CVB FINANCIAL CORP (CVBF)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of CVB Financial Corp. (referred to herein on an unconsolidated basis as “CVB” and on a consolidated basis as “we,” “our” or the “Company”) and its wholly owned bank subsidiary, Citizens Business Bank, National Association (the “Bank” or “CBB”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) and the unaudited condensed consolidated financial statements and accompanying notes presented elsewhere in this report.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the Company’s unaudited condensed consolidated financial statements are based upon the Company’s unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following is a summary of the more judgmental and complex accounting estimates and principles. In each area, we have identified the variables we believe are most important in our estimation process. We utilize information available to us to make the necessary estimates to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in the key variables and information could change future valuations and impact the results of operations.

•
Allowance for Credit Losses (“ACL”)

•
Business Combinations

•
Valuation and Recoverability of Goodwill

Our significant accounting policies are described in greater detail in our 2025 Form 10-K in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 3 – Summary of Significant Accounting Policies included in the 2025 Form 10-K.

38

OVERVIEW

For the first quarter of 2026, we reported net earnings of $51.0 million, or diluted earnings per share of $0.38, compared with $51.1 million, or diluted earnings per share of $0.36 for the first quarter of 2025. Net earnings for the first quarter of 2026 produced an annualized return on average equity (“ROAE”) of 8.86%, an annualized return on average tangible common equity (“ROATCE”) of 13.38%, and an annualized return on average assets (“ROAA”) of 1.33%. Our net interest margin (“NIM”), on a tax equivalent basis, was 3.44% for the first quarter of 2026, while our efficiency ratio was 45.84%. ROATCE is a non-GAAP financial measure. For additional details, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — GAAP to Non-GAAP Reconciliation in this Form 10-Q.

Net interest income was $117.8 million for the first quarter of 2026, an increase of $7.4 million, or 6.70%, from the first quarter of 2025. The increase was primarily driven by a $6.1 million increase in interest income that resulted from $335.7 million in higher average interest-earning assets and a seven basis point increase in the yield on earning assets. In addition to the increase in interest income, interest expense declined from the first quarter of 2025 by $1.3 million, as a five basis point decrease in the cost of deposits and customer repurchase agreements offset the $288.2 million increase in average total deposits and customer repurchase agreements.

Noninterest income was $14.3 million for the first quarter of 2026, a decrease of $2.0 million, or 12.0%, compared to $16.2 million for the first quarter of 2025. The decrease was primarily due to a $2.2 million gain on sale of other real estate owned (“OREO”) during the first quarter of 2025. Bank-owned life insurance (“BOLI”) income for the first quarter of 2026 increased by $308,000 compared to the first quarter of 2025. Trust and investment services income increased by $300,000, or 9.2%, from the first quarter of 2025.

Noninterest expense for the first quarter of 2026 was $60.6 million, an increase of $1.4 million, or 2.41%, compared to $59.1 million for the first quarter of 2025. Acquisition related expenses for the acquisition of Heritage Commerce Corp, announced at the end of the fourth quarter of 2025, totaled $1.1 million in the first quarter of 2026. Excluding acquisition expense, the increase in noninterest expense compared to the first quarter of 2025 was $295,000.

At March 31, 2026, total assets were $15.51 billion, a decrease of $123.5 million, or 0.79%, from total assets of $15.63 billion at December 31, 2025. Interest-earning assets were $13.86 billion at March 31, 2026, a decrease of $135.4 million, or 0.97%, when compared with $13.99 billion at December 31, 2025. The decrease in interest-earning assets was primarily due to a $116.3 million decrease in investment securities, a $55.9 million decrease in total loans and a $8.1 million decrease in interest-earning balances due from depository institutions, partially offset by a $44.9 million increase in interest-earning balances due from the Federal Reserve.

Total investment securities were $4.84 billion at March 31, 2026, a decrease of $116.3 million, or 2.35%, from $4.95 billion at December 31, 2025. At March 31, 2026, investment securities held-to-maturity (“HTM”) totaled $2.25 billion, a $22.4 million, or 0.98%, decline from $2.27 billion at December 31, 2025. At March 31, 2026, available-for-sale (“AFS”) investment securities totaled $2.59 billion, inclusive of a pre-tax net unrealized loss of $310.4 million. AFS securities decreased by $94.00 million, or 3.50%, from $2.68 billion at December 31, 2025. The pre-tax unrealized loss increased by $2.6 million from December 31, 2025. Our tax equivalent yield on investments was 2.63% for the quarter ended March 31, 2026, compared to 2.63% for the first quarter of 2025.

Fair value hedging transactions with $700 million notional pay-fixed interest rate swaps, had a fair value which totaled $3.9 million and was reflected as a liability at March 31, 2026. The fair value of these instruments totaled $8.6 million and were reflected as a liability at December 31, 2025. These instruments generated negative interest income of $96,000 for the first quarter of 2026, compared to interest income of $1.1 million for the first quarter of 2025, respectively. Refer to Note 9 – Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.

Total loans and leases, at amortized cost, of $8.64 billion at March 31, 2026, decreased by $55.9 million, or 0.64%, from December 31, 2025. The decrease from the prior year end was primarily due to decreases of $114.0 million in dairy and livestock loans associated with the seasonal increase that occurs every calendar year end, offset in part by increases of $56.8 million in commercial real estate loans. Our loan yields were 5.32% for the quarter ended March 31, 2026, compared to 5.22% for the first quarter of 2025.

The allowance for credit losses totaled $80.2 million at March 31, 2026, compared to $77.2 million at December 31, 2025. The increase was primarily due to a $3.0 million provision for credit losses in the first quarter of 2026.

39

Noninterest-bearing deposits were $7.10 billion at March 31, 2026, an increase of $299.8 million, or 4.41%, when compared to $6.80 billion at December 31, 2025. At March 31, 2026, noninterest-bearing deposits were 59.44% of total deposits, compared to 56.33% at December 31, 2025.

Interest-bearing deposits were $4.84 billion at March 31, 2026, a decrease of $426.6 million, or 8.09%, when compared to $5.27 billion at December 31, 2025. Customer repurchase agreements totaled $494.3 million at March 31, 2026, compared to $490.6 million at December 31, 2025. Our average cost of total deposits including customer repurchase agreements was 0.82% for the quarter ended March 31, 2026, compared to 0.87% for the quarter ended March 31, 2025.

