What changed in this filing

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Item 1. Business

2026-02-27 compared with 2025-03-03 · 173 added, 163 removed, 677 unchanged (33% of the section changed)

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The Bank was incorporated in September 1977 and opened for business in January 1978 as a one-branch bank with $1.5 million in capital.

Our growth in the ensuing years has largely been organic in nature but includes four whole-bank acquisitions:

Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in October 2017.

An agricultural loan production office was opened in 2022.

The Bank now maintains administrative offices, loan production offices, and 35 full-service branches in the following California locations:

Growth in the ensuing years has largely been organic but also includes four whole-bank acquisitions:

Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in 2017.

The Bank maintains administrative offices, loan production offices, and 34 full-service branches in California.

Administrative Headquarters

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2450 McCall Avenue

Tehachapi Downtown Office

224 West “F” Street

Three Rivers:

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624 South Main Street

Tulare Office

246 East Tulare Avenue

Tulare Prosperity Office

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Valencia Boulevard

Complementing the Bank’s stand-alone offices are specialized lending units which include our Commercial and Industrial, Mortgage Warehouse, and Real Estate lending divisions.

We have ATMs at all but one of our branch locations and at seven non-branch locations.

Furthermore, the Bank is a member of the Allpoint network, which provides our deposit customers with surcharge-free access to over 55,000 ATMs across the United States, Puerto Rico, Mexico, Canada, Australia and the United Kingdom.

We have ATMs at all but one of our branch locations and at six non-branch locations.

Additionally, the Bank is a member of the Allpoint network, which provides our deposit customers with surcharge-free access to over 55,000 ATMs across the United States, Puerto Rico, Mexico, Canada, Australia, and the United Kingdom.

Customers also have access to electronic point-of-sale payment alternatives nationwide via the Pulse network.

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online lending solutions for consumers and small businesses;

a customer service center that is accessible by toll-free telephone during business hours;

a customer service center accessible by toll-free telephone during business hours;

and an automated telephone banking system that is generally accessible 24 hours a day, seven days a week.

We offer a variety of other banking products and services to complement and support our lending and deposit products, including remote deposit capture and payroll services for business customers.

Our chief products and services relate to making loans and accepting deposits.

We offer a variety of other banking products and services to complement and support our lending and deposit products, including remote deposit capture and payroll services.

Our chief products and services are making loans and accepting deposits.

Lending activities cover real estate, commercial (including small business), mortgage warehouse, agricultural, and consumer loans.

The bulk of our real estate loans are secured by commercial real estate, both owner-occupied and non owner-occupied , including office, retail, and hotel/motels;

however, we also offer other types of real estate loans such as commercial construction loans, multifamily and agricultural.

The bulk of our real estate loans are secured by owner and non-owner occupied commercial real estate, including office, retail, and hotel/motels;

however, we also offer other real estate loan types such as commercial construction loans, multifamily, and agricultural.

As noted above, gross loans totaled $2.5 billion at December 31, 2025, and the percentage of our total loan portfolio for each of the principal types of credit we extend was as follows:

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(ii) mortgage warehouse loans (20.3%);

other commercial loans, including agricultural production and SBA loans (7.6%);

(iii) other commercial loans, including agricultural production and SBA loans (7.6%);

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In addition to loans, we offer a wide range of deposit products and services for individuals and businesses, including checking accounts, savings accounts, money market demand accounts, time deposits, retirement accounts, and sweep accounts.

The Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to maximum insurable amounts.

The Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to maximum insurable amounts.

We attract deposits throughout our market area via referrals from existing customers and direct-mail campaigns due to our customer-oriented product mix, competitive pricing, convenient locations, drive-through banking, and multiple delivery channels.

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At December 31, 2025, the Company had 116,570 deposit accounts, down from 119,388 at December 31, 2024.

Total deposits were $2.9 billion at December 31, 2024, up 5%, or $0.1 million from December 31, 2023.

Our officers and employees are continually searching for ways to increase public convenience, enhance customer access to payment systems, and enable us to improve our competitive position with the development of new products and services.

Total deposits were $2.9 billion at December 31, 2025, relatively unchanged from the prior year.

Our officers and employees are continually searching for ways to increase public convenience, enhance customer access to payment systems, and improve our competitive position by developing new products and services.

The cost to the Bank for these development, operations, and marketing activities cannot be calculated with any degree of certainty.

We hold no patents or licenses (other than licenses required by bank regulatory agencies), franchises, or

We hold no patents or licenses (other than licenses required by bank regulatory agencies), franchises, or concessions.

We are not dependent on a single customer or group of related customers for a material portion of our core deposits.

The one loan category that could be considered to be a concentration is commercial real estate loans (58.3%), with segments in retail (12.7%), office space (6.7%) and loans in the hotel industry (8.4%).

Our efforts to comply with government and regulatory mandates related to consumer protection and privacy, anti-money laundering, and other areas of focus have resulted in significant ongoing expense to the Bank, including compliance staffing costs and other expenses associated with compliance-related software.

The Company had two loan categories that could be considered to be concentrations.

The first was commercial real estate loans, which constituted 54.6% of total gross loans, with segments in retail (12.1%), office space (5.9%), and hospitality (9.4%).

The second loan category that could be considered a concentration was mortgage warehouse, which made up 20.4% of total gross loans.

Our efforts to comply with government and regulatory mandates related to consumer protection and privacy, anti-money laundering, and other focus areas have resulted in significant ongoing Bank expense, including for compliance staffing and compliance-related software.

However, as far as can be determined, there has been no material effect upon our capital expenditures, earnings, or competitive position as a result of environmental regulation at the federal, state, or local level.

The Company is not involved with chemicals or toxins that might have an adverse effect on the environment;

The Company is not directly involved with chemicals or toxins that might have an adverse effect on the environment;

thus, its primary exposure to environmental legislation is through lending activities.

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The banking business in California is generally highly competitive.

Continued consolidation within the banking industry, including many bank transactions within our market in 2024, has heightened competition in recent periods.

There are also a number of unregulated companies targeted at profitable customer segments competing for business in our markets.

Many of those companies are able to compete across geographic boundaries and provide meaningful alternatives to banking products and services.

Continued consolidation within the banking industry, including bank transactions within our market has heightened competition in recent periods.

There are also a number of unregulated companies targeting profitable customer segments in our markets.

Many of these companies operate across geographic boundaries and provide meaningful alternatives to banking products and services.

These competitive trends are likely to continue.

With respect to commercial bank competitors, our business is dominated by a relatively small number of major banks operating a large number of offices within our geographic footprint.

Based on June 30, 2024, FDIC combined market share data for the 25 cities within which the Company currently maintains branches, the largest portion of deposits belongs to Wells Fargo Bank with (19.6%) of total combined deposits, followed by Bank of America (16.8%), JPMorgan Chase (16.2%), and U.S.

Bank of the Sierra ranked 5th with 5.4% of total deposits.

In the Bank’s primary market and headquarter location of Tulare County, however, we ranked first for deposit market share with 22.6% of total deposits at June 30, 2024 and had the largest number of branch locations (13), including our online branch.

Commercial bank competitors are dominated by a relatively small number of major banks operating a large number of offices within our geographic footprint.

According to the FDIC’s June 30, 2025 combined market share data, the largest portion of combined total deposits in the 27 cities where the Company currently maintains branches belongs to Wells Fargo Bank (18.9%), Bank of America (16.4%), JPMorgan Chase (16.2%), and U.S.

Bank of the Sierra ranked fifth, with 5.4% of total deposits.

