HANMI FINANCIAL CORP (HAFC)

CIK: 0001109242. SIC: 6021 National Commercial Banks. Latest 10-K as of: 2026-02-27.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6021 National Commercial Banks

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1109242. Latest filing source: 0001193125-26-082425.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-27. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001109242.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001109242.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-214092.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-08. Report date: 2026-03-31.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of our results of operations and financial condition as of and for the three months ended March 31, 2026. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report on Form 10-K”) and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the period ended March 31, 2026 (this “Report”).

Forward-Looking Statements

Some of the statements contained in this Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this Report other than statements of historical fact are “forward–looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about anticipated future operating and financial performance, financial condition and liquidity, business strategies, regulatory and competitive outlook, investment and expenditure plans, capital and financing needs and availability, plans and objectives of management for future operations, developments regarding our capital and strategic plans and other similar forecasts and statements of expectation and statements of assumptions underlying any of the foregoing. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, financial condition, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statements. These factors include the following:

•
a failure to maintain adequate levels of capital and liquidity to support our operations;

•
general economic and business conditions internationally, nationally and in those areas in which we operate, including any potential recessionary conditions;

•
volatility and deterioration in the credit and equity markets;

•
changes in investor sentiment or consumer spending, borrowing and savings habits;

•
availability of capital from private and government sources;

•
demographic changes;

•
competition for loans and deposits and failure to attract or retain loans and deposits;

•
inflation and fluctuations in interest rates that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, the level of loan sales and the cost we pay to retain and attract deposits and secure other types of funding;

•
our ability to enter new markets successfully and capitalize on growth opportunities;

•
the current or anticipated impact of military conflict, terrorism or other geopolitical events;

•
the effect of potential future supervisory action against us or Hanmi Bank and our ability to address any issues raised in our regulatory exams;

•
risks of natural disasters;

•
legal proceedings and litigation brought against us;

•
a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;

•
the failure to maintain current technologies;

•
risks associated with Small Business Administration loans;

•
failure to attract or retain key employees;

•
our ability to access cost-effective funding;

•
the imposition of tariffs or other domestic or international governmental policies and any retaliatory responses;

•
the impact of a potential federal government shutdown, which may impact on our ability to effect sales of Small Business Administration loans;

•
changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio;

•
fluctuations in real estate values;

•
changes in accounting policies and practices;

•
changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums and changes in the monetary policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;

•
the ability of Hanmi Bank to make distributions to Hanmi Financial Corporation, which is restricted by certain factors, including Hanmi Bank’s retained earnings, net income, prior distributions made, and certain other financial tests;

39

•
strategic transactions we may enter into, including the costs associated with the evaluation of any strategic opportunities and the overall effects of any acquisitions or dispositions we may make;

•
the adequacy of and changes in the economic assumptions and methodology for computing our allowance for credit losses;

•
our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses;

•
changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements;

•
our ability to control expenses;

•
cyber security and fraud risks against our information technology and those of our third-party providers and vendors;

•
the inability of third-party service providers to perform their obligations to us; and

•
the ability of the Company to withstand disruptions that may be caused by any failure of the operational systems of third parties.

For additional information concerning risks we face, see “Part II, Item 1A. Risk Factors” in this Report and “Item 1A. Risk Factors” in Part I of the 2025 Annual Report on Form 10-K. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

Critical Accounting Policies

We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the consolidated financial statements in the 2025 Annual Report on Form 10-K. We had no significant changes in what constituted our accounting policies since the filing of the 2025 Annual Report on Form 10-K.

Certain accounting policies require us to make significant estimates and assumptions that have a material impact on the carrying value of certain assets and liabilities, and we consider these to be critical accounting policies. For a description of these critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in the 2025 Annual Report on Form 10-K. Actual results could differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods. Management has discussed the development and selection of these critical accounting policies with the Audit Committee of the Company’s Board of Directors.

Results of Operations

Net Interest Income

Our primary source of revenue is net interest income, which is the difference between interest derived from assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on loans are affected principally by changes to market interest rates, the demand for loans, the supply of money available for lending purposes, and other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve.

The following table shows the average balance of assets, liabilities and stockholders’ equity; the amount of interest income, and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin on a taxable-equivalent basis for the periods indicated. All average balances are daily average balances.

40

Three Months Ended

March 31, 2026

March 31, 2025

Interest

Average

Interest

Average

Average

Income /

Yield /

Average

Income /

Yield /

Balance

Expense

Rate

Balance

Expense

Rate

Assets

(dollars in thousands)

Interest-earning assets:

Loans:

   Commercial real estate (1)

$

3,964,174

$

55,836

5.71

%

$

3,938,099

$

54,861

5.65

%

   Residential mortgage

1,035,929

14,035

5.42

%

960,862

12,750

5.38

%

   Commercial and industrial (1)

1,024,117

16,970

6.72

%

797,524

15,252

7.76

%

   Consumer

5,295

84

6.40

%

6,893

119

7.01

%

   Equipment finance

404,801

6,941

6.86

%

486,153

7,905

6.50

%

Loans (1)

6,434,316

93,866

5.90

%

6,189,531

90,887

5.95

%

Securities (2)

921,065

5,959

2.62

%

1,001,499

6,169

2.49

%

FHLB stock

16,385

831

20.56

%

16,385

360

8.92

%

Interest-bearing deposits in other banks

171,953

1,496

3.53

%

176,028

1,841

4.24

%

Total interest-earning assets

7,543,719

102,152

5.48

%

7,383,443

99,257

5.45

%

Noninterest-earning assets:

Cash and due from banks

52,668

53,670

Allowance for credit losses

(69,284

)

(69,648

)

Other assets

247,771

249,148

Total assets

$

7,774,874

$

7,616,613

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Deposits:

Demand: interest-bearing

$

74,963

$

27

0.15

%

$

79,369

$

27

0.14

%

Money market and savings

2,063,186

13,082

2.57

%

2,037,224

16,437

3.27

%

Time deposits

2,522,505

23,629

3.80

%

2,345,346

24,095

4.17

%

Total interest-bearing deposits

4,660,654

36,738

3.20

%

4,461,939

40,559

3.69

%

Borrowings

69,388

675

3.94

%

179,444

2,024

4.57

%

Subordinated debentures

130,541

1,536

4.70

%

130,718

1,582

4.84

%

Total interest-bearing liabilities

4,860,583

38,949

3.25

%

4,772,101

44,165

3.75

%

Noninterest-bearing liabilities and equity:

Demand deposits: noninterest-bearing

1,937,628

1,895,953

Other liabilities

134,153

144,654

Stockholders’ equity

842,510

803,905

Total liabilities and stockholders’ equity

$

7,774,874

$

7,616,613

Net interest income

$

63,203

$

55,092

Cost of deposits (3)

2.26

%

2.59

%

Net interest spread (taxable equivalent basis) (4)

2.23

%

1.70

%

Net interest margin (taxable equivalent basis) (5)

3.38

%

3.02

%

(1)
Loans include loans held for sale and exclude the allowance for credit losses. Nonaccrual loans are included in the average loans balance.

41

(2)
Securities average yield is calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.

(3)
Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits.

(4)
Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.

(5)
Represents net interest income as a percentage of average interest-earning assets.

The table be

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

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-27. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion presents management’s analysis of the financial condition and results of operations as of and for the years ended December 31, 2025, 2024 and 2023. This discussion should be read in conjunction with our Consolidated Financial Statements and the Notes related thereto presented elsewhere in this Report. See also “Cautionary Note Regarding Forward-Looking Statements.”

Critical Accounting Policies

We have established various accounting policies that govern the application of GAAP in the preparation of our Consolidated Financial Statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions to arrive at the carrying value of assets and liabilities and amounts reported as revenues and expenses. Our financial position and results of operations can be materially affected by these estimates and assumptions. Critical accounting policies are those policies that are most important to the determination of our financial condition and results of operations and that require management to make assumptions and estimates that are subjective or complex. Our significant accounting policies are discussed in the “Notes to Consolidated Financial Statements, Note 1 — Summary of Significant Accounting Policies.” Management believes that the following policy is critical.

Allowance for credit losses and Allowance for credit losses related to off-balance sheet items

Effective January 1, 2025, we changed our methodology for estimating expected credit losses on our loan portfolio in accordance with Accounting Standards Update (“ASU”) 2016-23, Financial Instruments – Credit Losses. Previously, we primarily used a Probability of Default/Loss Given Default (“PD/LGD") model to determine the allowance for credit losses. Following a periodic review of the credit loss estimation process, we concluded that a historical loss rate approach, adjusted for current conditions and reasonable and supportable economic forecasts, more appropriately reflects the expected credit losses for our loan portfolio. This change is considered a change in accounting estimate resulting from a change in methodology and assumptions, and is accounted for prospectively in accordance with ASC 250-10-45-17 through 45-18.