At March 31, 2026 and December 31, 2025, total borrowings consisted of $500.0 million of FHLB advances at a weighted average cost of approximately 4.6%. The Federal Home Loan Bank of San Francisco (“FHLB”) advances include maturities of $300.0 million in May 2026 and $200.0 million in May 2027.

The Company’s total stockholders' equity was $2.32 billion at March 31, 2026, an increase of $26.1 million compared $2.30 billion at December 31, 2025. The increase was primarily attributable to $51.0 million in net earnings and a $2.7 million increase in other comprehensive income, partially offset by $27.2 million in cash dividends declared. We engaged in no stock repurchases during the first quarter of 2026. Our tangible book value per share at March 31, 2026 was $11.42, which compares to $11.24 at December 31, 2025. Tangible book value per share is a non-GAAP financial measure. For additional details, refer to Item 2. – MD&A — GAAP to Non-GAAP Reconciliation.

Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory requirements. As of March 31, 2026, the Company’s Tier 1 leverage capital ratio was 11.9%, Common Equity Tier 1 (“CET1”) ratio was 16.3%, Tier 1 risk-based capital ratio was 16.3%, and total risk-based capital ratio was 17.1%. Refer to Item 2. – MD&A —Analysis of Financial Condition – Capital Resources.

Acquisition of Heritage Commerce Corp.

On April 17, 2026, the Company completed its previously announced acquisition of Heritage Commerce Corp (“Heritage”), including its banking subsidiary, Heritage Bank of Commerce, in an all-stock transaction in accordance with the terms and conditions of that certain Agreement and Plan of Reorganization and Merger, dated as of December 17, 2025, by and between CVB and Heritage (the “Merger Agreement”). On the Closing Date, Heritage merged with and into CVB, with CVB being the surviving entity (the “Heritage Merger”). Immediately thereafter, Heritage’s wholly-owned banking subsidiary, Heritage Bank of Commerce, merged with and into Citizens Business Bank, N.A. Under the terms of the Merger Agreement, Heritage shareholders received 0.65 shares of the Company’s common stock for each share of Heritage common stock they own. As a result of the merger, the Company issued approximately 41 million shares of common stock to former Heritage shareholders, representing approximately $845 million of consideration. At close, Heritage had loans with a book value of approximately $3.6 billion and approximately $4.8 billion of deposits.

The Heritage Merger will be accounted for under ASC 805 as a business combination. Effective the closing date of April 17, 2026, Heritage’s financial results are included in the Company’s consolidated operations and will be reported in the Company’s second quarter 2026 results.

40

ANALYSIS OF THE RESULTS OF OPERATIONS

Financial Performance

[[GREPCENT_TABLE]]
[["","Three Months Ended","","","Variance"],["","March 31,","","","December 31,"],["","2026","","","2025","","","$","","","%"],["","(Dollars in thousands, except per sha

[Excerpt truncated for page length; source filing is linked above.]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of CVB Financial Corp. and its wholly owned subsidiary. This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with this Annual Report on Form 10-K, and the audited consolidated financial statements and accompanying notes presented elsewhere in this report.

CRITICAL ACCOUNTING POLICIES

The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following is a summary of the more judgmental and complex accounting estimates and principles. In each area, we have identified the variables most important in the estimation process. We have used the best information available to make the necessary estimates to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in the key variables could change future valuations and impact the results of operations.

Allowance for Credit Losses (“ACL”) — Our allowance for credit losses is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. Our ACL amounts are largely driven by portfolio characteristics, including loss history and various risk attributes, and the economic outlook for certain macroeconomic variables. Risk attributes for commercial real estate loans include original loan to value ratios, origination year, loan seasoning, and macroeconomic variables that include GDP growth, commercial real estate price index and unemployment rate. Risk attributes for commercial and industrial loans include internal risk ratings, borrower industry sector, loan credit spreads and macroeconomic variables that include unemployment rate and BBB spread. The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans. The Commercial and Industrial methodology is applied over a substantial portion of the Company’s commercial and industrial loans, all dairy & livestock and agribusiness loans, municipal lease receivables, as well as the remaining portion of SBA loans. The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction loans. In addition to determining the quantitative life of loan loss rate to be applied against the amortized cost basis of the portfolio segments, management reviews current conditions and forecasts to determine whether adjustments are needed to ensure that the life of loan loss rates reflect both the current state of the portfolio, and expectations for macroeconomic changes. Our methodology for assessing the appropriateness of the allowance is reviewed on a regular basis and considers overall risks in the Bank’s loan portfolio.

For a full discussion of our methodology of assessing the adequacy of the allowance for credit losses, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation — Risk Management” and Note 3 — Summary of Significant Accounting Policies and Note 5 — Loans and Lease Finance Receivables and Allowance for Credit Losses of our consolidated financial statements presented elsewhere in this report.

Business Combinations — The Company applies the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity in a business combination recognizes the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes prevailing valuation techniques appropriate for the asset or liability being measured in determining these fair values. These fair values are estimates and are subject to adjustment for up to one year after the acquisition date or when additional information relative to the closing date fair values becomes available and such information is considered final, whichever is earlier. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts

44

allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain would be recognized. Acquisition related costs are expensed as incurred.

Valuation and Recoverability of Goodwill — Goodwill represented $765.8 million of our $15.63 billion in total assets as of December 31, 2025. The Company has one reportable segment. Goodwill has an indefinite useful life and is not amortized, but is tested for impairment at least annually, or more frequently, if events and circumstances exist that indicate that a goodwill impairment test should be performed. Such events and circumstances may include among others, a significant adverse change in legal factors or in the general business climate, significant decline in our stock price and market capitalization, unanticipated competition, the testing for recoverability of a significant asset group within the reporting unit, and an adverse action or assessment by a regulating body. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements.

Based on the results of our annual goodwill impairment test, we determined that no goodwill impairment charges were required as our single reportable segment’s estimated fair value exceeded its carrying amount. See Note 6 — Goodwill and Other Intangible Assets of our consolidated financial statements presented elsewhere in this report.

For a complete discussion and disclosure of other accounting policies see Note 3 — Summary of Significant Accounting Policies of the Company’s consolidated financial statements presented elsewhere in this report.

