The Bank is a member of the Federal Home Loan Bank of Des Moines (the “FHLB”). As a member, the Bank is eligible to obtain advances from the FHLB. FHLB advances are dependent on the availability of acceptable collateral such as marketable securities or real estate loans, although all FHLB advances are secured by a blanket pledge of the Bank’s assets. At September 30, 2026, our maximum borrowing line from the FHLB was approximately 45% of the Bank’s assets, subject to the FHLB’s collateral requirements. Based on the Company's current collateral pledged to the FHLB, less outstanding advances, the Company's borrowing line is $472.3 million as of September 30, 2026. The Company has outstanding advances of $12.5 million as of September 30, 2026 which were originated to match fund low income housing projects that qualify for long term fixed interest rates. These advances have original terms of either 18 or 20 years with 30 year amortization periods and fixed interest rates ranging from 1.23% to 3.25%.

Federal Reserve Bank: The Federal Reserve Bank of San Francisco (the “Federal Reserve Bank”) is holding $70.0 million of securities as collateral to secure the Company's ability to take advances through the discount window on September 30, 2026. There were no discount window advances outstanding at either September 30, 2026 or December 31, 2025.

Other Short-term Borrowings: The Company is subject to provisions under Alaska state law, which generally limit the amount of outstanding debt to 15% of total assets or $533.2 million at September 30, 2026 and $490.6 million at December 31, 2025.

At September 30, 2026 and December 31, 2025, the Company had no short-term (original maturity of one year or less) borrowings that exceeded 30% of shareholders’ equity.

Long-term Borrowings. The Company had no long-term borrowing outstanding other than the FHLB advances noted above as of September 30, 2026 or December 31, 2025.

Junior Subordinated Debentures

At September 30, 2026 and December 31, 2025, the Company had trust preferred securities in the principal amount of $10 million. These securities carry an interest rate of 90-day CME SOFR plus tenor spread adjustment of 0.26% plus 1.37% per annum, adjusted quarterly. The securities have a maturity date of March 15, 2036, and are callable by the Company on or after March 15, 2011. These securities are treated as Tier 1 capital by the Company’s regulators for capital adequacy calculations. At September 30, 2026 and December 31, 2025, the securities had an interest rate of 5.53% and 5.35%, respectively. The Company entered into an interest rate swap in the third quarter of 2017 to hedge the variability in cash flows arising out of its junior subordinated debentures, by swapping the cash flows with an interest rate swap which receives floating and pays fixed. The Company has designated this interest rate swap as a hedging instrument. The interest rate swap effectively fixes the Company's interest payments on the $10 million of junior subordinated debentures held under Northrim Statutory Trust 2 at 3.72% through its maturity date. Net of the impact of the interest rate swap, interest expense on these securities was $96,000 in the third quarter of 2026 and $94,000 in the third quarter of 2025. Net of the impact of the interest rate swap, interest expense on these securities was $284,000 in the first nine months of 2026 and $280,000 in the first nine months of 2025. The Company also had interest expense of $4,000 in the third quarter of 2026 and $5,000 in the third quarter of 2025 and $13,000 in the first nine months of 2026 and $14,000 in the first nine months of 2025 on common securities related to this junior subordinated debt.

Subordinated Notes

At September 30, 2026 and December 31, 2025, the Company had $60.0 million in aggregate principal amount of its 6.875% Fixed-to-Floating Rate Subordinated Notes due 2035 (the “Subordinated Notes”). The Subordinated Notes mature on December 1, 2035 and currently carry interest at a fixed rate of 6.875% per year. The interest cost to the Company on the Subordinated Notes was $1.0 million in the third quarter of 2026 and $3.1 million in the first nine months of 2026. The Company incurred debt issuance costs of $1.4 million which will be amortized through December 1, 2035. The amortization expense amounted to $35,000 in the third quarter of 2026 and $105,000 in the first nine months of 2026. The Subordinated Notes are intended to qualify as Tier 2 capital of the Company for regulatory capital purposes.

Liquidity and Capital Resources

The Company is a single bank holding company and its primary ongoing source of liquidity is from dividends received from the Bank. Such dividends arise from the cash flow and earnings of the Bank. Banking regulations and regulatory authorities may limit the amount of, or require the Bank to obtain certain approvals before paying, dividends to the Company. Given that the Bank currently meets, and the Bank anticipates that it will continue to meet, all applicable capital adequacy requirements for a “well-capitalized” institution by regulatory standards, the Company expects to continue to receive dividends from the Bank during the remainder of 2026. Other available sources of liquidity for the bank holding company include the issuance of debt and the issuance of common or preferred stock. As of September 30, 2026, the Company has 40.0 million authorized shares of common stock, of which approximately 22.2 million are issued and outstanding, and approximately 5.95 million are expected to be issued in connection with the acquisition of PBCO, leaving approximately 11.85 million shares available for issuance. Additionally, the Company has 2.5 million authorized shares of preferred stock available for issuance.