Our allowance for credit losses methodologies incorporate a variety of risk considerations, both quantitative and qualitative, that management believes is appropriate at each reporting date. Quantitative factors are driven by aggregated industry loss rate history and the weighting of various macroeconomic forecast models, which are made up of a number of specific economic factors, including unemployment rates, gross domestic product growth rates, U.S. Treasury rates, BBB spreads, and Commercial Real Estate Price Index growth rates. Further, the Bank's own loan portfolio characteristics are incorporated as quantitative considerations, including risk ratings, collateral values, delinquencies, and non-performing loans. Quantitative factors are incorporated through the use of Moody's economic scenarios. We use qualitative factors to adjust the allowance calculation for risks not considered by the quantitative calculations. Qualitative factors considered in our methodologies include the Bank's historical loan loss trends, concentrations of credit, loan policy exception rate trends, changes in lending management and staff, quality of the loan review system, and changes in prepayment rates.

Certain quantitative and qualitative factors used to estimate credit losses and establish an allowance for credit losses are subject to uncertainty. The adequacy of our allowance for credit losses is sensitive to changes in current and forecasted economic conditions that may affect the ability of borrowers to make contractual payments as well as the value of the collateral securing such payments.

Although management believes it uses the best information necessary to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and the Company’s results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

In addition, because future events affecting borrowers and collateral cannot be predicted without uncertainty, the existing allowance for credit losses may not be adequate or increases may be necessary should the quality of any loans deteriorate as a result of the factors discussed. Any material increase in the allowance for credit losses would adversely impact the Company's financial condition and results of operations.

See “Results of Operations — Credit Loss Expense,” “Financial Condition — Allowance for credit losses and Allowance for Credit Losses related to off-balance sheet items,” and “Notes to Consolidated Financial Statements, Note 1 — Summary of Significant Accounting Policies” for additional information on methodologies used to determine the allowance for credit losses and the allowance for credit losses related to off-balance sheet items.

35

Allowance Attribution Analysis

Allowance for credit losses

(in thousands)

December 31, 2024

$

70,147

Charge-offs

(21,046

)

Recoveries

6,639

Provision (recovery) attributed to qualitative considerations

(7,638

)

Provision (recovery) attributed to quantitative considerations

10,158

Provision attributed to individually evaluated loans

11,643

December 31, 2025

$

69,903

The following macroeconomic variables, which are used in our allowance for credit losses calculation, are among those with the highest correlation to the historical loan loss data leveraged by Moody's in their allowance for credit losses models. Shown below are projections of those variables from Moody's, employed in the determination of the allowance for credit losses at December 31, 2025 and 2024:

Economic Factors

12/31/2025

Description of Economic Factors

Unemployment rate

4.48

%

Baseline forecast for Q1 2026 (1)

USA Real GDP Growth (Annualized Growth Rate)

2.55

%

Baseline forecast for Q1 2026 (1)

USA BBB Spread (7-1 Year BBB US Corporate Index- US Treasury 10 Year)

1.39

%

Baseline forecast for Q1 2026 (1)

US Treasury 3 Year

3.57

%

Baseline forecast for Q1 2026 (1)

USA CRE Price Index Growth (Annualized Growth Rate)

(1.09

)%

Baseline forecast for Q1 2026 (1)

(1)
The economic factors shown in this table are a single projection of a future point in time, and are provided to illustrate model assumptions. The remaining projections of these variables subsequent to March 31, 2026, which are not shown here, further impact the results of the allowance for credit losses as of December 31, 2025. Unlike the allowance for credit losses model used at December 31, 2024, there are not separate reversion periods in addition to the forecast periods.

12/31/2024

Description of Economic Factors

Prepayment rates

14.35

%

Average total portfolio rate

Curtailment rates

83.83

%

Average total portfolio rate

Unemployment rate

4.10

%

Average of 4 quarter forecast period; Baseline (1)

Gross domestic product (“GDP”) growth rate year over year %

(0.25

)%

Average of 4 quarter forecast period; Alternative Scenario 3 (2)

Consumer sentiment

71.31

Average of 4 quarter forecast period; Alternative Scenario 3 (2)

Federal funds target rate

3.9

%

1 year forecast of median target rate; FOMC December 2024 projection

(1)
The Moody's baseline scenario was used for the unemployment rate forecast for the period ended December 31, 2024. The unemployment rate forecast remained unfavorable within the baseline scenario due to job market volatility and deterioration below expectations, with less impact to the lending environment compared to GDP growth and consumer sentiment forecasts.

(2)
The Moody's alternative scenarios 2 and 3 (equally weighted) were used for the GDP growth rate and consumer sentiment forecast for the period ended December 31, 2024. Effective Q1 2024, the Company elected to use equally weighted alternative scenario 2 and 3 (mid-level downside/pessimistic scenario) for the GDP growth rate and consumer sentiment forecasts, given the current market condition.

36

Sensitivity Analysis

The potential effect from changes in key assumptions could affect the estimated allowance for credit losses at December 31, 2025. Adverse changes in management's assessment of the assumptions and key inputs used to determine the allowance for credit losses could lead to increases in the allowance for credit losses through additional provisions for credit losses. If actual losses and conditions differ materiality from the assumptions used to determine the allowance for credit losses, our actual credit losses could differ materially from management's estimates.

A sensitivity analysis of our allowance for credit losses was performed by allocating ten additional percentage points (a 33% relative increase) to the weighting on Moody's S2 scenario, which projects that the economy could fall into a mild recession starting the first quarter of 2026. This resulted in additional allowance for credit losses of approximately $2.5 million compared with the results using the midpoint approach of Moody's baseline, upside, and downside scenarios as of December 31, 2025.

Conversely, management performed a sensitivity analysis by allocating ten additional percentage points (a 33% relative increase) to the weighting on Moody's S1 scenario, which has a more positive outlook on the economy, compared with Moody's baseline and S2 scenarios. The S1 scenario assumes the impacts of tariffs and deportations on the economy are much lower than expected. This resulted in a reduction of allowance for credit losses of approximately $1.1 million compared with the results using the midpoint approach of Moody's baseline, upside, and downside scenarios as of December 31, 2025.

Management reviews and considers the results of each sensitivity analysis when evaluating the qualitative factor adjustments. While management believes that it has established adequate allowance for lifetime credit losses on loans, actual results may prove different, and the difference could be material.

The following table provides Moody's first-quarter 2026 forecast estimates, by scenario, for key economic variables that are inputs to the allowance for credit losses calculation:

Unemployment Rate

USA Real GDP Growth (Annualized Growth Rate)

USA BBB Spread (7-10 Year BBB US Corporate Index-US Treasury 10 Year)

US Treasury 3 Year

USA CRE Price Index Growth (Annualized Growth Rate)

Baseline scenario

4.48

%

2.55

%

1.39

%

3.57

%

(1.09

)%

Alternative Scenario S1

3.99

%

5.43

%

1.08

%

3.68

%

0.61

%

Alternative Scenario S2

5.55

%

(0.84

)%

1.64

%

3.54

%

(6.61

)%

Executive Overview

For the years ended December 31, 2025, 2024 and 2023, net income was $76.1 million, $62.2 million and $80.0 million, respectively. The increase of $13.9 million, or 22.3%, in net income for the year ended December 31, 2025 as compared with the year ended December 31, 2024, reflects a $33.4 million increase in net interest income and a $2.4 million increase in noninterest income, offset by a $6.5 million increase in noninterest expense and a $5.4 million increase in income tax expense.

The decrease of $17.8 million, or 22.3%, in net income for the year ended December 31, 2024 as compared with the year ended December 31, 2023, reflects an $18.5 million decrease in net interest income, a $2.6 million decrease in noninterest income, and a $4.8 million increase in noninterest expense, offset by an $8.1 million decrease in income tax expense.

For the years ended December 31, 2025, 2024 and 2023, our earnings per diluted share were $2.51, $2.05 and $2.62, respectively.

37

Additional significant financial highlights include:

•
Loans increased by $312.0 million, or 5.0%, to $6.56 billion as of December 31, 2025, compared with $6.25 billion as of December 31, 2024. The net increase was due to loan production of $1.62 billion, offset by payoffs, loan sales, and prepayments of $1.31 billion.

•
Credit loss expense increased by $10.0 million, to $14.4 million for the year ended December 31, 2025, compared with $4.4 million for the year ended December 31, 2024. The increase was primarily due to an $8.6 million charge-off during 2025.

•
Securities decreased $25.2 million to $880.6 million at December 31, 2025 from $905.8 million at December 31, 2024. The decrease was primarily attributable to $233.3 million in maturities and payments, partially offset by $173.1 million in purchases and a $37.6 million decline in net unrealized losses.

•
Deposits were $6.68 billion at December 31, 2025 compared with $6.44 billion at December 31, 2024 as money market and savings deposits and time deposits increased by $150.7 million and $178.1 million, respectively, while interest-bearing and non-interest bearing demand deposits decreased by $5.5 million and $81.4 million, respectively.

•
Borrowings decreased $112.5 million to $150.0 million at December 31, 2025 compared with $262.5 million at December 31, 2024.