45

OVERVIEW

For the year ended December 31, 2025, we reported net earnings of $209.3 million, compared with $200.7 million for 2024, a $8.6 million, or 4.28%, increase from the prior year. Diluted earnings per share of $1.52 for 2025, increased by $0.08, or 5.61%, when compared to $1.44 for 2024. Market interest rates stayed elevated throughout the first eight months of 2024 until the Federal Reserve initiated a series of rate cuts in September 2024. This shift in the interest rate environment materially affected the Company's net interest income and overall earnings during 2025. Net earnings benefited from higher net interest income, driven primarily by the expansion in net interest margin. The improvement reflected a reduction in overall cost of funds, particularly on borrowings, as a result of the Company's balance sheet deleveraging efforts in late 2024. Net earnings of $209.3 million produced a return on average equity (“ROAE”) of 9.26%, a return on average tangible common equity (“ROATCE”) of 14.28% and a return on average assets (“ROAA”) of 1.36%. Our net interest margin, tax equivalent (“NIM”), was 3.36% for 2025, while our efficiency ratio was 46.0%.

Net interest income of $460.3 million for the year ended December 31, 2025, increased $12.9 million, or 2.89%, compared to the same period of 2024. Interest income decreased by $36.8 million, or 5.84%, in 2025, while interest expense decreased $49.8 million year-over-year. Cost of funds for 2025 decreased by 29 basis points over 2024, while the earning asset yield decreased by two basis points. Average earning assets declined by $798.3 million year-over-year.

Noninterest income of $55.2 million for the year ended December 31, 2025, increased by $0.7 million, or 1.28%, compared to the same period of 2024. Trust and investment income for 2025 grew by $1.3 million, or 9.50%, from the prior year. Noninterest income in 2025 included a $11.0 million in losses on the sale of AFS investment securities, a $6.0 million legal settlement, and a $2.3 million gain in OREO, while 2024 included a total pre-tax loss of $28.3 million from the sale of $467 million of AFS securities partially offset by a pre-tax gain of $25.9 million from the sale-leaseback of four buildings.

Noninterest expense increased from $233.6 million in 2024 to $237.3 million in 2025. The $3.7 million increase in noninterest expense was primarily driven by higher software related costs associated with the continued investments in technology and infrastructure. In addition, noninterest expense included $1.6 million of acquisition related costs to the announced merger with Heritage.

At December 31, 2025, total assets of $15.63 billion increased by $477.4 million, or 3.15%, from total assets of $15.15 billion at December 31, 2024. Interest-earning assets of $13.99 billion at December 31, 2025 increased by $463.0 million, or 3.42%, when compared with $13.53 billion at December 31, 2024. The increase in interest-earning assets was primarily due to a $218.1 million increase in interest-earning balances due from the Federal Reserve, a $162.8 million increase in total loans, and a $31.7 million increase in investment securities.

Total investment securities were $4.95 billion at December 31, 2025, an increase of $31.7 million, or 0.64%, from $4.92 billion at December 31, 2024. At December 31, 2025, investment securities HTM totaled $2.27 billion. HTM securities decreased by $109.3 million, or 4.59% from $2.38 billion at December 31, 2024. At December 31, 2025, investment securities AFS totaled $2.68 billion, inclusive of a pre-tax net unrealized loss of $299.2 million. AFS securities increased by $141.0 million, or 5.54%, from $2.54 billion at December 31, 2024, driven primarily by $482.5 million in purchases of AFS securities and an improvement of $128.9 million in AFS investment securities mark-to-market unrealized loss, partially offset by principal payments and maturities, as well as sales of securities of $92.9 million during the year, which resulted in a pre-tax loss of $11.0 million. The securities sold had an average yield of less than three percent. Our tax equivalent yield on our investment portfolio remained the same at 2.65% for 2024 and 2025.

Fair value hedging transactions with $700 million notional pay-fixed interest rate swaps, had a fair value which totaled $8.7 million and was reflected as a liability at December 31, 2025. The fair value of these instruments totaled $7.2 million and were reflected as a asset at December 31, 2024. These instruments generated interest income of $4.3 million for 2025, a decrease of $10.1 million from interest income of $14.4 million for 2024. Refer to Note 18 – Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.

Total loans and leases, at amortized cost, were $8.70 billion at December 31, 2025, an increase of $162.8 million, or 1.91%, from $8.54 billion at December 31, 2024. The $162.8 million increase included $66.9 million in commercial real estate loans, $48.5 million in commercial and industrial loans, and $21.7 million in construction loans. Our loan yields were 5.29% for the year ended December 31, 2025, compared to 5.26% for 2024.

The allowance for credit losses totaled $77.2 million at December 31, 2025, compared to $80.1 million at December 31, 2024. At December 31, 2025, ACL as a percentage of total loans and leases outstanding was 0.89%. This compares to 0.94% at December 31, 2024. The decrease in the allowance was primarily the result of the successful resolution

46

of certain nonperforming loans, with nonaccrual loans declining by $23.1 million and positive credit migration resulting in a $36.8 million decrease in classified loans. The allowance was not materially impacted by changes in our economic forecast as of December 31, 2025. Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. The resulting economic forecast reflects GDP growth of less than 2% for 2026 though 2028. Commercial Real Estate values are forecasted to continue their decline in 2026, with growth in values returning in 2027. Unemployment is forecasted to exceed 5% from early 2026 until the second half of 2028.

Noninterest-bearing deposits were $6.80 billion at December 31, 2025, a decrease of $236.4 million, or 3.36% when compared to $7.04 billion at December 31, 2024. At December 31, 2025, noninterest-bearing deposits were 56.33% of total deposits, compared to 58.90% at December 31, 2024.

Interest-bearing deposits were $5.27 billion at December 31, 2025, an increase of $360.0 million, or 7.33%, when compared to $4.91 billion at December 31, 2024. Customer repurchase agreements totaled $490.6 million at December 31, 2025, compared to $261.9 million at December 31, 2024. Our average cost of total deposits including customer repurchase agreements for 2025 was 0.88%, compared to 0.90% for 2024.

At December 31, 2025, total borrowings of $500.0 million consisted of Federal Home Loan Bank (“FHLB”) advances, at an average cost of approximately 4.6%. Borrowings remained the same from $500.0 million at December 31, 2024. On average, borrowings decreased by more than $1.01 billion between 2024 and 2025, as the Company completed a deleveraging strategy during the later part of 2024. As a result of this deleveraging, cost of funds decreased by 29 basis points from 1.32% for 2024 to 1.03% for 2025 due to the decrease in the higher-cost short-term borrowings.

