HERITAGE FINANCIAL CORP /WA/ (HFWA)

CIK: 0001046025. SIC: 6036 Savings Institutions, Not Federally Chartered. Latest 10-K as of: 2026-02-27.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6036 Savings Institutions, Not Federally Chartered

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1046025. Latest filing source: 0001628280-26-012703.

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/CIK0001046025.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/CIK0001046025.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: 0001628280-26-032682.

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 discussion is intended to assist in understanding the financial condition and results of operations of the Company as of and for the three months ended March 31, 2026. The information contained in this section should be read together with the unaudited Condensed Consolidated Financial Statements and the accompanying Notes included herein, the Cautionary Note Regarding Forward-Looking Statements included herein and the December 31, 2025 audited Consolidated Financial Statements, and the accompanying Notes included in our 2025 Annual Form 10-K.

Overview

Heritage Financial Corporation is a bank holding company that was incorporated in the State of Washington in August 1997. We are primarily engaged in the business of planning, directing, and coordinating the business activities of our wholly-owned subsidiary and single reportable segment, Heritage Bank.

Heritage Bank is headquartered in Olympia, Washington and conducts business from its 65 branch offices located throughout Washington State, the greater Portland, Oregon area, Eugene, Oregon and Boise, Idaho and its one loan production office in Spokane, Washington as of March 31, 2026. Heritage Bank also does business under the Whidbey Island Bank name on Whidbey Island, Washington and does business under the Kitsap Bank name for certain branches acquired in the Olympic Merger.

Our business consists primarily of commercial lending and deposit relationships with small- to medium-sized businesses and their owners in our market areas, as well as attracting deposits from the general public. We also make real estate construction and land development loans, consumer loans and residential real estate loans on single family properties located primarily in our markets.

Our core profitability depends primarily on our net interest income. Net interest income is the difference between interest income, which is the income that we earn on interest earning assets, consisting primarily of loans and investment securities, and interest expense, which is the amount we pay on our interest bearing liabilities, consisting primarily of deposits and borrowings. Management manages the repricing characteristics of the Company's interest earning assets and interest bearing liabilities to protect net interest income from changes in market interest rates and changes in the shape of the yield curve. Like most financial institutions, our net interest income is significantly affected by general and local economic conditions, particularly changes in market interest rates, and by governmental policies and actions of regulatory agencies. Net interest income is additionally

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affected by changes in the volume and mix of interest earning assets, interest earned on these assets, the volume and mix of interest bearing liabilities and interest paid on these liabilities.

Our net income is affected by many factors, including the provision for credit losses on loans. The provision for credit losses on loans is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio, as well as prevailing economic and market conditions. Management believes that the ACL on loans reflects the amount that is appropriate to provide for current expected credit losses in our loan portfolio based on the CECL methodology.

Net income is also affected by noninterest income and noninterest expense. Noninterest income primarily consists of gains or losses on the sale of investment securities, service charges and other fees, card revenue and other income. Noninterest expense primarily consists of compensation and employee benefits, occupancy and equipment, data processing and professional services expense. Compensation and employee benefits consist primarily of the salaries and wages paid to our employees and payroll taxes and expenses for retirement and other employee benefits. Occupancy and equipment expenses are the fixed and variable costs of buildings and equipment and consist primarily of lease expenses, depreciation charges, maintenance and utilities. Data processing expense consists primarily of processing and network services related to the Bank’s core operating system, including the account processing system, electronic payments processing of products and services, internet and mobile banking channels and software-as-a-service providers. Professional services expense consists primarily of third-party service providers such as auditors, consultants and lawyers.

Results of operations may also be significantly affected by general and local economic and competitive conditions, changes in accounting, tax, and regulatory rules, governmental policies and actions of regulatory authorities, including changes resulting from inflation and the governmental actions taken to address this issue, as well as changes in policies driven by the new presidential administration, including policies on tariffs and immigration, which may impact our operations or those of our customers. Net income is also impacted by our ability to execute our strategic plan to grow the Company through organic growth or acquisitions. See also "Cautionary Note Regarding Forward-Looking Statements."

Recent Acquisition

On January 31, 2026, the Company completed its acquisition of Olympic, a bank holding company headquartered in Port Orchard, Washington, pursuant to the Agreement and Plan of Bank Merger, dated as of September 25, 2025, by and between the Company and Olympic (the "merger agreement"), whereby Olympic merged with and into the Company, and Kitsap Bank, Olympic's wholly-owned banking subsidiary, merged with and into the Bank. Pursuant to the terms of the merger agreement, Olympic shareholders received 45.0 shares of Heritage common stock for each share of Olympic capital stock based on a fixed exchange ratio. Olympic's principal activity was the ownership and operation of Kitsap Bank, a state-chartered banking institution that operated sixteen branches in Washington at the time of closing. The merger consideration, consisting of 7,167,600 shares of Heritage common stock, totaled approximately $185.0 million, based on the closing price of Heritage common stock on January 30, 2026 (the trading day immediately preceding the completion of the acquisition), as reported on the Nasdaq Global Select Market.

The Company accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of acquired institutions prior to the consummation date are not included in the accompanying consolidated financial statements. The acquisition method of accounting requires assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determines the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities, deposits and borrowings with the assistance of third party valuations, appraisals, and third party advisors. The estimated fair values are subject to refinement for up to one year after deal consummation as additional information becomes available relative to the closing date fair values.

Results of Operations

Net Income

Comparison of the quarter ended March 31, 2026 to the comparable quarter in the prior year

Net income increased $5.0 million, or 36.2%, to $18.9 million, or $0.48 per diluted common share, for the three months ended March 31, 2026, compared to $13.9 million, or $0.40 per diluted common share, for the same period in 2025.

The increase in net income was primarily due to a $15.5 million increase in net interest income and a $4.8 million increase in noninterest income. Net interest income increased primarily due to an increase in average interest earning assets, which increased substantially as a result of the Merger. Noninterest income increased due to a $3.9 million pre-tax loss on the sale of investment securities recognized during the three months ended March 31, 2025 while no loss was recognized during the three months ended March 31, 2026.

These improvements were partially offset by a $15.2 million increase in noninterest expense primarily due to expenses associated with the Merger, including increases related to compensation and employee benefits due to increased headcount, severance expense, occupancy and equipment expense primarily due to additional rent expense, and additional data processing expense due to an increase in transactional accounts and balances.

Net Interest Income and Margin

One of the Company's key sources of revenue is net interest income. Several factors affect net interest income, including, but not limited to: the volume, pricing, mix and maturity of interest earning assets and interest bearing liabilities; the volume of noninterest earning assets, noninterest bearing demand deposits, other noninterest bearing liabilities and stockholders' equity; market interest rate fluctuations; and asset quality.

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Comparison of the quarter ended March 31, 2026 to the comparable quarter in the prior year

The following table provides net interest income information for the periods indicated:

Three Months Ended March 31,

2026

2025

Change

Average

Balance(1)

Interest

Earned/

Paid

Average

Yield/

Rate(1)

Average

Balance(1)

Interest

Earned/

Paid

Average

Yield/

Rate(1)

Average

Balance(1)

Interest

Earned/

Paid

Average

Yield/

Rate(1)

(Dollars in thousands)

Interest Earning Assets:

Loans receivable (2)(3)

$

5,412,943 

$

76,445 

5.73 

%

$

4,793,917 

$

64,436 

5.45 

%

$

619,026 

$

12,009 

0.28 

%

Taxable securities

1,486,343 

12,570 

3.43 

1,427,976 

11,739 

3.33 

58,367 

831 

0.10 

Nontaxable securities (3)

15,662 

129 

3.34 

15,686 

139 

3.59 

(24)

(10)

(0.25)

Interest earning deposits

172,723 

1,531 

3.59 

96,118 

1,052 

4.44 

76,605 

479 

(0.85)

Total interest earning assets

7,087,671 

90,675 

5.19 

%

6,333,697 

77,366 

4.95 

%

753,974 

13,309 

0.24 

%

Noninterest earning assets

847,331 

769,530 

77,801 

Total assets

$

7,935,002 

$

7,103,227 

$

831,775 

Interest Bearing Liabilities:

Certificates of deposit

$

1,064,676 

$

8,814 

3.36 

%

$

980,336 

$

9,670 

4.00 

%

$

84,340 

$

(856)

(0.64)

%

Savings accounts

540,403 

315 

0.24 

426,321 

293 

0.28 

114,082 

22 

(0.04)

Interest bearing demand and money market accounts

3,303,007 

11,618 

1.43 

2,705,686 

9,526 

1.43 

597,321 

2,092 

— 

Total interest bearing deposits

4,908,086 

20,747 

1.71 

4,112,343 

19,489 

1.92 

795,743 

1,258 

(0.21)

Junior subordinated debentures

22,382 

430 

7.79 

22,086 

471 

8.65 

296 

(41)

(0.86)

Borrowings

27,372 

279 

4.13 

320,286 

3,716 

4.71 

(292,914)

(3,437)

(0.58)

Total interest bearing liabilities

4,957,840 

21,456 

1.76 

%

4,454,715 

23,676 

2.16 

%

503,125 

(2,220)

(0.40)

%

Noninterest bearing demand deposits

1,833,284 

1,631,268 

202,016 

Other noninterest bearing liabilities

94,834 

150,615 

(55,781)

Stockholders’ equity

1,049,044 

866,629 

182,415 

Total liabilities and stock-holders’ equity

$

7,935,002 

$

7,103,227 

$

831,775 

Net interest income and spread

$

69,219 

3.43 

%

$

53,690 

2.79 

%

$

15,529 

0.64 

%

Net interest margin

3.96 

%

3.44 

%

0.52 

%

(1) Average balances are calculated using daily balances. Average yield/rate is annualized.

(2) Average loans receivable includes loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable includes the amortization of net deferred loan fees of $819,000 and $752,000 for the three months ended March 31, 2026 and 2025, respectively and the incremental accretion on purchased loans of $1.6 million and $153,000 for the three

[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

The following is a discussion and analysis of our financial condition and results of operations and should be read in conjunction with our financial statements and notes thereto included in Item 8 Financial Statements and Supplementary Data of this Form 10-K. In addition to historical information, this discussion contains forward‑looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections of this Form 10-K entitled “Cautionary Note Regarding Forward Looking Statements” and Item 1A. Risk Factors.

Management’s discussion focuses on 2025 results compared to 2024 results. For a discussion of 2024 results compared to 2023 results, refer to Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 27, 2025.

Overview

Heritage Financial Corporation is a bank holding company which primarily engages in the business activities of our wholly-owned financial institution subsidiary, Heritage Bank. We provide financial services to our customers in our market areas with an ongoing strategic focus on our commercial banking relationships, market expansion and asset quality. The Company’s business activities generally are limited to passive investment activities and oversight of its investment in the Bank. Accordingly, the information set forth in this report relates primarily to the Bank’s operations.

Our business consists primarily of commercial lending and deposit relationships with small- to medium-sized businesses and their owners in our market areas, as well as attracting deposits from the general public. We also make real estate construction and land development loans, consumer loans and residential real estate loans on single family properties located primarily in our markets.

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Table of Contents

Our core profitability depends primarily on our net interest income. Net interest income is the difference between interest income, which is the income that we earn on interest earning assets, consisting primarily of loans and investment securities, and interest expense, which is the amount we pay on our interest bearing liabilities, consisting primarily of deposits and borrowings. Management manages the repricing characteristics of the Company's interest earning assets and interest bearing liabilities to protect net interest income from changes in market interest rates and changes in the shape of the yield curve. Like most financial institutions, our net interest income is significantly affected by general and local economic conditions, particularly changes in market interest rates, and by governmental policies and actions of regulatory agencies. Net interest income is additionally affected by changes in the volume and mix of interest earning assets, interest earned on these assets, the volume and mix of interest bearing liabilities and interest paid on these liabilities.

Our net income is affected by many factors, including the provision for credit losses on loans. The provision for credit losses on loans is dependent on changes in the loan portfolio and management’s assessment of the collectability of the loan portfolio, as well as prevailing economic and market conditions. Management believes that the ACL on loans reflects the amount that is appropriate to provide for current expected credit losses in our loan portfolio based on the CECL methodology.

Net income is also affected by noninterest income and noninterest expense. Noninterest income primarily consists of gains or losses on the sale of investment securities, service charges and other fees, card revenue and other income. Noninterest expense primarily consists of compensation and employee benefits, occupancy and equipment, data processing and professional services expense. Compensation and employee benefits consist primarily of the salaries and wages paid to our employees, payroll taxes, expenses for retirement and other employee benefits. Occupancy and equipment expenses are the fixed and variable costs of buildings and equipment and consist primarily of lease expenses, depreciation charges, maintenance and utilities. Data processing expense consists primarily of processing and network services related to the Bank’s core operating system, including the account processing system, electronic payments processing of products and services, internet and mobile banking channels and software-as-a-service providers. Professional services expense consists primarily of third party service providers such as auditors, consultants and lawyers.

Results of operations may also be significantly affected by general and local economic and competitive conditions, changes in accounting, tax and regulatory rules, governmental policies and actions of regulatory authorities, including changes resulting from inflation and the governmental actions taken to address this issue, as well as changes in policies driven by the current presidential administration. Net income is also impacted by growth of operations through organic growth or acquisitions. See also "Cautionary Note Regarding Forward-Looking Statements."

Recent Acquisition

On January 31, 2026, the Company its acquisition of Olympic Bancorp, Inc., a bank holding company headquartered in Port Orchard, Washington, whereby Olympic merged with and into the Company, and subsequently Kitsap Bank, Olympic's wholly-owned banking subsidiary, merged with and into the Bank. Pursuant to the terms of the merger agreement, Olympic shareholders received 45.0 shares of Heritage common stock for each share of Olympic common stock based on a fixed exchange ratio. Olympic's principal activity was the ownership and operation of Kitsap Bank, a state-chartered banking institution that operated sixteen branches in Washington at the time of closing.

The Company accounts for these transactions under the acquisition method of accounting, and thus, the financial position and results of operations of acquired institutions prior to the consummation date are not included in the accompanying consolidated financial statements. The acquisition method of accounting requires assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determines the fair value of core deposit intangibles, securities, premises and equipment, loans, other assets and liabilities, deposits and borrowings with the assistance of third party valuations, appraisals, and third party advisors. The estimated fair values are subject to refinement for up to one year after deal consummation as additional information becomes available relative to the closing date fair values.

Results of Operations

Net income was $67.5 million, or $1.96 per diluted common share, for the year ended December 31, 2025 up from $43.3 million, or $1.24 per diluted common share, for the year ended December 31, 2024. Net income increased $24.3 million, or 56.1%, compared to the year ended December 31, 2024 due primarily to an increase in net interest income of $15.0 million to $224.4 million from $209.4 million and a decrease in losses on sales of investment securities of $12.0 million to $10.7 million from $22.7 million, largely as a result of a smaller amount of investment portfolio repositioning in 2025 compared to 2024, which increased noninterest income. These increases were partially offset by an increase in noninterest expense of $7.3 million.

Net Interest Income and Margin Overview

One of the Company's key sources of revenue is net interest income. Several factors affect net interest income, including, but not limited to: the volume, pricing, mix and maturity of interest earning assets and interest bearing liabilities; the volume of noninterest earning assets, noninterest bearing demand deposits, other noninterest bearing liabilities and stockholders' equity; market interest rate fluctuations; and asset quality.