•
Cash dividends were $1.08, $1.00, and $1.00 per share of common stock for the years ended December 31, 2025, 2024 and 2023, respectively.

•
Return on average assets and return on average stockholders’ equity for the year ended December 31, 2025 were 0.98% and 9.32%, respectively, as compared with 0.83% and 7.97%, respectively, for the year ended December 31, 2024, and 1.08% and 10.70%, respectively, for the year ended December 31, 2023.

Results of Operations

Net Interest Income

Our primary source of revenue is net interest income, which is the difference between interest and fees derived from earning assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on loans are affected principally by changes to market interest rates, the demand for such loans, the supply of money available for lending purposes, and other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, including the imposition of the tariffs, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve.

38

The following table shows the average balances of assets, liabilities and stockholders’ equity; the amount of interest income, on a tax equivalent basis and interest expense; the average yield or rate for each category of interest-earning assets and interest-bearing liabilities; and the net interest spread and the net interest margin for the periods indicated. All average balances are daily average balances.

For the Year Ended

December 31, 2025

December 31, 2024

December 31, 2023

Interest

Average

Interest

Average

Interest

Average

Average

Income /

Yield /

Average

Income /

Yield /

Average

Income /

Yield /

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Assets

(dollars in thousands)

Interest-earning assets:

Loans:

Commercial real estate (1)

$

3,963,919

$

225,929

5.70

%

$

3,874,291

$

219,899

5.68

%

$

3,769,283

$

201,385

5.34

%

Residential mortgage

1,004,057

53,950

5.37

%

952,709

49,344

5.18

%

866,610

41,079

4.74

%

Commercial and industrial (1)

878,181

65,518

7.46

%

741,568

63,651

8.58

%

729,382

63,973

8.77

%

Consumer

7,127

501

7.03

%

6,509

486

7.46

%

7,294

528

7.24

%

Equipment financing

449,440

29,862

6.64

%

535,636

32,773

6.12

%

595,770

32,846

5.51

%

Total loans (1)

6,302,724

375,760

5.96

%

6,110,713

366,153

5.99

%

5,968,339

339,811

5.69

%

Securities (2)

984,172

25,345

2.60

%

983,434

21,583

2.22

%

967,231

16,938

1.78

%

FHLB stock

16,385

1,433

8.74

%

16,385

1,436

8.76

%

16,385

1,229

7.50

%

Interest-bearing deposits in other banks

202,152

8,390

4.15

%

192,342

9,611

5.00

%

230,835

11,350

4.92

%

Total interest-earning assets

7,505,433

410,928

5.48

%

7,302,874

398,783

5.46

%

7,182,790

369,328

5.15

%

Noninterest-earning assets:

Cash and due from banks

53,861

55,830

62,049

Allowance for credit losses

(69,373

)

(68,553

)

(70,501

)

Other assets

249,812

248,820

240,779

Total assets

$

7,739,733

$

7,538,971

$

7,415,117

Liabilities and stockholders' equity

Interest-bearing liabilities:

Deposits:

Demand: interest-bearing

$

81,213

$

124

0.15

%

$

83,807

$

119

0.14

%

$

97,388

$

117

0.12

%

Money market and savings

2,100,326

66,147

3.15

%

1,870,541

68,304

3.65

%

1,547,911

44,066

2.85

%

Time deposits

2,445,794

98,434

4.02

%

2,433,516

114,269

4.70

%

2,371,520

90,525

3.82

%

Total interest-bearing deposits

4,627,333

164,705

3.56

%

4,387,864

182,692

4.16

%

4,016,819

134,708

3.35

%

Borrowings

82,512

3,727

4.52

%

154,193

6,746

4.38

%

197,409

6,867

3.48

%

Subordinated debentures

130,687

6,306

4.83

%

130,325

6,571

5.04

%

129,708

6,482

5.00

%

Total interest-bearing liabilities

4,840,532

174,738

3.61

%

4,672,382

196,009

4.20

%

4,343,936

148,057

3.41

%

Noninterest-bearing liabilities and equity:

Demand deposits: noninterest-bearing

1,940,552

1,920,492

2,173,813

Other liabilities

142,508

165,288

149,460

Stockholders' equity

816,141

780,809

747,908

Total liabilities and stockholders' equity

$

7,739,733

$

7,538,971

$

7,415,117

Net interest income (taxable equivalent basis)

$

236,190

$

202,774

$

221,271

Cost of deposits (3)

2.51

%

2.90

%

2.18

%

Net interest spread (taxable equivalent basis) (4)

1.87

%

1.27

%

1.74

%

Net interest margin (taxable equivalent basis)(5)

3.15

%

2.78

%

3.08

%

(1)
Total loans includes loans held for sale and excludes the allowance for credit losses. Nonaccrual loans are included in the average total loans balance.

(2)
Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.

(3)
Represents interest expense on deposits as a percentage of all interest-bearing and noninterest-bearing deposits.

(4)
Represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.

(5)
Represents net interest income as a percentage of average interest-earning assets.

39

The table below shows changes in interest income and interest expense and the amounts attributable to variations in interest rates and volumes for the periods indicated. The variances are primarily attributable to simultaneous volume and rate changes that have been allocated to the change due to volume and the change due to rate categories in proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and to the change in rate.

Year Ended December 31,

2025 vs 2024

2024 vs 2023

Increases (Decreases) Due to Change In

Increases (Decreases) Due to Change In

Volume

Rate

Total

Volume

Rate

Total

(in thousands)

Interest and dividend income:

Loans (1)

$

10,497

$

(890

)

$

9,607

$

7,159

$

19,183

$

26,342

Securities (2)

17

3,745

3,762

284

4,361

4,645

FHLB stock

(3

)

—

(3

)

(3

)

211

208

Interest-bearing deposits in other banks

465

(1,686

)

(1,221

)

(1,924

)

184

(1,740

)

Total interest and dividend income (taxable equivalent) (2)

$

10,976

$

1,169

$

12,145

$

5,516

$

23,939

$

29,455

Interest expense:

Demand: interest-bearing

$

(4

)

$

9

$

5

$

(17

)

$

19

$

2

Money market and savings

8,204

(10,361

)

(2,157

)

9,064

15,174

24,238

Time deposits

264

(16,099

)

(15,835

)

2,118

21,626

23,744

Borrowings

(3,153

)

134

(3,019

)

(1,524

)

1,403

(121

)

Subordinated debentures

19

(284

)

(265

)

31

58

89

Total interest expense

$

5,330

$

(26,601

)

$

(21,271

)

$

9,672

$

38,280

$

47,952

Change in net interest income (taxable equivalent) (2)

$

5,646

$

27,770

$

33,416

$

(4,156

)

$

(14,341

)

$

(18,497

)

(1)
Total loans includes loans held for sale and excludes the allowance for credit losses. Nonaccrual loans are included in the average total loans balance.

(2)
Amounts calculated on a fully equivalent basis using the current statutory federal tax rate of 21%.

2025 Compared to 2024

Interest income increased $12.1 million, or 3.0%, to $410.9 million for the year ended December 31, 2025 from $398.8 million for the year ended December 31, 2024. Interest expense decreased $21.3 million, or 10.9%, to $174.7 million for 2025, from $196.0 million in 2024. Net interest income, on a taxable equivalent basis, increased by $33.4 million, or 16.5%, to $236.2 million in 2025, from $202.8 million in 2024. The increase in net interest income was due to lower rates paid on deposits and a higher average balance of loans, offset partially by a higher average balance of deposits and lower yields on loans. The net interest spread and net interest margin, on a taxable equivalent basis, for the year ended December 31, 2025 were 1.87% and 3.15%, respectively, compared with 1.27% and 2.78%, respectively, for 2024.

The average balance of interest earning assets increased $202.6 million, or 2.8%, to $7.51 billion for the year ended December 31, 2025 from $7.30 billion for 2024. The increase in the average balance of interest-earning assets was due mainly to a $192.0 million increase in the average balance of loans, from $6.11 billion in 2024, to $6.30 billion in 2025. Average loans were 84.0% of average interest earning assets for 2025, an increase from 83.7% for 2024. The average balance of securities increased $0.7 million, or 0.1%, to $984.2 million in 2025 from $983.4 million for 2024. The average balance of interest-bearing liabilities increased $168.2 million, or 3.6%, to $4.84 billion for 2025 compared with $4.67 billion in 2024. The average balance of money market and savings accounts and time deposits accounts increased $229.8 million and $12.3 million, respectively, which were offset by decreases in the average balance of borrowings and interest-bearing demand deposits of $71.7 million and $2.6 million, respectively.

The average yield on interest-earning assets, on a taxable equivalent basis, increased two basis points to 5.48% in 2025 from 5.46% in 2024, due primarily to the average yield on securities which, on a taxable equivalent basis, increased to 2.60% for 2025 from 2.22% for 2024, as the Company invested in higher-yielding securities as older, lower-yielding securities matured. Within interest-earning assets, the decline in market rates adversely impacted loan yields, which decreased three basis points to 5.96% for the year ended December 31, 2025, from 5.99% for 2024. Similarly, the average rate paid on interest-bearing liabilities decreased by 59 basis points to 3.61% for 2025 from 4.20% for 2024, reflecting a decline in the rates paid on money market and time deposit accounts during 2025 and the lower percentage of time deposits in the deposit portfolio. The average rate paid on interest-bearing deposits decreased from 4.16% in 2024, to 3.56% in 2025, while the average rate paid on borrowings increased from 4.38% in 2024, to 4.52% in 2025.

