What changed in this filing

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Item 1A. Risk Factors

2026-03-16 compared with 2025-03-13 · 33 added, 32 removed, 375 unchanged (15% of the section changed)

57 unchanged sentences

We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The BSA, the Patriot Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective AML program and to file reports such as suspicious activity reports and currency transaction reports.

We are required to comply with these and other AML requirements.

The BSA, the Patriot Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective AML/CFT program and to file reports such as suspicious activity reports and currency transaction reports.

We are required to comply with these and other AML/CFT requirements.

The federal banking agencies and Financial Crimes Enforcement Network are authorized to impose significant civil money penalties for violations of those requirements and have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the U.S.

1 unchanged sentence

We are also subject to increased scrutiny of compliance with the rules enforced by the OFAC.

If our policies, procedures and systems are deemed deficient, we would be subject to liabilities, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed acquisition and certain aspects of our business plan.

Failures to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.

If our policies, procedures and systems are deemed deficient, we would be subject to liabilities, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with acquisitions and certain aspects of our business plan.

Failures to maintain and implement adequate AML/CFT programs could also have serious reputational consequences for us.

Any of these results could reduce the Company’s ability to receive any necessary regulatory approvals for acquisitions or new branch openings.

This could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Any of these circumstances could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Adverse developments affecting the banking industry could have a material effect on our operations and/or stock price.

5 unchanged sentences

A decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect on our business, financial position, results of operations and growth prospects.

Our business and operations are sensitive to general business and economic conditions in the U.S., generally, and particularly the state of California and the Los Angeles/Orange County region, as well as the greater New York City/New Jersey metropolitan area and Dallas, Texas, where our branch offices are located.

Our business and operations are sensitive to general business and economic conditions in the U.S., generally, and particularly the state of California and the Los Angeles/Orange County region, as well as the greater New York City/New Jersey metropolitan area, Texas and Georgia,, where our branch offices are located.

Unfavorable or uncertain economic and market conditions in these areas could lead to credit quality concerns related to repayment ability and collateral protection as well as reduced demand for the products and services we offer.

The impact of the Trump administration’s policy changes regarding international trade, tariffs, renewable energy, immigration, domestic taxation, among other actions and policies of the current administration, may have on economic and market conditions is uncertain.

The impact of the current administration’s ongoing policy changes regarding international trade, tariffs, renewable energy, immigration, domestic taxation, among other actions and policies of the current administration, may have on economic and market conditions is uncertain.

In addition, concerns about the performance of international economies, especially in Europe and emerging markets, and economic conditions in Asia can impact the economy and financial markets here in the U.S.

28 unchanged sentences

We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services, including the use of artificial intelligence and machine learning to interact with customers and review to review and analyze data.

In addition to allowing us to better serve customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs.

26 unchanged sentences

Severe Weather, Natural Disasters or Other Climate Change Related Matters Could Significantly Impact Our Business.

Our primary market is located in an earthquake-prone zone in California, which is also subject to other weather or disasters, such as severe rainstorms, wildfire or flood, as well as health epidemics or pandemics (or expectations about them).

Our primary market is located in California, which is subject to earthquakes and other weather or disasters, such as severe rainstorms, wildfire or flood, as well as health epidemics or pandemics (or expectations about them).

These events could interrupt our business operations unexpectedly.

1 unchanged sentence

For example, our borrowers may have collateral properties located in coastal areas at risk to rise in sea level.

The properties pledged as collateral on our loan portfolio could also be damaged by tsunamis, floods, earthquakes or wildfires and thereby the recoverability of loans could be impaired.

The properties pledged as collateral in our loan portfolio could also be damaged by tsunamis, floods, earthquakes or wildfires and thereby the recoverability of loans could be impaired.

A number of factors can affect credit losses, including the extent of damage to the collateral, the extent of damage not covered by insurance, the extent to which unemployment and other economic conditions caused by the natural disaster adversely affect the ability of borrowers to repay their loans, and the cost of collection and foreclosure to us.

3 unchanged sentences

We primarily operate in California markets with a concentration of Korean-American individuals and businesses as customers.

We also currently have branch operations in New York, New Jersey and Texas, and LPO operations in various states and may evaluate additional branch expansion opportunities in other Korean-American populated markets.

