WESTAMERICA BANCORPORATION (WABC)

CIK: 0000311094. 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=311094. Latest filing source: 0001171843-26-001195.

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/CIK0000311094.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/CIK0000311094.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: 0001171843-26-003210.

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

WESTAMERICA BANCORPORATION

FINANCIAL SUMMARY

For the Three Months Ended

March 31,

December 31,

2026

2025

2025

(In thousands, except per share data)

Net Interest and Fee Income (FTE)(1)

$

52,690

$

56,390

$

53,549

(Reversal of) Provision for Credit Losses

(300

)

(550

)

-

Noninterest Income

9,607

10,321

10,003

Noninterest Expense

25,911

25,127

25,466

Income Before Income Taxes (FTE)(1)

36,686

42,134

38,086

Provision for Income Taxes (FTE)(1)

9,331

11,097

10,279

Net Income

$

27,355

$

31,037

$

27,807

Average Common Shares Outstanding

24,306

26,642

24,849

Average Diluted Common Shares Outstanding

24,306

26,642

24,849

Common Shares Outstanding at Period End

23,631

26,360

24,623

Per Common Share:

Basic Earnings

$

1.13

$

1.16

$

1.12

Diluted Earnings

1.13

1.16

1.12

Book Value Per Common Share

37.35

35.02

37.91

Financial Ratios:

Return On Assets

1.84

%

2.03

%

1.82

%

Return On Common Equity

11.00

%

11.92

%

10.83

%

Net Interest Margin (FTE)(1)

3.74

%

3.90

%

3.76

%

Net Loan (Chargeoffs) to Average Loans

(0.07

)%

(0.16

)%

(0.16

)%

Efficiency Ratio(2)

41.6

%

37.7

%

40.1

%

Average Balances:

Assets

$

6,034,899

$

6,187,321

$

6,055,696

Loans

708,613

789,935

727,540

Debt securities

4,454,472

4,395,565

4,328,668

Deposits

4,822,635

4,958,554

4,837,964

Shareholders' Equity

1,008,613

1,055,925

1,019,086

Period End Balances:

Assets

$

5,864,450

$

5,966,624

$

5,960,180

Loans

696,204

771,030

726,482

Debt securities

4,396,414

4,075,398

4,288,309

Deposits

4,783,752

4,874,095

4,840,019

Shareholders' Equity

882,690

923,138

933,509

Capital Ratios at Period End:

Total Risk Based Capital

22.11

%

23.68

%

23.05

%

Tangible Equity to Tangible Assets

13.25

%

13.71

%

13.90

%

Dividends Paid Per Common Share

$

0.46

$

0.44

$

0.46

Common Dividend Payout Ratio

41

%

38

%

41

%

The above financial summary has been derived from the Company's unaudited consolidated financial statements. This information should be read in conjunction with those statements, notes and the other information included elsewhere herein. Percentages under the heading "Financial Ratios" are annualized with the exception of the efficiency ratio.

(1) Yields on securities and certain loans have been adjusted upward to an FTE basis in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.

(2) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).

-29-

Financial Overview

Westamerica Bancorporation and subsidiaries (collectively, the “Company”) reported net income of $27.4 million or $1.13 diluted earnings per common share (“EPS”) in the three months ended March 31, 2026. The results in the three months ended March 31, 2026 included a $300 thousand reversal of provision for credit losses, which increased EPS $0.01. The results in the three months ended March 31, 2026 compare with net income of $31.0 million or $1.16 EPS in the three months ended March 31, 2025 and $27.8 million or $1.12 EPS in the three months ended December 31, 2025. The results in the three months ended March 31, 2025 included a $550 thousand reversal of provision for credit losses, which increased EPS $0.01. The results in the three months ended December 31, 2025 included a $628 thousand increase to the book tax provision to reconcile the 2024 income tax provision to the filed 2024 tax returns, which reduced EPS $0.02.

The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) maintained the target federal funds rate range of 3.50 to 3.75 percent in March 2026 after a 0.25 percent cut in December 2025. The FOMC press release in March 2026 stated, “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate.” The interest rate paid on reserve balances at the Federal Reserve Bank remained at 3.65 percent after a 0.25 percent cut in December 2025. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.

Management continues to evaluate the impacts of inflation, the Federal Reserve’s monetary policy, the impacts of the war in the Middle East, tariffs, international trade tensions, and climate changes on the Company’s business. The banking industry could experience significant volatility as it did with several regional bank failures in 2023. Industrywide concerns could develop related to liquidity, deposit outflows and unrealized losses on investment debt securities. These events and concerns could adversely affect the Company’s ability to effectively fund its operations. Any one or a combination of such risk factors, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects. The extent of the impact on the Company’s results of operations, cash flow, liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be reasonably predicted.

The Company presents its net interest margin and net interest income on a fully taxable equivalent (“FTE”) basis using the current statutory federal tax rate. Management believes the FTE basis is valuable to the reader because the Company’s loan and investment securities portfolios contain municipal loans and securities that are federally tax exempt. The Company’s tax exempt loans and securities composition may not be similar to that of other banks, therefore in order to reflect the impact of the federally tax exempt loans and securities on the net interest margin and net interest income for comparability with other banks, the Company presents its net interest margin and net interest income on an FTE basis.

The Company’s significant accounting policies (see Note 1 “Summary of Significant Accounting Policies” to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and Note 2 “Accounting Policies” to the unaudited consolidated financial statements in this Form 10-Q) are fundamental to understanding the Company’s results of operations and financial condition.

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-30-

Net Income

Following is a summary of the components of net income for the periods indicated:

For the Three Months Ended

March 31,

December 31,

2026

2025

2025

(In thousands, except per share data)

Net interest and loan fee income

$

52,475

$

56,095

$

53,306

FTE adjustment

215

295

243

Net interest and loan fee income (FTE)

52,690

56,390

53,549

(Reversal of) provision for credit losses

(300

)

(550

)

-

Noninterest income

9,607

10,321

10,003

Noninterest expense

25,911

25,127

25,466

Income before taxes (FTE)

36,686

42,134

38,086

Income tax provision (FTE)

9,331

11,097

10,279

Net income

$

27,355

$

31,037

$

27,807

Average diluted common shares

24,306

26,642

24,849

Diluted earnings per common share

$

1.13

$

1.16

$

1.12

Average total assets

$

6,034,899

$

6,187,321

$

6,055,696

Net income to average total assets (annualized)

1.84

%

2.03

%

1.82

%

Net income to average common shareholders' equity (annualized)

11.00

%

11.92

%

10.83

%

Net income for the three months ended March 31, 2026 decreased $3.7 million compared with the three months ended March 31, 2025 primarily due to lower net interest and loan fee income (FTE), lower noninterest income and higher noninterest expense, partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $3.7 million in the three months ended March 31, 2026 compared with the three months ended March 31, 2025 due to lower average balances of loans and interest-bearing cash, lower yield on investment securities and interest-bearing cash, partially offset by higher average balances of investment securities. Based on the results of its current expected credit losses (“CECL”) model and Management’s estimate of credit losses over the remaining life of its loans, the Company recorded a $300 thousand reversal of provision for credit losses in the three months ended March 31, 2026 and a $550 thousand reversal of provision for credit losses in the three months ended March 31, 2025. Noninterest income for the three months ended March 31, 2026 decreased compared with the three months ended March 31, 2025 due to lower debit card fees and recognition of unrealized securities losses of $247 thousand in the three months ended March 31, 2026. Noninterest expense for the three months ended March 31, 2026 increased compared with the three months ended March 31, 2025 primarily due to increases in salaries and benefits expense, occupancy and equipment expense and estimated operating losses from limited partnership investments. The tax rate (FTE) was 25.4% for the three months ended March 31, 2026 and 26.3% for the three months ended March 31, 2025.

Net income for the three months ended March 31, 2026 decreased $452 thousand compared with the three months ended December 31, 2025 primarily due to lower net interest and loan fee income (FTE), lower noninterest income and higher noninterest expense, partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $859 thousand in the three months ended March 31, 2026 compared with the three months ended December 31, 2025 due to lower average balances of loans and interest-bearing cash and lower yield on interest-bearing cash, partially offset by higher average balances of investment securities. Based on the results of its CECL model and Management’s estimate of credit losses over the remaining life of its loans, the Company recorded a $300 thousand reversal of provision for credit losses in the three months ended March 31, 2026 and provided no provision for credit losses in the three months ended December 31, 2025. Noninterest income for the three months ended March 31, 2026 decreased compared with the three months ended December 31, 2025 due to lower debit card fees and recognition of unrealized securities losses of $247 thousand in the three months ended March 31, 2026. Noninterest expense for the three months ended March 31, 2026 increased compared with the three months ended December 31, 2025 due to higher salaries and benefits expense and estimated operating losses from limited partnership investments. The tax rate (FTE) was 25.4% for the three months ended March 31, 2026 and 27.0% for the three months ended December 31, 2025. The results in the three months ended December 31, 2025 included a $628 thousand increase to the book tax provision to reconcile the 2024 income tax provision to the filed 2024 tax returns.

-31-

Net Interest and Loan Fee Income (FTE)

The Company's primary source of revenue is net interest income, or the difference between interest income earned on loans and investment securities and interest expense paid on interest-bearing deposits and other borrowings.

The following summarizes the components of the Company's net interest margin (FTE) for the periods indicated.

For the Three Months E

[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 financial information for the three years ended December 31, 2025 has been derived from the Company’s audited consolidated financial statements. This information should be read in conjunction with those statements, notes and other information included elsewhere herein.

WESTAMERICA BANCORPORATION

FINANCIAL SUMMARY

For the Years Ended December 31,

2025

2024

2023

(In thousands, except per share data and ratios)

Interest and loan fee income

$

230,980

$

268,014

$

284,013

Interest expense

13,712

17,419

3,890

Net interest and loan fee income

217,268

250,595

280,123

(Reversal of) provision for credit losses

(550

)

300

(1,150

)

Noninterest income:

Bank owned life insurance gains

208

202

279

Losses on sale of securities

-

-

(125

)

Other noninterest income

40,582

42,953

43,368

Total noninterest income

40,790

43,155

43,522

Noninterest expense

101,922

104,391

103,216

Income before income taxes

156,686

189,059

221,579

Income tax provision

40,513

50,423

59,811

Net income

$

116,173

$

138,636

$

161,768

Average common shares outstanding

25,674

26,685

26,703

Average diluted common shares outstanding

25,674

26,686

26,706

Common shares outstanding at December 31,

24,623

26,708

26,671

Per common share:

Basic earnings

$

4.52

$

5.20

$

6.06

Diluted earnings

4.52

5.20

6.06

Book value at December 31,

37.91

33.32

28.98

Financial ratios:

Return on assets

1.91

%

2.15

%

2.35

%

Return on common equity

11.23

%

13.82

%

18.08

%

Net interest margin (FTE)(1)

3.82

%

4.14

%

4.37

%

Net loan losses to average loans

(0.35

)%

(0.29

)%

(0.25

)%

Efficiency ratio(2)

39.3

%

35.4

%

31.7

%

Equity to assets

15.66

%

14.65

%

12.14

%

Period end balances:

Assets

$

5,960,180

$

6,076,274

$

6,364,592

Loans

726,482

820,300

866,602

Allowance for credit losses

11,573

14,780

16,867

Debt securities

4,288,309

4,240,445

4,878,198

Deposits

4,840,019

5,011,850

5,474,267

Identifiable intangible assets and goodwill

121,673

121,798

122,020

Short-term borrowed funds

137,298

120,322

58,162

Shareholders' equity

933,509

889,957

772,894

Capital ratios at period end:

Total risk based capital

23.05

%

22.82

%

19.15

%

Tangible equity to tangible assets

13.90

%

12.90

%

10.43

%

Dividends paid per common share

$

1.82

$

1.76

$

1.72

Common dividend payout ratio

40

%

34

%

28

%

(1) Yields on securities and certain loans have been adjusted upward to a "fully taxable equivalent" ("FTE") basis in order tor eflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.