In the Bank’s primary market and headquarters location of Tulare County, however, we ranked first for deposit market share, with 21.6% of total deposits at June 30, 2025, and had the largest number of branch locations at 13.

The larger banks noted above have, among other advantages, the ability to finance wide-ranging advertising campaigns and allocate their resources to regions of highest yield and demand.

They can also offer certain services we do not provide directly, although wet may offer these indirectly through correspondent institutions, and by virtue of their greater capitalization those banks have legal lending limits substantially higher than ours.

For loan customers whose needs exceed our legal lending limits, we may arrange for the sale, or participation, of some of the balances to financial institutions outside our geographic footprint.

In addition to other banks our competitors include savings institutions, credit unions, and numerous non-banking institutions such as finance companies, leasing companies, insurance companies, brokerage firms, asset management groups, mortgage banking firms and internet companies.

They can also offer certain services we do not provide directly, although we may offer these indirectly through correspondent institutions, and by virtue of their greater capitalization, those banks have substantially higher legal lending limits.

For loan customers whose needs exceed our legal lending limits, we may arrange for the sale, or participation, of a portion of the balances to financial institutions outside our geographic footprint.

In addition to other banks, our competitors include savings institutions, credit unions, and non-banking institutions, such as finance companies, leasing companies, insurance companies, brokerage firms, asset management groups, mortgage banking firms, and fintech companies.

Innovative technologies have lower barriers to entry than banks, yet many of these companies offer products and services previously considered traditional banking offerings.

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As of December 31, 2025, the Company had 436 full-time and 33 part-time employees.

On a full-time equivalent (“FTE”) basis staffing stood at 485 at December 31, 2024, unchanged from December 31, 2023.

On a full-time equivalent (“FTE”) basis, staffing stood at 465 at December 31, 2025, a decrease of 20 FTE from December 31, 2024.

At December 31, 2025, the population of our workforce was as follows:

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The Company recognizes a diverse workforce brings fresh perspectives that help strengthen and improve how we serve our communities.

In addition, flexible working arrangements have been found to create efficiencies while promoting employee health and safety.

The Company maintains a Safety program and policy and complies with all federal and state laws related to employee safety.

In addition, flexible working arrangements have been found to create efficiencies while also promoting employee health and safety.

The Company maintains a safety program and policy and complies with all federal and state employee safety laws.

At December 31, 2025, the Company had 55 employees working remotely and 141 working in hybrid arrangements.

The Company has long been committed to comprehensive and competitive compensation and benefits programs as we operate in intensely competitive environments for talent.

We continue to offer entry-level employees a minimum wage higher than the California minimum wage in an effort to attract, train, and retain skilled employees.

Community banking is often considered a relationship banking model rather than a purely transactional banking model.

Therefore, our employees are critical to the Company’s ability to develop and grow relationships with our clients.

Recruiting talent within the Company’s footprint has always been a fundamental strategy whenever possible and is facilitated by actively participating in and holding community job fairs.

Furthering our philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, compensation and benefits programs include an equity-based compensation plan;

health/dental/vision insurance, including an employee assistance program that supports mental health;

The Company has long been committed to a comprehensive and competitive compensation and benefits program, as we operate in intensely competitive environments for talent.

We continue to offer entry-level employees a minimum wage higher than the California minimum wage to attract, train, and retain skilled employees.

Community banking is typically considered a relationship rather than a transactional banking model.

Therefore, our employees are critical to the Company’s ability to develop and grow relationships with clients.

To attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, our compensation and benefits program includes an equity-based compensation plan;

health/dental/vision insurance, including an employee assistance program supporting mental health;

supplemental insurance;

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and leave for bereavement, military service and jury duty.

The Company invests in its employees’ future by sponsoring and prioritizing continued education throughout its employee ranks.

The Company requires certain of its employees and directors to participate in educational activities and training curriculum to stay current on industry-related topics, including compliance, human resources, cyber and other enterprise risks.

In addition, we provide opportunities for employees to improve or maintain their skills in their current position as well as to enhance skills for future opportunities.

The Company's employees are notified periodically of available internal course offerings and educational seminars run by outside parties, including but not limited to the American Bankers Association and Bankers Compliance Group.

Employees are also encouraged to continue their higher education at accredited colleges and universities and may receive assistance from the Company for their participation.

In order to develop a workforce that aligns with the Company’s corporate values, we regularly sponsor local community events so our employees can better integrate themselves in our communities.

Each year, the Company supports our local communities through employee volunteerism and donation support.

We invest in our employees’ future by sponsoring and prioritizing continued education for all employees.

The Company requires employees and directors to participate in role-based educational activities and training curriculum to stay current on industry-related topics, including compliance, human resources, and cyber and other enterprise risks.

In addition, we provide opportunities for employees to maintain or enhance their skills for both their current position, as well as potential future opportunities.

Company employees are notified periodically of available internal course offerings and educational seminars run by outside parties, including the American Bankers Association and Bankers Compliance Group.

Employees are also encouraged to continue their higher education at accredited colleges and universities and may receive financial assistance for their participation.

Each year, we support our local communities through employee volunteerism and donations.

Company employees logged nearly 3,600 volunteer hours in 2025.

Donations through our Sierra Grant program totaled $630,000 in 2025, raising our total donations since the program’s inception 20 years ago to more than $5.4 million.

As part of our commitment to environmental responsibility, we partnered with Southern California Edison to install 48 electric vehicle charging stations, which are free for public use.

As part of our commitment to environmental responsibility, we partnered with Southern California Edison to install 48 electric vehicle charging stations.

Further, in areas of California affected by wildfires, our tree-planting efforts continue to expand.

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A bank holding company that also qualifies as and elects to become a “financial holding company” may engage in a broader range of activities that are financial in nature or complementary to a financial activity (as determined by the FRB or Treasury regulations), such as securities underwriting and dealing, insurance underwriting and agency, and making merchant banking investments.

The Company has not elected to become a financial holding company but may do so at some point in the future if deemed appropriate in view of opportunities or circumstances at the time.

The Company has not elected to become a financial holding company but may do so in the future if deemed appropriate in view of opportunities or circumstances at the time.

The BHC Act requires the prior approval of the FRB for the direct or indirect acquisition of more than five percent of the voting shares of a commercial bank or its parent holding company.

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Acquisitions by both the Company and the Bank also require the prior approval of the California Department of Financial Protection and Innovation (the “DFPI”) pursuant to the California Financial Code.

Notably, in September 2024, the FDIC adopted a final statement of policy regarding its review of Bank Merger Act applications for FDIC-supervised institutions, including the Bank.

The policy statement provides heightened expectations around the existing statutory factors the FDIC is required to consider in evaluating Bank Merger Act applications.

September 2024, the DOJ withdrew its 1995 Bank Merger Guidelines and issued the 2024 Banking Addendum, clarifying that it will assess competition considerations in connection with bank and bank holding company mergers using its 2023 Merger Guidelines and the 2024 Banking Addendum.

Notably, in May 2025, the FDIC rescinded its previously adopted September 2024 final statement of policy regarding its review of Bank Merger Act applications for FDIC-supervised institutions, including the Bank.

The now rescinded policy statement provided heightened expectations around the existing statutory factors the FDIC is required to consider in evaluating Bank Merger Act applications.

The FDIC reverted to its prior standards generally viewed as more lenient than the rescinded 2024 policy statement.

Also in September 2024, the DOJ withdrew its 1995 Bank Merger Guidelines and issued the 2024 Banking Addendum, clarifying that it will assess competition considerations in connection with bank and bank holding company mergers using its 2023 Merger Guidelines and the 2024 Banking Addendum.

