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Item 7. Management’s Discussion and Analysis

2026-03-13 compared with 2025-03-14 · 244 added, 208 removed, 695 unchanged (39% of the section changed)

1 unchanged sentence

The following discussion of financial condition as of December 31, 2025 and 2024 and results of operations for each of the years in the three-year period ended December 31, 2025 should be read in conjunction with our consolidated financial statements and related notes thereto, included in Part II ITEM 8 of this report.

The Company restated its Consolidated Statements of Condition and revised its Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2024 and 2023, and the quarters ended September 30, 2025, June 30, 2025, March 31, 2025, September 30, 2024, June 30, 2024, and March 31, 2024, (the “Affected Periods”) for misstatements between the balance sheet and income statement that were determined, in the aggregate, to be material to previously issued financial statements.

Generally, the restatements and revisions related to the misclassification of certain deposits and expenses related thereto as non-interest bearing deposits and non-interest expense when they should have been classified as interest bearing deposits and interest expense.

See “Note 19, Restatement of Prior Period Financial Statements (Quarterly Information Unaudited)” in Item 8 of this Form 10-K, for additional information related to the restatement and revision, including descriptions of the misstatements and the impacts on our consolidated financial statements.

All affected tables and narrative disclosures herein from the Affected Periods have likewise been corrected.

Forward-Looking Statements

6 unchanged sentences

The allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis at the balance sheet date to present the net amount of loans expected to be collected.

The allowance for losses on unfunded loan commitments is based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity, and loss rates as determined for pooled funded loans.

The allowance for credit losses on unfunded loan commitments is based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity, and loss rates as determined for pooled funded loans.

The allowance for credit losses on unfunded commitments is a liability account included in interest payable and other liabilities.

5 unchanged sentences

Management considers whether adjustments to the quantitative portion of the ACL are needed for differences in segment-specific risk characteristics or to reflect the extent to which it expects current conditions and reasonable and supportable forecasts of economic conditions to differ from the conditions that existed during the historical period included in the development of PD and LGD.

Our allowance model is particularly sensitive to forecasted and seasonally-adjusted actual California unemployment rates, which increased to 5.5% at December 31, 2024, from 5.1% a t December 31, 2023.

Our allowance model is particularly sensitive to forecasted and seasonally-adjusted actual California unemployment rates, which was 5.5% at December 31, 2025 and December 31, 2024.

The ACL model incorporates a one-year forecast.

For periods beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over a one-year period through the remaining lives of the loans.

For period s beyond the forecast horizon, the economic factors revert to historical averages on a straight-line basis over a one-year period through the remaining lives of the loans.

We performed a sensitivity analysis as of December 31, 2025, and estimated that a 100 basis point change (e.g., 5.5% to 6.5%) in the forecasted unemployment rates over the next four quarters would result in about a 5% change to our allowance for credit losses on loans.

This impact does not consider changes to other assumptions for either the quantitative factors, such as probability of default, loss given default, loan mix or cash flows, prepayment/curtailment rates, and individually analyzed loans, or qualitative factors as discussed in Note 1 - Summary of Significant Accounting

T his impact does not consider changes to other assumptions for either the quantitative factors, such as probability of default, loss given default, loan mix or cash flows, prepayment/curtailment rates, and individually analyzed loans, or qualitative factors as discussed in Note 1 - Summary of Significant Accounting Policies.

Additionally, b ecause current economic conditions and forecasts can change, as future events are inherently difficult to predict, the estimated credit losses on loans and unfunded commitments could change significantly.

15 unchanged sentences

Fair value is discussed further in Note 1 - Summary of Significant Accounting Policies, and Note 9 - Fair Value of Assets and Liabilities in ITEM 8 - Financial Statements and Supplementary Data of this Form 10-K.

Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill is tested annually for impairment, or more often if conditions change and indicate a possible impairment.

Significant judgment is used in the assessment of goodwill, both in a qualitative assessment and a quantitative assessment.

Assessments of goodwill often require the use of fair value estimates, which are dependent upon various factors, including estimates concerning the Company’s long-term growth prospects and comparability to industry data.

Uncertainty and imprecision in estimates can affect the estimated fair value of the reporting unit in a goodwill assessment.

Additionally, various events or circumstances could have a negative effect on the estimated fair value of a reporting unit, such as declines in business performance, increases in credit losses, and deterioration in economic or market conditions, which may result in a material impairment charge to earnings in future periods.

In both 2024 and 2023, the Company assessed goodwill for impairment by performing a quantitative assessment, which encompassed an income approach and two market approaches (peer metrics and recent transactions).

The income approach considered such factors as the estimated future cash flows of our reporting unit based on internal long-term forecasts, assumptions concerning potential synergies and other economic benefits, and a discount rate used to present value such cash flows to determine the fair value.

The market approach utilized observable market data from comparable public companies, including price-to-tangible book value ratios, to estimate the Company’s fair value.

The market approach also incorporated a control premium to represent the Company’s expectation of a hypothetical acquisition.

Management used judgment in the selection of comparable companies and included those with similar business activities, and related operating environments.

In addition, the selection and weighting of the various fair value techniques may result in higher or lower estimates of fair value.

Judgment is applied in determining the weightings between the income approach and the market approach in determining fair value.

The results of these assessments indicated the value of goodwill was not impaired as of our annual impairment testing dates of November 30, 2024 and 2023, and there were no changes to our assessment through December 31, 2024.

RESULTS OF OPERATIONS

This discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Form 10-K.

As noted above, the Company restated its financial statements for the Affected Periods for misstatements between the balance sheet and income statement that were determined, in the aggregate, to be material to previously issued financial statements.

Generally, the restatements related to the misclassification of certain deposits and expenses related thereto as non-interest bearing deposits and non-interest expense when they should have been classified as interest bearing deposits and interest expense.

See below and “Note 19, Restatement of Prior Period Financial Statements (Quarterly Information Unaudited)” in Item 8 of this Form 10-K, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements.

All affected tables and narrative disclosure herein from the Affected Periods has likewise been corrected.

Financial Highlights

10 unchanged sentences

Borrowings and other obligations $ 709 $ 154

Subordinated notes, net $ 43,857 $ —

Stockholders' equity $ 394,654 $ 435,407

21 unchanged sentences

Net interest income $ 106,037 $ 91,582 $ 100,352

Provision for (reversal of) credit losses on loans 5,550 2,575 (63)

Reversal of credit losses on unfunded loan commitments (233) (342) (318)

Provision for credit losses on loans

375 5,550 2,575

Provision for (reversal of) credit losses on unfunded loan commitments

185 (233) (342)

Non-interest income (76,650) (21,360) 4,989

14 unchanged sentences

Efficiency ratio 276.69 % 112.13 % 73.16 %

Net charge-offs (recoveries) $ 66 $ 386 $ (23)

Net charge-offs (recoveries) to average loans NM 0.02 % NM

Net charge-offs $ 942 $ 66 $ 386

Net charge-offs to average loans 0.05 % NM 0.02 %

Cash dividend payout ratio on common stock 1

NM 80.65 % 33.45 %

NM NM 80.65 %

Cash dividends per common share $ 1.00 $ 1.00 $ 1.00

1 unchanged sentence

NM - Not meaningful.

Restatement and Revision of Prior Period Financial Statements and Financial Highlights

See below for the restated and revised prior period financial statements and affected financial highlights referred to above and in Form 8-K filed February 17, 2026.

Summary of Reclassifications and Impacts

($ in thousands) FY 2025 FY 2024 FY 2023 Q4 2025 Q3 2025 Q2 2025 Q1 2025 Q4 2024 Q3 2024 Q2 2024 Q1 2024

Non-interest-Bearing Deposits - end of period

As reported 1,492,249 1,399,900 1,441,987 1,492,249 1,458,230 1,379,814 1,426,446 1,399,900 1,473,379 1,417,661 1,444,435

As Adjusted 1,254,416 1,274,747 1,309,711 1,254,416 1,245,247 1,218,648 1,277,505 1,274,747 1,331,853 1,285,901 1,318,261

Change -237,833 -125,153 -132,276 -237,833 -212,983 -161,166 -148,941 -125,153 -141,526 -131,760 -126,174

Interest-Bearing Deposits - end of period

As reported 1,923,293 1,820,115 1,848,088 1,923,293 1,924,346 1,865,234 1,875,525 1,820,115 1,835,870 1,796,116 1,839,667

As Adjusted 2,161,126 1,945,268 1,980,364 2,161,126 2,137,329 2,026,400 2,024,466 1,945,268 1,977,396 1,927,876 1,965,841

Change 237,833 125,153 132,276 237,833 212,983 161,166 148,941 125,153 141,526 131,760 126,174

Non-interest-Bearing Deposits as a percentage of Total Deposits - end of period

As reported 43.7% 43.5% 43.8% 43.7% 43.1% 42.5% 43.2% 43.5% 44.5% 44.1% 44.0%

As Adjusted 36.7% 39.6% 39.8% 36.7% 36.8% 37.6% 38.7% 39.6% 40.2% 40.0% 40.1%

Change -7.0% -3.9% -4.0% -7.0% -6.3% -5.0% -4.5% -3.9% -4.3% -4.1% -3.8%

Non-interest-Bearing Deposits - average

As reported 1,433,223 1,448,346 1,656,047 1,506,847 1,419,872 1,398,570 1,406,648 1,452,966 1,460,011 1,421,543 1,458,686