Market rates impact the results of the Company's net interest income, including the changes in the federal funds target rate that have been made by the Federal Reserve. The following table provides the federal funds target rate history and changes since December 15, 2022:

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Change Date

Rate (%)

Rate Change (%)

December 15, 2022

4.25% - 4.50%

0.50 

%

February 2, 2023

4.50% - 4.75%

0.25 

%

March 23, 2023

4.75% - 5.00%

0.25 

%

May 4, 2023

5.00% - 5.25%

0.25 

%

July 27, 2023

5.25% - 5.50%

0.25 

%

September 19, 2024

4.75% - 5.00%

(0.50)

%

November 8, 2024

4.50% - 4.75%

(0.25)

%

December 19, 2024

4.25% - 4.50%

(0.25)

%

September 18, 2025

4.00% - 4.25%

(0.25)

%

October 30, 2025

3.75% - 4.00%

(0.25)

%

December 11, 2025

3.50% - 3.75%

(0.25)

%

Average Balances, Yields and Rates Paid

The following table provides relevant net interest income information for the periods indicated:

Year Ended December 31,

2025

2024

2023

Average

Balance(1)

Interest

Earned/

Paid

Average

Yield/

Rate

Average

Balance(1)

Interest

Earned/

Paid

Average

Yield/

Rate

Average

Balance(1)

Interest

Earned/

Paid

Average

Yield/

Rate

(Dollars in thousands)

Interest Earning Assets:

Loans receivable (2)(3)

$

4,773,760 

$

262,900 

5.51 

%

$

4,536,499 

$

247,472 

5.46 

%

$

4,201,737 

$

217,284 

5.17 

%

Taxable securities

1,350,278 

44,966 

3.33 

1,653,295 

54,972 

3.32 

1,937,603 

58,509 

3.02 

Nontaxable securities (3)

15,449 

549 

3.55 

18,425 

651 

3.53 

63,051 

1,854 

2.94 

Interest earning deposits

135,603 

5,821 

4.29 

125,036 

6,617 

5.29 

129,807 

6,818 

5.25 

Total interest earning assets

6,275,090 

314,236 

5.01 

%

6,333,255 

309,712 

4.89 

%

6,332,198 

284,465 

4.49 

%

Noninterest earning assets

752,048 

799,791 

807,826 

Total assets

$

7,027,138 

$

7,133,046 

$

7,140,024 

Interest Bearing Liabilities:

Certificates of Deposit

$

966,429 

$

36,266 

3.75 

%

$

857,079 

$

36,922 

4.31 

%

$

491,653 

$

14,554 

2.96 

%

Savings accounts

426,124 

1,154 

0.27 

451,528 

920 

0.20 

543,096 

701 

0.13 

Interest bearing demand and money market accounts

2,796,909 

41,916 

1.50 

2,640,487 

37,227 

1.41 

2,771,981 

24,095 

0.87 

Total interest bearing deposits

4,189,462 

79,336 

1.89 

3,949,094 

75,069 

1.90 

3,806,730 

39,350 

1.03 

Junior subordinated debentures

22,201 

1,872 

8.43 

21,910 

2,139 

9.76 

21,615 

2,074 

9.60 

Securities sold under agreement to repurchase

— 

— 

— 

— 

— 

— 

32,976 

153 

0.46 

Borrowings

185,544 

8,623 

4.65 

456,448 

23,140 

5.07 

369,665 

17,733 

4.80 

Total interest bearing liabilities

4,397,207 

89,831 

2.04 

%

4,427,452 

100,348 

2.27 

%

4,230,986 

59,310 

1.40 

%

Noninterest bearing demand deposits

1,623,952 

1,669,301 

1,899,317 

Other noninterest bearing liabilities

118,300 

182,121 

191,679 

Stockholders’ equity

887,679 

854,172 

818,042 

Total liabilities and stock-holders’ equity

$

7,027,138 

$

7,133,046 

$

7,140,024 

Net interest income and spread

$

224,405 

2.97 

%

$

209,364 

2.62 

%

$

225,155 

3.09 

%

Net interest margin

3.58 

%

3.31 

%

3.56 

%

(1) Average balances are calculated using daily balances.

(2) Average loans receivable, includes loans held for sale and loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable, includes the amortization of net deferred loan fees of $3.7 million, $3.6 million and $3.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

(3) Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.

35

Table of Contents

The following tables provide the changes in net interest income for the periods indicated due to changes in average asset and liability balances (volume), changes in average yields/rates (rate) and changes attributable to the combined effect of volume and rates allocated proportionately to the absolute value of changes due to volume and changes due to rates:

Year Ended December 31,

2025 Compared to 2024

Increase (Decrease) Due to changes in

Volume

Yield/Rate

Total

(Dollars in thousands)

Interest Earning Assets:

Loans receivable, net

$

13,045 

$

2,383 

$

15,428 

Taxable securities

(10,090)

84 

(10,006)

Nontaxable securities

(106)

4 

(102)

Interest earning deposits

527 

(1,323)

(796)

Total interest income

3,376 

1,148 

4,524 

Interest Bearing Liabilities:

Certificates of deposit

4,409 

(5,065)

(656)

Savings accounts

(54)

288 

234 

Interest bearing demand and money market accounts

2,272 

2,417 

4,689 

Total interest bearing deposits

6,627 

(2,360)

4,267 

Junior subordinated debentures

28 

(295)

(267)

Borrowings

(12,731)

(1,786)

(14,517)

Total interest expense

(6,076)

(4,441)

(10,517)

Net interest income

$

9,452 

$

5,589 

$

15,041 

Year Ended December 31,

2024 Compared to 2023

Increase (Decrease) Due to changes in

Volume

Yield/Rate

Total

(Dollars in thousands)

Interest Earning Assets:

Loans receivable, net

$

17,806 

$

12,382 

$

30,188 

Taxable securities

(9,099)

5,562 

(3,537)

Nontaxable securities

(1,518)

315 

(1,203)

Interest earning deposits

(252)

51 

(201)

Total interest income

6,937 

18,310 

25,247 

Interest Bearing Liabilities:

Certificates of deposit

13,871 

8,497 

22,368 

Savings accounts

(134)

353 

219 

Interest bearing demand and money market accounts

(1,193)

14,325 

13,132 

Total interest bearing deposits

12,544 

23,175 

35,719 

Junior subordinated debentures

28 

37 

65 

Securities sold under agreement to repurchase

(77)

(76)

(153)

Borrowings

4,354 

1,053 

5,407 

Total interest expense

16,849 

24,189 

41,038 

Net interest income

$

(9,912)

$

(5,879)

$

(15,791)

Total interest income increased $4.5 million, or 1.5%, to $314.2 million for the year ended December 31, 2025 compared to $309.7 million for the year ended December 31, 2024. The increase was primarily due to a 12 basis point increase in the yield on interest earning assets to 5.01% for the year ended December 31, 2025, compared to 4.89% for the year ended December 31, 2024 due primarily to a change in the mix of earning assets to higher yielding loan balances.

Total interest expense decreased $10.5 million, or 10.5%, to $89.8 million for the year ended December 31, 2025 compared to $100.3 million for the year ended December 31, 2024 due primarily to a decrease in borrowing rates and average balances, offset partially by an increase in average balances of interest bearing deposits. The total cost of interest bearing liabilities

36

Table of Contents

decreased 23 basis points to 2.04% for the year ended December 31, 2025, compared to 2.27% for the year ended December 31, 2024.

Net interest margin increased 27 basis points to 3.58% for the year ended December 31, 2025 compared to 3.31% for the year ended December 31, 2024. The increase in net interest margin was due primarily to an increase in average yields on total interest earning assets, including a change in mix of assets to higher yielding loans from lower yielding investments and interest earning deposits and a decrease in the average cost of interest bearing liabilities.

Provision for Credit Losses Overview

The aggregate of the provision for (reversal of) credit losses on loans and on unfunded commitments is presented in the Consolidated Statements of Income as the "Provision for credit losses." The ACL on unfunded commitments is included in the Consolidated Statements of Financial Condition within "Accrued expenses and other liabilities."

The following table presents the provision for (reversal of) credit losses for the periods indicated:

Year Ended December 31,

Change

2025

2024

$

%

(Dollars in thousands)

Provision for credit losses on loans

$

1,508 

$

6,983 

$

(5,475)

(78.4)

%

Provision for (reversal of) credit losses on unfunded commitments

460 

(701)

1,161 

(165.6)

Provision for credit losses

$

1,968 

$

6,282 

$

(4,314)

(68.7)

%

The provision for credit losses on loans recognized during the year ended December 31, 2025 was due primarily to $1.4 million in charge-offs recognized. The provision for credit losses on loans recognized during the year ended December 31, 2024 was due primarily to growth in balances of collectively evaluated loans.

The provision for credit losses on unfunded commitments recognized during the year ended December 31, 2025 was due primarily to a decrease in utilization rates on lines of credit, offset partially by an increase in the unfunded exposure on construction loans.