(2) The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income on an FTE basis and noninterest income).

[The remainder of this page intentionally left blank]

-20-

The following discussion addresses information pertaining to the financial condition and results of operations of Westamerica Bancorporation and subsidiaries (the “Company”) that may not be otherwise apparent from a review of the consolidated financial statements and related footnotes. It should be read in conjunction with those statements and notes found on pages 50 through 88, as well as with the other information presented throughout this Report.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the banking industry. Application of these principles requires the Company to make certain estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment writedown or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available.

The most significant accounting policies followed by the Company are presented in Note 1 to the consolidated financial statements. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, Management has identified the allowance for credit losses on loans accounting to be a critical accounting estimate. The accounting for the allowance for credit losses on loans requires the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available. The methodology, significant inputs and assumptions for the allowance for credit losses on loans are discussed in the section “Allowance for Credit Losses on Loans” below. Additional discussion of the factors affecting accounting for the allowance for credit losses on loans is included in the “Loan Portfolio Credit Risk” discussion below. The Company’s allowance for credit losses on loans is established to provide for expected losses based on the available estimates at that point in time. Changes in economic conditions could significantly impact the estimated losses and could materially affect the Company’s operating results.

Financial Overview

The Company reported net income of $116.2 million or $4.52 diluted earnings per common share (“EPS”) in 2025 compared with net income of $138.6 million or $5.20 EPS in 2024 and net income of $161.8 million or $6.06 EPS in 2023. 2025 results included a $550 thousand reversal of provision for credit losses and a $208 thousand bank owned life insurance gain, which increased EPS $0.02. 2024 results included a $202 thousand bank owned life insurance gain and a $1.4 million gain on sale of other assets, equivalent to combined EPS of $0.04. 2023 results included a $1.2 million reversal of provision for credit losses, net of a $400 thousand provision for credit losses and a $279 thousand bank owned life insurance gain, equivalent to combined EPS of $0.04.

The Federal Open Market Committee of the Federal Reserve Board (“FOMC”) decided to maintain the target federal funds rate range of 3.50 to 3.75 percent in January 2026 after a 0.25 percent cut in December 2025. The FOMC press release in January stated, “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.” The interest rate paid on reserve balances at the Federal Reserve Bank remained at 3.65 percent after a 0.25 percent cut in December 2025. The Bank maintains reserve balances at the Federal Reserve Bank; the amount that earns interest is identified as “interest-bearing cash”.

Management continues to evaluate the impacts of inflation, the Federal Reserve’s monetary policy, the impacts of tariffs, international trade tensions, and climate changes on the Company’s business. The banking industry could experience significant volatility as it did with several regional bank failures in 2023. Industrywide concerns could develop related to liquidity, deposit outflows and unrealized losses on investment debt securities. These events and concerns could adversely affect the Company’s ability to effectively fund its operations. Any one or a combination of such risk factors, or other factors, could materially adversely affect the Company's business, financial condition, results of operations and prospects. The extent of the impact on the Company’s results of operations, cash flow, liquidity, and financial performance, as well as the Company’s ability to execute near- and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be reasonably predicted.

-21-

The Company presents its net interest margin and net interest income on a fully taxable equivalent (“FTE”) basis using the current statutory federal tax rate. Management believes the FTE basis is valuable to the reader because the Company’s loan and investment securities portfolios contain municipal loans and securities that are federally tax exempt. The Company’s tax exempt loans and securities composition may not be similar to that of other banks, therefore in order to reflect the impact of the federally tax exempt loans and securities on the net interest margin and net interest income for comparability with other banks, the Company presents its net interest margin and net interest income on an FTE basis.

The Company’s significant accounting policies (see Note 1 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements below) are fundamental to understanding the Company’s results of operations and financial condition. In the year ended December 31, 2025 and December 31, 2024, the Company adopted the following new accounting guidance:

FASB ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, was issued December 14, 2023. The ASU enhances the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. The ASU primarily requires additional disclosures as part of the reconciliation of the effective tax rate to statutory tax rate, the amount of income taxes paid, net of refunds received, and income tax expense disaggregated between federal and state jurisdictions. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is to be applied prospectively, with retrospective application permitted. The Company adopted the ASU prospectively with retrospective application. The required disclosures are included in Note 10 “Income Taxes.”

FASB ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, was issued March 2020. The ASU provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.” The ASU 2022-06 deferred the sunset date of ASU 2020-04 to December 2024. As of March 31, 2024, all contracts and transactions within the scope of ASU 2020-04 have transitioned to alternative reference rates. The accounting effects of the transition to alternative reference rates were applied prospectively as an adjustment to the effective interest rate and did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, was issued June 2022. The ASU clarifies the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. Additionally, the ASU requires specific disclosures related to equity securities that are subject to contractual sale restrictions. The required disclosures include (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. The ASU became effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company adopted the ASU on January 1, 2024 on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.

FASB ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, was issued November 27, 2023. The ASU requires disclosure of certain significant segment expenses and other items, the title and position of the chief operating decision maker and information about how the reported measures of segment profit or loss are used in assessing segment performance. The ASU became effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

-22-

Net Income

Following is a summary of the components of net income for the periods indicated:

For the Years Ended December 31,

2025

2024

2023

($ in thousands, except per share data)

Net interest and loan fee income

$

217,268

$

250,595

$

280,123

FTE adjustment

1,079

1,311

1,550

Net interest and loan fee income (FTE)

218,347

251,906

281,673

(Provision) reversal of provision for credit losses

550

(300

)

1,150

Noninterest income

40,790

43,155

43,522

Noninterest expense

(101,922

)

(104,391

)

(103,216

)

Income before income taxes (FTE)

157,765

190,370

223,129

Income taxes (FTE)

(41,592

)

(51,734

)

(61,361

)

Net income

$

116,173

$

138,636

$

161,768

Net income per average fully-diluted common share

$

4.52

$

5.20

$

6.06

Net income as a percentage of average shareholders' equity

11.23

%

13.82

%

18.08

%

Net income as a percentage of average total assets

1.91

%

2.15

%

2.35

%

Net income for 2025 decreased $22.5 million compared with 2024 primarily due to decreased net interest and loan fee income (FTE) and lower noninterest income, partially offset by a reversal of provision for credit losses, lower noninterest expense and lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $33.6 million in 2025 compared with 2024 due to lower average balances of investment securities and loans, lower yield on investment securities and higher rates on interest-bearing deposits, partially offset by higher average balances of interest-bearing cash and lower average balances of Bank Term Funding Program borrowings. During 2025, the Company recorded a $550 thousand reversal of provision for credit losses, which was recorded in the first quarter of 2025. During 2024, the Company provided $300 thousand for credit losses, which was recorded in the first quarter 2024 based on the results of the CECL model and Management’s estimate of credit losses over the remaining life of its loans. Noninterest income for 2025 decreased compared with 2024 primarily due to a $1.4 million gain on sale of other assets in 2024, lower fee income from service charges on deposit accounts, debit card fees and ATM processing fees, partially offset by higher income from merchant processing services and trust fees. Noninterest expense in 2025 decreased $2.5 million compared with 2024 primarily due to decreases in salaries and benefits and operating losses from limited partnership investments, partially offset by higher expenses for outsourced data processing services, professional fees, courier services and occupancy and equipment. The tax rate (FTE) was 26.4% for 2025 and 27.2% for 2024.

Net income for 2024 decreased $23.1 million compared with 2023 primarily due to decreased net interest and loan fee income (FTE) and a reduction in net income resulting from a change in allowance for credit losses, partially offset by lower tax provision (FTE). Net interest and loan fee income (FTE) decreased $29.8 million in 2024 compared with 2023 due to lower average balances of investment securities and loans, higher average balances of Bank Term Funding Program borrowings and higher rates on interest-bearing liabilities, partially offset by higher yield on loans and higher average balances of interest-bearing cash. During 2024, the Company provided $300 thousand for credit losses, which was recorded in the first quarter, based on the results of the CECL model and Management’s estimate of credit losses over the remaining life of its loans. The Company recorded a $1.2 million reversal of provision for credit losses, net of a $400 thousand provision in 2023 as a result of a $2.2 million recovery on a previously charged off loan in the first quarter 2023. Noninterest income for 2024 was relatively unchanged compared with 2023 primarily due to a $1.4 million gain on sale of other assets, offset by lower income from merchant processing services, ATM processing fees and debit card fees. Noninterest expense for 2024 increased compared with 2023 primarily due to higher salaries and benefits, partially offset by decreases in losses from unauthorized debit card use, legal fees, operating losses from limited partnership investments and FDIC insurance assessments. The tax rate (FTE) was 27.2% for 2024 and 27.5% for 2023.

Net Interest and Loan Fee Income (FTE)

The Company's primary source of revenue is net interest income, or the difference between interest income earned on loans and investment securities and interest expense paid on interest-bearing deposits and other borrowings.

-23-

The following summarizes the components of the Company's net interest margin (FTE) for the periods indicated.

For the Years Ended December 31,

2025

2024

2023

($ in thousands)

Interest and loan fee income

$

230,980

$

268,014

$

284,013

FTE adjustment

1,079

1,311

1,550

Interest and loan fee income (FTE)

232,059

269,325

285,563

Interest expense

(13,712

)

(17,419

)

(3,890

)

Net interest and loan fee income (FTE)

$

218,347

$

251,906

$

281,673

Net interest margin (FTE)

3.82

%

4.14

%

4.37

%

Net interest and loan fee income (FTE) decreased $33.6 million in 2025 compared with 2024 due to lower average balances of investment securities (down $546 million) and loans (down $80 million), lower yield on investment securities (down 0.45%) and higher rates on interest-bearing deposits (up 0.10%), partially offset by higher average balances of interest-bearing cash (up $266 million) and lower average balances of Bank Term Funding Program borrowings (down $107 million).