We also currently have branch operations in New York, New Jersey, Georgia and Texas, and may evaluate additional branch expansion opportunities in other Korean-American populated markets.

In the course of this expansion, we will encounter significant risks and uncertainties that could have a material adverse effect on our operations.

2 unchanged sentences

This lack of geographic and ethnic diversification increases our risk profile.

Our operations are conducted through 16 branches located principally in Los Angeles and Orange Counties of Southern California and to a lesser extent in Texas and the New York/New Jersey region.

As a result of these geographic concentrations, our results depend largely upon economic and business conditions in these areas.

Any significant deterioration in economic and business conditions in our service areas could have a material adverse impact on the quality of our loan portfolio and the demand for our products and services, which in turn could have a material adverse effect on our results of operations.

We have attempted to diversify some of our loan business through LPOs in two states;

however, this diversification strategy may not be effective to reduce our geographic and ethnic concentrations.

Our operations are conducted through 15 branches located principally in Los Angeles and Orange Counties of Southern California and to a lesser extent in Georgia, Texas and the New York/New Jersey regions.

Our business focuses on Korean-American individuals and businesses in these markets.

As a result of these geographic and demographics concentrations, our results depend largely upon economic and business conditions in these areas.

Any significant deterioration in economic and business conditions in our service areas or in the Korean-American community could have a material adverse impact on the quality of our loan portfolio and the demand for our products and services, which in turn could have a material adverse effect on our results of operations.

We may not qualify to repurchase our Series C Preferred Stock on favorable terms.

On May 24, 2022, we sold shares of our Series C Preferred Stock to the U.S.

Treasury for the purchase price of $69.1 million under the Emergency Capital Investment Program, or “ECIP.” Under the ECIP program, the Treasury invested in depository institutions that are Community Development Financial Institutions or minority depository institutions (“MDIs”) to encourage lending to small businesses, minority-owned businesses and consumers in low-income and underserved communities.

In January of 2025, we entered into an ECIP Securities Purchase Option Agreement with Treasury that grants us or our qualifying designee may repurchase the Series C Preferred Stock, potentially at a substantial discount if we meet certain conditions (the “Repurchase Option”).

To be eligible to exercise the Repurchase Option, we must, among other things, meet certain thresholds for “deep impact lending” or “qualified lending” (as defined in the ECIP’s guidelines), comply with the ECIP agreements and rules, continue to qualify as an MDI, and be “well-capitalized” under federal Prompt Corrective Action guidelines.

The earliest possible date by which we could exercise the repurchase options (assuming we meet all required conditions) is June 30, 2026.

There can be no assurance that we will ever satisfy the lending and other requirements necessary to exercise the Repurchase Option.

For additional information, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Shareholders’ Equity and Regulatory Capital - Emergency Capital Investment Program”

Risks Related to Our Loans

38 unchanged sentences

These various guidelines and pronouncements 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 CRE market.

For example, bank regulators have issued guidance which refer to as the CRE Concentration Guidance that identifies certain CRE concentration levels that, if exceeded, will expose an institution to additional supervisory analysis with regard to the institution’s CRE concentration risk.

For example, bank regulators have issued guidance (referred to as the CRE Concentration Guidance) that identifies certain CRE concentration levels that, if exceeded, will expose an institution to additional supervisory analysis with regard to the institution’s CRE concentration risk.

The CRE Concentration Guidance is designed to promote appropriate levels of capital and sound loan and risk management practices for institutions with a concentration of CRE loans.

13 unchanged sentences

We originated non-qualified residential mortgage loans of $65.3 million and $36.0 million, respectively, for the years ended December 31, 2025 and 2024.

We originated qualified residential mortgage loans of $0 thousand and $0 thousand, respectively, for the years ended December 31, 2024 and 2023.

We originated no qualified residential mortgage loans for the years ended December 31, 2025 or 2024.

As of December 31, 2025, our non-qualified residential mortgage loans had a weighted average LTV of 62.0% and a weighted average Fair Isaac Corporation (“FICO”) score of 771.

26 unchanged sentences

These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects.

Real estate construction loans, including land development loans, comprised approximately 0.8% of our total loans held-for-investment portfolio as of December 31, 2024, and such lending involves additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets.