40

2024 Compared to 2023

Interest income, on a taxable equivalent basis, increased $29.5 million, or 8.0%, to $398.8 million for the year ended December 31, 2024 from $369.3 million for the year ended December 31, 2023. Interest expense increased $48.0 million, or 32.4%, to $196.0 million for 2024, from $148.1 million in 2023. Net interest income, on a taxable equivalent basis, decreased by $18.5 million, or 8.4%, to $202.8 million in 2024, from $221.3 million in 2023. The decrease in net interest income was due to higher rates paid on deposits and borrowings, and a higher average balance of deposits, offset partially by higher yields on loans and higher average balances of loans. The net interest spread and net interest margin, on a taxable equivalent basis, for the year ended December 31, 2024 were 1.27% and 2.78%, respectively, compared with 1.74% and 3.08%, respectively, for 2023.

The average balance of interest earning assets increased $120.1 million, or 1.7%, to $7.30 billion for the year ended December 31, 2024 from $7.18 billion for 2023. The increase in the average balance of interest-earning assets was due mainly to a $142.4 million increase in the average balance of loans, from $5.97 billion in 2023, to $6.11 billion in 2024. Average loans were 83.7% of average interest-earning assets for 2024, an increase from 83.1% for 2023. The average balance of securities increased $16.2 million, or 1.7%, to $983.4 million in 2024 from $967.2 million for 2023. The average balance of interest-bearing liabilities increased $328.4 million, or 7.6%, to $4.67 billion for 2024 compared to $4.34 billion in 2023. The average balance of money market and savings and time deposits accounts increased $322.6 million and $62.0 million, respectively, offset by decreases in the average balance of borrowings and interest-bearing demand deposits of $43.2 million and $13.6 million, respectively.

The average yield on interest-earning assets, on a taxable equivalent basis, increased 31 basis points to 5.46% in 2024 from 5.15% in 2023, due mainly to the increase in the yields on loans and securities. The average yield on loans increased to 5.99% for the year ended December 31, 2024 from 5.69% for 2023, primarily due to the continued increase in market interest rates in 2024. The average yield on securities, on a taxable equivalent basis, increased to 2.22% for 2024 from 1.78% for 2023. The average rate paid on interest-bearing liabilities increased by 79 basis points to 4.20% for 2024 from 3.41% for 2023. The increase reflected the higher cost of interest-bearing deposits, the greater percentage of time deposits in the deposit portfolio, and the increase in the average rate on borrowings due to increases in market rates in 2024. The average rate on interest-bearing deposits increased from 3.35% in 2023, to 4.16% in 2024. The average rate on borrowings increased from 3.48% in 2023, to 4.38% in 2024.

Credit Loss Expense

As a result of credit risks inherent in our lending business, we recognize an allowance for credit losses through charges to credit loss expense. These charges pertain not only to our outstanding loan portfolio, but also to off-balance sheet items, such as commitments to extend credit. Credit loss expense for our outstanding loan portfolio is recorded to the allowance for credit losses. The allowance for off-balance sheet items is included in accrued expenses and other liabilities.

2025 Compared to 2024

Credit loss expense for 2025 was $14.4 million, compared with a credit loss expense of $4.4 million for 2024. The 2025 credit loss expense included a $14.2 million credit loss expense for loan losses and a $0.2 million credit loss expense for off-balance sheet items. The credit loss expense for 2024 included a $4.8 million credit loss expense for loans and a $0.4 million credit loss recovery for off-balance sheet items. The increased credit loss expense in 2025 primarily reflects an $8.6 million charge-off of a syndicated commercial real estate office loan during the second quarter of 2025.

2024 Compared to 2023

Credit loss expense for 2024 was $4.4 million, compared with a credit loss expense of $4.3 million for 2023. The 2024 credit loss expense included a $4.8 million credit loss expenses for loan losses and a $0.4 million credit loss recovery for off-balance sheet items. The credit loss expense for 2023 was comprised of a $4.9 million credit loss for loan losses and a $0.6 million credit loss recovery for off-balance sheet items.

41

Noninterest Income

The following table sets forth the various components of noninterest income for the years indicated:

Year Ended December 31,

2025

2024

2023

(in thousands)

Service charges on deposit accounts

$

8,742

$

9,381

$

10,147

Trade finance and other service charges and fees

6,144

5,309

4,832

Servicing income

3,346

3,005

3,177

Bank-owned life insurance income

2,591

1,578

792

All other operating income

3,431

3,871

5,458

Service charges, fees and other

24,254

23,144

24,406

Gain on sale of SBA loans

7,808

6,112

5,701

Gain on sale of residential mortgage loans

1,913

1,469

—

Net loss on sales of securities

—

—

(1,871

)

Gain on sale of bank premises

—

860

4,000

Legal settlement

—

—

1,943

Total noninterest income

$

33,975

$

31,585

$

34,179

2025 Compared to 2024

For the year ended December 31, 2025, noninterest income was $34.0 million, an increase of $2.4 million, or 7.6%, compared to $31.6 million for the same period in 2024. The increase was primarily due to a $1.7 million increase in gain on the sale of SBA loans, a $1.0 million increase in bank-owned life insurance income from death benefit claims, and a $0.8 million increase in trade finance and other service charges and fees due a higher volume of annual trade finance extensions and standby letters of credit. Those items were partially offset by the absence in 2025 of a $0.9 million gain on the sale of a bank branch in 2024. The volume of SBA loans sold in 2025 increased to $130.0 million from $93.7 million for 2024, while trade premiums decreased to 7.45% for 2025, from 8.18% for 2024. The volume of residential mortgage loans sold increased to $111.3 million for 2025, from $88.4 million for 2024, while trade premiums increased to 2.49% for 2025, from 2.16% for 2024.

2024 Compared to 2023

For the year ended December 31, 2024, noninterest income was $31.6 million, a decrease of $2.6 million, or 7.6%, compared to $34.2 for the same period in 2023, due primarily to a $4.0 million gain on the sale-leaseback of a branch property in 2023 and a $0.8 million decrease in service charges on deposits due primarily to a decrease in money service business volume. Those items were partially offset by a $1.5 million gain on the sale of mortgage loans, and a $0.9 million gain from the sale and leaseback of a branch property in 2024. Gain on sale of SBA loans increased $0.4 million due to an increase in trade premiums to 8.18% for 2024, from 7.12% for 2023. Bank-owned life insurance income increased by $0.8 million due primarily to a $0.3 benefit received in 2024 and a $0.3 million impairment allowance in 2023.

42

Noninterest Expense

The following table sets forth various components of noninterest expense for the years indicated:

Year Ended December 31,

2025

2024

2023

(in thousands)

Salaries and employee benefits

$

87,676

$

83,368

$

81,398

Occupancy and equipment

17,639

17,845

18,340

Data processing

15,472

14,876

13,695

Professional fees

7,514

6,956

6,255

Supplies and communications

2,028

2,261

2,479

Advertising and promotion

3,104

3,028

3,105

All other operating expenses

14,206

13,173

11,306

Subtotal

147,639

141,507

136,578

Branch consolidation expense

—

301

—

Other real estate owned expense (income)

72

(1,483

)

(166

)

Repossessed personal property expense

88

1,010

115

Total noninterest expense

$

147,799

$

141,335

$

136,527

2025 Compared to 2024

For the year ended December 31, 2025, noninterest expense was $147.8 million, an increase of $6.5 million, or 4.6%, compared with $141.3 million for 2024. The increase in noninterest expense was due to increases in salaries and employee benefits, lower other-real-estate-owned income, higher other operating expenses, and higher professional fees, partially offset by lower repossessed personal property expense. Salaries and employee benefits increased $4.3 million, due primarily to merit increases and investment in new talent. The decrease in other-real-estate-owned income was due to the absence of a $1.6 million gain on the sale of property in 2024. All other operating expenses, which increased $1.0 million, primarily reflected a $0.9 million increase in loan-related expenses. Professional fees, which increased by $0.6 million, reflected higher legal fees, partially offset by lower consulting and advisory fees. The decrease in repossessed personal property expense of $0.9 million was due to fewer losses on the sales of repossessed leasing assets.