An analysis under the 2023 Merger Guidelines and 2024 Banking Addendum may include consideration of theories of harm and relevant markets not considered under the 1995 Bank Merger Guidelines, which focused primarily on concentrations of deposits and branches.

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The federal banking agencies published a final rule on November 13, 2019, that provided a simplified measure of capital adequacy for qualifying community banking organizations.

A qualifying community banking organization that opts into the community bank leverage ratio framework and maintains a leverage ratio greater than nine percent will be considered to have met the minimum capital requirements for the well capitalized category under the Prompt Corrective Action framework, and any other capital or leverage requirements to which the qualifying banking organization is subject.

A qualifying community banking organization that opts into the community bank leverage ratio (“CBLR”) framework and maintains a leverage ratio greater than nine percent will be considered to have met the minimum capital requirements for the well capitalized category under the Prompt Corrective Action framework, and any other capital or leverage requirements to which the qualifying banking organization is subject.

Recently, federal bank regulators proposed lowering the CBLR to eight percent with final action on such proposal expected in 2026.

(See below for further discussion of the requirements for well capitalized and the Prompt Corrective Action framework.)

A qualifying community banking organization with a leverage ratio of greater than nine percent may opt into the community bank leverage ratio framework if it has average consolidated total assets of less than $10 billion, has off-balance-sheet exposures, which are not unconditionally cancelable, of 25% or less of total consolidated assets, and has total trading assets and trading liabilities of five percent or less of total consolidated assets.

A qualifying community banking organization with a leverage ratio of greater than nine percent may opt into the CBLR framework if it has average consolidated total assets of less than $10 billion, has off-balance-sheet exposures, which are not unconditionally cancelable, of 25% or less of total consolidated assets, and has total trading assets and trading liabilities of five percent or less of total consolidated assets.

Further, the bank must not be an advance approaches banking organization.

The final rule became effective January 1, 2020 and banks meeting the qualifying criteria could elect to use the community bank leverage framework starting with the quarter ended March 31, 2020.

The Company and the Bank met the criteria outlined in the final rule and opted into the community bank leverage ratio framework in the first quarter 2020.

The final rule became effective January 1, 2020, and banks meeting the qualifying criteria could elect to use the CBLR starting with the quarter ended March 31, 2020.

The Company and the Bank met the criteria outlined in the final rule and opted into the CBLR framework in the first quarter 2020.

Capital Adequacy Requirements

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(ii) qualifying non-cumulative perpetual preferred stock and related surplus (and, in the case of holding companies, senior perpetual preferred stock issued to the U.S.

Treasury Department pursuant to the Troubled Asset Relief Program and the Emergency Capital Investment Program);

Treasury Department pursuant to the Troubled Asset Relief Program and the Emergency Capital Investment

(iii) minority interests in the equity accounts of consolidated subsidiaries;

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The final rules established a regulatory minimum of 4.5% for common equity Tier 1 capital to total risk weighted assets (“Common Equity Tier 1 RBC Ratio”), a minimum of 6.0% for Tier 1 capital to total risk weighted assets (“Tier 1 Risk-Based Capital Ratio” or “Tier 1 RBC Ratio”), a minimum of 8.0% for qualifying Tier 1 plus Tier 2 capital to total risk weighted assets (“Total Risk-Based Capital Ratio” or “Total RBC Ratio”), and a minimum of 4.0% for the Leverage Ratio, which is defined as Tier 1 capital to adjusted average assets (quarterly average assets less the disallowed capital items noted above).

In addition to the other minimum risk-based capital standards, the final rules also require a Common Equity Tier 1 capital conservation buffer which became fully phased in at 2.5% of risk-weighted assets beginning on January 1, 2019.

Effective January 1, 2019, the buffer effectively raises the minimum required Common Equity Tier 1 RBC Ratio to 7.0%, the Tier 1 RBC Ratio to 8.5%, and the Total RBC Ratio to 10.5%.

In addition to the other minimum risk-based capital standards, the final rules also require a Common Equity Tier 1 capital conservation buffer.

The buffer effectively raises the minimum required Common Equity Tier 1 RBC Ratio to 7.0%, the Tier 1 RBC Ratio to 8.5%, and the Total RBC Ratio to 10.5%.

Institutions that do not maintain the required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases, and on the payment of discretionary bonuses to executive management.

The Company is not required to report these ratios as long as we remain on the CBLR framework with a leverage ratio exceeding 9%.

Based on our capital levels at December 31, 2025 and 2024, the Company and the Bank met all capital adequacy requirements to which they are subject, utilizing the Capital Simplification for Qualifying Community Bank Organization.

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A bank may be treated as though it were in the next lower capital category if, after notice and the opportunity for a hearing, the appropriate federal agency finds an unsafe or unsound condition or practice merits a downgrade, but no bank may be treated as “critically undercapitalized” unless its actual tangible equity to assets ratio warrants such treatment.

The community bank leverage ratio (“CBLR”) removes the requirement for qualifying banking organizations to calculate and report risk-based capital and instead requires only a Tier 1 to average assets (leverage) ratio.

As described above, the CBLR removes the requirement for qualifying banking organizations to calculate and report risk-based capital and instead requires only a Tier 1 to average assets (leverage) ratio.

Qualifying banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than required minimums will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies' capital rules (generally applicable rule) and, if applicable, will be considered to have met the well capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act.

An eligible banking organization can opt out of the CBLR framework and revert back to the risk-weighting framework without restriction.

Under the final rules, the CBLR minimum requirement is 9% for calendar year 2022 and beyond.

The CBLR minimum requirement remains at 9% for years after 2022.

As of December 31, 2025 and 2024, both the Company and the Bank qualified as well capitalized for regulatory capital purposes, utilizing the Capital Simplification for Qualifying Community Bank Organization.

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Most provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), enacted in 2010, are now effective and have been fully implemented.

One area of Dodd-Frank that remains pending is the effective date of the regulation governing the collection of small business lending data for institutions represented by one of the plaintiffs challenging the rule in the Fifth Circuit Court of Appeals.

This includes the Bank due to its American Bankers Association membership.

Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (“ECOA”) to require financial institutions to compile, maintain, and submit to the Bureau certain data on applications for credit for women-owned, minority-owned, and small businesses.

Congress enacted section 1071 for the purpose of facilitating enforcement of fair lending laws and enabling communities,

governmental entities, and creditors to identify business and community development needs and opportunities for women-owned, minority-owned, and small businesses.

Congress enacted section 1071 for the purpose of facilitating enforcement of fair lending laws and enabling communities, governmental entities, and creditors to identify business and community development needs and opportunities for women-owned, minority-owned, and small businesses.

Consistent with section 1071, covered financial institutions will be required to collect and report data on applications for credit for small businesses, including those owned by women or minorities, to the CFPB.

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The Company is continuing to monitor challenges to this rule by various trade groups and other interested parties.

The Consumer Financial Protection Bureau (“CFPB”) has delayed the effective and compliance dates for this rule twice, with the Bank in the last group by loan origination volume, requiring compliance by October 2027 and filing by June 2028.

Further, in November 2025, the CFPB proposed increasing the number of covered transactions that trigger reporting requirements;

the Bank is currently well below the proposed one thousand transaction threshold.

Deposit Insurance

The Bank’s deposits are insured up to maximum applicable limits under the Federal Deposit Insurance Act (generally $250,000 per depositor), and the Bank is subject to deposit insurance assessments to maintain the FDIC’s Deposit Insurance Fund (the “DIF”).