Noninterest Income Overview 

The following table presents the change in the key components of noninterest income for the periods indicated:

Year Ended December 31,

Change

2025

2024

$

%

(Dollars in thousands)

Service charges and other fees

$

12,005 

$

11,285 

$

720 

6.4 

%

Card revenue

7,742 

7,752 

(10)

(0.1)

Loss on sale of investment securities, net

(10,741)

(22,742)

12,001 

(52.8)

Gain on sale of loans, net

— 

26 

(26)

(100.0)

Interest rate swap fees

496 

409 

87 

21.3 

BOLI income

4,378 

2,967 

1,411 

47.6 

Gain on sale of other assets, net

8 

1,552 

(1,544)

(99.5)

Other income

7,844 

6,224 

1,620 

26.0 

Total noninterest income

$

21,732 

$

7,473 

$

14,259 

190.8 

%

Noninterest income increased $14.3 million, or 190.8%, during the year ended December 31, 2025 compared to the same period in 2024. This increase was primarily driven by a lower pre-tax loss of $10.7 million incurred on the sale of investment securities available for sale during the year ended December 31, 2025, compared to a pre-tax loss of $22.7 million incurred during the same period in 2024. The loss on the sale of investment securities in 2025 was a consequence of strategically repositioning the Company's investment portfolio, involving the sale of $152.4 million in investment securities, with the aim of enhancing future earnings. BOLI income increased $1.4 million due primarily to an increase in revenue earned as a result of restructuring the BOLI portfolio which occurred at the end of 2024. Service charge income increased $720,000 due primarily to an increase in service charges on business deposit accounts. Other income increased primarily due to an increase in wealth management income, FHLB dividends received and merchant VISA fee income.

These increases were partially offset by a decrease in the gain on sale of other assets, net due to a $1.5 million gain on the sale of an administrative building recognized during the year ended December 31, 2024.

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Table of Contents

Noninterest Expense Overview

The following table presents changes in the key components of noninterest expense for the periods indicated:

Year Ended December 31,

Change

2025

2024

$

%

(Dollars in thousands)

Compensation and employee benefits

$

104,023 

$

98,527 

$

5,496 

5.6 

%

Occupancy and equipment

18,881 

19,289 

(408)

(2.1)

Data processing

14,998 

14,899 

99 

0.7 

Marketing

1,251 

988 

263 

26.6 

Professional services

4,258 

2,515 

1,743 

69.3 

State/municipal business and use tax

4,907 

4,889 

18 

0.4 

Federal deposit insurance premium

3,207 

3,260 

(53)

(1.6)

Amortization of intangible assets

1,174 

1,640 

(466)

(28.4)

Other expense

12,867 

12,289 

578 

4.7 

Total noninterest expense

$

165,566 

$

158,296 

$

7,270 

4.6 

%

Noninterest expense increased $7.3 million, or 4.6%, during the year ended December 31, 2025 compared to the same period in 2024. Compensation and employee benefits increased $5.5 million due primarily to annual merit increases in base pay, an increase in benefit costs and an increase in incentive compensation. Professional services increased $1.7 million due primarily to costs associated with the acquisition of Olympic and consulting costs related to technology-related contract renewals.

The increases were partially offset by a $466,000 reduction in the amortization of intangible assets due to the full amortization of the core deposit intangible related to a prior acquisition and a $408,000 decrease in occupancy expense due primarily to lower depreciation expense as compared to the prior year.

Income Tax Expense Overview

The following table presents the income tax expense and related metrics and the change for the periods indicated:

Year Ended December 31,

2025 Compared to 2024

Change

2025

2024

$

%

(Dollars in thousands)

Income before income taxes

$

78,603 

$

52,259 

$

26,344 

50.4 

%

Income tax expense

$

11,071 

$

9,001 

$

2,070 

23.0 

%

Effective income tax rate

14.1 

%

17.2 

%

(3.1)

%

(18.0)

%

Income tax expense increased during the year ended December 31, 2025 due primarily to higher pre-tax income. The Company also incurred additional tax expense of $2.4 million related to the surrender of certain BOLI policies as part of a BOLI restructuring in the fourth quarter of 2024. The effective income tax rate decreased during the year ended December 31, 2025 due primarily to the additional tax expense related to the previously discussed surrender of BOLI policies recognized in the prior year.

Financial Condition Overview

The table below provides a comparison of changes in key components of the Company's financial condition for the periods indicated:

December 31,

Change

2025

2024

$

%

(Dollars in thousands)

Assets

Cash and cash equivalents

$

233,089 

$

117,100 

$

115,989 

99.1 

%

Investment securities available for sale, at fair value, net

607,522 

764,394 

(156,872)

(20.5)

Investment securities held to maturity, at amortized cost, net

674,107 

703,285 

(29,178)

(4.1)

Loans receivable, net

4,730,682 

4,749,655 

(18,973)

(0.4)

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Table of Contents

December 31,

Change

2025

2024

$

%

Premises and equipment, net

74,690 

71,580 

3,110 

4.3 

Federal Home Loan Bank stock, at cost

5,163 

21,538 

(16,375)

(76.0)

Bank owned life insurance

105,974 

111,699 

(5,725)

(5.1)

Accrued interest receivable

19,280 

19,483 

(203)

(1.0)

Prepaid expenses and other assets

273,925 

303,452 

(29,527)

(9.7)

Other intangible assets, net

1,979 

3,153 

(1,174)

(37.2)

Goodwill

240,939 

240,939 

— 

— 

Total assets

$

6,967,350 

$

7,106,278 

$

(138,928)

(2.0)

%

Liabilities and Stockholders' Equity

Total deposits

5,920,199 

5,684,613 

$

235,586 

4.1 

Borrowings

20,000 

383,000 

(363,000)

(94.8)

Junior subordinated debentures

22,350 

22,058 

292 

1.3 

Accrued expenses and other liabilities

83,297 

153,080 

(69,783)

(45.6)

Total liabilities

6,045,846 

6,242,751 

(196,905)

(3.2)

Common stock

531,100 

531,674 

(574)

(0.1)

Retained earnings

421,619 

387,097 

34,522 

8.9 

Accumulated other comprehensive loss, net

(31,215)

(55,244)

24,029 

(43.5)

Total stockholders' equity

921,504 

863,527 

57,977 

6.7 

Total liabilities and stockholders' equity

$

6,967,350 

$

7,106,278 

$

(138,928)

(2.0)

%

Total assets decreased due primarily to decreases in investment securities offset partially by an increase in cash and cash equivalents. Total liabilities decreased due primarily to a decrease in borrowings and accrued expenses and other liabilities offset partially by an increase in deposits. Total stockholders' equity increased due primarily to net income as well as a decrease in accumulated other comprehensive loss, which was positively impacted by the fair value of our investment securities available for sale as well as the sale of securities at a loss. The changes are discussed in more detail in the sections below.

Investment Activities Overview

Our investment policy is established by the Board and monitored by the Risk Committee of the Board. It is designed primarily to provide and maintain liquidity, generate a favorable return on investments without incurring undue interest rate and credit risk, and complements the Company's lending activities. The policy permits investment in various types of liquid assets permissible under applicable regulations. Investment in sub-investment grade bonds is not permitted under the policy.

The following table provides information regarding our investment securities at the dates indicated:

December 31, 2025

December 31, 2024

Change

Balance

% of

Total

Balance

% of

Total

$

%

(Dollars in thousands)

Investment securities available for sale, at fair value:

U.S. government and agency securities

$

11,702 

0.9 

%

$

12,544 

0.9 

%

$

(842)

(6.7)

%

Municipal securities

51,423 

4.0 

50,942 

3.5 

481 

0.9 

Residential CMO and MBS(1)

275,268 

21.5 

369,331 

25.2 

(94,063)

(25.5)

Commercial CMO and MBS(1)

252,164 

19.7 

309,741 

21.0 

(57,577)

(18.6)

Corporate obligations

10,532 

0.8 

11,770 

0.8 

(1,238)

(10.5)

Other asset-backed securities

6,433 

0.5 

10,066 

0.7 

(3,633)

(36.1)

Total

607,522 

47.4 

764,394 

52.1 

(156,872)

(20.5)

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Table of Contents

December 31, 2025

December 31, 2024

Change

Balance

% of

Total

Balance

% of

Total

$

%

(Dollars in thousands)

Investment securities held to maturity, at amortized cost:

U.S. government and agency securities

$

151,319 

11.8 

%

$

151,216 

10.3 

%

$

103 

0.1 

Residential CMO and MBS(1)

217,707 

17.0 

244,309 

16.6 

(26,602)

(10.9)

Commercial CMO and MBS(1)

305,081 

23.8 

307,760 

21.0 

(2,679)

(0.9)

Total

674,107 

52.6 

703,285 

47.9 

(29,178)

(4.1)

Total investment securities

$

1,281,629 

100.0 

%

$

1,467,679 

100.0 

%

$

(186,050)

(12.7)

%

(1) U.S. government agency and government-sponsored enterprise CMO and MBS obligations.