As Adjusted 1,261,562 1,316,737 1,544,208 1,285,578 1,254,958 1,245,025 1,260,482 1,318,943 1,321,648 1,290,874 1,335,405

Change -171,661 -131,609 -111,839 -221,269 -164,914 -153,545 -146,166 -134,023 -138,363 -130,669 -123,281

Interest-Bearing Deposits - average

As reported 1,886,828 1,838,015 1,726,811 1,925,424 1,925,873 1,855,477 1,839,161 1,831,956 1,820,531 1,839,468 1,860,365

As Adjusted 2,058,489 1,969,624 1,838,650 2,146,693 2,090,787 2,009,022 1,985,327 1,965,979 1,958,894 1,970,137 1,983,646

Change 171,661 131,609 111,839 221,269 164,914 153,545 146,166 134,023 138,363 130,669 123,281

Interest Expense

As reported 42,196 46,613 36,733 10,651 10,876 10,376 10,293 11,246 12,050 11,865 11,452

As Adjusted 46,391 49,691 39,142 12,051 11,913 11,316 11,111 11,970 12,866 12,672 12,183

Change 4,195 3,078 2,409 1,400 1,037 940 818 724 816 807 731

Net Interest Income

As reported 110,232 94,660 102,761 31,181 28,193 25,912 24,946 25,230 24,269 22,467 22,694

As Adjusted 106,037 91,582 100,352 29,781 27,156 24,972 24,128 24,506 23,453 21,660 21,963

Change -4,195 -3,078 -2,409 -1,400 -1,037 -940 -818 -724 -816 -807 -731

Non-interest Expense

As reported 85,505 81,818 79,481 21,423 21,328 21,490 21,264 18,338 20,417 21,894 21,169

As Adjusted 81,310 78,740 77,072 20,023 20,291 20,550 20,446 17,614 19,601 21,087 20,438

Change -4,195 -3,078 -2,409 -1,400 -1,037 -940 -818 -724 -816 -807 -731

Net Interest Margin, reported

As reported 3.04% 2.61% 2.60% 3.31% 3.07% 2.91% 2.84% 2.78% 2.68% 2.50% 2.48%

As Adjusted 2.92% 2.53% 2.54% 3.16% 2.95% 2.81% 2.75% 2.70% 2.59% 2.41% 2.40%

Change -0.12% -0.08% -0.06% -0.15% -0.12% -0.10% -0.09% -0.08% -0.09% -0.09% -0.08%

Net Interest Margin, tax-equivalent

As reported 3.06% 2.63% 2.63% 3.32% 3.08% 2.93% 2.86% 2.80% 2.70% 2.52% 2.50%

As Adjusted 2.94% 2.55% 2.56% 3.18% 2.97% 2.83% 2.77% 2.72% 2.61% 2.43% 2.42%

Change -0.12% -0.08% -0.06% -0.14% -0.11% -0.10% -0.09% -0.08% -0.09% -0.09% -0.08%

Cost of Deposits

As reported 1.26% 1.41% 0.74% 1.19% 1.29% 1.28% 1.29% 1.36% 1.46% 1.45% 1.38%

As Adjusted 1.39% 1.50% 0.82% 1.35% 1.41% 1.39% 1.39% 1.45% 1.56% 1.54% 1.47%

Change 0.13% 0.09% 0.07% 0.16% 0.12% 0.11% 0.10% 0.09% 0.10% 0.09% 0.09%

Cost of Interest-Bearing Deposits

As reported 2.22% 2.52% 1.46% 2.12% 2.24% 2.24% 2.27% 2.44% 2.63% 2.56% 2.46%

As Adjusted 2.24% 2.51% 1.50% 2.16% 2.26% 2.26% 2.27% 2.42% 2.61% 2.56% 2.45%

Change 0.02% -0.01% 0.04% 0.04% 0.02% 0.02% 0.00% -0.02% -0.02% 0.00% -0.01%

Efficiency Ratio, GAAP

As reported 254.6% 111.6% 73.8% -60.4% 68.9% 208.8% 76.4% 65.5% 75.2% -300.4% 83.2%

As Adjusted 276.7% 112.1% 73.2% -54.3% 67.9% 219.8% 75.7% 64.6% 74.4% -260.5% 82.7%

Change 22.1% 0.5% -0.6% 6.1% -1.1% 11.0% -0.7% -0.9% -0.7% 39.9% -0.5%

Efficiency Ratio, non-GAAP excluding losses on securities sales

As reported 70.2 % 77.3 % 69.9 % 63.0 % 68.9 % 74.0 % 76.4 % 65.5 % 75.2 % 86.7 % 83.2 %

As Adjusted 69.1 % 76.6 % 69.3 % 61.4 % 67.9 % 73.2 % 75.7 % 64.6 % 74.4 % 86.3 % 82.7 %

Change -1.1 % -0.7 % -0.6 % -1.6 % -1.1 % -0.9 % -0.7 % -0.9 % -0.8 % -0.4 % -0.5 %

Executive Summary

Our annual loss was $8.4 million in 2024, compared to earnings of $19.9 million in 2023.

Diluted loss was $(0.52) per share in 2024, compared to earnings of $1.24 per share in 2023.

Results for 2024 were significantly impacted by our strategic balance sheet repositioning which included the sale of $325.2 million in low yielding investment securities at a $32.5 million pre-tax loss, the payoff of high cost borrowings and the purchase and origination of higher yielding loans and securities.

In addition, we took actions to reduce operating expenses in 2024 which positively impacted our results later in the year.

Though the percentage of non-accrual loans increased from the prior year, we continue to proactively identify and manage credit risk within the loan portfolio and there were some improvements in credit quality trends during the fourth quarter.

We believe the strength of our balance sheet, higher level of productivity that we are seeing from our banking teams, and positive trends in our net interest margin and operating leverage are key factors that should help mitigate any unforeseen credit quality deterioration that may arise and drive further improvement in our financial performance in the year ahead.

Our annual loss was $35.7 million in 2025, compared to an annual loss of $8.4 million in 2024.

Diluted loss was $2.24 per share in 2025, compared to a diluted loss of $0.52 per share in 2024.

Results for 2025 were significantly impacted by our strategic balance sheet repositioning which included the sale of available-for-sale ("AFS") securities with a book value of $185.8 million, resulting in a pre-tax loss of $18.7 million in the second quarter of 2025, the sale of AFS securities of $593.2 million in low yielding investment securities at a $69.5 million pre-tax loss in the fourth quarter of 2025, the purchase and origination of higher yielding loans and securities and the replenishment of our capital ratios through the issuance of $45.0 million of subordinated debt.

We continue to proactively identify and manage credit risk within the loan portfolio, reflected in the percentage of non-accrual loans which decreased from the prior year, and improvements in credit quality trends during the fourth quarter.

We believe the strength of our balance sheet, higher level of loan origination productivity that we are seeing from our banking teams, and positive trends in our net interest margin and operating leverage are key factors that should help mitigate any unforeseen credit quality deterioration that may arise and drive further improvement in our financial performance in the year ahead.

The following are highlights of operating and financial performance for the year ended December 31, 2025:

• Loans increased $37.6 million during the year ended December 31, 2025, to $2.121 billion, compared to $2.083 billion at December 31, 2024.

Excluding a $35.7 million loan pool purchase of residential real estate loans, loan originations totaled $152.6 million for the year ended December 31, 2024, compared to $144.1 million for the prior year.

The growth was spread across multiple geographic regions in Northern California and primarily within the commercial and commercial real estate sectors.

Loan originations funded totaled $273.5 million for the year ended December 31, 2025, compared to $152.6 million for the prior year.

• Classified loans made up 1.51% of total loans as of December 31, 2025, compared to 2.17% as of December 31, 2024.

The Bank continues to proactively identify and manage credit risk within the loan portfolio.

• Non-accrual loans totaled $33.9 million, or 1.63% of the loan portfolio, compared to $8.0 million, or 0.39%, as of December 31, 2024 and 2023, respectively primarily due to three relationships designated as non-accrual in the second and third quarters of 2024.

Classified loans decreased by $13.0 million to $32.1 million as of December 31, 2025, compared to $45.1 million as of December 31, 2024.

The decrease was largely due to upgrades of $6.9 million and payoffs and paydowns of $7.0 million during 2025.

This was partially offset by downgrades to classified loans totaling approximately $942 thousand in 2025.

• Non-accrual loans totaled $26.9 million, or 1.27% of the loan portfolio, compared to $33.9 million, or 1.63%, as of December 31, 2025 and 2024, respectively.

The decrease of $7.0 million in 2025 was primarily due to payoffs of $4.4 million, the sale of one $2.1 million commercial real estate loan which resulted in an $809 thousand charge-off, and paydowns of $1.6 million in addition to upgrades of approximately $700 thousand.

Of the total non-accrual loans as of December 31, 2025, approximately 68% were paying as agreed, 97% were real estate secured, and all are being closely managed and monitored.