2024 Compared to 2023

For the year ended December 31, 2024, noninterest expense was $141.3 million, an increase of $4.8 million, or 3.5%, compared with $136.5 million for 2023. The increase in noninterest expense was due to increases in salaries and employee benefits, data processing, professional fees, and other operating expenses. Salaries and employee benefits increased $2.0 million, due to higher salaries, group insurance, and share-based compensation expense, offset primarily by capitalized labor costs associated with the Company's investment in a new loan origination system. Data processing expense increased $1.2 million due to an increase in software license and maintenance expense in 2024. Professional fees increased $0.7 million primarily due to increases in legal fees related to loan matters and consulting fees related to the new loan origination system implementation. All other operating expenses increased $1.9 million mainly due to a $0.6 million increase in loan and deposit-related expenses related to loan collection costs and regulatory assessments, a $0.5 million charge related to an SBA loan acquired in a previous acquisition, and a $0.4 million SBA servicing asset recovery in 2023. Other real estate owned income in 2024 primarily consisted of a $1.6 million gain on sale of an other-real-estate-owned property, offset partially by other-real-estate-owned expenses.

Income Tax Expense

For the years ended December 31, 2025, 2024 and 2023, income tax expense was $31.8 million, $26.4 million and $34.5 million, respectively. The effective tax rate for the years ended December 31, 2025, 2024 and 2023 was 29.5%, 29.8% and 30.1%, respectively.

Income taxes are discussed in more detail in “Notes to Consolidated Financial Statements, Note 1 — Summary of Significant Accounting Policies” and “Note 11 — Income Taxes” presented elsewhere herein.

43

Financial Condition

Securities Portfolio

As of December 31, 2025, our securities portfolio was composed of mortgage-backed securities, collateralized mortgage obligations, debt securities issued by U.S. government agencies and sponsored agencies and tax-exempt municipal bonds. Most of the securities carried fixed interest rates. Other than holdings of U.S. government and agency securities, there were no securities of any one issuer exceeding 10% of stockholders’ equity as of December 31, 2025, 2024 or 2023.

As of December 31, 2025, securities, all of which were classified as available for sale, decreased $25.2 million, or 2.8%, to $880.6 million from $905.8 million as of December 31, 2024. The decrease was primarily attributable to $233.3 million in payments and maturities, partially offset by $173.1 million in purchases and a $37.6 million decrease in net unrealized losses.

The following table summarizes the contractual maturity schedule for securities, at amortized cost, and their cost-weighted average yield as of December 31, 2025:

After One

Year But

After Five

Years But

Within One

Year

Within Five

Years

Within Ten

Years

After Ten

Years

Total

Amount

Yield

Amount

Yield

Amount

Yield

Amount

Yield

Amount

Yield

(dollars in thousands)

Securities available for sale:

U.S. Treasury securities

$

103,513

3.92

%

$

25,056

3.84

%

$

—

—

%

$

—

—

%

$

128,569

3.91

%

U.S. government agency and sponsored agency obligations:

Mortgage-backed securities - residential

—

—

2,028

3.29

157,523

1.47

251,672

2.27

411,223

1.97

Mortgage-backed securities - commercial

967

0.66

3,183

3.46

—

—

67,601

2.48

71,751

2.50

Collateralized mortgage obligations

—

—

54

1.32

1,227

1.04

186,839

4.30

188,120

4.28

Debt securities

54,570

1.46

12,489

1.01

—

—

—

—

67,059

1.38

Total U.S. government agency and sponsored agency obligations

55,537

1.45

17,754

1.71

158,750

1.47

506,112

3.05

738,153

2.56

Municipal bonds-tax exempt

—

—

—

—

72,900

1.33

2,138

1.70

75,038

1.34

Total securities available for sale

$

159,050

3.06

%

$

42,810

2.96

%

$

231,650

1.42

%

$

508,250

3.04

%

$

941,760

2.64

%

44

Loan Portfolio

As of December 31, 2025, 2024 and 2023, total loans (excluding loans held for sale), net of deferred loan costs and discounts, were $6.56 billion, $6.25 billion and $6.18 billion, respectively, representing an increase of $312.0 million, or 5.0%, for 2025 and an increase of $68.9 million, or 1.1%, for 2024. The $312.0 million net increase in loans for 2025 was due to production of $1.62 billion, offset by payoffs, prepayments, and amortization of $947.3 million, sales of $241.7 million and other changes of $120.1 million. Loan originations in 2025 consisted of $561.3 million of commercial real estate loans, $389.3 million of commercial and industrial loans, $312.3 million of residential/consumer loans, $167.2 million of equipment financing agreements, and $191.1 million of SBA loans. Loan growth during the year ended December 31, 2025 was driven primarily by our strategic initiatives, including expansion of the commercial and industrial and residential real estate portfolios and reduction of commercial real estate exposure.

The table below shows the maturity distribution of outstanding loans (before the allowance for credit losses and excluding loans held for sale) as of December 31, 2025. In addition, the table shows the distribution of such loans between those with floating or variable interest rates and those with fixed or predetermined interest rates.

Within One

Year

After One Year but Within Three Years

After Three Years but Within Five Years

After Five Years but Within Fifteen Years

After Fifteen Years

Total

(in thousands)

Real estate loans:

Commercial property

Retail

$

211,724

$

346,722

$

362,742

$

133,295

$

77,956

$

1,132,439

Hospitality

195,065

278,120

341,370

14,441

18,993

847,989

Office

244,150

200,091

36,050

12,931

10,046

503,268

Other

409,419

462,585

539,836

80,838

39,989

1,532,667

Total commercial property loans

1,060,358

1,287,518

1,279,998

241,505

146,984

4,016,363

Construction

9,745

3,997

—

—

—

13,742

Residential

3,592

283

210

7,774

1,038,013

1,049,872

Total real estate loans

1,073,695

1,291,798

1,280,208

249,279

1,184,997

5,079,977

Commercial and industrial loans

436,372

159,231

258,442

220,863

—

1,074,908

Equipment financing agreements

34,950

201,994

157,239

14,300

—

408,483

Total loans

$

1,545,017

$

1,653,023

$

1,695,889

$

484,442

$

1,184,997

$

6,563,368

Loans with predetermined interest rates

$

936,954

$

960,523

$

626,369

$

24,500

$

260,538

$

2,808,884

Loans with variable interest rates

$

608,063

$

692,500

$

1,069,520

$

459,942

$

924,459

$

3,754,484

The table below shows the maturity distribution of outstanding loans (before the allowance for credit losses and excluding loans held for sale) with fixed or predetermined interest rates due after one year, as of December 31, 2025.

Within One

Year

After One Year but Within Three Years

After Three Years but Within Five Years

After Five Years but Within Fifteen Years

After Fifteen Years

Total

(in thousands)

Real estate loans:

Commercial property

Retail

$

162,771

$

195,719

$

192,089

$

15

$

442

$

551,036

Hospitality

148,888

154,637

38,046

—

—

341,571

Office

170,090

162,805

16,539

—

—

349,434

Other

278,534

237,047

213,493

4,448

3,175

736,697

Total commercial property loans

760,283

750,208

460,167

4,463

3,617

1,978,738

Construction

—

—

—

—

—

—

Residential

1,420

—

9

3,975

256,921

262,325

Total real estate loans

761,703

750,208

460,176

8,438

260,538

2,241,063

Commercial and industrial loans

140,301

8,321

8,954

1,762

—

159,338

Equipment financing agreements

34,950

201,994

157,239

14,300

—

408,483

Total loans

$

936,954

$

960,523

$

626,369

$

24,500

$

260,538

$

2,808,884

45

The table below shows the maturity distribution of outstanding loans (before the allowance for credit losses and excluding loans held for sale) with variable (floating, adjustable, or hybrid) interest rates due after one year, as of December 31, 2025.

Within One

Year

After One Year but Within Three Years

After Three Years but Within Five Years

After Five Years but Within Fifteen Years

After Fifteen Years

Total

(in thousands)

Real estate loans:

Commercial property

Retail

$

48,953

$

151,003

$

170,653

$

133,280

$

77,514

$

581,403

Hospitality

46,177

123,483

303,324

14,441

18,993

506,418

Office

74,060

37,286

19,511

12,931

10,046

153,834

Other

130,885

225,538

326,343

76,390

36,814

795,970

Total commercial property loans

300,075

537,310

819,831

237,042

143,367

2,037,625

Construction

9,745

3,997

—

—

—

13,742

Residential

2,172

283

201

3,799

781,092

787,547

Total real estate loans

311,992

541,590

820,032

240,841

924,459

2,838,914

Commercial and industrial loans

296,071

150,910

249,488

219,101

—

915,570

Equipment financing agreements

—

—

—

—

—

—

Total loans

$

608,063

$

692,500

$

1,069,520

$

459,942

$

924,459

$

3,754,484

As of December 31, 2025, the loan portfolio included the following concentrations of commercial loan types to borrowers in industries that represented greater than 10% of total loans:

Balance as of December 31, 2025

Percentage

of Loans

Receivable

Outstanding

(dollars in thousands)

Lessor of nonresidential buildings

$

1,559,667

23.8

%

Hospitality

$

847,412

12.9

%

Federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending. Institutions which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios and may be required to hold higher levels of capital. While the Company does not have a concentration in commercial real estate loans from a regulatory standpoint, it continues to refine information reviewed related to commercial real estate and to implement additional monitoring and testing of commercial real estate loans. In this regard, as of December 31, 2025, management has implemented appropriate risk management practices, including risk assessments, board-approved underwriting policies and related procedures, which include monitoring loan portfolio performance and stressing of the commercial real estate portfolio under adverse economic conditions.