Net interest and loan fee income (FTE) decreased $29.8 million in 2024 compared with 2023 due to lower average balances of investment securities (down $502 million) and loans (down $76 million), higher average balances of Bank Term Funding Program borrowings (up $107 million) and higher rates on interest-bearing liabilities (up 0.48%), partially offset by higher yield on loans (up 0.26%) and higher average balances of interest-bearing cash (up $170 million).

The net interest margin (FTE) was 3.82% in 2025, 4.14% in 2024, and 4.37% in 2023. The yield on earning assets (FTE) was 4.06% in 2025, 4.43% in 2024, and 4.43% in 2023.

The Company’s funding costs were 0.24% in 2025, compared with 0.29% in 2024, and 0.06% in 2023. Noninterest bearing deposits represented 46% of average deposits in 2025 and 47% in 2024, respectively. Average balances of time deposits in 2025 declined $16 million from 2024. Average balances of checking and saving deposits accounted for 98.5% of average total deposits in 2025 compared with 98.2% in 2024.

Net Interest Margin (FTE)

The following summarizes the components of the Company's net interest margin (FTE) for the periods indicated.

For the Years Ended December 31,

2025

2024

2023

Yield on earning assets (FTE)

4.06

%

4.43

%

4.43

%

Rate paid on interest-bearing liabilities

0.50

%

0.60

%

0.12

%

Net interest spread (FTE)

3.56

%

3.83

%

4.31

%

Benefit of noninterest-bearing demand deposits

0.26

%

0.31

%

0.06

%

Net interest margin (FTE)

3.82

%

4.14

%

4.37

%

The Company’s net interest margin decreased in 2025 compared with 2024 affected primarily by lower yield on earning assets due to declining interest rates in the market. The Company’s yield on earning assets in 2025 decreased compared with 2024 primarily due to lower yields on the investment securities and interest-bearing cash. The volume of higher-yielding CLOs declined due to calls and principal paydowns. Newly purchased investment securities have lower yields compared with CLOs. The CLOs have interest coupons that change once every three months by the amount of change in the three-month SOFR base rate. The average balances and yields of CLOs for 2025 and 2024 were $712 million yielding 6.19%, and $1,252 million yielding 7.11%, respectively. The Company’s yield on earning assets in 2024 remained the same compared with 2023 primarily due to higher yields on the loan portfolio and interest-bearing cash, offset by lower yield on investment securities. The average balances and yields of CLOs for 2024 and 2023 were $1,252 million yielding 7.11% and $1,543 million yielding 6.99%, respectively. The interest-bearing cash yield changes by the amount of change in the overnight federal funds rate on the effective date declared by the FOMC. The average balances and yields of interest-bearing cash for 2025, 2024 and 2023 were $641 million yielding 4.34%, $375 million yielding 5.25%, and $205 million yielding 5.21%, respectively. The rates on interest-bearing liabilities decreased in 2025 compared with 2024 and increased in 2024 compared with 2023 primarily affected by Bank Term Funding Program borrowings in 2024. The average balances and rates of Bank Term Funding program borrowings were $107 million and 5.40% in 2024. The Company has other earning assets with variable yields such as commercial loans and lines of credit, consumer lines of credit and adjustable rate residential real estate loans, which are included in “other taxable loans” in the following “Summary of Average Balances, Yields/Rates and Interest Differential.”

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-24-

Summary of Average Balances, Yields/Rates and Interest Differential

The following tables present information regarding the consolidated average assets, liabilities and shareholders’ equity, the amounts of interest income earned from average interest earning assets and the resulting yields, and the amounts of interest expense incurred on average interest-bearing liabilities and the resulting rates. Average loan balances include nonperforming loans. Interest income includes reversal of previously accrued interest on loans placed on non-accrual status during the period and proceeds from loans on nonaccrual status only to the extent cash payments have been received and applied as interest income and accretion of purchased loan discounts. Yields on tax-exempt securities and loans have been adjusted upward to reflect the effect of income exempt from federal income taxation at the federal statutory tax rate of 21 percent.

Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

For the Year Ended December 31, 2025

Interest

Average

Income/

Yields/

Balance

Expense

Rates

($ in thousands)

Assets

Investment securities:

Taxable

$

4,186,133

$

158,408

3.77

%

Tax-exempt (1)

101,034

3,896

3.86

%

Total investments (1)

4,287,167

162,304

3.77

%

Loans:

Taxable

724,456

40,657

5.61

%

Tax-exempt (1)

31,275

1,294

4.14

%

Total loans (1)

755,731

41,951

5.55

%

Total interest-bearing cash

640,564

27,804

4.34

%

Total interest-earning assets (1)

5,683,462

232,059

4.06

%

Other assets

392,034

Total assets

$

6,075,496

Liabilities and shareholders' equity

Noninterest-bearing demand

$

2,243,836

$

-

-

%

Savings and interest-bearing transaction

2,541,900

12,814

0.50

%

Time less than $100,000

48,307

143

0.30

%

Time $100,000 or more

26,699

55

0.21

%

Total interest-bearing deposits

2,616,906

13,012

0.50

%

Securities sold under repurchase agreements

112,958

700

0.62

%

Total interest-bearing liabilities

2,729,864

13,712

0.50

%

Other liabilities

67,215

Shareholders' equity

1,034,581

Total liabilities and shareholders' equity

$

6,075,496

Net interest spread (1) (2)

3.56

%

Net interest and fee income and interest margin (1) (3)

$

218,347

3.82

%

(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.

(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

-25-

Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

For the Year Ended December 31, 2024

Interest

Average

Income/

Yields/

Balance

Expense

Rates

($ in thousands)

Assets

Investment securities:

Taxable

$

4,705,641

$

199,355

4.24

%

Tax-exempt (1)

127,383

4,676

3.67

%

Total investments (1)

4,833,024

204,031

4.22

%

Loans:

Taxable

795,943

43,974

5.52

%

Tax-exempt (1)

40,193

1,655

4.12

%

Total loans (1)

836,136

45,629

5.46

%

Total interest-bearing cash

374,806

19,665

5.25

%

Total interest-earning assets (1)

6,043,966

269,325

4.43

%

Other assets

400,721

Total assets

$

6,444,687

Liabilities and shareholders' equity

Noninterest-bearing demand

$

2,445,945

$

-

-

%

Savings and interest-bearing transaction

2,638,139

10,658

0.40

%

Time less than $100,000

57,064

187

0.33

%

Time $100,000 or more

33,794

96

0.28

%

Total interest-bearing deposits

2,728,997

10,941

0.40

%

Bank term funding program borrowings

107,364

5,813

5.40

%

Securities sold under repurchase agreements

89,381

665

0.74

%

Total interest-bearing liabilities

2,925,742

17,419

0.60

%

Other liabilities

69,758

Shareholders' equity

1,003,242

Total liabilities and shareholders' equity

$

6,444,687

Net interest spread (1) (2)

3.83

%

Net interest and fee income and interest margin (1) (3)

$

251,906

4.14

%

(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.

(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits. 

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-26-

Distribution of Assets, Liabilities & Shareholders’ Equity and Yields, Rates & Interest Margin

For the Year Ended December 31, 2023

Interest

Average

Income/

Yields/

Balance

Expense

Rates

($ in thousands)

Assets

Investment securities:

Taxable

$

5,176,278

$

221,742

4.28

%

Tax-exempt (1)

158,433

5,668

3.58

%

Total investments (1)

5,334,711

227,410

4.26

%

Loans:

Taxable

868,255

45,739

5.27

%

Tax-exempt (1)

44,061

1,743

3.96

%

Total loans (1)

912,316

47,482

5.20

%

Total interest-bearing cash

204,794

10,671

5.21

%

Total Interest-earning assets (1)

6,451,821

285,563

4.43

%

Other assets

419,545

Total assets

$

6,871,366

Liabilities and shareholders' equity

Noninterest-bearing demand

$

2,748,544

$

-

-

%

Savings and interest-bearing transaction

2,922,909

3,450

0.12

%

Time less than $100,000

67,832

204

0.30

%

Time $100,000 or more

48,076

116

0.24

%

Total interest-bearing deposits

3,038,817

3,770

0.12

%

Securities sold under repurchase agreements

89,298

120

0.13

%

Total interest-bearing liabilities

3,128,115

3,890

0.12

%

Other liabilities

100,097

Shareholders' equity

894,610

Total liabilities and shareholders' equity

$

6,871,366

Net interest spread (1) (2)

4.31

%

Net interest and fee income and interest margin (1) (3)

$

281,673

4.37

%

(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.

(2) Net interest spread represents the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities.

(3) Net interest margin is computed by calculating the difference between interest income and expense, divided by the average balance of interest-earning assets. The net interest margin is greater than the net interest spread due to the benefit of noninterest-bearing demand deposits.

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-27-

Summary of Changes in Interest Income and Expense due to Changes in Average Asset & Liability Balances and Yields Earned & Rates Paid

The following tables set forth a summary of the changes in interest income and interest expense due to changes in average assets and liability balances (volume) and changes in average interest yields/rates for the periods indicated. Changes not solely attributable to volume or yields/rates have been allocated in proportion to the respective volume and yield/rate components.

Summary of Changes in Interest Income and Expense

For the Year Ended December 31, 2025

Compared with

For the Year Ended December 31, 2024

Volume

Yield/Rate

Total

(In thousands)

(Decrease) increase in interest and loan fee income:

Investment securities:

Taxable

$

(22,009

)

$

(18,938

)

$

(40,947

)

Tax-exempt (1)

(967

)

187

(780

)

Total investments (1)

(22,976

)

(18,751

)

(41,727

)

Loans:

Taxable

(3,949

)

632

(3,317

)

Tax-exempt (1)

(367

)

6

(361

)

Total loans (1)

(4,316

)

638

(3,678

)

Total interest-bearing cash

13,944

(5,805

)

8,139

Total decrease in interest and loan fee income (1)

(13,348

)

(23,918

)

(37,266

)

(Decrease) increase in interest expense:

Deposits:

Savings and interest-bearing transaction

(389

)

2,545

2,156

Time less than $100,000

(29

)

(15

)

(44

)

Time $100,000 or more

(20

)

(21

)

(41

)

Total interest-bearing deposits

(438

)

2,509

2,071

Bank term funding program borrowings

(5,813

)

-

(5,813

)

Securities sold under repurchase agreements

175

(140

)

35

Total (decrease) increase in interest expense

(6,076

)

2,369

(3,707

)

Decrease in net interest and loan fee income (1)

$

(7,272

)

$

(26,287

)

$

(33,559

)

(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.