Real estate construction loans, including land development loans, comprised 0.7% of our total loans held-for-investment portfolio as of December 31, 2025, and such lending involves additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets.

Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related LTV ratio.

14 unchanged sentences

(i) it is maintained on a cash basis because of deterioration in the financial condition of the borrower, (ii) payment in full of principal or interest is not expected, or (iii) principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection.

In addition, we had $4.9 million in accruing loans that were 30-89 days past due as of December 31, 2024.

In addition, we had $955 thousand in accruing loans that were 30-89 days past due as of December 31, 2025.

Our NPAs adversely affect our net income in various ways.

25 unchanged sentences

Interest-bearing deposit accounts earn interest at rates established by management based on competitive market factors.

Our cost of deposits increased from 2.87% for the year ended December 31, 2023, to 3.72% for the year ended December 31, 2024.

Our cost of deposits decreased from 3.72% for the year ended December 31, 2024, to 3.33% for the year ended December 31, 2025.

The demand for the deposit products we offer may also be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, regulatory actions that decrease customer access to particular products, or the availability of competing products.

31 unchanged sentences

ACL is funded from a provision (reversal) for credit losses, which is a charge to our income statement.

Our provision (reversal) for credit losses, was $3.4 million, $(132) thousand and $3.6 million, respectively, for the years ended December 31, 2024, 2023 and 2022.

Our provision (reversal) for credit losses, was $4.0 million, $3.4 million and $(132) thousand, respectively, for the years ended December 31, 2025, 2024 and 2023.

The determination of an appropriate level of ACL is an inherently difficult process and is based on numerous assumptions.

4 unchanged sentences

We have grown our consolidated assets from $2.15 billion as of December 31, 2021 to $3.28 billion as of December 31, 2025, and our deposits from $1.87 billion as of December 31, 2021 to $2.80 billion as of December 31, 2025.

We intend to continue to grow our business through organic loan and deposit growth, and we anticipate that much of our future growth will be dependent on our ability to successfully implement our organic growth strategy, which may include establishing additional branches or LPOs in new or existing markets.

A risk exists, however, that we will not be able to gain regulatory approval or identify suitable locations and management teams to execute this strategy.

2 unchanged sentences

A decline in economic and business conditions in our market areas or in Korea could have a material impact on our loan portfolio or the demand for our products or services, which in turn may have a material adverse effect on our financial condition and results of operations.

Operations in our LPOs have positively affected our results of operations, and sustaining these operations and growing loans may be more difficult than we expect, which could adversely affect our results of operations.

We maintained four LPOs that primarily originate SBA loans as of December 31, 2024.

During the year ended December 31, 2024, these LPOs accounted for approximately 12.3% of new loans originated by the Bank.

Sustaining the expansion of loan production through use of these out of state LPOs depends on a number of factors, including the continued strength of the markets in which our offices are located and identifying, hiring and retaining critical personnel.

The strength of these markets could be weakened by anticipated increases in interest rates and any economic downturn.

Moreover, competition for successful business developers and relationship managers in the SBA loan industry is fierce, and we may not be able to attract and retain the personnel we need to profitably operate our LPOs.

Unsuccessful operation of our out of state LPOs could negatively impact our financial condition and results of operation.

Risks Related to Our Capital

15 unchanged sentences

Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Company.

In the event that the Bank is unable to pay dividends to the Company, the Company may not be able to pay dividends to its shareholders and pay interest on the subordinated debentures.

In the event that the Bank is unable to pay dividends to the Company, the Company may not be able to pay dividends to its shareholders or repurchase its outstanding shares.

As a result, it could have an adverse effect on Company's stock price and investment value.

44 unchanged sentences

If these factors lead to financial strain on our borrowers, we may experience increased credit risk, higher loan delinquencies, and a potential decline in loan demand.

A prolonged trade tensions or the implementation of tariffs could negatively impact the broader economic environment, potentially leading to reduced consumer spending, lower economic growth, and decreased demand for other banking products and services.

Prolonged trade tensions or the ongoing implementation of tariffs could negatively impact the broader economic environment, potentially leading to reduced consumer spending, lower economic growth, and decreased demand for other banking products and services.

As a result, our financial performance, including credit quality and loan growth, could be adversely affected by these policy changes.

2 unchanged sentences

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 1A. Risk Factors