The Company’s total equity was $2.30 billion at December 31, 2025. This represented an overall increase of $108.9 million from total equity of $2.19 billion at December 31, 2024. Increases to equity included $209.3 million in net earnings and a $84.4 million increase in other comprehensive income, that were partially offset by $110.3 million in cash dividends. For the year ended December 31, 2025, we repurchased, under our stock repurchase plan, 4,321,777 shares at an average price of $18.60, totaling $80.4 million. We did not repurchase any stock during 2024. Our tangible book value per share at December 31, 2025 was $11.24, compared to $10.10 at December 31, 2024, an 11.29% increase.

Our capital ratios under the capital framework referred to as Basel III remain well above regulatory requirements. As of December 31, 2025, the Company’s Tier 1 leverage capital ratio totaled 11.62%, our common equity Tier 1 ratio totaled 15.89%, our Tier 1 risk-based capital ratio totaled 15.89%, and our total risk-based capital ratio totaled 16.66%. Refer to our Analysis of Financial Condition — Capital Resources.

Acquisition Related

On December 17, 2025, the Company announced that it entered into a Merger Agreement with Heritage, headquartered in San Jose, California. pursuant to which the Company will acquire Heritage in an all-stock transaction.

For the year ended December 31, 2025, the Company incurred non-recurring merger related expenses associated with the Heritage acquisition of $1.6 million.

47

ANALYSIS OF THE RESULTS OF OPERATIONS

Financial Performance

Return on Average Tangible Common Equity Reconciliations (Non-GAAP)

The return on average tangible common equity is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures commonly used by banking analysts and investors to provide supplemental information regarding the Company’s performance. The following is a reconciliation of net income, adjusted for tax-effected amortization of intangibles, to net income computed in accordance with GAAP; a reconciliation of average tangible common equity to the Company’s average stockholders’ equity computed in accordance with GAAP; as well as a calculation of return on average tangible common equity.

(1)
Tax effected at respective statutory rates.

(2)
Annualized where applicable.

48

Net Interest Income

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans, investments and interest earning cash (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax equivalent (“TE”) basis by adjusting interest income utilizing the federal statutory tax rates of 21% in effect for the years ended December 31, 2025, 2024 and 2023. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary policy, and the strength of the global, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, the growth and maturity of earning assets, and derivative financial instruments. See Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Asset/Liability and Market Risk Management — Interest Rate Sensitivity Management included herein.

49

The tables below present the interest rate spread, net interest margin and the composition of average interest-earning assets and average interest-bearing liabilities by category for the periods indicated, including the changes in average balance, composition, and average yield/rate between these respective periods.

Interest-Earning Assets and Interest-Bearing Liabilities

(1)
Includes tax equivalent (TE) adjustments utilizing a federal statutory rate of 21% in effect for the years ended December 31, 2025, 2024 and 2023. The non-TE rates for total investment securities was 2.61%, 2.61% and 2.48% for the years ended December 31, 2025, 2024 and 2023, respectively.

(2)
Includes loan fees of $3.1 million, $2.9 million and $3.1 million for the years ended December 31, 2025, 2024 and 2023, respectively. Prepayment penalty fees of $3.9 million, $2.6 million and $2.5 million are included in interest income for the years ended December 31, 2025, 2024 and 2023, respectively.

(3)
Includes interest-bearing demand and money market accounts.

50

The following table presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average interest-earning assets and average interest-bearing liabilities for the periods indicated. Changes in interest income or expense attributable to volume changes are calculated by multiplying the change in volume by the initial average interest rate. The change in interest income or expense attributable to changes in interest rates is calculated by multiplying the change in interest rate by the initial volume. The changes attributable to interest rate and volume changes are calculated by multiplying the change in rate times the change in volume and reflect an adjustment for the number of days as appropriate.

Rate and Volume Analysis for Changes in Interest Income, Interest Expense and Net Interest Income

2025 Compared to 2024

Net interest income before provision for credit losses of $460.3 million for 2025 increased $12.9 million, or 2.89%, compared to $447.3 million for 2024. Interest income decreased by $36.8 million, or 5.84% in 2025, while interest expense decreased by $49.8, or 27.22% year-over-year. Cost of funds for 2025 decreased by 29 basis points over 2024, while the earning asset yield decreased by two basis points. Interest-earning assets decreased on average by $798.3 million, or 5.49%, from $14.55 billion for 2024 to $13.76 billion for 2025. Our net interest margin (TE) was 3.36% for 2025, compared to 3.09% for 2024.

Total interest income for 2025 of $593.3 million decreased by $36.8 million, or 5.84%, when compared to 2024. Compared to 2024, average interest-earning assets decreased $798.3 million and the yield on interest-earning assets decreased by two basis point from 4.35% for 2024 to 4.33% for 2025. The $798.3 million year-over-year decrease in average earning assets resulted from a $298.1 million decrease in average earning balances due from the Federal Reserve, a $259.9 million decrease in investment securities and a decrease of $242.5 million in average loans. The decrease in the overall earning asset yield was primarily impacted by the 107 basis point decrease in the yield on balances held at the Federal Reserve and the decrease in average earning balances due from the Federal Reserve as a percentage of earning assets from approximately 5% in 2024 to 3% in 2025. Balances due from the Federal Reserve earned 5.38% on average in 2024 compared to 4.31% in 2025. The decrease in the earning asset yield was also impacted by a $10.1 million decrease in the

51

interest income derived from the positive carry on fair value hedges. A three basis point increase in loan yields, from 5.26% for 2024 to 5.29% for 2025 and 19 basis point increase in the yield on investment securities, from 2.37% for 2024 to 2.56% for 2025, partially offset the decline in earnings from the fair value hedges and funds held at the Federal Reserve.

Total interest income and fees on loans for 2025 of $446.2 million decreased $9.6 million, or 2.11%, when compared to 2024. This decrease in income was due to a decrease in average loans of $242.5 million partially offset by a higher loan yield. Loan yields were 5.29% for 2025, compared to 5.26% for 2024. Loan yields grew year-over-year, due to higher rates from adjustable rate loans and newly originated loans, as well as an increase in interest paid on nonaccrual loans.

In general, we stop accruing interest on a loan after its principal or interest becomes 90 days or more past due. When a loan is placed on nonaccrual, all interest previously accrued but not collected is charged against earnings. There was no interest income that was accrued and not reversed on nonaccrual loans at December 31, 2025 and 2024. As of December 31, 2025 and 2024, we had $4.7 million and $27.8 million of nonaccrual loans, respectively.