• A $5.6 million provision for credit losses on loans in 2024 including a $5.2 million specific reserve taken on a commercial real estate loan as a result of declining collateral values brought the allowance for credit losses to 1.47% of total loans, compared to 1.21% as of December 31, 2023 .

• Total deposits decreased by $70.1 million to $3.220 billion as of December 31, 2024, from $3.290 billion as of December 31, 2023.

Non-interest bearing deposits c ontinue to remain strong compared to our peers and made up 43.5% of total deposits as of December 31, 2024, compared to 43.8% as of December 31, 2023.

• We recorded a $375 thousand provision for credit losses on loans in 2025 primarily due to loan growth and a modest deterioration in the economic forecast, compared to a $5.6 million provision for credit losses on loans in 2024, including a $6.6 million specific reserve taken on a commercial real estate loan as a result of declining collateral values, partially offset by other factors.

The allowance for credit losses as of December 31, 2025 was 1.42% of total loans, compared to 1.47% as of December 31, 2024 .

• Total deposits increased by $195.5 million to $3.416 billion as of December 31, 2025, from $3.220 billion as of December 31, 2024.

Non-interest bearing deposits c ontinue to remain strong and made up 36.7% of total deposits as of December 31, 2025, compared to 39.6% as of December 31, 2024.

We believe we are appropriately competitive in regard to deposit pricin g, given our relationship banking model, which differentiates Bank of Marin through exceptional service.

Estimated uninsured and/or uncollateralized deposits comprised 31% of total deposits as of December 31, 2025.

• At December 31, 2024, the Bank had no outstanding borrowings compared to $26.0 million at December 31, 2023, as a result of our strategic balance sheet restructuring in 2023 and 2024.

• At December 31, 2025, the Bank had no outstanding short-term borrowings compared to $26.0 million at December 31, 2024, as a result of our strategic balance sheet restructuring in 2025 and 2024.

Total available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and total available borrowing capacity, were $2.148 billion, or 63% of total deposits and 209% of estimated uninsured and/or uncollateralized deposits as of December 31, 2025.

• The tax-equivalent net interest margin was 2.63% for 2024, consistent with 2023.

Higher yields on loans increased the margin by 31 basis points, while higher deposit costs resulted in a 64 basis points reduction in the margin.

In addition, the year's balance sheet restructuring activities affected the borrowings, interest-bearing cash and investments factors with impacts of 27, 13 and (7) basis points, respectively.

• During the fourth quarter of 2025, we issued Fixed-to-Floating Subordinated Notes of $45.0 million with a final maturity date of December 1, 2035, to certain investors in a private placement to strengthen capital ratios as part of our fourth quarter 2025 balance sheet repositioning.

The interest rate of the Bank’s subordinated notes is 6.75%, payable semi-annually in arrears on June 1 and December 1 of each year, commencing on June 1, 2026.

After December 1, 2030, the interest rate will be variable and equal Three-Month Term SOFR plus 335 basis points, resetting quarterly.

• The tax-equivalent net interest margin was 2.94% for 2025, compared to 2.55% for 2024.

The increase of 39 basis points was primarily attributable to the favorable impacts of the investment securities restructuring performed in 2025 and 2024, lower deposit costs and higher average deposit balances year over year, higher loan yields and loan balances, and higher interest-earning deposit balances with the Federal Reserve.

• All capital ratios were above well-capitalized regulatory requirements.

Bancorp's total risk-based capital ratio was 15.25% as of December 31, 2025, compared to 16.54% as of December 31, 2024.

Tangible common equity to tangible assets ("TCE ratio") increased to 9.93% as of December 31, 2024, from 9.73% as of December 31, 2023.

While we do not intend to sell our held-to-maturity securities, the TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.85% as of December 31, 2024 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures ).

• The Board of Directors declared a cash dividend of $0.25 per share on January 23, 2025, which was the 79 th consecutive quarterly dividend paid by Bancorp.

Tangible common equity to tangible assets ("TCE ratio") decreased to 8.35% as of December 31, 2025, from 9.93% as of December 31, 2024.

• The Board of Directors declared a cash dividend of $0.25 per share on January 22, 2026, which was the 83 rd consecutive quarterly dividend paid by Bancorp.

The dividend was paid on February 12, 2026 to shareholders of record at the close of business on February 5, 2026.

36 unchanged sentences

253 9 3.53 % 4,628 241 5.13 % 221,623 11,562 5.15 %

Subordinated notes

5,189 368 7.10 % — — — % — — — %

Total interest-bearing liabilities 2,063,931 46,391 2.25 % 1,974,252 49,691 2.52 % 2,060,273 39,142 1.90 %

19 unchanged sentences

Rate variances are equal to the increase or decrease in rates multiplied by prior period average balances.

Mix variances are attributable to the change in yields or rates multiplied by the change in average balances including one day more in the year ended 2024.

Mix variances are attributable to the change in yields or rates multiplied by the change in average balances.

2025 compared to 2024

11 unchanged sentences

Borrowings and other obligations (228) (76) 72 (232) (11,321) (50) 50 (11,321)

Subordinated notes — — 368 368 — — — —

Total interest-bearing liabilities 1,649 (5,170) 221 (3,300) (7,405) 15,871 2,083 10,549

3 unchanged sentences

Net interest income totaled $106.0 million in 2025, compared to $91.6 million in 2024.

The $8.1 million decrease from the prior year was primarily due to higher deposit costs of $21.2 million, partially offset by the reduction of $11.3 million in borrowing costs.

The tax-equivalent net interest margin was 2.63% for 2024, consistent with 2023.

Higher yields on loans increased the margin by 31 basis points, while higher deposit costs resulted in a 64 basis points reduction in the margin.

In addition, the year's balance sheet restructuring activities affected the borrowings, interest-bearing cash and investments factors with impacts of 27, 13 and (7) basis points, respectively.

The $14.4 million increase from the prior year was primarily due to higher average yields on investment securities and loans and higher average earning asset balances on interest-bearing deposits with banks during the year contributing an increase in interest income of $11.2 million.

In addition, interest-bearing deposit costs decreased by 27 basis points on an increased average balance contributing a reduction of $3.4 million in interest expense on deposits.

The tax-equivalent net interest margin was 2.94% for 2025, compared to 2.55% in 2024.

The increase of 39 basis points was primarily attributable to the favorable impacts of the investment securities restructuring performed in 2025 and 2024, lower deposit costs, higher average deposit balances year over year, higher loan yields, and higher interest-earning deposit balances with the Federal Reserve.

2024 Compared to 2023

Net interest income totaled $91.6 million in 2024, compared to $100.4 million in 2023.

The $24.7 million decrease from the prior year was primarily due to higher funding costs of $34.2 million, partially offset by higher average yields on earning assets.

The $8.8 million decrease from the prior year was primarily due to higher deposit costs of $21.9 million, partially offset by the reduction of $11.3 million in borrowing costs.

The tax-equivalent net interest margin was 2.55% for 2024, compared to 2.56% for 2023.

The decrease was primarily attributed to higher deposit and borrowing costs, partially offset by higher yields on loans and investment securities.

Average interest-bearing deposit balances decreased by $115.2 million, while the average rate increased by 133 basis points, decreasing the margin by 58 basis points.

Average borrowings and other obligations increased by $219.3 million, while the average cost increased by 125 basis points, decreasing the net interest margin by 29 basis points.

Average loan balances decreased by $75.5 million, while the average yield increased by 36 basis points, increasing the margin by 23 basis points.

Average investment securities decreased $42.9 million, while their average yield increased 25 basis points, improving the margin by 14 basis points.

Higher yields on loans increased the margin while higher deposit costs resulted in a reduction in the margin.

In addition, the year's balance sheet restructuring activities affected the borrowings, interest-bearing cash and investments factors.

Market Interest Rates

Market interest rates are, in part, based on the target federal funds interest rate (the interest rate banks charge each other for short-term borrowings) implemented by the Federal Reserve Open Market Committee ("FOMC").

In response to the evolving risks to economic activity caused by the COVID-19 pandemic, the FOMC made two emergency federal funds rate cuts totaling 150 basis points in March 2020.

The federal funds rate range remained between 0.0% and 0.25% through the beginning of 2022, putting downward pressure on our asset yields and net interest margin.

The FOMC began increasing rates in March 2022, totaling seven rate increases in 2022 and four

additional rate increases in 2023, and ended the year of 2023 at a federal funds target rate range between 5.25% and 5.50%.

Rising interest rates resulted in rapid increases in the cost of funds through rising deposit costs and increased average borrowings, putting pressure on our net interest margin.

Because market interest rates remained high for longer than many market participants anticipated, during the second quarter of 2024, we sold securities with relatively low yields and redeployed the proceeds to pay off borrowings, invest in higher yielding loans and securities, and position the balance sheet for future acquisitions of similar assets.

Primarily due to declining inflation, the Federal Reserve lowered the target for the federal funds rate by 100 basis points, to a range of 4.25% to 4.50% in the later months of 2024.

At the January 2025 meeting, the FOMC left rates unchanged and signaled slower than originally anticipated rate cuts are likely in 2025.

At the January 2025 meeting, the FOMC left rates unchanged and signaled slower than originally anticipated rate cuts are in 2025.

