Bank of Marin Bancorp 10-Q

ITEM 1. Financial Statements BANK OF MARIN BANCORP CONSOLIDATED STATEMENTS OF CONDITION (in thousands, except share data; unaudited) March 31, 2026 December 31, 2025 Assets Cash, cash equivalents and restricted cash $ 236,644 $ 225,303 Investment securities: Available-for-sale, at fair value (net of zero allowance for credit losses at March 31, 2026 and December 31, 2025) 1,326,191 1,327,812 Total investment securities 1,326,191 1,327,812 Loans, at amortized cost 2,115,719 2,120,853 Allowance for credit losses on loans ( 22,823 ) ( 30,089 ) Loans, net of allowance for credit losses on loans 2,092,896 2,090,764 Goodwill 72,754 72,754 Bank-owned life insurance 71,095 71,306 Operating lease right-of-use assets 22,173 22,499 Bank premises and equipment, net 7,960 8,059 Core deposit intangible, net 1,716 1,916 Interest receivable and other assets 82,688 84,365 Total assets $ 3,914,117 $ 3,904,778 Liabilities and Stockholders' Equity Liabilities Deposits: Non-interest bearing $ 1,232,228 $ 1,254,416 Interest bearing: Transaction accounts 475,817 417,482 Savings accounts 226,680 232,109 Money market accounts 1,313,266 1,305,849 Time accounts 180,135 205,686 Total deposits 3,428,126 3,415,542 Borrowings and other obligations 668 709 Subordinated notes, net 43,905 43,857 Operating lease liabilities 24,553 24,747 Interest payable and other liabilities 22,373 25,269 Total liabilities 3,519,625 3,510,124 Commitments and contingent liabilities (Note 8) Stockholders' Equity Preferred stock, no par value, Authorized - 5,000,000 shares, none issued — — Common stock, no par value, Authorized - 30,000,000 shares; issued and outstanding - 16,189,707 and 16,102,687 at March 31, 2026 and December 31, 2025, respectively 215,648 214,910 Retained earnings 202,645 198,163 Accumulated other comprehensive loss, net of taxes ( 23,801 ) ( 18,419 ) Total stockholders' equity 394,492 394,654 Total liabilities and stockholders' equity $ 3,914,117 $ 3,904,778 The accompanying notes are an integral part of these consolidated financial statements (unaudited). Page-3 BANK OF MARIN BANCORP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Three months ended (in thousands, except per share amounts; unaudited) March 31, 2026 December 31, 2025 March 31, 2025 Interest income Interest and fees on loans $ 26,534 $ 27,128 $ 25,183 Interest on investment securities 13,869 11,937 8,261 Interest on due from banks 2,392 2,767 1,795 Total interest income 42,795 41,832 35,239 Interest expense Interest on interest-bearing transaction accounts 2,039 1,591 1,161 Interest on savings accounts 577 609 533 Interest on money market accounts 7,821 7,961 7,626 Interest on time accounts 1,242 1,516 1,790 Interest on borrowings and other obligations 6 6 1 Interest on subordinated notes 808 368 — Total interest expense 12,493 12,051 11,111 Net interest income 30,302 29,781 24,128 Provision for credit losses on loans — 300 75 Provision for credit losses on unfunded loan commitments — 185 — Net interest income after provision for credit losses 30,302 29,296 24,053 Non-interest income Dividends on Federal Home Loan Bank stock 855 372 375 Wealth management and trust services 596 573 563 Service charges on deposit accounts 563 543 548 Earnings on bank-owned life insurance, net 487 440 476 Earnings on bank-owned life insurance death benefits 479 — 68 Debit card interchange fees, net 362 401 396 Merchant interchange fees, net 118 104 96 Losses on sale of investment securities — ( 69,466 ) — Other income 374 385 352 Total non-interest income (loss) 3,834 ( 66,648 ) 2,874 Non-interest expense Salaries and related benefits 13,394 11,359 12,050 Occupancy and equipment 2,099 2,098 2,106 Data processing 1,228 1,033 1,136 Professional services 1,093 1,341 937 Federal Deposit Insurance Corporation insurance 730 539 388 Information technology 515 532 413 Charitable contributions 437 82 403 Directors' expense 285 283 304 Depreciation and amortization 263 331 322 Amortization of core deposit intangible 200 211 227 Deposit network fees 149 127 114 Other expense 2,146 2,087 2,046 Total non-interest expense 22,539 20,023 20,446 Income (loss) before provision for (benefit from) income taxes 11,597 ( 57,375 ) 6,481 Provision for (benefit from) income taxes 3,087 ( 17,834 ) 1,605 Net income (loss) $ 8,510 $ ( 39,541 ) $ 4,876 Net income (loss) per common share Basic $ 0.53 $ ( 2.49 ) $ 0.31 Diluted $ 0.53 $ ( 2.49 ) $ 0.30 Weighted average shares: Basic 15,925 15,898 15,977 Diluted 15,973 15,898 16,002 Comprehensive income (loss): Net income (loss) $ 8,510 $ ( 39,541 ) $ 4,876 Other comprehensive (loss) income: Change in net unrealized (losses) gains on available-for-sale securities ( 7,642 ) 4,933 3,289 Reclassification adjustment for losses realized on the sale of available-for-sale securities in net loss — 69,466 — Net unrealized losses on securities transferred from held-to-maturity to available-for-sale — ( 92,842 ) — Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity — 9,867 340 Other comprehensive (loss) income, before tax ( 7,642 ) ( 8,576 ) 3,629 Deferred tax (benefit) expense ( 2,260 ) ( 2,533 ) 1,073 Other comprehensive (loss) income, net of tax ( 5,382 ) ( 6,043 ) 2,556 Total comprehensive income (loss) $ 3,128 $ ( 45,584 ) $ 7,432 The accompanying notes are an integral part of these consolidated financial statements (unaudited). Page-4 BANK OF MARIN BANCORP CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the three months ended March 31, 2026 and 2025 (in thousands, except share data; unaudited) Common Stock Retained Earnings Accumulated Other Comprehensive Loss, Net of Taxes Total Shares Amount Three months ended March 31, 2026 Balance at January 1, 2026 16,102,687 $ 214,910 $ 198,163 $ ( 18,419 ) $ 394,654 Net income — — 8,510 — 8,510 Other comprehensive loss, net of tax — — — ( 5,382 ) ( 5,382 ) Stock options exercised, net of shares surrendered for cashless exercises and tax withholdings 1,200 30 — — 30 Stock issued under employee stock purchase plan 356 9 — — 9 Stock issued under employee stock ownership plan 15,000 373 — — 373 Restricted stock granted 93,071 — — — — Restricted stock surrendered for tax withholdings upon vesting ( 5,994 ) ( 162 ) — — ( 162 ) Restricted stock forfeited / cancelled ( 24,938 ) — — — — Stock-based compensation - restricted stock — 274 — — 274 Cash dividends paid on common stock ($ 0.25 per share) — — ( 4,028 ) — ( 4,028 ) Stock issued in payment of director fees 8,325 214 — — 214 Balance at March 31, 2026 16,189,707 $ 215,648 $ 202,645 $ ( 23,801 ) $ 394,492 Three months ended March 31, 2025 Balance at January 1, 2025 16,089,454 $ 215,511 $ 249,964 $ ( 30,068 ) $ 435,407 Net income — — 4,876 — 4,876 Other comprehensive income, net of tax — — — 2,556 2,556 Stock issued under employee stock purchase plan 402 8 — — 8 Stock issued under employee stock ownership plan 17,000 417 — — 417 Restricted stock granted 90,205 — — — — Restricted stock surrendered for tax withholdings upon vesting ( 3,957 ) ( 96 ) — — ( 96 ) Restricted stock forfeited / cancelled ( 1,070 ) — — — — Stock-based compensation - stock options — 5 — — 5 Stock-based compensation - restricted stock — 163 — — 163 Cash dividends paid on common stock ($ 0.25 per share) — — ( 4,025 ) — ( 4,025 ) Stock issued in payment of director fees 10,835 255 — — 255 Balance at March 31, 2025 16,202,869 $ 216,263 $ 250,815 $ ( 27,512 ) $ 439,566 The accompanying notes are an integral part of these consolidated financial statements (unaudited). Page-5 BANK OF MARIN BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2026 and 2025 (in thousands; unaudited) 2026 2025 Cash Flows from Operating Activities: Net income (loss) $ 8,510 $ 4,876 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for credit losses on loans — 75 Noncash contribution expense to employee stock ownership plan 373 417 Noncash director compensation expense 215 255 Stock-based compensation expense 274 168 Amortization of core deposit intangible 200 227 Amortization of investment security premiums, net of accretion of discounts ( 38 ) 277 Accretion of discounts on acquired loans, net 5 45 Accretion of discount on subordinated notes 48 — Net change in deferred loan origination costs/fees 77 ( 9 ) Depreciation and amortization 263 322 Earnings on bank-owned life insurance policies ( 487 ) ( 476 ) Earnings on bank-owned life insurance death benefits ( 479 ) ( 68 ) Net changes in: Net changes in interest receivable and other assets ( 5,117 ) 2,050 Net changes in interest payable and other liabilities ( 2,759 ) ( 3,223 ) Total adjustments ( 7,425 ) 60 Net cash provided by operating activities 1,085 4,936 Cash Flows from Investing Activities: Purchase of available-for-sale securities ( 65,196 ) ( 33,561 ) Proceeds from paydowns/maturities of held-to-maturity securities — 44,681 Proceeds from paydowns/maturities of available-for-sale securities 59,213 18,316 Proceeds from sales of non-accrual loans 9,067 1,295 (Increase) decrease in loans