Interest income from investment securities was $127.3 million for 2025, a $6.7 million, or 5.01%, decrease from $134.0 million for 2024, including a $4.9 million decrease for AFS securities. This decrease was driven by a decline in the average balance of investment securities of $259.9 million, or 5.05%. The $4.9 million decrease in interest income on AFS securities was the net result of the decrease in interest income from the positive carry on fair value hedges and the 19 basis point increase in the yield on AFS securities. The positive carry on these fair value hedges resulted in approximately $4.3 million of interest income in 2025 compared to $14.4 million of interest income in 2024. The yield on investment securities was impacted positively by the sale of $467 million and $104 million of lower-yielding investment securities combined with the purchase of $418.5 million and $482 million of higher-yielding securities in 2024 and 2025 respectively.

Interest expense of $133.0 million for 2025 decreased $49.8 million, compared to $182.8 million for 2024. Total cost of funds for 2025 was 1.03%, compared with 1.32% for 2024. This 29 basis point decrease in cost of funds was primarily the result of the decrease in the average balance of higher cost borrowing of $1.01 billion, offset by a higher average balance and cost of customer repurchase agreements in 2025. The average rate paid on total deposits decreased by three basis points, to 0.85% for 2025 from 0.88% for 2024. Noninterest bearing deposits continued to be a significant portion of total deposits in 2025. Average noninterest-bearing deposits were 58.98% of our total deposits for 2025, compared to 59.92% for 2024.

2024 Compared to 2023

Net interest income before provision for credit losses of $447.3 million for 2024 decreased $40.6 million, or 8.33%, compared to $488.0 million for 2023. Interest income increased by $23.8 million, or 3.92% in 2024, offset by a $64.4 million increase in interest expense year-over-year. Cost of funds for 2024 increased by 49 basis points over 2023, while the earning asset yield increased by 25 basis points. Interest-earning assets decreased on average by $275.6 million, or 1.86%, from $14.83 billion for 2023 to $14.55 billion for 2024. Our net interest margin (TE) was 3.09% for 2024, compared to 3.31% for 2023.

Total interest income for 2024 of $630.1 million grew by $23.8 million, or 3.92%, when compared to 2023. Compared to 2023, average interest-earning assets decreased $275.6 million and the yield on interest-earning assets increased by 25 basis point from 4.10% for 2023 to 4.35% for 2024. The $275.6 million year-over-year decrease in average earning assets resulted from a $434.9 million decrease in average investment securities and a decline of $222.9 million in average loans, offset by $386.4 million of growth in average earning balances due from the Federal Reserve. The 25 basis point increase in the earning asset yield over 2023 resulted primarily from a 22 basis point increase in loan yields, from 5.04% for 2023 to 5.26% for 2024, and from a 13 basis point increase in the yield on investment securities, from 2.52% for 2023 to 2.65% for 2024. The increase in the overall earning asset yield was also impacted by the increase in average earning balances due from the Federal Reserve as a percentage of earning assets, from 2.2% in 2023 to 5.0% in 2024. Balances due from the Federal Reserve earned 5.38% on average in 2024.

Total interest income and fees on loans for 2024 of $455.8 million increased $7.5 million, or 1.66%, when compared to 2023. This increase in income was due to a higher loan yield partially offset by a decrease in average loans of $222.9 million. Loan yields were 5.26% for 2024, compared to 5.04% for 2023. Loan yields grew year-over-year, as rising interest rates contributed to an increase in yields on loans indexed to the Prime rate or other short-term indexes, as well as higher rates from adjustable rate loans and newly originated loans.

In general, we stop accruing interest on a loan after its principal or interest becomes 90 days or more past due. When a loan is placed on nonaccrual, all interest previously accrued but not collected is charged against earnings. There was no interest income that was accrued and not reversed on nonaccrual loans at December 31, 2024 and 2023. As of December 31, 2024 and 2023, we had $27.8 million and $21.3 million of nonaccrual loans, respectively.

52

Interest income from investment securities was $134.0 million for 2024, a $4.3 million, or 3.09%, decrease from $138.3 million for 2023. This decrease was driven by a decline in the average balance of investment securities of $434.9 million, or 7.80%, partially offset by a 13 basis point increase in the yield on securities, compared to 2023. This 13 basis point increase in the yield on investment securities from the prior year period was impacted by the positive spread generated from the pay-fixed swaps we entered into at the end of the second quarter of 2023. The positive carry on these fair value hedges resulted in approximately $14.4 million of interest income in 2024. The yield on investment securities was also impacted positively by the sale of $467 million of lower-yielding investment securities combined with the purchase of $418.5 million of higher-yielding securities in 2024.

Interest expense of $182.8 million for 2024 increased $64.4 million, compared to $118.3 million for 2023. Total cost of funds for 2024 was 1.32%, compared with 0.83% for 2023. This 49 basis point increase in cost of funds was primarily the result of the increase in the cost of deposits. The average rate paid on deposits increased by 47 basis points, to 0.88% for 2024 from 0.41% for 2023. The increase in interest expense was also driven by a $134.6 million increase in average interest-bearing deposits in 2024 as compared to 2023. Noninterest bearing deposits continued to be a significant portion of total deposits in 2024. Average noninterest-bearing deposits were 59.92% of our total deposits for 2024, compared to 62.66% for 2023.

Provision for (Recapture of) Credit Losses

The provision for (recapture of) credit losses is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected lifetime losses in the loan portfolio as of the balance sheet date.

We recorded a recapture of credit losses of $3.5 million in 2025, and experienced credit charge-offs of $642,000 and recoveries of $1.2 million, resulting in net recoveries of $539,000. The year-to-date recapture of credit losses of $3.5 million was the result of continued improvement in credit quality and lower nonperforming loans at December 31, 2025 as compared to the prior year-end and an overall decrease in projected loss rates from 0.94% at the end of 2024 to 0.89% at December 31, 2025. For 2024, we recorded $3.0 million recapture of credit losses, and experienced credit charge-offs of $4.4 million and total recoveries of $688,000, resulting in net charge-offs of $3.7 million. Specific credit reserves for nonperforming loans declined by $5.9 million during 2024 and modest changes in projected loss rates on performing loans were driven by economic forecast changes to various macroeconomic variables such as GDP growth, commercial real estate values and the rate of unemployment. Refer to the discussion of “Allowance for Credit Losses” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations contained herein for discussion concerning observed changes in the credit quality of various components of our loan portfolio as well as changes and refinements to our methodology.