Loan Quality Indicators

Loans 30 to 89 days past due and still accruing were $19.9 million, $18.5 million and $10.3 million as of December 31, 2025, 2024 and 2023, respectively, representing an increase of $1.4 million, or 7.6%, for 2025 and an increase of $8.2 million, or 79.8%, for 2024. The increase for 2025 was primarily attributable to $2.3 million and $1.1 million of increases in past due and still accruing commercial real estate loans and SBA loans, respectively, partially offset by a $2.5 million decrease in equipment financing agreements that were 30 to 89 days past due and still accruing. At December 31, 2025, equipment financing agreements comprised 6.2% of the total loan portfolio, compared with 7.8% at December 31, 2024. Of these, 1.56% were 30 to 89 days delinquent and still accruing at December 31, 2025, compared with 1.59% at December 31, 2024.

At December 31, 2025, 2024 and 2023, there were no loans 90 days or more past due and still accruing interest.

46

Activity in criticized loans was as follows for the years ended December 31:

2025

2024

(in thousands)

Special Mention

Balance at beginning of period

$

139,613

$

65,315

Additions:

Downgrades from pass loans

59,551

144,776

Upgrades from classified loans

—

1,017

Total additions

59,551

145,793

Reductions:

Upgrades to pass loans

(126,566

)

(27,174

)

Downgrades to classified loans

—

(36,887

)

Payoffs and paydowns

(1,485

)

(7,434

)

Total reductions

(128,051

)

(71,495

)

Balance at end of period

$

71,113

$

139,613

Classified

Balance at beginning of period

$

25,683

$

31,367

Additions:

Downgrades

39,980

57,792

Total additions

39,980

57,792

Reductions:

Upgrades

(7,781

)

(2,735

)

Payoffs and paydowns

(10,101

)

(22,544

)

Transfer to loans held for sale

—

(28,320

)

Charge-offs

(19,901

)

(9,104

)

Other reductions

(1,989

)

(773

)

Total reductions

(39,772

)

(63,476

)

Balance at end of period

$

25,891

$

25,683

Special mention loans decreased $68.5 million, or 49.1%, to $71.1 million at December 31, 2025 from $139.6 million at December 31, 2024. The decrease included upgrades to pass loans of $126.6 million and pay-downs and payoffs of $1.5 million, partially offset by downgrades from pass loans of $59.6 million. The upgrades included two commercial real estate loans in the hospitality industry during the second quarter of 2025, totaling $105.8 million, and two commercial and industrial loans during the first quarter of 2025, totaling $20.5 million. Downgrades included one of the two commercial real estate loans that had been previously upgraded during the second quarter which, at the time of downgrade during the fourth quarter, had received a paydown of $21.0 million, resulting in a balance of $55.0 million. At the time of its previous upgrade into pass-rated loans during the second quarter, it had a balance of $76.0 million.

Classified loans increased $0.2 million, or 0.8%, to $25.9 million at December 31, 2025, from $25.7 million at December 31, 2024. This activity comprised $29.2 million of loan downgrades and $10.8 million of equipment financing agreement downgrades, partially offset by $19.9 million of charge-offs, $10.1 million of paydowns and payoffs, $7.8 million of upgrades, and $2.0 million transferred to other-real-estate-owned. The loan downgrades included a $20.0 commercial real estate office loan in the first quarter of 2025, which received an $8.6 million partial charge-off in the second quarter of 2025, and a $1.8 million commercial real estate loan in the hospitality industry in the first quarter of 2025, which was subsequently transferred to other-real-estate-owned in the third quarter of 2025. The $7.8 million of upgrades to pass loans included two commercial real estate loans, one for $3.9 million in the second quarter of 2025 and one for $3.1 million in the third quarter of 2025.

47

Charge-offs, pay downs and payoffs, and upgrades included $9.9 million, $3.4 million, and $0.9 million, respectively, of equipment financing agreements.

Nonperforming Assets

Nonperforming loans consist of loans on nonaccrual status and loans 90 days or more past due and still accruing interest. Nonperforming assets consist of nonperforming loans and OREO. Loans are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless management believes the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on nonaccrual status earlier, depending upon the individual circumstances surrounding the delinquency of the loan. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans may be restored to accrual status when principal and interest become current and full repayment is expected, which generally occurs after sustained payment of six months. Interest income is recognized on the accrual basis for loans not meeting the criteria for nonaccrual. OREO consists of properties acquired by foreclosure or similar means.

Except for nonperforming loans discussed below, management is not aware of any loans as of December 31, 2025 for which known credit problems of the borrower would cause serious doubts as to the ability of such borrowers to comply with their present loan repayment terms, or any known events that would result in the loan being designated as nonperforming at some future date.

Activity in nonperforming loans was as follows for the years ended December 31:

2025

2024

(in thousands)

Nonperforming Loans

Balance at beginning of period

$

14,272

$

15,474

Additions:

Downgrades - equipment financing agreements

10,504

14,283

Downgrades - all other loans

27,331

38,290

Total additions

37,835

52,573

Reductions:

Upgrades, equipment financing agreements

(955

)

(31

)

Upgrades, all other loans

(4,811

)

(1,156

)

Charge-offs, equipment financing agreements

(9,843

)

(8,650

)

Charge-offs, all other loans

(9,438

)

(382

)

Payoffs and paydowns, equipment financing agreements

(3,419

)

(4,096

)

Payoffs and paydowns, all other loans

(3,534

)

(11,140

)

Transfer to other-real-estate-owned

(1,995

)

—

Transfer to loans held for sale

—

(28,320

)

Total reductions

(33,995

)

(53,775

)

Balance at end of period

$

18,112

$

14,272

Nonperforming loans were $18.1 million and $14.3 million as of December 31, 2025 and 2024, respectively, representing an increase of $3.8 million, or 26.6%, for 2025. This increase was due to downgrades of $37.8 million, which were partially offset by charge-offs of $19.3 million, upgrades of $5.8 million, payoffs and paydowns of $7.0 million, and transfers to other-real-estate-owned of $2.0 million. The loan downgrades in 2025 included a $20.0 commercial real estate office loan in the first quarter of 2025, which received an $8.6 million partial charge-off in the second quarter of 2025, and a $1.8 million commercial real estate loan in the hospitality industry in the first quarter of 2025, which was subsequently transferred to other-real-estate-owned in the third quarter of 2025. At December 31, 2025, 1.3% of equipment financing agreements were classified as nonaccrual, compared with 1.8% at December 31, 2024. At December 31, 2025 and 2024, all loans 90 days or more past due were classified as nonaccrual.

48

The $18.1 million of nonperforming loans as of December 31, 2025 had individually evaluated allowances of $3.4 million, compared with $14.3 million of nonperforming loans with individually evaluated allowances of $6.2 million as of December 31, 2024. The allowance for credit losses on individually evaluated loans decreased $2.8 million to $3.4 million as of December 31, 2025, compared with $6.2 million as of December 31, 2024. The decrease was primarily due to $3.8 million of charge-offs during 2025 of equipment financing agreements that were individually evaluated at December 31, 2024.

Nonperforming assets were $20.1 million at December 31, 2025, or 0.26% of total assets, compared with $14.4 million, or 0.19%, at December 31, 2024. Additionally, not included in nonperforming assets was repossessed personal property associated with equipment financing agreements of $0.6 million at December 31, 2025 and 2024.

At December 31, 2025, OREO consisted of two properties with an aggregate carrying value of $2.0 million. At December 31, 2024, OREO consisted of one property with a carrying value of $0.1 million.

Individually Evaluated Loans

The Company reviews all loans on an individual basis when they do not share similar risk characteristics with loan pools. Individually evaluated loans are measured for expected credit losses based on the present value of expected cash flows discounted at the effective interest rate, the observable market price, or the fair value of collateral.

Individually evaluated loans were $18.1 million, $14.3 million and $15.4 million as of December 31, 2025, 2024 and 2023, respectively, representing an increase of $3.8 million, or 26.9%, for 2025, and an increase of $5.6 million, or 56.8%, for 2024. The increase in 2025 was due to the addition of $15.7 million of new individually-evaluated loans, partially offset by a decrease of $11.9 million due to paydowns, upgrades to collectively-evaluated status, and charge-offs. Included in the $15.7 million of new individually evaluated loans is a $10.2 million collateral-dependent commercial real estate office loan that was on nonaccrual status at December 31, 2025.

A borrower is experiencing financial difficulties when there is a probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Company may grant a concession by providing principal forgiveness, a term extension, an other-than-insignificant payment delay, interest only, payment deferrals, or an interest rate reduction.

No loans were modified to borrowers experiencing financial difficulty during the twelve months ended December 31, 2025.

During the twelve months ended December 31, 2025, there were no payment defaults on loans modified within the preceding twelve months.