Insurance Fund (the “DIF”).

In October 2010, the FDIC adopted a revised restoration plan to ensure that the DIF’s designated reserve ratio (“DRR”) reached 1.35% of insured deposits by September 30, 2020, the deadline mandated by the Dodd-Frank Act.

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Community Reinvestment Act

The Bank is subject to the Community Reinvestment Act (“CRA”), which imposescertain requirements and reporting obligations..

The Bank is subject to the Community Reinvestment Act (“CRA”), which imposes certain requirements and reporting obligations.

The CRA generally requires federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income (“LMI”) neighborhoods.

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In March 2024, the agencies issued an interim final rule to extend the applicability date for certain provisions of the final rule from April 1, 2024, to January 1, 2026.

On July 16, 2025, the FRB, FDIC, and OCC issued a joint proposal to rescind the 2023 CRA Final Rule, reinstating the 1995 CRA rules.

The Bank continues to monitor challenges to the CRA regulations by various trade groups and other interested parties.

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The Financial Modernization Act generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure.

The statute also directed federal regulators, including the FRB and the FDIC, to establish standards for the security of consumer information, and requires financial institutions to disclose their privacy policies to consumers annually.

The statute also

directed federal regulators, including the FRB and the FDIC, to establish standards for the security of consumer information, and requires financial institutions to disclose their privacy policies to consumers annually.

In June 2018, the California Consumer Privacy Act (“CCPA”) was signed into law, creating new privacy rights for Californians and significant new data protection obligations for businesses.

The CCPA went into effect January 1, 2020.

California’s Office of the Attorney General has enforcement authority.

The California Privacy Protection Agency (“CPPA”) has enforcement authority.

The CCPA added required notices about personal information we collect, use, share, and disclose for business purposes.

The CCPA provides California residents rights regarding their personal information specifically related to exercising access, data portability and deletion rights.

The CCPA provides California residents with rights regarding their personal information, specifically related to exercising access, data portability, and deletion rights.

There are also California breach notification and disclosure requirements.

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The majority of the CPRA’s provisions were in force January 1, 2023, with a look-back to January 2022.

On January 1, 2026, additional CCPA requirements related to cybersecurity audits, privacy risk assessments, and automated decision-making technology became effective, with mandatory compliance dates beginning in 2027, or earlier if privacy practices change during 2026.

On November 23, 2021, the federal banking agencies issued a final rule requiring banking organizations that experience a computer-security incident to notify its primary Federal regulator of the occurrence of an event that rises to the level of a “notification incident.” Generally, a notification incident occurs when a banking organization has suffered a computer-security incident that has a reasonable likelihood of materially disrupting or degrading the banking organization or its operations.

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The opt-in provision establishes requirements for clear disclosure of fees and terms of overdraft services for ATM and one-time debit card transactions.

Other regulatory issuances include the FDIC’s Overdraft Payment Supervisory Guidance, which ois designed to ensure banks appropriately mitigate risks associated with offering automated overdraft payment programs and comply with all consumer protection laws and regulations.

Other regulatory issuances include the FDIC’s Overdraft Payment Supervisory Guidance, which is designed to ensure banks appropriately mitigate risks associated with offering automated overdraft payment programs and comply with all consumer protection laws and regulations.

Additionally, the FDIC issued guidance on assessing multiple re-presentment nonsufficient fund fees (NSF) of the same unpaid transaction.

This guidance included their supervisory approach when a violation of law is identified, as well as expectations for full corrective action.

As of the third quarter of 2022, the Bank no longer charges customers for

The Bank also increased the discretionary overdraft privilege amount for both commercial and consumer customers but limited the number of daily overdraft fees to four per day (previously five per day) and no longer charges a fee for continuous overdrafts (previously a $35 charge after the 10 th consecutive day an account is in an overdraft position).

These changes to our NSF fees, overdraft fees and discretionary overdraft privilege program did not have a material impact on deposit fee income.

On December 12, 2024, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule that treats covered overdraft services offered by banks with more than $10 billion in assets as credit, bringing them under the Truth in Lending Act and Regulation Z.

Banks subject to this final rule may choose to charge $5 for overdrafts, or charge a fee that covers no more than the costs or losses of overdrafts.

If a bank chooses to continue to offer profit-generating overdraft loans under the final rule, they must comply with applicable lending laws, including disclosing any applicable interest rate.

This rule was immediately challenged by various national and state banking associations.

Although the Bank is under $10 billion and not subject to the final rule, the Bank continuously evaluates its overdraft practices and monitors potential and final legislative and regulatory changes, as well as regulatory guidance related to overdrafts.

The Bank does not charge customers for NSFs.

The Bank continues to offer a discretionary overdraft privilege amount for both commercial and consumer customers and limits the number of daily overdraft fees to four per day.

The Bank does not charge a fee for continuous overdrafts.

On December 12, 2024, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule to treat covered overdraft services offered by banks with more than $10 billion in assets as credit, bringing them under the Truth in Lending Act and Regulation Z unless fees were below a statutorily set limit.

This rule was immediately challenged by various national and state banking associations and ultimately overturned on May 9, 2025, via a Congressional Review Act resolution.

Although the Bank is under $10 billion would and not have been subject to the final rule, the Bank continuously evaluates its overdraft practices and monitors potential and final legislative and regulatory changes, as well as regulatory guidance related to overdrafts.

In addition to potential federal changes to overdraft practices, California signed into law Senate Bill 1075 in September 2024, which limits overdrafts and non-sufficient fund fees for credit unions.

While the Bank is not a credit union subject to such law, we continue to monitor California legislative agendas for potential imposed restrictions on overdraft fees.

If the Bank were to be subject to a regulatory cap on overdraft fees or if competitive pressures cause the Bank to significantly lower overdraft fees, it could have a material impact on deposit fee income.

Consumer Financial Protection and Financial Privacy

Consumer Financial Protection

Dodd-Frank created the CFPB as an independent entity with broad rulemaking, supervisory and enforcement authority over consumer financial products and services including deposit products, residential mortgages, home-equity loans, and credit cards.

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These and other laws require disclosures including the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive practices, restrict the Bank’s ability to raise interest rates, and otherwise subject the Bank to substantial regulatory oversight.

As is the case with all financial institutions, the Bank is required to maintain the privacy of its customers’ non-public, personal information.

Such privacy requirements direct financial institutions to:

(i) provide notice to customers regarding privacy policies and practices;

(ii) inform customers regarding the conditions under which their non-public personal information may be disclosed to non-affiliated third parties;

and (iii) give customers an option to prevent disclosure of such information to non-affiliated third parties.

Identity Theft

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In June 2010, the FRB and the FDIC issued comprehensive final guidance on incentive compensation policies intended to help ensure banking organizations do not undermine their own safety and soundness by encouraging excessive risk-taking.

The guidance, which covers all employees who have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

(i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

The regulatory agencies will review, as part of their regular risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, which are not “large, complex banking organizations.” Where appropriate, the regulatory agencies will take supervisory or enforcement action to address perceived deficiencies in an institution’s incentive compensation arrangements or related risk-management, control, and governance processes.

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In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including the Nasdaq, to implement listing standards that require public companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error was either corrected or left uncorrected in the current period.

The final rule required us to adopt a clawback policy within 60 days after such listing standard became effective and file the policy as an exhibit in our Annual Report on Form 10-K.

Please see Exhibit 97.1 for a copy of our policy.

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Commercial Real Estate Lending Concentrations

As a part of their regulatory oversight, the federal regulators have issued guidelines on sound risk management practices with respect to a financial institution’s concentrations in commercial real estate (“CRE”) lending activities.