No assurance can be given that economic conditions which affect the Company’s service areas or other circumstances will or will not be reflected in future changes in the level of our allowance for credit losses and the resulting provision or recapture of provision for credit losses. The process to estimate the allowance for credit losses requires considerable judgment and our economic forecasts may continue to vary due to the uncertainty of the future impact from changes in rates by the Federal Reserve, geopolitical events in Europe and the Middle East, and impacts of changes in global trade and inflation will have on future interest rates, unemployment, the overall economy and resulting impact on our customers. See “Allowance for Credit Losses” under Analysis of Financial Condition herein.

Noninterest Income

Noninterest income includes income derived from financial services offered to our customers, such as CitizensTrust, merchant processing and card services, international banking, and other business services. Also included in noninterest income are service charges and fees, primarily from deposit accounts, bank owned life insurance (“BOLI”) income, gains/losses from the disposition of investment securities, loans, other real estate owned, and fixed assets, and other revenues not included as interest on earning assets.

53

The following table sets forth the various components of noninterest income for the periods presented.

2025 Compared to 2024

The $0.7 million increase in noninterest income in 2025 was impacted by $11.0 million in losses on the sale of AFS securities, a $6.0 million legal settlement, and a $2.3 million gain on OREO, while 2024 included $28.3 million in losses from the sale of AFS securities that were partially offset by gains of $25.9 million from the sale and leaseback of four properties in 2024. Trust and investment management fees increased by $1.3 million, or 9.50% compared to 2024. Service charges on deposit accounts decreased by $910,000, or 4.47% from the year ended December 31, 2024. BOLI income decreased by $953,000, or 7.67% from the prior year, as additional income from death benefits decreased by $855,000.

Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is made up of wealth management and investment services. They provide a variety of services, which include asset management, financial planning, estate planning, retirement planning, private and corporate trustee services, and probate services. Investment Services provides self-directed brokerage, 401(k) plans, mutual funds, insurance and other non-insured investment products. At December 31, 2025, CitizensTrust had approximately $5.11 billion in assets under management and administration, including $3.75 billion in assets under management. CitizensTrust generated fees of $15.0 million for 2025, compared to $13.7 million for 2024. The increase in fees in 2025 included both the impact on market values of changes in equity and fixed income markets but also increased flows of funds from customers, including liquidity management of funds formerly on deposit with the Bank.

The Bank’s investment in BOLI includes life insurance policies generally acquired through acquisitions or the purchase of life insurance by the Bank on a select group of employees to fund deferred compensation plans. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at its cash surrender value. Increases in the cash value of these policies, as well as insurance proceeds received, are recorded in noninterest income and are not subject to income tax, as long as they are held for the life of the covered parties. Income from our BOLI policies declined by $953,000 for 2025 as compared to 2024, as 2024 included death benefits that exceeded cash surrender values of $1.4 million.

2024 Compared to 2023

The $4.9 million decrease in noninterest income included $28.3 million in losses from the sale of AFS securities partially offset by gains of $25.9 million from the sale and leaseback of four properties in 2024, while 2023 included a $2.6 million gain from an equity fund distribution related to a CRA investment. Service charges on deposit accounts increased by $0.2 million, or 0.75% from the year ended December 31, 2023. Trust management fees increased by $1.2 million, or 9.34% compared to 2023. Income from Bank-Owned Life Insurance (“BOLI”) decreased by $0.3 million, or 2.60% from the prior year.

54

Trust and Investment Services represents our CitizensTrust group. The CitizensTrust group is madeup of wealth management and investment services. They provide a variety of services, which include asset management, financial planning, estate planning, retirement planning, private and corporate trustee services, and probate services. Investment Services provides self-directed brokerage, 401(k) plans, mutual funds, insurance and other non-insured investment products. At December 31, 2024, CitizensTrust had approximately $4.6 billion in assets under management and administration, including $3.3 billion in assets under management. CitizensTrust generated fees of $13.7 million for 2024, compared to $12.6 million for 2023. The increase in fees in 2024 included both the impact on market values of changes in equity and fixed income markets but also increased flows of funds from customers, including liquidity management of funds formerly on deposit with the Bank.

The Bank’s investment in BOLI includes life insurance policies generally acquired through acquisitions or the purchase of life insurance by the Bank on a select group of employees to fund deferred compensation plans. The Bank is the owner and beneficiary of these policies. BOLI is recorded as an asset at its cash surrender value. Increases in the cash value of these policies, as well as insurance proceeds received, are recorded in noninterest income and are not subject to income tax, as long as they are held for the life of the covered parties. Income from our BOLI policies declined by $0.3 million for 2024 as compared to 2023, which consisted of lower cash surrender value income partially offset by higher gains and death benefits that exceeded cash surrender values.

The Bank has entered into interest rate swap agreements with our customers to manage our interest rate risk and enters into identical offsetting swaps with a counterparty. The changes in the fair value of these non-hedged swaps primarily offset each other resulting in swap fee income. Generally speaking, our volume of back-to-back interest rate swaps is impacted by the level and shape of the yield curve and the Bank's management of interest rate risk. Swap fee income was $0.4 million lower than 2023, primarily due to LIBOR indexed swaps that were converted to term SOFR in 2023 generating fee income of approximately $620,000. Refer to Note 18 — Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.

Noninterest Expense

The following table summarizes the various components of noninterest expense for the periods presented.

(1)
Noninterest expense divided by net interest income before provision for credit losses plus noninterest income.

55

Our ability to control noninterest expenses in relation to asset growth can be measured in terms of total noninterest expenses as a percentage of average assets. Noninterest expense as a percentage of average assets was 1.54% for 2025, compared to 1.45% for 2024 and 1.41% for 2023, respectively. The increase in this ratio in 2025 as compared to 2024 was due to both a reduction in average assets of $207 million resulting from the deleveraging strategy executed in the later half of 2024, as well as normal inflationary increases in most expense categories, partially offset by a decrease in regulatory assessment expense as 2023 included the $9.2 million FDIC Special Assessment. The increase in this ratio for 2024 compared with 2023 reflects the impact of inflationary pressures on staff related expenses and expense growth associated with investments in technology, partially offset by the impact in 2023 for a $9.2 million expense accrual for the FDIC Special Assessment.