Allowance for Credit Losses and Allowance for Credit Losses Related to Off-Balance Sheet Items

The Company’s estimate of the allowance for credit losses at December 31, 2025 and 2024 reflected losses expected over the remaining contractual life of the assets based on historical, current, and forward-looking information. The contractual term does not consider extensions, renewals or modifications.

At December 31, 2025, the Company used forward-looking, econometric, and loan-level (or pool-level) methodologies from Moody's to estimate lifetime expected losses, incorporating macroeconomic forecasts, historical loss data, and probability-weighted scenarios. Loans that do not share similar risk characteristics are individually evaluated for allowances.

The Company applies a lifetime reasonable and supportable forecast period, leveraging Moody's long-term outlook for various loss factors. The Company's historical loss experience is benchmarked against Moody's Credit Research Database's lifetime loss rates, with adjustments made for the Company's unique loss characteristics. The quantitative results are further adjusted as appropriate to account for qualitative considerations. When estimating qualitative factors, the Company takes into account market, industry, and business-specific data, changes in the underlying portfolio composition, trends relating to credit quality and delinquencies, and reasonable and supportable economic forecasts.

For the years ended December 31, 2025 and 2024, the Company relied on the economic projections from Moody's to inform its loss driver forecasts. The methodology for calculating the allowance for credit losses is discussed in more detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies —

49

Allowance for credit losses and Allowance for credit losses related to off-balance sheet items" and "Notes to Consolidated Financial Statements, Note 1 — Summary of Significant Accounting Policies."

The table below presents the allowance for credit losses by portfolio segment as a percentage of the total allowance for credit losses and loans by portfolio segment as a percentage of the aggregate investment of total loans for the periods presented:

As of December 31,

2025

2024

Allowance

Amount

% of Total Allowance

Total Loans

% of Total Loans

Allowance

Amount

% of Total Allowance

Total Loans

% of Total Loans

(dollars in thousands)

Real estate loans:

Commercial property

Retail

$

9,999

14.3

%

$

1,132,439

17.3

%

$

10,171

14.5

%

$

1,068,978

17.1

%

Hospitality

8,737

12.5

847,989

12.9

15,302

21.8

848,134

13.6

Office

5,700

8.2

503,268

7.7

3,935

5.6

568,861

9.1

Other

14,078

20.1

1,532,667

23.4

8,243

11.8

1,385,051

22.2

Total commercial property loans

38,514

55.1

4,016,363

61.3

37,651

53.7

3,871,024

62.0

Construction

208

0.3

13,742

0.2

1,664

2.4

78,598

1.3

Residential

12,948

18.5

1,049,872

16.0

5,784

8.2

951,302

15.2

Total real estate loans

51,670

73.9

5,079,977

77.5

45,099

64.3

4,900,924

78.5

Commercial and industrial loans

7,792

11.1

1,074,908

16.4

10,006

14.3

863,431

13.8

Equipment financing agreements

10,441

15.0

408,483

6.1

15,042

21.4

487,022

7.7

Total

$

69,903

100.0

%

$

6,563,368

100.0

%

$

70,147

100.0

%

$

6,251,377

100.0

%

The following table sets forth certain information regarding certain ratios related to our allowance for credit losses for the periods presented:

As of and for the Year Ended December 31,

2025

2024

2023

(dollars in thousands)

Ratios:

Allowance for credit losses to loans

1.07

%

1.12

%

1.12

%

Nonaccrual loans to loans

0.28

%

0.23

%

0.25

%

Allowance for credit losses to nonaccrual loans

385.95

%

491.50

%

448.89

%

Balance:

Nonaccrual loans at end of period

$

18,112

$

14,272

$

15,474

Nonperforming loans at end of period

$

18,112

$

14,272

$

15,474

The allowance for credit losses was $69.9 million at December 31, 2025 compared with $70.1 million at December 31, 2024. The allowance for credit losses as a percentage of loans was 1.07% as of December 31, 2025 and 1.12% as of December 31, 2024. The allowance attributed to loans individually evaluated was $3.4 million at December 31, 2025 compared with $6.2 million at December 31, 2024. The allowance attributed to loans collectively evaluated was $66.5 million at December 31, 2025, compared with $64.0 million at December 31, 2024.

The following table presents a summary of net charge-offs (recoveries) for the loan portfolio:

For the year ended December 31,

2025

2024

2023

Average Loans

Net (Charge-offs) Recoveries

Net (Charge-offs) Recoveries to Average Loans

Average Loans

Net (Charge-offs) Recoveries

Net (Charge-offs) Recoveries to Average Loans

Average Loans

Net (Charge-offs) Recoveries

Net (Charge-offs) Recoveries to Average Loans

(dollars in thousands)

Commercial real estate loans

$

3,963,919

$

(8,515

)

(0.21

)%

$

3,874,291

$

451

0.01

%

$

3,769,283

$

(322

)

(0.01

)%

Construction loans

—

—

—

—

226

—

—

—

—

Residential loans

1,004,057

4

0.00

952,709

3

0.00

873,904

7

0.00

Commercial and industrial loans

885,308

1,406

0.16

748,077

2,906

0.39

729,382

432

0.06

Equipment financing agreements

449,440

(7,302

)

(1.62

)

535,636

(7,719

)

(1.44

)

595,770

(7,160

)

(1.20

)

Total

$

6,302,724

$

(14,407

)

(0.23

)%

$

6,110,713

$

(4,133

)

(0.07

)%

$

5,968,339

$

(7,043

)

(0.12

)%

For the year ended December 31, 2025, gross charge-offs were $21.0 million, an increase of $9.4 million, or 81.1%, from $11.6 million for 2024, and gross recoveries were $6.6 million, a decrease of $0.8 million, or 11.3%, from $7.5 million for

50

2024. This resulted in net charge-offs of $14.4 million and $4.1 million for the years ended December 31, 2025 and 2024, respectively. Charge-offs for the year ended December 31, 2025 included $8.6 million on a syndicated commercial real estate office loan and $10.1 million of equipment financing agreements. Recoveries for the year ended December 31, 2025 primarily consisted of $2.0 million from a loan in the healthcare industry and $2.8 million of equipment financing agreements.

The allowance for off-balance sheet exposures was $2.3 million, $2.1 million and $2.5 million, as of December 31, 2025, 2024 and 2023 respectively. This represents an increase of $0.2 million, or 9.5%, in 2025 and a decrease of $0.4 million, or 16.2%, in 2024. The Bank closely monitors the borrower’s repayment capabilities, while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality, prevailing economic conditions and economic forecasts, we believe these allowances were adequate for losses inherent in the loan portfolio and off-balance sheet exposure as of December 31, 2025.

Deposits

The following table shows the composition of deposits by type as of the dates indicated:

As of December 31,

2025

2024

2023

Balance

%

Balance

%

Balance

%

(dollars in thousands)

Demand – noninterest-bearing

$

2,015,212

30.2

%

$

2,096,634

32.6

%

$

2,003,596

31.9

%

Interest-bearing:

Demand

74,799

1.1

80,323

1.2

87,452

1.4

Money market and savings

2,084,218

31.2

1,933,535

30.0

1,734,659

27.6

Uninsured amount of time deposits more than $250,000:

Three months or less

317,086

4.7

225,015

3.5

186,321

3.0

Over three months through six months

276,791

4.1

219,304

3.4

201,085

3.2

Over six months through twelve months

156,750

2.3

202,966

3.2

222,683

3.5

Over twelve months

159

—

14

—

70,932

1.1

All other insured time deposits

1,752,635

26.2

1,677,985

26.1

1,773,846

28.2

Total deposits

$

6,677,650

100.0

%

$

6,435,776

100.0

%

$

6,280,574

100.0

%

Total deposits were $6.68 billion, $6.44 billion and $6.28 billion as of December 31, 2025, 2024 and 2023, respectively, representing an increase of $241.9 million, or 3.8%, for 2025, and an increase of $112.5 million, or 1.8%, for 2024. The increase in total deposits for 2025 was primarily attributable to an increase of $150.7 million in money market and savings accounts and an increase of $178.1 million in time deposits, offset by a decrease of $81.4 million in non-interest bearing demand deposits and a decrease of $5.5 million in interest-bearing demand deposits. The changes in the deposit composition from 2024 to 2025 were primarily due to customers moving their deposits to higher-yielding deposit products in the declining interest rate environment. At December 31, 2025, the loan-to-deposit ratio was 98.3% compared with 97.1% at December 31, 2024.

The average balance of deposits for the years ended December 31, 2025, 2024 and 2023 was $6.57 billion, $6.31 billion and $6.19 billion, respectively. The average balance of deposits increased 4.1%, 1.9%, and 4.0% in 2025, 2024 and 2023, respectively.

As of December 31, 2025, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $2.92 billion. The aggregate amount of our uninsured time deposits was $750.8 million. Other uninsured deposits, such as demand deposits and money market and savings deposits were $2.17 billion. In addition, $1.34 billion of total uninsured deposits were in accounts with balances of $5.0 million or more at December 31, 2025.