Total investment securities decreased $186.1 million to $1.28 billion at December 31, 2025 from $1.47 billion at December 31, 2024 due to sales of investment securities available for sale in connection with a strategic repositioning of the Company's investment portfolio, as well as maturities and repayments of $153.8 million, offset partially by purchases of investment securities available for sale.

During the year ended December 31, 2025, the Company incurred a pre-tax loss of $10.7 million on the sale of investment securities available for sale due to the aforementioned strategic repositioning of its investment portfolio. The Company sold $152.4 million in investment securities with an estimated weighted average book yield of 2.62% and purchased $88.2 million of investment securities with an estimated weighted average book yield of 4.89%. The remaining proceeds were used for other balance sheet initiatives such as the funding of higher yielding loan growth.

The following table provides the weighted average yield of the Company's investment portfolio at December 31, 2025 calculated based upon the fair values of our investment securities available for sale and held to maturity, and excluding any income tax benefits of tax-exempt bonds:

In one year or less

After one year through five years

After five years through ten years

After ten years

Total

Fair 

Value

Yield

Fair 

Value

Yield

Fair 

Value

Yield

Fair 

Value

Yield

Fair 

Value

Yield

(Dollars in thousands)

Investment securities available for sale:

U.S. government and agency securities

$

— 

— 

%

$

4,868 

3.04 

%

$

6,834 

2.32 

%

$

— 

— 

%

$

11,702 

2.59 

%

Municipal securities

571 

5.81 

3,781 

4.16 

21,813 

3.36 

25,258 

2.58 

51,423 

3.03 

Residential CMO and MBS(1)

6 

1.93 

— 

— 

25,708 

4.07 

249,554 

3.42 

275,268 

3.48 

Commercial CMO and MBS(1)

12,647 

3.46 

133,831 

4.13 

96,477 

2.44 

9,209 

4.64 

252,164 

3.44 

Corporate obligations

— 

— 

— 

— 

10,532 

6.33 

— 

— 

10,532 

6.33 

Other asset-backed securities

— 

— 

— 

— 

— 

— 

6,433 

5.11 

6,433 

5.11 

Total

$

13,224 

3.56 

%

$

142,480 

4.10 

%

$

161,364 

3.04 

%

$

290,454 

3.41 

%

$

607,522 

3.47 

%

Investment securities held to maturity:

U.S. government and agency securities

$

— 

— 

%

$

— 

— 

%

$

90,246 

2.14 

%

$

40,203 

2.12 

%

$

130,449 

2.13 

%

Residential CMO and MBS(1)

— 

— 

— 

— 

29,197 

3.27 

179,890 

4.03 

209,087 

3.92 

Commercial CMO and MBS(1)

— 

— 

168,589 

2.88 

104,291 

1.77 

12,871 

3.52 

285,751 

2.49 

Total

$

— 

— 

%

$

168,589 

2.88 

%

$

223,734 

2.10 

%

$

232,964 

3.62 

%

$

625,287 

2.87 

%

(1) U.S. government agency and government-sponsored enterprise CMO and MBS obligations.

40

Table of Contents

Loan Portfolio Overview

Changes by loan type

The Company originates a wide variety of loans with a focus on commercial business loans. In addition to originating loans, the Company may also acquire loans through pool purchases, participation purchases and syndicated loan purchases. The following table provides information about our loan portfolio by type of loan at the dates indicated:

December 31, 2025

December 31, 2024

Change

Amortized Cost

% of Loans Receivable

Amortized Cost

% of Loans Receivable

$

%

(Dollars in thousands)

Commercial business:

Commercial and industrial

$

818,000 

17.1 

%

$

842,672 

17.5 

%

$

(24,672)

(2.9)

%

Owner-occupied CRE

1,034,829 

21.6 

1,003,243 

20.9 

31,586 

3.1 

Non-owner occupied CRE

2,057,844 

43.0 

1,909,107 

39.9 

148,737 

7.8 

Total commercial business

3,910,673 

81.7 

3,755,022 

78.3 

155,651 

4.1 

Residential real estate

358,834 

7.5 

402,954 

8.4 

(44,120)

(10.9)

Real estate construction and land development:

Residential

95,350 

2.0 

83,890 

1.7 

11,460 

13.7 

Commercial and multifamily

247,975 

5.2 

395,553 

8.2 

(147,578)

(37.3)

Total real estate construction and land development

343,325 

7.2 

479,443 

9.9 

(136,118)

(28.4)

Consumer

170,434 

3.6 

164,704 

3.4 

5,730 

3.5 

Total

$

4,783,266 

100.0 

%

$

4,802,123 

100.0 

%

$

(18,857)

(0.4)

%

Loans receivable decreased $18.9 million, or 0.4%, to $4.78 billion at December 31, 2025 from $4.80 billion at December 31, 2024. New loans funded in the year ended December 31, 2025 totaled $583.3 million. Prepaid and closed loans were elevated in 2025 at $520.3 million, compared to $312.3 million in the prior year.

Commercial and industrial loans decreased $24.7 million, or 2.9%, due primarily to pay downs on outstanding balances, partially offset by new loan production of $138.7 million during the year ended December 31, 2025. Owner-occupied CRE loans increased $31.6 million, or 3.1%, due to new loan production of $137.2 million during the year ended December 31, 2025, partially offset by pay downs on outstanding balances. Non-owner occupied CRE loans increased $148.7 million, or 7.8%, due primarily to transfers from commercial and multifamily construction loans and new loan production of $218.3 million, partially offset by pay downs on outstanding balances. Residential real estate loans decreased $44.1 million, or 10.9%, due to pay downs on outstanding balances. The Company did not originate or purchase residential real estate loans during the year ended December 31, 2025. Residential construction loans increased $11.5 million, or 13.7%, due primarily to new loan production and advances on current loans. Commercial and multifamily construction loans decreased $147.6 million, or 37.3%, during the year ended December 31, 2025 due primarily to transfers to non-owner occupied CRE loans and paydowns on outstanding balances.

Owner-occupied CRE and non-owner occupied CRE loans increased $180.3 million to $3.09 billion at December 31, 2025 compared to $2.91 billion at December 31, 2024. The following table provides information about owner occupied CRE and non-owner occupied CRE loans by collateral type at the dates indicated:

December 31, 2025

December 31, 2024

Change

Amortized Cost

% of CRE Loans

Amortized Cost

% of CRE Loans

$

%

(Dollars in thousands)

Owner occupied and non-owner occupied CRE loans by collateral type:

Office

$

588,772 

19.0 

%

$

565,892 

19.4 

%

$

22,880 

4.0 

%

Industrial

541,664 

17.5 

513,615 

17.6 

28,049 

5.5 

Multi-family

520,602 

16.8 

414,728 

14.2 

105,874 

25.5 

Retail store / shopping center

338,939 

11.0 

304,562 

10.5 

34,377 

11.3 

Mini-storage

155,130 

5.0 

161,390 

5.5 

(6,260)

(3.9)

Mixed use property

156,853 

5.1 

156,627 

5.4 

226 

0.1 

Warehouse

133,544 

4.3 

139,341 

4.8 

(5,797)

(4.2)

Motel / hotel

124,612 

4.0 

165,420 

5.7 

(40,808)

(24.7)

Single purpose

134,290 

4.3 

125,430 

4.3 

8,860 

7.1 

41

Table of Contents

December 31, 2025

December 31, 2024

Change

Amortized Cost

% of CRE Loans

Amortized Cost

% of CRE Loans

$

%

(Dollars in thousands)

Recreational / school

83,047 

2.7 

68,416 

2.3 

14,631 

21.4 

Other

315,220 

10.3 

296,929 

10.3 

18,291 

6.2 

Total

$

3,092,673 

100.0 

%

$

2,912,350 

100.0 

%

$

180,323 

6.2 

%

Office loans represented the largest segment of owner-occupied and non-owner occupied CRE loans totaling $588.8 million, or 19.0% of the total owner-occupied CRE and non-owner occupied CRE at December 31, 2025. Of this total, $288.9 million, or 49.1%, consisted of owner-occupied CRE loans which have a lower risk profile as there is less tenant rollover risk, 82.0% have recourse to the owners and 24.8% of loans are to borrowers in the health care and social assistance sectors, who are less likely to reduce office space. Multi-family loans increased $105.9 million, or 25.5% to $520.6 million from $414.7 million December 31, 2024 due primarily to conversion of multi-family construction loans to permanent loans.