Our ability to control noninterest expenses in relation to the level of total revenue (net interest income before provision for credit losses plus noninterest income) can be measured by the efficiency ratio and indicates the percentage of net revenue that is used to cover expenses. The efficiency ratio was 46.03% for 2025, compared to 46.55% for 2024 and 42.00% for 2023. The decrease in the efficiency ratio in 2025 was due to the increase in our net interest margin in 2025, that resulted in a revenue growth rate that exceeded the 1.6% increase in noninterest expense. The increase in the efficiency ratio in 2024 compared to 2023 reflects the impact of a decline in the net interest margin in 2024.

2025 Compared to 2024

Noninterest expense of $237.3 million for the year ended December 31, 2025 was $3.7 million, or 1.6% higher than 2024. The year-over-year increase included software expense increasing by $1.8 million, or 12.07%, due to continued investment in new technology. The increase in technology costs demonstrates our commitment to improving efficiencies and providing an excellent customer experience. The provision or recapture of unfunded loan commitments also increased by $3.3 million in 2025. Furthermore, the increase included acquisition related expenses of $1.6 million associated with the pending merger with Heritage announced in 2025.

2024 Compared to 2023

Noninterest expense of $233.6 million for the year ended December 31, 2024 was $3.7 million, or 1.6% higher than 2023. Year-over-year increases included normal inflationary increases in most expense categories including $5.3 million in salaries and employee benefits, primarily due to inflationary pressures on salaries and benefits. As we continue to invest in new technology, software expense increased by $1.3 million, or 8.90%. Professional expense increased by $1.4 million, or 15.42%, as legal expense increased by $1.3 million or 80.7%. These increase were partially offset by a $7.6 million decrease in regulatory assessment expense, as 2023 included $9.2 million for the FDIC Special Assessment.

Income Taxes

The Company’s effective tax rate for the year ended December 31, 2025 was 25.70%, compared with 26.00% and 29.80% for the years ended December 31, 2024 and 2023, respectively. The decrease in the effective tax rate in 2025 and 2024 was a result of increased investments in tax credits and the impact on taxes in 2023 from the surrender of certain BOLI policies. During the fourth quarter and full year of 2023, our effective tax rate was impacted by more than $6 million in combined income tax expense and penalties resulting from the surrender of various BOLI policies. Our estimated annual effective tax rate also varies depending upon the level of tax-advantaged income from municipal securities and BOLI as well as available tax credits. Refer to Note 9 — Income Taxes of the notes to consolidated financial statements for more information.

The effective tax rates are below the nominal combined Federal and State tax rate as a result of tax-advantaged income from certain municipal security investments, municipal loans and leases and BOLI, as well as available tax credits for each period.

56

ANALYSIS OF FINANCIAL CONDITION

Total assets of $15.63 billion at December 31, 2025 increased $477.4 million, or 3.15%, from $15.15 billion at December 31, 2024. Interest-earning assets of $13.99 billion at December 31, 2025, increased by $463.0 million, or 3.42%, when compared with $13.53 billion at December 31, 2024. The increase in interest-earning assets was primarily due to a $218.1 million increase in interest-earning balances due from the Federal Reserve, a $162.8 million increase in total loans, a $37.9 million increase in FRB stock, and $31.7 million in investment securities.

Total liabilities were $13.34 billion at December 31, 2025, an increase of $368.5 million, or 2.84%, from total liabilities of $12.97 billion at December 31, 2024. The increase was due to a $228.7 million increase in customer repurchase agreements and a $123.6 million increase in total deposits. As of December 31, 2025 and 2024, total borrowings consisted of $500 million of FHLB advances, at an average cost of approximately 4.55%.

Total equity was $2.3 million at December 31, 2025 increased $108.9 million, or 4.98%, to $2.30 billion from $2.19 billion at December 31, 2024. Increases to equity included $209.3 million in net earnings and an $84.4 million in other comprehensive income, partially offset by $110.3 million in cash dividends and $81.1 million in common stock repurchase. For the year ended 2025, we repurchased, under our stock repurchase plan, 4,321,777 shares of common stock, at an average repurchase price of $18.60, totaling $80.4 million. We engaged in no stock repurchases during 2024.

Sale-Leaseback Transactions

We engaged in no sale-leaseback transactions during 2025. During the third and fourth quarters of 2024, the Bank executed sale-leaseback transactions and sold four buildings for a cumulative sale price of $47.1 million, resulting in a net pre-tax gain of $25.9 million and cash proceeds of $44.76 million. The Bank simultaneously entered into lease agreements with the respective purchasers for initial terms of 15 and 18 years. Total ROU assets and corresponding operating lease liabilities recorded were $26.8 million.

Investment Securities

The Company maintains a portfolio of investment securities to provide interest income and to serve as a source of liquidity for its ongoing operations. At December 31, 2025, total investment securities were $4.95 billion, an increase of $31.7 million, or 0.64%, from $4.92 billion at December 31, 2024. The increase in investment securities was primarily due $483.6 million in purchases of AFS securities and an improvement of $128.9 million in AFS investment securities mark-to-market unrealized loss, partially offset by principal payments and maturities, as well as sales of securities of $92.9 million in fair value during the year, which resulted in a pre-tax loss of $11.0 million. At December 31, 2025, our AFS investment securities totaled $2.68 billion, inclusive of a pre-tax net unrealized loss of $299.2 million. The after-tax unrealized loss reported in AOCI on AFS investment securities was $218.3 million. This represented a decrease of $97.0 million from $315.4 million after-tax unrealized loss at December 31, 2024. The change in the net unrealized holding loss resulted primarily from fluctuations in market interest rates and from realized losses on sold securities. At December 31, 2025, total HTM investment securities of $2.27 billion declined by $109.3 million from December 31, 2024. For the years ended December 31, 2025 and 2024, sales/repayments/maturities of investment securities totaled $572.1 million and $901.5 million, respectively. The Company purchased additional investment securities totaling $489.8 million and $430.6 million for the years ended December 31, 2025 and 2024, respectively.

The tables below set forth our investment securities AFS and HTM portfolio by type for the dates presented.

57

The distribution of the AFS and HTM portfolios by estimated average life consist of the following as of the date presented.

(1)
The weighted average yield for the portfolio is not tax-equivalent. The tax equivalent yield at December 13, 2025 was 3.47%.