The federal regulators have issued guidelines on sound risk management practices with respect to a financial institution’s concentrations in commercial real estate (“CRE”) lending activities.

These guidelines were issued in response to the agencies’ concerns that rising CRE concentrations might expose institutions to unanticipated earnings and capital volatility in the event of adverse changes in the commercial real estate market.

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or (2) total CRE loans as defined in the regulatory guidelines represent 300% or more of Tier 1 risk-based capital plus allowance for credit losses on loans, and the institution’s CRE loan portfolio has increased by 50% or more during the prior 36 month period.

At December 31, 2024, the Bank’s total construction, land development and other land loans represented 1% of Tier 1 risk-based capital plus allowance for credit losses on loans.

At December 31, 2024, the Bank’s total CRE loans as defined in the regulatory guidelines represented 236% of Tier 1 risk-based capital plus allowance for credit losses on loans.

The Bank remains well below these guidelines.

Specifically, at December 31, 2025, the Bank’s total construction, land development and other land loans represented 3% of Tier 1 risk-based capital plus allowance for credit losses on loans.

Further, at December 31, 2025, the Bank’s total CRE loans as defined in the regulatory guidelines represented 242% of Tier 1 risk-based capital plus allowance for credit losses on loans.

The Bank and its Board of Directors have discussed the guidelines and believe that the Bank’s underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are sufficient to address the risk management of CRE under the guidelines.

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Future economic conditions cannot be predicted, and recurrent deterioration in the economies of the nation as a whole or in the Company’s markets could have an adverse effect, which could be material, on our business, financial condition, results of operations and future prospects, and could cause the market price of the Company’s stock to decline.

Interest rates have flattened along the curve through 2024, but uncertainty about the magnitude and direction of future rate movements along the curve remains due primarily to inflation and jobs data.

Conditions appear relatively stable in most of our local markets, but potential labor shortages, tariffs, natural disasters, and demand for products produced in our markets could affect local economies.

Adverse developments, such as, continued interest rate volatility, inflation, tariffs, jobs market, health epidemics or pandemics (or expectations about them) interest rate volatility, international trade disputes, oil price volatility, the level of U.S.

Adverse developments, such as continued interest rate volatility, inflation, tariffs, federal government shut-downs, jobs market, health epidemics or pandemics (or expectations about them), interest rate volatility, international trade disputes, oil price volatility, the level of U.S.

debt, including the debt ceiling (and the potential inability to raise the debt ceiling), and global economic conditions, could depress business and/or consumer confidence levels, negatively impact real estate values, and otherwise lead to economic weakness which could have one or more of the following undesirable effects on our business:

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● an inability to retain and recruit employees due to competition for labor;

● increased competition for loans or other earning assets;

● increased competition for loans or other earning assets, including compression of credit spreads;

● a decline in the value of our loans or other assets secured by real estate;

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Changes in interest rates could adversely affect our profitability, business, and prospects.

Net interest income, and therefore earnings, can be adversely affected by differences or changes in the interest rates on, or the repricing frequency

of, our financial instruments.

Fluctuations in interest rates can affect the demand of customers for products and services, and an increase in the general level of interest rates may adversely affect the ability of certain borrowers to make variable-rate or adjustable-rate loan payments.

Net interest income, and therefore earnings, can be adversely affected by differences or changes in the interest rates on, or the repricing frequency of, our financial instruments.

In addition to the impact of interest rate risk on earnings, fluctuations in interest rates can affect the demand of customers for products and services, and an increase in the general level of interest rates may adversely affect the ability of certain borrowers to make variable-rate or adjustable-rate loan payments.

The speed and absolute level of increase or decrease in interest rates can have a material impact on the net interest income and economic value of equity of the Bank depending on the asset liability profile at any point in time.

In addition, different parts of the yield curve could change by different amounts causing the yield curve to steepen, flatten, or invert.

The continued inversion of the shorter-end of the yield curve along with a relatively flat longer-end of the yield curve could further negative impact the Company’s earnings over time.

The continued inversion of the shorter-end of the yield curve, along with a relatively flat longer-end of the yield curve, could further negatively impact the Company’s earnings over time.

Interest rates remain uncertain.

With three rate cuts by the Federal Open Markets Committee of the Federal Reserve Bank in 2025, parts of the interest rate curve steepened through 2025 toward a more normal, upward-sloping shape.

the shorter end of the curve remains inverted.

Further, rates continue to be volatile along the curve, and uncertainty about the magnitude and direction of future rate movements along the curve remains due primarily to inflation and jobs data.

Changes in market interest rates could have a material adverse effect on the Company’s asset quality based on borrowers’ ability to repay at higher rates, loan origination volume, financial condition, results of operations, and cash flows.

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This interest rate risk can arise from FRB monetary policies, as well as other economic, regulatory, and competitive factors beyond our control.

Rising interest rates since 2022 have decreased the value of the Company’s held-to-maturity and available-for-sale securities portfolio and certain fixed-rate loans and the Company would realize losses if it were required to sell such securities or loans to meet liquidity needs.

Elevated interest rates since 2022 have decreased the value of the Company’s held-to-maturity and available-for-sale securities portfolio and certain fixed-rate loans, and the Company would realize losses if it were required to sell many of the securities or loans originated prior to 2022 to meet liquidity needs.

As a result of inflationary pressures and the resulting rapid increases in interest rates since 2022, the trading value of previously issued government and other fixed income securities, as well as the value of certain fixed-rate loans, declined significantly.

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Difficulties experienced by the agricultural industry have led to relatively high levels of nonperforming assets in previous economic cycles.

This is due to the fact that a considerable portion of our borrowers are involved in, or are impacted to some extent by, the agricultural industry.

This is due to our footprint in Central California, where a considerable portion of the population is impacted, to some extent, by the agricultural industry.

While a great number of our borrowers are not directly involved in agriculture, they would likely be impacted by difficulties in the agricultural industry since many jobs in our market areas are ancillary to the regular production, processing, marketing, and sale of agricultural commodities.

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A degenerative cycle of weather has the potential to adversely affect agricultural industries as well as consumer purchasing power and could lead to higher unemployment throughout the San Joaquin Valley.

In recent years, California experienced the worst drought in its recorded history, and it is difficult to predict if the drought will resume and if it does how long it might last.

It is difficult to predict if a drought will resume and if it does how long it might last.

Another looming issue that could have a major impact on the agricultural industry involves water availability and distribution rights.

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As we have experienced in the past, a drop in oil prices could lead to declines in property values and property taxes, particularly in Kern County, which is home to about three quarters of California’s oil production.

The Company does not have direct

exposure to oil producers, and our exposure via loans outstanding to borrowers involved in servicing oil companies totaled only $4.0 million at December 31, 2024.

The Company does not have direct exposure to oil producers, and our exposure via loans outstanding to borrowers involved in servicing oil companies totaled $110.0 million at December 31, 2025.

However, if cash flows are disrupted for our energy-related borrowers, or if other borrowers are indirectly impacted and/or non-oil property values decline, our level of nonperforming assets and loan charge-offs could increase.

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We also compete with numerous financial and quasi-financial institutions, including providers of financial services via the internet, for deposits and loans.

Due to deposit declines from a higher rate environment, competition for deposits has become more fierce, and new deposits generally have a higher cost.

Due to a higher rate environment, competition for deposits has become more fierce, and new deposits generally have a higher cost.

Recent advances in technology and other changes have allowed parties to effectuate financial transactions that previously required the involvement of banks.