The average individual loan balance of owner-occupied CRE and non-owner occupied CRE was $1.4 million at December 31, 2025. See also Item 1. Business - Commercial Business Lending of this Form 10-K for CRE underwriting standards.

Composition of loans receivable by contractual maturity and interest type

The following table presents the amortized cost of the loan portfolio by segment and contractual maturity at December 31, 2025:

In one year or less

After one year through five years

After five years through 15 years

After 15 years

Total

(Dollars in thousands)

Commercial business:

Commercial and industrial

$

148,345 

$

306,979 

$

359,449 

$

3,227 

$

818,000 

Owner-occupied CRE

46,863 

314,581 

612,230 

61,155 

1,034,829 

Non-owner occupied CRE

146,023 

782,883 

1,089,765 

39,173 

2,057,844 

Total commercial business

341,231 

1,404,443 

2,061,444 

103,555 

3,910,673 

Residential real estate

— 

112 

47,981 

310,741 

358,834 

Real estate construction and land development:

Residential

66,518 

28,824 

8 

— 

95,350 

Commercial and multifamily

62,366 

94,326 

79,746 

11,537 

247,975 

Total real estate construction and land development

128,884 

123,150 

79,754 

11,537 

343,325 

Consumer

10,585 

5,154 

2,315 

152,380 

170,434 

Total

$

480,700 

$

1,532,859 

$

2,191,494 

$

578,213 

$

4,783,266 

The following table presents the amortized cost of the loan portfolio by segment and interest rate type that are due after one year, at December 31, 2025:

Have predetermined interest rates(1)

Have floating or adjustable interest rates(1)

Total

(Dollars in thousands)

Commercial business:

Commercial and industrial

$

319,716 

$

349,939 

$

669,655 

Owner-occupied CRE

476,727 

511,239 

987,966 

Non-owner occupied CRE

988,194 

923,627 

1,911,821 

Total commercial business

1,784,637 

1,784,805 

3,569,442 

Residential real estate

302,105 

56,729 

358,834 

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Have predetermined interest rates(1)

Have floating or adjustable interest rates(1)

Total

(Dollars in thousands)

Real estate construction and land development:

Residential

3,617 

25,215 

28,832 

Commercial and multifamily

95,820 

89,789 

185,609 

Total real estate construction and land development

99,437 

115,004 

214,441 

Consumer

6,210 

153,639 

159,849 

Total

$

2,192,389 

$

2,110,177 

$

4,302,566 

(1) Includes $258.7 million of commercial business loans with floating or adjustable interest rates in which the Company entered into non-hedge interest rate swap contracts with the borrower and a third party. Under these derivative contract arrangements, the Company effectively earns a variable rate of interest based on the one-month SOFR plus a margin.

Loans classified as nonaccrual, performing modified loans and nonperforming assets

The following tables provide information about our nonaccrual loans, nonperforming assets and performing modified loans at the dates indicated:

Change

December 31, 2025

December 31, 2024

$

%

(Dollars in thousands)

Nonaccrual loans:(1)

Commercial business

$

6,886 

$

3,919 

$

2,967 

75.7 

%

Residential real estate

1,196 

— 

1,196 

100.0 

Real estate construction and land development

12,408 

— 

12,408 

100.0 

Consumer

486 

160 

326 

203.8 

Total nonaccrual loans

20,976 

4,079 

16,897 

414.2 

Accruing loans past due 90 days or more

194 

1,195 

(1,001)

(83.8)

Total nonperforming loans

21,170 

5,274 

15,896 

301.4 

Other real estate owned

— 

— 

— 

—

Total nonperforming assets

$

21,170 

$

5,274 

$

15,896 

301.4 

%

Credit quality ratios:

Nonaccrual loans to loans receivable

0.44 

%

0.08 

%

0.36 

%

450.0 

%

Nonperforming loans to loans receivable

0.44 

0.11 

0.33 

300.0 

Nonperforming assets to total assets

0.30 

0.07 

0.23 

328.6 

(1) At December 31, 2025 and December 31, 2024, $2.4 million, and $1.0 million, respectively, of nonaccrual loans were guaranteed by government agencies.

Year Ended December 31,

Change

2025

2024

$

%

(Dollars in thousands)

Modified loans:

Commercial business

$

15,185 

$

21,162 

$

(5,977)

(28.2)

%

Real estate construction and land development

13,294 

28,030 

(14,736)

(52.6)

Consumer

121 

44 

77 

175.0 

Total performing modified loans

$

28,600 

$

49,236 

$

(20,636)

(41.9)

%

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The following table provides the changes in nonaccrual loans during the periods indicated:

Year Ended December 31,

Change

2025

2024

$

%

(Dollars in thousands)

Balance, beginning of period

$

4,079 

$

4,468 

$

(389)

(8.7)

%

Additions

21,488 

6,292 

15,196 

241.5 

Net principal payments, sales and transfers to accruing status

(3,544)

(1,175)

(2,369)

201.6 

Payoffs

(175)

(2,733)

2,558 

(93.6)

Charge-offs

(872)

(2,773)

1,901 

(68.6)

Balance, end of period

$

20,976 

$

4,079 

$

16,897 

414.2 

%

Nonaccrual loans increased $16.9 million, or 414.2%, due primarily to the migration of two residential construction loans totaling $6.7 million, one $6.0 million commercial and multifamily construction loan, one $1.7 million commercial and industrial loan, and three non-owner occupied CRE loans totaling $3.9 million during the year ended December 31, 2025. These additions were partially offset by principal payments of $3.5 million including a $2.0 million pay down of one owner-occupied CRE loan.

Allowance for Credit Losses on Loans Overview

The following table provides information regarding changes in our ACL on loans for the years indicated:

At or For the Years Ended December 31,

2025

2024

2023

(Dollars in thousands)

ACL on loans at the beginning of the period

$

52,468 

$

47,999 

$

42,986 

Charge-offs:

Commercial business

(1,436)

(2,953)

(719)

Residential real estate

(27)

— 

— 

Consumer

(485)

(538)

(586)

Total charge-offs

(1,948)

(3,491)

(1,305)

Recoveries:

Commercial business

403 

855 

1,372 

Residential real estate

1 

— 

— 

Consumer

152 

122 

210 

Total recoveries

556 

977 

1,582 

Net (charge-offs) recoveries

(1,392)

(2,514)

277 

Provision for credit losses on loans

1,508 

6,983 

4,736 

ACL on loans at the end of period

$

52,584 

$

52,468 

$

47,999 

Credit quality ratios:

ACL on loans to:

Loans receivable

1.10 

%

1.09 

%

1.11 

%

Nonaccrual loans

250.69 

1286.30 

1074.28 

Nonaccrual loans to loans receivable

0.44 

%

0.08 

%

0.10 

%

Balances at the end of the period:

Loans receivable

$

4,783,266 

$

4,802,123 

$

4,335,627 

Nonaccrual loans

20,976 

4,079 

4,468 

Average balances outstanding during the period:(1)

Commercial business

$

3,788,025 

$

3,522,065 

$

3,289,564 

Residential real estate

382,502 

399,857 

369,297 

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At or For the Years Ended December 31,

2025

2024

2023

(Dollars in thousands)

Real estate construction and land development

433,049 

446,713 

362,919 

Consumer

170,184 

167,830 

179,454 

Total

$

4,773,760 

$

4,536,465 

$

4,201,234 

Net charge-offs (recoveries) during the period to average balances outstanding during the period:

2025

2024

2023

Commercial business

0.03 

%

0.06 

%

(0.02)

%

Residential real estate

0.01 

— 

— 

Real estate construction and land development

— 

— 

— 

Consumer

0.20 

0.25 

0.21 

Total

0.03 

%

0.06 

%

(0.01)

%

(1) Average balances exclude the ACL on loans and loans held for sale, but include loans classified as nonaccrual.