(1)
The weighted average yield for the portfolio is not tax-equivalent. The tax equivalent yield at December 31, 2025 was 2.78%.

58

The maturity of each security category is defined as the contractual maturity except for the categories of mortgage-backed securities and CMO/REMIC whose maturities are defined as the estimated average life. The final maturity of mortgage-backed securities and CMO/REMIC will differ from their contractual maturities because the underlying mortgages have the right to repay such obligations without penalty. The speed at which the underlying mortgages repay is influenced by many factors, one of which is interest rates. Mortgages tend to repay faster as interest rates fall and slower as interest rate rise. This will either shorten or extend the estimated average life. Also, the yield on mortgage-backed securities and CMO/REMIC are affected by the speed at which the underlying mortgages repay. This is caused by the change in the amount of amortization of premiums or accretion of discounts of each security as repayments increase or decrease. The Company obtains the estimated average life of each security from independent third parties.

The weighted-average yield on the total investment portfolio at December 31, 2025 was 2.49% with a weighted-average life of 6.4 years. This compares to a weighted-average yield of 2.36% at December 31, 2024 with a weighted-average life of 7.2 years. The weighted average life is the average number of years that each dollar of unpaid principal due remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal pay-downs.

Approximately 90% of the securities in the total investment portfolio, at December 31, 2025, are issued by the U.S. government or U.S. government-sponsored enterprises, with the implied guarantee of payment of principal and interest. The remaining securities are predominately AA or better general-obligation municipal bonds. As of December 31, 2025, approximately $22.3 million in U.S. government agency bonds are callable. The Agency CMO/REMIC are backed by agency-pooled collateral. Municipal bonds, which represented approximately 9% of the total investment portfolio, are predominately AA or higher rated securities.

Municipal securities held by the Company are issued by various states and their various local municipalities. The following tables present municipal securities by the top holdings by state as of the dates presented.

59

The allowance for credit losses on investment securities is determined for both the AFS and HTM classifications of the investment portfolio in accordance with ASC 326 . We review investment securities to determine whether unrealized losses are deemed credit related or due to other factors such as changes in interest rates and general market conditions, issuer rating changes and trends. Non-credit related unrealized losses on AFS investment securities, which may be attributed to changes in interest rates and other market-related factors, are not recorded through an ACL. Such declines are recorded as an adjustment to accumulated other comprehensive loss, net. In the event the Company is required to sell or has the intent to sell an AFS security that has experienced a decline in fair value below its amortized cost, the Company writes the amortized cost of the security down to fair value in the current period.. Management determined that credit losses did not exist for securities in an unrealized loss position as of December 31, 2025 and 2024.

Refer to Note 4 – Investment Securities of the notes to the consolidated financial statements of this report for additional information on our investment securities portfolio.

Bank owned life insurance

At December 31, 2025, the Company had $325.3 million of BOLI. The $9.1 million increase in the value of BOLI, when compared to December 31, 2024, was primarily due to increases in the cash surrender value of the policies owned.

Loans

Total loans and leases, at amortized cost, of $8.70 billion at December 31, 2025, increased by $162.8 million, or 1.91%, from $8.54 billion at December 31, 2024. The $162.8 million increase primarily consists of $66.9 million in commercial real estate loans, $48.5 million in commercial and industrial loans, $21.7 million in construction loans, $12.6 million in SFR mortgage and $10.8 million in agribusiness loans.

60

Total loans, at amortized cost, comprised 62.18% of our total earning assets as of December 31, 2025. The following table presents our loan portfolio by type as of the dates presented.

Distribution of Loan Portfolio by Type

As of December 31, 2025, $424.5 million, or 6.46% of the total commercial real estate loans included loans secured by farmland, compared to $449.8 million, or 6.91%, at December 31, 2024. The loans secured by farmland included $119.0 million for loans secured by dairy & livestock land and $305.5 million for loans secured by agricultural land at December 31, 2025, compared to $109.1 million for loans secured by dairy & livestock land and $340.7 million for loans secured by agricultural land at December 31, 2024. As of December 31, 2025, dairy & livestock and agribusiness loans of $431.6 million were comprised of $386.1 million for dairy & livestock loans and $45.5 million for agribusiness loans, compared to $419.9 million in dairy & livestock and agribusiness loans comprised of $385.3 million for dairy & livestock loans and $34.6 million for agribusiness loans at December 31, 2024.

Real estate loans are loans secured by conforming trust deeds on real property, including property under construction, land development, commercial property and single-family and multi-family residences. Our real estate loans are comprised of industrial, office, retail, medical, single family residences, multi-family residences, and farmland. Consumer loans include installment loans to consumers as well as home equity loans, auto and equipment leases and other loans secured by junior liens on real property. Municipal lease finance receivables are leases to municipalities. Dairy & livestock and agribusiness loans are loans to finance the operating needs of wholesale dairy farm operations, cattle feeders, livestock raisers and farmers.

As of December 31, 2025, the Company had $228.8 million of SBA 504 loans, which include term loans to finance capital expenditures and for the purchase of commercial real estate. Initially the Bank provides two separate loans to the borrower representing a first and second lien on the collateral. The loan with the first lien is typically at a 50% advance to the acquisition costs and the second lien loan provides the financing for 40% of the acquisition costs with the borrower’s down payment of 10% of the acquisition costs. The Bank retains the first lien loan for its term and sells the second lien loan to the SBA subordinated debenture program. A majority of the Bank’s 504 loans are granted for the purpose of commercial real estate acquisition. As of December 31, 2025, the Company had $53.6 million of total SBA 7(a) loans that include a guarantee of payment from the SBA (typically 75% of the loan amount, but up to 90% in certain cases) in the event of default. The SBA 7(a) loans include revolving lines of credit (SBA Express) and term loans of up to ten (10) years to finance long-term working capital requirements, capital expenditures, and/or for the purchase or refinance of commercial real estate.

As of December 31, 2025, the Company had $37.8 million in construction loans. This represented 0.40% of total held-for-investment loans at amortized cost. Our construction loans are located throughout our California market footprint and the majority consist of commercial land development and construction projects. There were no nonperforming construction loans at December 31, 2025.

61

Our loan portfolio is geographically disbursed throughout our marketplace. The following is the breakdown of our total held-for-investment commercial real estate loans by region as of December 31, 2025.

The table below breaks down our commercial real estate portfolio by property type.