Stock-based compensation plans are designed to promote stock ownership in NW Holdings by employees, including officers. These compensation plans include a Long Term Incentive Plan (LTIP) and an Employee Stock Purchase Plan (ESPP). For additional information on stock-based compensation plans, see Note 8 in the 2025 Form 10-K and the updates provided below.

LTIP performance shares incorporate a combination of market, performance, and service-based factors. During the six months ended June 30, 2026, the final performance factor under the 2024-2026 LTIP was approved and 49,520 performance-based shares were granted under the 2024-2026 LTIP for accounting purposes. As such, NW Natural began recognizing compensation expense.

In February 2025, LTIP shares were awarded to participants; however, the agreement allows for one of the performance factors to remain variable until the first quarter of the third year of the award period. As the performance factor will not be approved until the first quarter of 2027, there is not a mutual understanding of the awards' key terms and conditions between NW Holdings and the participants as of June 30, 2026, and therefore, no expense was recognized for the 2025-2027 award. NW Holdings will calculate the grant date fair value and the applicable subsidiaries of NW Holdings will recognize expense over the remaining service period for each award once the final performance factor has been approved.

In February 2026, LTIP shares were awarded to certain participants; however, the agreement allows for one of the performance factors to remain variable until the first quarter of the third year of the award period. As the performance factor will not be approved until the first quarter of 2028, there is not a mutual understanding of the awards' key terms and conditions between NW Holdings and the participants as of June 30, 2026, and therefore, no expense was recognized for the 2026-2028 award. NW Holdings will calculate the grant date fair value and the applicable subsidiaries of NW Holdings will recognize expense over the remaining service period for each award once the final performance factor has been approved.

For the 2025-2027 and 2026-2028 LTIP awards, share payouts range from a threshold of 0% to a maximum of 200% based on achievement of pre-established goals. The performance criteria for the 2025-2027 and 2026-2028 performance shares consists of a three-year Return on Invested Capital (ROIC) threshold that must be satisfied and a cumulative EPS factor, which can be modified by a total shareholder return factor (TSR modifier) relative to the performance of peer group companies over the performance period of three years for each respective award. If the targets were achieved for the 2025-2027 and 2026-2028 awards, NW Holdings would grant for accounting purposes 67,429 and 65,240 shares in the first quarters of 2027 and 2028, respectively.

In February 2025 and 2026, 4,090 and 5,205 LTIP shares were awarded to certain participants, respectively. The LTIP awards share payouts range from a threshold of 0% to a maximum of 200% based on achievement of pre-established goals. The performance criteria for the 2025-2027 and 2026-2028 performance shares consist of a three-year ROIC threshold that must be satisfied and a 3-year cumulative EBITDA, which can be modified by a TSR modifier relative to the performance of peer group companies over the period. During the six months ended June 30, 2026, there was mutual understanding of all key terms of the awards. As such, NW Holdings recognized compensation expense.

During the six months ended June 30, 2026, 59,688 RSUs were granted under the LTIP with a weighted-average grant date fair value of $49.91 per share. Generally, the RSUs awarded are forfeitable and include a performance-based threshold as well as a vesting period of three years from the grant date. The majority of our RSU grants obligate NW Holdings, upon vesting, to issue the RSU holder one share of common stock. The grant may also include a cash payment equal to the total amount of dividends paid per share between the grant date and vesting date of that portion of the RSU depending on the structure of the award agreement. The fair value of an RSU is equal to the closing market price of NW Holdings' common stock on the grant date.

As of June 30, 2026, there was $5.0 million of unrecognized compensation cost from grants of RSUs, which is expected to be recognized over a period extending through 2029.