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-28-

Summary of Changes in Interest Income and Expense

For the Year Ended December 31, 2024

Compared with

For the Year Ended December 31, 2023

Volume

Yield/Rate

Total

(In thousands)

(Decrease) increase in interest and loan fee income:

Investment securities:

Taxable

$

(20,161

)

$

(2,226

)

$

(22,387

)

Tax-exempt (1)

(1,111

)

119

(992

)

Total investments (1)

(21,272

)

(2,107

)

(23,379

)

Loans:

Taxable

(3,809

)

2,044

(1,765

)

Tax-exempt (1)

(153

)

65

(88

)

Total loans (1)

(3,962

)

2,109

(1,853

)

Total interest-bearing cash

8,859

135

8,994

Total (decrease) increase in interest and loan fee income (1)

(16,375

)

137

(16,238

)

(Decrease) increase in interest expense:

Deposits:

Savings and interest-bearing transaction

(336

)

7,544

7,208

Time less than $100,000

(32

)

15

(17

)

Time $100,000 or more

(34

)

14

(20

)

Total interest-bearing deposits

(402

)

7,573

7,171

Bank term funding program borrowings

5,813

-

5,813

Securities sold under repurchase agreements

-

545

545

Total increase in interest expense

5,411

8,118

13,529

Decrease in net interest and loan fee income (1)

$

(21,786

)

$

(7,981

)

$

(29,767

)

(1) Amounts calculated on an FTE basis using the current statutory federal tax rate.

Provision for Credit Losses

The Company manages credit risk by enforcing conservative underwriting and administration procedures and aggressively pursuing collection efforts with debtors experiencing financial difficulties. The provision for credit losses reflects Management's assessment of credit risk in the loan portfolio and debt securities held to maturity portfolio during each of the periods presented.

Based on Management’s estimate of credit losses over the remaining life of its loans and debt securities held to maturity, the Company recorded a $550 thousand reversal of provision for credit losses in 2025, which was recorded in the first quarter of 2025. In 2024, the Company provided $300 thousand for credit losses, which was recorded in the first quarter of 2024. In 2023, the Company recorded a $1.2 million reversal of provision for credit losses which reflected a $2.2 million recovery in the first quarter 2023 on a previously charged off loan and a $400 thousand provision for credit losses in the third quarter of 2023. For further information regarding credit risk, net credit losses, and the allowance for credit losses, see the “Loan Portfolio Credit Risk” and “Allowance for Credit Losses” sections of this Report.

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-29-

Noninterest Income

Components of Noninterest Income

For the Years Ended December 31,

2025

2024

2023

(In thousands)

Service charges on deposit accounts

$

13,336

$

14,025

$

14,169

Merchant processing services

10,970

10,449

11,280

Debit card fees

6,346

6,853

7,185

Trust fees

3,584

3,318

3,122

ATM processing fees

1,912

2,170

2,618

Other service fees

1,753

1,770

1,765

Bank owned Life insurance gains

208

202

279

Losses on sale of securities

-

-

(125

)

Unrealized losses on equity securities

(60

)

-

-

Other noninterest income

2,741

4,368

3,229

Total Noninterest Income

$

40,790

$

43,155

$

43,522

Noninterest income in 2025 decreased $2.4 million compared with 2024 primarily because 2024 results included a $1.4 million gain on sale of other assets. Service charges on deposit accounts decreased in 2025 compared with 2024 primarily due to a decrease in overdraft charges. Debit card fees and ATM processing fees decreased in 2025 compared with 2024 primarily due to lower transaction volumes. The decreases in 2025 compared with 2024 were partially offset by higher income from merchant processing services and trust fees.

Noninterest income in 2024 remained relatively unchanged when compared with 2023 primarily due to a $1.4 million gain on sale of other assets, offset by lower income from merchant processing services, ATM processing fees and debit card fees. Merchant processing services fee income decreased in 2024 from 2023 primarily due to an increase in lower margin transactions. ATM processing fees declined in 2024 compared with 2023 due to reduced processing volumes.

Noninterest Expense

Components of Noninterest Expense

For the Years Ended December 31,

2025

2024

2023

(In thousands)

Salaries and related benefits

$

48,687

$

50,292

$

47,871

Occupancy and equipment

20,871

20,673

20,520

Outsourced data processing services

10,829

10,271

9,846

Limited partnership operating losses

3,636

5,185

5,754

Courier service

2,956

2,709

2,652

Professional fees

1,964

1,470

1,751

Other noninterest expense

12,979

13,791

14,822

Total Noninterest Expense

$

101,922

$

104,391

$

103,216

Noninterest expense in 2025 decreased $2.5 million compared with 2024 primarily due to decreases in salaries and benefits and operating losses from limited partnership investments. The decreases in 2025 from 2024 were partially offset by higher expenses for outsourced data processing services, professional fees, courier services and occupancy and equipment.

Noninterest expense in 2024 increased $1.2 million compared with 2023 primarily due to increases in salaries and benefits and outsourced data processing. The increases in 2024 from 2023 were partially offset by decreases in losses from unauthorized debit card use, legal fees, operating losses from limited partnership investments and FDIC insurance assessments.

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-30-

Provision for Income Tax

The Company’s income tax provision (FTE) was $41.6 million in 2025 compared with $51.7 million in 2024 and $61.4 million in 2023. The effective tax rates (FTE) were 26.4% in 2025 compared with 27.2% in 2024 and 27.5% in 2023. See Note 10 to the consolidated financial statements for additional information related to income taxes.

Investment Securities Portfolio

The Company maintains an investment securities portfolio consisting of securities issued by U.S. Treasury, U.S. Government sponsored entities, state and political subdivisions, corporations and banks. The Company had marketable equity securities held for trading at fair value of $466 thousand at December 31, 2025. The Company had no marketable equity securities not held for trading at December 31, 2025 and December 31, 2024.

Management manages the investment securities portfolio in response to anticipated changes in interest rates, and changes in deposit and loan volumes. The carrying value of the Company’s investment securities portfolio was $4.3 billion at December 31, 2025 and $4.2 billion at December 31, 2024. The following table lists debt securities in the Company’s portfolio by type as of the dates indicated. Debt securities held to maturity are listed at amortized cost before related reserve for expected credit losses of $1 thousand at December 31, 2025 and $1 thousand at December 31, 2024. Debt securities available for sale are listed at fair value.

At December 31, 2025

At December 31, 2024

Carrying Value

As a percent of total investment securities

Carrying Value

As a percent of total investment securities

($ in thousands)

Securities of U.S. Government sponsored entities

$

302,412

7

%

$

292,117

7

%

Agency residential mortgage-backed securities ("MBS")

228,080

5

%

268,987

6

%

Agency commercial MBS

707,560

16

%

6,966

-

%

U.S. Treasury securities

-

-

%

4,955

-

%

Obligations of states and political subdivisions

79,319

2

%

113,447

3

%

Corporate securities

2,546,324

60

%

2,571,384

61

%

Collateralized loan obligations

424,614

10

%

982,589

23

%

Total

$

4,288,309

100

%

$

4,240,445

100

%

Debt securities available for sale

$

3,468,734

$

3,395,810

Debt securities held to maturity

819,575

844,635

Total

$

4,288,309

$

4,240,445

Management continually evaluates the Company’s investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, liquidity, and the level of interest rate risk to which the Company is exposed. These evaluations may cause Management to change the level of funds the Company deploys into investment securities and change the composition of the Company’s investment securities portfolio.

At December 31, 2025, substantially all of the Company’s investment securities were investment grade as rated by one or more major rating agencies. In addition to monitoring credit rating agency evaluations, Management performs its own evaluations regarding the credit worthiness of the issuer or the securitized assets underlying asset-backed securities. The Company’s procedures for evaluating investments in securities are in accordance with guidance issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Agencies” (SR 12-15) and other regulatory guidance.

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-31-

The following table shows the fair value carrying amount of the Company’s debt securities available for sale as of the dates indicated:

At December 31,

2025

2024

2023

(In thousands)

Debt securities available for sale:

Securities of U.S. Government sponsored entities

$

302,412

$

292,117

$

294,919

Agency residential MBS

184,346

211,060

239,454

Agency commercial MBS

707,560

6,966

-

U.S. Treasury securities

-

4,955

-

Obligations of states and political subdivisions

45,722

62,186

71,283

Corporate securities

1,804,080

1,835,937

1,909,548

Collateralized loan obligations

424,614

982,589

1,484,597

Total debt securities available for sale

$

3,468,734

$

3,395,810

$

3,999,801

The following table sets forth the relative maturities and contractual yields of the Company’s debt securities available for sale (stated at fair value) at December 31, 2025. Yields on state and political subdivision securities have been calculated on a fully taxable equivalent basis using the current federal statutory rate. Collateralized loan obligations and mortgage-backed securities are shown separately because they are typically paid in quarterly and monthly installments, respectively, over a number of years.

Debt Securities Available for Sale Maturity Distribution

At December 31, 2025

Within one year

After one but

within five

years

After five but

within ten

years

CLO and Mortgage- backed

Total

($ in thousands)

Securities of U.S. Government sponsored entities

$

7,036

$

116,579

$

178,797

$

-

$

302,412

Interest rate

4.07

%

3.39

%

3.49

%

-

%

3.54

%

Obligations of states and political subdivisions

3,220

20,885

21,617

-

45,722

Interest rate

2.60

%

2.89

%

3.20

%

-

%

3.01

%

Corporate securities

188,317

1,044,637

571,126

-

1,804,080

Interest rate

3.24

%

2.81

%

2.30

%

-

%

2.67

%

Subtotal

198,573

1,182,101

771,540

-

2,152,214

Interest rate

3.26

%

2.87

%

2.60

%

-

%

2.80

%

Collateralized loan obligations (CLO)

-

-

-

424,614

424,614

Interest rate

-

%

-

%

-

%

5.95

%

5.95

%

MBS

-

-

-

891,906

891,906

Interest rate

-

%

-

%

-

%

4.77

%

4.77

%

Total

$

198,573

$

1,182,101

$

771,540

$

1,316,520

$

3,468,734

Interest rate

3.26

%

2.87

%

2.60

%

5.15

%

3.64

%

The following table shows the amortized cost carrying amount and fair value before related reserve for expected credit losses of $1 thousand at December 31, 2025, December 31, 2024 and December 31, 2023, of the Company’s debt securities held to maturity as of the dates indicated:

At December 31,

2025

2024

2023

(In thousands)

Agency residential MBS

$

43,734

$

57,927

$

78,565

Obligations of states and political subdivisions

33,597

51,261

71,182

Corporate securities

742,244

735,447

728,650

Total

$

819,575

$

844,635

$

878,397

Fair value

$

812,580

$

807,838

$

849,562

-32-

The following table sets forth the relative maturities and contractual yields of the Company’s debt securities held to maturity at December 31, 2025. Yields on state and political subdivision securities have been calculated on a fully taxable equivalent basis using the current federal statutory rate. Mortgage-backed securities are shown separately because they are typically paid in monthly installments over a number of years.         