Due to a significant easing of inflationary pressures, the FOMC began decreasing rates in September 2025, and made a total of three rate decreases in 2025 ending the year at a range of 3.50% to 3.75%.

During the second and fourth quarters of 2025, we sold additional securities with relatively low yields and redeployed the proceeds to further reposition our balance sheet, by investing in higher yielding securities.

Management and the Board are continuously monitoring and analyzing the impact of market rates on the Company's financial condition and results of operations to enhance performance, safety and soundness and returns to shareholders.

7 unchanged sentences

Provision for (reversal of) credit losses on loans $ 375 $ 5,550 $ 2,575

The provision in 2024 was due primarily to increases in qualitative risk factors to account for continued uncertainty about inflation and recession risks, and from continued negative trends in adversely graded loans and/or collateral values on our non-owner occupied commercial real estate office and multi-family real estate portfolios including $5.2 million taken in the second quarter due to an increased individual reserve for one non-owner occupied commercial real estate loan totaling $16.7 million that, although current, had experienced a deterioration in the collateral value and, therefore, a material increase in the loan-to-value.

The provision in 2025 was due primarily to the $37.6 million net increase in loans during the year including the $92.7 million increase in non-owner occupied commercial real estate loans, partially offset by the $32.6 million decrease in other residential real estate loans.

In addition to this pooled loan growth, the peer group used in our loss driver analysis was updated in 2025, and the fourth quarter of 2025 showed a modest deterioration in Moody's economic forecast over the next four quarters.

Partially offsetting these increases were qualitative risk factor improvements in areas including staff experience and graded/delinquent/non-accrual loans and specific reserve adjustments.

The provision in 2024 was due primarily to increases in qualitative risk factors to account for continued uncertainty about inflation and recession risks, and from continued negative trends in adversely graded loans and/or collateral values on our non-owner occupied commercial real estate office and multi-family real estate portfolios including $5.2 million taken in the second quarter due to a $6.6 million increased individual reserve for one non-owner occupied commercial real estate loan totaling $16.7 million that, although current, had experienced a deterioration in the collateral value and, therefore, a material increase in the loan-to-value

The provision in 2023 was due primarily to adjustments to qualitative risk factors from continued uncertainty about inflation and recession risks, the potential impact of rapidly increasing interest rates and other external factors on both our non-owner-occupied commercial real estate and construction portfolios, loan and collateral concentration risks in our construction and commercial real estate portfolios, heightened portfolio management in light of current economic conditions, and continued negative trends in adversely graded loans and/or collateral values for our non-owner occupied commercial real estate office and multi-family real estate portfolios.

The provision reversal in 2022 was largely due to a $55.4 million decrease in applicable loan balances (excludes the $107.7 million decrease in PPP loans for which there was no allowance) and improvements in Moody's Analytics' Baseline Forecast of California unemployment rates since December 31, 2021, which decreased the quantitative "modeled" allowance for credit losses.

These decreas es were partially offset by adjustments to qualitative risk factors to account for the ongoing deterioration in the economic outlook that management believed was not captured in the quantitative portion of the allowance calculation.

Non-interest Income

11 unchanged sentences

Merchant interchange fees, net 377 324 496 53 16.4 % (172) (34.7) %

Earnings on bank-owned life insurance death benefits 306 — 314 306 NM (314) (100.0) %

Losses on sale of investment securities, net

3 unchanged sentences

2025 Compared to 2024

Non-interest income showed a loss of $21.4 million for 2024, a $26.3 million decrease from income of $5.0 million for 2023.

The decrease in 2024 was primarily due to the $32.5 million net loss on the sale of available-for-sale investment securities in the second quarter related to our balance sheet restructuring.

Excluding losses on sale of securities in both years, non-interest income increased by $299 thousand, which included a $275 thousand year-over-year increase in wealth management and trust services income due to increased assets.

Non-interest income showed a loss of $76.7 million for 2025, a $55.3 million decrease from a loss of $21.4 million for 2024.

The decrease in 2025 was primarily due to the $88.2 million net loss on the sales of available-for-sale investment securities in the second and fourth quarters related to our balance sheet restructuring.

Excluding losses on sale of securities in both years, non-interest income increased by $371 thousand, which included $306 thousand death benefit on bank-owned life insurance in 2025, partially offset by a $108 thousand year-over-year decrease in wealth management and trust services income due to decreased assets.

2024 Compared to 2023

Non-interest income totaled $5.0 million in 2023, a $5.9 million decrease from $10.9 million in 2022.

The decrease in 2023 was primarily due to the $5.9 million net loss on the sale of investment securities mentioned above.

Excluding this loss, non-interest income decreased by $86 thousand, which included a $504 thousand decline in deposit network fees earned when deposit balances were brought back on the balance sheet, and a $220 thousand decrease in debit card interchange income.

Decreases were partially offset by $573 thousand higher benefit payments from and earnings on bank-owned life insurance, and $209 thousand from increases in dividends on Federal Home Loan Bank stock.

Non-interest income showed a loss of $21.4 million for 2024, a $26.3 million decrease from income of $5.0 million for 2023.

The decrease in 2024 was primarily due to the $32.5 million net loss on the sale of available-for-sale investment securities in 2024 related to our balance sheet restructuring.

Excluding losses on sale of securities in both years, non-interest income increased by $300 thousand, which included a $275 thousand year-over-year increase in wealth management and trust services income due to increased assets and an increase of $226 thousand in net earnings on bank-owned life insurance due to increased rates.

These were partially offset by the reduction of $314 thousand in bank-owned life insurance death benefits recorded in 2023 and not repeated in 2024.

Non-interest Expense

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Occupancy and equipment 8,509 8,242 8,306 267 3.2 % (64) (0.8) %

Professional services 5,129 3,598 3,299 1,531 42.6 % 299 9.1 %

Data processing 4,326 4,222 4,057 104 2.5 % 165 4.1 %

Deposit network fees 3,526 2,783 258 743 26.7 % 2,525 978.7 %

Federal Deposit Insurance Corporation insurance 1,863 1,878 1,179 (15) (0.8) % 699 59.3 %

Professional services 4,301 5,129 3,598 (828) (16.1) % 1,531 42.6 %

Information technology 2,046 1,686 1,569 360 21.4 % 117 7.5 %

Federal Deposit Insurance Corporation insurance 1,807 1,863 1,878 (56) (3.0) % (15) (0.8) %

Depreciation and amortization 1,264 1,466 2,098 (202) (13.8) % (632) (30.1) %

2 unchanged sentences

Charitable contributions 657 677 717 (20) (3.0) % (40) (5.6) %

Other real estate owned — 48 359 (48) (100.0) % (311) (86.6) %

Deposit network fees 476 448 374 28 6.3 % 74 19.8 %

Other real estate owned — — 48 — NM (48) (100.0) %

Other non-interest expense:

5 unchanged sentences

Non-interest expenses increased $2.6 million to $81.3 million in 2025 from $78.7 million in 2024.

Salaries and employee benefits increased by $2.8 million primarily due to an increase in annual incentives due to performance and increased employee insurance and profit share expenses.

These were partially offset by an increase in deferred loan costs.

Partially offsetting increases were the decrease of $828 thousand in p rofessional services expenses, mainly from the legal resolution of a Private Attorneys General Act / putative class action lawsuit of $615 thousand and $354 thousand in the new loan operating system platform and implementation costs in the prior year.

2024 Compared to 2023

Non-interest expenses increased $1.7 million to $78.7 million in 2024 from $77.1 million in 2023 .

Significant fluctuations were as follows:

2 unchanged sentences

Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payouts.

• Deposit network fees increased by $743 thousand due both to rate and volume.

• Depreciation and amortization expenses decreased by $632 thousand, mainly from the acceleration of lease-related costs for four branch closures in 2023.

• Amortization of the core deposit intangible decreased by $375 thousand as the Bank of Alameda amortization completed in 2023.

2023 Compared to 2022

Non-interest expenses increased $4.2 million to $79.5 million in 2023 from $75.3 million in 2022.

Significant fluctuations were as follows:

• Deposit network fees increased by $2.5 million as customers sought additional FDIC insurance protection through reciprocal deposit networks.

• Salaries and employee benefits increased by $1.4 million primarily due to the filling of open positions and the hiring of several key employees and officers, an increase in SERP-related expenses largely due to new and retired participant adjustments lowering costs for 2022, an increase in deferred officer compensation expense from increased participation and interest rates, higher insurance costs, and lower deferred loan origination costs.

Increases to salaries and employee benefits were partially offset by a decrease in profit sharing expense mainly from accrual adjustments and because some contributions in 2023 were made from forfeitures rather than paid in cash, a decrease in accrued incentive bonuses, and a decrease in stock-based compensation from changes in award structure and estimated performance award payout estimates.

• FDIC insurance costs increased by $699 thousand due to an increase in the FDIC statutory assessment rate to s trengthen the Deposit Insurance Fund.

• Occupancy and equipment and depreciation and amortization expenses rose by $483 thousand and $258 thousand , respectively, mainly from the acceleration of lease-related costs for branch closures in the first quarter of 2 0 23 and higher maintenance costs.