The ACL on loans to loans receivable increased to 1.10% at December 31, 2025, compared to 1.09% at December 31, 2024 primarily to an increase in the weighted average life of residential real estate and real estate construction and land development loans which increased the ACL as a percentage of loans in these segments.

The following table presents the ACL on loans by loan portfolio segment at the indicated dates:

December 31, 2025

December 31, 2024

ACL on Loans

ACL as a % of Loans in Loan Category

% of Loans in Loan Category to

Total Loans

ACL on Loans

ACL as a % of Loans in Loan Category

% of Loans in Loan Category to

Total Loans

(Dollars in thousands)

Commercial business

$

39,412 

1.01 

%

81.7 

%

$

38,293 

1.02 

%

78.3 

%

Residential real estate

3,708 

1.03 

7.5 

3,464 

0.86 

8.4 

Real estate construction and land development

7,624 

2.22 

7.2 

8,656 

1.81 

9.9 

Consumer

1,840 

1.08 

3.6 

2,055 

1.25 

3.4 

Total ACL on loans

$

52,584 

1.10 

%

100.0 

%

$

52,468 

1.09 

%

100.0 

%

Deposits Overview

The following table summarizes the Company's deposits at the dates indicated:

December 31, 2025

December 31, 2024

Change

Balance

% of Total

Balance

% of Total

$

%

(Dollars in thousands)

Noninterest demand deposits

$

1,597,650 

27.0 

%

$

1,654,955 

29.1 

%

$

(57,305)

(3.5)

%

Interest bearing demand deposits

1,627,259 

27.5 

1,464,129 

25.8 

163,130 

11.1 

Money market accounts

1,334,904 

22.5 

1,166,901 

20.5 

168,003 

14.4 

Savings accounts

422,523 

7.1 

421,377 

7.4 

1,146 

0.3 

Total non-maturity deposits

4,982,336 

84.1 

4,707,362 

82.8 

274,974 

5.8 

Certificates of deposit

937,863 

15.9 

977,251 

17.2 

(39,388)

(4.0)

Total deposits

$

5,920,199 

100.0 

%

$

5,684,613 

100.0 

%

$

235,586 

4.1 

%

Total deposits increased $235.6 million, or 4.1%, to $5.92 billion at December 31, 2025, compared to $5.68 billion at December 31, 2024. Non-maturity deposits increased by $275.0 million, or 5.8%, due primarily to a $168.0 million increase in money market accounts and a $163.1 million increase in interest bearing demand accounts from new accounts opened and transfers of funds from existing noninterest bearing demand deposit accounts into these higher yielding accounts. The decline in certificates of deposit of $39.4 million, or 4.0%, was due primarily to a decline in brokered deposits.

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Total deposits include uninsured deposits of approximately $2.43 billion and $2.27 billion at December 31, 2025 and 2024, respectively, calculated in accordance with FDIC guidelines. Uninsured deposits included $286.4 million and $267.8 million of fully collateralized deposits as of December 31, 2025 and December 31, 2024, respectively. The Bank does not hold any foreign deposits.

The following table provides the estimated uninsured portion of certificates of deposit that are in excess of the FDIC insurance limit, by remaining time until maturity at December 31, 2025, by account, with a maturity of:

(Dollars in thousands)

Three months or less

$

205,742 

Over three months through six months

114,151 

Over six months through twelve months

15,227 

Over twelve months

1,704 

Total

$

336,824 

Stockholders' Equity Overview

The Company’s stockholders' equity to assets ratio was 13.2% and 12.2% at December 31, 2025 and 2024, respectively. The following table provides the changes to stockholders' equity during the periods indicated:

Year Ended December 31,

Change

2025

2024

$

%

(Dollars in thousands)

Balance, beginning of period

$

863,527 

$

853,261 

$

10,266 

1.2 

%

Net income

67,532 

43,258 

24,274 

56.1 

Dividends declared

(33,010)

(32,150)

(860)

2.7 

Other comprehensive income, net of tax

24,029 

17,232 

6,797 

39.4 

Common stock repurchased

(5,517)

(22,418)

16,901 

(75.4)

Stock-based compensation expense

4,943 

4,344 

599 

13.8 

Balance, end of period

$

921,504 

$

863,527 

$

57,977 

6.7 

%

Stockholders' equity increased for the year ended December 31, 2025 primarily as a result of net income and a decrease in other comprehensive loss, net of tax, which was positively impacted by the fair value of our investment securities available for sale and losses recognized on investment sales. Accumulated other comprehensive income (loss) has no effect on our regulatory capital ratios as the Company opted to exclude it from its common equity tier 1 capital. Cash dividends and stock repurchases partially offset the increase in stockholders' equity during the year ended December 31, 2025.

On April 24, 2024, the Board authorized the repurchase of up to 5% of the Company's outstanding common shares, or 1,734,492 shares in total. The stock repurchase program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will make any repurchases in the future. Under the stock repurchase program, the Company may repurchase shares of common stock from time to time in open market or privately negotiated transactions. The number, timing and price of shares repurchased will depend on business and market conditions, regulatory requirements, availability of funds and other factors, including opportunities to deploy the Company's capital. The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the stock repurchase program’s expiration, without any prior notice. The stock repurchase program authorized in April 2024 superseded the previous stock repurchase program authorized in March 2020, which allowed for the repurchase of up to 5% of the Company's outstanding common shares, or 1,799,054 shares. At the time the April 2024 stock repurchase program was authorized, 3,910 shares remained available for purchase under the March 2020 stock repurchase program.

The Company repurchased 193,690 and 1,051,760 shares of its common stock under the its stock repurchase plan during the years ended December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025, 796,832 shares remained available for future repurchases under the April 2024 stock repurchase program. The Company also repurchased 42,098 and 31,850 shares during the years ended December 31, 2025 and December 31, 2024, respectively, which represented the cancellation of stock to pay withholding taxes on vested restricted stock awards or units.

Liquidity and Capital Resources

Liquidity

Liquidity refers to the Company’s ability to provide funds at an acceptable cost to meet loan demand and deposit withdrawals, as well as contingency plans to meet unanticipated funding needs or loss of funding sources. These objectives can be met from either our assets or liabilities.

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Table of Contents

Asset liquidity sources consist of the repayments and maturities of loans, sales of loans, maturities of investment securities and sales of investment securities available for sale. These activities are generally included as investing activities in the Consolidated Statements of Cash Flows. Net cash provided by investing activities was $186.8 million during the year ended December 31, 2025. Investment securities sales and maturities, net of purchases provided $207.3 million in cash and decreases in loan balances provided $21.6 million of cash during the year ended December 31, 2025, offset partially by $63.3 million in capital contributions to tax credit partnerships.

Liquidity may also be affected by liabilities as a result of changes in deposits and borrowings. These activities are included in financing activities in the Consolidated Statements of Cash Flows. During the year ended December 31, 2025, financing activities used $165.6 million of funds resulting primarily from a decrease in short-term borrowings of $363.0 million, $32.6 million in dividend payments and $5.5 million in repurchases of common stock, offset partially by an increase in deposits of $235.6 million.

At December 31, 2025, we had outstanding loan commitments of $1.20 billion, primarily relating to undisbursed loans in process and unused credit lines as discussed in Note (18) Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Form 10-K. Loan commitments represent potential growth in the loan portfolio and lending activities. The current level of commitments is proportionally consistent with our historical experience and does not represent a departure from traditional operations. As of December 31, 2025, we had $22.8 million of purchase obligations under contracts with our key vendors to provide services, mainly information technology related contracts. In addition, as of December 31, 2025, we had $25.3 million of commitments under operating lease agreements.