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In addition, exempt employees of the Company receive a minimum salary of twice the California minimum wage, which is well above the national requirements for such employees.

When coupled with many exempt positions remaining remote and/or hybrid work arrangements, this assists with recruiting talent we would not otherwise be able to attract.

When coupled with many exempt positions remaining remote and/or hybrid work arrangements, the Company is able to recruit talent we would not otherwise be able to attract.

The Company’s employees are critical to the Company’s ability to develop and grow relationships with its clients.

However, we recognize that competition for talent by both banks and non-banks is fierce and that our overall expenses may be negatively affected by higher per employee costs or by

higher-cost temporary staff or consultants.

However, we recognize that competition for talent by both banks and non-banks is fierce and that our overall expenses may be negatively affected by higher per employee costs or by higher-cost temporary staff or consultants.

The competitive market for talent could also result in gaps of experience in certain areas or lower staffing levels, which could result in a reduced ability to serve our customers.

The value of the securities in our investment portfolio may be negatively affected by market disruptions, adverse credit events or fluctuations in interest rates, which could have a material adverse impact on capital levels.

Our available-for-sale investment securities are reported at their estimated fair values, and fluctuations in fair values can result from changes in market interest rates, rating agency actions, issuer defaults, illiquid markets, and limited investor demand, among other things.

Our available-for-sale investment securities are reported at their estimated fair values, and fluctuations in fair values can result

from changes in market interest rates, rating agency actions, issuer defaults, illiquid markets, and limited investor demand, among other things.

Under current accounting rules we directly increase or decrease accumulated other comprehensive income in shareholders’ equity by the amount of the change in fair value, net of the tax effect.

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Our loan portfolio is heavily concentrated in real estate loans, particularly commercial real estate.

However, the overall concentration of commercial real estate loans has been reduced significantly since peaking at December 31, 2020.

However, the overall concentration of commercial real estate loans has declined significantly since peaking at December 31, 2020.

At December 31, 2025, 72.0% of our loan portfolio consisted of real estate loans, and a sizeable portion of the remaining loan portfolio had real estate collateral as a secondary source of repayment or as an abundance of caution.

Loans on commercial buildings represented approximately 75.9% of all real estate loans, while construction/development and land loans were 0.8%, loans secured by residential properties accounted for 21.0%, and loans secured by farmland were 3.7% of real estate loans.

The Company’s $19.7 million balance of nonperforming assets at December 31, 2024, is mostly comprised of one nonperforming operating line of credit collateralized with receivables from wine grape production and other assets.

The Company’s $14.8 million balance of nonperforming assets at December 31, 2025, is comprised primarily of two agricultural relationships totaling $13.0 million and a single other real estate owned property of $1.6 million.

In past recessionary periods, the residential real estate market experienced significant deflation in property values and foreclosures occurred at relatively high rates.

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An increase in nonperforming assets could have a material adverse effect on our financial condition and results of operations by reducing our income and increasing our expenses.

Deterioration in real estate values might also further reduce the amount of loans the Company makes to businesses in the construction and real estate industry, which could negatively impact our organic growth prospects.

Deterioration in real estate values might also further reduce the number of loans the Company makes to businesses in the construction and real estate industry, which could negatively impact our organic growth prospects.

Similarly, the occurrence of more natural disasters like those California has experienced recently, including fires, flooding, and earthquakes, could impair the value of the collateral we hold for real estate secured loans and negatively impact our results of operations.

Our commercial real estate, including construction and land development exposes us to increased lending risks.

Our commercial real estate exposes us to increased lending risks.

Commercial and agricultural real estate, construction and land development, and multi-family loans comprise approximately 57.9% of our total loan portfolio as of December 31, 2025, exposing the Company to certain risks if not properly managed overall and individually.

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In the next three years, $30.9 million, or 20.1%, of our office real estate loans have the ability to reprice.

The potential inability of our borrowers to service debt at higher rates expose us to greater risk of loss.

The potential inability of our borrowers to service debt at higher rates exposes us to greater risk of loss.

Commercial real estate and land development loans typically involve relatively large balances to a borrower or a group of related borrowers, and an adverse development with respect to a larger commercial loan relationship would expose us to greater risk of loss if not properly collateralized.

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Deterioration in the value of these problem assets, the underlying collateral, or in the borrowers’ performance or financial condition, could adversely affect our business, results of operations and financial condition.

In addition, the resolution of nonperforming assets requires a significant commitment

of time from Bank staff, which can be detrimental to their performance of other responsibilities.

In addition, the resolution of nonperforming assets requires a significant commitment of time from Bank staff, which can be detrimental to their performance of other responsibilities.

There can be no assurance that we will avoid increases in nonperforming loans in the future.

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The allowance for credit losses can be affected by changes in economic forecasts, especially national employment rates, gross national product, and housing price indices, changes in estimated loan prepayment speeds, actual levels of charge-offs, changes to the level of nonaccrual loans, and changes to management’s estimate of items not otherwise considered as part of the quantitative calculation of the allowance.

At any given date, we maintain an allowance for credit losses on loans that we believe is adequate to absorb specifically identified expected losses as well as any other losses of principal which is not expected to be collected over the contractual life of the loans, adjusted for expected prepayments.

At any given date, we maintain an allowance for credit losses on loans that we believe is adequate to absorb specifically identified expected losses as well as any other losses of principal which are not expected to be collected over the contractual life of the loans, adjusted for expected prepayments.

While we strive to carefully monitor credit quality and to identify loans that may become nonperforming, at any given time there may be loans in our portfolio that could result in losses but have not been identified as nonperforming or potential problem loans.

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As a result of any of these factors the value of the collateral backing a loan may be less than supposed, and if a default occurs, we may not recover the entire outstanding balance of the loan via the liquidation of such collateral.

Our mortgage warehouse portfolio could be volatile, and the income could be affected by changes to the difference between loan yields and wholesale funding costs.

At December 31, 2025, we had approximately $766.0 million in total commitments related to mortgage warehouse, and $518.3 million of loans outstanding.

The amount of mortgage warehouse loans outstanding represented 20.4% of our total loans outstanding as of December 31, 2025, and had increased from 14.0% of loans outstanding as of December 31, 2024.

Individual loans underlying the mortgage warehouse facilities are very short-term as we provide funding from the date the loan is originated until our customer can sell such loan to any number of mortgage buyers.

While we have expanded the number of products offered, as well as expanded geographically across the United States, the demand for mortgages can be volatile causing fluctuations in both balances and income.

Further, in order to best match the short-term nature of our mortgage warehouse facilities, we rely upon wholesale funding including brokered deposits, federal funds purchased, and secured borrowings from the FHLB or Federal Reserve Bank.

The cost of short-term wholesale fundings could change by an amount greater than or less than the related change in yield on mortgage warehouse loans, thus causing income compression.

Further, the availability of wholesale funding could decline causing rates to increase relative to the yield on mortgage warehouse loans.

Section 1.03 Risks Related to our Management

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We believe that our continued growth and success depends in large part upon the skills of our executive management team and other key personnel.

The competition for qualified personnel in the financial services industry is intense, and the loss of key personnel or an inability to attract, retain or motivate key personnel could adversely affect our business.

The competition for qualified personnel in the financial services

industry is intense, and the loss of key personnel or an inability to attract, retain, or motivate key personnel could adversely affect our business.

Further, incentive programs have to be balanced between alignment with our growth goals and prudent risk management.

If we are not able to retain our existing key personnel or attract additional qualified personnel, our business operations could be impaired.