• Professional services expenses increased by $299 thousand, mainly from consulting fees associated with core systems contract negotiations, systems transformation projects, and internal and external audit costs.

• Information technology and data processing expenses decreased by $628 thousand and $592 thousand , respectively, due to our core system contract renegotiation for the current period and because the prior year included data processing expenses largely eliminated after the systems conversion associated with the American River Bankshares merger.

• Other real estate owned expenses decreased by $311 thousand due to the write-down in 2022 of the property that was then sold in the third quarter of 2023.

Provision for Income Taxes

1 unchanged sentence

Provisions also reflect permanent differences between income for tax and financial reporting purposes (such as earnings on tax exempt loans and municipal securities, bank-owned life insurance ("BOLI"), low-income housing tax credits, and stock-based compensation from the exercise of stock options, disqualifying dispositions of incentive stock options and vesting of restricted stock awards).

The benefit for income taxes totaled $5.4 million at an effective tax rate of 39.2% in 2024, compared to the provision of $6.1 million at an effective tax rate of 23.6% in 2023 and $16.9 million at an effective tax rate of 26.6% in 2022.

The reversal in the provision for income taxes in 2024, reflected the impact of the net loss before taxes in the year of $13.8 million compared to net income before taxes of $26.0 million in 2023.

The 15.6% increase in the effective tax rate in 2024, as compared to 2023, was due to the treatment of certain permanent differences while in a loss position, such as in 2024.

The 300 basis point decrease from 2022 to 2023 was primarily due to a larger proportional effect of permanent tax differences on lower pretax income and higher tax-exempt BOLI income.

This decrease was partially offset by a reduction in the tax-exempt interest exclusion (due to a larger IRC Section 291(e) interest expense disallowance), compared to 2022.

The benefit from income taxes totaled $16.8 million at an effective tax rate of 32.0% in 2025, compared to the benefit from income taxes of $5.4 million at an effective tax rate of 39.2% in 2024 and a provision of $6.1 million at an effective tax rate of 23.6% in 2023.

The increase in the benefit from income taxes in 2025 reflected the impact of the net loss before taxes in the year of $52.5 million compared to net loss before taxes of $13.8 million in 2024.

The 7.2% decrease in the effective tax rate in 2025, as compared to 2024, was due to the treatment of certain permanent differences while in a larger loss position, such as in 2025.

The 15.60% increase from 2023 to 2024 was primarily due to a larger proportional effect of permanent tax differences on lower pretax income and higher tax-exempt BOLI income.

This increase was partially offset by a reduction in the tax-exempt interest exclusion (due to a larger IRC Section 291(e) interest expense disallowance), compared to 2023.

We file a consolidated return in the U.S.

federal tax jurisdiction and a combined return in the state of California tax jurisdiction.

federal tax jurisdiction and a combined return in the State of California and the State of New Jersey due to interest on purchased auto loans registered in New Jersey.

There were no ongoing federal or state income tax examinations at the time of the issuance of this report.

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The effective duration of the investment portfolio was 2.8 and 4.6 at December 31, 2025 and 2024, respectively.

In the fourth quarter of 2025, the Bank completed a balance sheet repositioning and reclassified its HTM portfolio into AFS resulting in no HTM securities at December 31, 2025.

December 31, 2025 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total

10 unchanged sentences

Fair Value Average Yield 2

Held-to-maturity:

CMBS/MBS/CMOs issued by U.S.

government agencies

$ 10,895 2.47 % $ 194,427 3.29 % $ 353,313 2.10 % $ 86,060 2.07 % $ 644,695 $ 560,812 2.46 %

SBA-backed securities — — 1,513 3.16 — — — — 1,513 1,452 3.16

Debentures of government-sponsored agencies 20,000 4.25 5,000 5.00 83,460 1.83 32,971 1.85 141,431 118,737 2.29

Obligations of state and political subdivisions - tax-exempt 3

3,041 3.77 2,368 3.64 20,067 3.00 5,765 1.90 31,241 29,057 2.92

Obligations of state and political subdivisions - taxable — — — — 13,637 2.03 16,682 2.36 30,319 24,162 2.21

Corporate bonds 15,000 3.50 15,000 3.75 — — — — 30,000 29,315 3.63

Total held-to-maturity 48,936 3.59 218,308 3.36 470,477 2.09 141,478 2.05 879,199 763,535 2.48

Available-for-sale:

2 unchanged sentences

$ 52,519 4.26 % $ 1,035,618 4.37 % $ 174,622 3.43 % $ — — % $ 1,262,759 $ 1,250,230 4.23 %

SBA-backed securities — — 331 2.20 — — — — 331 308 2.20

Debentures of government sponsored agencies — — — — — — 29,988 1.88 29,988 23,694 1.88

Treasury securities — — 12,020 0.78 — — — — 12,020 10,815 0.78

Obligations of state and political subdivisions - tax-exempt 3

1 unchanged sentence

Obligations of state and political subdivisions - taxable — — — — 7,801 2.41 10,082 2.32 17,883 14,755 2.36

Corporate bonds — — 6,000 1.15 — — — — 6,000 5,649 1.15

Total available-for-sale $ 55,544 4.30 % $ 1,042,454 4.37 % $ 182,423 3.39 % $ 73,540 2.37 % $ 1,353,961 $ 1,327,812 4.13 %

Total $ 149,333 3.93 % $ 375,302 3.17 % $ 583,617 2.15 % $ 190,239 2.21 % $ 1,298,491 $ 1,151,069 2.66 %

December 31, 2024 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total

32 unchanged sentences

Corporate bonds — — 6,000 1.15 — — — — 6,000 5,649 1.15

Asset-backed securities — — — — — — — — — — —

Total available-for-sale 100,397 4.09 156,994 2.91 113,140 2.40 48,761 2.66 419,292 387,534 3.02

3 unchanged sentences

3 Yields on tax-exempt municipal bonds are presented on a taxable equivalent basis, using a federal tax rate of 21%.

The amortized cost of our investment securities portfolio decreased by $240.2 million, or 15.6%, in 2024.

In 2024, we sold $325.2 million in available-for-sale securities with an average yield of 1.94%, as part of a balance sheet restructuring, including $190.5 million in agency collateralized mortgage obligations ("CMOs"), $65.0 million in debentures of government sponsored agencies, $39.8 million in agency mortgage-backed securities ("MBSs"), $18.4 million in SBA-backed securities, $6.0 million in corporate bonds and $5.5 million in obligations of state and political subdivisions.

The amortized cost of our investment securities portfolio increased by $55.5 million, or 4.3%, in 2025.

In 2025, we sold $778.9 million in available-for-sale securities with an average yield of 1.99%, as part of a balance sheet restructuring, including $279.8 million in agency collateralized mortgage obligations ("CMOs"), $270.8 million in agency mortgage-backed securities ("MBSs"), $98.1 million in debentures of government sponsored agencies, $95.7 million in obligations of state and political subdivisions, $21.0 million in corporate bonds, $12.0 million in U.S.

Treasury securities and $1.5 million in SBA-backed securities.

The sales of available-for-sale securities generated a net pre-tax loss of $88.2 million.

Sales proceeds were deployed into securities with a higher yield and lower effective duration than the securities sold.

We consider agency debentures and CMOs issued by U.S.

2 unchanged sentences

The debentures, CMBSs, CMOs and MBS issued by U.S.

government sponsored agencies, SBA-backed securities and U.S.

Treasury securities made up 85.1% of the portfolio as of December 31, 2024, compared to 86.6% at December 31, 2023.

government sponsored agencies made up 95.5% of the portfolio as of December 31, 2025, compared to 85.1% at December 31, 2024.

See the discussion in the section captioned “Securities May Lose Value Due to Credit Quality of the Issuers” in ITEM 1A Risk Factors above.

8 unchanged sentences

Revenue bonds — — — 2,060 1,658 1.3

Tax allocation bonds — — — — — —

Total within California 9,981 8,359 16.3 24,973 20,407 15.8

6 unchanged sentences

The portion of the portfolio outside the state of California is distributed among twelve states.

Of the total investment in obligations of state and political subdivisions, the largest concentrations outside California are in Texas (38.4%), Washington (15.7%), and Wisconsin (9.4%).

Of the total investment in obligations of state and political subdivisions, the largest concentrations outside California are in Texas (44.3%), Wisconsin (24.1%) and Virginia (6.7%).

Our investments in obligations issued by municipal issuers in Texas are either guaranteed by the AAA-rated Texas Permanent School Fund ("PSF"), rated AAA without enhancement, or backed by revenue sources from essential services (such as utilities and transportation).

20 unchanged sentences

Total loans, net of allowance for credit losses $ 2,090,764 $ 2,052,600

Loans increased by $9.5 million in 2024, or 0.5%, to $2.083 billion as of December 31, 2024, from $2.074 billion as of December 31, 2023.

Loans increased by $37.6 million in 2025, or 1.8%, to $2.121 billion as of December 31, 2025, from $2.083 billion as of December 31, 2024 and was primarily due to a $92.7 million increase in commercial non-owner occupied real estate loans, offset by a decrease of $32.6 million in residential real estate loans and a decrease of $21.9 million in

construction loans.