The Bank manages its liquidity through its Asset and Liability Committee. The Bank's primary source of funds are customer deposits. These funds, together with loan repayments, loan sales, maturity and sale of investment securities, borrowed funds, and retained earnings are used to make loans, to acquire securities and other assets, and to fund deposit flows and continuing operations. The primary sources of demands on our liquidity are customer demands for withdrawal of deposits and borrowers’ demands that we advance funds against unfunded lending commitments.

The Company had cash and cash equivalents of $241.8 million, or 7% of total assets at September 30, 2026 compared to $145.9 million, or 4% of total assets as of December 31, 2025. The increase in cash and cash equivalents since the end of 2025 is primarily due to an increase in deposits. The Company had other comprehensive loss, net of tax, of $3.3 million for the nine-month period ending September 30, 2026 primarily due to unrealized holding losses on available for sale securities. Accumulated unrealized losses, net of income taxes on available for sale securities, which are recorded in total shareholders' equity, are $4.3 million as of September 30, 2026. Accumulated unrealized losses, net of income taxes on held to maturity securities, which are not recorded in shareholders' equity, are $424,000 as of September 30, 2026. Management does not believe that liquidation of these securities, which would result in realized losses, will occur prior to maturity of these securities. As of September 30, 2026, the weighted average maturity of available for sale securities is 2.9 years as compared to 2.0 years as of December 31, 2025. At September 30, 2026, $129.0 million available for sale securities mature within one year, $113.3 million mature within one to two years, and $68.7 million mature within two to three years. Our total unfunded commitments to fund loans and letters of credit at September 30, 2026 were $665.1 million. We do not expect that all of these loans are likely to be fully drawn upon at any one time. At September 30, 2026, certificates of deposit totaling $362.9 million are scheduled to mature over the next 12 months and may be withdrawn from the Bank. Similar to loans, we do not expect that these maturing certificates of deposit, or other non-maturity deposits, to be withdrawn from the Bank in a manner that will strain liquidity; however, unforeseen future circumstances or events may cause higher than anticipated withdrawal of deposits or draws of unfunded commitments to fund new loans. Management believes that cash requirements to fund future non-deposit and non-borrowing liabilities, including operating lease liabilities and other liabilities, as of September 30, 2026, are not material to the Company's liquidity position as of September 30, 2026.

The Company has other available sources of liquidity to fund unforeseen liquidity requirements. These include borrowings available through our correspondent banking relationships and our credit lines with the Federal Reserve Bank and the FHLB. At September 30, 2026, our liquid assets, which include investments and loans maturing within a year, were $1.26 billion. Our funds available for borrowing under our existing lines of credit based on loans currently pledged and investments available to be pledged as collateral were $585.6 million. Given these sources of liquidity and our expectations for customer demands for cash and for our operating cash needs, we believe our sources of liquidity to be sufficient for the foreseeable future.

As shown in the Consolidated Statements of Cash Flows included in Part I - Item 1 “Financial Statements” of this report, net cash provided by operating activities was $53.5 million for the first nine months of 2026, primarily due to net proceeds from the sale of loans held for sale and cash provided by net income, which was only partially offset by cash used in connection with the origination of loans held for sale. Net cash used by investing activities was $185.1 million for the same period, primarily due to an increase in loans and purchases of long term investments which were only partially offset by maturities and calls of available for sale and held to maturity securities. Net cash provided by financing activities in the first nine months of 2026 was $227.5 million, primarily due to increases in deposits which were only partially offset by cash dividends paid to shareholders.

Throughout our history, the Company has periodically repurchased for cash a portion of its shares of common stock in the open market. At September 30, 2026, there are no shares remaining under the repurchase program, and we did not repurchase any shares in the third quarter of 2026. The Company currently has no plans to repurchase shares of its common stock in 2026.

Capital Requirements and Ratios

We are subject to minimum capital requirements. Federal banking agencies have adopted regulations establishing minimum requirements for the capital adequacy of banks and bank holding companies. The requirements address both risk-based capital and leverage capital. We believe as of September 30, 2026, that the Company and the Bank met all applicable capital adequacy requirements for a “well-capitalized” institution by regulatory standards.