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This includes establishing the Company’s Risk Appetite, performing an annual Enterprise Risk Assessment, and ongoing monitoring of key risk indicators.

anticipate all material economic and financial outcome on the Company and its customers, or the specifics and timing of such outcomes.

While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, including performing an internal audit of our enterprise risk framework, those techniques and the judgements that accompany their application may not be effective and may not anticipate all material economic and financial outcomes on the Company and its customers, or the specifics and timing of such outcomes.

Section 1.04 Risks Related to our Other Accounting Estimates

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As part of our testing, we assess quantitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If we determine that the fair value of a reporting unit is less than its carrying amount using these quantitative factors, we must record a goodwill impairment charge based on that difference.

If we determine the fair value of a reporting unit is less than its carrying amount using these quantitative factors, we must record a goodwill impairment charge based on that difference.

Adverse conditions in our business climate, including a significant decline in future operating cash flows, a significant change in our stock price or market capitalization, or a deviation from our expected growth rate and performance may significantly affect the fair value of the Company and may trigger goodwill impairment losses, which could be materially adverse to our operating results and financial position.

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We rely on quantitative models to measure risks and estimate certain financial values.

Models may be used to measure interest rate and other market risks, predicting or estimating losses, assessing capital adequacy, assisting with identifying compliance risk, as well as to estimate the value of financial instruments and balance sheet items.

Models may be used to measure interest rate and other market risks, predicting or estimating losses, assessing capital adequacy, assisting with identifying compliance and fraud risk, as well as to estimate the value of financial instruments and balance sheet items.

Poorly designed or implemented models could result in business decisions made based on the use of models being adversely affected due to the inaccuracy of that information.

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Our reliance on models continues to increase as rules, guidance, and expectations change, including the model used in the determination of our allowance for credit losses.

Section 1.05 Risks Related to our Growth Strategy

Section 1.05 Risks Related to our Strategy

A key part of our strategy is operational leverage, which relies on income growth at a faster pace than expense growth.

Growing income is primarily dependent on growing earnings assets and lower cost deposits.

Many factors could cause our income not to grow, including the inability to attract and retain employees, economic conditions, competition, and regulatory or legislative changes affecting the industry.

Expense management is dependent upon the Bank’s ability to manage overall costs, including investments in technology and staffing necessary for growth.

These investments may take

more time to break-even or to provide an expected return on such investment than initially forecasted.

Another component of this strategy involves process efficiency, which is dependent on the bank’s ability to properly leverage technology for both customer-facing and back-office roles.

Growing by acquisition entails integration and certain other risks, and our financial condition and results of operations could be negatively affected if our expansion efforts are unsuccessful, or we fail to manage our growth effectively.

In addition to organic growth and the establishment of de novo branches, we have also expanded through acquisitions of branches and whole institutions – most recently in 2018.

In addition to organic growth, we have also expanded through acquisitions of branches and whole institutions, most recently in 2018.

We desire to reestablish this inorganic growth strategy, within our current footprint and/or via geographic expansion, but there are risks associated with any such expansion.

Those risks include, among others, incorrectly assessing the asset quality of a bank acquired in a particular transaction, encountering greater than anticipated costs in integrating acquired businesses, facing resistance from customers or employees, being unable to profitably deploy assets acquired in the transaction, and regulatory compliance risks.

To the extent we issue capital stock in connection with additional transactions, if any, these transactions and related stock issuances may have a dilutive effect on tangible book value per share.

To the extent we issue capital stock, if any, in connection with additional transactions, the transactions and related stock issuances may have a dilutive effect on tangible book value per share.

If our Company’s stock value is valued lower than peers, it could subject us to effectively paying more to acquire another institution or be unable to effectively match a peer offer for such institution.

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Section 1.06 Legislative and Regulatory Risks

We are subject to extensive government regulation that could limit or restrict our activities which may include crypto currency and legalized marijuana business activities, which in turn may adversely impact our ability to increase our assets and earnings .

We are subject to extensive government regulation that could limit or restrict our activities, which in turn may adversely impact our ability to increase our assets and earnings .

We operate in a highly regulated environment and are subject to supervision and regulation by a number of governmental regulatory agencies, including the FRB, the DFPI, and the FDIC.

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Changes in regulatory oversight of money service businesses could negatively impact the number of money service businesses we serve and the related income from such customers.

Legislative changes could adversely affect our business.

Both federal and state legislative bodies have issued and/or proposed laws that could adversely affect banking, including limiting certain fees or interest charged.

Other legislative proposals could increase costs of compliance, increase potential losses, or reduce income.

If enacted, these proposals could adversely affect our services provided, fees charged for such services, or limit how such services are delivered.

Section 1.07 Risks Related to our Common Stock

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Although our stock has been listed on Nasdaq for many years and our trading volume has increased in recent periods, trading in our stock does not consistently occur in high volumes and the market for our stock cannot always be characterized as active.

Thin trading in our stock may exaggerate fluctuations in the stock’s value, leading to price volatility in excess of that which would occur in a more active trading market.

Thin trading in our stock may exaggerate

fluctuations in the stock’s value, leading to price volatility in excess of that which would occur in a more active trading market.

In addition, the stock market in general is subject to fluctuations that affect the share prices and trading volumes of many companies, and these broad market fluctuations could adversely affect the market price of our common stock.

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In some cases, the markets have produced downward pressure on stock prices and adversely impacted credit availability for certain issuers without regard to the issuers’ underlying financial strength.

Future acquisitions may dilute shareholder ownership and value, especially tangible book value per share.

Future acquisitions or share repurchases may dilute shareholder ownership and value, especially tangible book value per share.

We periodically evaluate opportunities to acquire other financial institutions and/or bank branches and could incorporate such acquisitions as part of our future growth strategy.

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To the extent we issue capital stock in connection with such transactions, the share ownership of our existing shareholders may be diluted on the date of such transaction.

Similarly, repurchases of shares at a price in excess of our tangible book value per share will result in some dilution of the tangible book value per share on the date of such transaction.

The Company relies heavily on the payment of dividends from the Bank.

At December 31, 2025, the holding company had $6.9 million in cash available.

While this cash is sufficient to cover cash flow needs over the course of the next several quarters the Company’s long-term ability to meet debt service requirements and pay dividends depends on the Bank’s ability to pay dividends to the Company, as the Company has no other source of significant income.

While this cash is sufficient to cover required cash flow needs beyond the end of the next quarter, the Company’s long-term ability to meet debt service requirements and pay dividends depends on the Bank’s ability to pay dividends to the Company, as the Company has no other source of significant income.

However, the Bank is subject to regulations limiting the amount of dividends it may pay.

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Further, one or more of the Bank’s regulators could prohibit the Bank from paying dividends if, in their view, such payments would constitute unsafe or unsound banking practices.

The Bank’s ability to pay dividends to the Company is also limited by the California Financial Code.

The Bank’s ability to pay dividends to the Company

is also limited by the California Financial Code.

Whether dividends are paid, and the frequency and amount of such dividends will also depend on the financial condition and performance of the Bank and the decision of the Bank’s Board of Directors.

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All of these junior subordinated debt securities are senior to the shares of our common stock.

As a result, we must make interest payments on the debentures before any dividends can be paid on our common stock, and in the event of our bankruptcy, dissolution or liquidation, the holders of debt securities must be paid in full before any distributions may be made to the holders of our

common stock.

In addition, we have the right to defer interest payments on the junior subordinated debt securities for up to five years, during which time no dividends may be paid to holders of our common stock.