Organic loan originations were $273.5 million in 2025, compared to $152.6 million in 2024.

Loan purchases totaled $35.7 million in 2024, compared to none in the prior year.

Non-PPP payoffs were $120.2 million in 2024, compared to $107.1 million in 2023.

PPP loan payoffs during 2024 and 2023 were $443 thousand and $2.7 million, respectively.

The majority of the payoffs were a result of cash payoffs and asset sales.

There were loan purchases of approximately $250 thousand in 2025 compared to $35.7 million in 2024.

Payoffs were $145.7 million in 2025, compared to $120.6 million in 2024.

The majority of the payoffs were a result of asset sales and cash payoffs.

In addition, $90.2 million of loan amortization from scheduled repayments, net of credit line utilization, contributed to the change in loan balances for 2025.

The originations and payoffs noted above, combined with utilization on lines of credit and amortization on existing loans, resulted in a net increase for this period.

Approximately 90% and 89% of total loans were secured by real estate as of December 31, 2025 and 2024, respectively.

4 unchanged sentences

unaudited) December 31, 2025 December 31, 2024

County Amount Percent of Commercial Real Estate Loans Amount Percent of Commercial Real Estate Loans

Marin $ 303,255 19 % $ 317,862 20 %

Sonoma 245,510 15 256,516 16

San Francisco 211,254 13 186,803 12

Alameda 187,526 12 156,934 10

Napa 170,492 11 178,685 12

Sacramento 131,857 8 125,483 8

Contra Costa 75,522 5 72,580 5

Solano 52,294 3 39,247 2

Placer 41,951 2 40,733 3

San Mateo 41,275 2 35,420 2

Santa Clara 23,610 2 24,086 2

San Joaquin 14,933 1 15,261 1

El Dorado 8,460 1 11,257 1

Other 87,619 6 91,699 6

Total $ 1,595,558 100 % $ 1,552,566 100 %

Commercial real estate loans increased by $43.0 million in 2024, compared to a $5.8 million increase in 2023.

County Amount Percent of Commercial Real Estate Loans County Amount Percent of Commercial Real Estate Loans

Marin $ 298,615 18 % Marin $ 303,255 19 %

Sonoma 265,542 16 Sonoma 245,510 15

Alameda 201,558 12 San Francisco 211,254 13

San Francisco 188,372 11 Alameda 187,526 12

Sacramento 177,277 11 Napa 170,492 11

Napa 173,587 10 Sacramento 131,857 8

Contra Costa 85,559 5 Contra Costa 75,522 5

Solano 51,948 3 Solano 52,294 3

San Mateo 40,511 2 Placer 41,951 2

Placer 39,355 2 San Mateo 41,275 2

Santa Clara 37,682 2 Santa Clara 23,610 2

San Joaquin 14,278 1 San Joaquin 14,933 1

Orange 10,234 1 El Dorado 8,460 1

Other 91,952 7 Other 87,619 6

Total $ 1,676,470 100 % Total $ 1,595,558 100 %

Commercial real estate loans increased by $80.9 million in 2025 to $1.676 billion from $1.596 billion at December 31, 2024.

The increase in 2025 was comprised of the $92.7 million increase within the non-owner occupied loan portfolio, partially offset by the $11.7 million decrease within the owner-occupied loan portfolio.

4 unchanged sentences

Percent of Owner-Occupied Commercial Real Estate Loans

County December 31, 2024

December 31, 2023

December 31, 2024

December 31, 2023

County December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024

27 % 27 % 19 % 19 %

5 unchanged sentences

Warehouse & industrial

County Dec 31, 2024 Dec 31,

County Dec 31, 2025 Dec 31, 2024 Dec 31, 2025 Dec 31

2024 Dec 31, 2025 Dec 31,

Sacramento 20 % 20 % 26 % 18 % 17 % 9 % 5 % 6 % 21 % 19 %

19 unchanged sentences

1-4 Single family residential 11,878 78.7 15,652 42.4

Land - unimproved — — 1,066 1.0

Total $ 15,101 100.0 % $ 36,970 100.0 %

1 unchanged sentence

unaudited) December 31, 2025 December 31, 2024

County Amount Percent of Construction Loans Amount Percent of Construction Loans

San Francisco $ 24,706 66.8 % $ 43,341 43.7 %

County Amount Percent of Construction Loans County Amount Percent of Construction Loans

San Francisco $ 6,272 41.6 % San Francisco $ 24,706 66.8 %

5,468 36.2 Contra Costa 4,682 12.7

Marin 2,995 8.1 4,542 4.6

2,326 6.3 — —

2,261 6.1 — —

Alameda — — 32,808 33.1

Solano — — 11,372 11.5

San Mateo — — 4,851 4.9

Other — 1,066 1.0

Total $ 36,970 100.0 % $ 99,164 100.0 %

Cons truction loans decreased by $62.2 million in 2024, compared to a decrease of $15.2 million in 2023.

The decrease in 2024 was primarily due to $44.5 million in conversions to commercial real estate financing following completion of construction and $15.4 million in payoffs.

These decreases were partially offset by $11.5 million in new loans and $4.9 million in advances on existing construction loans.

The decrease in 2023 was primarily due to $22.2 million in payoffs and $16.9 million in conversions to commercial real estate financing.

These decreases were partially offset by $24.5 million in advances on existing construction loans.

Marin 3,224 21.3 Marin 2,995 8.1

Santa Clara 137 0.9 Napa

Total $ 15,101 100.0 % Total $ 36,970 100.0 %

Construction loans decreased by $21.9 million in 2025 to $15.1 million from $37.0 million at December 31, 2024.

The decrease in 2025 was primarily due to payoffs of $28.7 million offset by $6.7 million in advances on existing construction loans.

Undisbursed construction loan commitments at December 31, 2025 and 2024 were $10.5 million and $8.3 million, respectively.

40 unchanged sentences

The ratio of the allowance for credit losses to total loans was 1.42% at December 31, 2025 and 1.47% at December 31, 2024.

The $5.5 million increase in the allowance for credit losses on loans in 2024 was largely due to the specific allowance increase of $6.7 million.

This was mainly due to the increased reserve of $5.2 million for one non-owner occupied commercial real estate loan totaling $16.7 million that, although current, had experienced a deterioration in the collateral value and, therefore, a material increase in the loan-to-value.

The $567 thousand decrease in the allowance for credit losses on loans in 2025 was largely due to the $942 thousand in net charge-offs, primarily due to a $2.1 million acquired non-owner occupied commercial real estate loan with a partial charge-off in the first quarter of 2025 of $809 thousand that the Bank had previously reserved $449 thousand for as of December 31, 2024.

There was an additional decline in the financial condition of the borrower and guarantor and the value of the collateral during the first quarter that led to the Bank proactively selling the note in March rather than pursuing the additional costly steps of liquidating after foreclosure.

It had been on non-accrual since late 2023.

This decline was partially offset by the $375 thousand provision recorded in 2025.

For further information, refer to the Provision for Credit Losses section above, and Notes 1 and 3 to the Consolidated Financial Statements in ITEM 8 of this report.

24 unchanged sentences

Commercial real estate, owner-occupied — — (406)

Commercial, non-owner occupied (809) — —

Installment and other consumer (16) (58) (24)

6 unchanged sentences

Total loans recovered — 33 55

Net loans (charged-off) recovered (66) (386) 23

Net loans charged-off (942) (66) (386)

Ending balance $ 30,089 $ 30,656 $ 25,172

2 unchanged sentences

Ratio of allowance for credit losses to total loans at end of year 1.42 % 1.47 % 1.21 %

Net charge-offs (recoveries) to average loans NM 0.02 % NM

Net charge-offs (recoveries) to average loans 0.05 % NM 0.02 %

NM - Not meaningful.

8 unchanged sentences

Home equity 401 752

Other residential 72 —

Installment and other consumer 204 222

12 unchanged sentences

Non-Accrual Loans

Non-accrual loans decreased by $7.0 million in 2025, primarily due to $4.4 million in payoffs including a $3.6 million commercial relationship paid off in full in the fourth quarter and a $2.1 million non-owner occupied real estate loan sale in the first quarter.

Non-accrual loans increased by $25.9 million in 2024, primarily due to three relationships designated as non-accrual in the second and third quarters.

One non-owner occupied commercial real estate loan was due to material declines in collateral value, as mentioned in earlier sections.

Another was a commercial relationship which had a material paydown in the fourth quarter of 2024.

The third relationship was another non-owner occupied commercial real estate loan whose renewal negotiations remain ongoing.

This property became 100% occupied with a conforming debt service coverage in the fourth quarter.

Approximately 97% of the non-accrual loans as of December 31, 2025 were well-secured by either commercial or residential real estate.

Non-accrual loans in 2023 were comprised of mostly of commercial and industrial and non-owner occupied commercial real estate loans.

Over 66% of the non-accrual loans as of December 31, 2023 were well-secured by either commercial or residential real estate.

Criticized and Classified Loans

Loans designated as special mention, which are not considered adversely classified, decreased by $26.3 million in 2024, primarily due to net downgrades of $2.6 million from the pass or watch category and downgrades of $25.0 million to substandard.