receivable, net ( 2,233 ) 8,958 Proceeds from bank-owned life insurance policies 1,177 504 Purchase of premises and equipment ( 164 ) ( 314 ) Net cash provided by investing activities 1,864 39,879 Cash Flows from Financing Activities: Net increase in deposits 12,584 81,956 Repayment of finance lease obligations ( 41 ) ( 38 ) Proceeds from stock options exercised 30 — Restricted stock surrendered for tax withholdings upon vesting ( 156 ) ( 96 ) Cash dividends paid on common stock ( 4,028 ) ( 4,025 ) Stock repurchased ( 6 ) — Proceeds from stock issued under employee and director stock purchase plans 9 8 Net cash provided by financing activities 8,392 77,805 Net increase in cash, cash equivalents and restricted cash 11,341 122,620 Cash, cash equivalents and restricted cash at beginning of period 225,303 137,304 Cash, cash equivalents and restricted cash at end of period $ 236,644 $ 259,924 Supplemental disclosure of cash flow information: Interest paid on deposits and borrowings $ 12,290 $ 10,806 Income taxes paid, net of refunds $ ( 421 ) $ — Supplemental disclosure of noncash investing and financing activities: Change in net unrealized gains or losses on available-for-sale securities $ ( 7,642 ) $ 3,289 Amortization of net unrealized loss on available-for-sale securities transferred to held-to-maturity $ — $ 340 The accompanying notes are an integral part of these consolidated financial statements (unaudited). Page-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1: Basis of Presentation The consolidated financial statements include the accounts of Bancorp, a bank holding company, and its wholly-owned bank subsidiary, Bank of Marin, a California state-chartered commercial bank. References to “we,” “our,” “us” and "the Company" mean Bancorp and the Bank that are consolidated for financial reporting purposes. The accompanying unaudited consolidated interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations. Although we believe that the disclosures are adequate and the information presented is not misleading, we suggest that these interim financial statements be read in conjunction with the annual financial statements and the notes thereto included in our 2025 Annual Report on Form 10-K. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which are necessary for a fair presentation of the consolidated financial position, the results of operations, changes in comprehensive income, changes in stockholders’ equity, and cash flows for the periods presented. All material intercompany transactions have been eliminated. The results of these interim periods may not be indicative of the results for the full year or for any other period. Segment Reporting: Our Chief Operating Decision Maker ("CODM") is our Chief Executive Officer, who reviews our financial information on a consolidated basis for purposes of evaluating financial performance and allocating resources. We have one operating and reportable segment, community banking, and our other operating segment, wealth management services, does not meet the quantitative threshold for separate reporting. Our CODM reviews consolidated net income (loss) before provision for income taxes as our primary measure of profitability alongside significant expense information consistent with the expense captions presented in our Consolidated Statements of Comprehensive Income (Loss). These metrics are used by our CODM to monitor actual results and to benchmark to our peers. Segment assets are equal to consolidated total assets in our Consolidated Statements of Condition and all segment non-cash items are equal to those disclosed in our Consolidated Statements of Cash Flows. We derive materially all of our income or loss from activities within the United States, and materially all of our long lived assets are physically located within the United States. No single customer or client relationship accounts for ten percent or more of our income or loss. Page-7 Segment revenue, profit or loss, significant segment expenses and other segment items Three months ended (in thousands) March 31, 2026 December 31, 2025 March 31, 2025 Community banking segment: Interest income $ 42,795 $ 41,832 $ 35,239 Non-interest income 3,238 ( 67,221 ) 2,311 Reconciliation of income All other income 1 596 573 563 Total consolidated income 46,629 ( 24,816 ) 38,113 Less: 2 Total interest expense 12,493 12,051 11,111 Provision for credit losses on loans — 300 75 Provision for credit losses on unfunded loan commitments — 185 — Non-interest expense Salaries and related benefits 13,184 11,153 11,838 Occupancy and equipment 2,099 2,097 2,106 Data processing 1,154 996 1,079 Professional services 938 1,146 784 Federal Deposit Insurance Corporation insurance 730 539 388 Information technology 515 532 413 Charitable contributions 437 82 403 Directors' expense 285 283 304 Depreciation and amortization 263 331 322 Amortization of core deposit intangible 200 211 227 Deposit network fees 149 127 114 Other expense 2,135 2,072 2,036 Segment income (loss) 12,047 ( 56,921 ) 6,913 Reconciliation of segment income All other income 1 450 454 432 Income (loss) before income taxes $ 11,597 $ ( 57,375 ) $ 6,481 1 All other income and loss from segment below the quantitative thresholds are attributable to one operating segment of the Bank, the Wealth Management and Trust Services, which does not meet the quantitative thresholds for presenting reportable segments. Expenses of Wealth Management and Trust Services are comprised of salary and employee benefits, professional services, data processing, occupancy and equipment and other expenses totaling $ 450 thousand, $ 454 thousand and $ 432 thousand for the three months ended March 31, 2026, December 31, 2025 and March 31, 2025, respectively, 2 The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. Earnings Per Share: The following table shows: 1) weighted average basic shares, 2) potentially dilutive weighted average common shares related to stock options and unvested restricted stock awards, and 3) weighted average diluted shares. Basic earnings (loss) per share (“EPS”) are calculated by dividing net income (loss) by the weighted average number of common shares outstanding during each period, excluding unvested restricted stock awards. Diluted EPS are calculated using the weighted average number of potentially dilutive common shares. The number of potentially dilutive common shares included in the quarterly diluted EPS is computed using the average market prices during the three months included in the reporting period under the treasury stock method. The number of potentially dilutive common shares included in year-to-date diluted EPS is a year-to-date weighted average of potentially dilutive common shares included in each quarterly diluted EPS computation. In computing diluted EPS, we exclude anti-dilutive shares such as options whose exercise prices exceed the current common stock price, as they would not reduce EPS under the treasury stock method. We have two forms of outstanding common stock: common stock and unvested restricted stock awards. Holders of unvested restricted stock awards receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings. Under the two-class method, the difference in EPS is nominal for these participating securities. Page-8 Three months ended (in thousands, except per share data) March 31, 2026 March 31, 2025 Weighted average basic common shares outstanding 15,925 15,977 Potentially dilutive common shares related to: Stock options 1 — Unvested restricted stock awards 47 25 Weighted average diluted common shares outstanding 15,973 16,002 Net income $ 8,510 $ 4,876 Basic income per common share $ 0.53 $ 0.31 Diluted income per common share $ 0.53 $ 0.30 Weighted average anti-dilutive common shares and unvested restricted shares not included in the calculation of diluted EPS 188 274 Note 2: Recently Adopted and Issued Accounting Standards Accounting Standards Adopted in 2026 We have not adopted any new accounting standards during three months ended March 31, 2026. Accounting Standards Not Yet Adopted In November 2024, the FASB issued 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., year ended December 31, 2027 Form 10-K) and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. 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 accounting 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 Page-9 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. Note 3: Fair Value of Assets and Liabilities Fair Value Hierarchy and Fair Value Measurement We group our assets and liabilities that are measured at fair value into three levels within the fair value hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: Level 1: Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations for which all significant assumptions are observable or can be corroborated by observable market data. Level 3: Valuations are based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Values are determined using pricing models and discounted cash flow models and may include significant management judgment and estimation. Transfers between levels of the fair value hierarchy are recognized through our monthly and/or quarterly valuation process in the reporting period during which the event or circumstances that caused the transfer occurred. No such transfers occurred in the years presented. The following table summarizes our assets and liabilities that were required to be recorded at fair value on a recurring basis. (in thousands) Description of Financial Instruments Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Measurement Categories: Changes in Fair Value Recorded In 1 March 31, 2026 Securities available-for-sale: Commercial mortgage-backed securities, mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies $ 1,252,460 $ — $ 1,252,460 $ — OCI Debentures of government sponsored agencies $ 23,561 $ — $ 23,561 $ — OCI Obligations of state and political subdivisions $ 50,170 $ — $ 50,170 $ — OCI Derivative financial assets (interest rate contracts) $ 163 $ — $ 163 $ — NI Derivative financial liabilities (interest rate contracts) $ 2 $ — $ 2 $ — NI December 31, 2025 Securities available-for-sale: Commercial mortgage-backed securities, mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies $ 1,250,230 $ — $ 1,250,230 $ — OCI Debentures of government sponsored agencies $ 23,694 $ — $ 23,694 $ — OCI Obligations of state and political subdivisions $ 53,888 $ — $ 53,888 $ — OCI Derivative financial assets (interest rate contracts) $ 148 $ — $ 148 $ — NI Derivative financial liabilities (interest rate contracts) $ 11 $ — $ 11 $ — NI 1 Other comprehensive income ("OCI") or net income ("NI"). Available-for-sale securities are recorded at fair value on a recurring basis. When available, quoted market prices (Level 1) are used to determine the fair value of available-for-sale 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 obligations of state and political subdivisions, U.S. agencies or Page-10 government-sponsored agencies' debt securities, mortgage-backed securities, government agency-issued securities, and corporate bonds. As of March 31, 2026 and December 31, 2025, there were no Level 3 securities. The Bank did not hold any held-to-maturity securities at March 31, 2026. We did not record any credit loss expense on held-to-maturity securities during the three months ended March 31, 2025. Fair value of held-to-maturity securities is determined using the same techniques discussed above for available-for-sale 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. Standard valuation techniques are used to calculate the present value of the future expected cash flows assuming an orderly transaction. Valuation adjustments may be made to reflect both our own credit risk and the counterparties’ credit risk in determining the fair value of the derivatives. These unobservable inputs are not considered significant inputs to the fair value measurement overall. Level 2 inputs for the valuations are limited to observable market prices for Secured Overnight Financing Rate ("SOFR") and Overnight Index Swap ("OIS") rates (for the very short term), quoted prices for SOFR futures contracts, observable market prices for SOFR and OIS swap rates, and one-month and three-month SOFR basis spreads at commonly quoted intervals. Mid-market pricing of the inputs is used as a practical expedient in the fair value measurements. We project spot rates at reset days specified by each swap contract to determine future cash flows, then discount to present value using OIS curves as of the measurement date. When the value of any collateral placed with counterparties is less than the interest rate derivative liability, a credit valuation adjustment ("CVA") is applied to reflect the credit risk we pose to counterparties. We have used the spread between the Standard & Poor's BBB rated U.S. Bank Composite rate and SOFR for the closest maturity term corresponding to the duration of the swaps to derive the CVA. Because there is little to no counterparty risk, we did not incorporate credit adjustments from our assessment of the counterparty credit risk in determining fair value. For further discussion on our methodology for valuing our derivative financial instruments, refer to Note 10, Derivative Financial Instruments and Hedging Activities, to the consolidated financial statements in this Form 10-Q. Certain financial assets may be measured at fair value on a non-recurring basis. 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"). As of March 31, 2026 and December 31, 2025, we carried assets measured at fair value on a non-recurring basis totaling $ 8.4 million and $ 18.9 million, respectively, which were all individually analyzed loans that are collateral dependent (Level 3) net of specific allowances of $ 17 thousand and $ 7.2 million, respectively. (in thousands) Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Disclosures about Fair Value of Financial Instruments The table below is a summary of fair value estimates for financial instruments as of March 31, 2026 and December 31, 2025, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note). The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions. 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 March 31, 2026 and December 31, 2025. 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 March 31, 2026 or December 31, 2025. See further discussion on values within Note 4, Investment Securities, to the consolidated financial statements in this Form 10-Q. March 31, 2026 December 31, 2025 (in thousands) Carrying Amounts Fair Value Fair Value Hierarchy Carrying Amounts Fair Value Fair Value Hierarchy Financial assets (recorded at amortized cost) Cash and cash equivalents $ 236,644 $ 236,644 Level 1 $ 225,303 $ 225,303 Level 1 Loans, net of allowance for credit losses 2,092,896 2,049,126 Level 3 2,090,764 2,043,150 Level 3 Interest receivable 11,516 11,516 Level 2 11,561 11,561 Level 2 Financial liabilities (recorded at amortized cost) Time deposits 180,135 180,410 Level 2 205,686 206,040 Level 2 Subordinated notes 43,905 44,436 Level 2 43,857 44,852 Level 2 Interest payable 2,275 2,275 Level 2 2,072 2,072 Level 2 Page-11 The fair value of loans is based on exit price techniques and obtained from an independent third-party that uses its proprietary valuation model and methodology and may differ from the actual price from a prospective buyer. The discounted cash flow valuation approach reflects key inputs and assumptions that are unobservable, such as loan probability of default, loss given default, prepayment speed, and market discount rates. 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. The fair value of commitment fees was not material as of March 31, 2026 or December 31, 2025. Note 4: Investment Securities Our investment securities portfolio consists of obligations of state and political subdivisions and debentures of U.S. government-sponsored enterprises ("GSEs"), such as the Federal National Mortgage Association ("FNMA"), Federal Farm Credit Banks Funding Corporation ("FFCB") and Federal Home Loan Bank ("FHLB"). We also invest in residential and commercial mortgage-backed securities (“MBS”/"CMBS") and collateralized mortgage obligations (“CMOs”) issued or guaranteed by government agencies and GSEs, as reflected in the following table. Held-to-maturity: Amortized Cost 1 Allowance for Credit Losses Net Carrying Amount Gross Unrealized Fair Value The Bank did not hold any HTM securities at March 31, 2026. 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. Obligations of state and political subdivisions Corporate bonds A summary of the amortized cost, fair value and allowance for credit losses related to securities available-for-sale as of March 31, 2026 and December 31, 2025 is presented below. Available-for-sale: Amortized Cost 1 Gross Unrealized Allowance for Credit Losses Fair Value (in thousands) Gains (Losses) March 31, 2026 Securities of Government Agencies and GSEs: CMBS issued by FHLMC 2 , FNMA 3 and GNMA 4 $ 489,267 $ 378 $ ( 13,348 ) $ — $ 476,297 CMOs issued by FHLMC, FNMA and GNMA 190,704 435 ( 1,280 ) — 189,859 MBS pass-through securities issued by FHLMC, FNMA and GNMA 591,893 275 ( 5,864 ) — 586,304 Debentures of government- sponsored enterprises 29,988 — ( 6,427 ) — 23,561 Obligations of state and political subdivisions 58,130 — ( 7,960 ) — 50,170 Total available-for-sale $ 1,359,982 $ 1,088 $ ( 34,879 ) $ — $ 1,326,191 December 31, 2025 Securities of Government Agencies and GSEs: CMBS issued by FHLMC, FNMA and GNMA $ 470,598 $ 1,052 $ ( 12,347 ) $ — $ 459,303 CMOs issued by FHLMC, FNMA and GNMA 208,752 818 ( 949 ) — 208,621 MBS pass-through securities issued by FHLMC, FNMA and GNMA 583,409 1,639 ( 2,742 ) — 582,306 Debentures of government- sponsored enterprises 29,988 — ( 6,294 ) — 23,694 Obligations of state and political subdivisions 61,214 — ( 7,326 ) — 53,888 Total available-for-sale $ 1,353,961 $ 3,509 $ ( 29,658 ) $ — $ 1,327,812 1 Amortized cost and fair value exclude accrued interest receivable of $ 4.6 million and $ 4.8 million at March 31, 2026 and December 31, 2025, respectively, which is included in interest receivable and other assets in the consolidated statements of condition. 2 Federal Home Loan Mortgage Corporation 3 Federal National Mortgage Association 4 Government National Mortgage Association Page-12 The amortized cost a nd fair value of investment debt securities by contractual maturity at March 31, 2026 and December 31, 2025 are shown below. Expected maturities may differ from contractual maturities if the issuers of the securities have the right to call or prepay obligations with or without call or prepayment penalties. March 31, 2026 December 31, 2025 Available-for-Sale Available-for-Sale (in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Within one year $ 18,334 $ 18,300 $ 21,905 $ 21,884 After one but within five years 299,652 298,682 277,409 277,643 After five years through ten years 424,780 411,814 366,118 364,430 After ten years 617,216 597,395 688,529 663,855 Total $ 1,359,982 $ 1,326,191 $ 1,353,961 $ 1,327,812 There were no sales of investment securities in the first quarters of 2026 or 2025. Three months ended The reported values of pledged investment securities are shown in the following table. (in thousands) March 31, 2026 December 31, 2025 Pledged to the State of California: Secure public deposits in compliance with the Local Agency Security Program $ 299,849 $ 311,543 Collateral for trust deposits 1,000 1,010 Collateral for Wealth Management and Trust Services checking account 1,250 1,260 Total investment securities pledged to the State of California 302,099 313,813 Bankruptcy trustee deposits pledged with Federal Reserve Bank 1,967 1,992 Pledged to FHLB Securities-Backed Credit Program 214,610 224,787 Pledged to the Federal Reserve Discount Window 279,808 297,610 Total pledged investment securities $ 798,484 $ 838,202 There were 181 and 114 securities in unrealized loss positions at March 31, 2026 and December 31, 2025, respectively. Those securities are summarized and classified according to the duration of the loss period in the tables below: March 31, 2026 < 12 continuous months ≥ 12 continuous months Total securities in a loss position (in thousands) Fair value Unrealized loss Fair value Unrealized loss Fair value Unrealized loss Available-for-sale: CMBS issued by FHLMC, FNMA and GNMA $ 271,207 $ ( 960 ) $ 115,882 $ ( 12,388 ) $ 387,089 $ ( 13,348 ) CMOs issued by FHLMC, FNMA and GNMA 73,579 ( 478 ) 15,784 ( 802 ) 89,363 ( 1,280 ) MBS pass-through securities issued by FHLMC, FNMA and GNMA 515,415 ( 3,476 ) 13,081 ( 2,388 ) 528,496 ( 5,864 ) Debentures of government- sponsored agencies — — 23,561 ( 6,427 ) 23,561 ( 6,427 ) Obligations of state and political subdivisions 6,764 ( 64 ) 43,406 ( 7,896 ) 50,170 ( 7,960 ) Total available-for-sale 866,965 ( 4,978 ) 211,714 ( 29,901 ) 1,078,679 ( 34,879 ) Total securities at loss position $ 866,965 $ ( 4,978 ) $ 211,714 $ ( 29,901 ) $ 1,078,679 $ ( 34,879 ) Page-13 December 31, 2025 < 12 continuous months ≥ 12 continuous months Total securities in a loss position (in thousands) Fair value Unrealized loss Fair value Unrealized loss Fair value Unrealized loss Available-for-sale: CMBS issued by FHLMC, FNMA and GNMA $ 142,774 $ ( 218 ) $ 108,282 $ ( 12,129 ) $ 251,056 $ ( 12,347 ) CMOs issued by FHLMC, FNMA and GNMA 27,833 ( 165 ) 36,861 ( 784 ) 64,694 ( 949 ) MBS pass-through securities issued by FHLMC, FNMA and GNMA 113,487 ( 386 ) 13,574 ( 2,356 ) 127,061 ( 2,742 ) Debentures of government- sponsored agencies — — 23,693 ( 6,294 ) 23,693 ( 6,294 ) Obligations of state and political subdivisions 247 ( 3 ) 50,616 ( 7,323 ) 50,863 ( 7,326 ) Total available-for-sale $ 284,341 $ ( 772 ) $ 233,026 $ ( 28,886 ) $ 517,367 $ ( 29,658 ) As of March 31, 2026, the investment portfolio included 70 investment securities that had been in a continuous loss position for twelve months or more and 111 investment securities that had been in a loss position for less than twelve months. Securities issued by government-sponsored enterprises, such as FNMA and FHLMC, usually have implicit credit support from the U.S. federal government. However, since 2008, FNMA and FHLMC have been under government conservatorship and, therefore, contractual cash flows for these investments carry explicit guarantees by the U.S. federal government while FNMA and FHLMC remain under conservatorship. Securities issued by GNMA have explicit credit guarantees by the U.S. federal government, which protects us from credit losses on the contractual cash flows of the securities. 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 to credit risk factors at either March 31, 2026 or December 31, 2025. In addition, for any available-for-sale securities in an unrealized loss position at March 31, 2026 and December 31, 2025, 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. Because the Bank did not intend to sell those securities that were in an unrealized loss position, and it was not more-likely-than-not that the Bank would be required to sell the securities before recovery of their amortized cost bases, the Bank determined that no write-down was necessary as of the reporting date. Non-Marketable Securities Included in Other Assets FHLB Capital Stock As a member of the FHLB, we are required to maintain a minimum investment in FHLB capital stock as determined by the Board of Directors of the FHLB. The minimum investment requirements can increase in the event we increase our borrowings with the FHLB. Shares cannot be purchased or sold except between the FHLB and its members at the $ 100 per share par value. On January 2, 2026 FHLB converted its legacy Class B stock into Membership-based stock ("Class B-1"), which is tied to membership asset requirements, and Activity-based stock ("Class B-2"), which is tied to borrowing activity. We held $ 16.7 million of Class B-1 shares and no Class B-2 shares included in other assets on the consolidated statements of condition at March 31, 2026. We held $ 16.7 million of FHLB stock at December 31, 2025. The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks, and they do not have a readily determinable market value. Based on our analysis of FHLB's financial condition and certain qualitative factors, we determined that the FHLB stock w as not im paired at March 31, 2026 and December 31, 2025. On April 24, 2026, FHLB announced a cash dividend on their Class B-1 stock for the first quarter of 2026 at an annualized dividend rate of 4.75 % to be distributed in mid-May 2026. Cash dividends paid on FHLB capital stock are recorded as non-interest income. Page-14 Note 5: Loans and Allowance for Credit Losses on Loans The following table presents the amortized cost of loans by portfolio class as of March 31, 2026 and December 31, 2025. (in thousands) March 31, 2026 December 31, 2025 Commercial and industrial $ 159,028 $ 159,898 Real estate: Commercial owner-occupied 308,905 310,219 Commercial non-owner occupied 1,373,332 1,366,251 Construction 14,215 15,101 Home equity 98,445 99,222 Other residential 105,502 110,614 Installment and other consumer loans 56,292 59,548 Total loans, at amortized cost 1 2,115,719 2,120,853 Allowance for credit losses on loans ( 22,823 ) ( 30,089 ) Total loans, net of allowance for credit losses on loans $ 2,092,896 $ 2,090,764 1 Amortized cost includes net deferred loan origination costs of $ 2.2 million and $ 2.2 million at March 31, 2026 and December 31, 2025, respectively. Amounts are also net of unrecognized purchase discounts of $ 1.0 million and $ 1.3 million at March 31, 2026 and December 31, 2025, respectively. Amortized cost excludes accrued interest, which totaled $ 6.9 million and $ 6.8 million at March 31, 2026 and December 31, 2025, respectively, and is included in interest receivable and other assets in the consolidated statements of condition. Lending Risks Commercial and Industrial Loans - Commercial loans are generally made to established small and mid-sized businesses to provide financing for their growth and working capital needs, equipment purchases and acquisitions. Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed. Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and guarantor support. The cash flows of borrowers, however, may not occur as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed, such as accounts receivable and inventory, and typically include personal guarantees. We target stable businesses with guarantors who provide additional sources of repayment and have proven to be resilient in periods of economic stress. A weakened economy, and the resultant decreased consumer and/or business spending, may have an effect on the credit quality of commercial loans. Commercial Real Estate Loans - Commercial real estate loans, which include income producing investment properties and owner-occupied real estate used for business purposes, are subject to underwriting standards and processes similar to commercial loans discussed above. We underwrite these loans to be repaid from cash flow from either the business or investment property and supported by real property collateral. Underwriting standards for commercial real estate loans include, but are not limited to, debt coverage and loan-to-value ratios. Furthermore, a large majority of our loans are guaranteed by the owners of the properties. Conditions in the real estate markets or a downturn in the general economy may adversely affect our commercial real estate loans. In the event of a vacancy, we expect guarantors to carry the loans until they find a replacement tenant. The owner's substantial equity investment provides a strong economic incentive to continue to support their commercial real estate projects. As such, we have generally experienced a relatively low level of losses and delinquencies in this portfolio. Construction Loans - Construction loans are generally made to developers and builders to finance construction, renovation and occasionally land acquisitions in anticipation of near-term development. Construction loans include interest reserves that are used for the payment of interest during the development and marketing periods and are capitalized as part of the loan balance. When a construction loan is placed on non-accrual status before the depletion of the interest reserve, we apply the interest funded by the interest reserve against the loan's principal balance. These loans are underwritten after an evaluation of the borrower's financial strength, reputation, prior track record, and independent appraisals. We monitor all construction projects to determine whether they are on schedule, completed as planned and in accordance with the approved construction budgets. Significant events can affect the construction industry, including: the inherent volatility of real estate markets and vulnerability to delays due Page-15 to weather, change orders, inability to obtain construction permits, labor or material shortages, and price changes. Estimates of construction costs and value associated with the completed project may be inaccurate. Repayment of construction loans is largely dependent on the ultimate success of the project. Consumer Loans - Consumer loans primarily consist of home equity lines of credit, other residential loans, floating homes, and indirect luxury auto loans, along with a small number of installment loans. Our other residential loans include tenancy-in-common fractional interest loans ("TIC") located almost entirely in San Francisco County. We originate consumer loans utilizing credit score information, debt-to-income ratio, and loan-to-value ratio analysis. Diversification among consumer loan types, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk. We do not originate sub-prime residential mortgage loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages," the characteristics of which are reduced documentation, borrowers with low FICO scores, or collateral with high loan-to-value ratios. Credit Quality Indicators We use a risk rating system to evaluate asset quality, and to identify and monitor credit risk in individual loans, and in the loan portfolio. Our definitions of “Special Mention” risk graded loans, or worse, are consistent with those used by the Federal Deposit Insurance Corporation ("FDIC"). Our internally assigned grades are as follows: Pass and Watch - Loans to borrowers of acceptable or better credit quality. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history and management expertise. Loans in this category must have an identifiable and stable source of repayment and meet the Bank’s policy regarding debt-service-coverage ratios. These borrowers are capable of sustaining normal economic, market or operational setbacks without significant financial consequences. Negative external industry factors are generally not present. The loan may be secured, unsecured, or supported by non-real estate collateral for which the value is more difficult to determine and/or whose marketability is more uncertain. This category also includes “Watch” loans, where the primary source of repayment has been delayed. The “Watch” risk rating is intended to be a transitional grade, with either an upgrade or downgrade within a reasonable period. Special Mention - Potential weaknesses that deserve close attention. If left uncorrected, those potential weaknesses may result in deterioration of the payment prospects for the asset. Special Mention assets do not present sufficient risk to warrant adverse classification. Substandard - Inadequately protected by either the current sound worth and paying capacity of the obligor or the collateral pledged, if any. A Substandard asset has well-defined weaknesses that jeopardize the liquidation of the debt. Substandard assets are characterized by the distinct possibility that we will sustain some loss if such weaknesses or deficiencies are not corrected. Well-defined weaknesses include adverse trends or developments in the borrower’s financial condition, managerial weaknesses and/or significant collateral deficiencies. Doubtful - Critical weaknesses that make collection or liquidation in full improbable. There may be specific pending events that work to strengthen the asset; however, the amount or timing of the loss may not be determinable. Pending events generally occur within one year of the asset being classified as Doubtful. Examples include: merger, acquisition, or liquidation; capital injection; guarantee; perfecting liens on additional collateral; and refinancing. Such loans are placed on non-accrual status and are usually collateral-dependent. We regularly review our credits for the accuracy of risk grades whenever we receive new information and at each quarterly and year-end reporting period. Borrowers are generally required to submit financial information at regular intervals. Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals ranging from monthly to annually depending on credit size, risk and complexity. In addition, investor commercial real estate borrowers with loans exceeding a certain dollar threshold are usually required to submit rent rolls or property income statements annually. We monitor construction loans monthly. We review home equity and other consumer loans based on delinquency. We also review loans graded “Watch” or worse, regardless of loan type, no less than quarterly. The following tables present the loan portfolio by loan portfolio class, origination/renewal year and internal risk rating as of March 31, 2026 and December 31, 2025. The current year vintage table reflects year to date gross charge-offs by loan portfolio class and year of origination. Generally, existing term loans that were re-underwritten are reflected in the table in the year of renewal. Lines of credit that have a conversion feature at the time of origination, such as construction to perm loans, are presented by year of origination. Page-16 (in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost March 31, 2026 2026 2025 2024 2023 2022 Prior Total Commercial and industrial: Pass and Watch $ 2,617 $ 32,446 $ 5,825 $ 14,095 $ 5,634 $ 21,372 $ 63,123 $ 145,112 Special Mention — 1,001 2,330 — — 72 10,471 13,874 Substandard — 28 13 — — — 1 42 Total commercial and industrial $ 2,617 $ 33,475 $ 8,168 $ 14,095 $ 5,634 $ 21,444 $ 73,595 $ 159,028 Gross current period charge-offs $ — $ ( 19 ) $ — $ — $ — $ — $ ( 53 ) $ ( 72 ) Commercial real estate, owner-occupied: Pass and Watch $ 7,354 $ 25,852 $ 12,011 $ 10,914 $ 35,417 $ 165,568 $ 305 $ 257,421 Special Mention 161 7,226 $ — — 4,038 36,961 48,386 Substandard — — — — 3,098 — — 3,098 Total commercial real estate, owner-occupied $ 7,515 $ 33,078 $ 12,011 $ 10,914 $ 42,553 $ 202,529 $ 305 $ 308,905 Commercial real estate, non-owner occupied: Pass and Watch $ 51,335 $ 235,643 $ 98,230 $ 49,896 $ 154,212 $ 698,268 $ 14,336 $ 1,301,920 Special Mention 3,797 18,334 $ 1,020 — — 34,020 — 57,171 Substandard — 2,621 — — — 11,620 — 14,241 Total commercial real estate, non-owner occupied $ 55,132 $ 256,598 $ 99,250 $ 49,896 $ 154,212 $ 743,908 $ 14,336 $ 1,373,332 Gross current period charge-offs $ — $ — $ — $ — $ — $ ( 7,192 ) $ — $ ( 7,192 ) Construction: Pass and Watch $ 427 $ 5,381 $ 8,407 $ — $ — $ — $ — $ 14,215 Total construction $ 427 $ 5,381 $ 8,407 $ — $ — $ — $ — $ 14,215 Home equity: Pass and Watch $ — $ 96 $ 45 $ 13 $ — $ 592 $ 97,415 $ 98,161 Substandard — — — — — 158 126 284 Total home equity $ — $ 96 $ 45 $ 13 $ — $ 750 $ 97,541 $ 98,445 Other residential: Pass and Watch $ 300 $ 2,963 $ 12,285 $ 15,130 $ 17,161 $ 57,593 $ — $ 105,432 Substandard — — — 70 — — — 70 Total other residential $ 300 $ 2,963 $ 12,285 $ 15,200 $ 17,161 $ 57,593 $ — $ 105,502 Installment and other consumer: Pass and Watch $ 1,812 $ 9,724 $ 12,591 $ 9,230 $ 6,844 $ 14,342 $ 1,545 $ 56,088 Substandard — — — 176 — 28 — 204 Total installment and other consumer $ 1,812 $ 9,724 $ 12,591 $ 9,406 $ 6,844 $ 14,370 $ 1,545 $ 56,292 Gross current period charge-offs $ — $ — $ — $ — $ — $ — $ ( 2 ) $ ( 2 ) Total loans: Pass and Watch $ 63,845 $ 312,105 $ 149,394 $ 99,278 $ 219,268 $ 957,735 $ 176,724 $ 1,978,349 Total Special Mention $ 3,958 $ 26,561 $ 3,350 $ — $ 4,038 $ 71,053 $ 10,471 $ 119,431 Total Substandard $ — $ 2,649 $ 13 $ 246 $ 3,098 $ 11,806 $ 127 $ 17,939 Totals $ 67,803 $ 341,315 $ 152,757 $ 99,524 $ 226,404 $ 1,040,594 $ 187,322 $ 2,115,719 Total gross current period charge-offs $ — $ ( 19 ) $ — $ — $ — $ ( 7,192 ) $ ( 55 ) $ ( 7,266 ) (in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost December 31, 2025 2025 2024 2023 2022 2021 Prior Total Commercial and industrial: Pass and Watch $ 32,723 $ 5,735 $ 15,069 $ 6,002 $ 632 $ 22,238 $ 62,490 $ 144,889 Special Mention 1,002 2,392 — — — 102 10,925 14,421 Substandard 19 520 — — — — 49 588 Total commercial and industrial $ 33,744 $ 8,647 $ 15,069 $ 6,002 $ 632 $ 22,340 $ 73,464 $ 159,898 Commercial real estate, owner-occupied: Pass and Watch $ 25,844 $ 12,158 $ 11,858 $ 35,709 $ 42,288 $ 132,766 $ 284 $ 260,907 Special Mention 7,275 — 367 4,092 18,153 14,461 — 44,348 Page-17 (in thousands) Term Loans - Amortized Cost by Origination Year Revolving Loans Amortized Cost December 31, 2025 2025 2024 2023 2022 2021 Prior Total Substandard 1,513 — — 3,137 — 314 — 4,964 Total commercial real estate, owner-occupied $ 34,632 $ 12,158 $ 12,225 $ 42,938 $ 60,441 $ 147,541 $ 284 $ 310,219 Commercial real estate, non-owner occupied: Pass and Watch $ 238,253 $ 99,947 $ 53,969 $ 155,608 $ 189,703 $ 531,672 $ 12,022 $ 1,281,174 Special Mention 21,857 — — — — 37,399 — 59,256 Substandard — — — — — 25,821 — 25,821 Total commercial real estate, non-owner occupied $ 260,110 $ 99,947 $ 53,969 $ 155,608 $ 189,703 $ 594,892 $ 12,022 $ 1,366,251 Construction: Pass and Watch $ 4,602 $ 10,499 $ — $ — $ — $ — $ — $ 15,101 Total construction $ 4,602 $ 10,499 $ — $ — $ — $ — $ — $ 15,101 Home equity: Pass and Watch $ 97 $ 44 $ 13 $ — $ — $ 630 $ 97,976 $ 98,760 Substandard — — — — — 161 301 462 Total home equity $ 97 $ 44 $ 13 $ — $ — $ 791 $ 98,277 $ 99,222 Other residential: 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 Installment and other consumer: Pass and Watch $ 10,515 $ 13,253 $ 9,858 $ 8,057 $ 6,553 $ 9,447 $ 1,661 $ 59,344 Substandard — — 176 — — 28 — 204 Total installment and other consumer $ 10,515 $ 13,253 $ 10,034 $ 8,057 $ 6,553 $ 9,475 $ 1,661 $ 59,548 Total loans: Pass and Watch $ 315,005 $ 157,535 $ 106,246 $ 223,121 $ 248,456 $ 745,921 $ 174,433 $ 1,970,717 Total Special Mention $ 30,134 $ 2,392 $ 367 $ 4,092 $ 18,153 $ 51,962 $ 10,925 $ 118,025 Total Substandard $ 1,532 $ 520 $ 248 $ 3,137 $ — $ 26,324 $ 350 $ 32,111 Totals $ 346,671 $ 160,447 $ 106,861 $ 230,350 $ 266,609 $ 824,207 $ 185,708 $ 2,120,853 Page-18 The following table shows the amortized cost of loans by portfolio class, payment aging and non-accrual status as of March 31, 2026 and December 31, 2025. Loan Aging Analysis by Class (in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, non-owner occupied Construction Home equity Other residential Installment and other consumer Total March 31, 2026 30-59 days past due $ 340 $ — $ — $ — $ 82 $ 257 $ — $ 679 60-89 days past due 6 — — — — — 2 8 90 days or more past due 1 23 — 8,118 — — 70 204 8,415 Total past due 369 — 8,118 — 82 327 206 9,102 Current 158,659 308,905 1,365,214 14,215 98,363 105,175 56,086 2,106,617 Total loans 1 $ 159,028 $ 308,905 $ 1,373,332 $ 14,215 $ 98,445 $ 105,502 $ 56,292 $ 2,115,719 Non-accrual loans 2 $ 29 $ — $ 8,118 $ — $ 223 $ 70 $ 204 $ 8,644 Non-accrual loans with no allowance $ — $ — $ 8,118 $ — $ 223 $ — $ 204 $ 8,545 December 31, 2025 30-59 days past due $ 76 $ — $ — $ — $ 381 $ — $ 1,070 $ 1,527 60-89 days past due 66 — 1,250 — — — — 1,316 90 days or more past due 1 19 77 8,118 — — 72 204 8,490 Total past due 161 77 9,368 — 381 72 1,274 11,333 Current 159,737 310,142 1,356,882 15,102 98,841 110,542 58,274 2,109,520 Total loans 1 $ 159,898 $ 310,219 $ 1,366,250 $ 15,102 $ 99,222 $ 110,614 $ 59,548 $ 2,120,853 Non-accrual loans 2 $ 524 $ 314 $ 25,387 $ — $ 401 $ 72 $ 204 $ 26,902 Non-accrual loans with no allowance $ — $ 314 $ 8,822 $ — $ 401 $ — $ 204 $ 9,741 1 There were no non-performing loans over 90 days past due and accruing interest as of March 31, 2026 or December 31, 2025 . 2 None of the non-accrual loans as of March 31, 2026 or December 31, 2025 were earning interest on a cash or accrual basis. We reversed $ 1 thousand in accrued interest income for loans that were placed on non-accrual status during the three months ended March 31, 2026. We reversed accrued interest income of $ 33 thousand for loans that were placed on non-accrual status during the three months ended March 31, 2025. Collateral Dependent Loans The following table presents the amortized cost basis of individually analyzed collateral-dependent loans, which were all on non-accrual status, by portfolio class at March 31, 2026 and December 31, 2025. Amortized Cost by Collateral Type (in thousands) Commercial Real Estate Residential Real Estate Other Total 1 Allowance for Credit Losses March 31, 2026 Commercial real estate, non-owner occupied $ 8,118 $ — $ — $ 8,118 $ — Home equity — 223 — 223 — Other residential — 70 — 70 17 Total $ 8,118 $ 293 $ — $ 8,411 $ 17 December 31, 2025 Commercial real estate, owner-occupied $ 314 $ — $ — $ 314 $ — Commercial real estate, non-owner occupied 25,387 — — 25,387 7,226 Home equity — 401 — 401 — Other residential — 72 — 72 18 Total $ 25,701 $ 473 $ — $ 26,174 $ 7,244 1 There were no collateral-dependent residential real estate mortgage loans in process of foreclosure or in substance repossessed at March 31, 2026 and December 31, 2025. The weighted average loan-to-value of real estate secured collateral dependent loans was approximately 64 % at March 31, 2026 and 106 % at December 31, 2025. Loan Mod ifications to Borrowers Experiencing Financial Difficulty There were no modifications of loans during the three months ended March 31, 2026 or March 31, 2025 requiring disclosure. Page-19 Allocation of the Allowance for Credit Losses on Loans The following table presents the details of the allowance for credit losses on loans segregated by loan portfolio class as of March 31, 2026 and December 31, 2025 . Allocation of the Allowance for Credit Losses on Loans (in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, non-owner occupied Construction Home equity Other residential Installment and other consumer Unallocated Total March 31, 2026 Modeled expected credit losses $ 1,401 $ 1,474 $ 8,065 $ 35 $ 684 $ 955 $ 630 $ — $ 13,244 Qualitative adjustments 584 978 6,262 169 80 2 115 1,343 9,533 Specific allocations 29 — — — — 17 — — 46 Total $ 2,014 $ 2,452 $ 14,327 $ 204 $ 764 $ 974 $ 745 $ 1,343 $ 22,823 December 31, 2025 Modeled expected credit losses $ 1,512 $ 1,553 $ 8,449 $ 38 $ 736 $ 1,059 $ 697 $ — $ 14,044 Qualitative adjustments 522 901 5,802 161 67 2 106 1,185 8,746 Specific allocations 55 — 7,226 — — 18 — — 7,299 Total $ 2,089 $ 2,454 $ 21,477 $ 199 $ 803 $ 1,079 $ 803 $ 1,185 $ 30,089 Allowance for Credit Losses on Loans Rollforward The following table discloses activity in the allowance for credit losses on loans for the periods presented. Allowance for Credit Losses on Loans Rollforward (in thousands) Commercial and industrial Commercial real estate, owner-occupied Commercial real estate, non-owner occupied Construction Home equity Other residential Installment and other consumer Unallocated Total Three months ended March 31, 2026 Beginning balance $ 2,089 $ 2,454 $ 21,477 $ 199 $ 803 $ 1,079 $ 803 $ 1,185 $ 30,089 (Reversal) Provision ( 3 ) ( 2 ) 42 5 ( 39 ) ( 105 ) ( 56 ) 158 — (Charge-offs) ( 72 ) — ( 7,192 ) — — — ( 2 ) — ( 7,266 ) Recoveries — — — — — — — — — Ending balance $ 2,014 $ 2,452 $ 14,327 $ 204 $ 764 $ 974 $ 745 $ 1,343 $ 22,823 Three months ended March 31, 2025 Beginning balance $ 1,576 $ 2,361 $ 22,093 $ 638 $ 684 $ 1,141 $ 908 $ 1,255 $ 30,656 (Reversal) Provision ( 68 ) ( 42 ) 477 ( 222 ) 14 ( 67 ) ( 8 ) ( 9 ) 75 (Charge-offs) — — ( 809 ) — — — ( 16 ) — ( 825 ) Recoveries — — — — — — — — — Ending balance $ 1,508 $ 2,319 $ 21,761 $ 416 $ 698 $ 1,074 $ 884 $ 1,246 $ 29,906 Pledged Loans 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 $ 1.435 billion and $ 1.396 billion at March 31, 2026 and December 31, 2025, respectively. In addition, we pledge eligible residential loans, which totaled $ 53.3 million and $ 97.2 million at March 31, 2026 and December 31, 2025, respectively, to secure our borrowing capacity with the Federal Reserve Bank ("FRB"). For additional information, see Note 6, Borrowings and Other Obligations. Related Party Loans The Bank has, and expects to have in the future, banking transactions in the ordinary course of its business with directors, officers, principal shareholders and their businesses or associates. These transactions, including loans, are granted on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with persons not related to us. Likewise, these transactions do not involve more than the normal risk of collectability or present other unfavorable features. Related party loans totaled $ 3.6 million and $ 3.6 million as of March 31, 2026 and December 31, 2025, respectively. In addition, undisbursed commitments to related parties totaled $ 10 thousand as of both March 31, 2026 and December 31, 2025, Page-20 Note 6: Borrowings and Other Obligations Federal Reserve Bank: The Bank had a line of credit through the Discount Window at the Federal Reserve Bank of San Francisco ("FRBSF") totaling $ 325.4 million and $ 344.7 million as of March 31, 2026 and December 31, 2025, respectively, secured by investment securities and residential loans. Federal Home Loan Bank: The Bank had lines of credit with the FHLB totaling $ 976.1 million and $ 967.2 million as of March 31, 2026 and December 31, 2025, respectively, based on 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 as of both March 31, 2026 and December 31, 2025. In general, interest rates on these lines approximate the federal funds target rate. 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. See Note 9: Subordinated Notes. Other Obligations: Finance lease liabilities totaling $ 668 thousand and $ 709 thousand as of March 31, 2026 and December 31, 2025, respectively, are included in borrowings and other obligations in the consolidated statements of condition. Refer to Note 8, Commitments and Contingent Liabilities, for additional information. The carrying values and weighted average interest rates on borrowings and other obligations as of March 31, 2026 and December 31, 2025 are summarized in the following table. March 31, 2026 December 31, 2025 (dollars in thousands) Carrying Value Average Balance Weighted Average Rate Carrying Value Average Balance Weighted Average Rate FRBSF advances - Discount Window $ — $ — — % $ — $ — — % FHLB short-term borrowings — — — % — — — % Federal funds lines of credit — — — % — — — % Subordinated notes 43,905 43,874 7.36 % 43,857 5,189 6.98 % Other obligations (finance leases) 668 683 3.67 % 709 253 3.52 % Total borrowings and other obligations $ 44,573 $ 44,557 7.31 % $ 44,566 $ 5,442 6.82 % Note 7: Stockholders' Equity Dividends On April 23, 2026, Bancorp approved a $ 0.25 per share cash dividend to shareholders of record at the close of business on May 7, 2026. The dividend is payable on May 14, 2026. Share-Based Payments 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. Stock-based compensation also includes compensation expense related to the issuance of restricted stock awards. The grant-date fair value of the restricted stock awards, which equals the grant date price, is recorded as compensation expense over the requisite service period with a corresponding increase in common stock as the shares vest. Stock options and restricted stock awards issued include a retirement eligibility clause whereby the requisite service period is satisfied at the retirement eligibility date. For those awards, we accelerate the recording of stock-based compensation when the award holder is eligible to retire. However, retirement eligibility does not affect the vesting of restricted stock or the exercisability of the stock options, which are based on the scheduled vesting period. Page-21 Under the 2017 Equity Plan, performance-based stock awards (restricted stock) are issued to a selected group of employees. Stock award vesting is contingent upon the achievement of pre-established long-term performance goals set by the Compensation Committee of the Board of Directors. Performance is measured over a three-year period and cliff vested. These performance-based stock awards were granted at a maximum opportunity level, and based on the achievement of the pre-established goals, the actual payouts can range from 0 % to 200 % of the target award. For performance-based stock awards, an estimate is made of the number of shares expected to vest based on the probability that the performance criteria will be achieved to determine the amount of compensation expense to be recognized. The estimate is re-evaluated quarterly, and total compensation expense is adjusted for any change in the current period. We record excess tax benefits (deficiencies) resulting from the exercise of non-qualified stock options, the disqualifying disposition of incentive stock options and vesting of restricted stock awards as income tax benefits (expense) in the consolidated statements of comprehensive income (loss) with a corresponding decrease (increase) to current taxes payable. The holders of unvested restricted stock awards are entitled to dividends on the same per-share ratio as holders of common stock. Tax benefits for dividends paid on unvested restricted stock awards are recorded as tax benefits in the consolidated statements of comprehensive income (loss) with a corresponding decrease to current taxes payable. Dividends on forfeited awards are included in stock-based compensation expense. Stock options and restricted stock may be net settled in a cashless exercise by a reduction in the number of shares otherwise deliverable upon exercise or vesting in satisfaction of the exercise payment and/or applicable tax withholding requirements. Shares withheld under net settlement arrangements are available for future grants. The table below depicts the total number of shares, amount, and weighted average price withheld for cashless exercises for the periods presented. Three months ended March 31, 2026 March 31, 2025 Number of shares withheld 5,994 3,957 Total amount withheld (in thousands) $ 150 $ 96 Weighted-average price $ 25.05 $ 24.22 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. There were no repurchases in the three months ended March 31, 2026 and 2025. Bancorp will continue to assess opportunities to utilize the program. Note 8: Commitments and Contingent Liabilities Financial Instruments with Off-Balance Sheet Risk We make commitments to extend credit in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because various commitments will expire without being fully drawn, the total commitment amount does not necessarily represent future cash requirements. Our credit loss exposure is equal to the contractual amount of the commitment in the event of nonperformance by the borrower. We use the same credit underwriting criteria for all credit exposure. The amount of collateral obtained, if deemed necessary by us, is based on management's credit evaluation of the borrower. Collateral types pledged may include accounts receivable, inventory, other personal property and real property. Page-22 The contractual amount of unfunded loan commitments and standby letters of credit not reflected in the consolidated statements of condition are as follows: (in thousands) March 31, 2026 December 31, 2025 Commercial lines of credit $ 220,899 $ 232,758 Revolving home equity lines 208,640 208,509 Undisbursed construction loans 10,779 13,946 Personal and other lines of credit 8,137 7,900 Standby letters of credit 1,616 1,615 Total unfunded loan commitments and standby letters of credit $ 450,071 $ 464,728 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 $ 1.1 million at both March 31, 2026 and December 31, 2025, which is included in interest payable and other liabilities in the consolidated statements of condition. There was no provision for credit losses on unfunded loan commitments in the first quarter of 2026 or 2025. Leases We lease premises under long-term non-cancelable operating leases with remaining terms of 3 months to 16 years, 2 months , most of which include escalation clauses and one or more options to extend the lease term, and some of which contain lease termination clauses. Lease terms may include certain renewal options that were considered reasonably certain to be exercised. We lease certain equipment under finance leases with initial terms of three years to five years . The equipment finance leases do not contain renewal options, bargain purchase options or residual value guarantees. The following table shows the balances of operating and finance lease right-of-use assets and lease liabilities. (in thousands) March 31, 2026 December 31, 2025 Operating leases: Operating lease right-of-use assets $ 22,173 $ 22,499 Operating lease liabilities $ 24,553 $ 24,747 Finance leases: Finance lease right-of-use assets $ 766 $ 766 Accumulated amortization ( 117 ) ( 73 ) Finance lease right-of-use assets, net 1 $ 649 $ 693 Finance lease liabilities 2 $ 668 $ 709 1 Included in premises and equipment in the consolidated statements of condition. 2 Included in borrowings and other obligations in the consolidated statements of condition. The following table shows supplemental disclosures of noncash investing and financing activities for the periods presented. Three months ended (in thousands) March 31, 2026 March 31, 2025 Right-of-use assets obtained in exchange for operating lease liabilities $ 689 $ 1,090 Right-of-use assets obtained in exchange for finance lease liabilities $ — $ — Page-23 The following table shows components of operating and finance lease cost. Three months ended (in thousands) March 31, 2026 March 31, 2025 Operating lease cost 1 $ 1,218 $ 1,185 Finance lease cost: Amortization of right-of-use assets 2 $ 44 $ 37 Interest on finance lease liabilities 3 6 1 Total finance lease cost $ 50 $ 38 Total lease cost $ 1,268 $ 1,223 1 Included in occupancy and equipment expense in the consolidated statements of comprehensive income (loss). 2 Included in depreciation and amortization in the consolidated statements of comprehensive income (loss). 3 Included in interest on borrowings and other obligations in the consolidated statements of comprehensive income (loss). The following table shows the future minimum lease payments, weighted average remaining lease terms, and weighted average discount rates under operating and finance lease arrangements as of March 31, 2026. The discount rates used to calculate the present value of lease liabilities were based on the collateralized FHLB borrowing rates that were commensurate with lease terms and minimum payments on the lease commencement date. (in thousands) March 31, 2026 Year Operating Leases Finance Leases 2026 $ 3,615 $ 145 2027 4,428 188 2028 3,992 183 2029 3,366 183 2030 3,148 15 Thereafter 9,935 — Total minimum lease payments 28,484 714 Amounts representing interest (present value discount) ( 3,931 ) ( 46 ) Present value of net minimum lease payments (lease liability) $ 24,553 $ 668 Weighted average remaining term (in years) 7.91 3.79 Weighted average discount rate 3.37 % 3.67 % Litigation Matters Bancorp may be subject to legal actions that arise from time to time in the normal course of business. Bancorp's management is not aware of any pending legal proceedings to which either it or the Bank may be a party or has recently been a party that will have a material adverse effect on the financial condition or results of operations of Bancorp or the Bank. The Bank is responsible for a proportionate share of certain litigation indemnifications provided to Visa U.S.A. ("Visa") by its member banks in connection with Visa's lawsuits related to anti-trust charges and interchange fees ("Covered Litigation"). We sold our remaining shares on July 13, 2023, however our proportionate share of the litigation indemnification liability does not change or transfer upon the sale of our Class B Visa shares to member banks or, per the terms of the sale, to the recent purchaser of our shares. Visa established an escrow account for the Covered Litigation that it periodically funds, which is expected to cover the settlement payment obligations. Litigation is ongoing, and until the court approval process is complete, there is no assurance that Visa will resolve the claims as contemplated by the amended class settlement agreement, and additional lawsuits may arise from individual merchants who opted out of the class settlement. However, until the escrow account is fully depleted and the conversion rate of Class B to Class A common stock is reduced to zero, no future cash settlement payments are required by the member banks, such as us, on the Covered Litigation. Therefore, we are not required to record any contingent liabilities for the indemnification related to the Covered Litigation, as we consider the probability of losses to be remote. Page-24 Note 9: 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. 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, paid upon issuance, and is being amortized through the December 1, 2030 call date. The Company has the right to redeem the 2035 Notes, in whole or in part, on or after December 1, 2030. At the time of issuance, $ 30.0 million was downstreamed as common equity to the Bank. At March 31, 2026, the balance of the 2035 Notes included in the Company’s consolidated statements of condition net of debt issuance cost, was $ 43.9 million. The amortization of debt issuance cost was $ 48 thousand for the three months ended March 31, 2026. The Company was in compliance with all covenants under the terms of the 2035 Notes. Note 10: Derivative Financial Instruments and Hedging Activities The Bank is exposed to certain risks from both its business operations and changes in economic conditions. As part of our asset/liability and interest rate risk management strategy, we may enter into interest rate derivative contracts to modify repricing characteristics of certain of our interest-earning assets and interest-bearing liabilities. The Bank generally designates interest rate hedging agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. 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. Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap values. We had three interest rate swap agreements on certain loans with notional values totaling $ 6.4 million, which are equal to the notional amounts of the hedged loans and are sched uled 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. Converting fixed-rate interest payments to floating-rate interest payments, generally benchmarked to the one-month U.S. dollar SOFR index, protects us against changes in the fair value of our loans associated with fluctuating interest rates. Information on our derivatives follows: Asset derivatives Liability derivatives (in thousands) March 31, 2026 December 31, 2025 March 31, 2026 December 31, 2025 Loans receivable: Interest rate contracts - notional amount $ 4,846 $ 5,030 $ 1,575 $ 1,643 Interest rate contracts - fair value 1 $ 163 $ 148 $ 2 $ 11 1 Refer to Note 3, Fair Value of Assets and Liabilities, for valuation methodology. The following table presents the carrying amount and associated cumulative basis adjustment related to the application of fair value hedge accounting that is included in the carrying amount of hedged assets as of March 31, 2026 and December 31, 2025. Page-25 Carrying Amounts of Hedged Assets Cumulative Amounts of Fair Value Hedging Adjustments Included in the Carrying Amounts of the Hedged Assets (in thousands) March 31, 2026 December 31, 2025 March 31, 2026 December 31, 2025 Loans receivable 1 $ 6,183 $ 6,452 $ ( 205 ) $ ( 186 ) 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. Amortized cost excludes accrued interest, which was not material. The following table presents the pretax net gains recognized in interest income related to our fair value hedges for the years presented. Three months ended (in thousands) March 31, 2026 March 31, 2025 Interest and fees on loans 1 Increase (decrease) in fair value of interest rate swaps hedging loans receivable $ 23 $ ( 106 ) Hedged interest earned 16 30 (Decrease) increase in carrying value included in the hedged loans ( 19 ) 111 Decrease in value of yield maintenance agreement ( 2 ) ( 2 ) Net gain recognized in interest income on loans $ 18 $ 33 1 Represents the income line item in the statements of comprehensive income (loss) in which the effects of fair value hedges are recorded. Our derivative transactions with the counterparty are under an International Swaps and Derivative Association (“ISDA”) master agreement that includes “right of set-off” provisions. “Right of set-off” provisions are legally enforceable rights to offset recognized amounts and there may be an intention to settle such amounts on a net basis. We do not offset such financial instruments for financial reporting purposes. Information on financial instruments that are eligible for offset in the consolidated statements of condition follows: Offsetting of Financial Assets and Derivative Assets Gross Amounts Net Amounts of Gross Amounts Not Offset in Gross Amounts Offset in the Assets Presented the Statements of Condition of Recognized Statements of in the Statements Financial Cash Collateral ( in thousands) Assets 1 Condition of Condition 1 Instruments Received Net Amount March 31, 2026 Derivatives by Counterparty: Counterparty $ 163 $ — $ 163 $ — $ — $ 163 Total $ 163 $ — $ 163 $ — $ — $ 163 December 31, 2025 Derivatives by Counterparty: Counterparty $ 148 $ — $ 148 $ — $ — $ 148 Total $ 148 $ — $ 148 $ — $ — $ 148 Offsetting of Financial Liabilities and Derivative Liabilities Gross Amounts Net Amounts of Gross Amounts Not Offset in Gross Amounts Offset in the Liabilities Presented the Statements of Condition of Recognized Statements of in the Statements Financial Cash Collateral (in thousands) Liabilities 1 Condition of Condition 1 Instruments Pledged Net Amount March 31, 2026 Counterparty $ 2 $ — $ 2 $ ( 2 ) $ — Total $ 2 $ — $ 2 $ ( 2 ) $ — $ — December 31, 2025 Counterparty $ 11 $ — $ 11 $ ( 11 ) $ — $ — Total $ 11 $ — $ 11 $ ( 11 ) $ — $ — 1 Amounts exclude accrued interest on swaps. For more information on how we account for our interest rate swaps, refer to Note 1 to the Consolidated Financial Statements included in our 2025 Form 10-K filed with the SEC on March 14, 2026. Page-26