What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-13 compared with 2025-03-14 · 473 added, 301 removed, 1675 unchanged (32% of the section changed)

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors

To the Stockholders and the Board of Directors

Bank of Marin Bancorp

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of condition of Bank of Marin Bancorp and Subsidiary (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated statements of condition of Bank of Marin Bancorp (the “Company”) as of December 31, 2025, and 2024, the related consolidated statements of comprehensive (loss) income, changes in stockholders’ equity and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Also in our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Restatement of Previously Issued Financial Statements

As discussed in Note 19 to the consolidated financial statements, the 2024 consolidated financial statements have been restated.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment:

Management did not design and implement adequate control activities related to the accounting for and classification of certain reciprocal network deposits and transactions.

We considered the material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the Company’s consolidated financial statements as of and for the year ended December 31, 2025, and our opinion on such consolidated financial statements was not affected.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

only in accordance with authorizations of management and directors of the company;

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans

Critical Audit Matter Description

As described in Note 1 and Note 3 to the consolidated financial statements, the allowance for credit losses on loans at December 31, 2025, was $30.1 million on a total loan portfolio of $2.1 billion.

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The measurement of expected credit losses is based on relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.

We identified the forecasted economic conditions and qualitative internal and external risk factors used in the allowance for credit losses on loans as a critical audit matter.

The principal considerations for our determination of these components of the allowance for credit losses on loans as a critical audit matter are subjectivity of the estimation and application of forecasted economic conditions and qualitative internal and external risk factors used in the calculation.

The economic forecast component of the allowance for credit losses on loans is used to compare the conditions that existed during the historical period to current conditions and future expectations.

We identified the qualitative internal and external risk factors used in the allowance for credit losses on loans as a critical audit matter.

The principal considerations for our determination of this component of the allowance for credit losses on loans as a critical audit matter are subjectivity of the estimation and application of qualitative internal and external risk factors used in the calculation.

The qualitative internal and external risk factors are used to adjust for differences in segment-specific risk characteristics or conditions that differ from those that existed during the historical period for which the probability of default and loss given default factors were developed.

Auditing management’s judgements regarding the forecasted economic conditions and qualitative internal and external risk factors applied to the allowance for credit losses on loans involved a high degree of subjectivity.

Auditing management’s judgements regarding the qualitative internal and external risk factors applied to the allowance for

credit losses on loans involved especially challenging and subjective auditor judgments when performing audit procedures and evaluating the results of those procedures.

How We Addressed the Matter in Our Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

Our audit procedures related to the allowance for credit losses on loans included the following, among others:

• Testing the design, implementation, and operating effectiveness of controls related to management’s calculation of the allowance for credit losses on loans, including controls over the forecasted economic conditions and qualitative internal and external risk factors utilized.

• Testing the appropriateness of the methodology used in the calculation of the allowance for credit losses on loans, as well as testing completeness and accuracy of the data used in the calculation, application of the forecasted economic conditions and qualitative internal and external risk factors determined by management and used in the calculation, and verifying calculations in the allowance for credit losses on loans.

• Obtaining management’s analysis and supporting documentation related to the forecasted economic conditions and testing whether the forecasts used in the calculation of the allowance for credit losses on loans are reasonable and supportable based on the analysis provided by management.

These procedures included evaluating the design and testing the operating effectiveness of internal controls related to the Company’s calculation of the allowance for credit losses on loans, including controls over the qualitative internal and external risk factors utilized.

Our audit procedures related to the matter included the following, among others:

• Evaluating the appropriateness of the methodology used in the calculation of the allowance for credit losses on loans, as well as testing completeness and accuracy of the data used in the calculation, application of the qualitative internal and external risk factors determined by management and used in the calculation, and verifying calculations in the allowance for credit losses on loans.

• Obtaining management’s analysis of qualitative internal and external risk factors and evaluating the reasonableness of the assumptions used in determining the qualitative factor adjustments.

/s/ Moss Adams LLP

/s/ Baker Tilly US, LLP

Portland, Oregon

March 13, 2026

We have served as the Company’s auditor since 2004.

March 14, 2025

Management's Report on Internal Control over Financial Reporting

Management of Bank of Marin Bancorp and subsidiary, (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

generally accepted accounting principles ("GAAP").

The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and board of directors;

and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Management conducted an assessment of the effectiveness of internal control over financial reporting as of December 31, 2024, utilizing the framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2024.

The Company's independent registered public accounting firm, Moss Adams LLP, has issued an integrated audit opinion on our internal control over financial reporting, which appears on the previous page.

/s/ Timothy D.

Myers, President and Chief Executive Officer

/s/ Dave Bonaccorso

Dave Bonaccorso, EVP and Chief Financial Officer

We have served as the Company’s auditors since 2004.

BANK OF MARIN BANCORP

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(in thousands, except share data) 2025 2024

(As Restated)

Cash, cash equivalents and restricted cash $ 225,303 $ 137,304

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Held-to-maturity, at amortized cost (net of zero allowance for credit losses at December 31, 2025 and 2024)

879,199 925,198

Available-for-sale, at fair value (net of zero allowance for credit losses at December 31, 2025 and 2024)

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Borrowings and other obligations 709 154

Subordinated notes, net of issuance costs 43,857 —

Operating lease liabilities 24,747 21,509

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Total liabilities 3,510,124 3,265,928

Commitments and contingent liabilities (Note 12)

Commitments and contingent liabilities (Note 12 and 17)

Stockholders' Equity

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BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Years ended December 31, 2025, 2024 and 2023

(in thousands, except per share amounts) 2025 2024 2023

(As Revised) (As Revised)

Interest income

9 unchanged sentences

Interest on borrowings and other obligations 9 241 11,562

Interest on subordinated notes 368 — —

Total interest expense 46,391 49,691 39,142

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 )

Net interest income after provision for (reversal of) for credit losses

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Merchant interchange fees, net 377 324 496

Earnings on bank-owned life insurance death benefits 306 — 314

Net losses on sale of investment securities

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Occupancy and equipment 8,509 8,242 8,306

Professional services 5,129 3,598 3,299

Data processing 4,326 4,222 4,057

Deposit network fees 3,526 2,783 258

Federal Deposit Insurance Corporation insurance 1,863 1,878 1,179

Professional services 4,301 5,129 3,598

Information technology 2,046 1,686 1,569

Federal Deposit Insurance Corporation insurance 1,807 1,863 1,878

Depreciation and amortization 1,264 1,466 2,098

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Charitable contributions 657 677 717

Deposit network fees 476 448 374

Other real estate owned — — 48

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(Loss) income before provision for income taxes ( 52,483 ) ( 13,835 ) 26,036

Provision for income taxes ( 5,426 ) 6,141 16,923

(Benefit from) provision for income taxes ( 16,808 ) ( 5,426 ) 6,141

Net (loss) income $ ( 35,675 ) $ ( 8,409 ) $ 19,895

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Diluted 15,942 16,042 16,026

Comprehensive income (loss):

Comprehensive (loss) income :

Net (loss) income $ ( 35,675 ) $ ( 8,409 ) $ 19,895

Other comprehensive income (loss):

Change in net unrealized gains or losses on available-for-sale securities ( 2,848 ) 20,358 ( 88,620 )

Change in net unrealized losses on available-for-sale securities 10,250 ( 2,848 ) 20,358

Reclassification adjustment for losses on available-for-sale securities included in net income

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— 1,359 ( 1,359 )

Net unrealized losses on securities transferred from available-for-sale to held-to-maturity — — ( 14,847 )

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 1,504 1,743 1,580

Other comprehensive income (loss), before tax 32,556 29,442 ( 101,824 )

Deferred tax expense (benefit) 9,618 8,702 ( 30,102 )

Other comprehensive income (loss), net of tax 22,938 20,740 ( 71,722 )

Total comprehensive income (loss)

Net unrealized losses on securities transferred from held-to-maturity to available-for-sale ( 92,842 ) — —

Amortization of net unrealized loss on AFS securities transferred to HTM

10,932 1,504 1,743

Other comprehensive income, before tax 16,542 32,556 29,442

Deferred tax expense

4,893 9,618 8,702

Other comprehensive income, net of tax 11,649 22,938 20,740

Total comprehensive (loss) income

$ ( 24,026 ) $ 14,529 $ 40,635

The accompanying notes are an integral part of these consolidated financial statements.

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Net income — — 19,895 — 19,895

Other comprehensive loss, net of tax — — — ( 71,722 ) ( 71,722 )

Other comprehensive income, net of tax — — — 20,740 20,740

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 11,530 230 — — 230

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— — ( 16,106 ) — ( 16,106 )

Stock purchased by directors under director stock plan 515 16 — — 16

Stock issued in payment of director fees 18,362 398 — — 398

Stock repurchased, including commissions ( 23,275 ) ( 877 ) — — ( 877 )

Balance at December 31, 2023

16,158,413 $ 217,498 $ 274,570 $ ( 53,006 ) $ 439,062

Net income — — 19,895 — 19,895

Net loss — — ( 8,409 ) — ( 8,409 )

Other comprehensive income, net of tax — — — 22,938 22,938

Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 11,530 230 — — 230

Stock issued under employee stock purchase plan 2,184 38 — — 38

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Stock issued in payment of director fees 27,287 513 — — 513

Stock repurchased, including commissions ( 220,000 ) ( 4,253 ) — — ( 4,253 )

Balance at December 31, 2024

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Cash Flows from Operating Activities:

Net income $ ( 8,409 ) $ 19,895 $ 46,586

Adjustments to reconcile net income to net cash provided by operating activities:

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

Reversal of credit losses on unfunded loan commitments

Net (loss) income

$ ( 35,675 ) $ ( 8,409 ) $ 19,895

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Provision for credit losses on loans

375 5,550 2,575

Provision for (reversal of) credit losses on unfunded loan commitments 185 ( 233 ) ( 342 )

Noncash contribution expense to employee stock ownership plan 1,476 1,149 1,315

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(Accretion of discounts) amortization of premiums on acquired loans, net ( 134 ) ( 236 ) ( 573 )

Accretion of discount on subordinated notes 22 — —

Issuance costs offset to subordinated notes

( 1,165 ) — —

Net change in deferred loan origination costs/fees 302 120 ( 836 )

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Depreciation and amortization 1,264 1,466 2,098

Loss on disposal of premises and equipment 9 — —

Earnings on bank-owned life insurance policies ( 1,779 ) ( 1,714 ) ( 1,488 )

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

Net changes in:

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Proceeds from sale of premises and equipment — 21 —

Purchase of held-to-maturity securities — — ( 319,937 )

Purchase of available-for-sale securities ( 1,068,748 ) ( 163,769 ) —

Proceeds from sale of available-for-sale securities 167,017 292,621 205,795

Proceeds from sale of available-for-sale securities transferred from held-to-maturity

Proceeds from paydowns/maturities of held-to-maturity securities 82,081 46,551 47,170

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Class B restricted common stock — — 2,807

Decrease in loans receivable, net 26,150 16,945 164,019

Purchased Loans

(Increase) decrease in loans receivable, net

( 38,270 ) 26,150 16,945

Purchased loans ( 226 ) ( 35,874 ) —

Proceeds from sale of loan — — 3,263

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Cash Flows from Financing Activities:

Decrease in deposits

Net increase (decrease) in deposits

195,527 ( 70,060 ) ( 283,273 )

1 unchanged sentence

Repayment of finance lease obligations ( 126 ) ( 152 ) ( 148 )

Proceeds from issuance of subordinated notes

Proceeds from stock options exercised — — 230

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Change in net unrealized gains or losses on available-for-sale securities $ 10,250 $ ( 2,848 ) $ 20,358

Purchase of available-for-sale security on account and unsettled $ — $ — $ —

Cumulative effect of change in accounting principle ASU 2016-13 $ — $ — $ —

Securities transferred from available-for-sale to held-to-maturity, at fair value $ — $ — $ 357,482

Amortization of net unrealized loss on available-for-sale securities transferred to held-to-maturity $ 1,504 $ 1,743 $ 1,580

Stock issued to employee stock ownership plan

Amortization of net unrealized loss on AFS securities transferred to HTM $ 10,932 $ 1,504 $ 1,743

Transfer of loan to loans held-for-sale

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Total interest expense 46,391 46,613 39,142

Provision for (reversal of) credit losses on loans

5,550 2,575 ( 63 )

Provision for credit losses on loans 375 5,550 2,575

Reversal of credit losses on unfunded loan commitments 185 ( 233 ) ( 342 )

2 unchanged sentences

Occupancy and equipment 8,506 8,240 8,304

Professional services 4,562 3,086 2,688

Data processing 4,126 4,032 3,879

Deposit network fees 3,526 2,783 258

Federal Deposit Insurance Corporation insurance 1,863 1,878 1,179

Professional services 3,646 4,562 3,086

Information technology 2,046 1,686 1,569

Federal Deposit Insurance Corporation insurance 1,807 1,863 1,878

Depreciation and amortization 1,264 1,465 2,097

2 unchanged sentences

Charitable contributions 657 677 717

Deposit network fees 476 448 374

Other real estate owned — — 48

11 unchanged sentences

Accounting Changes and Reclassifications:

There have been no items in prior financial statements that have been reclassified to conform to the current presentation.

Prior financial statements have been adjusted in this document to include the reclassification of a portion of deposit network fees within non-interest expense to deposit interest expense, as noted in the Explanatory Note in Part I and in Note 19, Restatement of Prior Period Financial Statements.

Use of Estimates:

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Investment Securities:

Investment securities are classified as "held-to-maturity," "trading securities" or "available-for-sale." Investments classified as held-to-maturity are those that we have the ability and intent to hold until maturity and are reported at cost, adjusted for the amortization or accretion of premiums or discounts.

Investment securities are classified as "held-to-maturity" or "HTM," "trading securities" or "available-for-sale" or "AFS." Investments classified as held-to-maturity are those that we have the ability and intent to hold until maturity and are reported at cost, adjusted for the amortization or accretion of premiums or discounts.

Investments held for resale in anticipation of short-term market movements are classified as trading securities and are reported at fair value, with unrealized gains and losses included in earnings.

Investments that are neither held-to-maturity

nor trading are classified as available-for-sale and are reported at fair value.

Investments that are neither held-to-maturity nor trading are classified as available-for-sale and are reported at fair value.

Unrealized gains and losses for available-for-sale securities, net of related taxes, are reported as a separate component of comprehensive income (loss) and included in stockholders' equity until realized.

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The specific identification method is used to calculate realized gains and losses on sales of securities.

Securities transferred from the available-for-sale category to the held-to-maturity category are recorded at fair value at the date of transfer.

Unrealized holding gains or losses on the dates of the transfer of securities from available-for-sale to held-to-maturity are included in the balance of accumulated other comprehensive income (loss), net of tax, in the consolidated balance sheets.

These unrealized holding gains or losses on the dates of transfer are amortized over the remaining life of the securities as yield adjustments in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security.

Prior to the balance sheet repositioning in the fourth quarter of 2025, securities transferred from the available-for-sale category to the held-to-maturity category were recorded at fair value at the date of transfer and the unrealized holding gains or losses on the dates of the transfer of securities from available-for-sale to held-to-maturity were included in the balance of accumulated other comprehensive income (loss), net of tax, in the consolidated balance sheets and amortized over the life of the securities.

After the repositioning, investments previously classified as held-to-maturity and reclassified as available-for-sale are recorded at fair value, and the unrealized gains or losses are included in the balance of accumulated other comprehensive income (loss), net of tax.

Subsequent to the sale of a portion of these securities, the remaining balance of the unrealized holding gains or losses on the date of the original transfer held within accumulated other comprehensive income (loss) was realized.

Non-marketable equity securities include stock held for membership and regulatory purposes, such as Federal Home Loan Bank ("FHLB") stock and other non-marketable equity securities.

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Investment securities are placed on non-accrual status when principal or interest is contractually past due more than ninety days, or management does not expect full payment of principal and interest.

We do not record an allowance for credit losses for accrued interest on investment securities, as the amounts are written-off

when the investment is placed on non-accrual status.

We do not record an allowance for credit losses for accrued interest on investment securities, as the amounts are written-off when the investment is placed on non-accrual status.

There were no non-accrual investment securities in any of the years presented in the consolidated financial statements.

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For collateral dependent loans, including those for which management determines foreclosure is probable, each loan is individually evaluated and the allowance for credit losses is based on the fair value of the collateral, adjusted for estimated selling costs when repayment is expected from the sale of the collateral, less the loan's amortized c ost.

In determining the fair value, management consi ders such information as the appraised value of the c ollateral, observed and potential future changes in collateral value, and historical loss experience for loans that were secured by similar collateral.

by similar collateral.

Generally, with problem credits that are collateral dependent, we obtain appraisals of the collateral at least annually.

50 unchanged sentences

There were no material changes to the ACL methodology during 2025.

However, assumptions that mainly influenced management's current estimate of the expected credit losses were primarily 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.

However, assumptions that mainly influenced management's current estimate of the expected credit losses were primarily adjustments to qualitative risk factors from continued uncertainty about inflation and recession risks 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.

Other elements of the estimated current expected credit losses included increased allowances for individually analyzed loans exhibiting unique credit risk characteristics and a slight increase in Moody's Analytics' Baseline Forecast of California's unemployment rate, partially offset by the impact of an overall decrease in loans.

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We account for these transfers of financial assets as sales when control over the transferred financial assets has been surrendered.

Control over transferred assets is deemed to be surrendered when 1) the

assets and liabilities have been isolated from us, 2) the transferee has the right to pledge or exchange the assets (or beneficial interests) it received, free of conditions that constrain it from taking advantage of that right, beyond a trivial benefit and 3) we do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets.

Control over transferred assets is deemed to be surrendered when 1) the assets and liabilities have been isolated from us, 2) the transferee has the right to pledge or exchange the assets (or beneficial interests) it received, free of conditions that constrain it from taking advantage of that right, beyond a trivial benefit and 3) we do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets.

Transfers of a portion of a loan must meet the criteria of a participating interest.

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Business acquisition-related costs, including conversion and restructuring charges, are expensed as incurred.

If substantially all of an acquisition is made up of one asset or several similar assets, or without a substantive process that together contributes to the ability to create outputs, the acquisition is accounted for as an asset acquisition and acquisition costs will be capitalized as part of the assets acquired, rather than expensed in a business combinations.

If substantially all of an acquisition is made up of one asset or several similar assets, or without a substantive process that together contributes to the ability to create

outputs, the acquisition is accounted for as an asset acquisition and acquisition costs will be capitalized as part of the assets acquired, rather than expensed in a business combinations.

Goodwill and Other Intangible Assets:

3 unchanged sentences

Impairment testing is performed at the reporting unit level, which management considered to be the Community Banking Segment at December 31, 2025.

Management considered the Company to be its sole reportable unit for the year ended December 31, 2024.

Management’s assessment of goodwill impairment is performed in accordance with ASC 350-20, Intangibles - Goodwill and Other - Goodwill and encompasses a two-step process to evaluate each reporting unit.

6 unchanged sentences

The Company performs its annual goodwill impairment test as of November 30 th each year.

The results indicated that goodwill was not impaired as of December 31, 2024, and there were no changes to our assessment through December 31, 2024.

The results indicated that goodwill was not impaired as of November 30, 2025, and there were no changes to our assessment through December 31, 2025.

In addition, the Company recorded no goodwill impairment for the year ended December 31, 2024 or 2023.

Core deposit intangibles ("CDI") arising from the acquisition of other financial institutions are considered to have definite useful lives and are amortized on an accelerated method over their estimated useful life of ten years .

At December 31, 2024, the future estimated amortization expens e for the CDI arising from our past acquisitions was as follows:

At December 31, 2025, the future estimated amortization expense for the CDI arising from our past acquisitions was as follows:

(in thousands) 2026 2027 2028 2029 2030 Thereafter Total

8 unchanged sentences

Revenues and expenses associated with OREO, and subsequent adjustments to the fair value of the property and to the estimated costs of disposal, are realized and reported as a component of non-interest income and expense when incurred.

We recorded a $ 40 thousand and $ 345 thousand valuation adjustment to OREO in 2023 and 2022, respectively, and no adjustment in 2024.

We recorded a $ 40 thousand valuation adjustment to OREO in 2023 and no adjustment in 2025 and 2024.

In July 2023, the Bank completed the sale of its only OREO property.

1 unchanged sentence

The Bank owns life insurance policies on certain key current and former officers.

BOLI is recorded in interest receivable and other assets on the consolidated statements of condition at the

amount that can be realized under the insurance contract at period-end, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement.

BOLI is recorded in interest receivable and other assets on the consolidated statements of condition at the amount that can be realized under the insurance contract at period-end, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement.

Investments in Low Income Housing Tax Credit Funds:

25 unchanged sentences

Revision of our estimate of accrued income taxes also may result from our own income tax planning, which may affect effective tax rates and results of operations for any reporting period.

We present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss ("NOL") carryforward, or similar tax loss or tax credit carryforward, rather than as a liability, when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) we intend to and are able to use the deferred tax asset for that purpose.

intend to and are able to use the deferred tax asset for that purpose.

Otherwise, the unrecognized tax benefit is presented as a liability instead of being netted with deferred tax assets.

17 unchanged sentences

Weighted average diluted common shares outstanding 15,942 16,042 16,026

Net income $ ( 8,409 ) $ 19,895 $ 46,586

Net (loss) income $ ( 35,675 ) $ ( 8,409 ) $ 19,895

Basic EPS $ ( 2.24 ) $ ( 0.52 ) $ 1.24

1 unchanged sentence

Weighted average anti-dilutive common shares not included in the calculation of diluted EPS 252 368 364

1 Because Bancorp was in a net loss position for the years ended December 31, 2025 and 2024, diluted net loss per share is the same as basic net loss per share, as the inclusion of potentially dilutive common shares would have been anti-dilutive.

Share-Based Compensation:

46 unchanged sentences

Performance obligations for monthly maintenance fees and account analysis fees are satisfied, and the related revenue recognized, when we complete our performance obligation each month.

Performance obligations related to transaction-based services (such as check orders) are satisfied, and the related revenue recognized, at a point in time typically when the transaction is completed, except for business accounts subject to analysis where the transaction-based fees are part of the monthly account analysis fees.

Performance obligations related to transaction-based services (such as check orders) are satisfied, and the

related revenue recognized, at a point in time typically when the transaction is completed, except for business accounts subject to analysis where the transaction-based fees are part of the monthly account analysis fees.

• Debit card interchange fees - We issue debit cards to our consumer and small business customers that allow them to purchase goods and services from merchants in person, online, or via mobile devices using funds held in their demand deposit accounts held with us.

18 unchanged sentences

As a result, if other assumptions had been used, our recorded earnings or disclosures could have been materially different from those reflected in these consolidated financial statements.

Other Recently Adopted Accounting Standards

In June 2022, the FASB issued Accounting Standards Update ("ASU") No.

2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

The amendment reduces diversity in practice by clarifying that a separate contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

In addition, this ASU provided amended examples to illustrate that a restriction that is a characteristic of the equity security, which market participants would take into account when pricing them, would be considered in measuring fair value.

This ASU also introduced new disclosure requirements.

The amendments were effective prospectively for years beginning after December 15, 2023.

As discussed in Note 2, Investment Securities, in July 2023 we sold our remaining shares of Visa Inc.

Class B restricted common stock.

We adopted ASU 2022-03 in the first quarter of 2024, which as a result of the previously mentioned sale had no impact our financial condition, results of operations or disclosures.

In March 2023, the FASB issued ASU No.

2023-01, Leases (Topic 842):

Common Control Arrangements .

For public companies, the amendment requires entities to amortize leasehold improvements associated with common control lease arrangements over the useful life of the improvements to the common control group, as opposed to

the shorter of the remaining lease term and the useful life of the improvements for all other operating leases.

The amendments were effective for years beginning after December 15, 2023, and may be adopted either prospectively or retrospectively.

We adopted ASU 2023-01 on a prospective basis in the first quarter of 2024, which had no impact on our financial condition or results of operations as we did not have common control lease arrangements at the time of adoption and we have not since entered into any such arrangements.

In March 2023, the FASB issued ASU No.

2023-02, Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method .

Under current GAAP, an entity can only elect to apply the proportional amortization method to investments in low-income housing tax credit ("LIHTC") structures.

The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the consolidated statements of income as a component of income tax expense (benefit).

The amendments will allow entities to elect to account for all other equity investments made primarily for the purpose of receiving income tax credits to using the proportional amortization method, regardless of the tax credit program through which the investment earns income tax credits, when certain conditions are met.

The amendments were effective for fiscal years beginning after December 15, 2023, and may be adopted either on a modified retrospective basis or retrospectively.

Other than investments in LIHTC funds, as disclosed in Note 2, Investment Securities, we currently have no other equity investments made primarily for the purpose of receiving income tax credits, and therefore the adoption of this ASU had no impact on our financial condition, results of operations, or disclosures.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, enhanced interim disclosure requirements, clarifying circumstances in which an entity can disclose multiple segment measures of profit or loss, providing new segment disclosure requirements for entities with a single reportable segment, and requiring other disclosures.

The amendments were effective for annual reporting periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 31, 2024, and shall be applied retrospectively to all prior periods presented in the financial statements.

We adopted ASU 2023-07 in the fourth quarter of 2024 with this Form 10-K, and the required expanded disclosures have been made above within this Note 1, Summary of Significant Accounting Policies, under the section titled Segment Reporting.

Adoption had no impact on our financial condition or results of operations.

Accounting Standards Not Yet Effective

In December 2023, the FASB issued ASU No.

Accounting Standards Adopted in 2025

In December 2023, the Financial Accounting Standards Board "FASB" issued Accounting Standards Update "ASU" No.

2023-09, Income Taxes (Topic 740):

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The amendments are effective for annual reporting periods beginning after December 15, 2024, and may be adopted either prospectively or retrospectively.

Early adoption is permitted.

We are currently evaluating the impact of the amendments on our financial statement disclosures upon adoption.

We adopted ASU No.

2023-09 prospectively in the fourth quarter of 2025.

This ASU only impacted the Company's income tax disclosures and consequently, the adoption of this ASU did not have a material impact on the Company's business operations or Consolidated Statements of Financial Conditio n.

Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU No.

2024-03 (updated in January 2025 to ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

The amendments are intended to improve income statement expense disclosure requirements, primarily through enhanced disclosures about certain costs and expenses included in income statement expense captions.

The amendments are effective for annual reporting periods beginning after December 15, 2026 (i.e., 2027 Form 10-K) and interim periods within annual reporting periods beginning after December 15, 2027.

amendments are intended to improve income statement expense disclosure requirements, primarily through enhanced disclosures about certain costs and expenses included in income statement expense captions.

The amendments are effective for annual reporting periods beginning after December 15, 2026 (i.e., year ended December 31, 2027 Form 10-K) and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

We are currently evaluating the impact of the amendments on our financial statement disclosures upon adoption.

The Company is currently evaluating the impact of the amendments on its financial statement disclosures, and does not expect the adoption to have a material impact on its business operations or Consolidated Statements of Financial Condition.

In May 2025, the FASB issued ASU 2025-03 , Business Combinations (Topic 805) and Consolidation (Topic 810):

Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity , which revises current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity that meets the definition of a business.

The amendments require that an entity consider the same factors that are currently required for determining which entity is the accounting acquirer in other acquisition transactions.

ASU 2025-03 is effective for the Company's annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted.

ASU 2025-03 is required to be applied prospectively.

The Company is evaluating the impact of this update on its financial statements and related disclosures, and does not expect the adoption to have a material impact on its business operations or Consolidated Statements of Financial Condition.

In November 2025, the FASB issued ASU 2025-08 Financial Instruments - Credit Losses (Topic 326) related to a ccounting for credit losses on purchased loans.

This guidance requires the allowance established for certain loans that are acquired without credit deterioration, excluding credit cards, be offset by an increase in the basis of the acquired loans at acquisition.

ASU 2025-08 is effective for the Company's annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, and should be applied prospectively to loans that are acquired on or after the initial application date.

Early adoption is permitted, The Company is evaluating the impact of this update on its financial statements and related disclosures, and does not expect the adoption to have a material impact on its business operations or Consolidated Statements of Financial Condition.

In December 2025, the FASB issued ASU 2025-11 Interim Reporting (Topic 270) related to interim disclosure requirements.

The amendments in this update clarify current interim disclosure requirements and provide a comprehensive list of required interim disclosures.

The update also incorporates a disclosure principle that requires entities to disclose material events that occur after the end of the last annual reporting period.

This update is effective for interim periods within annual periods beginning after December 15, 2027 and early adoption is permitted.

The Company is currently evaluating the impact that the adoption of this new standard on its financial statements and related disclosures, and does not expect the adoption to have a material impact on its business operations or Consolidated Statements of Financial Condition.

Investment Securities

Our investment securities portfolio consists of U.S.

Treasury securities, obligations of state and political subdivisions, U.S.

federal government agencies, such as the Government National Mortgage Association ("GNMA") and Small Business Administration ("SBA"), and U.S.

government-sponsored enterprises ("GSEs"), such as the Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal

Farm Credit Banks Funding Corporation and FHLB, and U.S.

and foreign corporations.

Our investment securities portfolio consists of obligations of state and political subdivisions, U.S.

federal government agencies, such as the Government National Mortgage Association ("GNMA"), and U.S.

government-sponsored enterprises ("GSEs"), such as the Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Farm Credit Banks Funding Corporation and FHLB.

We also invest in residential and commercial mortgage-backed securities ("MBS"/"CMBS") and collateralized mortgage obligations ("CMOs") issued or guaranteed by the GSEs, as reflected in the following table.

A summary of the amortized cost, fair value and allowance for credit losses related to securities held-to-maturity as of December 31, 2024 and December 31, 2023 is presented below.

The Bank did not hold any HTM securities at December 31, 2025.

In the fourth quarter of 2025, the Bank completed a balance sheet repositioning and reclassified its HTM portfolio into AFS.

The Bank then sold securities with a book value of $ 593.2 million at a pre-tax loss of $ 69.5 million.

A summary of the amortized cost, fair value and allowance for credit losses related to securities held-to-maturity as of December 31, 2024 is presented below.

Held-to-maturity:

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Total held-to-maturity $ 879,199 $ — $ 879,199 $ — $ ( 115,664 ) $ 763,535

December 31, 2023

Securities of U.S.

government-sponsored enterprises:

CMBS issued by FHLMC, FNMA and GNMA

$ 247,441 $ — $ 247,441 $ — $ ( 35,071 ) $ 212,370

CMOs issued by FHLMC, FNMA and GNMA

228,761 — 228,761 28 ( 16,882 ) 211,907

MBS pass-through securities issued by FHLMC, FNMA and GNMA 208,983 — 208,983 — ( 27,326 ) 181,657

SBA-backed securities 1,853 — 1,853 — ( 90 ) 1,763

Debentures of government-sponsored agencies 146,126 — 146,126 — ( 21,994 ) 124,132

Obligations of state and political subdivisions 62,034 — 62,034 47 ( 7,884 ) 54,197

Corporate bonds 30,000 — 30,000 — ( 1,196 ) 28,804

Total held-to-maturity $ 925,198 $ — $ 925,198 $ 75 $ ( 110,443 ) $ 814,830

1 Amortized cost and fair values exclude accrued interest receivable of $ 3.4 million and $ 3.6 million at December 31, 2024 and 2023, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

Management measures expected credit losses on held-to-maturity securities collectively by major security type, with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

With regard to MBSs and CMOs issued or guaranteed by the GSEs, and SBA-backed securities, we expect to receive all the contractual principal and interest on these securities, as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

Accordingly, no allowance for credit losses has been recorded for these securities.

With regard to securities issued by states and political subdivisions and corporate bonds, management considers:

(i) issuer and/or guarantor credit ratings, (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal credit review of the financial information, and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers.

Based on the comprehensive analysis, no credit losses are expected.

The following table summarizes the amortized cost of our portfolio of held-to-maturity securities issued by states and political subdivisions and corporate bonds by Moody's and/or Standard & Poor's bond ratings as of December 31, 2024 and 2023.

1 Amortized cost and fair values exclude accrued interest receivable of $ 3.4 million at December 31, 2024, which is included in interest receivable and other assets in the consolidated statements of condition.

Obligations of state and political subdivisions Corporate bonds

(in thousands) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023

(in thousands) December 31, 2024 December 31, 2024

Aaa / AAA $ 42,161 $ —

19,399 19,457 — —

A2 / A — 30,000

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MBS pass-through securities issued by FHLMC, FNMA and GNMA 583,409 1,639 ( 2,742 ) — 582,306

SBA-backed securities 331 — ( 23 ) — 308

Debentures of government- sponsored agencies 29,988 — ( 6,294 ) — 23,694

Treasury securities 12,020 — ( 1,205 ) — 10,815

Obligations of state and political subdivisions 61,214 — ( 7,326 ) — 53,888

Corporate bonds 6,000 — ( 351 ) — 5,649

Total available-for-sale $ 1,353,961 $ 3,509 $ ( 29,658 ) $ — $ 1,327,812

12 unchanged sentences

Corporate bonds 6,000 — ( 351 ) — 5,649

Asset-backed securities — — — — —

Total available-for-sale $ 419,292 $ 184 $ ( 31,942 ) $ — $ 387,534

1 Amortized cost and fair value exclude accrued interest receivable of $ 4.8 million and $ 1.7 million at December 31, 2025 and 2024, respectively, which is included in interest receivable and other assets in the consolidated statements of condition.

As part of our ongoing review of our investment securities portfolio, we reassessed the classification of certain securities issued by government-sponsored agencies.

In March 2022, we transferred $ 357.5 million of these securities from available-for-sale to held-to-maturity at fair value.

We intend and have the ability to hold these securities to maturity.

The net unrealized pre-tax loss of $ 14.8 million that remained and the related accumulated other comprehensive loss are accreted to interest income over the remaining lives of the securities.

Because these entries offset each other, there is no impact on net income.

The amortized cost and fair value of investment debt securities by contractual maturity at December 31, 2025 and 2024 are shown below.

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Pledged to the Federal Reserve Discount Window

Pledged to the Federal Reserve "BTFP" — 265,660

297,610 365,759

Total pledged investment securities $ 838,202 $ 941,122

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(in thousands) Fair value Unrealized loss Fair value Unrealized loss Fair value Unrealized loss

Held-to-maturity:

CMBS issued by FHLMC, FNMA and GNMA

$ — $ — $ 208,110 $ ( 34,449 ) $ 208,110 $ ( 34,449 )

CMOs issued by FHLMC, FNMA and GNMA

18,451 ( 1,623 ) 172,805 ( 16,869 ) 191,256 ( 18,492 )

MBS pass-through securities issued by FHLMC, FNMA and GNMA 3,487 ( 150 ) 157,959 ( 30,792 ) 161,446 ( 30,942 )

SBA-backed securities — — 1,452 ( 61 ) 1,452 ( 61 )

Debentures of government-sponsored agencies — — 118,737 ( 22,694 ) 118,737 ( 22,694 )

Obligations of state and political subdivisions 5,558 ( 44 ) 47,661 ( 8,297 ) 53,219 ( 8,341 )

Corporate bonds — — 29,315 ( 685 ) 29,315 ( 685 )

Total held-to-maturity $ 27,496 $ ( 1,817 ) $ 736,039 $ ( 113,847 ) $ 763,535 $ ( 115,664 )

Available-for-sale:

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MBS pass-through securities issued by FHLMC, FNMA and GNMA 113,487 ( 386 ) 13,574 ( 2,356 ) 127,061 ( 2,742 )

SBA-backed securities — — 309 ( 23 ) 309 ( 23 )

Debentures of government-sponsored agencies — — 23,693 ( 6,294 ) 23,693 ( 6,294 )

Treasury securities — — 10,815 ( 1,205 ) 10,815 ( 1,205 )

Obligations of state and political subdivisions 247 ( 3 ) 50,616 ( 7,323 ) 50,863 ( 7,326 )

Corporate bonds — — 5,649 ( 351 ) 5,649 ( 351 )

Total available-for-sale $ 284,341 $ ( 772 ) $ 233,026 $ ( 28,886 ) $ 517,367 $ ( 29,658 )

Total securities at a loss position $ 156,905 $ ( 2,160 ) $ 961,045 $ ( 145,446 ) $ 1,117,950 $ ( 147,606 )

December 31, 2024 < 12 continuous months > 12 continuous months Total securities

23 unchanged sentences

Corporate bonds — — 5,649 ( 351 ) 5,649 ( 351 )

Asset-backed securities — — — — — —

Total available-for-sale $ 129,409 $ ( 343 ) $ 225,006 $ ( 31,599 ) $ 354,415 $ ( 31,942 )

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Our investments in obligations of state and political subdivision bonds are deemed creditworthy after our comprehensive analysis of the issuers' latest financial information, credit ratings by major credit agencies, and/or credit enhancements.

No allowances for credit losses have been recognized on available-for-sale securities in an unrealized loss position, as management does not believe any of the securities are impaired due credit risk factors at either December 31, 2024 or 2023.

No allowances for credit losses have been recognized on available-for-sale securities in an unrealized loss position, as management does not believe any of the securities are impaired due to credit risk factors at either December 31, 2025 or 2024.

In addition, for any available-for-sale securities in an unrealized loss position at December 31, 2025 and 2024, the Bank assessed whether it intended to sell the securities, or if it was more likely than not that it would be required to sell the securities before recovery of its amortized cost basis, which would require a write-down to fair value through net income.

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On February 12, 2026, FHLB announced a cash dividend for the fourth quarter of 2025 at an annualized dividend rate of 8.75 % to be distributed in mid-March 2026.

In addition, FHLB announced a special cash dividend on the average capital stock outstanding during the fourth quarter of 2025 at an annualized rate of 11.36 % which was distributed on February 25, 2026.

Cash dividends paid on FHLB capital stock are recorded as non- interest income.

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For further information, refer to Note 12, Commitments and Contingencies.

Low Income Housing Tax Credits

We invest in low-income housing tax credit funds as a limited partner, which totaled $ 1.6 million and $ 2.0 million recorded in other assets as of December 31, 2024 and 2023, respectively.

In 2024, we recognized $ 525 thousand of low income housing tax credits and other tax benefits , offset by $ 438 thousand of amortization expense for low-income housing tax credit investments, as a component of income tax expense.

As of December 31, 2024, our unfunded commitments for these low-income housing tax credit funds totaled $ 338 thousand.

We did not recognize any impairment losses on these low-income housing tax credit investments during 2024 or 2023, as the value of the future tax benefits exceeds the carrying value of the investments.

Loans and Allowance for Credit Losses on Loans

115 unchanged sentences

$ 260,110 $ 99,947 $ 53,969 $ 155,608 $ 189,703 $ 594,892 $ 12,022 $ 1,366,251

Gross current period charge-offs $ — $ — $ — $ — $ ( 809 ) $ — $ — $ ( 809 )

Construction:

Pass and Watch $ 4,602 $ 10,499 $ — $ — $ — $ — $ — $ 15,101

Special Mention 7,462 — — — — — — 7,462

Total construction $ 4,602 $ 10,499 $ — $ — $ — $ — $ — $ 15,101

4 unchanged sentences

Pass and Watch $ 2,971 $ 15,899 $ 15,479 $ 17,745 $ 9,280 $ 49,168 $ — $ 110,542

Substandard — — 72 — — — — 72

Total other residential $ 2,971 $ 15,899 $ 15,551 $ 17,745 $ 9,280 $ 49,168 $ — $ 110,614

39 unchanged sentences

Pass and Watch $ 17,525 $ 15,429 $ 10,841 $ 7,798 $ 2,788 $ 10,901 $ 1,429 $ 66,711

Substandard — — — 207 — 15 — 222

Total installment and other consumer $ 17,525 $ 15,429 $ 10,841 $ 8,005 $ 2,788 $ 10,916 $ 1,429 $ 66,933

41 unchanged sentences

December 31, 2025

Commercial and industrial $ 52 $ — $ — $ 52 $ 52

Commercial real estate, owner-occupied 314 — — 314 —

2 unchanged sentences

Home equity — 401 — 401 —

Installment and other consumer — 222 222 15

Other residential — 72 — 72 18

Total $ 25,701 $ 473 $ — $ 26,174 $ 7,244

4 unchanged sentences

Home equity — 752 — 752 —

Installment and other consumer — 222 222 15

Total $ 30,114 $ 752 $ 222 $ 31,088 $ 8,000

4 unchanged sentences

(in thousands) Term Extension

Multiple Modifications

Total Modifications

1 unchanged sentence

December 31, 2025

Home equity $ 188 $ 188 0.2 %

Commercial and industrial $ — $ 505 $ 505 0.3 %

Commercial real estate, owner-occupied

1,513 $ — 1,513 0.5 %

Commercial real estate, non-owner occupied

3,371 $ — 3,371 0.3 %

$ 4,884 $ 505 $ 5,389

December 31, 2024

Commercial owner-occupied $ 1,431 $ 1,431 0.4 %

Commercial non-owner occupied 878 878 0.1 %

Home equity $ 188 $ — $ 188 0.2 %

$ 188 $ — $ 188

1 unchanged sentence

The following table summarizes the financial effect of loan modifications presented in the table above during the years ended December 31, 2025 and 2024 by portfolio class.

(in thousands) Weighted-Average Term Extension (in years)

(in thousands) Weighted-Average Interest Rate Reduction

Weighted-Average Term Extension (in years)

Year ended December 31, 2025

Home equity 6.6

Commercial and industrial 4.8 % 1.7

Commercial real estate, owner-occupied

Commercial real estate, non-owner occupied

Year ended December 31, 2024

Commercial owner-occupied 2.3

Commercial non-owner occupied 0.5

Home equity — 6.6

The loan modifications did not significantly impact the determination of the allowance for credit losses on loans during the years ended December 31, 2025 and 2024.

4 unchanged sentences

December 31, 2025

Home equity $ 188 $ — $ — $ — $ 188 $ 113

Commercial and industrial $ 505 $ — $ — $ — $ 505 $ 505

Commercial real estate, owner-occupied

1,513 — — — 1,513 $ —

Commercial real estate, non-owner occupied

3,371 — — — 3,371 $ 708

$ 5,389 $ — $ — $ — $ 5,389 $ 1,213

December 31, 2024

Commercial owner-occupied $ 1,431 $ — $ — $ — $ 1,431 $ —

Commercial non-owner occupied 878 — — — 878 878

Home equity $ 188 $ — $ — $ — $ 188 $ 113

$ 188 $ — $ — $ — $ 188 $ 113

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Total $ 1,576 $ 2,361 $ 22,093 $ 638 $ 684 $ 1,141 $ 908 $ 1,255 $ 30,656

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

This was offset by a provision totaling $ 375 thousand in 2025 impacted by modest deterioration in Moody's economic forecasts, a loss driver analysis peer group update, and pooled loan growth, partially offset by qualitative risk factor improvements in areas including staff experience and classified/delinquent/non-accrual loans and specific reserve adjustments.

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.

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Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $ 1.396 billion and $ 1.351 billion at December 31, 2025 and 2024, respectively.

In addition, we pledged eligible TIC loans, which totaled $ 110.0 million and $ 110.4 million at

December 31, 2024 and 2023, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

In addition, we pledged eligible TIC loans, which totaled $ 97.2 million and $ 110.0 million at December 31, 2025 and 2024, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB").

For additional information, see Note 7, Borrowings.

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Earnings on BOLI totaled $ 1.8 million, $ 1.7 million and $ 1.5 million in 2025, 2024 and 2023, respectively.

These earnings included death benefit proceeds in excess of the cash surrender values of the BOLI policies of $ 313 thousand in 2023 and $ 86 thousand in 2022.

Earnings for death benefit proceeds in excess of the cash surrender values of the BOLI policies of $ 306 thousand in 2025 and $ 313 thousand in 2023.

There were no death benefit proceeds in 2024.

5 unchanged sentences

Total time deposits $ 205,686 $ 242,377

Interest on time deposits was $ 9.3 million, $ 4.7 million and $ 323 thousand in 2024, 2023 and 2022, respectively.

Interest on time deposits was $ 6.4 million, $ 9.3 million, and $ 4.7 million in 2025, 2024 and 2023, respectively.

Scheduled maturities of time deposits at December 31, 2025 are as follows:

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Federal Home Loan Bank:

The Bank had lines of credit with the FHLB totaling $ 948.1 million and $ 1.009 billion as of December 31, 2024 and 2023, respectively , based on the eligible collateral of certain loans and investment securities.

The Bank had lines of credit with the FHLB totaling $ 967.2 million and $ 948.1 million as of December 31, 2025 and 2024, respectively , based on the eligible collateral of certain loans and investment securities.

Federal Funds Lines of Credit:

The Bank had unsecured lines of credit with correspondent banks for overnight borrowings totaling $ 140.0 million and $ 125.0 million as of December 31, 2025 and 2024, respectively.

In general, interest rates on these lines approximate the federal funds target rate.

In general, interest rates on these lines approximate the federal funds effective rate.

Federal Reserve Bank:

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.

When the BTFP program ended on March 11, 2024, the investment securities were reallocated to our borrowing facility through the Discount Window.

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 .

Subordinated Notes:

On November 19, 2025, the Company issued Fixed-to-Floating Subordinated Notes (“2035 Notes”) of $ 45.0 million with a final maturity date of December 1, 2035, to certain investors in a private placement.

The 2035 Notes have an initial fixed interest rate of 6.75 % per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing on June 1, 2026.

Subordinated Notes.

Other Obligations:

9 unchanged sentences

FRBSF short-term borrowings under the BTFP — — — % — 1,607 5.00 % 26,000 56,959 5.30 %

Subordinated notes 43,857 5,189 6.98 % — — — % — $ — — %

Other obligations (finance leases) 709 253 3.52 % 154 222 2.23 % 298 $ 364 1.88 %

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The 2017 Employee Stock Purchase Plan ("ESPP") gives our employees an opportunity to purchase Bancorp's common shares through payroll deductions of between one and fifteen percent of their pay.

Shares are purchased quarterly at a five percent discount from the closing market price on the last day of the quarter.

Shares are purchased

quarterly at a five percent discount from the closing market price on the last day of the quarter.

As of December 31, 2025, 369,200 shares were available for future purchases under the ESPP.

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303,777 33.22 1 4.86

Granted 10,040 32.54 8.49

Cancelled, expired or forfeited ( 25,594 ) 29.81

Exercised ( 12,164 ) 20.25 88

Options outstanding at December 31, 2024

22 unchanged sentences

213,644 213,644

278,183 273,242

The following table summarizes non-vested restricted stock awards and changes during the years ended December 31, 2025, 2024, and 2023.

6 unchanged sentences

Non-vested awards at December 31, 2023

107,552 30.88

Granted 106,964 16.61

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We determine the fair value of stock options at the grant date using the Black-Scholes pricing model that takes into account the stock price at the grant date, exercise price, and the following assumptions (weighted-average shown).

There were no options granted in the year 2024.

There were no options granted during the year ended 2025 or 2024.

Years ended December 31,

2025 2024 2023

Risk-free interest rate N/A 3.94 % 1.86 %

Expected dividend yield on common stock N/A 3.07 % 2.85 %

Risk-free interest rate N/A N/A 3.94 %

Expected dividend yield on common stock N/A N/A 3.07 %

Expected life in years N/A

Expected price volatility N/A 34.68 % 33.44 %

Expected price volatility N/A N/A 34.68 %

The fair value of stock options as of the grant date is recorded as stock-based compensation expense in the consolidated statements of comprehensive income (loss) over the requisite service period, which is generally the vesting period, with a corresponding increase in common stock.

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Total compensation expense for stock options and restricted stock awards was $ 815 thousand, $ 622 thousand, and $ 522 thousand during 2025, 2024, and 2023, respectively, and the total recognized deferred tax benefits related thereto were $ 242 thousand, $ 206 thousand, and $ 146 thousand, respectively.

As of December 31, 2024, there was $ 800 thousand of total unrecognized compensation expense related to non-vested stock options and restricted stock awards, which is expected to be recognized over a weighted-average period of approximately 2.2 years.

As of December 31, 2025, there was $ 1.6 million of total unrecognized compensation expense related to non-vested stock options and restricted stock awards, which is expected to be recognized over a weighted-average period of approximately 2.2 years.

The total grant-date fair value of stock options vested during the years ended December 31, 2025, 2024, and 2023 was $ 41 thousand, $ 100 thousand, and $ 255 thousand, respectively.

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Under the California Financial Code, payment of dividends by the Bank to Bancorp generally is restricted to the lesser of retained earnings or the amount of undistributed net profits of the Bank from the three most recent fiscal years.

Under this restriction, approximately $ 717 thousand of the Bank's retained earnings balance was available for payment of dividends to Bancorp as of December 31, 2024.

Dividends in excess of that amount may be paid with prior approval of the DFPI.

Bancorp held $ 10.3 million in cash as of December 31, 2024.

Bancorp held $ 35.2 million in cash as of December 31, 2025, which is sufficient to meet its cash flow needs, including interest payments on subordinated notes, for the next twelve months.

Share Repurchase Program

In 2022, Bancorp repurchased 23,275 shares totaling $ 877 thousand in the share repurchase plan approved by the Bancorp's Board of Directors on July 16, 2021, amended October 22, 2021.

On July 21, 2023, the Board of Directors approved the adoption of Bancorp's new share repurchase program, which replaced the existing program that expired on July 31, 2023, for up to $ 25.0 million and expiring on July 31, 2025.

Under this new program, Bancorp repurchased 220,000 shares totaling $ 4.3 million at an average price of $ 19.21 per share in the year ended December 31, 2024, and made no repurchases under this program in the year ended December 31, 2023.

Bancorp will continue to assess opportunities to utilize the program.

Bancorp repurchased 150,000 shares totaling $ 3.3 million at an average price of $ 21.93 per share during the year ended December 31, 2025, under our share repurchase program.

On July 24, 2025, the Board of Directors authorized the repurchase of up to $ 25.0 million of its common stock effective July 24, 2025 through July 31, 2027.

This stock buyback program replaced the program approved in 2023 which expired July 31, 2025, under which Bancorp repurchased 320,000 shares totaling $ 6.4 million.

Bancorp will continue to assess opportunities to utilize the new program.

Bancorp repurchased 220,000 shares totaling $ 4.3 million at an average price of $ 19.21 per share in the year ended December 31, 2024, under our share repurchase program that expired on July 31, 2025.

Under the share repurchase program, Bancorp may purchase shares of its common stock through various means, such as open market transactions, including block purchases, and privately negotiated transactions.

The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at Bancorp's discretion.

Factors include, but are not limited to, stock price, trading volume and general market conditions, along with Bancorp’s general business conditions.

Factors include, but are not limited to, stock price, trading volume and general market conditions, along

with Bancorp’s general business conditions.

The program may be suspended or discontinued at any time and does not obligate Bancorp to acquire any specific number of shares of its common stock.

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$ 1,250,230 $ — $ 1,250,230 $ — OCI

SBA-backed securities $ 308 $ — $ 308 $ — OCI

Debentures of government sponsored agencies $ 23,694 $ — $ 23,694 $ — OCI

Treasury securities $ 10,815 $ 10,815 $ — $ — OCI

Obligations of state and political subdivisions $ 53,888 $ — $ 53,888 $ — OCI

Corporate bonds $ 5,649 $ — $ 5,649 $ — OCI

Derivative financial assets (interest rate contracts) $ 148 $ — $ 148 $ — NI

Derivative financial liabilities (interest rate contracts) $ 11 $ — $ 11 $ — NI

December 31, 2024

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Derivative financial assets (interest rate contracts) $ 333 $ — $ 333 $ — NI

Derivative financial liabilities (interest rate contracts) $ 1,361 $ — $ 1,361 $ — NI

1 Other comprehensive income (loss) ("OCI") or net income ("NI").

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Treasury securities.

If quoted market prices are not available, we obtain pricing information from a reputable third-

party service provider, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity and credit spreads (Level 2).

Level 2 securities include asset-backed securities, obligations of state and political subdivisions, U.S.

If quoted market prices are not available, we obtain pricing information from a reputable third-party service provider, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity and credit spreads (Level 2).

Level 2 securities include

asset-backed securities, obligations of state and political subdivisions, U.S.

agencies or government-sponsored agencies' debt securities, mortgage-backed securities, government agency-issued securities, and corporate bonds.

As of December 31, 2025 and 2024, there were no Level 3 securities.

Held-to-maturity securities may be subject to an allowance for credit losses as a result of our evaluation of expected losses due to credit quality factors.

In the fourth quarter of 2025, the Bank reclassified its HTM portfolio into AFS.

We did not record any credit loss expense on held-to-maturity securities during 2025 or 2024.

Fair value of held-to-maturity securities is determined using the same techniques discussed above for available-for-sale securities.

See further discussion on the balance sheet repositioning within Note 2, Investment Securities.

On a recurring basis, derivative financial instruments are recorded at fair value, which is based on the income approach using observable Level 2 market inputs, reflecting market expectations of future interest rates as of the measurement date.

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These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as individually analyzed loans that are collateral dependent and other real estate owned ("OREO").

OREO is classified as Level 3 and represents collateral acquired through foreclosure and is initially recorded at fair value as established by a current appraisal of the collateral.

Subsequent to foreclosure, OREO is carried at the lower of cost or fair value, less estimated costs to sell.

On July 12, 2023, the Bank completed the sale of its only OREO property for the periods presented.

(in thousands) Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

As of December 31, 2025 and 2024, we carried assets measured at fair value on a non-recurring basis totalling $ 18.9 million and $ 23.1 million, respectively, which were all individually analyzed loans that are collateral dependent (Level 3) net of specific allowances of $ 7.2 million and $ 8.0 million, respectively.

Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

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Further, we have not disclosed the fair value of financial instruments specifically excluded from disclosure requirements such as bank-owned life insurance policies ("BOLI"), lease obligations and non-maturity deposit liabilities.

Additionally, we held shares of Federal Home Loan Bank ("FHLB") of San Francisco stock at cost as of December 31, 2024 and 2023, and Visa Inc.

Class B common stock with no carrying value as of December 31, 2023, which was sold entirely in July of 2023.

Additionally, we held shares of Federal Home Loan Bank ("FHLB") of San Francisco stock at cost as of December 31, 2025 and 2024.

There were no impairments or changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer as of December 31, 2025 and 2024.

See further discussion on values within Note 2, Investment Securities , above.

See further discussion on values within Note 2, Investment Securities .

December 31, 2025 December 31, 2024

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Time deposits 205,686 206,040 Level 2 242,377 243,773 Level 2

FRBSF short-term borrowings under the BTFP

— — Level 2 26,000 25,998 Level 2

Subordinated notes 43,857 44,852 Level 2 — — Level 2

Interest payable 2,072 2,072 Level 2 3,019 3,019 Level 2

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The fair value of fixed-rate time deposits is estimated by discounting future contractual cash flows using discount rates that reflect the current observable market rates offered for time deposits of similar remaining maturities.

The fair value of the subordinated notes are estimated by an independent third-party using a discounted cash flow approach based on current interest rates for similar financial instruments adjusted for credit and liquidity spreads.

The value of off-balance-sheet financial instruments is estimated based on the fee income associated with the commitments, which, in the absence of credit exposure, is considered to approximate their settlement value.

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however, employee contributions are not permitted.

The Board of Directors determines a specific

portion of the Bank's profits to be contributed to the ESOP each year either in common stock or in cash for the purchase of Bancorp stock to be allocated to all eligible employees based on a percentage of their salaries, regardless of whether an employee participates in the 401(k) Plan.

The Board of Directors determines a specific portion of the Bank's profits to be contributed to the ESOP each year either in common stock or in cash for the purchase of Bancorp stock to be allocated to all eligible employees based on a percentage of their salaries, regardless of whether an employee participates in the 401(k) Plan.

For all participants, employer contributions vest over a five-year service period.

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At December 31, 2025 and 2024, respectively, our total liability under the SERPs was $ 4.8 million and $ 4.6 million recorded in interest payable and other liabilities.

Pretax income from continuing operations for each of the three years ended December 31 was as follows:

(in thousands) 2025 2024 2023

Domestic $ ( 52,483 ) $ ( 13,835 ) $ 26,036

Foreign — — —

Total $ ( 52,483 ) $ ( 13,835 ) $ 26,036

The current and deferred components of the income tax provision for each of the three years ended December 31 are as follows:

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State ( 5,930 ) ( 1,632 ) ( 235 )

Foreign — — —

Total deferred tax (benefit) provision

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$ ( 16,808 ) $ ( 5,426 ) $ 6,141

The effective tax rate for 2025, 2024 and 2023 differs from the current federal statutory income tax rate as follows:

(in thousands) 2025 2024 2023

Amount Percent Amount Percent Amount Percent

Federal statutory income tax rate $ ( 11,021 ) 21.00 % $ ( 2,908 ) 21.00 % $ 5,464 21.00 %

California franchise tax, net of federal tax benefit (a) ( 4,681 ) 8.92 % ( 1,342 ) 9.70 % 2,057 7.90 %

Low income housing (includes benefits of tax losses, net of amortization ( 73 ) 0.14 % ( 68 ) 0.49 % ( 156 ) ( 0.60 ) %

Other ( 21 ) 0.04 % ( 19 ) 0.14 % ( 26 ) ( 0.10 ) %

Nontaxable or nondeductible items

Tax-exempt interest, net of TEFRA ( 672 ) 1.28 % ( 674 ) 4.87 % ( 807 ) ( 3.10 ) %

Other ( 315 ) 0.60 % ( 55 ) 0.40 % — — %

Other adjustments

Other ( 25 ) 0.04 % ( 360 ) 2.60 % ( 391 ) ( 1.50 ) %

Taxes at effective rate $ ( 16,808 ) 32.02 % $ ( 5,426 ) 39.20 % $ 6,141 23.60 %

(a) State taxes in California made up the majority (greater than 50%) of the tax effect in this category.

The following table shows the tax effect of our cumulative temporary differences as of December 31:

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Net unrealized losses on securities available-for-sale $ 7,731 $ 12,624

Net operating loss carryforwards 19,855 9,327

Allowance for credit losses on loans and unfunded loan commitments 9,214 6,404

1 unchanged sentence

Deferred compensation and salary continuation plans 3,017 4,353

Net operating loss carryforwards 4,353 1,136

Accrued but unpaid expenses 2,062 1,644

Stock-based compensation 643 632

Interest received on non-accrual loans 831 643

Stock-based compensation 492 639

Tax credit carryforwards 467 396

Charitable contribution carryforwards 394 —

Fair value adjustment on acquired loans 384 —

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Net deferred tax assets $ 42,944 $ 30,605

As of December 31, 2025, the Bank had net deferred tax assets of approximately $ 42.9 million.

Management evaluates the realizability of its deferred tax assets quarterly by assessing the need for a valuation allowance.

In making this assessment, management considers all available positive and negative evidence, including past earnings, forecasted future taxable income, and the reversal of existing taxable temporary differences.

Based on this evaluation, management determined that it is more-likely-than-not that the Bank will realize the benefits of its deferred tax assets.

Accordingly, no valuation allowance was recorded as of December 31, 2025.

As of December 31, 2025, the Bank had net operating loss carryforwards ("NOLs") for federal income tax purposes of $ 65.6 million.

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If not fully utilized, the California NOLs will begin to expire in 2032.

Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are expected to be deductible, management believes it is more likely than not that we will realize the benefit of the remaining deferred tax assets.

Accordingly, no valuation allowance has been established as of December 31, 2024 or 2023.

The effective tax rate for 2024, 2023 and 2022 differs from the current federal statutory income tax rate as follows:

2024 2023 2022

Federal statutory income tax rate 21.0 % 21.0 % 21.0 %

Increase (decrease) due to:

California franchise tax, net of federal tax benefit 9.7 % 7.9 % 8.3 %

Tax exempt interest on municipal securities and loans 4.9 % ( 3.1 ) % ( 1.9 ) %

Tax exempt earnings on bank owned life insurance 2.6 % ( 1.5 ) % ( 0.4 ) %

Non-deductible acquisition related expenses — % — % — %

Non-deductible executive compensation — % — % — %

Other 1.0 % ( 0.7 ) % ( 0.4 ) %

Effective Tax Rate 39.2 % 23.6 % 26.6 %

As of December 31, 2025, the Bank has general business credit carryforwards compromised of Qualified Zone Academy Bond ("QZAB") and Low Income Housing ("LIH") credits of $ 68 thousand and $ 400 thousand, respectfully.

The QZAB credits will expire in 2045 if not utilized.

Income taxes paid (net of refunds) for each of the three years ended December 31 were as follows:

(in thousands) 2025 2024 2023

Federal $ 425 $ 860 $ 5,012

State 4 1,385 3,416

Foreign — — —

Total $ 429 $ 2,245 $ 8,428

Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions for each of the three years ended December 31:

(in thousands) 2025 2024 2023

California $ — $ 1,385 $ 3,416

New Jersey 4 — —

Foreign — — —

Total $ 4 $ 1,385 $ 3,416

Bancorp and the Bank have entered into a tax allocation agreement, which provides that income taxes shall be allocated between the parties on a separate entity basis.

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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 in the State of 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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$ 4,797 $ 4,911 $ 5,493

Variable lease cost — — —

Total operating lease cost $ 4,797 $ 4,911 $ 5,493

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2027 4,216 188

2028 3,821 183

2029 3,189 183

2030 2,967 15

Thereafter 9,897 —

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We are not aware of any other similar wage and hour claims at this time.

Subordinated Notes

The 2035 Notes have an

initial fixed interest rate of 6.75 % per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing on June 1, 2026.

From and including December 1, 2030, and thereafter, the 2035 Notes will bear interest at a floating rate.

The floating interest rate will reset quarterly and shall be equal to the then current three-month Term SOFR plus 335 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing on March 1, 2031.

If the then current three-month term SOFR rate is less than zero, the three-month SOFR will be deemed to be zero.

Debt issuance cost was $ 1.2 million, which is being amortized through the 2035 Notes maturity date.

The Company has the right to redeem the 2035 Notes, in whole or in part, on or after December 1, 2030.

At December 31, 2025, the balance of the 2035 Notes included in the Company’s Consolidated Balance Sheet, net of debt issuance cost, was $ 43.9 million.

The amortization of debt issuance cost was $ 22 thousand for the year ended December 31, 2025.

The Company was in compliance with all covenants under the terms of the 2035 Notes.

Concentrations of Credit Risk

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government and GSEs, which accounted for $ 1.274 billion, or 96 % of our total investment portfolio at December 31, 2025 and $ 1.075 billion, or 85 % at December 31, 2024.

The decrease was mainly due to the sale of $ 282.6 million and $ 72.7 million in paydowns of this security type in 2024.

The increase was mainly due to the purchase of $ 1.1 billion, primarily offset by $ 650.2 million in sales, $ 169.4 million in paydowns and $ 60.2 million in calls and maturities of this security type in 2025.

The largest security not issued by the U.S.

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The largest loan concentration is real estate, which accounted for 90 % and 89 % of our loan portfolio at December 31, 2025 and 2024, respectively.

Commercial real estate loans outstanding by county were primarily in Marin County at December 31, 2025 and 2024.

Derivative Financial Instruments and Hedging Activities

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Our credit exposure, if any, on interest rate swap asset positions is limited to the fair value (net of any collateral pledged to us) and interest payments of all swaps by each counterparty.

Conversely, when an interest rate swap is in a liability position exceeding a certain threshold, we may be required to post collateral to the counterparty in an amount determined by the agreements.

Conversely, when an interest rate swap is

in a liability position exceeding a certain threshold, we may be required to post collateral to the counterparty in an amount determined by the agreements.

Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap values.

On July 7, 2023, the Bank entered into various interest rate swap agreements with notional values totaling $ 101.8 million split evenly between terms of 2.5 and 3.0 years to hedge balance sheet interest rate sensitivity and protect certain of our fixed rate available-for-sale securities against changes in fair value related to changes in the benchmark interest rate.

The interest rate swaps involve the receipt of floating rate interest from a counterparty in exchange for us making fixed-rate interest payments over the lives of the agreements, without the exchange of the underlying notional values.

The transactions were designated as partial term fair value hedges and structured such that the changes in the fair value of the interest rate swaps are expected to be perfectly effective in offsetting the changes in the fair value of the hedged items attributable to changes in the SOFR OIS swap rate, the designated benchmark interest rate.

Because the hedges met the criteria for using the shortcut method, there is no need to periodically reassess effectiveness during the term of the hedges.

For fair value designated hedges, the gains or losses on the hedging instruments as well as the offsetting gains or losses on the hedged items, are recognized in current earnings as their fair values change.

On November 4, 2024, the Bank terminated these contracts resulting in an adjustment to book value that will be amortized over the life of the hedged securities.

In addition, we had three interest rate swap agreements on certain loans with our customers, which are scheduled to mature at various dates ranging from June 2031 to July 2032.

In December 2023, one interest rate swap,

scheduled to mature in October 2037, was terminated as the hedged loan was paid off.

We had three interest rate swap agreements on certain loans with our customers, which are scheduled to mature at various dates ranging from June 2031 to July 2032.

The loan interest rate swaps were designated as fair value hedges and allowed us to offer long-term fixed-rate loans to customers without assuming the interest rate risk of a long-term asset.

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The notional amounts of the interest rate contracts are equal to the notional amounts of the hedged loans.

In the third quarter of 2023, the Bank entered into various interest rate swap agreements with notional values totaling $ 101.8 million to hedge balance sheet interest rate sensitivity and protect certain of our fixed rate available-for-sale securities against changes in fair value related to changes in interest rates by receiving floating rate interest from a counterparty in exchange for us making fixed-rate interest payments.

In the fourth quarter of 2024, the Bank terminated these contracts, resulting in an immaterial loss that is being amortized over the life of the hedged securities.

In the second quarter of 2025, a total of $ 69.1 million of par value of these securities were sold.

Information on our derivatives follows:

1 unchanged sentence

(in thousands) December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024

Available-for-sale securities:

Interest rate swaps - notional amount $ — $ — $ — $ 101,770

Interest rate swaps - fair value 1

$ — $ — $ — $ 1,359

Loans receivable:

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(in thousands) December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024

Available-for-sale securities 1

$ — $ 107,181 $ — $ ( 1,359 )

Loans receivable 1

$ 6,452 $ 7,215 $ ( 186 ) $ ( 398 )

1 Carrying value equals the amortized cost basis of the securities underlying the hedge relationship, which is the book value net of the fair value hedge adjustment.

Amortized cost excludes accrued interest totaling $ 222 thousand as of December 31, 2023.

1 Carrying value equals the amortized cost basis of the loans underlying the hedge relationship, which is the loan balance net of deferred loan origination fees and cost and the fair value hedge adjustment.

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Interest and fees on loans 1

Increase (decrease) increase in fair value of interest rate swaps hedging loans receivable

$ 47 $ ( 317 ) $ 1,687

Decrease (increase) in fair value of interest rate swaps hedging loans receivable $ ( 196 ) $ 47 $ ( 317 )

Hedged interest earned (paid) 112 201 268

Decrease (increase) in carrying value included in the hedged loans

( 30 ) 359 ( 1,666 )

Increase (decrease) in carrying value included in the hedged loans 212 ( 30 ) 359

Decrease in value of yield maintenance agreement ( 7 ) ( 8 ) ( 9 )

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We record an allowance for credit losses on unfunded loan commitments at the balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and expected loss rates determined for pooled funded loans.

The allowance for credit losses on unfunded commitments totaled $ 894 thousand and $ 1.1 million as of December 31, 2024 and 2023, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition.

We recorded reversals of the provision for credit losses on unfunded commitments totaling $ 233 thousand , $ 342 thousand and $ 318 thousand in 2024 , 2023, and 2022, respectively.

The allowance for credit losses on unfunded commitments totaled $ 1.1 million and $ 894 thousand as of December 31, 2025 and 2024, respectively, which is included in interest payable and other liabilities in the consolidated statements of condition.

We recorded a provision for credit losses on unfunded commitments totaling $ 185 thousand , and reversals of $ 233 thousand and $ 342 thousand in 2025, 2024 , and 2023, respectively.

The provision in 2025 was primarily due to loan growth.

The reversals in 2024 and 2023 were due primarily to decreases in total unfunded loan commitments.

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Accrued expenses payable $ 477 $ 141

Subordinated notes 43,857 —

Total liabilities 44,334 141

1 unchanged sentence

Total liabilities and stockholders' equity $ 438,988 $ 435,548

CONDENSED UNCONSOLIDATED STATEMENTS OF INCOME

CONDENSED UNCONSOLIDATED STATEMENTS OF (LOSS) INCOME

Years ended December 31, 2025, 2024 and 2023

2 unchanged sentences

Total income 32,000 25,000 20,000

Interest expense 368 — —

Non-interest expense 1,986 1,814 1,705

10 unchanged sentences

(in thousands) 2025 2024 2023

Cash Flows from Operating Activities:

Net income $ ( 8,409 ) $ 19,895 $ 46,586

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Earnings of bank subsidiary (greater) less than dividends received from bank subsidiary 32,029 ( 1,096 ) ( 31,649 )

Net (loss) income

$ ( 35,675 ) $ ( 8,409 ) $ 19,895

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Earnings of bank subsidiary less (greater) than dividends received from bank subsidiary 65,751 32,029 ( 1,096 )

Accretion of discount on subordinated notes 22 — —

Noncash director compensation expense 68 71 60

11 unchanged sentences

( 3,293 ) ( 4,253 ) —

Proceeds from issuance of subordinated notes, net of issuance costs

Proceeds from stock options exercised and stock issued under employee and director stock purchase plans 35 38 276

Net cash used in financing activities ( 20,476 ) ( 15,900 ) ( 16,064 )

Net cash provided by (used in) financing activities

24,345 ( 20,476 ) ( 15,900 )

Net increase (decrease) in cash and cash equivalents 24,861 3,140 2,696

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Stock issued to ESOP $ 1,476 $ 1,149 $ 1,315

Restatement of Prior Period Financial Statements (Quarterly Information Unaudited)

Restatement Background

The Company has restated herein the impacted line items to the Consolidated Statements of Condition, and revised the Consolidated Statements of Comprehensive (Loss) Income as of and for the years ended December 31, 2024 and December 31, 2023.

In addition, the Company has restated the impacted line items to its unaudited quarterly Condensed Consolidated Statements of Condition and revised the Condensed Consolidated Statements of Comprehensive (Loss) Income for the first three quarters of the years ended December 31, 2025 and December 31, 2024.

Description of Misstatements

Certain errors were made in the Company’s accounting related to the classification of certain reciprocal network deposits and related interest expense as non-interest bearing deposits and non-interest expense when they should have been included in interest bearing deposits and interest expense.

The reclassification of the expense was determined not to be material and had no impact on net income (loss) or earnings per share, for the revised periods.

The required reclassifications on the balance sheet from non-interest bearing deposits to interest bearing deposits were determined to be material, although the reclassifications did not have any impact on total balance sheet amounts, including total deposits and stockholders’ equity for the restated periods.

Description of Restated and Revised Tables

The following tables present the amounts previously reported and a reconciliation of the restatement amounts reported on the restated Consolidated Statements of Condition and the revised amounts on the Consolidated

Statements of Comprehensive (Loss) Income for the periods presented.

The misclassifications had no impact on the reported Consolidated Statements of Cash Flows for the periods below.

Further information regarding the misstatements and related restatements and revisions are summarized in the tables below.

Corrected Consolidated Statement of Condition As of

December 31, 2024

(in thousands) As Previously Reported

Non-interest bearing $ 1,399,900 $ ( 125,153 ) $ 1,274,747

Interest bearing:

Transaction accounts 198,301 125,153 323,454

Savings accounts 225,691 — 225,691

Money market accounts 1,153,746 — 1,153,746

Time accounts 242,377 — 242,377

Total deposits 3,220,015 — 3,220,015

Corrected Consolidated Statement of Comprehensive (Loss) Income Year Ended

December 31, 2024

(in thousands) As Previously Reported

Interest expense

Interest on interest-bearing transaction accounts $ 1,201 $ 3,078 $ 4,279

Interest on savings accounts 2,003 — 2,003

Interest on money market accounts 33,914 — 33,914

Interest on time accounts 9,254 — 9,254

Interest on borrowings and other obligations 241 — 241

Interest on subordinated notes — — —

Total interest expense 46,613 3,078 49,691

Non-interest expense

Deposit network fees 3,526 ( 3,078 ) 448

Corrected Consolidated Statement of Condition

December 31, 2023

(in thousands) As Previously Reported Adjustment As Restated

Non-interest bearing $ 1,441,987 $ ( 132,276 ) $ 1,309,711

Interest bearing:

Transaction accounts 225,040 132,276 357,316

Savings accounts 233,298 — 233,298

Money market accounts 1,138,433 — 1,138,433

Time accounts 251,317 — 251,317

Total deposits 3,290,075 — 3,290,075

Corrected Consolidated Statement of Comprehensive (Loss) Income Year Ended

December 31, 2023

(in thousands) As Previously Reported

Interest expense

Interest on interest-bearing transaction accounts $ 1,036 $ 2,409 $ 3,445

Interest on savings accounts 867 — 867

Interest on money market accounts 18,553 — 18,553

Interest on time accounts 4,715 — 4,715

Interest on borrowings and other obligations 11,562 — 11,562

Interest on subordinated notes — — —

Total interest expense 36,733 2,409 39,142

Non-interest expense

Deposit network fees 2,783 ( 2,409 ) 374

Corrected Consolidated Statements of Condition

September 30, 2025

June 30, 2025

(in thousands) As Previously Reported

As Previously Reported

Non-interest bearing $ 1,458,230 $ ( 212,983 ) $ 1,245,247 $ 1,379,814 $ ( 161,166 ) $ 1,218,648

Interest bearing:

Transaction accounts 185,485 212,983 398,468 180,444 161,166 341,610

Savings accounts 224,642 — 224,642 221,172 — 221,172

Money market accounts 1,297,703 — 1,297,703 1,246,013 — 1,246,013

Time accounts 216,516 — 216,516 217,605 — 217,605

Total deposits 3,382,576 — 3,382,576 3,245,048 — 3,245,048

Corrected Consolidated Statements of Condition

March 31, 2025

September 30, 2024

(in thousands) As Previously Reported

As Previously Reported

Non-interest bearing $ 1,426,446 $ ( 148,941 ) $ 1,277,505 $ 1,473,379 $ ( 141,526 ) $ 1,331,853

Interest bearing:

Transaction accounts 184,322 148,941 333,263 181,001 141,526 322,527

Savings accounts 228,038 — 228,038 222,588 — 222,588

Money market accounts 1,246,739 — 1,246,739 1,156,483 — 1,156,483

Time accounts 216,426 — 216,426 275,798 — 275,798

Total deposits 3,301,971 — 3,301,971 3,309,249 — 3,309,249

Corrected Consolidated Statements of Condition

June 30, 2024

March 31, 2024

(in thousands) As Previously Reported

As Previously Reported

Non-interest bearing $ 1,417,661 $ ( 131,760 ) $ 1,285,901 $ 1,444,435 $ ( 126,174 ) $ 1,318,261

Interest bearing:

Transaction accounts 178,712 131,760 310,472 211,274 126,174 337,448

Savings accounts 228,946 — 228,946 224,262 — 224,262

Money market accounts 1,121,336 — 1,121,336 $ 1,136,595 — 1,136,595

Time accounts 267,122 — 267,122 $ 267,536 — 267,536

Total deposits 3,213,777 — 3,213,777 3,284,102 — 3,284,102

Corrected Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

Nine Months Ended

September 30, 2025

(in thousands) As Previously Reported Adjustment As Revised As Previously Reported Adjustment As Revised

Interest expense

Interest on interest-bearing transaction accounts $ 328 $ 1,037 $ 1,365 $ 1,022 $ 2,795 $ 3,817

Interest on savings accounts 600 — 600 1,720 — 1,720

Interest on money market accounts 8,376 — 8,376 23,880 — 23,880

Interest on time accounts 1,571 — 1,571 4,920 — 4,920

Interest on borrowings and other obligations 1 — 1 3 — 3

Interest on subordinated notes — — — — — —

Total interest expense 10,876 1,037 11,913 31,545 2,795 34,340

Non-interest expense

Deposit network fees 1,158 ( 1,037 ) 121 3,144 ( 2,795 ) 349

Corrected Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

Six Months Ended

June 30, 2025

(in thousands) As Previously Reported

As Previously Reported

Interest expense

Interest on interest-bearing transaction accounts $ 351 $ 940 $ 1,291 $ 694 $ 1,758 $ 2,452

Interest on savings accounts 587 — 587 1,120 — 1,120

Interest on money market accounts 7,878 — 7,878 15,504 — 15,504

Interest on time accounts 1,559 — 1,559 3,349 — 3,349

Interest on borrowings and other obligations 1 — 1 2 — 2

Interest on subordinated notes — — — — — —

Total interest expense 10,376 940 11,316 20,669 1,758 22,427

Non-interest expense

Deposit network fees 1,054 ( 940 ) 114 1,986 ( 1,758 ) 228

Corrected Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

March 31, 2025

(in thousands) As Previously Reported

Interest expense

Interest on interest-bearing transaction accounts $ 343 $ 818 $ 1,161

Interest on savings accounts 533 — 533

Interest on money market accounts 7,626 — 7,626

Interest on time accounts 1,790 — 1,790

Interest on borrowings and other obligations 1 — 1

Interest on subordinated notes — — —

Total interest expense 10,293 818 11,111

Non-interest expense

Deposit network fees 932 ( 818 ) 114

Corrected Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

Nine Months Ended

September 30, 2024

(in thousands) As Previously Reported

As Previously Reported

Interest expense

Interest on interest-bearing transaction accounts $ 339 $ 816 $ 1,155 $ 874 $ 2,354 $ 3,228

Interest on savings accounts 565 — 565 1,447 — 1,447

Interest on money market accounts 8,714 — 8,714 25,804 — 25,804

Interest on time accounts 2,431 — 2,431 7,002 — 7,002

Interest on borrowings and other obligations 1 — 1 240 — 240

Interest on subordinated notes — — — — — —

Total interest expense 12,050 816 12,866 35,367 2,354 37,721

Non-interest expense

Deposit network fees 927 ( 816 ) 111 2,688 ( 2,354 ) 334

Corrected Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

Six Months Ended

June 30, 2024

(in thousands) As Previously Reported

As Previously Reported

Interest expense

Interest on interest-bearing transaction accounts $ 274 $ 807 $ 1,081 $ 535 $ 1,538 $ 2,073

Interest on savings accounts 511 — 511 882 — 882

Interest on money market accounts 8,641 — 8,641 17,090 — 17,090

Interest on time accounts 2,291 — 2,291 4,571 — 4,571

Interest on borrowings and other obligations 148 — 148 239 — 239

Interest on subordinated notes — — — — —

Total interest expense 11,865 807 12,672 23,317 1,538 24,855

Non-interest expense

Deposit network fees 916 ( 807 ) 109 1,761 ( 1,538 ) 223

Corrected Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

March 31, 2024

(in thousands) As Previously Reported

Interest expense

Interest on interest-bearing transaction accounts $ 261 $ 731 $ 992

Interest on savings accounts 371 — 371

Interest on money market accounts 8,449 — 8,449

Interest on time accounts 2,280 — 2,280

Interest on borrowings and other obligations 91 — 91

Interest on subordinated notes — — —

Total interest expense 11,452 731 12,183

Non-interest expense

Deposit network fees 845 ( 731 ) 114

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data