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no cumulative voting in the election of directors;

the approval by a plurality of votes cast for directors;

and the requirement that our Board of Directors consider the potential social and economic effects on our employees, depositors, customers and the communities we serve as well as certain other factors, when evaluating a possible tender offer, merger or other acquisition of the Company.

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If we are not able to successfully keep pace with technological changes in the industry, our business could be hurt.

The financial services industry is constantly undergoing technological change, with the frequent introduction of new technology-driven products and services.

The effective use of technology increases efficiency and enables financial institutions to better serve clients and reduce costs.

The financial services industry is constantly undergoing technological change, with the frequent introduction of new

technology-driven products and services, including new payment solutions and the use of agentic artificial intelligence (“AI”).

The effective use of technology increases efficiency and enables financial institutions to better serve clients and reduce costs, including mitigating fraud risks.

Our future success depends, in part, upon our ability to respond to the needs of our clients by using technology to provide desired products and services and create additional operating efficiencies.

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Despite the security measures we have in place, our facilities and systems may be vulnerable to cyber-attacks, security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events.

Notably, cybersecurity risks for banking organizations have significantly increased in recent years because of new emerging technologies, including artificial intelligence (“AI”), and the use of the internet and telecommunications technologies to conduct financial transactions.

In recent periods there has been a rise in fraudulent electronic activity, security breaches, and cyber-attacks, including in the banking sector.

Some financial institutions have reported breaches of their websites and systems which have involved sophisticated and targeted attacks intended to misappropriate sensitive or confidential information, destroy or corrupt data, disable or degrade service, disrupt operations and/or sabotage systems.

These breaches can remain undetected for an extended period.

Furthermore, our customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications that may appear to be legitimate messages sent by the Bank, in attempts to misappropriate passwords, card numbers, bank account information or other personal information or to introduce viruses or malware to personal computers.

Information security risks for financial institutions have increased in part because of new technologies, mobile services and other web-based products used to conduct financial and other business transactions, as well as the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.

The secure maintenance and transmission of confidential information, as well as the secure and reliable execution of transactions over our systems, are essential to protect us and our customers and to maintain our customers’ confidence.

Despite our efforts to identify, contain and mitigate these threats through detection and response mechanisms, product improvement, the use of encryption and authentication technology, and customer and employee education, fraudulent attempts directed against us, our customers, and third party service providers remain a serious issue.

The pervasiveness of cyber security incidents in general and the risks of cyber-crime are complex and continue to evolve, especially with emerging technologies such as AI, which may enhance the efforts of cyber threat actors.

We also face risks related to cyber-attacks and other security breaches in connection with debit card transactions, which typically involve the transmission of sensitive information regarding our customers through various third parties.

Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them.

We also rely on third party service providers to conduct certain other aspects of our business operations and face similar risks relating to them.

While we require regular security assessments from those third parties, we cannot be sure that their information security protocols are sufficient to withstand a cyber-attack or security breach.

Any cyber-attack or other security breach involving the misappropriation or loss of Company assets or those of its customers, or unauthorized disclosure of confidential customer information, could severely damage our reputation, erode confidence in the security of our systems, products and services, expose us to the risk of litigation and liability, disrupt our operations, and have a material adverse effect on our business.

We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations.

These types of incidents or breaches can remain undetected for an extended period.

Cybersecurity risks for banking organizations have significantly increased in recent years because of new emerging technologies, including AI, and the use of digital technologies to conduct financial transactions.

While we continue our efforts to identify, contain and mitigate these threats through detection and response mechanisms, product improvement, the use of encryption and multi-factor authentication technology, and customer and employee education, fraudulent attempts directed against us, our customers, and third-party service providers remain a serious issue.

We rely on external vendors to provide products and services necessary to maintain our day-to-day operations.

These third-party vendors are sources of operational and informational security risk to us, including risks associated with cyber-attacks.

While we require regular security assessments from third parties, we cannot be sure that their information security protocols are sufficient to withstand a cyber-attack or security breach.

If these vendors encounter a cyber-attack, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.

If our information systems were to experience a system failure, our business and reputation could suffer.

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We are subject to risks associated with the adoption of new technologies such as AI.

The Company or its third-party vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services or products.

The Company or its third-party vendors, clients or counterparties may develop or incorporate AI technology, including agentic AI, in certain business processes, services or products.

The legal and regulatory environment relating to AI is uncertain and rapidly evolving, and includes regulation targeted specifically at AI, as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI.

These evolving laws and regulations could require changes in the Company’s or third parties’ implementation of AI technology and increase the Company’s compliance costs and risk of non-compliance.

While the Company does not deploy AI at this time for either customer or internal purposes, we continue to evaluate whether to implement AI in certain limited capacities and the risks associated with potential errors, inaccuracies of work product, privacy, intellectual property rights, the potential for bias, and cybersecurity.

While the Company’s deployment of AI at this time is generally limited to fraud detection or prevention;

we continue to evaluate whether to implement additional AI tools, or agentic AI, in certain limited capacities, taking into

account the risks associated with potential errors, inaccuracies of work product, privacy, intellectual property rights, the potential for bias, and cybersecurity.

We are subject to a variety of operational risks, including reputational risk, legal risk, compliance risk, the risk of fraud or theft by employees or outsiders, and the risk of clerical or record-keeping errors, which may adversely affect our business and results of operations.

If personal, non-public, confidential, or proprietary customer information in our possession were to be mishandled or misused, we could suffer significant regulatory consequences, reputational

damage, and financial loss.

If personal, non-public, confidential, or proprietary customer information in our possession were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage, and financial loss.

This could occur, for example, if information were erroneously provided to parties who are not permitted to have the information, either by fault of our systems, employees, or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties.

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Fraud risk continues to evolve and impact our customers and our Bank.

In particular, check fraud has reemerged as a key source of fraud in addition to debit card fraud, mobile banking fraud, account takeover, invoice fraud, and cyber fraud.

Scams are often harder to detect as fraudsters deploy AI causing many customers to authorize transactions that they believe are legitimate.

Thefts of credentials using social engineering and malicious emails or websites, continues to rise.

Detecting and preventing fraud requires deploying additional resources and technologies, obtaining cooperation from other institutions, active monitoring of payment activities for suspicious activity, and training of employees and customers.

Check fraud has reemerged as a key source of fraud, in addition to debit card fraud, mobile banking fraud, account takeover, invoice fraud, and cyber fraud.

Scams are often harder to detect as fraudsters deploy AI, causing many customers to authorize transactions they believe are legitimate.

Theft of credentials, including multi-factor authentication codes, using social engineering and malicious emails or websites, continues to rise.

In addition, liability for fraud remains uncertain for particular transactions.

In addition, the Company is named as a defendant in lawsuits from time-to-time.

Even if the case has no basis, there are costs to defend, and the Company may determine that it should settle certain suits even if there is no liability.

The costs of lawsuits, whether merited or not, have a negative impact on the Company’s expenses.

The occurrence of any of these risks could result in a diminished ability to operate our business (for example, by requiring us to expend significant resources to correct the defect), as well as potential liability to clients, reputational damage and regulatory intervention, which could adversely affect our business, financial condition and results of operations, perhaps materially.

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If claims or legal actions, whether founded or unfounded, are not resolved favorably, they may result in significant financial liability.

Even if the case has no basis, there are costs to defend, and the Company may determine that it should settle certain suits even if there is no liability.

Although we establish accruals for legal matters as required and certain expenses and liabilities may be covered by insurance, the amount of any loss ultimately incurred in relation to legal claims and litigation may be substantially higher than the amounts accrued and/or insured.

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

What changed 10-K

Item 1. Business