The table below illustrates the capital requirements in effect for the periods noted for the Company and the Bank and the actual capital ratios for each entity that exceed these requirements. Management intends to maintain capital ratios for the Bank in 2026, exceeding the FDIC’s requirements for the “well-capitalized” classification. Some capital ratios for the Company exceed those for the Bank primarily because the $10 million trust preferred securities offering and the $60 million in Subordinated Notes are included in the Company’s capital for regulatory purposes, although they are accounted for as a long-term debt in our consolidated financial statements. These items are not accounted for on the Bank’s financial statements nor are they included in its capital. As a result, the Company has $70 million more in regulatory capital than the Bank at September 30, 2026, which explains most of the difference in the capital ratios for the two entities.

See Note 23 of the Consolidated Financial Statements in Part II. Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2025 for a detailed discussion of the capital ratios. The requirements for “well-capitalized” come from the Prompt Corrective Action rules. See Part I. Item 1 - Business - Supervision and Regulation in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. These rules apply to the Bank but not to the Company. Under the rules of the Federal Reserve Bank, a bank holding company such as the Company is generally defined to be “well capitalized” if its Tier 1 risk-based capital ratio is 8.0% or more and its total risk-based capital ratio is 10.0% or more.

Our assessment of market risk as of September 30, 2026 indicates that there are no material changes in the quantitative and qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2025.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934). Our principal executive and financial officers supervised and participated in this evaluation. Based on this evaluation, our principal executive and financial officers each concluded that as of September 30, 2026, the disclosure controls and procedures are effective in timely alerting them to material information required to be included in the periodic reports to the Securities and Exchange Commission. The design of any system of controls is based in part upon various assumptions about the likelihood of future events, and there can be no assurance that any of our plans, products, services or procedures will succeed in achieving their intended goals under future conditions.

Changes in Internal Control over Disclosure and Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15-d-15(f) of the Securities Exchange Act of 1934) that occurred during the quarterly period ended September 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

For information regarding risk factors, please refer to Part I. Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as updated by the Company's periodic filings with the SEC. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this Quarterly Report on Form 10-Q. The Company believes that there has been no material change in its risk factors as previously disclosed in the Company's Form 10-K for the year ended December 31, 2025 other than as set forth below.

The Merger Agreement may be terminated in accordance with its terms and the Mergers may not be completed.

The Merger Agreement remains subject to a number of conditions which must be fulfilled in order to complete the Mergers. Those conditions include, among other things: (i) the receipt of required regulatory approvals, including the approval of the Federal Reserve, the FDIC, the Oregon Department of Consumer and Business Services, Division of Financial Regulation; and the Alaska Department of Commerce, Community, and Economic Development, Division of Banking and Securities; and (ii) the absence of any order, injunction, decree, or other law preventing or making illegal the completion of the Mergers, the Bank Merger or any of the other transactions contemplated by the Merger Agreement. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party, (b) the performance in all material respects by the other party of its obligations under the Merger Agreement and (c) the receipt by each party of an opinion from its counsel to the effect that the Mergers should qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986.

These conditions to the closing of the Mergers may not be fulfilled in a timely manner or at all, and, accordingly, the Mergers may not be completed. In addition, the parties can mutually decide to terminate the Merger Agreement at any time, even after the requisite shareholder approvals, or Northrim or PBCO may unilaterally elect to terminate the Merger Agreement in certain other circumstances.

Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the Mergers.

Before the Mergers and the Bank Merger may be completed, various approvals, consents and non-objections must be obtained from the Federal Reserve, the FDIC, the Oregon Department of Consumer and Business Services, Division of Financial Regulation, the Alaska Department of Commerce, Community, and Economic Development, Division of Banking and Securities, and other regulatory authorities in the United States. In determining whether to grant these approvals, such regulatory authorities consider a variety of factors, including the regulatory standing of each party. These approvals could be delayed or not obtained at all, including due to an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approvals; governmental, political, or community group inquiries, investigations, or opposition; or changes in legislation or the political environment generally.

The approvals that are granted may impose terms and conditions, limitations, obligations, or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the Merger Agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations, or restrictions and that such conditions, limitations, obligations, or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the Merger Agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the Mergers or otherwise reducing the anticipated benefits of the Mergers if the Mergers were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations, or restrictions will not result in the delay or abandonment of the Mergers. Additionally, the completion of the Mergers is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the Merger Agreement.

In addition, despite the parties’ commitments to using their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the Merger Agreement, neither Northrim nor PBCO, nor any of their respective subsidiaries, is permitted (without the written consent of the other party), to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the required permits, consents, approvals and authorizations of governmental entities that would reasonably be expected to have a material adverse effect on the combined company and its subsidiaries, taken as a whole, after giving effect to the Mergers and the Bank Merger.

Failure to complete the Mergers could negatively impact Northrim.

If the Mergers are not completed for any reason there may be various adverse consequences and Northrim may experience negative reactions from the financial markets and from its customers and employees. For example, Northrim’s business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Mergers, without realizing any of the anticipated benefits of completing the Mergers. Also, Northrim has devoted significant internal resources to the pursuit of the Mergers and the expected benefit of those resource allocations would be lost if the Mergers are not completed. Additionally, if the Merger Agreement is terminated, the market price of Northrim’s common stock could decline to the extent that current market prices reflect a market assumption that the Mergers will be beneficial and will be completed. Northrim also could be subject to litigation related to any failure to complete the Mergers or to proceedings commenced against Northrim to perform its obligations under the Merger Agreement.

Combining Northrim and PBCO may be more difficult, costly or time-consuming than expected, and Northrim may fail to realize the anticipated benefits of the Mergers.

Northrim and PBCO have operated and, until the completion of the Mergers, will continue to operate independently. The success of the Mergers, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully combine and integrate the businesses of Northrim and PBCO in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits and cost savings of the Mergers. The loss of key employees could adversely affect Northrim’s ability to successfully conduct its business, which could have an adverse effect on Northrim’s financial results and the value of its common stock. If Northrim experiences difficulties with the integration process, the anticipated benefits of the Mergers may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause Northrim or PBCO to lose customers or cause customers to remove their accounts from Northrim or PBCO and move their business to competing financial institutions. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Northrim and PBCO during this transition period and for an undetermined period after completion of the Mergers on the combined company. In addition, the actual cost savings of the Mergers could be less than anticipated.

The combined company may be unable to retain Northrim and/or PBCO personnel successfully after the Mergers are completed.

The success of the Mergers will depend in part on the combined company’s ability to retain the talent and dedication of key employees currently employed by Northrim and PBCO. It is possible that these employees may decide not to remain with Northrim or PBCO, as applicable, while the Mergers are pending or with the combined company after the Mergers are consummated. If Northrim and PBCO are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, Northrim and PBCO could face disruptions in their operations, loss of existing customers, loss of key information, expertise, or know-how and unanticipated additional recruitment costs. In addition, following the Mergers, if key employees terminate their employment, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer. Northrim and PBCO also may not be able to locate or retain suitable replacements for any key employees who leave either company.

Northrim will be subject to business uncertainties and contractual restrictions while the Mergers are pending.

Uncertainty about the effect of the Mergers on employees and customers may have an adverse effect on Northrim. These uncertainties may impair Northrim’s ability to attract, retain and motivate key personnel until the Mergers are completed, and could cause customers and others that deal with Northrim to seek to change existing business relationships with Northrim. In addition, subject to certain exceptions, Northrim has agreed to operate its business in the ordinary course prior to closing in all material respects. These restrictions may prevent Northrim from pursuing attractive business opportunities that may arise prior to the completion of the Mergers.

Northrim has incurred and is expected to incur substantial costs related to the Mergers and integration.

Northrim has incurred and will continue to incur substantial expenses in connection with completion of the transactions contemplated by the Merger Agreement. These costs include legal, financial advisory, accounting, consulting, and other advisory fees, retention, severance and employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs, closing, integration, and other related costs. Some of these costs are payable by Northrim regardless of whether or not the Mergers are completed.

Shareholder litigation related to the Mergers could prevent or delay the completion of the Mergers, result in the payment of damages or otherwise negatively impact the business and operations of Northrim.

Shareholders may bring claims in connection with the proposed Mergers and, among other remedies, may seek damages or an injunction preventing the Mergers from closing. If any plaintiff were successful in obtaining an injunction prohibiting Northrim or PBCO from completing the Mergers or any other transactions contemplated by the Merger Agreement, then such injunction may delay or prevent the effectiveness of the Mergers and could result in costs to Northrim, including costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the Mergers. Further, such lawsuits and the defense or settlement of any such lawsuits may have an adverse effect on the financial condition and results of operations of Northrim.

The Merger Agreement limits Northrim’s ability to pursue acquisition proposals.

The Merger Agreement prohibits Northrim from soliciting, initiating, knowingly encouraging, or knowingly facilitating certain third-party acquisition proposals. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Northrim from considering or proposing such an acquisition.