We maintain sufficient cash and cash equivalents and investment securities to meet short-term liquidity needs and also actively monitor our long-term liquidity position to ensure the availability of capital resources for contractual obligations, strategic loan growth objectives and to fund operations. Our funding strategy has been to acquire non-maturity deposits from our retail accounts, acquire noninterest bearing demand deposits from our commercial customers and use our borrowing availability to fund growth in assets. We may also acquire brokered deposits when the cost of funds is advantageous compared to other funding sources. Borrowings may be used on a short-term basis to compensate for reductions in other sources of funds (such as deposit inflows at less than projected levels). Borrowings may also be used on a longer-term basis to support expanded lending activities and match the maturity of repricing intervals of assets. While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and loan prepayments are greatly influenced by the level of interest rates, economic conditions and competition so we adhere to internal management targets assigned to the loan to deposit ratio, liquidity ratio, net short-term non-core funding ratio and non-core liabilities to total assets ratio to ensure an appropriate liquidity position.

We maintain credit facilities with the FHLB, which provide for advances that in the aggregate would equal the lesser of 45% of the Bank’s assets or adjusted qualifying collateral (subject to a sufficient level of ownership of FHLB stock). At December 31, 2025, under these credit facilities based on pledged loan collateral, the Bank had $1.3 billion of available credit capacity. The Bank had $20.0 million in outstanding borrowings from the FHLB at December 31, 2025, compared to $383.0 million in outstanding borrowings from the FHLB at December 31, 2024. In addition, the Bank has access to the FRB Discount Window. Based on pledged investment collateral, the Bank had available lines of credit from the FRB of approximately $346.3 million as of December 31, 2025. The Bank had no outstanding borrowings from the FRB at December 31, 2025 and December 31, 2024. At December 31, 2025, the Bank also had uncommitted federal funds line of credit agreements with other financial institutions totaling $145.0 million. No balances were outstanding under these agreements as of either December 31, 2025 or December 31, 2024. Availability of lines of credit is subject to federal funds balances available for loan and continued borrower eligibility. These lines of credit are intended to support short-term liquidity needs and the agreements may restrict consecutive day usage. Management believes it has adequate resources and funding potential to meet our foreseeable liquidity requirements.

The following table summarizes the Company's available liquidity as of the dates indicated:

December 31,

2025

December 31,

2024

(Dollars in thousands)

On-balance sheet liquidity

Cash and cash equivalents

$

233,089 

$

117,100 

Unencumbered investment securities available for sale (1)

606,968 

746,163 

Total on-balance sheet liquidity

$

840,057 

$

863,263 

Off-balance sheet liquidity

FRB borrowing availability

$

346,307 

$

360,104 

FHLB borrowing availability (2)

1,285,640 

976,288 

Fed funds line borrowing availability with correspondent banks

145,000 

145,000 

Total off-balance sheet liquidity

$

1,776,947 

$

1,481,392 

Total available liquidity

$

2,617,004 

$

2,344,655 

(1) Investment securities available for sale at fair value.

(2) Includes FHLB borrowing availability of $1.31 billion at December 31, 2025 based on pledged assets, however, maximum credit capacity is 45% of the Bank's total assets one quarter in arrears or $3.15 billion.

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Capital Resources

The Company pays dividends to its shareholders. The primary source of the Company's liquidity is dividends from the Bank to the Company. The Bank is subject to strict regulatory capital ratios, and may not be able to issue dividends to the Company in an amount sufficient to maintain our current or anticipated dividend practices. We expect to continue our current practice of paying quarterly cash dividends on our common stock subject to our Board's discretion to modify or terminate this practice at any time and for any reason without prior notice. No assurances can be given that any dividends will be paid on our common stock in future periods or that, if paid, such dividends will not be reduced in amount. Our current quarterly common stock dividend rate is $0.24 per share, as approved by our Board on January 16, 2026. We believe this dividend rate per share enables us to balance our multiple objectives of managing and investing in the Bank and returning a substantial portion of our cash to our shareholders. Assuming continued payment during 2026 at this rate, our average total dividend paid each quarter would be approximately $8.2 million based on the current number of our outstanding shares (assuming no increases or decreases in the number of shares).

From time to time, our Board has authorized stock repurchase plans. In general, stock repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. Shares purchased under such stock repurchase plans may also provide us with shares of common stock necessary to satisfy obligations related to stock compensation awards. The Company's current stock repurchase program authorizes us to repurchase up to 5% of the Company's outstanding common shares, or 1,734,492 in total, of which 796,832 shares remained available for future repurchases as of December 31, 2025. The actual timing, number and value of shares repurchased under the stock repurchase program will depend on a number of factors, including constraints specified pursuant to any trading plan that may be adopted under Rule 10b5-1 of the SEC, price, general business and market conditions, and alternative investment opportunities. See Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of this Form 10-K for additional information relating to stock repurchases.

Management believes that the Company's capital sources are adequate to meet all of the Company's reasonably foreseeable short-term and intermediate-term requirements.

Critical Accounting Estimates

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company's financial condition or results of operations. The Company considers its critical accounting estimates to be as follows:

ACL on Loans

Management's estimate of the ACL on loans relies on the identification, stratification and separate estimates of loss for both loans individually evaluated for loss and loans collectively evaluated for loss. The estimate of loss for loans collectively evaluated for loss in particular involves a significant level of estimation uncertainty due to its complexity and the quantity of relevant inputs, including: management's determination of baseline loss rate multipliers based on a third party forecast of economic conditions, estimates of the reasonable and supportable forecast period, estimates of the baseline loss rate lookback period, estimates of the reversion period from the reasonable and supportable forecast period to the baseline loss rate and estimates of the prepayment rate and related lookback period. Additionally, management considers other qualitative risk factors to further adjust the estimated ACL on loans through a qualitative allowance.

Management's estimates for these inputs are based on past events and current conditions, are inherently subjective and are susceptible to significant revision as new or different information becomes available. While management utilizes its best judgment and information available at the time of evaluation to recognize credit losses on loans, future additions to the allowance may be necessary based on declines in local and national economic conditions or other factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL on loans. Such agencies may require the Company make adjustments to the allowance based on their interpretation of information available to them at the time of their examinations. Unanticipated changes in any of these inputs could have a significant impact on our financial condition and results of operations.

For additional information regarding the ACL on loans, its relation to the provision for credit losses and its risk related to asset quality and lending activity, see Item 1A. Risk Factors—The Company’s allowance for credit losses may prove to be insufficient to absorb potential losses in its loan portfolio, as well as Note (1) Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements and Note (4) Allowance for Credit Losses on Loans of the Notes to Consolidated Financial Statements included in Item 8. Financial Statements And Supplementary Data of this Form 10-K.

Goodwill

Goodwill is tested for impairment at the reporting unit level on an annual basis as of December 31 each year, and more frequently if events or circumstances indicate that there may be impairment. Goodwill impairment is determined by comparing the fair value of a reporting unit to its carrying amount. If the fair value of the reporting unit is less than its carrying value, the difference is the amount of impairment and goodwill is written down to the fair value of the reporting unit. The Company has a single reporting unit.

In testing goodwill, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. In this qualitative assessment, the Company evaluates events and circumstances which may include, but are not limited to: the general economic environment; banking industry and market

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conditions; a significant adverse change in legal factors; 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 regulator.

If the quantitative impairment test is required or the decision to bypass the qualitative assessment is elected, the Company performs the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The determination of the fair value of a reporting unit is a subjective process that involves the use of estimates and judgments about economic and industry factors and the growth and earnings prospects of the Bank. Variability in the market and changes in assumptions or subjective measurements used to estimate fair value are reasonably possible and may have a material impact on our consolidated financial statements or results of operations.

The Company performed its annual goodwill impairment test during the fourth quarter of 2025 which consisted of a qualitative assessment and determined that it is more likely than not that the fair value of the reporting unit exceeded the carrying value, such that the Company's goodwill was not considered impaired for the year ended December 31, 2025. Changes in the economic environment, operations of the reporting unit or other adverse events, could result in future impairment charges which could have a material adverse impact on the Company’s operating results.

For additional information regarding goodwill, see Note (1) Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements and Note (6) Goodwill and Other Intangible Assets of the Notes to Consolidated Financial Statements included in Item 8. Financial Statements And Supplementary Data.