Loans designated as special mention, which are not considered adversely classified, increased by $9.1 million in 2025 with downgrades from the pass or watch category of $49.3 million primarily within commercial real estate and commercial with an average balance of $2.7 million and upgrades from substandard of $6.9 million, partially offset by payoffs and paydowns of $38.7 million and $7.3 million, respectively.

Loans designated as special mention decreased by $26.3 million in 2024, primarily due to net downgrades of $2.6 million from the pass or watch category and downgrades of $25.0 million to substandard.

Of the downgrades to special mention, $15.3 million was attributed to one recently completed construction loan that will be marketed for sale or paid down to a conforming debt service level.

The remaining balance changes consisted of paydowns, payoffs and upgrades from substandard risk rating.

Loans designated as special mention, which are not considered adversely classified, increased by $75.0 million in 2023, primarily due to downgrades from the watch category to special mention.

The majority of the downgrades from watch to special mention were not necessarily due to worsening conditions or deterioration in the borrowers' financial condition but to a lack of meaningful improvement over the most recent quarters.

Of the $92.5 million in downgrades to special mention in 2023, $83.2 million (or 90%) were collateralized by real estate.

These increases were partially offset by $7.7 million in paydowns and payoffs, $6.0 million in downgrades from special mention to substandard, and $3.8 million in upgrades to a pass risk rating.

Loans classified as substandard decreased by $13.0 million in 2025 largely due to upgrades to special mention of $6.9 million mentioned above and payoffs and paydowns of $5.3 million and $1.7 million, respectively.

Downgrades from pass or watch of $2.1 million in the year were offset by the $2.1 million loan that was sold.

Loans classified as substandard increased by $12.8 million in 2024, primarily due to downgrades from special mention totaling $25.0 million and from pass totaling $2.7 million, partially offset by $11.9 million in paydowns and payoffs and $2.8 million in upgrades to pass or special mention.

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was secured by commercial real estate, $3.5 million was to commercial borrowers, and the remaining $222 thousand were personal loans.

Loans classified as substandard increased by $4.2 million in 2023, primarily due to downgrades from special mention totaling $6.0 million and from pass totaling $3.7 million, partially offset by $4.5 million in paydowns and payoffs and $939 thousand in upgrades to pass.

Of the downgraded loans, $7.0 million (or 72%) was secured by commercial real estate, and the remaining $2.7 million was to commercial borrowers.

Refer to Note 3 to the Consolidated Financial Statements in ITEM 8 of this report for an allocation of criticized and classified loans by loan portfolio class.

BOLI totaled $71.3 million as of December 31, 2025, compared to $71.0 million at December 31, 2024.

The $2.9 million increase was primarily due to the purchase of $1.2 million in new BOLI policies and earnings from the BOLI policies.

The $279 thousand increase was primarily due to increased earnings from higher yields on policies in 2025.

Interest receivable and other assets totaled $84.4 million and $72.3 million at December 31, 2025 and 2024, respectively.

The $2.7 million decrease was primarily due to a $3.7 million decrease in net deferred tax assets, as discussed below.

The $12.1 million increase was primarily due to a $12.3 million increase in net deferred tax assets, as discussed below.

Net deferred tax assets totaled $42.9 million and $30.6 million at December 31, 2025 and 2024, respectively.

Deferred tax assets consist primarily of tax benefits expected to be realized in future periods related to temporary differences such as allowances for credit losses and unfunded loan commitments, net operating loss carryforwards, and deferred compensation and salary continuation obligations.

The $3.7 million decrease in 2024 was primarily due to an $8.4 million decrease in deferred tax assets related to changes in unrealized losses on available-for-sale investment securities.

The decreases in net deferred tax assets was partially offset by a $3.2 million increase in deferred tax assets related to net operating loss carryforwards and $1.6 million increase in the allowance for credit losses on loans and unfunded loan commitments.

The $12.3 million increase in 2025 was primarily due to the $12.8 million increase in net operating loss carryforwards resulting from the Bank's higher pre-tax loss of $52.5 million in 2025 compared to $13.8 million in 2024.

Also contributing to the increase were a $4.4 million increase in operating and finance lease liabilities and a $2.8 million increase in the allowance for credit losses on loans and unfunded loan commitments.

The increases in net deferred tax assets were partially offset by a $4.9 million decrease in the net unrealized losses on available-for-sale securities.

Management believes deferred tax assets will be realizable due to our expectation that earnings will continue to be at a level adequate to realize such tax benefits.

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For additional information, refer to Note 2 to the Consolidated Financial Statements in ITEM 8 of this report.

Deposits decreased by $70.1 million, to $3.220 billion at December 31, 2024, compared to $3.290 billion at December 31, 2023.

Non-interest bearing deposits declined to 43.5% of total deposits at December 31, 2024, compared to 43.8% at December 31, 2023.

Deposit outflows included transfers to investment accounts in our wealth management services team and other outflows that did not meet our disciplined pricing strategy given our strong liquidity position.

We continued our disciplined and focused approach to relationship management and customer outreach, adding approximately 4,700 new accounts in 2024.

Deposits increased by $195.5 million, to $3.416 billion at December 31, 2025, compared to $3.220 billion at December 31, 2024.

Non-interest bearing deposits were 36.7% of total deposits at December 31, 2025, compared to 39.6% at December 31, 2024.

We continued our disciplined and focused approach to relationship management and customer outreach, adding over 4,000 new accounts in 2025, 43% of which were new relationships, and 51% were non-interest bearing (excluding new reciprocal accounts).

As of December 31, 2025 , 62% of deposit balances were held in business accounts, with average balances of $141 thousand per account.

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The largest depositor represented 3.8% of total deposits, and the combined four largest depositors represented 7.3% of total deposits.

Balances in the reciprocal deposit network program decreased by $19.3 million during 2024 to $404.7 million as of December 31, 2024.

Costs associated with network deposits are recorded as non-interest expense and totaled $3.5 million, $2.8 million, and $258 thousand for the years ended December 31, 2023, 2022 and 2021, respectively.

Balances in reciprocal deposit networks increased by $54.2 million during 2025 to $458.9 million as of December 31, 2025.

Costs associated with network deposits fees are recorded as non-interest expense and totaled $476 thousand, $448 thousand, and $374 thousand for the years ended December 31, 2025, 2024 and 2023 , respectively.

The interest the bank pays on balances in the deposit networks is recorded in deposit interest expense.

Estimated uninsured and/or uncollateralized deposits totaled 31% of total deposits as of December 31, 2025, compared to 29% as of December 31, 2024 .

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1 Money market balances include Insured Cash Sweep ® ("ICS") in both 2025 and 2024.

Demand Deposit Marketplace SM ("DDM") and ICS balances are discussed in Note 6 to the Consolidated Financial Statements in ITEM 8 of this report.

Maturities of Uninsured Time Deposits

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Our deposit portfolio includes deposits offered through the Promontory Interfinancial Network that are comprised of Certificate of Deposit Account Registry Service ® ("CDARS") balances included in time deposits and Insured Cash Sweep ® ("ICS") balances included in money market deposits.

In addition, we offer deposits through Reich & Tang Deposit Networks, LLC, comprised of Demand Deposit Marketplace SM ("DDM") balances.

In addition, we offer deposits through R&T Deposit Solutions comprised of Demand Deposit Marketplace SM ("DDM") balances.

Through these two networks we are able to offer our customers access to FDIC-insured deposit products in aggregate amounts exceeding current insurance limits.

When we place funds through CDARS, ICS and DDM, on behalf of a customer, we have the option of receiving matching deposits through the network's reciprocal deposit program, or placing deposits "one-way" for which we receive no matching deposits.

We consider reciprocal deposits to be in-market deposits, as distinguished from traditional out-of-market brokered deposits.

The following table shows the composition of our network deposits at December 31, 2025 and 2024.

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1 Reciprocal deposits are on-balance-sheet while one-way deposits are off-balance-sheet.

As of December 31, 2024 and 2023, our borrowing capacity with the Federal Home Loan Bank ("FHLB") under secured lines of credit totaled $948.1 million and $1.009 billion, respectively.

As of December 31, 2025 and 2024, our borrowing capacity with the Federal Home Loan Bank ("FHLB") under secured lines of credit totaled $967.2 million and $948.1 million, respectively.

The Bank had a line of credit through the Discount Window at the Federal Reserve Bank of San Francisco ("FRBSF") totaling $344.7 million as of December 31, 2025, secured by investment securities and residential loans.

As of December 31, 2023, the Bank had a line of credit through the Discount Window totaling $64.0 million, secured by residential loans, and a $270.2 million line under the Federal Reserve's temporary Bank Term Funding Program ("BTFP") based on the par values of pledged investment securities.

As of December 31, 2024, the Bank had a line of credit through the Discount Window totaling $358.0 million, secured by investment securities and residential loans .

I n addition, as of December 31, 2025 and 2024 we had $140.0 million and $125.0 million, respectively, in unsecured lines of credit with correspondent banks to cover short-term borrowing needs.

As of December 31, 2024, the Bank had no outstanding borrowings, compared to $26.0 million outstanding in short-term borrowings under the BTFP facility at an average rate of 4.83% as of December 31, 2023.