Borrowings and Subordinated Debentures

The Bank’s wholesale funds have historically consisted of FHLB advances, brokered deposits, and State of California time deposits. FHLB advances allow for open basis (no maturity) borrowing or term borrowing. Borrowing terms can be overnight or for finite periods of time. At December 31, 2025, the Bank had $150.0 million of FHLB advances, all of which were overnight advances. This represented a decrease of $112.5 million from $262.5 million at December 31, 2024, as funds from deposit growth not used to fund loan production were used to pay off borrowings. At December 31, 2024, FHLB advances included $37.5 million of term advances and $225.0 million of open advances.

51

As of December 31, 2025 and 2024, the Bank had $88.5 million and $60.7 million of brokered deposits, respectively. The Bank had $150.0 million and $120.0 million of State of California time deposits at December 31, 2025 and 2024, respectively.

The following is a summary of contractual maturities of FHLB advances greater than twelve months:

December 31, 2025

December 31, 2024

FHLB of San Francisco

Outstanding

Balance

Weighted

Average

Rate

Outstanding

Balance

Weighted

Average

Rate

(dollars in thousands)

Advances due over 12 months through 24 months

$

—

—

%

$

37,500

4.58

%

Advances due over 24 months through 36 months

—

—

—

—

Outstanding advances over 12 months

$

—

—

%

$

37,500

4.58

%

The following is financial data pertaining to FHLB advances:

As of December 31,

2025

2024

2023

(dollars in thousands)

Weighted-average interest rate at end of year

4.02

%

4.75

%

4.69

%

Weighted-average interest rate during the year

4.52

%

4.37

%

3.48

%

Average balance of FHLB advances

$

82,390

$

154,112

$

197,390

Maximum amount outstanding at any month-end

$

150,000

$

350,000

$

450,000

Subordinated debentures were $130.5 million as of December 31, 2025 and $130.6 million as of December 31, 2024. Subordinated debentures were comprised of fixed-to-floating subordinated notes of $108.7 million and $108.5 million as of December 31, 2025 and 2024, respectively, and junior subordinated deferrable interest debentures of $21.7 million and $22.1 million as of December 31, 2025 and 2024, respectively. See “Note 10 - Subordinated Debentures” to the consolidated financial statements for more details.

Stockholders' Equity

Stockholders’ equity at December 31, 2025 was $796.4 million, an increase of $64.2 million from $732.2 million at December 31, 2024. 2025 net income, net of $32.6 million of dividends paid, added $43.5 million to stockholders' equity for the period. In addition, the increase during 2025 includes a $27.0 million decrease in unrealized after-tax losses on securities available for sale due to changes in intermediate-term interest rates.

During 2025, Hanmi repurchased 393,298 shares of its common stock at an average share price of $23.91 for a total cost of $9.4 million. At December 31, 2025, 837,202 shares remain under the Company’s share repurchase program. On January 29, 2026, the Board of Directors authorized an expansion of the share repurchase program, adding 1.5 million shares to the 837,202 shares remaining as of December 31, 2025, bringing total repurchase capacity to approximately 2.3 million shares.

Interest Rate Risk Management

The financial performance of the Company is impacted by changes in interest rates because the Company's primary source of income is derived from its net interest income, which represents the spread between the interest income it receives on its interest-earning assets and the interest expense it pays on its interest-bearing liabilities. We emphasize capital protection through stable earnings rather than maximizing yield. In order to achieve stable earnings, we prudently manage our assets and liabilities and closely monitor the percentage changes in net interest income and equity value in relation to limits established within our guidelines.

52

The Company performs simulation modeling to measure sensitivity of its interest-earning assets and interest-bearing liabilities to changes in interest rates. It consists of forecasting the net interest income and measuring the economic value of equity in scenarios of instantaneous parallel shifts in the yield curve, and measuring changes from the current rate scenario. The following table summarizes the results as of December 31, 2025. The results are compared to policy limits, which for net interest income, specify the maximum tolerance level over a 1- to 12-month and a 13- to 24-month horizon.

Net Interest Income Simulation

1- to 12-Month Horizon

13- to 24-Month Horizon

Change in Interest Rate

Dollar

Percentage

Dollar

Percentage

(basis points)

Change

Change

Change

Change

(dollars in thousands)

300

$

21,666

7.60

%

$

56,431

18.03

%

200

$

14,826

5.20

%

$

38,396

12.27

%

100

$

8,859

3.11

%

$

21,229

6.78

%

(100)

$

(8,754

)

(3.07

%)

$

(23,223

)

(7.42

%)

(200)

$

(15,538

)

(5.45

%)

$

(46,353

)

(14.81

%)

(300)

$

(21,597

)

(7.58

%)

$

(69,327

)

(22.16

%)

Economic Value of Equity

(EVE)

Dollar

Percentage

Change in Interest Rate

Change

Change

(dollars in thousands)

300

$

83,057

8.93

%

200

$

62,923

6.77

%

100

$

44,418

4.78

%

(100)

$

(59,717

)

(6.42

%)

(200)

$

(133,781

)

(14.38

%)

(300)

$

(222,567

)

(23.93

%)

The estimated sensitivity does not necessarily represent our forecast, and the results may not be indicative of actual changes to our net interest income. These estimates are based upon a number of assumptions, including the timing and magnitude of interest rate changes, prepayments on loans and securities, pricing strategies on loans and deposits, and replacement of asset and liability cash flows.

The key assumptions, based upon loans, securities and deposits, are as follows:

  Conditional prepayment rates*:

     Loans

12

%

     Securities

6

%

  Deposit rate betas*:

     NOW, savings, money market demand

49

%

     Time deposits, retail and wholesale

76

%

* Balance-weighted average

While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions, including how customer preferences or competitor influences might change.

53

Capital Resources and Liquidity

Capital Resources

Historically, our primary source of capital has been the retention of operating earnings. In order to ensure adequate levels of capital, management periodically assesses projected sources and uses of capital in conjunction with projected increases in assets and levels of risk. Management considers, among other things, earnings generated from operations, and access to capital from financial markets through the issuance of additional securities, including common stock or notes, to meet our capital needs.

The Company’s ability to pay dividends to shareholders depends in part upon dividends it receives from the Bank. California law restricts the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to shareholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the DFPI, in an amount not exceeding the greatest of: (1) retained earnings of the Bank; (2) net income of the Bank for its last fiscal year; or (3) the net income of the Bank for its current fiscal year. The Company paid $32.6 million ($1.08 per share), $30.4 million ($1.00 per share), and $30.5 million ($1.00 per share) in dividends in 2025, 2024, and 2023, respectively. As of January 1, 2026, after giving effect to the 2026 first quarter dividend declared by the Company, the Bank had the ability to pay $86.4 million of dividends without the prior approval of the Commissioner of the DFPI.

At December 31, 2025, the Bank’s total risk-based capital ratio was 14.25%, Tier 1 risk-based capital ratio was 13.17%, common equity Tier 1 capital ratio was 13.17%, and Tier 1 leverage capital ratio was 11.47%, placing the Bank in the “well capitalized” category, which is defined as institutions with total risk-based capital ratio equal to or greater than 10.00%, Tier 1 risk-based capital ratio equal to or greater than 8.00%, common equity Tier 1 capital ratio of 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.

At December 31, 2025, the Company’s total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 capital ratio and Tier 1 leverage capital ratio were 15.06%, 12.37%, 12.05%, and 10.70%, respectively, all of which exceeded the Company’s regulatory capital ratio requirements.

For a discussion of recently implemented changes to the capital adequacy framework prompted by Basel III and the Dodd-Frank Act, see “Note 13 — Regulatory Matters” in the Notes to Consolidated Financial Statements in this Report.

Liquidity

The Bank has Contingency Funding Plan (“CFP”) designed to ensure that liquidity sources are sufficient to meet its ongoing obligations and commitments, particularly in the event of a liquidity contraction. The CFP provides a framework for management and other critical personnel to follow in the event of a liquidity contraction or in anticipation of such an event. Management believes that Hanmi Financial, on a stand-alone basis, had adequate liquid assets to meet its current debt obligations.

As a means of augmenting its liquidity, the Bank increased its available borrowing capacity through the Federal Reserve Discount Window to $424.5 million at December 31, 2025, from $27.6 million at December 31, 2024. The Bank had no borrowings outstanding through the Federal Reserve Bank Discount Window as of December 31, 2025.

The Bank also maintains other sources of liquidity, including a line of credit for repurchase agreements up to $100.0 million and four unsecured federal funds lines of credit totaling $140.0 million. These sources had no outstanding balances as of December 31, 2025 and 2024.

For a discussion of our liquidity position, see “Note 22 - Liquidity” in the Notes to Consolidated Financial Statements in this Report.

Off-Balance Sheet Arrangements

For a discussion of off-balance sheet arrangements, see “Note 19 — Off-Balance Sheet Commitments” in the Notes to Consolidated Financial Statements and “Item 1. Business — Off-Balance Sheet Commitments” in this Report.