Debt Securities Held to Maturity Maturity Distribution

At December 31, 2025

Within one year

After one but

within five

years

After five but within ten

years

Mortgage- backed

Total

($ in thousands)

Obligations of states and political subdivisions

$

28,363

$

5,234

$

-

$

-

$

33,597

Interest rate

3.56

%

3.80

%

-

%

-

%

3.63

%

Corporate securities

4,963

420,153

317,128

-

742,244

Interest rate

4.15

%

4.24

%

4.17

%

-

%

4.21

%

Subtotal

33,326

425,387

317,128

-

775,841

Interest rate

3.56

%

4.23

%

4.17

%

-

%

4.18

%

MBS

-

-

-

43,734

43,734

Interest rate

-

%

-

%

-

%

2.37

%

2.37

%

Total

$

33,326

$

425,387

$

317,128

$

43,734

$

819,575

Interest rate

3.56

%

4.23

%

4.17

%

2.37

%

4.08

%

The Company had corporate securities as shown below at the dates indicated:

Corporate securities

At December 31, 2025

At December 31, 2024

Amortized

Fair

Amortized

Fair

Cost

Value

Cost

Value

(In thousands)

Debt securities available for sale

$

1,913,553

$

1,804,080

$

2,031,144

$

1,835,937

Debt securities held to maturity

742,244

737,480

735,447

703,210

Total corporate securities

$

2,655,797

$

2,541,560

$

2,766,591

$

2,539,147

The following table summarizes total corporate securities by credit rating:

At December 31, 2025

At December 31, 2024

Fair value

As a percent of total corporate securities

Fair value

As a percent of total corporate securities

($ in thousands)

AA-

$

77,304

3

%

$

72,569

3

%

A+

272,496

11

%

256,906

10

%

A

423,726

17

%

353,434

14

%

A-

801,466

31

%

807,698

32

%

BBB+

624,557

25

%

634,118

25

%

BBB

342,011

13

%

414,422

16

%

Total corporate securities

$

2,541,560

100

%

$

2,539,147

100

%

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-33-

The following table summarizes total corporate securities by the industry sector in which the issuing companies operate:

At December 31, 2025

At December 31, 2024

Fair value

As a percent of total corporate securities

Fair value

As a percent of total corporate securities

($ in thousands)

Financial

$

1,448,196

57

%

$

1,450,675

57

%

Utilities

288,995

11

%

275,551

11

%

Industrial

214,154

8

%

212,587

8

%

Consumer, Non-cyclical

174,853

7

%

169,311

7

%

Communications

130,355

5

%

154,358

6

%

Basic Materials

102,612

4

%

100,617

4

%

Energy

71,815

3

%

69,320

3

%

Technology

63,158

3

%

61,008

2

%

Consumer, Cyclical

47,422

2

%

45,720

2

%

Total corporate securities

$

2,541,560

100

%

$

2,539,147

100

%

The following table summarizes total corporate securities by the location of the issuers’ headquarters; all the corporate securities are denominated in United States dollars:

At December 31, 2025

At December 31, 2024

Fair value

As a percent of total corporate securities

Fair value

As a percent of total corporate securities

($ in thousands)

United States of America

$

1,815,106

71

%

$

1,767,669

70

%

Canada

203,940

8

%

192,122

8

%

Japan

159,249

6

%

167,624

7

%

United Kingdom

112,636

4

%

139,648

5

%

France

80,668

3

%

92,970

4

%

Switzerland

76,127

3

%

73,424

3

%

Netherlands

37,660

2

%

35,425

1

%

Australia

25,305

1

%

24,700

1

%

Belgium

17,211

1

%

19,726

1

%

Germany

13,658

1

%

12,891

-

%

Jersey

-

-

%

12,948

-

%

Total corporate securities

$

2,541,560

100

%

$

2,539,147

100

%

The following table summarizes the above corporate securities with issuer’s headquarters located outside of the United States of America by the industry sector in which the issuing companies operate; all the corporate securities are denominated in United States dollars:

At December 31, 2025

At December 31, 2024

Fair value

As a percent of total foreign corporate securities

Fair value

As a percent of total foreign corporate securities

($ in thousands)

Financial

$

626,661

86

%

$

659,403

86

%

Energy

33,540

5

%

32,041

4

%

Basic Materials

25,305

4

%

24,700

3

%

Consumer, Non-cyclical

17,211

2

%

19,726

3

%

Consumer, Cyclical

13,658

2

%

25,839

3

%

Utilities

10,079

1

%

9,769

1

%

Total foreign corporate securities

$

726,454

100

%

$

771,478

100

%

-34-

The Company’s $425 million (fair value) in collateralized loan obligations at December 31, 2025, consist of investments in 41 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:

At December 31, 2025

Amortized

Fair

Cost

Value

(In thousands)

AAA

$

156,335

$

155,881

AA+/AA

269,130

268,733

Total

$

425,465

$

424,614

The Company’s $983 million (fair value) in collateralized loan obligations at December 31, 2024, consist of investments in 96 issues that are within the senior tranches of their respective fund securitization structures. The following table summarizes total collateralized loan obligations by credit rating:

At December 31, 2024

Amortized

Fair

Cost

Value

(In thousands)

AAA

$

312,710

$

311,650

AA

674,445

670,939

Total

$

987,155

$

982,589

See Note 2 to the consolidated financial statements for additional information related to the investment securities.

Loan Portfolio         

The Company originates loans with the intent to hold such assets until principal is repaid. Management follows written loan underwriting policies and procedures which are approved by the Bank’s Board of Directors. Loans are underwritten following approved underwriting standards and lending authorities within a formalized organizational structure. The Board of Directors also approves independent real estate appraisers to be used in obtaining estimated values for real property serving as loan collateral. Prevailing economic trends and conditions are also taken into consideration in loan underwriting practices.

All loan applications must be for clearly defined legitimate purposes with a determinable primary source of repayment, and as appropriate, secondary sources of repayment. All loans are supported by appropriate documentation such as current financial statements, tax returns, credit reports, collateral information, guarantor asset verification, title reports, appraisals, and other relevant documentation.

Commercial loans represent term loans used to acquire durable business assets or revolving lines of credit used to finance working capital. Underwriting practices evaluate each borrower’s cash flow as the principal source of loan repayment. Commercial loans are generally secured by the borrower’s business assets as a secondary source of repayment. Commercial loans are evaluated for credit-worthiness based on prior loan performance and borrower financial information including cash flow, borrower net worth and aggregate debt.

Commercial real estate loans represent term loans used to acquire or refinance real estate to be operated by the borrower in a commercial capacity. Underwriting practices evaluate each borrower’s global cash flow as the principal source of loan repayment, independent appraisal of value of the property, and other relevant factors. Commercial real estate loans are generally secured by a first lien on the property as a secondary source of repayment.

Real estate construction loans represent the financing of real estate development. Loan principal disbursements are controlled through the use of project budgets, and disbursements are approved based on construction progress, which is validated by project site inspections. A first lien on the real estate serves as collateral to secure the loan.

Residential real estate loans generally represent first lien mortgages used by the borrower to purchase or refinance a principal residence. For interest-rate risk purposes, the Company offers only fully-amortizing, adjustable-rate mortgages. In underwriting first lien mortgages, the Company evaluates each borrower’s ability to repay the loan, an independent appraisal of the value of the property, and other relevant factors. The Company does not offer riskier mortgage products, such as non-amortizing “interest-only” mortgages and “negative amortization” mortgages.

-35-

For loans secured by real estate, the Bank requires title insurance to insure the status of its lien and each borrower is obligated to insure the real estate collateral, naming the Company as loss payee, in an amount sufficient to repay the principal amount outstanding in the event of a property casualty loss.

Consumer installment and other loans are predominantly comprised of indirect automobile loans with underwriting based on credit history and scores, personal income, debt service capacity, and collateral values.

Loan volumes have declined due to payoffs and problem loan workout activities, particularly with purchased loans, and reduced volumes of loan originations. The Company did not take an aggressive posture relative to loan portfolio growth during the post-recession period of historically low interest rates. Management increased investment securities as loan volumes declined.

The following table shows the composition of the loan portfolio of the Company by type of loan and type of borrower, on the dates indicated:

Loan Portfolio

At December 31,

2025

2024

(In thousands)

Commercial

$

117,009

$

127,276

Commercial real estate

482,230

507,900

Construction

-

5,064

Residential real estate

7,186

8,274

Consumer installment and other

120,057

171,786

Total loans

$

726,482

$

820,300

The following table shows the maturity distribution of loans at December 31, 2025. There were no loans with a remaining maturity of over fifteen years as of December 31, 2025.

Loan Maturity Distribution

At December 31, 2025

Within One Year

One to Five Years

Five to Fifteen Years

Total

(In thousands)

Commercial

$

31,724

$

40,925

$

44,360

$

117,009

Commercial real estate

11,473

207,238

263,519

482,230

Residential real estate

-

375

6,811

7,186

Consumer and other installment

17,594

86,450

16,013

120,057

Total

$

60,791

$

334,988

$

330,703

$

726,482

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-36-

The following table shows the distribution of variable-rate and fixed-rate loans due after one year as of December 31, 2025.

At December 31, 2025

Fixed

Variable

Total

(In thousands)

Commercial

$

71,293

$

13,992

$

85,285

Commercial real estate

91,768

378,989

470,757

Residential real estate

988

6,198

7,186

Consumer and other installment

102,463

-

102,463

Total

$

266,512

$

399,179

$

665,691

Commitments and Letters of Credit

The Company issues formal commitments on lines of credit to well-established and financially responsible commercial enterprises. Such commitments can be either secured or unsecured and are typically in the form of revolving lines of credit for seasonal working capital needs. Occasionally, such commitments are in the form of letters of credit to facilitate the customers’ particular business transactions. Commitment fees are generally charged for commitments and letters of credit. Commitments on lines of credit and letters of credit typically mature within one year. For further information, see the accompanying notes to the consolidated financial statements.

Loan Portfolio Credit Risk

The Company extends loans to commercial and consumer customers which expose the Company to the risk that the borrowers will default, causing loss. The Company’s lending activities are exposed to various qualitative risks. All loan segments are exposed to risks inherent in the economy and market conditions. Significant risk characteristics related to the commercial loan segment include the borrowers’ business performance and financial condition, and the value of collateral for secured loans. Significant risk characteristics related to the commercial real estate segment include the borrowers’ business performance and the value of properties collateralizing the loans. Significant risk characteristics related to the construction loan segment include the borrowers’ performance in successfully developing the real estate into the intended purpose and the value of the property collateralizing the loans. Significant risk characteristics related to the residential real estate segment include the borrowers’ financial wherewithal to service the mortgages and the value of the property collateralizing the loans. Significant risk characteristics related to the consumer loan segment include the financial condition of the borrowers and the value of collateral securing the loans.

The Company closely monitors the markets in which it conducts its lending operations and follows a strategy to control exposure to loans with high credit risk. The Bank’s organizational structure separates the functions of business development and loan underwriting; Management believes this segregation of duties avoids inherent conflicts of combining business development and loan approval functions. In measuring and managing credit risk, the Company adheres to the following practices:

●

The Bank maintains a Loan Review Department which reports directly to the audit committee of the Board of Directors. The Loan Review Department performs independent evaluations of loans to challenge the credit risk grades assigned by Management, using grading standards employed by bank regulatory agencies. Those loans judged to carry higher risk attributes are referred to as “classified loans.” Classified loans receive elevated Management attention in order to maximize collection.

●

The Bank maintains two loan administration offices whose sole responsibility is to manage and collect classified loans.

Classified loans with higher levels of credit risk are further designated as “nonaccrual loans.” Management places classified loans on nonaccrual status when full collection of contractual interest and principal payments is in doubt. Uncollected interest previously accrued on loans placed on nonaccrual status is reversed as a charge against interest income. The Company does not accrue interest income on loans following placement on nonaccrual status. Interest payments received on nonaccrual loans are applied to reduce the carrying amount of the loan unless the carrying amount is well secured by loan collateral. “Nonperforming assets” include nonaccrual loans, loans 90 or more days past due and still accruing, and repossessed loan collateral (commonly referred to as “Other Real Estate Owned”).

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-37-

Nonperforming Loans

At December 31,

2025

2024

(In thousands)

Nonperforming nonaccrual loans

$

768

$

201

Performing nonaccrual loans

706

-

Total nonaccrual loans

1,474

201

Accruing loans 90 or more days past due

340

534

Total nonperforming loans

$

1,814

$

735

Management believes the overall credit quality of the loan portfolio is reasonably stable; however, classified and nonperforming assets could fluctuate from period to period. The performance of any individual loan can be affected by external factors such as the interest rate environment, economic conditions, pandemics, and collateral values or factors particular to the borrower. No assurance can be given that additional increases in nonaccrual and delinquent loans will not occur in the future.

Allowance for Credit Losses

The following table summarizes allowance for credit losses at the dates indicated:

At December 31,

At December 31,

2025

2024

(In thousands)

Allowance for credit losses on loans

$

11,573

$

14,780

Allowance for credit losses on held to maturity debt securities

1

1

Total allowance for credit losses

$

11,574

$

14,781

Allowance for unfunded credit commitments

$

201

$

201

Allowance for Credit Losses on Debt Securities Held to Maturity

Management segmented debt securities held to maturity, selected methods to estimate losses for each segment, and measured a loss estimate. Agency mortgage-backed securities were assigned no credit loss allowance due to the perceived backing of government sponsored entities. Corporate securities held to maturity were individually evaluated for expected credit loss by evaluating the issuer’s financial condition, profitability, cash flows, and credit ratings. The Company has evaluated each issuer’s historical financial performance and ability to service debt payments throughout and following the 2008-2009 recession. The Company has an expectation that nonpayment of the amortized cost basis continues to be zero. At December 31, 2025, no credit loss allowance was assigned to corporate securities held to maturity based on evaluation of each individual issuer’s historical financial performance throughout full business cycles. Municipal securities were evaluated for risk of default based on credit rating and remaining term to maturity using Moody’s risk of default factors; Moody’s loss upon default factors were applied to the assumed defaulted principal amounts to estimate the amount for credit loss allowance. Allowance for credit losses related to debt securities held to maturity was $1 thousand related to municipal securities at December 31, 2025 and December 31, 2024, reflecting the expected credit losses on debt securities held to maturity.

Allowance for Credit Losses on Loans

The Company’s allowance for credit losses on loans represents Management’s estimate of forecasted credit losses in the loan portfolio based on the current expected credit loss model. In evaluating credit risk for loans, Management measures the loss potential of the carrying value of loans. As described above, payments received on nonaccrual loans may be applied against the principal balance of the loans until such time as full collection of the remaining recorded balance is expected.

The preparation of the financial statements requires Management to estimate the amount of expected losses over the expected contractual life of the Bank’s existing loan portfolio and establish an allowance for credit losses. Loan agreements generally include a maturity date, and the Company considers the contractual life of a loan agreement to extend from the date of origination to the contractual maturity date. In estimating credit losses, Management must exercise significant judgment in evaluating information deemed relevant. The amount of ultimate losses on the loan portfolio can vary from the estimated amounts. Management follows a systematic methodology to estimate loss potential in an effort to reduce the differences between estimated and actual losses.

-38-

The allowance for credit losses is established through provisions for credit losses charged to income. Losses on loans are charged to the allowance for credit losses when all or a portion of the recorded amount of a loan is deemed to be uncollectible. Recoveries of loans previously charged off are credited to the allowance when realized. The Company’s allowance for credit losses is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall credit loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing economic conditions, or credit protection agreements and other factors.

Loans that share common risk characteristics are segregated into pools based on common characteristics, which is primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. For consumer installment loans, primarily secured by automobiles, historical loss rates are determined using a vintage methodology, which tracks losses based on period of origination. For commercial, construction, and commercial real estate, historical loss rates are determined using an open pool methodology where losses are tracked over time for all loans included in the pool at the historical measurement date. Historical loss rates are adjusted for factors that are not reflected in the historical loss rates that are attributable to national or local economic or industry trends which have occurred but have not yet been recognized in past loan charge-off history, estimated losses based on management’s reasonable and supportable expectation of economic trends over a forecast horizon of up to two years, and other factors that impact credit loss expectations that are not reflected in the historical loss rates. Other factors include, but are not limited to, the effectiveness of the Company’s loan review system, adequacy of lending Management and staff, loan policies and procedures, problem loan trends, and concentrations of credit. At the end of the two-year forecast period loss rates revert immediately to the historical loss rates. The results of this analysis are applied to the amortized cost of the loans included within each pool.

Loans that do not share risk characteristics with other loans in the pools are evaluated individually. A loan is considered ‘collateral-dependent’ when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. A credit loss reserve for collateral-dependent loans is established at the difference between the amortized cost basis in the loan and the fair value of the underlying collateral adjusted for costs to sell. For other individually evaluated loans that are not collateral dependent, a credit loss reserve is established at the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate. The impact of an expected modification to be made to loans to borrowers experiencing financial difficulty is included in the allowance for credit losses when management determines such modification is likely.

Accrued interest is recorded in other assets and is excluded from the estimation of expected credit loss. Accrued interest is reversed through interest income when amounts are determined to be uncollectible, which generally occurs when the underlying receivable is placed on nonaccrual status or charged off.

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-39-

The following table summarizes the allowance for credit losses, chargeoffs and recoveries for the periods indicated.

At and For the Year Ended December 31,

2025

2024

2023

($ in thousands)

Analysis of the Allowance for Credit Losses

Balance, beginning of period

$

14,780

$

16,867

$

20,284

Provision for (reversal of) credit losses on loans

(550

)

300

(1,150

)

Loans charged off:

Commercial

(1,597

)

(283

)

(410

)

Commercial real estate

(191

)

-

(45

)

Consumer and other installment

(4,100

)

(6,391

)

(7,499

)

Total chargeoffs

(5,888

)

(6,674

)

(7,954

)

Recoveries of loans previously charged off:

Commercial

462

124

2,359

Commercial real estate

54

204

71

Consumer and other installment

2,715

3,959

3,257

Total recoveries

3,231

4,287

5,687

Net loan losses

(2,657

)

(2,387

)

(2,267

)

Balance, end of period

$

11,573

$

14,780

$

16,867

Net loan losses as a percentage of average loans

(0.35

)%

(0.29

)%

(0.25

)%

Selected financial data: (at period end)

Loans

$

726,482

$

820,300

$

866,602

Nonaccrual loans

1,474

201

403

Allowance for credit losses as a percentage of loans

1.59

%

1.80

%

1.95

%

Nonaccrual loans as a percentage of loans

0.20

%

0.02

%

0.05

%

Allowance for credit losses to nonaccrual loans

785.14

%

7353.23

%

4185.36

%

The following table summarizes net (chargeoffs) recoveries and the ratio of net (chargeoffs) recoveries to average loans for the periods indicated:

For the Year Ended December 31,

2025

2024

2023

As a percentage

As a percentage

As a percentage

Average

of Net (chargeoffs)

Average

of Net (chargeoffs)

Average

of Net (chargeoffs)

Net (chargeoffs)

Loan

recoveries

Net (chargeoffs)

Loan

recoveries

Net (chargeoffs)

Loan

recoveries

Recoveries

Balances

to Average loans

Recoveries

Balances

to Average loans

Recoveries

Balances

to Average loans

($ in thousands)

Commercial

$

(1,135

)

$

113,770

(1.00

)%

$

(159

)

$

128,505

(0.12

)%

$

1,949

$

149,137

1.31

%

Commercial real estate

(137

)

488,758

(0.03

)%

204

493,282

0.04

%

26

492,183

0.01

%

Construction

-

1,748

-

%

-

5,064

-

%

-

4,362

-

%

Residential real estate

-

7,787

-

%

-

9,197

-

%

-

12,080

-

%

Consumer and other installment

(1,385

)

143,668

(0.96

)%

(2,432

)

200,088

(1.22

)%

(4,242

)

254,554

(1.67

)%

Total

$

(2,657

)

$

755,731

(0.35

)%

$

(2,387

)

$

836,136

(0.29

)%

$

(2,267

)

$

912,316

(0.25

)%

The Company's allowance for credit losses on loans is maintained at a level considered adequate to provide for expected losses based on historical loss rates adjusted for current and expected conditions over a forecast period. These include conditions unique to individual borrowers, as well as overall loan loss experience, the amount of past due, nonperforming and classified loans, recommendations of regulatory authorities, prevailing and forecasted economic conditions, or credit protection agreements and other factors. Loans that share common risk characteristics are segregated into pools based on common characteristics, which are primarily determined by loan, borrower, or collateral type. Historical loss rates are determined for each pool. Loans that do not share risk characteristics with other loans in the pools are evaluated individually. See Note 1 “Business and Accounting Policies” to consolidated financial statements for additional information.

[The remainder of this page intentionally left blank]

-40-

The following table presents the allocation of the allowance for credit losses for the periods indicated.

At December 31,

2025

2024

Allocation of the Allowance Balance

Loans as Percent of Total Loans

Allocation of the Allowance Balance

Loans as Percent of Total Loans

($ in thousands)

Commercial

$

4,048

16

%

$

4,197

15

%

Commercial real estate

6,109

66

%

6,034

62

%

Construction

-

-

%

247

1

%

Residential real estate

22

1

%

22

1

%

Consumer installment and other

1,394

17

%

4,280

21

%

Total

$

11,573

100

%

$

14,780

100

%

Allowance for Credit Losses

For the Year Ended December 31, 2025

Consumer

Commercial

Residential

Installment

Commercial

Real Estate

Construction

Real Estate

and Other

Total

(In thousands)

Allowance for credit losses:

Balance at beginning of period

$

4,197

$

6,034

$

247

$

22

$

4,280

$

14,780

Provision (reversal)

986

212

(247

)

-

(1,501

)

(550

)

Chargeoffs

(1,597

)

(191

)

-

-

(4,100

)

(5,888

)

Recoveries

462

54

-

-

2,715

3,231

Total allowance for credit losses

$

4,048

$

6,109

$

-

$

22

$

1,394

$

11,573

Management considers the $11.6 million allowance for credit losses on loans to be adequate as a reserve against current expected credit losses in the loan portfolio as of December 31, 2025.

See Note 3 to the consolidated financial statements for additional information related to the loan portfolio, loan portfolio credit risk, and allowance for credit losses.

Climate-Related Financial Risk

Climate change presents risk to the Company, our critical vendors and our customers. Our risk management practices incorporate the challenges brought about by climate change. The operations conducted in our centralized facilities and branch locations can be disrupted by acute physical risks such as flooding and windstorms, and by chronic physical risks such as rising sea levels, sustained higher temperatures, drought, and increased wildfires. Over the intermediate and longer-term, the Company can be subject to transition risks such as market demand, and policy and law changes.

None of the Company’s physical locations are located near sea level, and only a limited number of branches are located in flood zones. The Company and its critical vendors maintain property and casualty insurance, and maintain and regularly test disaster recovery plans, which include redundant operational locations and power sources. The Company’s operations do not use a significant amount of water in producing its products and services.

The Company monitors the climate risks of its loan customers. Borrowers with real estate loan collateral located in flood zones must carry flood insurance under the loans’ terms. At December 31, 2025, the Company had $16 million in loans to agricultural borrowers; Management continuously monitors these customers’ access to adequate water sources as well as their ability to sustain low crop yields and volatile commodity prices without encountering financial hardship. The Company makes automobile loans; changes in consumer demand, or governmental laws or policies, regarding gasoline, electric and hybrid vehicles are not considered to be material risks to the Company’s automobile lending practices. The Company considers climate risk in its underwriting of corporate bonds, and avoids purchasing bonds of issuers, which, in Management’s judgement, have elevated climate risk.

While the Company follows risk management practices related to climate risk, the Company may experience financial losses due to climate risk despite these precautions.

Asset/Liability and Market Risk Management

Asset/liability management involves the evaluation, monitoring and management of interest rate risk, market risk, liquidity and funding. The fundamental objective of the Company's management of assets and liabilities is to maximize its economic value while maintaining adequate liquidity and a conservative level of interest rate risk.

-41-

Interest Rate Risk

Interest rate risk is a significant market risk affecting the Company. Many factors affect the Company’s exposure to interest rates, such as general economic and financial conditions, customer preferences, historical pricing relationships, and re-pricing characteristics of financial instruments. Financial instruments may mature or re-price at different times. Financial instruments may re-price at the same time but by different amounts. Short-term and long-term market interest rates may change by different amounts. The timing and amount of cash flows of various financial instruments may change as interest rates change. In addition, the changing levels of interest rates may have an impact on bond portfolio volumes, accumulated other comprehensive (loss) income, loan demand and demand for various deposit products.

The Company’s earnings are affected not only by general economic conditions, but also by the monetary and fiscal policies of the United States government and its agencies, particularly the FOMC. The monetary policies of the FOMC can influence the overall demand for loans and growth of deposits and the level of interest rates earned on loans and investment securities and paid for deposits and other borrowings. The nature and impact of future changes in monetary policies are generally not predictable.

Management attempts to manage interest rate risk while enhancing the net interest margin and net interest income. At times, depending on expected increases or decreases in market interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, Management may adjust the Company's interest rate risk position. The Company's results of operations and net portfolio values remain subject to changes in interest rates and to fluctuations in the difference between long, intermediate, and short-term interest rates.

Management monitors the Company’s interest rate risk using a licensed third party simulation model, which is periodically assessed using supervisory guidance issued by the Board of Governors of the Federal Reserve System, SR 11-7 “Guidance on Model Risk Management.” Management measures its exposure to interest rate risk using a dynamic composition simulation and static simulation. Within the dynamic composition simulation, Management makes assumptions regarding the expected change in the volume of financial instruments given the assumed change in market interest rates. Within the static simulation, cash flows are assumed redeployed into like financial instruments at prevailing rates and yields. Both simulations are used to measure expected changes in net interest income assuming various levels of change in market interest rates.

The Company’s asset and liability position was generally “asset sensitive” at December 31, 2025, based on the interest rate assumptions applied to the simulation model. An “asset sensitive” position results in a larger change in interest income than in interest expense resulting from application of assumed interest rate changes. However, in the dynamic simulation, an assumed decline in interest rates is expected to result in improved deposit balances funding higher earning asset levels. Further, in the dynamic simulation, no change in interest rates is expected to result in a decline in net interest income as asset yields remain stable and deposit costs rise as the Bank negotiates deposit rates with customers in the current environment.

At December 31, 2025, Management’s most recent measurements of estimated changes in net interest income were:

Dynamic Simulation (1)

Static Simulation (2)

Change in Interest Rates

First Year Change in Net Interest Income

+ 2.0%

+ 4.1%

+ 10.7%

+ 1.0%

+ 2.1%

+ 5.3%

   0.0%

- 2.2%

   0.0%

- 1.0%

- 3.1%

- 6.1%

- 2.0%

- 6.6%

- 12.2%

(1)

Balance sheet composition changes; Assumed change in interest rates over 1 year

(2)

Balance sheet composition unchanged; Assumed immediate change in interest rates

Simulation estimates depend on, and will change with, the size and mix of the actual and projected composition of financial instruments at the time of each simulation. Assumptions made in the simulation may not materialize and unanticipated events and circumstances may occur. In addition, the simulation does not take into account any future actions Management may undertake to mitigate the impact of interest rate changes, loan prepayment estimates and spread relationships, which may change regularly.

The Company does not currently engage in trading activities or use derivative instruments to manage interest rate risk, even though such activities may be permitted with the approval of the Company's Board of Directors.

-42-

Market Risk - Equity Markets

Equity price risk can affect the Company. Preferred or common stock holdings, as permitted by banking regulations, can fluctuate in value. Changes in value of preferred or common stock holdings are recognized in the Company's income statement.

Fluctuations in the Company's common stock price can impact the Company's financial results in several ways. First, the Company has at times repurchased and retired its common stock; the market price paid to retire the Company's common stock affects the level of the Company's shareholders' equity, cash flows and shares outstanding. Second, the Company's common stock price impacts the number of dilutive equivalent shares used to compute diluted earnings per share. Third, fluctuations in the Company's common stock price can motivate holders of options to purchase Company common stock through the exercise of such options thereby increasing the number of shares outstanding and potentially adding volatility to the book tax provision. Finally, the amount of compensation expense and tax deductions associated with share based compensation fluctuates with changes in and the volatility of the Company's common stock price.

Market Risk - Other

Market values of loan collateral can directly impact the level of loan chargeoffs and the provision for credit losses. The financial condition and liquidity of debtors issuing bonds and debtors whose mortgages or other obligations are securitized can directly impact the credit quality of the Company’s investment securities portfolio requiring the Company to establish or increase reserves for expected credit losses. Other types of market risk, such as foreign currency exchange risk, are not significant in the normal course of the Company's business activities.

Liquidity and Funding

The objective of liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund the Bank's operations and meet obligations and other commitments on a timely basis and at a reasonable cost. The Bank achieves this objective through the selection of asset and liability maturity mixes that it believes best meet its needs. The Bank's liquidity position is enhanced by its ability to raise additional funds as needed by borrowing from correspondent banks or in the wholesale markets, or by selling debt securities available for sale.

In recent years, the Bank's deposit base has provided the majority of the Bank's funding requirements. This low-cost source of funds, along with shareholders' equity, provided 97% of funding for average total assets for the year ended December 31, 2025 and 96% for the year ended December 31, 2024. The Bank’s funding from customer deposits is in part reliant on the confidence clients have in the Bank. The Bank places a very high priority in maintaining this confidence through conservative credit risk and capital management practices and by maintaining an appropriate level of liquidity.

Total deposits were $4,840 million at December 31, 2025 and $5,012 million at December 31, 2024. Total time deposits were $67 million at December 31, 2025 and $82 million at December 31, 2024. The Company has no foreign time deposits. FDIC deposit insurance is $250,000 per depositor, for each account ownership category. At December 31, 2025, estimated federally uninsured total deposits and time deposits were $2,457 million and $4 million, respectively.

The following table shows the time remaining to maturity of the Company’s estimated amounts of uninsured time deposits with a balance greater than $250,000 per depositor per category:

At December 31, 2025

(In thousands)

Three months or less

$

1,466

Over three through six months

279

Over six through twelve months

1,901

Over twelve months

72

Total

$

3,718

Liquidity is further provided by assets such as balances held at the Federal Reserve Bank, and principal and interest payments from debt securities and loans. At December 31, 2025, the Company had $567,801 thousand in cash balances. During the twelve months ending December 31, 2026, the Company expects to receive $397,000 thousand in principal payments from its debt securities. If additional operational liquidity is required, the Company can pledge debt securities as collateral for borrowing purposes; at December 31, 2025, the Company’s debt securities which qualify as collateral for borrowing totaled $4,013,502 thousand. In the ordinary course of business, the Company pledges debt securities as collateral for certain depository customers; at December 31, 2025, the Company had pledged $710,092 thousand in debt securities for depository customers. In the ordinary course of business, the Company pledges debt securities as collateral for borrowing from the Federal Reserve Bank; at December 31, 2025, the Company had pledged $741,923 thousand in debt securities at the Federal Reserve Bank. During the year ended December 31, 2025, the Company’s average borrowings from the Federal Reserve Bank and other correspondent banks were $-0- thousand, respectively, and at December 31, 2025, the Company had no borrowings from the Federal Reserve Bank or other correspondent banks. At December 31, 2025, the Company had access to borrowing from the Federal Reserve Bank up to $741,923 thousand based on collateral pledged at December 31, 2025. At December 31, 2025, the Company’s estimated unpledged collateral qualifying debt securities totaled $2,137,832 thousand. Debt securities eligible as collateral are shown at market value unless noted otherwise:

-43-

At December 31, 2025

(in thousands)

Debt Securities Eligible as Collateral:

Corporate Securities

$

2,541,560

Collateralized Loan Obligations rated AAA

155,881

Obligations of States and Political Subdivisions

79,293

Agency Mortgage Backed Securities

934,356

Securities of U.S. Government Sponsored Entities

302,412

Total Debt Securities Eligible as Collateral

$

4,013,502

Debt Securities Pledged as Collateral:

Debt Securities Pledged at the Federal Reserve Bank

$

(741,923

)

Deposits by Public Entities

(710,092

)

Securities Sold under Repurchase Agreements

(417,531

)

Other

(6,124

)

Total Debt Securities Pledged as Collateral

$

(1,875,670

)

Estimated Debt Securities Available to Pledge

$

2,137,832

Liquidity risk can result from the mismatching of asset and liability cash flows, or from disruptions in the financial markets. The Bank performs liquidity stress tests on a periodic basis to evaluate the sustainability of its liquidity. Under the stress testing, the Bank assumes outflows of funds increase beyond expected levels. Measurement of such heightened outflows considers the composition of the Bank’s deposit base, including any concentration of deposits, non-deposit funding such as short-term borrowings, and unfunded lending commitments. The composition of the Bank’s deposits is considered including the broad industry and geographic diversification in the Bank’s market area. The Bank evaluates its stock of highly liquid assets to meet the assumed higher levels of outflows. Highly liquid assets include cash and amounts due from other banks from daily transaction settlements, reduced by branch cash needs and any Federal Reserve Bank reserve requirements, and investment securities based on regulatory guidelines. Based on the results of the most recent liquidity stress test, Management is satisfied with the liquidity condition of the Bank. However, no assurance can be given the Bank will not experience a period of reduced liquidity.

Management continually monitors the Bank’s cash levels. Loan demand from credit worthy borrowers will be dictated by economic and competitive conditions. The Bank aggressively solicits non-interest bearing demand deposits and money market checking deposits, which are the least sensitive to changes in interest rates. The growth of these deposit balances is subject to heightened competition, the success of the Bank's sales efforts, delivery of superior customer service, new regulations and market conditions. The Bank does not aggressively solicit higher-costing time deposits. Changes in interest rates, most notably rising or elevated interest rates, or increased consumer spending, could impact deposit volumes. Depending on economic conditions, interest rate levels, liquidity management and a variety of other conditions, any deposit growth may be used to fund loans or purchase investment securities. However, due to possible volatility in economic conditions, competition and political uncertainty, loan demand and levels of customer deposits are not certain. Shareholder dividends are expected to continue subject to the Board's discretion and continuing evaluation of capital levels, earnings, asset quality and other factors.

Westamerica Bancorporation ("Parent Company") is a separate entity apart from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Parent Company is responsible for the payment of dividends declared for its shareholders, and interest and principal on any outstanding debt. The Parent Company had no debt at December 31, 2025. Substantially all of the Parent Company's revenues are obtained from subsidiary dividends and service fees.

The Bank’s dividends paid to the Parent Company and Parent Company cash balances provided adequate cash for the Parent Company to pay shareholder dividends of $47 million for the year ended December 31, 2025 and $47 million in the year ended December 31, 2024 and retire common stock in the amounts of $104 million in the year ended December 31, 2025 and $210 thousand in the year ended December 31, 2024. Payment of dividends to the Parent Company by the Bank is limited under California and Federal laws. The Company believes these regulatory dividend restrictions will not impact Parent Company's ability to meet its ongoing cash obligations. The Parent Company’s cash balance was $268 million at December 31, 2025 and $263 million at December 31, 2024.

-44-

Capital Resources

The Company has historically generated high levels of earnings, which provide a means of accumulating capital. The Company's net income as a percentage of average shareholders' equity (“return on equity” or “ROE”) was 11.2% for the year ended December 31, 2025 and 13.8% for the year ended December 31, 2024. The Company also raises capital as employees exercise stock options. The Company raised $376 thousand through the exercise of stock options in the year ended December 31, 2025 while $1.5 million was raised through the exercise of stock options in the year ended December 31, 2024.

The Company paid cash dividends on its common stock totaling $47 million in the year ended December 31, 2025 and $47 million in the year ended December 31, 2024, which represent dividends per common share of $1.82 and $1.76, respectively. The Company's earnings have historically exceeded dividends paid to shareholders. The amount of earnings in excess of dividends provides the Company resources to finance growth and maintain appropriate levels of shareholders' equity. In the absence of profitable growth opportunities, the Company has at times repurchased and retired its common stock as another means to return capital to shareholders. The Company retired approximately 2 million shares valued at $104 million in the year ended December 31, 2025 and 4 thousand shares valued at $210 thousand in the year ended December 31, 2024.

The Company's primary capital resource is shareholders' equity, which was $934 million at December 31, 2025 compared with $890 million at December 31, 2024. The Company's ratio of equity to total assets was 15.66% at December 31, 2025 and 14.65% at December 31, 2024.

The Company performs capital stress tests on a periodic basis to evaluate the sustainability of its capital. Under the stress testing, the Company assumes various scenarios such as deteriorating economic and operating conditions, and unanticipated asset devaluations. The Company measures the impact of these scenarios on its earnings and capital. Based on the results of the most recent stress tests, Management is satisfied with the capital condition of the Bank and the Company. However, no assurance can be given the Bank or Company will not experience a period of reduced earnings or a reduction in capital from unanticipated events and circumstances.

Capital to Risk-Adjusted Assets

The capital ratios for the Company and the Bank under current regulatory capital standards are presented in the tables below, on the dates indicated. For Common Equity Tier I Capital, Tier 1 Capital and Total Capital, the minimum percentage required for regulatory capital adequacy purposes include a 2.5% “capital conservation buffer.”

To Be

Well-capitalized

Required for

Under Prompt

At December 31, 2025

Capital Adequacy

Corrective Action

Company

Bank

Purposes

Regulations (Bank)

Common Equity Tier I Capital

22.75

%

15.14

%

7.00

%

6.50

%

Tier I Capital

22.75

%

15.14

%

8.50

%

8.00

%

Total Capital

23.05

%

15.59

%

10.50

%

10.00

%

Leverage Ratio

15.22

%

10.09

%

4.00

%

5.00

%

[The remainder of this page intentionally left blank]

-45-

To Be

Well-capitalized

Required for

Under Prompt

At December 31, 2024

Capital Adequacy

Corrective Action

Company

Bank

Purposes

Regulations (Bank)

Common Equity Tier I Capital

22.46

%

15.33

%

7.00

%

6.50

%

Tier I Capital

22.46

%

15.33

%

8.50

%

8.00

%

Total Capital

22.82

%

15.84

%

10.50

%

10.00

%

Leverage Ratio

15.30

%

10.41

%

4.00

%

5.00

%

The Company and the Bank routinely project capital levels by analyzing forecasted earnings, credit quality, shareholder dividends, asset volumes, share repurchase activity, stock option exercise proceeds, and other factors. Based on current capital projections, the Bank expects to maintain regulatory capital levels in excess of the minimum required to be considered well-capitalized under the prompt corrective action framework. The Company expects to continue paying quarterly dividends to shareholders. No assurance can be given that changes in capital management plans will not occur.

Deposit Categories

The Company primarily attracts deposits from local businesses and professionals, as well as through retail savings and checking accounts, and, to a more limited extent, certificates of deposit. The following table summarizes the Company’s average daily amount of deposits and the rates paid for the periods indicated:

Deposit Distribution and Average Rates Paid

For the Years Ended December 31,

2025

2024

2023

Average Balance

Percentage of Total Deposits

Rate

Average Balance

Percentage of Total Deposits

Rate

Average Balance

Percentage of Total Deposits

Rate

($ In thousands)

Noninterest-bearing demand

$

2,243,836

46.2

%

-

%

$

2,445,945

47.3

%

-

%

$

2,748,544

47.5

%

-

%

Interest bearing:

Transaction

908,290

18.7

%

0.02

%

977,912

18.9

%

0.03

%

1,156,684

20.0

%

0.04

%

Savings

1,633,610

33.6

%

0.77

%

1,660,227

32.1

%

0.63

%

1,766,225

30.5

%

0.17

%

Time less than $100 thousand

48,307

1.0

%

0.30

%

57,064

1.1

%

0.33

%

67,832

1.2

%

0.30

%

Time $100 thousand or more

26,699

0.5

%

0.21

%

33,794

0.6

%

0.28

%

48,076

0.8

%

0.24

%

Total (1)

$

4,860,742

100.0

%

0.50

%

$

5,174,942

100.0

%

0.40

%

$

5,787,361

100.0

%

0.12

%

(1) The rates for total deposits were calculated using the average balances of interest-bearing deposits.

The Company’s strategy includes building the value of its deposit base by building balances of lower-costing deposits and avoiding reliance on higher-costing time deposits. Average balances of higher costing time deposits declined 35% to $75 million from 2023 to 2025. The Company’s average balances of checking and savings accounts represented 98% of average balances of total deposits in 2025, 2024 and 2023.

Total time deposits were $67 million and $82 million at December 31, 2025 and December 31, 2024, respectively. The following table sets forth, by time remaining to maturity, the Company’s total domestic time deposits. The Company has no foreign time deposits.

[The remainder of this page intentionally left blank]

-46-

Time Deposits Maturity Distribution

At December 31, 2025

(In thousands)

2026

$

52,526

2027

5,865

2028

4,045

2029

2,486

2030

2,080

Thereafter

19

Total

$

67,021

Short-term Borrowings

The following table sets forth the short-term borrowings of the Company:

Short-Term Borrowings Distribution

At December 31,

2025

2024

2023

(In thousands)

Securities sold under agreements to repurchase the securities

$

137,298

$

120,322

$

58,162

Total short-term borrowings

$

137,298

$

120,322

$

58,162

Further detail of other borrowed funds is as follows:

For the Years Ended December 31,

2025

2024

2023

($ in thousands)

Securities sold under agreements to repurchase the securities balances and rates paid on outstanding amount:

Average balance for the year

$

112,958

$

89,381

$

89,298

Maximum month-end balance during the year

137,298

132,487

138,005

Average interest rate for the year

0.62

%

0.74

%

0.13

%

Average interest rate at period end

0.61

%

0.62

%

0.31

%

Bank Term Funding Program borrowings balances and rates paid on outstanding amount:

Average balance for the year

$

-

$

107,364

$

-

Maximum month-end balance during the year

-

200,000

-

Average interest rate for the year

-

%

5.40

%

-

%

Average interest rate at period end

-

%

-

%

-

%

Financial Ratios         

The following table shows key financial ratios for the periods indicated:

At and For the Years Ended December 31,

2025

2024

2023

Return on average total assets

1.91

%

2.15

%

2.35

%

Return on average common shareholders' equity

11.23

%

13.82

%

18.08

%

Average shareholders' equity as a percentage of:

Average total assets

17.03

%

15.57

%

13.02

%

Average total loans

136.90

%

119.99

%

98.06

%

Average total deposits

21.28

%

19.39

%

15.46

%

Common dividend payout ratio

40

%

34

%

28

%

-47-