Other bank lines of credit were not utilized as of December 31, 2024 or 2023.

As of December 31, 2025 and 2024, the Bank had no outstanding short-term borrowings and our bank lines of credit were not utilized as of December 31, 2025 or 2024.

For additional information, see Note 7, Borrowings and Other Obligations, in ITEM 8 of this report.

Subordinated Notes

During the fourth quarter of 2025, we issued Fixed-to-Floating Subordinated Notes of $45.0 million with a final maturity date of December 1, 2035, to certain investors in a private placement, to strengthen capital ratios as part of our balance sheet repositioning.

Subordinated notes outstanding was $43.9 million, net of issuance costs, at December 31, 2025.

Bancorp made a capital contribution of $30.0 million to the Bank in the fourth quarter.

The subordinated notes qualify as Tier 2 capital for the consolidated Company (Bancorp) for regulatory purposes and the portion that Bancorp contributed to the Bank is treated as Tier 1 capital for the Bank.

At December 31, 2025, we were in compliance with all covenants under our long-term debt subordinated notes agreement.

For additional information, see Note 13, Subordinated Notes, in ITEM 8 of this report.

Deferred Compensation Obligations

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The total risk-based capital ratio for Bancorp was 15.25% at December 31, 2025, compared to 16.54% at December 31, 2024.

The reduction is primarily related to losses realized on securities sales in 2024.

Bancorp's tangible common equity to tangible assets ("TCE ratio") increased to 9.93% at December 31, 2024, from 9.73% at December 31, 2023, primarily due to due to the reduction in total assets .

Bancorp's TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized, was 7.85% as of December 31, 2024, compared to 7.80% at December 31, 2023 (refer to the discussion and reconciliation of this non-GAAP financial measure in the section below entitled Statement Regarding Use of Non-GAAP Financial Measures ).

The reduction is primarily related to losses recognized on securities sales in 2025.

Bancorp's tangible common equity to tangible assets ("TCE ratio") decreased to 8.35% at December 31, 2025, from 9.93% at December 31, 2024, primarily due to increases in unrealized losses attributed to the HTM securities reclassification and the subsequent loss from sales of securities during 2025 .

The Bank's total risk-based capital ratio decreased to 13.90% at December 31, 2025, from 16.13% at December 31, 2024 .

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Although available as a liquidity source, we have not chosen to utilize brokered deposits.

Our primary uses of funds are the origination of loans, the purchase of investment securities and loans, withdrawals of deposits, maturities of certificates of deposit, repayment of borrowings, dividends to common stockholders, share repurchases and operating expenses.

Our primary uses of funds are the origination of loans, the purchase of investment securities and loans, withdrawals of deposits, maturities of certificates of deposit, dividends to common stockholders, share repurchases and operating expenses.

Customer deposits are a significant component of our daily liquidity position.

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Our cash and cash equivalents increased by $88.0 million to $225.3 million at December 31, 2025, from $137.3 million at December 31, 2024.

The most significant sources of liquidity during 2024 were proceeds from sales, principal paydowns, calls and maturities of investment securities totaling $370.4 million, and $28.4 million in net cash was provided by operating activities.

Significant uses of liquidity during 2024 were $163.8 million in investment securities purchased, $70.1 million in withdrawals of deposits, $26.0 million in repayments of short-term borrowings, and $9.7 million in purchased loan pool, loan originations, and unfunded loan commitment advances, net of principal collected.

The most significant sources of liquidity during 2025 were proceeds from sales,

principal paydowns, calls and maturities of investment securities totaling $935.3 million, $195.5 million in increased deposits, loan payoffs of $145.7 million, $87.4 million in amortization of principal, a net $2.8 million decrease in utilization of credit lines, $45.0 million in proceeds from the issuance of subordinated notes and $39.1 million in net cash was provided by operating activities.

Significant uses of liquidity during 2025 were $1.069 billion in investment securities purchased, and $273.5 million in loan fundings.

Additionally other uses included $16.1 million in cash dividends paid on common stock to our shareholders, and $3.3 million in common stock repurchases.

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We believe our emphasis on local deposits, combined with our immediately available funding sources, provides a very stable base for our liquidity needs.

We had no outstanding borrowings under our credit facilities as of December 31, 2024, and $26.0 million as of December 31, 2023, as discussed in Note 7 to the Consolidated Financial Statements in ITEM 8 of this report.

We had no outstanding short term borrowings under our credit facilities as of December 31, 2025, and 2024, as discussed in Note 7 to the Consolidated Financial Statements in ITEM 8 of this report.

We issued Fixed-to-Floating Subordinated Notes of $45.0 million with a final maturity date of December 1, 2035, during 2025, to certain investors in a private placement, to strengthen our capital ratios as part of our balance sheet repositioning, as discussed in Note 13 to the Consolidated Financial Statements in ITEM 8 of this report.

Because Bancorp is a holding company and does not conduct regular banking operations, its primary sources of liquidity are dividends from the Bank.

Under the California Financial Code, payment of a dividend from the Bank to Bancorp without advance regulatory approval is restricted to the lesser of the Bank’s retained earnings or the amount of the Bank’s net profits from the previous three fiscal years less the amount of dividends paid during that period.

The Bank received approval from the State of California - Department of Financial Protection and Innovation on May 30, 2024, for a dividend of $19.0 million which was paid to Bancorp on June 24, 2024.

The primary uses of funds for Bancorp are shareholder dividends, share repurchases and ordinary operating expenses.

Bancorp held $10.3 million in cash as of December 31, 2024 , which is expected to cover cash needs into the second quarter of 2025 .

The Bank received approval from the State of California - Department of Financial Protection and Innovation on May 30, 2025, for a dividend of $32.0 million which was paid to Bancorp on May 30, 2025.

The primary uses of funds for Bancorp are shareholder dividends, subordinated notes servicing, share repurchases and ordinary operating expenses.

Bancorp held $35.2 million in cash as of December 31, 2025 , which is expected to cover cash needs throughout 2026 .

Statement Regarding Use of Non-GAAP Financial Measures

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In addition, management believes that providing selected financial measures excluding the loss on sale of securities discussed above is useful to investors as the strategic short-term loss taken for long-term profitability makes the operational performance difficult to compare to the prior period.

The year 2022 did not have a material loss on sale of securities and was therefore excluded below.

Because there are limits to the usefulness of this or any other non-GAAP measure to investors, Bancorp encourages readers to consider its annual and quarterly consolidated financial statements and notes related thereto in their entirety, as filed with the Securities and Exchange Commission, and not to rely on any single financial measure.

A reconciliation of the GAAP financial measures to comparable non-GAAP financial measures is presented below.

There were no held-to-maturity securities held at December 31, 2025, resulting in the non-GAAP TCE ratio being equal to the GAAP TCE ratio.

Reconciliation of GAAP and Non-GAAP Financial Measures

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Unrealized losses on HTM securities, net of tax 1

(89,171) (86,500)

Unrealized losses on HTM securities included in AOCI, net of tax 2

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Unrealized losses on HTM securities, net of tax 1

(89,171) (86,500)

Unrealized losses on HTM securities included in AOCI, net of tax 2

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$ 19.87 $ 22.37

1 Unrealized losses on held-to-maturity securities as of December 31, 2024 and December 31, 2023 of $126.6 million and $122.8 million, respectively, including the unrealized losses that resulted from the transfer of securities from AFS to HTM, net of an estimated $37.4million and $36.3 million, respectively, in deferred tax benefits based on a blended state and federal statutory tax rate of 29.56%.

2 The remaining unrealized losses that resulted from the transfer of securities from AFS to HTM, net of an estimated $3.2 million and $3.7 million, respectively, in deferred tax benefits based on a blended state and federal statutory tax rate of 29.56% are added back as they are already included in AOCI.

1 There were no held-to-maturity securities as of December 31, 2025.

Unrealized losses on held-to-maturity securities as of December 31, 2024 were $126.6 million including the unrealized losses that resulted from the transfer of securities from AFS to HTM, net of an estimated $37.4 million in deferred tax benefits based on a blended state and federal statutory tax rate of 29.56%.

2 The remaining unrealized losses that resulted from the transfer of securities from AFS to HTM, as of December 31, 2024, net of an estimated $3.2 million, in deferred tax benefits based on a blended state and federal statutory tax rate of 29.56% are added back as they are already included in AOCI.

(in thousands, except per share amounts;

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Diluted (loss) earnings per share

Weighted average diluted shares 16,042 16,026

Weighted average basic and diluted shares 15,942 16,042

Diluted (loss) earnings per share (GAAP)

$ (2.24) $ (0.52)

Comparable diluted earnings per share (non-GAAP) $ 0.90 $ 1.50

Comparable basic earnings per share (non-GAAP) $ 1.66 $ 0.90

Return on average assets

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Comparable return on average equity (non-GAAP) 6.07 % 3.34 %

Return on average tangible common equity

Average goodwill and intangibles $ 76,031 $ 75,115

Average tangible common equity $ 359,629 $ 359,955

Return on average tangible common equity (GAAP) (9.92) % (2.34) %

Comparable return on average tangible common equity (non-GAAP) 7.36 % 4.03 %

Efficiency ratio

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis