UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number: 001-40379

FIVE STAR BANCORP

(Exact name of registrant as specified in its charter)


California (State or other jurisdiction of incorporation or organization) 3100 Zinfandel Drive, Suite 100 Rancho Cordova, California (Address of principal executive offices)			75-3100966 (I.R.S. Employer Identification No.) 95670 (Zip Code)

(916) 626-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value per share	FSBC	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	x

Non-accelerated filer	o	Smaller reporting company	o

Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates as of June 30, ~~2024~~2025 was $~~393~~477.32 million. As of February 2524, ~~2025~~2026, the number of shares outstanding of the registrant’s common stock was 21,~~329~~376,~~235~~153.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A for its ~~2025~~2026 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.

INDEX

		Page
Cautionary Note Regarding Forward-Looking Statements		1
PART I		3
Item 1.	Business	3
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	4039
Item 1C.	Cybersecurity	40
Item 2.	Properties	42
Item 3.	Legal Proceedings	42
Item 4.	Mine Safety Disclosures	42
PART II		43
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	43
Item 6.	[Reserved]	44
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	7173
Item 8.	Financial Statements and Supplementary Data	7375
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~118~~124
Item 9A.	Controls and Procedures	~~118~~124
Item 9B.	Other Information	~~118~~125
PART III		~~119~~126
Item 10.	Directors, Executive Officers and Corporate Governance	~~119~~126
Item 11.	Executive Compensation	~~119~~126
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	~~119~~126
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~120~~127
Item 14.	Principal Accountant Fees and Services	~~120~~127
PART IV		~~121~~128
Item 15.	Exhibits and Financial Statement Schedules	~~121~~128
Item 16.	Form 10-K Summary	~~122~~129
SIGNATURES		~~123~~130

Glossary of Acronyms, Abbreviations, and Terms

The terms identified below are used in various sections of this Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 and the unaudited Consolidated Financial Statements and Notes to the Financial Statements in Item 1 of this Annual Report on Form 10-K.

AAA Accumulated Adjustments Account FNMA Federal National Mortgage Association ACL Allowance for Credit Losses GAAP Generally Accepted Accounting Principles in the U.S. ASC Accounting Standards Codification GNMA Government National Mortgage Association ASU Accounting Standards Update GSE Government Sponsored Entity Bancorp Five Star Bancorp and its subsidiary ICS Insured Cash Sweep® Bank Five Star Bank IPO Initial Public Offering Basel III A capital framework and rules for U.S. banking organizations ~~IRS~~IRC Internal Revenue ~~Service~~Code BOLI Bank-owned Life Insurance LMIRS ~~Loan~~Internal ~~modification~~Revenue ~~made~~Service ~~to borrower experiencing financial difficulty~~ CDARS Certificate of Deposit Account Registry Service® ~~Nasdaq~~LM ~~The~~Loan ~~Nasdaq~~modification ~~Stock~~made ~~Market~~to ~~LLC~~borrower experiencing financial difficulty CECL Current Expected Credit Loss NINasdaq ~~Net~~The ~~Income~~Nasdaq Stock Market LLC CFPB Consumer Financial Protection Bureau ~~NII~~NI Net ~~Interest~~ Income CRA Community Reinvestment Act ~~OCI~~NII ~~Other~~Net ~~Comprehensive~~Interest Income CME Chicago Mercantile Exchange ~~OFAC~~OCI ~~Office~~Other ofComprehensive ~~Foreign~~Income ~~Assets Control~~ CRE Commercial Real Estate ~~OREO~~OFAC ~~Other~~Office ~~Real~~of ~~Estate~~Foreign ~~Owned~~Assets Control C&I Commercial & Industrial ~~PPP~~OREO ~~Paycheck~~Other ~~Protection~~Real ~~Program~~Estate Owned DFPI Department of Financial Protection and Innovation RSA Restricted Stock Award EPS Earnings per Share ROAA Return on Average Assets, annualized EVE Economic Value of Equity ROAE Return on Average Equity, annualized FASB Financial Accounting Standards Board ROUA Right-of-Use Asset FDIC Federal Deposit Insurance Corporation SBA U.S. Small Business Administration Federal Reserve Board of Governors of the Federal Reserve System SEC Securities and Exchange Commission FFIEC Federal Financial Institutions Examination Council SOFR Secured Overnight Financing Rate FHLB Federal Home Loan Bank of San Francisco Treasury Department U.S. Department of the Treasury FHLMC Federal Home Loan Mortgage Corporation

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of our beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Such forward-looking statements are based on various assumptions (some of which may be beyond our control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to:

•risks related to the concentration of our business in California, and specifically within Northern California, including risks associated with any downturn in the real estate sector;

•changes in market interest rates that affect the pricing of our loans and deposits, our net interest income, and our borrowers’ ability to repay loans;

•changes in the U.S. economy, including an economic slowdown, recession, inflation, deflation, tariffs, housing prices, employment levels, rate of growth, and general business conditions;

•uncertain market conditions and economic trends nationally, regionally, and particularly in Northern California and California;

•the soundness of other financial institutions and the impacts related to or resulting from bank failures and other economic and industry volatility, including increased regulatory requirements and costs and potential impacts to macroeconomic conditions;

•the impact of recent and future legislative and regulatory changes, including changes in banking, securities, and tax laws and regulations and their application by our regulators~~, and economic stimulus programs~~;

•the effects of increased competition from a wide variety of local, regional, national, and other providers of financial and investment services;

•the risks associated with our loan portfolios, and specifically with our commercial real estate loans;

•our ability to maintain adequate liquidity and to maintain capital necessary to fund our growth strategy and operations and to satisfy minimum regulatory capital levels;

•risks related to our strategic focus on lending to small to medium-sized businesses;

•the sufficiency of the assumptions and estimates we make in establishing reserves for potential credit losses and the value of loan collateral and securities;

•our level of nonperforming assets and the costs associated with resolving problem loans, if any~~, and complying with government-imposed foreclosure moratoriums~~;

•our ability to comply with various governmental and regulatory requirements applicable to financial institutions, including supervisory actions by federal and state banking agencies;

•governmental monetary and fiscal policies, including the policies of the Federal Reserve;

•risks associated with unauthorized access, cybersecurity breaches, cyber-crime, and other threats and disruptions to data security;

•our ability to implement, maintain, and improve effective risk management framework, disclosure controls and procedures, and internal controls over financial reporting;

•our ability to adopt and successfully integrate new initiatives or technologies into our business in a strategic manner;

•our ability to attract and retain executive officers and key employees and their customer and community relationships;

•the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;

•the occurrence or impact of climate change or natural or man-made disasters or calamities, such as wildfires, droughts, mudslides, floods, and earthquakes, and particularly in ~~Northern~~ California, and specifically Northern California;

•changes in and impact of local, regional, and global business, economic, and political conditions and geopolitical events, such as pandemics, civil unrest, wars, and acts of terrorism; and

•other factors that are discussed in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.”

The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in this Annual Report on Form 10-K, including those discussed in the section entitled “Risk Factors.” Additional factors that could cause results or performance to materially differ from those expressed in our forward-looking statements are detailed in other filings we may make with the SEC, copies of which are available from us at no charge. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect us. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Annual Report on Form 10-K. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We disclaim any duty to revise or update the forward-looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward-looking statements, except as specifically required by law.

PART I

Item 1. Business

Our Company

Headquartered in the greater Sacramento metropolitan area of California, Five Star Bancorp is a bank holding company that operates through its wholly owned subsidiary, Five Star Bank, a California state-chartered non-member bank. The Bank began operations on December 20, 1999. Bancorp was incorporated on September 16, 2002 and became the sole shareholder of the Bank on June 2, 2003. Our executive offices are located at 3100 Zinfandel Drive, Suite 100, Rancho Cordova, California 95670 and our telephone number is (916) 626-5000. Our website address is https://www.fivestarbank.com. Information on our website should not be considered a part of this Annual Report on Form 10-K.

The Company provides a broad range of banking products and services to small and medium-sized businesses, professionals, and individuals primarily in Northern California through ~~eight~~nine branch offices. The Bank opened a full -service branch in ~~Downtown~~Walnut ~~San~~Creek ~~Francisco~~ in September ~~2024~~2025. The Bank’s deposits are insured in whole or in part by the FDIC. The Bank’s loans and deposits are primarily within Northern California, and the Bank’s primary funding source is deposits from customers. Our mission is to strive to become the top business bank in all markets we serve through exceptional service, deep connectivity, and customer empathy. We are dedicated to serving real estate, agricultural, faith-based, and small to medium-sized enterprises. We aim to consistently deliver value that meets or exceeds expectations of our shareholders, customers, employees, business partners, and community. We refer to our mission as “purpose-driven and integrity-centered banking.” At December 31, ~~2024~~2025, we had total assets of $4.18 billion, total loans held for investment of $34.51 billion, and total deposits of $34.62 billion.

In May 2021, the Company completed its IPO, in connection with which the Company terminated its status as a Subchapter S corporation as of May 5, 2021 and became a taxable C Corporation.

Unless otherwise indicated, references in this report to “we,” “our,” “us,” “the Company,” or “Bancorp” refer to Five Star Bancorp and our consolidated subsidiary. All references to “the Bank” or “Five Star” refer to Five Star Bank, our wholly owned subsidiary.

Our Market

The Company, through the Bank, provides financial services to customers who are predominately small and middle-market businesses, professionals, and individuals primarily in the Northern California region. Our primary loan products are commercial real estate loans, land development loans, construction loans, and operating lines of credit and our primary deposit products are checking accounts, savings accounts, money market accounts, and term certificate accounts.

Our principal geographic market is the Roseville/Sacramento/Rancho Cordova/Elk Grove area (the “Greater Sacramento Area”). The Greater Sacramento Area has a profitable and productive economy driven by the governmental, education, technology, health care, agricultural, and manufacturing sectors. Since 2016, our market share of the total deposits in the Greater Sacramento Area has increased significantly, according to the FDIC Deposit Market Share Reports. We believe that our market growth confirms the quality of the purpose-driven and integrity-centered banking that we strive to deliver to our customers.

During ~~2024~~2025, we continued our expansion into the San Francisco Bay Area, including the opening of a full service branch in ~~Downtown~~Walnut ~~San~~Creek ~~Francisco~~ in September ~~2024~~2025. We hired ~~eight~~three business development officers, ~~four relationship managers,~~ three loan officers, ~~one~~and ~~relationship~~four ~~specialist,~~additional ~~one~~staff ~~treasury~~to ~~solutions~~support ~~specialist,~~these ~~and~~operations ~~one branch manager~~ during ~~2024~~2025 as part of our expansion.

Our Products and Services

Lending Activities

We focus primarily on commercial lending, with an emphasis on commercial real estate. We offer a variety of loans to small and medium-sized businesses, professionals, and individuals, including commercial real estate, commercial, commercial land and construction, and farmland loans. Although a substantial portion of our loan portfolio consists of commercial real estate loans within our market, our portfolio is diverse and includes ~~a significant amount of~~ SBA loans to customers nationwide. To a lesser extent, we also offer residential real estate and construction loans and consumer loans.

Commercial real estate loans: As of December 31, ~~2024~~2025, we had $23.93 billion in total commercial real estate loans, representing 8081.7508% of total loans before deferred fees. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. These loans are generally collateralized by first liens on real estate and amortized over a period of years. We monitor and evaluate commercial real estate loans based on collateral, geography, and risk grade criteria. Our commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing our commercial real estate portfolio are diverse in terms of type and industry. This diversity helps reduce our exposure to adverse economic events that affect any single market or industry.

Commercial land and construction loans: As of December 31, ~~2024~~2025, we had $~~115~~98.21 million in commercial land and construction loans, representing 32.2640% of total loans before deferred fees. We make loans to established builders to construct residential properties, loans to developers of commercial real estate investment properties and residential developments, and, to a lesser extent, loans to individual clients for construction of single-family homes in our market. On rare occasions, we also make loans for the acquisition of undeveloped land subject to heightened underwriting requirements. Construction loans are typically disbursed as construction progresses and carry either fixed or variable interest rates generally based on the borrowers’ ability to repay the loans from the cash flow of their businesses. The terms of our commercial land and construction loans vary depending on factors such as the type and size of the development and the financial strength of the borrower/guarantor. Loans are typically structured with an interest-only construction period and mature at the completion of construction.

Residential real estate and construction loans: As of December 31, ~~2024~~2025, we had $3746.30 million in residential real estate and construction loans, representing 1.0613% of total loans before deferred fees. Residential real estate loans are underwritten based upon income, credit history, and collateral. To monitor and manage residential loan risk, policies and procedures are developed and modified, as needed. We believe that this activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage, collection remedies, the number of such loans a borrower can have at one time, and documentation requirements.

Farmland loans: As of December 31, ~~2024~~2025, we had $4759.26 million in farmland loans, representing 1.3446% of total loans before deferred fees. We are a strong agricultural lender, with both lines of credit and term loans. Farmland loans are generally made to producers and processors of crops and livestock. Repayment is primarily from the sale of an agricultural product or service. Farmland loans are secured by real property and are susceptible to changes in market demand for specific commodities. This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions, and changes in business cycles, as well as adverse weather conditions.

Commercial loans: As of December 31, ~~2024~~2025, we had $~~198~~292.12 million in commercial loans, representing 57.6016% of total loans before deferred fees. Commercial loans are underwritten after evaluating the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

SBA loans: As of December 31, ~~2024~~2025, our total commercial SBA portfolio held for investment was $4234.83 million, representing 10.2184% of total loans before deferred fees. In ~~2024~~2025, we sold 5610 SBA 7(a) loans with government-guaranteed portions totaling approximately $183.3 million. We participate in the SBA 7(a) program in order to meet the needs of our small business community as well as customers nationwide. As an approved participant in the SBA Preferred Lender Program, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA presently guarantees 75% to 90% of the principal amount of qualifying loans originated under the 7(a) loan program. The guarantee is conditional and covers a portion of the risk of payment default by the borrower, but not the risk of improper closing and servicing by the lender. As such, prudent underwriting and closing processes are essential to

~~essential to~~ effective utilization of the 7(a) program. We typically sell in the ~~secondary market the~~ SBA-guaranteed portion of the SBA loans we originate in the secondary market.

Consumer and other loans: As of December 31, ~~2024~~2025, we had $~~279~~275.65 million in consumer and other loans, representing 76.9077% of total loans before deferred fees. WeThese ~~make~~loans consist primarily of loans purchased in a loan purchase program with a non-bank lender, generally made to professionals for the purpose of large personal or household purchases. The loans are unsecured, fixed rate loans. These loans also include loans purchased or originated through financing partnerships which are no longer active. Under those financing programs, we made a variety of loans in relatively small amounts to individuals for personal purposes, primarily for home repairs and improvements. Consumer loans are underwritten based on the individual borrower’s income, current debt level, past credit history, and the value of any available collateral. The terms of consumer loans vary considerably based upon the loan type, nature of collateral, and size of the loan. The performance of consumer loans is affected by the local and regional economy as well as the rates of personal bankruptcies, job loss, divorce, and other individual-specific characteristics. We do not expect these consumer and other loans to make up a significant portion of our lending activity.

Lending Philosophy

In keeping with our mission of purpose-driven and integrity-centered banking, we seek credit arrangements that serve our local community and provide attractive risk-adjusted returns to us. We pursue our objectives ~~and~~while ~~are~~remaining mindful of liquidity, flexibility, and risk considerations by exercising controls on non-interest expenses and close management of our assets and liabilities. We periodically set guidelines ~~aimed~~designed to maintain stability of our loan-to-deposit ratio, minimize past-due and non-accrual loans, and achieve an optimal loan mix and concentration. We seek well-margined and collateralized loan opportunities to borrowers with extensive professional asset operating experience.

Lending Policy and Procedures

We have established common documentation, policies, and standards for lending based on the type of loan. A thorough credit analysis precedes commercial and real estate loan decisions, and we follow well-established and proven procedures when approving consumer loans.

We have established a Management Loan Committee and a Director Loan Committee. Our Management Loan Committee is comprised of our Chief Executive Officer, our Chief Credit Officer, certain other members of management, and select senior loan officers and is primarily responsible for day-to-day implementation and oversight of our loan approval procedures. Our board of directors approves, from time to time, a delegated lending authority to members of the Management Loan Committee. The amount of authority delegated to each member of the committee varies based on years of direct lending experience, responsibility, and performance. The authority limits also vary by collateral type.

Concentrations of Credit Risk

Although we have a diversified loan portfolio, a substantial portion is secured by commercial and residential real estate located in Northern California. As of December 31, ~~2024~~2025, approximately 5756.6689% of our real estate loans measured by dollar amount were secured by collateral located in California, a majority of which is in Northern California. Additionally, we have a high concentration of real estate related loans, which represented approximately 86.4107% of total loans before deferred fees at December 31, ~~2024~~2025. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, or a decline in real estate values in our primary market in particular, could have an adverse impact on the collectability of these loans. Personal and business incomes represent the primary source of repayment for the majority of these loans.

Deposit Products

Representing 97.3049% of our total liabilities as of December 31, ~~2024~~2025, deposits are our primary source of funding for our business operations. As of December 31, ~~2024~~2025, we held total deposits of $34.62 billion, including $~~922~~1.61 ~~million~~billion in non-interest-bearing deposits.

We offer a ~~complete~~comprehensive array of deposit products for small and medium-sized businesses, professionals, and individuals, including a variety of checking and savings accounts, time deposits, and money market accounts. We also provide a wide range of deposit services, including debit cards, remote deposit capture, online banking, mobile banking, and direct deposit services.

We obtain most of our deposits from individuals, small and medium-sized businesses, and municipalities in our market. We solicit deposits through our relationship-driven team of dedicated and accessible bankers and through community-focused marketing. We emphasize obtaining deposit relationships at loan origination. We provide a high level of customer service to our depositors. We have invested in personnel, business and compliance processes, and technology that enable us

We obtain most of our deposits from individuals, small and medium-sized businesses, and municipalities in our market. We solicit deposits through our relationship-driven team of dedicated and accessible bankers, as well as through community-focused marketing. We emphasize obtaining deposit relationships at loan origination. We provide a high level of customer service to ~~acquire~~our depositors. We have invested in personnel, business and compliance processes, and technology that enable us to acquire, as well as efficiently and effectively serve, a wide array of business deposit accounts, while continuing to provide the level of customer service for which we are known.

As of December 31, ~~2024~~2025, our 4953 largest deposit relationships, each accounting for more than $10.0 million, totaled $12.80 billion, or 5047.3582% of our total deposits. This includes $~~674~~789.16 million of our total deposits held by municipalities, of which we conduct a monthly review. Our management maintains our liquidity position and lines of credit with correspondent banks to mitigate the risk of large withdrawals by this group of large depositors.

Investment Securities

As of December 31, ~~2024~~2025, the carrying value of our investment portfolio, which represented 2.4904% of total assets, totaled $~~100~~96.9 million and had an average effective yield of 2.0903% and an estimated modified duration of approximately 6.1406 years. The primary objectives of the investment portfolio are to provide a source of liquidity and provide collateral that can be readily sold or pledged for public deposits or other business purposes. At December 31, ~~2024~~2025, 5049.1073% and 3940.5041% of our investment portfolio consisted of mortgage-backed securities and obligations of states and political subdivisions, respectively. The remainder of our securities portfolio is invested in U.S. government agencies, collateralized mortgage obligations, and corporate bonds. We regularly evaluate the composition of our investment portfolio as the interest rate yield curve changes and may sell or pledge investment securities from time to time to adjust our exposure to interest rates or to provide liquidity to meet loan demand. Due to loan growth, we are holding the majority of our on-balance sheet liquidity in the Federal Reserve Bank to provide readily available funds for loan growth and deposit activities in the normal course of business for our existing clients.

Competition

The banking business is highly competitive, and we face strong competition from many other financial institutions and financial services providers. Our principal competitors are commercial and community banks, credit unions, savings and loan associations, mortgage banking firms and online mortgage lenders, and commercial and consumer finance companies, including large national financial institutions that operate in our market. Our profitability depends in large part upon our continued ability to successfully compete with these institutions for lending opportunities, deposit funds, financial products, bankers, and potential acquisition targets.

We conduct business through ~~eight~~nine branches in our key market of Northern California. We opened a full service branch in ~~Downtown~~Walnut ~~San~~Creek ~~Francisco~~ in September ~~2024~~2025. Many other commercial and community banks, savings institutions, credit unions, and other financial institutions maintain a physical presence in our primary market area, and some maintain only a virtual presence. Many of these competitors are larger than we are, have significantly more resources, greater brand recognition, and more extensive and established branch networks or geographic footprints than we do, and may be able to attract customers more effectively than we can. Because of their scale, many of these competitors can be more aggressive on loan and deposit pricing than we can and may better afford and make broader use of media advertising, support services, and electronic technology than we do. Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. To offset these competitive disadvantages, we concentrate marketing efforts in the local markets we service with local advertisements and personal contacts. We depend on our reputation of having greater personal service than our competitors, as well as consistency, flexibility, our ability to make credit and other business decisions quickly, and our deep knowledge of competitor strengths and weaknesses.

Based on the FDIC Summary of Deposits as of June 30, ~~2024~~2025, ~~Five~~the ~~Star~~Bank ranks sixth in the Sacramento-Roseville-Folsom metropolitan statistical area (“MSA”) by deposit market share with deposits of $23.81 billion and four branches. As of June 30, ~~2024~~2025, total market deposits in the Sacramento-Roseville-Folsom MSA were $9294.27 billion, of which $7577.43 billion, or approximately 81.7755%, iswas held by five money center banks across ~~181~~174 branches. We are the ~~43rd~~39th largest insured depository institution in California by deposits as of June 30, ~~2024~~2025.

Information Technology Systems

We have made, and continue to make, significant investments in our information technology systems and staff for our banking and lending operations and treasury management activities. We believe this investment will support our continued growth and enable us to enhance our capabilities to offer new products, improve overall customer experience, improve profitability through efficiencies, and provide scalability for future growth. We utilize nationally recognized software vendors and their cloud/hosted models, which allow us to outsource the processing of our data. Our internal network and e-mail systems are administered by a managed service provider specializing in financial institutions, and we maintain our

profitability through efficiencies, and provide scalability for future growth. We utilize nationally recognized software vendors and their cloud/hosted models, which allow us to outsource the processing of our data. Our internal network and e-mail systems are administered by a managed service provider specializing in financial institutions, and we maintain our production infrastructure in a data center facility near Reno, Nevada. This site provides for power and connectivity redundancy, and we maintain a disaster recovery program, including a cloud-based recovery environment.

The majority of our other systems, including our electronic funds transfer, transaction processing, and online banking services are hosted by third-party service providers. The scalability of this infrastructure will support our growth strategy. In addition, the tested capability of these vendors to automatically switch over to standby systems should allow us to recover our systems and provide business continuity quickly in case of a disaster.

Emerging Growth Company Status

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. Among other factors, as an emerging growth company:

•we may discuss our results of operations for only two years in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” provided that we reference disclosure where the third year of our results of operations may be found;

•we are exempt from the requirement to provide an opinion from our auditors on the design and operating effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”);

•we may choose not to comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and our audited financial statements;

•we are permitted to provide less extensive disclosure regarding our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies and with which emerging growth companies may comply, which means we are not required to include a compensation discussion and analysis and other disclosures regarding our executive compensation in this Annual Report on Form 10-K; and

•we are not required to hold nonbinding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions for up to five years unless we earlier cease to qualify as an emerging growth company. We would cease to be an emerging growth company upon the earliest of: (i) the first fiscal year following the fifth anniversary of our IPO; (ii) the first fiscal year after our annual gross revenues are $1.235 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We have elected to adopt the reduced disclosure requirements described above regarding the number of periods for which we are providing audited financial statements and selected financial data, and our executive compensation arrangements. In addition, we take advantage of the reduced reporting and other requirements under the JOBS Act with respect to the periodic reports we file with the SEC and proxy statements that we use to solicit proxies from our shareholders. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you invest.

The JOBS Act exempts emerging growth companies from compliance with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement declared effective under the Securities Act of 1933, as amended, or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of this extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. ~~As such~~However, ~~our~~we ~~consolidated financial statements~~ may ~~not~~early beadopt ~~comparable~~certain ~~with~~accounting ~~those~~standards, ofas athe ~~public~~JOBS ~~company~~Act ~~that~~does is not preclude an emerging growth company, orfrom ~~those~~adopting of a ~~public~~new ~~company~~or ~~that~~revised isaccounting anstandard ~~emerging~~early ~~growth~~than ~~company~~the time that ~~has~~such ~~opted~~standard ~~out~~applies ofto ~~using~~private ~~the~~companies ~~extended~~to ~~transition~~the ~~period,~~extent ~~because~~early ofadoption ~~the~~is ~~potential~~permitted. ~~differences~~As insuch, ~~accounting~~our ~~standards~~consolidated ~~used.~~

financial statements may not be comparable with those of a public company that is not an emerging growth company, or those of a public company that is an emerging growth company that has opted out of using the extended transition period, because of the potential differences in accounting standards used.

Risk Management

We believe that effective risk management and control processes are critical to our safety and soundness, our ability to predict and manage the challenges that we face, and, ultimately, our long-term corporate success. Risk management refers to the activities by which we identify, measure, monitor, evaluate, and manage the risks we face in the course of our banking activities. These include liquidity, interest rate, credit, operational, compliance, regulatory, strategic, financial, and reputational risk exposures. Our board of directors, both directly and through its committees, is responsible for overseeing our risk management processes, including quarterly enterprise risk management assessments and annual assessments in the following areas: (i) cyber; (ii) Bank Secrecy Act of 1970 (“Bank Secrecy Act”)/anti-money laundering; and (iii) third-party risk, with each of the committees of our board of directors assuming a different and important role in overseeing the management of the risks we face.

The Audit Committee of our board of directors is responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures, and internal control over financial reporting). The Compensation Committee of our board of directors has primary responsibility for risks and exposures associated with our compensation policies, plans, and practices regarding executive compensation, board compensation, and our compensation structure generally. Our Compensation Committee, in conjunction with our President and Chief Executive Officer and other members of our management, as appropriate, reviews our incentive compensation arrangements to ensure these programs are consistent with applicable laws and regulations, including safety and soundness requirements, and do not encourage imprudent or excessive risk-taking by our employees. The Governance and Nominating Committee of our board of directors oversees risks associated with the independence of our board of directors and potential conflicts of interest.

Our senior management is responsible for implementing our risk management processes by assessing and managing the risks we face, including strategic, operational, regulatory, investment, and execution risks, on a day-to-day basis, and reporting to our board of directors regarding our risk management processes. Our senior management is also responsible for creating and recommending to our board of directors for approval appropriate risk appetite metrics reflecting the aggregate levels and types of risk we are willing to accept in connection with the operation of our business and pursuit of our business objectives.

The role of our board of directors in our risk oversight is consistent with our leadership structure, with our President and Chief Executive Officer and the other members of senior management having responsibility for assessing and managing our risk exposure, and our board of directors and its committees providing oversight in connection with those efforts. We believe this division of risk management responsibilities presents a consistent, systemic, and effective approach for identifying, managing, and mitigating risks throughout our operations.

Human Capital

To facilitate talent attraction and retention, we strive to create an inclusive, safe, and healthy workplace with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits, and health and welfare programs.

Employee Profile

As of December 31, ~~2024~~2025, we had ~~205~~233 full-time employees and five part-time employees. None of our employees are covered by a collective bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.

Compensation and Benefits

We provide a competitive compensation and benefits program to help meet the needs of our employees. In addition to salaries, this program includes annual bonus opportunities, a 401(k) plan with an employer matching contribution, healthcare and insurance benefits, ~~flexible~~health ~~spending~~reimbursement accounts, paid time off and family leave, and an employee assistance program.

Learning and Development

~~Engagement.~~Learning ~~We facilitate the educational~~ and ~~professional development of our employees through support to attend conferences and obtain degrees, licenses, and certifications while employed by us.~~Development

We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues under the leadership of a Director of Employee Engagement. We facilitate the educational and professional development of our employees through support to attend conferences and obtain degrees, licenses, and certifications while employed by us.

Commitment to Environmental, Social, and Governance

We are executing an Environmental, Social, and Governance strategy designed to promote positive change that focuses on the environmental impacts of our business and the geographical service areas in which we serve, social factors in the communities we serve, and the governance of our board of directors.

Environmental: Climate change impacts our customers, communities, employees, and shareholders. We are committed to developing policies and procedures that can contribute to reducing the effects of climate change, including funding customer business ventures that create a positive environmental impact through agriculture or technology. We continue to sponsor and support environmental impact initiatives by partnering with our customers that aid in the efforts of a clean and sustainable community. Additionally, we equip customers with technology tools designed to reduce their carbon footprint by reducing in-branch customer visits.

We have taken steps designed to help reduce our own carbon footprint by utilizing e-signatures to conduct business to reduce paper consumption, occupying sustainable facilities when possible, and encouraging our employees to work remotely, where possible. We recognize that reducing the effects of climate change and helping to drive the transformation to a lower carbon environment are ongoing efforts, and plan to continually seek out opportunities that can positively impact the effect that climate change has on the environment.

Social: We work to create positive social impacts in the communities in which our business operates, including by assisting unhoused populations, supporting affordable housing projects, and prioritizing non-profit donations. We believe it is our shared responsibility to build a strong foundation of community by fostering a culture of belonging and inclusion. We also remain focused on ~~the~~investing ~~investment in, economic development of,~~ and ~~sustainability~~economically ofdeveloping the geographical service areas in which we serve, as well as on their sustainability.

Governance: The Governance and Nominating Committee is committed to diversity on our board of directors and compliance with applicable rules, regulations, and guidance regarding the composition of our leadership. Members of our board of directors represent diverse backgrounds, including diversity of race, ethnicity, gender, and other demographics. We are committed to ethical business practices and accounting transparency, as evidenced through our involvement in the community and results of examinations by regulators.

Dedication to ~~Diversity,~~Community ~~Equity,~~Impact and Inclusion

~~Diversity,~~Community ~~Equity,~~Impact and Inclusion ~~(“DE&I”)~~ is essential in our workplace. We have aan ~~fully engaged~~ Executive Vice President, Chief Operating Officer and a Vice President, Director of Community Impact and Inclusion who ~~leads~~lead our ~~DE&I~~ efforts in this area. Our Human Resources department is focused on our commitment to ~~DE&I~~inclusion through hiring practices and employee training. We are committed to ensuring that all employees feel a sense of belonging in the workplace and that processes and programs are impartial, fair, and provide equal opportunity for every individual. We also have a history of serving customers in the non-profit community who are dedicated to the success of under-resourced and vulnerable populations, the empowerment of women, and the continued vitality of the environment.

Available Information

The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, and other filings with the SEC are available free of charge at https://investors.fivestarbank.com under the heading “Financials & Filings,” as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. These reports are also available for free on the SEC’s website at https://www.sec.gov. The information contained on the Company’s website as referenced in this Annual Report on Form 10-K should not be considered a part of this report.

Supervision and Regulation

General

Federal and state banking laws impose a comprehensive system of supervision, examination, regulation, and enforcement on the operations of insured banks and their holding companies. Supervision and regulation of banks, their holding companies, and affiliates is intended primarily for the protection of depositors and customers, the Deposit Insurance Fund (the “DIF”) of the FDIC, and the U.S. banking and financial system, rather than holders of our capital stock. As a result, our growth, earnings performance, and operations may be affected by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the DFPI, the FDIC, the Federal Reserve, and the CFPB. Furthermore, tax laws administered by the IRS and state taxing authorities, accounting rules developed by the FASB, securities laws administered by the SEC and state securities authorities, anti-money laundering laws enforced by the Treasury Department, and SBA regulations with respect to small business loans, have an impact on our business. These statutes, regulations, and policies are continually under the review of the United States Congress and state legislatures, as well as federal and state regulatory agencies, and the nature and extent of future legislative, regulatory, or other developments affecting financial institutions are impossible to predict with any certainty. Any change in the statutes, regulations or regulatory policies applicable to us, including changes in their interpretation, expectations or implementation, could have a material effect on our business and operations.

(the “DIF”) of the FDIC, and the U.S. banking and financial system, rather than holders of our capital stock. As a result, our growth, earnings performance, and operations may be affected by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the DFPI, the FDIC, the Federal Reserve, and the CFPB. Furthermore, tax laws administered by the IRS and state taxing authorities, accounting rules developed by the FASB, securities laws administered by the SEC and state securities authorities, anti-money laundering laws enforced by the Treasury Department, and SBA regulations with respect to small business loans, have an impact on our business. These statutes, regulations, and policies are continually under the review of the United States Congress and state legislatures, as well as federal and state regulatory agencies, and the nature and extent of future legislative, regulatory, or other developments affecting financial institutions are impossible to predict with any certainty. Any change in the statutes, regulations or regulatory policies applicable to us, including changes in their interpretation, expectations or implementation, could have a material effect on our business and operations.

To this end, due to the recent issuance of certain executive orders by the President of the United States, it may not be clear for a period of time as to what the priorities of the three prudential banking agencies, the OCC, Federal Reserve, and FDIC, may be with respect to their respective supervisory and enforcement matters for banks and bank holding companies during the current administration. For example, one executive order requires independent agencies, including the Federal Reserve and FDIC, to submit to the White House Office of Management and Budget (“OMB”) major orders proposed by these agencies for OMB’s review. OMB would also write “performance standards and management objectives” to the heads of independent agencies, and review and adjust their budgets, including the Federal Reserve (excluding with respect to its monetary policy function) and the FDIC. As a result, it may take longer for the prudential banking agencies to establish their supervisory and enforcement priorities and develop and adopt new rules and regulations, or make changes to existing rules and regulations. Another executive order requires agency heads to determine whether ongoing enforcement of any regulations identified in their regulatory review is compliant with law and policy of the current administration. This executive order also provides that to preserve resources and ensure lawful enforcement, agency heads, in consultation with the Director of the OMB, shall, on a case-by-case basis and as appropriate and consistent with applicable law, then direct the termination of all such enforcement proceedings that do not comply with the Constitution, laws, or the policy of the current administration. It is unclear what impact these orders will have on the supervisory and enforcement activities of the OCC, Federal Reserve, and FDIC.

The following is a summary of material elements of the regulatory and supervisory framework applicable to us and the Bank. It does not describe all of the statutes, regulations, and regulatory policies that apply, nor does it provide complete summaries of the statutes, regulations, and policies referenced therein.

Supervision and Regulation of the Company

We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). As a result, we are primarily subject to the supervision, examination, and reporting requirements of the BHC Act, Federal Deposit Insurance Act (the “FDI Act”), and the regulations of the Federal Reserve and FDIC~~, and certain of the requirements imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”)~~.

Federal law subjects bank holding companies, such as the Company, to restrictions on the types of activities in which they may engage and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. Violations of laws and regulations, or other unsafe and unsound practices, may result in regulatory agencies imposing fines, penalties, or cease and desist orders, or taking other enforcement actions. Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees, and other parties participating in the affairs of a bank or bank holding company.

Federal Oversight over Mergers and Acquisitions, Investments, and Activities

The BHC Act requires a bank holding company to obtain the prior approval of the Federal Reserve before: (i) it may acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, the bank holding company will directly or indirectly own or control 5% or more of the voting shares of the bank; (ii) it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or (iii) it may merge or consolidate with any other bank holding company.

Before approving any such transaction, the Federal Reserve is required by the BHC Act to consider a number of factors, including the transaction’s competitive impact, the financial and managerial resources and future prospects of the bank holding companies and banks concerned, the convenience and needs of the community to be served, and the effectiveness of the parties in combating money laundering activities.

Provisions of the FDI Act known as the Bank Merger Act impose similar approval standards for an insured depository institution to merge with another insured depository institution or a non-insured institution. On September 17, 2024, the United States Department of Justice (the “DOJ”) withdrew its 1995 Bank Merger Guidelines and announced that it will instead evaluate the competitive impact of bank mergers using its 2023 Merger Guidelines that the DOJ applies to mergers in all industries. Compared to the 1995 Bank Merger Guidelines, the 2023 Merger Guidelines set forth more stringent concentration limits and add several largely qualitative bases on which the DOJ may challenge a merger. While the effect of changes in the DOJ’s bank merger antitrust policy for particular transactions remains unclear, the changes may make it more difficult and/or costly for us to obtain regulatory approval for an acquisition or otherwise result in more onerous conditions to obtain approval for an acquisition.

~~Provisions~~The ofBHC ~~the FDI~~ Act, ~~known~~ as ~~the~~amended ~~Bank~~by ~~Merger~~the ~~Act~~interstate ~~impose~~banking ~~similar~~provisions ~~approval~~of ~~standards~~the ~~for an insured depository institution to merge with another insured depository institution or a non~~Riegle-~~insured~~Neal ~~institution.~~Interstate OnBanking ~~September~~and ~~17,~~Branching ~~2024,~~Efficiency ~~the~~Act ~~FDIC finalized changes to its Statement~~ of ~~Policy~~1994 ~~on Bank Merger Transactions~~ (the “~~Policy~~Riegle-Neal ~~Statement~~Act”), ~~which~~permits ~~outlines~~us ~~factors~~to ~~that~~acquire ~~the FDIC will consider when evaluating~~ a ~~proposed~~ bank ~~merger~~located ~~transaction.~~in ~~Also~~any onother ~~September 17~~state, ~~2024,~~regardless ~~the United States Department~~ of ~~Justice~~state ~~(the~~law ~~“DOJ”) withdrew its 1995 Bank Merger Guidelines and announced that it will instead evaluate the competitive impact of bank mergers using its 2023 Merger Guidelines that the DOJ applies~~ to ~~mergers in all industries. Compared to~~ the ~~1995 Bank Merger Guidelines~~contrary, ~~the~~subject ~~2023~~to ~~Merger~~certain ~~Guidelines~~deposit ~~set forth more stringent~~ concentration limits, ~~and~~aging ~~add~~requirements, ~~several~~and ~~largely~~other ~~qualitative bases on which the DOJ may challenge a merger~~restrictions. ~~While~~The ~~the~~Riegle-Neal ~~effect~~Act ofalso ~~these~~generally ~~changes~~permits ~~for~~national- ~~particular~~and ~~transactions~~state-chartered ~~remains~~banks ~~unclear,~~to ~~both~~branch ~~the~~interstate ~~Policy~~through ~~Statement~~acquisitions ~~and~~of ~~the~~banks ~~change~~ in ~~the~~other ~~DOJ’s~~states. ~~bank~~Bank ~~merger~~holding ~~antitrust~~companies ~~policy~~must ~~may~~be ~~make~~“well-capitalized” ~~it more difficult~~ and~~/or~~ ~~costly~~“well-managed” ~~for us~~ to obtain federal bank regulatory approval ~~for~~of an interstate acquisition orwithout ~~otherwise~~regard ~~result in more onerous conditions~~ to ~~obtain~~state ~~approval~~law ~~for~~prohibiting anthe ~~acquisition~~transaction.

The BHC Act, as amended by the interstate banking provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”), permits us to acquire a bank located in any other state, regardless of state law to the contrary, subject to certain deposit percentage, aging requirements, and other restrictions. The Riegle-Neal Act also generally permits national- and state-chartered banks to branch interstate through acquisitions of banks in other states. Bank holding companies must be “well-capitalized” and “well-managed” to obtain federal bank regulatory approval of an interstate acquisition without regard to state law prohibiting the transaction.

The BHC Act also generally requires Federal Reserve approval for a bank holding company’s acquisition of a company that is not an insured depository institution. Bank holding companies generally may engage, directly or indirectly, only in managing or controlling banks, and such other activities as are determined by the Federal Reserve to be closely related to banking, and certain other permissible nonbanking activities. Bank holding companies generally must notify the Federal Reserve before acquiring a company that is not an insured depository institution or engaging in a permissible nonbanking activity, and the Federal Reserve considers several factors in reviewing such a notice. The Federal Reserve may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity, or control constitutes a serious risk to the financial safety, soundness, or stability of it or any of its bank subsidiaries.

The Gramm-Leach-Bliley Act (the “GLB Act”) allows a bank holding company that satisfies certain criteria to elect to become a financial holding company, which would allow such company to engage in activities that are financial in nature, incidental to such activities, or complementary to such activities. We have not elected financial holding company status.

The FDIC has the authority to approve applications by state non-member banks to establish de novo branches, including, under the Riegle-Neal Act, in states other than the bank’s home state if the law of the state in which the branch is located, or is to be located, would permit establishment of the branch if the bank were a state bank chartered by that state.

Certain acquisitions of our voting stock may be subject to regulatory approval or notice under federal law. Investors are responsible for ensuring that they do not, directly or indirectly, acquire shares of our stock in excess of the amount that can be acquired without regulatory approval under the Change in Bank Control Act and the BHC Act, which prohibit any person or company from acquiring control of the Company without, in most cases, the prior written approval of the Federal Reserve.

Source of Strength

The FDI Act and Federal Reserve regulations require a bank holding company to serve as a source of financial and managerial strength to its bank subsidiaries. As a result, a bank holding company may be expected to commit resources to support its bank subsidiary, including at times when the holding company may not be inclined or in a financial position to provide it.

Capital Adequacy

Bank holding companies and banks are subject to various regulatory capital requirements administered by federal and state bank regulatory agencies. Capital adequacy regulations and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices, as well as qualitative judgments by the regulators about components of capital, risk-weightings, and other factors. ~~United States capital regulations were substantially revised in 2013 as a result of changes in the Dodd-Frank Act and Basel III capital rules.~~ The Federal Reserve and the FDIC, the primary federal regulators of the Company and Bank, respectively, have substantially similar generally applicable risk-based capital ratio and leverage ratio requirements.

Under the generally applicable capital requirements of the Federal Reserve and the FDIC, the Company and the Bank are required to meet a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.0% (a minimum of 4.5% plus a capital conservation buffer of 2.5%), a Tier 1 capital to risk-weighted assets ratio of at least 8.5% (a minimum of 6.0% plus a capital conservation buffer of 2.5%), a total capital to risk-weighted assets ratio of at least 10.5% (a minimum of 8.0% plus a capital conservation buffer of 2.5%), and a Tier 1 leverage ratio of at least 4.0%. In addition, insured depository institutions such as the Bank, unlike bank holding companies, are subject to further capital requirements to be deemed “well-capitalized” under the prompt corrective action provisions of the FDI Act and implementing regulations of the federal banking agencies, as described in the section entitled “—Supervision and Regulation of the Bank—Prompt Corrective Action” below.

~~Under~~three tiers depending on the ~~generally~~“quality” ~~applicable~~and ~~capital~~loss-absorbing ~~requirements~~features of the ~~Federal~~capital ~~Reserve~~instrument. ~~and~~Common ~~the~~equity ~~FDIC,~~Tier ~~the~~1 ~~Company~~capital ~~and~~is ~~the~~predominantly ~~Bank~~comprised ~~are~~of ~~required~~common tostock ~~meet~~instruments a(including ~~common~~related ~~equity~~surplus) ~~Tier~~and 1retained ~~capital~~earnings, tonet ~~risk-weighted~~of ~~assets~~treasury ~~ratio~~stock, ofand atafter ~~least~~making ~~7.00%~~necessary (acapital ~~minimum~~deductions ofand 4adjustments.~~50%~~ ~~plus~~Tier a1 capital ~~conservation~~is ~~buffer~~comprised of ~~2.50%),~~common aequity Tier 1 capital toand ~~risk~~additional Tier 1 capital, which includes non-~~weighted~~cumulative ~~assets~~perpetual ~~ratio~~preferred ofstock atand ~~least~~similar ~~8.50%~~instruments (ameeting ~~minimum~~specified ofeligibility ~~6.00%~~criteria ~~plus~~(including arelated surplus). Total capital ~~conservation~~is ~~buffer~~comprised of ~~2.50%),~~Tier a1 ~~total~~ capital toand ~~risk-weighted~~Tier ~~assets~~2 ~~ratio~~capital, ofwhich atincludes ~~least~~certain ~~10.50%~~subordinated (notes with a minimum oforiginal ~~8.00%~~maturity ~~plus~~of afive ~~capital~~years ~~conservation~~(including ~~buffer~~related ~~of 2.50%~~surplus), and a ~~Tier~~limited 1amount ~~leverage ratio~~ of atallowance ~~least~~for 4credit losses.~~00%.~~ InNewly ~~addition,~~issued ~~insured~~trust ~~depository~~preferred ~~institutions~~securities ~~such~~and ascumulative ~~the~~perpetual ~~Bank,~~preferred ~~unlike~~stock ~~bank~~may ~~holding~~not ~~companies,~~be ~~are~~included ~~subject~~in toTier ~~further~~1 capital, ~~requirements~~but togenerally may be ~~deemed~~included ~~“well-capitalized”~~in ~~under~~Tier ~~the~~2 ~~prompt~~capital, ~~corrective~~provided ~~action~~they ~~provisions~~do ofnot ~~the~~include ~~FDI~~features ~~Act~~that ~~and~~are ~~implementing~~disallowed ~~regulations~~by of the ~~federal~~capital ~~banking agencies~~rules, such as ~~described~~the inacceleration ~~the~~of ~~section~~principal ~~entitled~~other ~~“—Supervision~~than ~~and~~in ~~Regulation~~the event of ~~the~~a ~~Bank—Prompt~~bankruptcy, ~~Corrective~~insolvency, ~~Action”~~or ~~below~~receivership of the issuer.

For purposes of calculating the denominator of the risk-based capital ratios, a banking institution’s assets and some of its specified off-balance sheet commitments and obligations are assigned to various risk categories. For purposes of calculating the numerator of the capital ratios, capital, at both the holding company and bank levels, is classified in one of three tiers depending on the “quality” and loss-absorbing features of the capital instrument. Common equity Tier 1 capital is predominantly comprised of common stock instruments (including related surplus) and retained earnings, net of treasury stock, and after making necessary capital deductions and adjustments. Tier 1 capital is comprised of common equity Tier 1 capital and additional Tier 1 capital, which includes non-cumulative perpetual preferred stock and similar instruments meeting specified eligibility criteria (including related surplus). Total capital is comprised of Tier 1 capital and Tier 2 capital, which includes certain subordinated notes with a minimum original maturity of five years (including related surplus) and a limited amount of allowance for credit losses. Newly issued trust preferred securities and cumulative perpetual preferred stock may not be included in Tier 1 capital, but generally may be included in Tier 2 capital, provided they do not include features that are disallowed by the capital rules, such as the acceleration of principal other than in the event of a bankruptcy, insolvency, or receivership of the issuer.

Failure to meet minimum capital requirements could subject a banking organization to a variety of enforcement remedies. A banking organization’s failure to exceed the capital conservation buffer with common equity Tier 1 capital would result in limitations on the banking organization’s ability to make capital distributions and discretionary bonus payments.

At December 31, ~~2024~~2025, common equity Tier 1 capital, Tier 1 capital, and total capital of the Company on a consolidated basis equaled 1110.0258%, 1110.0258%, and 13.9933% of its total risk-weighted assets, respectively, and its Tier 1 leverage ratio on a consolidated basis was 109.0570%. At December 31, ~~2024~~2025, the Bank exceeded its minimum capital requirements with common equity Tier 1 capital, Tier 1 capital, and total capital equal to 1211.6189%, 1211.6189%, and 1312.5992% of its total risk-weighted assets, respectively, and a Tier 1 leverage ratio of 1110.5089%. As a result, the Bank was “well-capitalized” for prompt corrective action purposes based on the ratios and guidelines described above.

Payment of Dividends and Stock Repurchases

The Company is limited in its ability to pay dividends or repurchase its stock by the Federal Reserve, including if doing so would be an unsafe or unsound banking practice. When a bank holding company intends to declare or pay a dividend that could raise safety and soundness concerns, it generally will be required to inform and consult with the Federal Reserve in advance. It is the policy of the Federal Reserve that a bank holding company should generally pay dividends on common stock only out of earnings, and only if prospective earnings retention is consistent with the company’s capital needs and overall current and prospective financial condition. Additionally, bank holding companies should inform and consult with the Federal Reserve in advance of declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid.

According to guidance from the Federal Reserve, a bank holding company’s dividend policies will be assessed against, among other things, its ability to achieve applicable capital ratio requirements. If a bank holding company does not achieve applicable capital ratio requirements, it may not be able to pay dividends.

A bank holding company is also required to give the Federal Reserve prior written notice before purchasing or redeeming its equity securities if the gross consideration for the purchase or redemption, when aggregated with the net consideration paid by the Company for all such purchases or redemptions during the preceding twelve months, is equal to 10% or more of the Company’s consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order, or any condition imposed by or written agreement with the Federal Reserve. This prior notice requirement does not apply to any bank holding company that meets certain “well-capitalized” and “well-managed” standards and is not the subject of any unresolved supervisory issues.

In addition, a bank holding company is required to consult with the Federal Reserve before redeeming any equity or other capital instrument included in Tier 1 or Tier 2 capital prior to stated maturity if such redemption could have a material effect on the level or composition of the organization’s capital base.

Examinations

Bank holding companies and banks are subject to regular examination by their respective regulatory agencies, which results in examination reports and ratings that, while not publicly available, can impact the conduct and growth of their businesses. These examinations may consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, sensitivity to market risk, and various other factors. The regulatory agencies generally have broad authority to impose restrictions and limitations on the operations of a regulated entity when an agency determines, among other things, that such operations are unsafe or ~~unsound, fail to comply with applicable law, or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.~~

unsound, fail to comply with applicable law, or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.

Anti-Money Laundering Initiatives and Sanctions Compliance

The Company and Bank are subject to extensive regulations aimed at combating money laundering and terrorist financing. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant compliance and due diligence obligations, creating new crimes and penalties, and expanding the extra-territorial jurisdiction of the United States. Treasury Department regulations implementing the Patriot Act impose obligations on financial institutions to maintain appropriate policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of their customers. In addition, the Anti-Money Laundering Act of 2020 (the “AML Act”), enacted in January 2021, includes the most substantial changes to U.S. anti-money laundering law since the Patriot Act. Among other things, the AML Act creates new beneficial ownership reporting requirements for certain entities doing business in the United States, requires the Treasury Department’s Financial Crimes Enforcement Network to establish national anti-money laundering priorities and combating the financing of terrorism priorities, increases anti-money laundering whistleblower awards and expands whistleblower protections, and enhances penalties for Bank Secrecy Act and anti-money laundering violations. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and financial consequences for the institution.

The Treasury Department’s Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of persons, organizations, and countries suspected of aiding, harboring, or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. OFAC administers and enforces applicable economic and trade sanctions programs. These sanctions are usually targeted against foreign countries, terrorists, international narcotics traffickers, and those believed to be involved in the proliferation of weapons of mass destruction. These regulations generally require either the blocking of accounts or other property of specified entities or individuals, but they may also require the rejection of certain transactions involving specified entities or individuals. The Company maintains policies, procedures, and other internal controls designed to comply with anti-money laundering requirements and sanctions programs.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act represents a comprehensive revision of laws affecting corporate governance, accounting obligations, and corporate reporting. The Sarbanes-Oxley Act is applicable to all companies with equity securities registered, or that file reports, under the Exchange Act. In particular, the act established: (i) requirements for audit committees, including independence, expertise, and responsibilities; (ii) responsibilities regarding financial statements for the chief executive officer and chief financial officer of the reporting company and new requirements for them to certify the accuracy of periodic reports; (iii) standards for auditors and regulation of audits; (iv) disclosure and reporting obligations for the reporting company and its directors and executive officers; and (v) civil and criminal penalties for violations of the federal securities laws. The legislation also established a new accounting oversight board to enforce auditing standards and restrict the scope of services that accounting firms may provide to their publicly traded company audit clients.

Supervision and Regulation of the Bank

The Bank is a commercial bank chartered under the laws of the state of California and is primarily subject to the supervision, examination, and reporting requirements of the FDIC and the DFPI. Almost every area of the operations and financial condition of the Bank is subject to extensive regulation and supervision and to various requirements and restrictions under federal and state law, including loans, reserves, investments, issuance of securities, establishment of branches, capital adequacy, liquidity, earnings, dividends, management practices, and the provision of services. The FDIC and the DFPI regularly examine the Bank’s operations and have the authority to approve or disapprove mergers, the establishment of branches, and similar corporate actions. Both regulatory agencies have the power to take enforcement action to prevent the development or continuance of unsafe or unsound banking practices or other violations of law. The Bank is subject to supervision, examination, enforcement, and reporting requirements under the FDI Act, the California Financial Code, regulations of the FDIC and the DFPI, and certain of the requirements imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). The Company and the Bank are also subject to a wide range of consumer protection laws and regulations.

California Law

California law governs the chartering and regulation of California commercial banks like ours, including organizational and capital requirements, fiduciary powers, investment authority, banking offices and electronic terminals, declaration of dividends, changes of control and mergers, out of state activities, interstate branching and banking, debt offerings, borrowing limits, and limits on loans to one borrower. The DFPI is charged with the Bank’s supervision and regulation. The DFPI may take possession of a bank if certain conditions exist, such as insufficient shareholders’ equity, unsafe or unauthorized operations, or violations of law.

Under California law, we may engage in the general business of banking, including, but not limited to, accepting deposits, making secured and unsecured loans, purchasing and holding real property for our own use, and issuing, advising, and confirming letters of credit. The amount a bank generally may borrow may not exceed the amount of its shareholders’ equity without the consent of the DFPI.

Restrictions on Lending, Insider Transactions, and Affiliate Transactions

California law limits California banks in the amount they may lend to one borrower and the amount they may lend to insiders. Under California law, with limited exceptions, unsecured loans to one person may not exceed 15% of the sum of a bank’s shareholders’ equity, allowance for credit losses, capital notes, and debentures. Additionally, both secured and unsecured loans to one person (excluding certain secured lending and letters of credit) at any given time generally may not exceed 25% of the sum of a bank’s shareholders’ equity, allowance for credit losses, capital notes, and debentures.

Section 22(g) of the Federal Reserve Act, as implemented by the Federal Reserve’s Regulation O, governs and restricts extensions of credit by a member bank to an executive officer, director, or principal shareholder of the bank and its affiliates. By making these provisions applicable to state non-member banks, the FDI Act and FDIC regulations impose these restrictions on the Bank’s purchases or sales of assets from or to insiders of the Bank and the Company. In general, extensions of credit to insiders: (i) may not exceed certain dollar limitations; (ii) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties; and (iii) must not involve more than the normal risk of repayment or present other unfavorable features. Additionally, California law imposes insider lending limits that are similar to the restrictions of the Federal Reserve’s Regulation O.

Sections 23A and 23B of the Federal Reserve Act, which the FDI Act makes applicable to a state non-member bank like ours in the same manner and to the same extent as if it were a member bank, establish parameters for an insured bank to conduct “covered transactions” with its affiliates, generally: (i) limiting the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount not greater than 10% of the bank’s capital stock and surplus, and limiting the aggregate of all such transactions with all affiliates to an amount not greater than 20% of the bank’s capital stock and surplus; and (ii) requiring that all such transactions be on terms substantially the same, or at least as favorable, to the bank or subsidiary as those that would be provided to a non-affiliate. In addition, an insured bank’s loans to affiliates generally must be fully collateralized. The term “covered transaction” includes the making of loans to the affiliate, purchase of assets from the affiliate, issuance of a guarantee on behalf of the affiliate, and several other types of transactions.

Concentrations in Lending

In 2006, the federal bank regulatory agencies released guidance advising financial institutions of the risks posed by commercial real estate lending concentrations and reinforcing that financial institutions should implement sound risk management processes to identify, monitor, and control risks associated with commercial real estate concentrations. Higher allowances for credit losses and capital levels may also be required. The commercial real estate guidance provides that further supervisory analysis of an institution’s commercial real estate loan concentrations is warranted when its concentrations exceed either: (i) total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk-based capital; or (ii) total reported loans secured by multifamily and non-farm non-residential properties and loans for construction, land development, and other land of 300% or more of a bank’s total risk-based capital, where the outstanding balance of the institution’s commercial real estate portfolio has also increased by 50% or more during the prior 36 months. We have exposures to loans secured by commercial real estate due to the nature of our market and the loan needs of both our retail and commercial customers. We believe that our long-term experience in commercial real estate lending, underwriting policies, internal controls, and other policies currently in place, as well as our loan and credit monitoring and administration procedures, are generally appropriate to managing our concentrations as required under the commercial real estate guidance.

Prompt Corrective Action

The FDI Act identifies five capital categories for insured depository institutions: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under the banking agencies’ prompt corrective action framework, an insured depository institution is subject to differential regulation corresponding to the capital category within which the institution falls. For an insured depository institution to be “well-capitalized” under this framework, it must have a common equity Tier 1 capital ratio of at least 6.50%, a Tier 1 capital ratio of at least 8.00%, a total capital ratio of at least 10.00%, and a leverage ratio of at least 5.00%, and must not be subject to any written agreement, order or capital directive, or prompt corrective action directive issued by its primary federal or state banking regulator to meet and maintain a specific capital level for any capital measure. These limitations apply to the Bank, and not to the Company on a standalone basis.

The FDI Act requires the federal banking agencies to take prompt corrective action whenever an insured depository institution does not meet minimum capital requirements. Failure to meet the capital guidelines could also subject an insured depository institution to capital raising requirements. In addition, an insured depository institution is generally prohibited from making capital distributions, including paying dividends or paying management fees to a holding company, if the institution would thereafter be undercapitalized. Finally, failure to meet statutorily mandated capital guidelines or more restrictive ratios separately established for an insured depository institution could subject the institution to a variety of enforcement remedies available to federal regulatory authorities, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting or renewing brokered deposits, limitations on the rates of interest that the institution may pay on its deposits, and other restrictions on its business.

The FDI Act also requires the federal banking agencies to prescribe certain noncapital standards for safety and soundness relating generally to operations and management, asset quality, and executive compensation, and permits regulatory action against an insured depository institution that does not meet such standards.

Payment of Dividends

The principal source of the Company’s cash flow is dividends from the Bank. There are various legal and regulatory provisions that limit the amount of dividends the Bank can pay to the Company without regulatory approval. Under the California Financial Code, the Bank may not make any distribution to shareholders that exceeds the lesser of its retained earnings or its net income for the last three fiscal years, less the amount of any distributions made by the Bank to shareholders of the Bank during such period. However, with prior approval of the DFPI, the Bank may make a distribution to shareholders that exceeds such amounts, subject to limits set forth in the California Financial Code. Moreover, an institution’s failure to exceed the capital conservation buffer set forth in the federal banking agencies’ capital rules with common equity Tier 1 capital would result in limitations on an institution’s ability to make capital distributions and discretionary bonus payments. In addition, an insured depository institution is generally prohibited from making capital distributions, including paying dividends or paying management fees to a holding company, if the institution would thereafter be undercapitalized. Finally, the FDI Act prohibits an insured depository institution from paying dividends on its capital stock if it is in default of its payment of deposit insurance assessments to the FDIC.

Reserve Requirements

Federal Reserve rules require depository institutions, such as the Bank, to maintain reserves against their transaction accounts. In response to the COVID-19 pandemic, the Federal Reserve reduced reserve requirement ratios to 0.00% effective March 26, 2020. Increases to the reserve requirement would decrease the amount of the Bank’s assets that it may make available for lending and investment activities. Currently, the Federal Reserve has no plans to re-impose reserve requirements. However, the Federal Reserve may adjust reserve requirement ratios in the future if conditions warrant. Balances maintained by or on behalf of depository institutions in accounts at Federal Reserve Banks continue to receive interest when reserve requirement ratios are set to 0.00%. All balances earned the interest on excess reserves rate through July 28, 2021. Thereafter, all balances earn the Interest on Reserve Balances (the “IORB”) rate. The IORB rate is the rate of interest paid by the Federal Reserve Bank on balances maintained by or on behalf of an eligible institution in an account at a Federal Reserve Bank. The Board of Governors votes on the level of the IORB rate at each Federal Open Market Committee meeting that is consistent with the announced monetary policy stance. The amount of interest on reserve balances is calculated by multiplying the IORB rate on a day by the end of day balance maintained in an account on that day.

Consumer Protection Laws

While consumer lending is not currently a significant focus of our business, we are subject to numerous laws and regulations intended to protect consumers, in addition to those discussed above, when lending or offering deposit products to consumers. These laws include, among others: the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair and Accurate Credit Transactions Act, the Fair Housing Act, the Fair Credit Reporting Act, the Fair Debt Collection Act, the GLB Act, the Home Mortgage Disclosure Act, the Right to Financial Privacy Act, the Real Estate Settlement Procedures Act, laws regarding unfair and deceptive acts and practices, and usury ~~laws.~~and ~~Additionally,~~other ~~the~~fair ~~Dodd-Frank~~lending ~~Act~~laws ~~created~~and ~~the CFPB, which has authority to issue~~ regulations ~~prohibiting unfair~~, ~~deceptive,~~including orstate ~~abusive~~laws ~~acts~~and ~~or practices~~regulations.

Because the Bank has assets of not more than $10 billion, its primary federal regulator, the FDIC, examines and enforces the Bank’s compliance with consumer financial protection laws. However, the CFPB has rulemaking authority, including with respect to regulations prohibiting unfair, deceptive, or abusive acts or practices. Additionally, the CFPB may participate in examinations of banks with not more than $10 billion in assets on a “sampling basis” and may refer potential enforcement actions against such banks to their primary federal regulators.

Many states and local jurisdictions have consumer protection laws analogous, and in addition, to those listed above. These include, for instance, the California Unfair Competition Law, which broadly prohibits any unlawful, unfair, or fraudulent business act or practice, and false, deceptive, or misleading advertising. Violations of applicable consumer protection laws can result in significant potential liability, including actual damages, restitution, and injunctive relief, from litigation brought by customers, state attorneys general, and other plaintiffs, as well as enforcement actions by banking regulators.

Financial Privacy Laws

The GLB Act and California Consumer Privacy Act impose requirements related to the privacy of customer financial information. Among other things, these laws require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The California Consumer Privacy Act grants California residents the rights to know about personal information collected about them, to delete certain of this personal information, to opt out of the sale of personal information, and to non-discrimination for exercising these rights. The privacy provisions of these laws may affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

On October 22, 2024, the CFPB ~~released~~issued a final rule to implement Section 1033 of the Dodd-Frank Act. Under the final rule, financial institutions ~~are~~such ~~required,~~as ~~upon request, to make available to a consumer or third party authorized by~~ the ~~consumer certain information the~~ Bank ~~has~~that ~~concerning~~offer a consumer ~~financial~~ product or service covered by the rule, ~~such~~would asbe arequired, ~~credit~~upon ~~card~~request, orto amake ~~deposit~~available ~~account.~~to Ina ~~issuing~~consumer ~~this~~or ~~rule,~~third ~~the~~party ~~CFPB~~authorized ~~said~~by ~~that~~ the ~~rule~~consumer ~~will~~certain ~~move~~information the ~~U.S.~~Bank ~~closer~~has toconcerning ansuch ~~“open~~a ~~banking”~~product ~~system that will allow consumers to switch banks~~ or ~~other~~service. ~~providers~~Industry ~~more~~organizations ~~easily.~~challenged ~~The~~the final rule ~~also~~in ~~requires,~~court. ~~among~~On ~~other~~July ~~things~~29, ~~covered data providers~~2025, ~~such as~~ the ~~Bank,~~district tocourt ~~establish~~granted a ~~developer~~motion ~~interface~~by ~~that~~the ~~satisfies~~CFPB ~~certain~~to ~~performance~~stay ~~and data security specifications through which~~ the ~~data~~proceedings ~~provider~~while ~~can receive requests for, and provide, specific types of data covered by~~ the ~~rule~~CFPB inconducts ~~electronic,~~a ~~usable~~rulemaking ~~form~~ to ~~authorized~~revise ~~third~~the ~~parties~~final ~~directly~~rule ~~or through data aggregators~~substantially. ~~Under~~On ~~the~~August ~~final~~22, ~~rule~~2025, the ~~Bank~~CFPB ~~will~~issued bean ~~prohibited~~advance ~~from~~notice ~~charging~~of ~~fees~~proposed ~~for~~rulemaking ~~maintaining~~to ~~the~~solicit ~~developer~~comments ~~interface~~and ~~or providing access to such~~ data. ~~The~~on ~~Bank~~several ~~may~~issues ~~also act~~ as anpart ~~authorized~~of ~~third~~a ~~party~~reconsideration toof ~~request and access covered data under~~ the final rule ~~from other financial institutions that are covered data providers~~. ~~The~~On ~~final~~October ~~rule places data security~~29, ~~authorization~~2025, ~~and~~the ~~other~~district ~~obligations~~court onissued ~~those~~a ~~authorized~~preliminary ~~third~~injunction ~~parties,~~preventing ~~including limitations on secondary uses of~~ the ~~data~~CFPB ~~received.~~from ~~Industry~~enforcing ~~organizations have challenged~~ the final rule inuntil ~~court and~~ the ~~litigation~~CFPB ishas ~~ongoing.~~completed Ifits ~~the~~reconsideration ~~challenge is not successful, as a data provider, the Bank must comply with the rule beginning April 1, 2028. We are monitoring the status~~ of the ~~litigation and evaluating the impact of this~~ rule.

Branching

Under California law, the Bank may open branch offices throughout California with the prior approval of the DFPI. In addition, with prior DFPI approval, the Bank may acquire branches of existing banks located in California. Under federal law, the Bank may establish branch offices with the prior approval of the FDIC. Federal law allows a bank to branch into a new state through the establishment of a new branch if, among other factors, the bank is “well-managed” and “well-capitalized” and, under the laws of the state in which the branch is to be located, a state bank chartered by that state would be permitted to establish the branch.

FDIC Deposit Insurance Assessments

The deposits of the Bank are insured by the DIF as administered by the FDIC and, accordingly, are subject to deposit insurance assessments to maintain the DIF at minimum levels required by statute. The Dodd-Frank Act increased the minimum reserve ratio requirement for the DIF to 1.35% of total estimated insured deposits or the comparable percentage of the deposit assessment base. The DIF reserve ratio fell to below the statutory minimum of 1.35% during the COVID-19 pandemic. The FDIC adopted a restoration plan in September 2020, which it amended in June 2022, to restore the DIF reserve ratio to at least 1.35% by September 30, 2028. On October 18, 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by two basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate schedules will remain in effect unless and until the reserve ratio of the DIF meets or exceeds 2.00%. As a result of the new rule, the FDIC insurance costs of insured depository institutions, including the Bank, generally increased.

reserve ratio to at least 1.35% by September 30, 2028. On October 18, 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by two basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate schedules will remain in effect unless and until the reserve ratio of the DIF meets or exceeds 2.00%. As a result of the new rule, the FDIC insurance costs of insured depository institutions, including the Bank, generally increased.

The FDIC uses a risk-based assessment system that imposes insurance premiums as determined by multiplying an insured bank’s assessment base by its assessment rate. A bank’s deposit insurance assessment base is generally equal to its total assets minus its average tangible equity during the assessment period. For a depository institution that has been insured for more than five years and that has total consolidated assets of less than $10.0 billion, such as the Bank, the FDIC determines the assessment rate within a range of base assessment rates based on the bank’s CAMELS composite rating, considering other factors and adjustments. The CAMELS rating system is a supervisory rating system developed to classify a bank’s overall condition by considering capital adequacy, assets, management capability, earnings, liquidity, and sensitivity to market and interest rate risk.

Insurance of deposits may be terminated by the FDIC upon a finding that a bank has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the bank’s federal regulatory agency. In addition, the FDI Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of its parent bank holding company.

On July 30, 2024, the FDIC issued a proposed rule that would revise the FDIC’s regulations governing the classification and treatment of brokered deposits. The proposal would require many insured depository institutions to classify a greater amount of their deposits obtained with the involvement of third parties as brokered deposits. An increase in the amount of brokered deposits on an insured depository institution’s balance sheet could, among other consequences, increase the institution’s deposit insurance assessment costs.

Community Reinvestment Act (“CRA”)

The CRA requires that, in connection with examinations of insured depository institutions within their respective jurisdictions, the federal banking agencies must evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate-income neighborhoods. A bank’s CRA performance is also considered in evaluating applications seeking approval for mergers, acquisitions, and new offices or facilities, and a CRA rating of less than “Satisfactory” may adversely affect the ability of a bank or its parent company to engage in such transactions. The ~~FDIC’s evaluation of the~~ Bank’s record of performance under the CRA is publicly available. The FDIC’s CRA regulations provide that a bank may elect to have its CRA performance evaluated under a strategic plan. This option enables a bank to structure its CRA goals and objectives to address the needs of its community consistent with its business strategy, operational focus, capacity, and constraints. The Bank operated under a CRA Strategic Plan approved by the FDIC for the years 2019 to 2021 and received a rating of “Satisfactory” at its most recent CRA evaluation, dated as of July 22, 2024 and covering activities from 2021 through the evaluation date. The FDIC’s evaluation of the Bank’s record of performance under the CRA is publicly available.

17On October 24, 2023, the federal banking agencies issued a final rule revising their framework for evaluating banks’ records of community reinvestment under the CRA. On July 16, 2025, these agencies issued a notice of proposed rulemaking to rescind the October 2023 final rule and restore the CRA framework that existed prior to the October 2023 final rule. The Bank’s most recent performance evaluation was conducted using the CRA framework that existed prior to the October 2023 final rule.

On October 24, 2023, the federal banking agencies issued a final rule amending the CRA regulations, to substantially revise how they evaluate an insured depository institution’s record of satisfying the credit needs of its entire communities, including low- and moderate-income individuals and neighborhoods. Under the final rule, banks with assets of at least $2 billion, including the Bank, are considered large banks and their retail lending, retail services and products, community development financing, and community development services will be subject to periodic evaluation. Depending on a large bank’s geographic distribution of lending, the evaluation of retail lending may include assessment areas in which the bank extends loans but does not operate any deposit-taking facilities, in addition to assessment areas in which the bank has deposit-taking facilities. Additionally, while the final rule retains the option for a large bank to adopt a strategic plan, a strategic plan under the final rule will generally be required to cover the same tests and geographies as the revised framework applies to other large banks. Most of the final rule’s new requirements were scheduled to become applicable beginning January 1, 2026. The remaining new requirements, including data reporting requirements, were scheduled to become applicable on January 1, 2027. However, industry organizations have challenged the final rule in court, and on March 29, 2024, the United States District Court for the Northern District of Texas granted an injunction and stay of the final rule. The final outcome of such challenge is uncertain.

FHLB Membership

The Bank is a member of the FHLB, which is one of 11 regional Federal Home Loan Banks that administer the home financing credit function of banking institutions. Each Federal Home Loan Bank is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Bank system and makes advances to members in accordance with policies and procedures established by the Board of Directors of the Federal Home Loan Bank and subject to the oversight of the Federal Housing Finance Agency. All advances from a Federal Home Loan Bank are required to be fully secured by sufficient collateral as determined by the Federal Home Loan Bank. In addition, all long-term advances are required to provide funds for residential home financing.

Cybersecurity

Federal banking agencies pay close attention to the cybersecurity practices of banks and their holding companies and affiliates. The interagency council of the agencies, the FFIEC, has issued several policy statements and other guidance for banks as new cybersecurity threats arise. The FFIEC has recently focused on such matters as compromised customer credentials and business continuity planning. Examinations by the banking agencies now include review of an institution’s information technology and its ability to thwart cyber-attacks.

Banking organizations are required to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred. In addition, the SEC enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance.

Item 1A. Risk Factors

Certain factors may have an adverse effect on our business, financial condition, and results of operations. You should carefully consider the following risks, together with all of the other information contained in this Annual Report on Form 10-K, including the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes thereto. Any of the following risks could have an adverse effect on our business, financial condition, and results of operations and could cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Our business, financial condition, and results of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Risk Factor Summary

The most significant risks that may have an adverse effect on our business, financial condition, and results of operations are summarized below.

•Our business and operations are concentrated in Northern California, and we are sensitive to adverse changes in the local economy.

•We operate in a highly competitive market and face increasing competition from traditional and new financial services providers.

•We are subject to the various risks associated with our banking business and operations, including, among others, credit, market, liquidity, interest rate, and compliance risks, which may have an adverse effect on our business, financial condition, and results of operations if we are unable to manage such risks.

•We may be unable to effectively manage our growth, which could have an adverse effect on our business, financial condition, and results of operations.

•We operate in a highly regulated industry, and current regulatory requirements, including stringent capital requirements, consumer protection laws, and anti-money laundering laws, and failure to comply with these requirements and any future legislative and regulatory changes may have an adverse effect on our business, financial condition, and results of operations.

•We are subject to laws regarding privacy, information security, and protection of personal information, and any violation of these laws or incidents involving personal, confidential, or proprietary information of individuals, including, among others, system failures or cybersecurity breaches of our network security, could damage our reputation and otherwise adversely affect our business, financial condition, and results of operations.

•Our charter documents contain certain provisions, including anti-takeover and exclusive forum provisions, that limit the ability of our shareholders to take certain actions and could delay or discourage takeover attempts that shareholders may consider favorable.

Risks Related to Our Business

Our business and operations are concentrated in California, specifically Northern California, and we are more sensitive than our more geographically diversified competitors to adverse changes in the local economy.

Unlike many of our larger competitors that maintain significant operations located outside our market, substantially all of our customers are individuals and businesses located and doing business in the state of California. As of December 31, ~~2024~~2025, approximately 5756.6689% of our real estate loans measured by dollar amount were secured by collateral located in California, ~~substantially~~a ~~all~~majority of which is in Northern California. Therefore, our success will depend upon the general economic conditions and real estate activity in these areas, which we cannot predict with certainty. As a result, our operations and profitability may be more adversely affected by a local economic downturn than those of larger, more geographically diverse competitors. A downturn in the local economy could make it more difficult for our borrowers to repay their loans, may lead to credit losses that are not offset by operations in other markets, and may also reduce the ability of depositors to make or maintain deposits with us. In addition, businesses operating in Northern California, and Sacramento in particular, depend on California state government employees for business, and reduced spending activity by such employees in the event of furloughing or termination of such employees could have an adverse impact on the success or failure of these businesses, some of which are current or could become future customers of the Bank. For these reasons, any regional or local economic downturn could have an adverse effect on our business, financial condition, and results of operations.

may lead to credit losses that are not offset by operations in other markets, and may also reduce the ability of depositors to make or maintain deposits with us. In addition, businesses operating in Northern California, and Sacramento in particular, depend on California state government employees for business, and reduced spending activity by such employees in the event of furloughing or termination of such employees could have an adverse impact on the success or failure of these businesses, some of which are current or could become future customers of the Bank. For these reasons, any regional or local economic downturn could have an adverse effect on our business, financial condition, and results of operations.

The small to medium-sized businesses to which we lend may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan.

We target our business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which may impair their ability as a borrower to repay a loan. In addition, the success of small and medium-sized businesses often depends on the management skills, talents, and efforts of one or two people or a small group of people, and the death, disability, or resignation of one or more of these people could have an adverse impact on the business and its ability to repay its loan. If general economic conditions negatively impact the markets in which we operate or any of our borrowers are otherwise affected by adverse business developments, our small to medium-sized borrowers may be disproportionately affected and their ability to repay outstanding loans may be negatively affected, resulting in an adverse effect on our business, financial condition, and results of operations.

Our business is significantly dependent on the real estate markets in which we operate, as a significant percentage of our loan portfolio is secured by real estate.

As of December 31, ~~2024~~2025, a ~~significant~~substantial ~~majority~~portion of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral, with a majority of these real estate loans concentrated in Northern California. Real property values in our market may be different from, and in some instances worse than, real property values in other markets or in the United States as a whole and may be affected by a variety of factors outside of our control and the control of our borrowers, including national and local economic conditions, generally. Declines in real estate values, including prices for homes and commercial properties, could result in a deterioration of the credit quality of our borrowers, an increase in the number of loan delinquencies, defaults, and charge-offs, and reduced demand for our products and services, generally. Our commercial real estate loans may have a greater risk of loss than residential mortgage loans, in part because these loans are generally larger or more complex to underwrite. In particular, real estate construction and land acquisition and development loans have risks not present in other types of loans, including risks associated with construction cost overruns, project completion risk, general contractor credit risk, and risks associated with the ultimate sale or use of the completed construction. In addition, declines in real property values in California could reduce the value of any collateral we realize following a default on these loans and could adversely affect our ability to continue to grow our loan portfolio consistent with our underwriting standards. We may have to foreclose on real estate assets if borrowers default on their loans, in which case we are required to record the related asset to the then-fair market value of the collateral, which may ultimately result in a loss. An increase in the level of nonperforming assets increases our risk profile and may affect the capital levels regulators believe are appropriate in light of the ensuing risk profile. Our failure to effectively mitigate these risks could have an adverse effect on our business, financial condition, and results of operations.

We are subject to interest rate risk, which could adversely affect our profitability.

Our profitability, like that of most financial institutions of our type, depends to a large extent on our net interest income, which is the difference between our interest income on interest-earning assets, such as loans and investment securities, and our interest expense on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates can increase or decrease our net interest income because different types of assets and liabilities may react differently, and at different times, to market interest rate changes.

Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve,. ~~which~~Changes ~~has raised interest rates significantly~~ in ~~2022 and 2023. As~~ interest rates ~~have~~can ~~increased,~~increase ~~so have~~ competitive pressures on the ~~deposit~~ cost of deposit funds. ~~This~~These ~~has~~pressures have been exacerbated by the bank failures in the first half of 2023 and the resulting heightened competition for deposits, which has also affected the interest we pay on deposits. It is not possible to predict the pace and magnitude of changes in interest rates, or the impact rate changes will have on our results of operations. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration of our assets and liabilities. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, or prolonged change in market interest rates could have an adverse effect on our business, financial condition, and results of operations. As of December 31, 2024, significant portions of our interest-bearing liabilities were variable rate, where our variable rate liabilities reprice at a faster rate than our variable rate assets.

In addition, an increase in interest rates could also have a negative impact on our results of operations by reducing the demand for loans, decreasing the ability of borrowers to repay their current loan obligations, and increasing early withdrawals on term deposits. These circumstances could not only result in increased loan defaults, foreclosures, and charge-offs, but also reduce collateral values and necessitate further increases to the allowance for credit losses, which could have an adverse effect on our business, financial condition, and results of operations. The Federal Reserve has indicated that it expects to continue to lower the target range for the federal funds rate in 2025. A decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio, and our cost of funds may not fall as quickly as yields on interest-earning assets. Our asset-liability management strategy may not be effective in mitigating exposure to the risks related to changes in market interest rates.19

20also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration of our assets and liabilities. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, or prolonged change in market interest rates could have an adverse effect on our business, financial condition, and results of operations. As of December 31, 2025, significant portions of our interest-bearing liabilities were variable rate, where our variable rate liabilities reprice at a faster rate than our variable rate assets.

In addition, an increase in interest rates could also have a negative impact on our results of operations by reducing the demand for loans, decreasing the ability of borrowers to repay their current loan obligations, and increasing early withdrawals on term deposits. These circumstances could not only result in increased loan defaults, foreclosures, and charge-offs, but also reduce collateral values and necessitate further increases to the allowance for credit losses, which could have an adverse effect on our business, financial condition, and results of operations. Conversely, a decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio, and our cost of funds may not fall as quickly as yields on interest-earning assets. Our asset-liability management strategy may not be effective in mitigating exposure to the risks related to changes in market interest rates.

Inflation can have an adverse impact on our business and on our customers.

Inflation results in the value of assets or income from investments being worth less in the future due to a decrease in the value of money. Interest rates are likely to be higher during periods of elevated inflation and, together, these factors typically cause the value of our investment securities, particularly those with longer maturities, to decrease, although this effect is less pronounced for floating rate instruments than for fixed-rate instruments. Prolonged periods of inflation also may impact our profitability by negatively impacting our costs and expenses, including increasing funding costs and expenses related to talent acquisition and retention, and negatively impacting the demand for our products and services. Moreover, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans. Adverse changes in inflation and interest rates could negatively impact consumer and business confidence, and adversely affect the economy as well as our business, results of operations and financial condition.

We operate in a highly competitive market and face increasing competition from a variety of traditional and new financial services providers.

We have many competitors. Our principal competitors are commercial and community banks, credit unions, savings and loan associations, mortgage banking firms and online mortgage lenders, and commercial and consumer finance companies, including large national financial institutions that operate in our market. Many of these competitors are larger than we are, have significantly more resources, greater brand recognition, and more extensive and established branch networks or geographic footprints than we do, and may be able to attract customers more effectively than we can. Because of their scale, many of these competitors can be more aggressive on loan and deposit pricing than we can and may better afford and make broader use of media advertising, support services, and electronic technology than we do. Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. Additionally, financial technology companies and other firms have begun to offer services such as stablecoins that may serve as alternatives to traditional banking products such as deposits. We compete with these other ~~financial~~companies ~~institutions~~ both in attracting deposits and making loans. We expect competition to continue to increase as a result of legislative, regulatory, and technological changes, the continuing trend of consolidation in the financial services industry, and the emergence of alternative banking sources. Our profitability in large part depends upon our continued ability to compete successfully with traditional and new financial services providers, some of which maintain a physical presence in our market and others of which maintain only a virtual presence. Increased competition could require us to increase the rates we pay on deposits or lower the rates that we offer on loans, which could reduce our profitability.

Additionally, like many of our competitors, we rely on customer deposits as our primary source of funding for our lending activities, and we continue to seek and compete for customer deposits to maintain this funding base. Our future growth will largely depend on our ability to retain and grow our deposit base. Although we have historically maintained a high deposit customer retention rate, these deposits are subject to potentially dramatic fluctuations in availability or price due to certain factors outside of our control, such as increasing competitive pressures for deposits, changes in interest rates and returns on other investment classes, customer perceptions of our financial health and general reputation, and a loss of confidence by customers in us or the banking sector generally, which could result in significant outflows of deposits within short periods of time or significant changes in pricing necessary to maintain current customer deposits or attract additional deposits. Additionally, any such loss of funds could result in lower loan originations, which could have an adverse effect on our business, financial condition, and results of operations. Our failure to compete effectively in our market could restrain our growth or cause us to lose market share, which could have an adverse effect on our business, financial condition, and results of operations.

Additionally, any such loss of funds could result in lower loan originations, which could have an adverse effect on our business, financial condition, and results of operations. Our failure to compete effectively in our market could restrain our growth or cause us to lose market share, which could have an adverse effect on our business, financial condition, and results of operations.

Failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements than we do. We may not be able to implement new technology-driven products and services effectively or be successful in marketing these products and services to our customers. Failure to keep pace successfully with technological change affecting the financial services industry could harm our ability to compete effectively and could have an adverse effect on our business, financial condition, and results of operations. As these technologies improve in the future, we may be required to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have an adverse effect on our business, financial condition, and results of operations.

We are dependent on the use of data and modeling in both our management’s decision-making generally and in meeting regulatory expectations in particular.

The use of statistical and quantitative models and other quantitatively based analyses is endemic to bank decision making and regulatory compliance processes, and the employment of such analyses is becoming increasingly widespread in our operations. Liquidity stress testing, interest rate sensitivity analysis, allowance for credit loss measurement, portfolio stress testing, and the identification of possible violations of anti-money laundering regulations are examples of areas in which we are dependent on models and the data that underlie them. We anticipate that model-derived insights will be used more widely in our decision making in the future. While these quantitative techniques and approaches improve our decision making, they also create the possibility that faulty data or flawed quantitative approaches could yield adverse outcomes or regulatory scrutiny. Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision making, which could have an adverse effect on our business, financial condition, and results of operations.

their outputs could similarly result in suboptimal decision making, which could have an adverse effect on our business, financial condition, and results of operations.

We may not be able to measure and limit our credit risk adequately, which could adversely affect our profitability.

Our business depends on our ability to successfully measure and manage credit risk. As a lender, we are exposed to the risk that the principal of, or interest on, a loan will not be paid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure. In addition, we are exposed to risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual loans and borrowers. The creditworthiness of a borrower is affected by many factors, including local market conditions and general economic conditions. Many of our loans are made to small to medium-sized businesses that are less able to withstand competitive, economic, and financial pressures than larger borrowers. If the overall economic climate in the United States, generally, or in our market specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs, and delinquencies could rise and require significant additional provisions for credit losses. Additional factors related to the credit quality of multifamily residential, real estate construction, and other commercial real estate loans include the quality of management of the business and tenant vacancy rates.

Our risk management practices, such as monitoring the concentration of our loans within specific markets and our credit approval, review, and administrative practices, may not adequately reduce credit risk, and our credit administration personnel, policies, and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio. A failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures, and additional charge-offs, and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have an adverse effect on our business, financial condition, and results of operations.

We are exposed to higher credit risk and other risks and costs by our commercial real estate, commercial land and construction, commercial construction, farmland loans and other real estate assets.

Commercial real estate, commercial land and construction, commercial construction, and farmland-based lending, which form significant portions of our loan portfolio, usually involve higher credit risks than other types of mortgage loans. These types of loans also involve larger loan balances to a single borrower or groups of related borrowers. These higher credit risks are further heightened when the loans are concentrated in a small number of larger borrowers, leading to relationship exposure.

Non-owner-occupied commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful development of their properties, in addition to the factors affecting residential real estate borrowers. These loans also involve greater risk because they generally are not fully amortizing over the loan period but have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner.

Banking regulators closely supervise banks’ commercial real estate lending activities and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies, and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.

Commercial land development loans and owner-occupied commercial real estate loans are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses. These loans may involve greater risk because the availability of funds to repay each loan depends substantially on the success of the business itself. In addition, the assets securing the loans have the following characteristics: (i) they depreciate over time; (ii) they are difficult to appraise and liquidate; and (iii) they fluctuate in value based on the success of the business.

Commercial real estate loans, commercial and industrial loans, and construction loans are more susceptible to a risk of loss during a downturn in the business cycle. InOur ~~particular~~underwriting, ~~the~~review, ~~increase~~and inmonitoring ~~working~~cannot ~~from~~eliminate ~~home~~all ~~since outbreak of~~ the ~~COVID-19~~risks ~~pandemic~~related ~~could~~to ~~have~~these ~~adverse effects on our~~ loans ~~for office space, which are dependent for repayment on the successful~~ .

operation and management of the associated commercial real estate. Our underwriting, review, and monitoring cannot eliminate all the risks related to these loans.

We also make both secured and unsecured loans to our commercial clients. Secured commercial loans are generally collateralized by real estate, accounts receivable, inventory, equipment, or other assets owned by the borrower, or may include a personal guaranty of the business owner. Unsecured loans generally involve a higher degree of risk of loss than do secured loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’ businesses. Because of this lack of collateral, we are limited in our ability to collect on defaulted unsecured loans. Furthermore, the collateral that secures our secured commercial and industrial loans typically includes inventory, accounts receivable, and equipment, which, if the business is unsuccessful, usually has a value that is insufficient to satisfy the loan without a loss.

We may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all. The amount that we, as a mortgagee, may realize after a foreclosure depends on factors outside of our control, including, but not limited to, general or local economic conditions, environmental cleanup liabilities, assessments, interest rates, real estate tax rates, operating expenses of the mortgaged properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, governmental and regulatory rules, and natural disasters. Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or write-downs in the value of OREO could have an adverse effect on our business, financial condition, and results of operations.

Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expenses associated with the foreclosure process or prevent us from foreclosing at all. A number of states in recent years have either considered or adopted foreclosure reform laws that make it substantially more difficult and expensive for lenders to foreclose on properties in default. Additionally, federal and state regulators and state attorneys general have prosecuted or pursued enforcement action against a number of mortgage servicing companies for alleged consumer protection law violations. If new federal or state laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or raise outright barriers to foreclosure, they could have an adverse effect on our business, financial condition, and results of operations.

In addition, if we foreclose on and take title to real property securing loans, there is a risk that hazardous or toxic substances could be found on these properties and that we could be liable for remediation costs, as well as personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to sell the affected property. The remediation costs and any other financial liabilities associated with an environmental hazard could have an adverse effect on our business, financial condition, and results of operations.

Curtailment of government-guaranteed loan programs or changes in federal government funding could affect our business.

One component of our business consists of originating and periodically selling U.S. government-guaranteed loans, in particular those guaranteed by the SBA. ~~Pursuant to the Consolidated Appropriations Act, 2021, the SBA guaranteed 90% of the principal amount of each qualifying SBA loan originated~~ under ~~the~~its ~~SBA’s~~ 7(a) loan program ~~through October 1, 2021~~. The SBA presently guarantees 75% to 90% of the principal amount of qualifying loans originated under the 7(a) loan program. The U.S. government may not maintain the SBA 7(a) loan program, and even if it does, the guaranteed portion may not remain at its current or anticipated level. In addition, from time to time, the ~~government~~SBA ~~agencies~~may ~~that guarantee these loans~~ reach ~~their~~its ~~internal~~funding limits and cease to guarantee future loans. In addition, ~~these~~the ~~agencies~~SBA may change ~~their~~its rules for qualifying loans or Congress may adopt legislation that would have the effect of discontinuing or changing the loan guarantee programs. Non-governmental programs could replace government programs for some borrowers, but the terms might not be equally acceptable. Therefore, if these changes occur, the volume of loans to small business and industrial borrowers of the types that now qualify for government-guaranteed loans could decline. Also, the profitability of the sale of the guaranteed portion of these loans could decline as a result of market displacements due to increases in interest rates, and premiums realized on the sale of the guaranteed portions could decline from current levels. As the funding and sale of the guaranteed portion of SBA 7(a) loans is a major portion of our business and a significant portion of our non-interest income, any significant changes to the SBA 7(a) loan program, such as its funding or eligibility requirements, may have an unfavorable impact on our prospects, future performance, and results of operations. The aggregate principal balance of SBA 7(a) guaranteed portions sold during the year ended December 31, 2024 was approximately $18.3 million, compared to approximately $36.5 million for the year ended December 31, 2023.

23If these changes occur, the volume of loans to small business and industrial borrowers of the types that now qualify for government-guaranteed loans could decline. Also, the profitability of the sale of the guaranteed portion of these loans could decline as a result of market displacements due to increases in interest rates, and premiums realized on the sale of the guaranteed portions could decline from current levels. Any significant changes to the SBA 7(a) loan program, such as its funding or eligibility requirements, may have an unfavorable impact on our prospects, future performance, and results of operations. The aggregate principal balance of SBA 7(a) loans with government-guaranteed portions sold during the year ended December 31, 2025 was approximately $3.3 million, compared to approximately $18.3 million for the year ended December 31, 2024.

In addition, current or future delays to, reductions of, and/or cancellations of certain federal government payments in connection with cost-saving and government efficiency efforts undertaken by the Trump Administration may lead to increased repayment risk from clients of the Bank who rely on payments from the federal government in conducting their businesses. Potential losses could adversely affect our business, financial condition, and results of operations.

Liquidity risk could impair our ability to fund operations and meet our obligations as they become due.

Liquidity is essential to our business, and we monitor our liquidity and manage our liquidity risk at the holding company and bank levels. We require sufficient liquidity to fund asset growth, meet customer loan requests, facilitate customer deposit maturities and withdrawals, make payments on our debt obligations as they come due, and fulfill other cash commitments under both normal operating conditions and other unpredictable circumstances, including events causing industry or general financial market stress. Liquidity risk can increase due to a number of factors, which include, but are not limited to, an over-reliance on a particular source of funding, changes in the liquidity needs of our depositors, adverse regulatory actions against us, or a downturn in the markets in which our loans are concentrated.

Market conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner, and without adverse consequences. Our inability to raise funds through deposits, borrowings, the sale of loans, and other sources could have an adverse effect on our business, financial condition, and results of operations, and could result in the closure of the Bank.

Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities, and proceeds from issuance and sale of our equity and debt securities. Additional liquidity is provided by the ability to borrow from the FHLB and the Federal Reserve Bank of San Francisco to fund our operations. We may also borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization specifically or the financial services industry or economy in general. Our access to funding sources could also be affected by a decrease in the level of our business activity as a result of a downturn in our primary market or by one or more adverse regulatory actions against us.

Any substantial, unexpected, and/or prolonged change in the level or cost of liquidity could impair our ability to fund operations and meet our obligations as they become due and could have an adverse effect on our business, financial condition, and results of operations. Although we have historically been able to replace maturing deposits and advances if desired, we may not be able to replace such funds in the future if our financial condition, the financial condition of the FHLB, or market conditions change. FHLB borrowings and other current sources of liquidity may not be available or, if available, may not be sufficient to provide adequate funding for operations and to support our continued growth. The unavailability of sufficient funding could have an adverse effect on our business, financial condition, and results of operations.

We may be adversely affected by the soundness of other financial institutions.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies may be interrelated as a result of trading, clearing, counterparty, and other relationships. The failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in 2023 resulted in significant disruption in the financial services industry and negative media attention, which has also adversely impacted the volatility and market prices of the securities of financial institutions and resulted in outflows of deposits for us and many other financial institutions. These events have adversely impacted and could continue to adversely affect our business, results of operations, and financial condition, as well as the market price and volatility of our common stock.

The rapid rise in interest rates during 2022 and 2023 and the resulting industry-wide reduction in the fair value of securities portfolios, among other events, have resulted in a current state of volatility and uncertainty with respect to the health of the United States banking system. There is heightened awareness around liquidity, uninsured deposits, deposit composition, unrecognized investment losses, and capital. We are exposed to different industries and counterparties through transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, and other financial intermediaries. As a result, defaults by, declines in the financial condition of, or even rumors or questions about one or more financial services companies, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by us or other institutions. These losses could adversely affect our business, financial condition, and results of operations.23

242023 resulted in significant disruption in the financial services industry and negative media attention, which has also adversely impacted the volatility and market prices of the securities of financial institutions and resulted in outflows of deposits for us and many other financial institutions. These events have adversely impacted and could continue to adversely affect our business, results of operations, and financial condition, as well as the market price and volatility of our common stock.

While the volatility and uncertainty with respect to the health of the United States banking system has abated somewhat since the bank failures that occurred in the spring of 2023, there remains heightened awareness around liquidity, uninsured deposits, deposit composition, unrecognized investment losses, and capital among counterparties, customers, and regulators. We are exposed to different industries and counterparties through transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, and other financial intermediaries. As a result, defaults by, declines in the financial condition of, or even rumors or questions about one or more financial services companies, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by us or other institutions. These losses could adversely affect our business, financial condition, and results of operations.

Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.

The federal banking agencies have issued guidance regarding concentrations in commercial real estate lending for institutions that are deemed to have particularly high concentrations of commercial real estate loans within their lending portfolios. Under this guidance, an institution that has: (i) total reported loans for construction, land development, and other land which represent 100% or more of the institution’s total risk-based capital; or (ii) total reported loans secured by multifamily and non-farm non-residential properties and loans for construction, land development, and other land of 300% or more of the institution’s total risk-based capital, where the outstanding balance of the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months, is identified as having potential commercial real estate concentration risk. An institution that is deemed to have concentrations in commercial real estate lending is expected to employ heightened levels of risk management with respect to its commercial real estate portfolios and may be required to maintain higher levels of capital. We have a concentration in commercial real estate loans, and we have experienced significant growth in our commercial real estate portfolio in recent years. We cannot guarantee that any risk management practices we implement will be effective to prevent losses relating to our commercial real estate portfolio. Management has extensive experience in commercial real estate lending and has implemented and continues to maintain heightened portfolio monitoring and reporting, and strong underwriting criteria with respect to our commercial real estate portfolio. Nevertheless, we could be required to maintain higher levels of capital as a result of our commercial real estate concentration, which could limit our growth, require us to obtain additional capital, and have an adverse effect on our business, financial condition, and results of operations.

Our recovery on commercial real estate loans could be further reduced by a lack of a liquid secondary market for such mortgage loans and mortgage-backed securities.

Our current business strategy includes an emphasis on commercial real estate lending. Although we sold 5610 SBA 7(a) loans with government-guaranteed portions totaling approximately $183.3 million in the year ended December 31, ~~2024~~2025, we may decide to sell more loans in the future. A secondary market for most types of commercial real estate loans is not readily liquid, so we have less opportunity to mitigate credit risk by selling part or all of our interest in these loans. As a result of these characteristics, if we foreclose on a commercial real estate loan, our holding period for the collateral typically is longer than for residential mortgage loans because there are fewer potential purchasers of the collateral. Accordingly, charge-offs on commercial real estate loans may be larger as a percentage of the total principal outstanding than those incurred with our residential or consumer loan portfolios.

The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property and OREO may not accurately reflect the net value of the asset.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately reflect the net value of the collateral after the loan is made. As a result, we may not be able to realize the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. In addition, we rely on appraisals and other valuation techniques to establish the value of OREO that we acquire through foreclosure proceedings and to determine loan impairments. If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our OREO, if any, and our allowance for credit losses may not reflect accurate loan impairments. Inaccurate valuation of OREO or inaccurate provisioning for credit losses could have an adverse effect on our business, financial condition, and results of operations.

consolidated financial statements may not reflect the correct value of our OREO, if any, and our allowance for credit losses may not reflect accurate loan impairments. Inaccurate valuation of OREO or inaccurate provisioning for credit losses could have an adverse effect on our business, financial condition, and results of operations.

Federal, state, and local consumer lending laws may restrict our or our partners’ ability to originate certain loans or increase our risk of liability with respect to such loans.

Federal, state, and local laws have been adopted that are intended to prevent certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans, and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. It is our policy to determine borrowers’ ability to repay and not to make predatory loans. Nonetheless, the law and related rules create the potential for increased liability with respect to our lending and loan investment activities. Compliance with these laws increases our cost of doing business.

Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expenses associated with the foreclosure process or prevent us from foreclosing at all. A number of states in recent years have either considered or adopted foreclosure reform laws that make it substantially more difficult and expensive for lenders to foreclose on properties in default, and we cannot be certain that the state in which we operate will not adopt similar legislation in the future. Additionally, federal regulators have prosecuted or pursued enforcement actions against a number of mortgage servicing companies for alleged consumer protection law violations. If new state or federal laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or raise outright barriers to foreclosure, such laws or regulations could have an adverse effect on our business, financial condition, and results of operations.

Our largest loan relationships make up a material percentage of our total loan portfolio, and credit risks relating to these would have a disproportionate impact.

As of December 31, ~~2024~~2025, our 30 largest borrowing relationships ranged from approximately $2025.30 million to $~~284~~293.3 million (including unfunded commitments) and totaled approximately $1.45 billion in total commitments (representing, in the aggregate, 3835.6864% of our total loans held for investment before deferred fees at that date). Each of the loans associated with these relationships has been underwritten in accordance with our underwriting policies and limits. Along with other risks inherent in these loans, such as the deterioration of the underlying businesses or property securing these loans, this concentration of borrowers presents a risk that, if one or more of these relationships were to become delinquent or suffer default, we could be exposed to material losses. The allowance for credit losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance would negatively affect our earnings and capital. Even if these loans are adequately collateralized, an increase in classified assets could harm our reputation with our regulators and inhibit our ability to execute our business plan.

Our largest deposit relationships currently make up a material percentage of our deposits and the withdrawal of deposits by our largest depositors, or withdrawals of other large deposits over a short period of time, could force us to fund our business through more expensive and less stable sources.

At December 31, ~~2024~~2025, our 4953 largest deposit relationships, each accounting for more than $10.0 million, amounted to $12.80 billion, or 5047.3582% of our total deposits. This includes $~~674~~789.16 million in deposits from municipalities, of which we conduct a monthly review. Withdrawals of deposits by any one of our largest depositors or by one of our related customer groups could force us to rely more heavily on borrowings and other sources of funding for our business and withdrawal demands, adversely affecting our net interest margin and results of operations. If a significant amount of these deposits, or other large deposits, including deposits that exceed applicable FDIC insurance limits, were withdrawn within a short period of time, it could have a negative impact on our short-term liquidity and have an adverse impact on our earnings. The ease and speed of the electronic withdrawals may increase this risk. We may also be forced, as a result of withdrawals of deposits, to rely more heavily on other, potentially more expensive and less stable, funding sources. Additionally, such circumstances could require us to raise deposit rates in an attempt to attract new deposits, which would adversely affect our results of operations, and/or to raise funding through brokered deposits. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated interest rates and financial industry instability. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Under applicable regulations, if the Bank were no longer “well-capitalized,” the Bank would not be able to accept brokered deposits without the approval of the FDIC.

Our allowance for credit losses may be inadequate to absorb losses inherent in the loan portfolio.

Experience in the banking industry indicates that a portion of our loans will become delinquent, and that some may only be partially repaid or may never be repaid at all. We may experience losses for reasons beyond our control, such as the impact of general economic conditions on customers and their businesses. Accordingly, we maintain an allowance for credit losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio. In determining the size of our allowance for credit losses, we rely on an analysis of our loan portfolio that considers historical loss experience, volume and types of loans, trends in classification, volume and trends in delinquencies and non-accruals, economic conditions, and other pertinent information. The determination of the appropriate level of the allowance for credit losses is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risk and future trends, all of which may change materially. Although we endeavor to maintain our allowance for credit losses at a level adequate to absorb any inherent losses in the loan portfolio, these estimates of credit losses are necessarily subjective, and their accuracy depends on the outcome of future events. At December 31, ~~2024~~2025, the allowance for credit losses was $3744.84 million.

Deterioration of economic conditions affecting borrowers, new information regarding existing loans, inaccurate management assumptions, identification of additional problem loans, temporary modifications, loan forgiveness, automatic forbearance, and other factors, both within and outside of our control, may result in our experiencing higher levels of nonperforming assets and charge-offs, and incurring credit losses in excess of our current allowance for credit losses, requiring us to make material additions to our allowance for credit losses, which could have an adverse effect on our business, financial condition, and results of operations.

requiring us to make material additions to our allowance for credit losses, which could have an adverse effect on our business, financial condition, and results of operations.

Additionally, federal and state banking regulators, as an integral part of their supervisory function, periodically review the allowance for credit losses. These regulatory agencies may require us to increase our allowance for credit losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours. If we need to make significant and unanticipated increases in the loss allowance in the future, or to take additional charge-offs for which we have not established adequate reserves, our business, financial condition, and results of operations could be adversely affected at that time.

On January 1, 2023, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all subsequent amendments that modified ASU 2016-13 (collectively, “ASC 326,”), which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model applies to estimated credit losses on loans receivable, held-to-maturity debt securities, unfunded loan commitments, and certain other financial assets measured at amortized cost. Under ASC 326, available-for-sale debt securities are evaluated for impairment if fair value is less than amortized cost, with any estimated credit losses recorded through a credit loss expense and an allowance, rather than a write-down of the investment. Changes in fair value that are not credit-related will continue to be recorded in other comprehensive income. Under the CECL model, the calculated allowance for credit losses was $5.3 million higher on January 1, 2023 than the allowance under the incurred loss model. For further information, please see Note 2, Recently Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K.

We could recognize losses on investment securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

As of December 31, ~~2024~~2025, the carrying value of our investment securities portfolio was approximately $~~100~~96.9 million. As of the same date, 87.2760% of our investments were U.S. government agency securities. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions with respect to the securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and instability in the capital markets. Any of these factors, among others, could require the Company to record an allowance for credit losses, which could have an adverse effect on our business, financial condition, and results of operations. The process for determining whether an allowance for credit losses is required involves complex, subjective judgments about the future financial performance and liquidity of the issuer, any collateral underlying the security, and our intent and ability to hold the security for a sufficient period of time to allow for any anticipated recovery in fair value, in order to assess the probability of receiving all contractual principal and interest payments on the security. Our failure to correctly and timely assess any impairments or losses with respect to our securities could have an adverse effect on our business, financial condition, and results of operations.

We depend on the accuracy and completeness of information provided by customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished by or on behalf of customers and counterparties, including financial information. We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information. In deciding whether to extend credit, we may rely upon customers’ representations that their financial statements conform to GAAP and present fairly the financial condition, results of operations, and cash flows of the customer. We also may rely on customer representations and certifications, or other audit or accountants’ reports, with respect to the business and financial condition of our customers. Our business, financial condition, and results of operations could be adversely affected if we rely on misleading, false, inaccurate, or fraudulent information.

Risks Related to Our Industry and Regulation

Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have an adverse effect on our operations.

The banking industry is highly regulated and supervised under both federal and state laws and regulations that are intended primarily for the protection of depositors, customers, the public, the banking system as a whole, and/or the FDIC DIF, not for the protection of our shareholders and creditors. We are subject to regulation and supervision by the Federal Reserve, and our Bank is subject to regulation and supervision by the FDIC and the DFPI. Compliance with these laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance costs. The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts, and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept and the rates we may pay on such deposits, maintenance of adequate capital and liquidity, changes in control of us and our Bank, transactions between us and our Bank, handling of nonpublic information, restrictions on dividends, and establishment of new offices. We must obtain approval from our regulators before engaging in certain activities, and there is risk that such approvals may not be granted, either in a timely manner or at all. These requirements may constrain our operations, and the adoption of new laws and changes to or repeal of existing laws may have an adverse effect on our business, financial condition, and results of operations. Also, the burden imposed by those federal and state regulations may place banks in general, including our Bank in particular, at a competitive disadvantage compared to their non-bank competitors. Compliance with current and potential regulation, as well as supervisory scrutiny by our regulators, may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital, and limit our ability to pursue business opportunities in an efficient manner by requiring us to expend significant time, effort, and resources to ensure compliance and respond to any regulatory inquiries or investigations. Our failure to comply with any applicable laws or regulations, interpretations of such laws and regulations, or regulatory policies could result in sanctions by regulatory agencies, civil money penalties, and/or damage to our reputation, all of which could have an adverse effect on our business, financial condition, and results of operations.

and our Bank is subject to regulation and supervision by the FDIC and the DFPI. Compliance with these laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance costs. The Dodd-Frank Act, which imposed significant regulatory and compliance changes on financial institutions, is an example of this type of federal law. The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts, and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept and the rates we may pay on such deposits, maintenance of adequate capital and liquidity, changes in control of us and our Bank, transactions between us and our Bank, handling of nonpublic information, restrictions on dividends, and establishment of new offices. We must obtain approval from our regulators before engaging in certain activities, and there is risk that such approvals may not be granted, either in a timely manner or at all. These requirements may constrain our operations, and the adoption of new laws and changes to or repeal of existing laws may have an adverse effect on our business, financial condition, and results of operations. Also, the burden imposed by those federal and state regulations may place banks in general, including our Bank in particular, at a competitive disadvantage compared to their non-bank competitors. Compliance with current and potential regulation, as well as supervisory scrutiny by our regulators, may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital, and limit our ability to pursue business opportunities in an efficient manner by requiring us to expend significant time, effort, and resources to ensure compliance and respond to any regulatory inquiries or investigations. Our failure to comply with any applicable laws or regulations, interpretations of such laws and regulations, or regulatory policies could result in sanctions by regulatory agencies, civil money penalties, and/or damage to our reputation, all of which could have an adverse effect on our business, financial condition, and results of operations.

Applicable laws, regulations, interpretations, enforcement policies, and accounting principles have been subject to significant changes in recent years and may be subject to significant future changes. Additionally, federal and state regulatory agencies may change the manner in which existing regulations are applied. We cannot predict the substance or effect of pending or future legislation or regulation or changes to the application of laws and regulations to us. Future changes may have an adverse effect on our business, financial condition, and results of operations.

In addition, given the current economic and financial environment, regulators may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine the adequacy of liquidity, risk management, or other operational practices for financial service companies. This could impact our ability to implement our strategy, could affect us in substantial and unpredictable ways, and could have an adverse effect on our business, financial condition, and results of operations. Furthermore, the regulatory agencies have broad discretion in their interpretation of laws and regulations and their assessment of the quality of our loan portfolio, securities portfolio, and other assets. Based on our regulators’ assessment of the quality of our assets, operations, lending practices, investment practices, capital structure, or other aspects of our business, we may be required to take additional charges or undertake, or refrain from taking, actions that could have an adverse effect on our business, financial condition, and results of operations.

Monetary policies and regulations of the Federal Reserve could have an adverse effect on our business, financial condition, and results of operations.

Our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate, and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments, and deposits. Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition, and results of operations cannot be predicted with certainty.

Federal and state regulators periodically examine our business and may require us to remediate adverse examination findings or may take enforcement action against us.

The Federal Reserve periodically examines our business, and the FDIC, and the DFPI periodically examine ~~our~~the business of the Bank, including ~~our~~ compliance with laws and regulations. If, as a result of an examination, the Federal Reserve, the FDIC, or the DFPI were to determine that our or the Bank’s financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our or the Bank’s operations had become unsatisfactory, or that we or the Bank were in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate. These actions may include requiring us or the Bank to remediate any such adverse examination findings.

28In addition, these agencies have the power to take enforcement action against us and/or the Bank to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation of law or regulation or unsafe or unsound practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to direct the sale of subsidiaries or other assets, to limit dividends and distributions, to restrict our growth, to assess civil money penalties against us or our officers or directors, to remove officers and directors, and, if it is concluded that such conditions cannot be corrected or there is imminent risk of loss to depositors, to terminate the Bank’s deposit insurance and place the Bank into receivership or conservatorship. Any regulatory enforcement action against us or the Bank could have an adverse effect on our business, financial condition, and results of operations.

different remedial actions as they deem appropriate. These actions may include requiring us to remediate any such adverse examination findings.

In addition, these agencies have the power to take enforcement action against us to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation of law or regulation or unsafe or unsound practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to direct the sale of subsidiaries or other assets, to limit dividends and distributions, to restrict our growth, to assess civil money penalties against us or our officers or directors, to remove officers and directors, and, if it is concluded that such conditions cannot be corrected or there is imminent risk of loss to depositors, to terminate our deposit insurance and place the Bank into receivership or conservatorship. Any regulatory enforcement action against us could have an adverse effect on our business, financial condition, and results of operations.

We are subject to stringent capital requirements, which could have an adverse effect on our operations.

Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define different forms of capital for calculating these ratios. The capital rules generally require bank holding companies and banks to maintain a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.000% (a minimum of 4.505% plus a capital conservation buffer of 2.505%), a Tier 1 capital to risk-weighted assets ratio of at least 8.505% (a minimum of 6.000% plus a capital conservation buffer of 2.505%), a total capital to risk-weighted assets ratio of at least 10.505% (a minimum of 8.000% plus a capital conservation buffer of 2.505%), and a Tier 1 leverage ratio of at least 4.000%. An institution’s failure to exceed the capital conservation buffer with common equity Tier 1 capital would result in limitations on an institution’s ability to make capital distributions and discretionary bonus payments. In addition, for an insured depository institution to be “well-capitalized” under the banking agencies’ prompt corrective action framework, it must have a common equity Tier 1 capital ratio of at least 6.505%, a Tier 1 capital ratio of at least 8.000%, a total capital ratio of at least 10.000%, and a Tier 1 leverage ratio of at least 5.000%, and must not be subject to any written agreement, order or capital directive, or prompt corrective action directive issued by its primary federal or state banking regulator to meet and maintain a specific capital level for any capital measure.

Any new or revised standards adopted in the future may require us to maintain materially more capital, with common equity as a more predominant component, or manage the configuration of our assets and liabilities to comply with formulaic capital requirements. We may not be able to raise additional capital at all, or on terms acceptable to us. Failure to maintain capital to meet current or future regulatory requirements could have an adverse effect on our business, financial condition, and results of operations.

We are subject to numerous “fair and responsible banking” laws and other laws and regulations designed to protect consumers, and failure to comply with these laws could lead to a wide variety of sanctions.

~~The~~We are subject to extensive and evolving federal and state fair lending laws and regulations. For example, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and regulations, including state laws and regulations, prohibit discriminatory lending practices by financial institutions. The Federal Trade Commission Act prohibits unfair or deceptive acts or practices, and the Dodd-Frank Act prohibits unfair, deceptive, or abusive acts or practices by financial institutions. The FDIC, the U.S. Department of Justice, ~~federal~~ and/or ~~state banking agencies, and~~ other federal and state agencies, ~~including the CFPB,~~ are responsible for enforcing these ~~fair and responsible banking~~ laws and regulations. Banks with no more than $10.0 billion in total consolidated assets, including the Bank, are subject to rules promulgated by the CFPB but are examined and supervised by federal banking agencies for compliance with federal consumer protection laws and regulations. The CFPB has issued rules that restrict or place conditions on various fees that financial institutions can charge consumers, including credit card late fees and overdraft fees. Although these rules have been challenged in court, and leadership of the CFPB during the Trump Administration has taken steps to curtail the CFPB’s regulatory activities, in general CFPB rulemaking has the potential to have a significant impact on the operations of the Bank.

A successful regulatory challenge to an institution’s compliance with fair ~~and~~lending ~~responsible~~or ~~banking~~consumer protection laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private litigation, including through class action litigation. In addition, an institution’s receipt of a less-than-Satisfactory CRA rating, which could result from a violation of fair lending or consumer protection laws or from an unsatisfactory record of meeting the credit needs of low- and moderate-income communities, could similarly result in an inability of the institution to engage in mergers or other expansionary activity. Such actions and limitations could have ana material adverse effect on our business, financial condition, and results of operations.

We are a bank holding company and are dependent upon the Bank for cash flow, and the Bank’s ability to make cash distributions is restricted. Additionally, the Federal Reserve may require us to commit capital resources to support the Bank.

We are a bank holding company with no material activities other than activities incidental to holding the common stock of the Bank. Our principal source of funds to pay distributions on our common stock and service any of our obligations, other than further issuances of securities, is dividends received from the Bank. The holding company, Five Star Bancorp, is a legal entity separate and distinct from the Bank. Furthermore, the Bank is not obligated to pay dividends to us, and any dividends paid to us would depend on the earnings or financial condition of the Bank, various business considerations, and applicable law and regulation. As is generally the case for banking institutions, the profitability of the Bank is subject to the fluctuating cost and availability of money, changes in interest rates, and economic conditions in general. In addition, various federal and state statutes and regulations limit the amount of dividends that the Bank may pay to the Company without regulatory approval.

In addition, the Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to support its subsidiary banks. Under ~~the~~this “source of strength” doctrine ~~that was codified by the Dodd-Frank Act~~, the Federal Reserve may require a bank holding company to make capital injections into a subsidiary bank, including at times when the bank holding company may not be inclined to do so, and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. Accordingly, we could be required to provide financial assistance to the Bank if it experiences financial distress.

A capital injection may be required at a time when our resources are limited, and we may be required to borrow the funds or raise capital to make the required capital injection. Any loan by a bank holding company to its subsidiary bank is subordinate in right of payment to deposits and certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of any note obligations. Thus, any borrowing by a bank holding company for the purpose of making a capital injection to a subsidiary bank may become more difficult and expensive relative to other corporate borrowings.

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

The Bank Secrecy Act, the Patriot Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and to file reports such as suspicious activity reports and currency transaction reports. We are required to comply with these and other anti-money laundering requirements. Our federal and state banking regulators, the Treasury Department’s Financial Crimes Enforcement Network, and other government agencies are authorized to impose significant civil money penalties for violations of anti-money laundering requirements. We are also subject to increased scrutiny of compliance with the regulations issued and enforced by the Treasury Department’s OFAC, which is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. If our program is deemed deficient, we could be subject to liability, including fines, civil money penalties, and other regulatory actions, which may include restrictions on our business operations and our ability to pay dividends, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have significant reputational consequences for us. Any of these circumstances could have an adverse effect on our business, financial condition, and results of operations.

requirements. We are also subject to increased scrutiny of compliance with the regulations issued and enforced by the Treasury Department’s OFAC, which is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. If our program is deemed deficient, we could be subject to liability, including fines, civil money penalties, and other regulatory actions, which may include restrictions on our business operations and our ability to pay dividends, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have significant reputational consequences for us. Any of these circumstances could have an adverse effect on our business, financial condition, and results of operations.

Risks Related to Ownership of Our Common Stock

The market price of our common stock may be volatile, and we may not be able to meet investor or analyst expectations. You may not be able to resell your shares at or above the price you paid and may lose part or all of your investment as a result.

Our stock price has fluctuated from a low of $18.21 to a high of $3338.5514 between our initial public offering and December 31, ~~2024~~2025. Volatility in the market price of our common stock may negatively impact the price at which our common stock may be sold and may also negatively impact the timing of any sale. The market price of our common stock may continue to fluctuate widely in response to a variety of factors including the risk factors described herein and, among other things:

may continue to fluctuate widely in response to a variety of factors including the risk factors described herein and, among other things:

•actual or anticipated variations in quarterly or annual operating results, financial conditions, or credit quality;

•changes in business or economic conditions;

•changes in accounting standards, policies, guidance, interpretations, or principles;

•changes in recommendations or research reports about us or the financial services industry in general published by securities analysts;

•the failure of securities analysts to cover, or to continue to cover, us;

•changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial institutions;

•news reports relating to trends, concerns, and other issues in the financial services industry;

•reports related to the impact of natural or man-made disasters in our market;

•perceptions in the marketplace regarding us and or our competitors;

•sudden increases in the demand for our common stock, including as a result of any “short squeezes”;

•significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors;

•additional investments from third parties;

•additions or departures of key personnel;

•future sales or issuance of additional shares of our common stock;

•~~fluctuations~~changes or proposed changes in ~~the~~laws ~~market~~or ~~price~~regulations, ofor ~~our~~differing ~~common~~interpretations ~~stock~~thereof, ~~and~~affecting ~~operating~~our ~~results~~business, or enforcement of ~~our~~these ~~competitors~~laws or regulations; or

•~~changes~~geopolitical orconditions ~~proposed changes in laws~~ or ~~regulations,~~natural or ~~differing~~man ~~interpretations~~made ~~thereof, affecting our business, or enforcement of these laws or regulations;~~disasters.

•new technology used, or services offered, by competitors;

•additional investments from third parties; or

•geopolitical conditions such as acts or threats of terrorism, pandemics, or military conflicts.

In particular, the realization of any of the risks described in this section could have an adverse effect on the market price of our common stock and cause the value of your investment to decline. In addition, the stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our common stock over the short, medium, or long term, regardless of our actual performance. In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class action litigation. If we were to be involved in a class action lawsuit, it could divert the attention of our senior management and could adversely affect our business, financial condition, and results of operations.

We are an “emerging growth company,” as defined in the JOBS Act and are able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors and adversely affect the market price of our common stock.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various requirements generally applicable to public companies. These exemptions allow us, among other things, to discuss our results of operations for only two years in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; not to provide an auditor attestation of our internal control over financial reporting; to take advantage of an extended transition period to comply with the new or revised accounting standards applicable to public companies; and not to seek a non-binding advisory vote on executive compensation or golden parachute arrangements.

We may take advantage of these exemptions until we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest of: (i) the first fiscal year following the fifth anniversary of our IPO; (ii) the first fiscal year after our annual gross revenues are $1.235 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

We cannot predict whether investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile or decline.

Our significant shareholders have the ability to control significant corporate activities, and our significant shareholders’ interests may not coincide with yours.

Upon the closing of our IPO, our directors, executive officers, and principal shareholders beneficially owned an aggregate of 5,881,682 shares, or approximately 34.47% of our issued and outstanding shares of common stock at the time. As of December 31, 2025, our directors, executive officers, and principal shareholders beneficially owned an aggregate of 9,955,654, or approximately 46.59% of our issued and outstanding shares of common stock. Consequently, our directors, executive officers, and principal shareholders are able to significantly affect our affairs and policies, including the outcome of the election of directors and the potential outcome of other matters submitted to a vote of our shareholders, such as mergers, the sale of substantially all of our assets, and other extraordinary corporate matters. This influence may also have the effect of delaying or preventing changes of control or changes in management or limiting the ability of our other shareholders to approve transactions that they may deem to be in the best interests of our Company. The interests of these ~~insiders~~significant shareholders could conflict with the interests of our other shareholders, including you.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, or change their recommendations regarding our common stock, or if our operating results do not meet their expectations, the market price of our common stock and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, or our operating results do not meet their expectations, either absolutely or relative to our competitors, the market price of our common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we would lose visibility in the financial markets, which in turn could cause the market price of our common stock or trading volume to decline. If we fail to meet the expectations of analysts for our operating results, the market price of our common stock would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause the market price of our common stock and trading volume to decline.

We may not pay dividends on our common stock in the future, and our ability to pay dividends is subject to certain restrictions.

Holders of our common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments. Our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. In addition, we are a bank holding company, and our ability to declare and pay dividends is dependent on federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends. It is the policy of the Federal Reserve that bank holding companies should generally pay dividends on common stock only out of earnings, and only if prospective earnings retention is consistent with the organization’s expected future needs, asset quality, and financial condition, and that bank holding companies should inform and consult with the Federal Reserve in advance of declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid.

The holders of our debt obligations and preferred stock, if any, have priority over the holders of our common stock with respect to payment in the event of liquidation, dissolution, or winding up and with respect to the payment of interest and dividends.

In any liquidation, dissolution, or winding up of the Company, our common stock would rank below all claims of debt holders against us as well as any preferred stock that has been issued. As of December 31, 2024, we had outstanding an aggregate of $73.9 million of subordinated notes, net of debt issuance costs, outstanding, and we did not have any outstanding preferred stock or trust preferred securities. We could incur future debt obligations or issue preferred stock in the future to raise additional capital. In such event, holders of our common stock will not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution, or winding up of the Company until after all of our

obligations to the debt holders are satisfied and holders of subordinated notes and senior equity securities, including preferred shares, if any, have received any payment or distribution due to them. In addition, we are required to pay interest on the subordinated notes and dividends on the trust preferred securities and preferred stock before we will be able to pay any dividends on our common stock. Since any decision to issue debt securities or incur other borrowings in the future will depend on market conditions and other factors beyond our control, the amount, timing, nature, or success of our future capital raising efforts is uncertain. Thus, holders of our common stock bear the risk that our future issuances of debt securities or our incurrence of other borrowings will negatively affect the market price of our common stock.

California law and the provisions of our amended and restated articles of incorporation and amended and restated bylaws may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.

California corporate law and provisions of our amended and restated articles of incorporation (“articles of incorporation”) and our second amended and restated bylaws (“bylaws”) could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. Furthermore, with certain limited exceptions, federal regulations prohibit a person, company, or group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring 10% or more (5% or more if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our Company without prior notice or application to and the approval of the Federal Reserve. Accordingly, prospective investors must comply with these requirements, if applicable, in connection with any purchase of shares of our common stock. Collectively, provisions of our articles of incorporation and bylaws and other statutory and regulatory provisions may delay, prevent, or deter a merger, acquisition, tender offer, proxy contest, or other transaction that might otherwise result in our shareholders receiving a premium over the market price for their common stock. Moreover, the combination of these provisions effectively inhibits certain business combinations, which, in turn, could adversely affect the market price of our common stock.

Furthermore, prior approval of the Federal Reserve and the DFPI is generally required for any person to acquire control of the Company. Under federal and state laws, a person may be presumed to acquire control of the Company if the person

acquires 10% or more of the Company’s outstanding common stock. In addition, Federal Reserve approval is also generally required for a bank holding company to acquire more than 5% or more of the Company’s outstanding common stock. Accordingly, prospective investors must comply with these requirements, if applicable, in connection with any purchase of shares of our common stock. Collectively, provisions of our articles of incorporation and bylaws and other statutory and regulatory provisions may delay, prevent, or deter a merger, acquisition, tender offer, proxy contest, or other transaction that might otherwise result in our shareholders receiving a premium over the market price for their common stock. Moreover, the combination of these provisions effectively inhibits certain business combinations, which, in turn, could adversely affect the market price of our common stock.

Our bylaws have an exclusive forum provision, which could limit a shareholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or other employees.

Our bylaws have an exclusive forum provision providing that, unless we consent in writing to the selection of an alternative forum, the United States District Court for the Northern District of California (or, in the event that the United States District Court for the Northern District of California does not have jurisdiction, any federal or state court of California) shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of any duty owed by any director, officer, or other employee to us or to our shareholders; (iii) any action asserting a claim against us or any of our directors, officers, or other employees arising pursuant to any provision of the General Corporation Law of California or the articles of incorporation or the bylaws; or (iv) any action asserting a claim against us or any of our directors, officers, or other employees that is governed by the internal affairs doctrine. Our bylaws will further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by applicable law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws, including the applicable rules and regulations promulgated thereunder. Any person purchasing or otherwise acquiring any interest in any shares of our capital stock will be deemed to have notice of and to have consented to this provision of our bylaws. The exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits. Alternatively, if a court were to find the exclusive forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have an adverse effect on our business, financial condition, results of operations, and growth prospects.

The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we incur significant legal, accounting, insurance, and other expenses. We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and applicable securities rules and regulations. These laws and regulations increase the scope, complexity, and cost of corporate governance, reporting, and disclosure practices over those of non-public or non-reporting companies. Despite our conducting business in a highly regulated environment, these laws and regulations have different requirements for compliance than we experienced prior to becoming a public company. Among other things, the Exchange Act requires that we file annual, quarterly, and current reports with respect to our business and operating results and maintain effective disclosure controls and procedures and internal control over financial reporting. As a Nasdaq-listed company, we are required to prepare and file proxy materials which meet the requirements of the Exchange Act and the SEC’s proxy rules. Compliance with these rules and regulations has increased, and will continue

to increase, our legal and financial compliance costs, will make some activities more difficult, time-consuming, or costly, and will increase demand on our systems and resources, particularly after we are no longer an “emerging growth company” as defined in the JOBS Act. In order to maintain, appropriately document and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet the standards required by the Sarbanes-Oxley Act, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. Additionally, any failure by us to file our periodic reports with the SEC in a timely manner could harm our reputation and cause our investors and potential investors to lose confidence in us, and restrict trading in, and reduce the market price of, our common stock, and potentially impact our ability to access the capital markets.

If we fail to design, implement, and maintain effective internal control over financial reporting or remediate any future material weakness in our internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Effective internal control over financial reporting is necessary for us to provide reliable reports and prevent fraud. We may not be able to identify all significant deficiencies and/or material weaknesses in our internal control over financial reporting in the future, and our failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have an adverse effect on our business, financial condition, and results of operations.

In the normal course of our operations, we may identify deficiencies that would have to be remediated to satisfy the SEC rules for certification of our internal control over financial reporting. A material weakness is defined by the standards issued by the PCAOB as a deficiency, or combination of deficiencies, in internal control over financial reporting that results in a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a consequence, we would have to disclose in periodic reports we file with the SEC any material weakness in our internal control over financial reporting. The existence of a material weakness would preclude management from concluding that our internal control over financial reporting is effective and, when we cease to be an emerging growth company under the JOBS Act, preclude our independent registered public accounting firm from rendering their report addressing an assessment of the effectiveness of our internal control over financial reporting. In addition, disclosures of deficiencies of this type in our SEC reports could cause investors to lose confidence in our financial reporting, may negatively affect the market price of our common stock, and could result in the delisting of our securities from the securities exchanges on which they trade. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud. If we have deficiencies in our disclosure controls and procedures or internal control over financial reporting, such deficiencies may adversely affect us.

General Risk Factors

Our success is largely dependent upon our management team and key employees and ability to successfully execute our business strategy.

Our success depends, in large part, on the retention of our management team and key employees. Our management team and other key employees, including those who conduct our loan origination and other business development activities, have significant industry experience. We cannot ensure that we will be able to retain the services of any members of our management team or other key employees. Though we have employment agreements in place with certain members of our management team, they may still elect to leave at any time. The loss of any of our management team or our key employees could adversely affect our ability to execute our business strategy, and we may not be able to find adequate replacements on a timely basis, or at all.

Our future success also depends on our continuing ability to attract, develop, motivate, and retain key employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. Because the market for qualified individuals is highly competitive, we may not be able to attract and retain qualified officers or candidates. Failure to attract and retain a qualified management team and qualified key employees could have an adverse effect on our business, financial condition, and results of operations.

There can be no assurance that we will be able to continue to grow and to remain profitable in future periods, or, if profitable, that our overall earnings will remain consistent with our prior results of operations or increase in the future. A downturn in economic conditions in our market, particularly in the real estate market, heightened competition from other financial services providers, an inability to retain or grow our core deposit base, regulatory and legislative considerations, and failure to attract and retain high-performing talent, among other factors, could limit our ability to grow assets or increase profitability as rapidly as we have in the past. Sustainable growth requires that we manage our risks by following prudent loan underwriting standards, balancing loan and deposit growth without materially increasing interest rate risk or compressing our net interest margin, maintaining more than adequate capital at all times, managing a growing number of customer relationships, scaling technology platforms, hiring and retaining qualified employees, and successfully implementing our strategic initiatives. We must also successfully implement improvements to, or integrate, our management information and control systems, procedures, and processes in an efficient and timely manner and identify deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate an increase in loan volume in various markets and the infrastructure that comes with expanding operations, including new branches. Our growth strategy may require us to incur additional expenditures to expand our administrative and operational infrastructure. If we are unable to effectively manage and grow our banking franchise, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth. We may not have, or may not be able to develop, the knowledge or relationships necessary to be successful in new markets. Our failure to sustain our historical rate of growth, adequately manage the factors that have contributed to our growth, or successfully enter new markets could have an adverse effect on our earnings and profitability and, therefore, on our business, financial condition, and results of operations.

and failure to attract and retain high-performing talent, among other factors, could limit our ability to grow assets or increase profitability as rapidly as we have in the past. Sustainable growth requires that we manage our risks by following prudent loan underwriting standards, balancing loan and deposit growth without materially increasing interest rate risk or compressing our net interest margin, maintaining more than adequate capital at all times, managing a growing number of customer relationships, scaling technology platforms, hiring and retaining qualified employees, and successfully implementing our strategic initiatives. We must also successfully implement improvements to, or integrate, our management information and control systems, procedures, and processes in an efficient and timely manner and identify deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate an increase in loan volume in various markets and the infrastructure that comes with expanding operations, including new branches. Our growth strategy may require us to incur additional expenditures to expand our administrative and operational infrastructure. If we are unable to effectively manage and grow our banking franchise, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth. We may not have, or may not be able to develop, the knowledge or relationships necessary to be successful in new markets. Our failure to sustain our historical rate of growth, adequately manage the factors that have contributed to our growth, or successfully enter new markets could have an adverse effect on our earnings and profitability and, therefore, on our business, financial condition, and results of operations.

If we implement new lines of business, products, or services, we may invest significant time and resources in doing so, and such new lines of business, products, or services may not be successful.

From time to time, we may implement new lines of business or offer new products and product enhancements as well as new services within our existing lines of business. There are substantial risks and uncertainties associated with these efforts. In developing, implementing, or marketing new lines of business, products, product enhancements, or services, we may invest significant time and resources. We may underestimate the appropriate level of resources or expertise necessary to make new lines of business or products successful or to realize their expected benefits. We may not achieve the milestones set in initial timetables for the development and introduction of new lines of business, products, product enhancements, or services, and price and profitability targets may not prove feasible. External factors, such as new or changing regulations, competitive alternatives, and shifting market preferences, may also impact the ultimate implementation of a new line of business or offerings of new products, product enhancements, or services. Any new line of business, product, product enhancement, or service could have a significant impact on the effectiveness of our system of internal controls. We may also decide to discontinue businesses or products due to lack of customer acceptance or unprofitability. Failure to successfully manage these risks in the development and implementation of new lines of business ~~or offerings of new products, product enhancements, or services could have an adverse effect on our business, financial condition, and results of operations.~~

or offerings of new products, product enhancements, or services could have an adverse effect on our business, financial condition, and results of operations.

We may pursue strategic acquisitions in the future, and we may not be able to overcome risks associated with such transactions.

Although we plan to continue to grow our business organically, we may explore opportunities to invest in, or to acquire, other financial institutions and businesses that we believe would complement our existing business.

Our investment or acquisition activities could be material to our business and involve a number of risks including the following:

•investing time and incurring expense associated with identifying and evaluating potential investments or acquisitions and negotiating potential transactions, resulting in our attention being diverted from the operation of our existing business;

•the lack of history among our management team in working together on acquisitions and related integration activities;

•the time, expense, and difficulty of integrating the operations and personnel of the combined businesses;

•unexpected asset quality problems with acquired companies;

•inaccurate estimates and judgments used to evaluate credit, operations, management, and market risks with respect to the target institution or assets;

•risks of impairment to goodwill or allowance for credit losses of investment securities;

•potential exposure to unknown or contingent liabilities of banks and businesses we acquire;

•an inability to realize expected synergies or returns on investment;

•potential disruption of our ongoing banking business; and

•loss of key employees or key customers following our investment or acquisition.

We may not be successful in overcoming these risks or other problems encountered in connection with potential investments or acquisitions. Our inability to overcome these risks could have an adverse effect on our ability to implement our business strategy and enhance shareholder value, which, in turn, could have an adverse effect on our business, financial condition, and results of operations. Additionally, if we record goodwill in connection with any acquisition, our business, financial condition, and results of operations may be adversely affected if that goodwill is determined to be impaired, which would require us to take an impairment charge.

Our reputation is critical to our business, and damage to it could have an adverse effect on us.

A key differentiating factor for our business is the strong reputation we are building in our market. Maintaining a positive reputation is critical to attracting and retaining customers and employees. Adverse perceptions of us could make it more difficult for us to execute on our strategy. Harm to our reputation can arise from many sources, including actual or perceived employee misconduct, errors or misconduct by our third-party vendors or other counterparties, litigation or regulatory actions, our failure to meet our high customer service and quality standards, system failures, cybersecurity breaches, and compliance failures.

In particular, it is not always possible to prevent employee error or misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon processing systems to record and process transactions and our large transaction volume may further increase the risk that employee errors, tampering, or manipulation of those systems will result in losses that are difficult to detect. Employee error or misconduct could also subject us to financial claims. If our internal control systems fail to prevent or detect an occurrence, or if any resulting loss is not insured, exceeds applicable insurance limits, or if insurance coverage is denied or not available, it could have an adverse effect on our business, financial condition, and results of operations.

Additionally, as a financial institution, we are inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, customers, and other third parties targeting us and our customers or data. Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts. Although we devote substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the increasing sophistication of possible perpetrators, we may experience financial losses or reputational harm as a result of fraud.

Negative publicity about us, whether accurate or not, may also damage our reputation, which could have an adverse effect on our business, financial condition, and results of operations.

Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services, or fail to comply with banking regulations.

We outsource some of our operational activities and, accordingly, depend on relationships with third-party providers for services such as core systems support, informational website hosting, internet services, online account opening, and other processing services. Our business depends on the successful and uninterrupted functioning of our information technology and telecommunications systems, many of which also depend on third-party providers. The failure of these systems, a cybersecurity breach involving any of our third-party service providers, or the termination or change in terms of a third-party software license or service agreement on which any of these systems is based could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity, or such third-party systems fail or experience interruptions. Replacing vendors or addressing other issues with our third-party service providers could entail significant delay, expense, and disruption of service.

As a result, if these third-party service providers experience difficulties, are subject to cybersecurity breaches, or terminate their services, and we are unable to replace them with other service providers, particularly on a timely basis, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition, and results of operations could be adversely affected. Even if we are able to replace third-party service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition, and results of operations.

36Furthermore, third-party service providers, and banking organizations’ relationships with those providers, are subject to demanding regulatory requirements and attention by bank regulators. These regulatory expectations may change, and potentially become more rigorous in certain ways. Our regulators may hold us responsible for any deficiencies in our oversight or control of our third-party service providers and in the performance of the parties with which we have these relationships. As a result, if our regulators assess that we have not exercised adequate oversight and control over our third-party service providers or that such providers have not performed adequately, we could be subject to administrative penalties, fines, or other forms of regulatory enforcement action as well as requirements for consumer remediation, any of which could have an adverse effect on our business, financial condition, and results of operations.

Furthermore, third-party service providers, and banking organizations’ relationships with those providers, are subject to demanding regulatory requirements and attention by bank regulators. These regulatory expectations may change, and potentially become more rigorous in certain ways, due to an interagency effort to replace existing guidance on the risk management of third-party relationships with new guidance. Our regulators may hold us responsible for any deficiencies in our oversight or control of our third-party service providers and in the performance of the parties with which we have these relationships. As a result, if our regulators assess that we have not exercised adequate oversight and control over our third-party service providers or that such providers have not performed adequately, we could be subject to administrative penalties, fines, or other forms of regulatory enforcement action as well as requirements for consumer remediation, any of which could have an adverse effect on our business, financial condition, and results of operations.

We are subject to laws regarding the privacy, information security, and protection of personal information, and any violation of these laws or other incidents involving personal, confidential, or proprietary information of individuals could damage our reputation and otherwise adversely affect our business.

Our business requires the collection and retention of large volumes of customer data, including personally identifiable information (“PII”), in various information systems that we maintain and in those maintained by third-party service providers. We also maintain important internal company data such as PII about our employees and information relating to our operations. We are subject to complex and evolving laws and regulations governing the privacy and protection of PII of individuals (including customers, employees, and other third parties). For example, our business is subject to the GLB Act, which, among other things: (i) imposes certain limitations on our ability to share nonpublic PII about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing, and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement, and maintain a written comprehensive information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Various federal and state banking regulators and states have also enacted data breach notification requirements with varying levels of individual, consumer, regulatory, or law enforcement notification in the event of a security breach. The California Consumer Privacy Act grants California residents the rights to know about personal ~~information collected about them, to delete certain of this personal information, to opt out of the sale of personal information, and to non-discrimination for exercising these rights.~~

Ensuring that our collection, use, transfer, and storage of PII complies with all applicable laws and regulations can increase our costs. Furthermore, we may not be able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential, or proprietary information of customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Concerns regarding the effectiveness of our measures to safeguard PII, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers and thereby reduce our revenues. Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations, and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines, or penalties, and could damage our reputation and otherwise adversely affect our business, financial condition, and results of operations.35

information collected about them, to delete certain of this personal information, to opt out of the sale of personal information, and to non-discrimination for exercising these rights.

Ensuring that our collection, use, transfer, and storage of PII complies with all applicable laws and regulations can increase our costs. Furthermore, we may not be able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with respect to personal, confidential, or proprietary information of customers or others, or if that data were otherwise to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Concerns regarding the effectiveness of our measures to safeguard PII, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers and thereby reduce our revenues. Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations, and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines, penalties, regulatory enforcement actions, and/or criminal prosecution and could damage our reputation and otherwise adversely affect our business, financial condition, and results of operations. Depending on the circumstances giving rise to the breach, this liability may not be subject to a contractual limit or an exclusion of consequential or indirect damages.

System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation, damage to our reputation, and other potential losses.

Failures in, or breaches of, our computer systems and network infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks, cybersecurity breaches, and other disruptions, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, result in supervisory liability or regulatory enforcement action, damage our reputation, result in a loss of customers and business, result in a loss of confidence in the security of our systems, products, and services, increase our costs, and cause losses. Our operations are dependent upon our ability to protect our computer equipment against damage from fire, power loss, telecommunications failure, or a similar catastrophic event. Any damage or failure that causes an interruption in our operations could have an adverse effect on our business, financial condition, and results of operations. In addition, our operations are dependent upon our ability to protect our computer systems and network infrastructure, including our internet banking activities, against damage from physical break-ins, cybersecurity breaches, and other disruptive problems caused by the internet or other users. Cybersecurity breaches and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in business disruptions, significant liability to us, and damage to our reputation and may discourage current and potential customers from using our internet banking services. Our security measures, including firewalls and penetration testing, as well as oversight by our board of directors and the Audit Committee as well as management’s assessment, identification, and management of cybersecurity risks, may not prevent or detect future potential losses from system failures or cybersecurity breaches, attacks, or other disruptions. While we seek to continuously monitor for and react to any and all such malicious cyber activity and develop our systems to protect our technology infrastructure and data, such monitoring and systems development may not be effective in preventing misuse, misappropriation, or corruption. In the ordinary course of business, our board of directors receives quarterly cybersecurity risk management updates and members of the Audit Committee of our board of directors also attend the meetings of our information technology steering committee on a quarterly basis. Cybersecurity risk management is incorporated into our overall enterprise risk management model, which is updated on a quarterly basis and subject to oversight by our board of directors.

37In the normal course of business, we collect, process, and retain sensitive and confidential information regarding our customers. Although we devote significant resources, oversight by our board of directors, and management focus to ensuring the integrity of our systems through information security and business continuity programs, our facilities and systems, and those of our third-party service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses, malware, misplaced or lost data, programming or human errors, or other similar events. We and our third-party service providers have experienced these types of events in the past and expect to continue to experience them in the future. These events could interrupt our business or operations or result in significant legal and financial exposure (including costs associated with remediating any security breaches), supervisory liability, regulatory enforcement action, damage to our reputation, loss of customers and business, or a loss of confidence in the security of our systems, products, and services. Although the impact to date from these events has not had an adverse effect on us, we cannot be sure this will be the case in the future. Any of these occurrences could have an adverse effect on our business, financial condition, and results of operations. We are not able to anticipate or implement effective preventive measures

transmitted through our computer systems and network infrastructure, which may result in business disruptions, significant liability to us, and damage to our reputation and may discourage current and potential customers from using our internet banking services. Our security measures, including firewalls and penetration testing, as well as oversight by our board of directors and the Audit Committee as well as management’s assessment, identification, and management of cybersecurity risks, may not prevent or detect future potential losses from system failures or cybersecurity breaches, attacks, or other disruptions. While we seek to continuously monitor for and react to any and all such malicious cyber activity and develop our systems to protect our technology infrastructure and data, such monitoring and systems development may not be effective in preventing misuse, misappropriation, or corruption. In the ordinary course of business, our board of directors receives quarterly cybersecurity risk management updates and members of the Audit Committee of our board of directors also attend the meetings of our information technology steering committee on a quarterly basis. Cybersecurity risk management is incorporated into our overall enterprise risk management model, which is updated on a quarterly basis and subject to oversight by our board of directors.36

In the normal course of business, we collect, process, and retain sensitive and confidential information regarding our customers. Although we devote significant resources, oversight by our board of directors, and management focus to ensuring the integrity of our systems through information security and business continuity programs, our facilities and systems, and those of our third-party service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses, malware, misplaced or lost data, programming or human errors, or other similar events. We and our third-party service providers have experienced these types of events in the past and expect to continue to experience them in the future. These events could interrupt our business or operations or result in significant legal and financial exposure (including costs associated with remediating any security breaches), supervisory liability, regulatory enforcement action, damage to our reputation, loss of customers and business, or a loss of confidence in the security of our systems, products, and services. Although the impact to date from these events has not had an adverse effect on us, we cannot be sure this will be the case in the future. Any of these occurrences could have an adverse effect on our business, financial condition, and results of operations. We are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because attacks are increasingly sophisticated, change frequently, often are not recognized until launched, and can originate from a wide variety of sources. Our early detection and response mechanisms could fail to detect, mitigate, or remediate these risks in a timely manner. Despite our implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software, and networks may be vulnerable to human error, equipment failure, natural disasters, power loss, unauthorized access, supply chain attacks, distributed denial of service attacks, computer viruses and other malicious code, and other events that could result in significant liability and damage to our reputation, and have an ongoing impact on the security and stability of our operations. In addition, although we maintain insurance coverage that may, subject to terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover all losses, such as litigation costs or financial losses that exceed our policy limits or are not covered under any of our current insurance policies.

Information security risks for financial institutions like us have increased recently in part because of new technologies, such as artificial intelligence, the use of the internet, cloud, and telecommunications technologies (including mobile devices) to conduct financial and other business transactions, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists, and others. Additionally, like many large enterprises, we have introduced more remote work arrangements for our employees. The increase in remote work arrangements over the past few years has introduced potential new vulnerabilities to cyber threats. We also face increased cybersecurity risk as we deploy additional technologies and digital solutions, including our website and digital banking platform with complementary treasury management solutions. Moreover, any cyber-attack or other security breach may persist for an extended period of time without detection. We endeavor to design and implement policies and procedures to identify such cyber-attacks or breaches as quickly as possible; however, we expect that any investigation of a cyber-attack or breach would take substantial amounts of time, and that there may be extensive delays before we obtain full and reliable information. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all of which would further increase the costs and consequences of such an attack or breach. Notwithstanding the strength of defensive measures, cybersecurity threats and the tactics, techniques, and procedures used in cyberattacks change, develop, and evolve rapidly and continuously, including from emerging technologies, such as artificial intelligence, which may be used to enhance the tactics, techniques, and procedures described above and facilitate new cyber threats.

In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers recently have engaged in attacks against large financial institutions that are designed to disrupt key business services, such as consumer-facing web sites. We are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. Our early detection and response mechanisms may be thwarted by sophisticated attacks and malware designed to avoid detection.

Banking organizations are required to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred. Failure to comply with this requirement in the event of such an incident could result in sanctions by regulatory agencies, civil money penalties, and/or damage to our reputation, all of which could have an adverse effect on our business, financial condition, and results of operations.

The ~~SEC~~adoption ~~enacted rules, effective as~~ of ~~December~~artificial ~~18,~~intelligence ~~2023,~~tools ~~requiring~~by ~~public~~us ~~companies~~and toour ~~disclose material cybersecurity incidents that they experience on Form 8~~third-Kparty ~~within~~vendors ~~four business days of determining that a material cybersecurity incident has occurred~~ and toservice ~~disclose~~providers onmay anincrease ~~annual~~the ~~basis material information regarding their cybersecurity~~ risk ~~management~~of errors, ~~strategy~~omissions, ~~and~~unfair ~~governance.~~treatment, Ifor wefraudulent ~~fail~~behavior toby ~~comply with these new requirements we could incur regulatory fines in addition to other adverse consequences to~~ our ~~reputation~~employees, ~~business~~clients, ~~financial~~or ~~condition~~counterparties, ~~and~~or ~~results~~other ofthird ~~operations~~parties.

WeOur ~~may~~adoption ~~also~~of beartificial ~~subject~~intelligence, toincluding ~~liability~~generative ~~under~~artificial ~~various~~intelligence, ~~data~~machine ~~protection~~learning, ~~laws.~~and Insimilar ~~the~~tools ~~normal~~and ~~course~~technologies ofthat ~~business~~collect, weaggregate, ~~collect~~analyze, ~~process~~or generate data or other materials or content (collectively, ~~and~~“AI”), ~~retain~~for ~~sensitive~~limited ~~and~~internal ~~confidential~~use ~~information~~has ~~regarding~~increased our ~~customers~~efficiency, and ~~employees,~~we ~~including~~expect ~~personal~~to ~~data.~~continue Asto aadopt ~~result~~such tools as appropriate. In addition, we ~~are~~expect ~~subject~~our tothird-party ~~numerous~~vendors ~~laws~~ and ~~regulations~~service ~~designed~~providers to ~~protect~~increasingly ~~this~~develop ~~information,~~and ~~such~~incorporate asAI ~~U.S.~~into ~~federal,~~their ~~state,~~product ~~and~~offerings ~~international~~faster ~~laws~~than ~~governing~~we ~~the~~are ~~protection~~able ofto ~~personally~~do ~~identifiable~~so ~~information~~independently. ~~These~~There ~~laws~~are ~~and~~significant ~~regulations~~risks ~~are~~involved ~~increasing~~ in ~~complexity~~utilizing AI and ~~number.~~no Ifassurance ~~any~~can ~~person,~~be ~~including~~provided ~~any~~that of our ~~employees,~~or ~~negligently~~our ~~disregards~~third-party vendors’ or ~~intentionally~~service ~~breaches~~providers’ ~~our~~use ~~established~~of ~~controls~~AI ~~with~~will ~~respect~~enhance toour ~~client~~ or ~~employee~~our ~~data,~~third-party vendors’ or ~~otherwise~~service ~~mismanages~~providers’ products or ~~misappropriates~~services ~~such~~or ~~data,~~produce wethe ~~could~~intended beresults. ~~subject~~The adoption and incorporation of such tools can lead to ~~significant~~concerns ~~monetary~~around ~~damages~~safety and soundness, ~~regulatory~~fair ~~enforcement~~access ~~actions~~to financial services, ~~fines~~fair treatment of consumers, and~~/or~~ ~~criminal~~compliance ~~prosecution~~with applicable laws and regulations. InSuch ~~addition,~~risk ~~unauthorized~~can ~~disclosure~~result offrom ~~sensitive~~models orbeing ~~confidential~~poorly ~~client~~designed or ~~employee~~faulty data being used, ~~whether~~inadequate ~~through~~model ~~system~~testing ~~failure~~or validation, ~~employee~~narrow ~~negligence,~~or ~~fraud~~limited human oversight, inadequate planning or ~~misappropriation~~due diligence, ~~could~~inappropriate ~~damage~~or ~~our~~controversial ~~reputation~~data practices by developers or end-users, and ~~cause~~other usfactors toadversely ~~lose~~affecting ~~clients~~public opinion of AI and ~~related~~the ~~revenue.~~acceptance ~~Potential~~of ~~liability~~AI insolutions. Furthermore, given the ~~event~~pace of arapid ~~security~~adoption ~~breach~~ of ~~client~~such ~~data~~tools ~~could~~by bevendors ~~significant.~~and ~~Depending~~service onproviders, we may not be aware of the ~~circumstances~~addition ~~giving~~of ~~rise~~AI solutions prior to ~~the~~such ~~breach,~~tools ~~this~~being ~~liability~~introduced ~~may~~into ~~not~~our beenvironment. ~~subject~~Failure to aadequately ~~contractual~~manage ~~limit~~AI orrisks ancan ~~exclusion~~result in erroneous results and decisions made by misinformation, unwanted forms of ~~consequential~~bias, unauthorized access to sensitive, confidential, proprietary or ~~indirect~~personal ~~damages.~~information, and violations

of applicable laws and regulations, leading to operational inefficiencies, competitive harm, reputational harm, ethical challenges, legal liability, losses, fines, and other adverse impacts on our business and financial results. If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, or to use the output of such AI tools, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacy, or other rights or contracts to which we are a party.

In addition, regulation of AI is rapidly evolving as federal and state legislators and regulators are increasingly focused on these powerful emerging technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including, but not limited to, intellectual property, data privacy and cybersecurity, consumer protection, competition, equal opportunity and fair lending laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations. AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states are applying, or are considering applying, existing laws and regulations to AI or are considering general legal frameworks for AI. We may not be able to anticipate how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions. Moreover, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to the use of AI.

Our ability to conduct our business could be disrupted by natural or man-made disasters or the effects of climate change.

All of our offices, a significant portion of the real estate securing loans we make, and many of our borrowers’ business operations in general, are located in California. California has had and will continue to have major earthquakes in areas where a significant portion of the collateral and assets of our borrowers are concentrated. California is also prone to wildfires, droughts, mudslides, floods, and other natural disasters. Additionally, acts of terrorism, war, civil unrest, violence, other man-made disasters, or the effects of climate change could also cause disruptions to our business or to the economy as a whole. The occurrence of natural or man-made disasters or the effects of climate change could destroy, or cause a decline in the value of, mortgaged properties or other assets that serve as our collateral and increase the risk of delinquencies, defaults, foreclosures, and losses on our loans, damage our banking facilities and offices, negatively impact regional economic conditions, result in a decline in loan demand and loan originations, result in drawdowns of deposits by customers impacted by disasters, and negatively impact the implementation of our growth strategy. Natural or man-made disasters or the effects of climate change could also disrupt our business operations more generally. We have implemented a business continuity program that allows us to move critical functions to a backup data center in the event of a catastrophe. Although this program has been tested, we cannot guarantee its effectiveness in any disaster scenarios. Regardless of the effectiveness of our disaster recovery and business continuity plan, the occurrence of any natural or man-made disaster or the effects of climate change could have an adverse effect on our business, financial condition, and results of operations. Climate change also could present financial risks to us as a result of transition risks, such as societal and/or technological responses to climate change, which could include changes in climate policy or in the regulation of financial institutions with respect to risks posed by climate change.

Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments, or other requirements resulting in increased expenses or restrictions on our business activities.

From time to time, in the normal course of business, we have in the past been and may in the future be named as a defendant in various legal actions, arising in connection with our current and/or prior business activities. Legal actions could include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. Further, in the future our regulators may impose consent orders, civil money penalties, matters requiring attention, or similar types of supervisory criticism. We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations, and proceedings (both formal and informal) by governmental agencies regarding our current and/or prior business activities. Any such legal or regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices, or other requirements resulting in increased expenses, diminished income, and damage to our reputation. Our involvement in any such matters, whether tangential or otherwise and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any settlement, consent order, or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations, or proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could have an adverse effect on our business, financial condition, and results of operations.

3938

our reputation and divert management attention from the operation of our business. Further, any settlement, consent order, or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations, or proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could have an adverse effect on our business, financial condition, and results of operations.

We are subject to an extensive body of accounting rules and best practices. Periodic changes to such rules may change the treatment and recognition of critical financial line items. In addition, the accuracy of our consolidated financial statements and related disclosures could be affected if the judgments, assumptions, or estimates used in our critical accounting policies are inaccurate.

The nature of our business makes us sensitive to the large body of accounting rules in the United States. From time to time, the governing bodies that oversee changes to accounting rules and reporting requirements may release new guidance for the preparation of our consolidated financial statements. These changes can materially impact how we record and report our financial condition and results of operations. In some instances, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. Changes which have been approved for future implementation, or which are currently proposed or expected to be proposed or adopted include requirements that we: (i) calculate the allowance for credit losses on the basis of the current expected credit losses over the lifetime of our loans, which was applicable to us beginning in 2023, and may result in increases in our allowance for credit losses and future provisions for credit losses; and (ii) record the value of and liabilities relating to operating leases on our balance sheet, which became applicable to us beginning in 2022. These changes could adversely affect our capital, regulatory capital ratios, ability to make larger loans, earnings, and performance metrics. Any such changes could have an adverse effect on our business, financial condition, and results of operations.

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies, which are included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions, and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events or regulatory views concerning such analysis differ significantly from the judgments, assumptions, and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our possible need to revise or, if in error, restate prior period financial statements, cause damage to our reputation and the price of our common stock, and adversely affect our business, financial condition, and results of operations.

We could be subject to changes in tax laws, regulations and interpretations or challenges to our income tax provision.

We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. Any change in enacted tax laws, rules, or regulatory or judicial interpretations, or any change in the pronouncements relating to accounting for income taxes, could adversely affect our effective tax rate, tax payments, and results of operations. For example, on July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Act also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025. The Company evaluated the impact on future periods and the legislation is not expected to have a significant impact on the Company’s consolidated financial statements. Additionally, the taxing authorities in the jurisdictions in which we operate may challenge our tax positions, which could increase our effective tax rate and harm our financial position and results of operations. We are subject to audit and review by U.S. federal and state tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. In addition, changes in enacted tax laws, such as adoption of a lower income tax rate in any of the jurisdictions in which we operate, could impact our ability to obtain the future tax benefits represented by our deferred tax assets. Also, the determination of our provision for income taxes and other liabilities requires significant judgment by management. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and could have a material adverse effect on our financial results in the period or periods for which such determination is made.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

We recognize the crucial importance of identifying, assessing, and managing material risks from cybersecurity threats. We are committed to implementing and maintaining a comprehensive information security program to manage such risks and safeguard our systems and data, including the data of our customers.

Information Security Policies and Procedures

We manage our cybersecurity risk in accordance with our Information Security Program (the “Information Security Program”), which is applicable to all users of our information technology assets, information assets, and facilities, including our employees, contractors, vendors, volunteers, and agents. The Information Security Program includes an Information Security Incident Response Policy (the “Incident Response Policy”), which sets forth the rules and requirements for identifying, investigating, validating, prioritizing, and responding to information security incidents, and addresses the response portion of security monitoring. The Information Security Program also includes: (i) an Information Security Incident Response Procedure (the “Incident Response Procedure”), which delineates the processes for reporting, classifying, investigating, planning, containing, eradicating, recovering, documenting, and communicating information security incidents, as well as post-incident activities; and (ii) a Security Monitoring Policy, which establishes the rules and requirements for enabling, logging, alerting, and monitoring real time security alerts and security logs (automated or manual), as well as various condition monitoring tests and reviews, and documentation requirements in connection with security incident identification.

manual), as well as various condition monitoring tests and reviews, and documentation requirements in connection with security incident identification.

Potential information security incidents are identified in a number of ways, including, but not limited to: users reporting security violations, system weaknesses, violations of our Information Security Acceptable Use Policy, which addresses the boundaries of acceptable use of our information technology assets, automated system alerts, and monitoring of both system generated and manually generated logs. Our Information Security Program mandates that any potential information security incident response begin at the initial internal communication and investigation stage, during which such events undergo initial investigation for validation, including related to the scope and depth of such incident and to ensure that it has not resulted from a false positive. Internal communications regarding the potential incident occur with the relevant security coordinator according to our Incident Response Procedures.

Following this initial stage, we gather and update impact information and related documentation for such incident. We use an incident classification matrix to determine the initial classification of a potential information security incident, which considers users, customers, and systems affected, the sensitivity of data at risk, and the potential business impacts to the Company, including financial, legal, regulatory, operational, and reputation. The resulting classification of “Red,” “Yellow,” or “Green” identifies next steps for escalation and communication following initial investigation of the potential incident. Upon escalation of an incident, a member of management who is identified as an Incident Response Contact per our Information Security Program reviews and validates the initial determination of the priority of the incident prior to entering into the subsequent stage, during which a response to the incident is determined and notifications or communications are made to either additional personnel or any external entities. Depending on the specific details of any such incident, we may notify additional members of our management team, our board of directors, the Audit Committee, state and federal regulators, technology service providers, and/or the SEC. The timing of such communications varies based on the details of a particular incident and applicable regulations governing such disclosure. Following this classification and communication stage, we enter the recovery stage to determine containment and a response to the incident, assign technical staff to address such incident, implement containment, eradicate the incident source, and recover from such incident. Following any such incident, we engage in follow-up to communicate with law enforcement and notify impacted third parties and customers, as appropriate, in addition to further investigating the cause of the incident, documenting takeaways, and engaging in remediation.

Our Director of Information Security (“DIS”) coordinates with other members of our executive management team identified in our Information Security Program to document, validate, respond to, and manage actual or potential security incidents according to their threat classifications as described above, and report to our board of directors and/or the Audit Committee on an ad hoc basis. The DIS also provides quarterly reports on the status of our Information Security Program and its compliance with regulatory requirements to our board of directors in connection with our board’s general risk management oversight role, as described in further detail below. The DIS and the Chief Information Officer (“CIO”) have shared responsibility for overseeing day-to-day operations of the Information Security Program; coordinating or contributing to reviews, audits, risk assessments, and other risk management material; development of departmental policies and procedures for board approval; and periodic updates to our information technology steering committee and/or the full board of directors. The CIO reports to the President and Chief Executive Officer, while the DIS reports to the Chief Regulatory Officer and reports regularly to the Audit Committee.

The CIO has 20 years of industry experience including management of technology, security, data analytics, and vendor relationships. The DIS has over 10 years of industry experience and 25 years of information security experience focusing on management of security and vendor relationships. The DIS also possesses several industry certifications, including certification as a Certified in Risk and Information Systems Control and Certified Information Security Manager from the Information System Audit and Control Association.40

The CIO has over 20 years of industry experience including management of technology, security, data analytics, and vendor relationships. The DIS has over 10 years of industry experience and over 25 years of information security experience focusing on management of security and vendor relationships. The DIS also possesses several industry certifications, including certification as a Certified in Risk and Information Systems Control and Certified Information Security Manager from the Information System Audit and Control Association.

With the approval of the Audit Committee, we also engage third-party assessors, consultants, and auditors in connection with the Company’s Information Security Program and in accordance with our Audit Program, including to conduct external and internal penetration testing, independent audits, and risk assessments. We may also utilize third-party service providers in the ordinary course of business, including to assist us in performing information security assessments for third-party service providers that store or process our confidential data. These information security assessments, whether performed by a third party or internally, include a review of any systems and organization control reports, and proof of the vendor’s independent testing of their data protection controls, as well as a review of any exceptions noted and assessment of management responses, results of vulnerability and penetration testing, incident response processes, and third-party data protection controls (which can include, but are not limited to: access reviews and controls, backups, monitoring, encryption standards, and disaster recovery). The review of these areas is taken into account in order to provide an overall information security conclusion and risk rating for the vendor.

In addition, we use a combination of technology, policies, procedures, training, and monitoring to promote security awareness and prevent security incidents.

Cybersecurity Risk Oversight

Our executive management team is responsible for the development of our policies and procedures and for managing any exception to the same. In particular, our DIS oversees information security compliance, as described above. The board of directors of the Company has ultimate oversight of cybersecurity-related risk and activities, including the review and approval of our policies and procedures related to cybersecurity. The Information Security Program is approved on an annual basis. Cybersecurity risk management is also incorporated into our overall enterprise risk management model, which is updated on a quarterly basis and subject to oversight by our board of directors.

In the ordinary course of business, our board of directors receives quarterly updates from the DIS regarding the Information Security Program and compliance with relevant regulations, as described above. Members of the Audit Committee of our board of directors receive presentations as well as minutes of the meetings of our information technology steering committee on a quarterly basis. Our information technology steering committee consists of members of ~~our~~management ~~board of directors~~ who have relevant experience ~~from their audit and management experience~~ as well as ~~training~~industry ~~provided by our management~~training. If an incident occurs, depending on its priority as identified through the procedures described above, management may inform our board of directors and/or the Audit Committee sooner than its next quarterly update. See the section entitled “Part I, Item 1. Business—Risk Management” for additional information on the role of our board of directors and its committees in overseeing risk management.

Relevant Regulations

As a regulated financial institution, the Bank is also subject to financial privacy laws, and our cybersecurity practices are subject to oversight by the federal banking agencies. In addition, the Bank is subject to SEC rules requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance. For additional information, see the section entitled “Part I, Item 1. Business—Supervision and Regulation—Supervision and Regulation of the Bank—Cybersecurity.”

Prior Incidents

Although we have not, as of the date of this Annual Report on Form 10-K, experienced a cybersecurity threat or incident that materially affected our business strategy, results of operations, or financial condition, there can be no guarantee that we will not experience such an incident in the future. For additional information regarding the risk we face from cybersecurity threats, see the risk factor entitled “System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation, damage to our reputation, and other potential losses.” included in Part I, Item 1A. Risk Factors in this Annual Report on Form 10-K.

Item 2. Properties

Our corporate headquarters is located at 3100 Zinfandel Drive, Suite 100, Rancho Cordova, CA 95670. As of December 31, ~~2024~~2025, in addition to our corporate headquarters, which includes our Rancho Cordova branch, we operated ~~seven~~eight other branch offices in Roseville, Natomas, Redding, Elk Grove, Chico, Yuba City, ~~and~~ San Francisco, and ~~one~~Walnut Creek and two administrative ~~office~~offices in Sacramento and Newport Beach. We lease our corporate headquarters and all of our other offices. The lease on our corporate headquarters expires in ~~2026~~2032, and the leases on our branch offices and administrative ~~office~~offices expire in 2026 through ~~2035~~2036. We believe that these facilities and additional or alternative space available to us are adequate to meet our needs for the foreseeable future.

Item 3. Legal Proceedings

From time to time, we are a party to various litigation matters incidental to the conduct of our business. We do not believe that any currently pending legal proceedings will have a material adverse effect on our business, financial condition, or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Market Information, Holders of Common Stock, and Dividends

The Company’s common stock, no par value per share, is traded on the Nasdaq Global Select Market under the symbol “FSBC.” On February 2524, ~~2025~~2026, there were ~~125~~123 holders of record of the Company’s common stock. The actual number of stockholders is greater than this, as it would include stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

The Company has paid cash dividends on its common stock in every quarter since January 2002, with the exception of the third and fourth quarters of 2009 and all quarters of 2010. ~~Prior~~It is currently the intention of the board of directors of the Company to ~~our~~continue ~~IPO~~payment of cash dividends on a quarterly basis. There is no assurance, wehowever, ~~were~~that ~~treated~~any asdividends anwill Sbe ~~Corporation~~paid ~~for~~since ~~U.S.~~they ~~federal~~are ~~income~~dependent ~~tax~~on ~~purposes~~a number of factors, including general and aseconomic ~~such~~conditions, weindustry ~~paid~~standards, ~~distributions~~our tofinancial ~~our~~condition ~~existing~~and ~~shareholders~~operating toresults, ~~assist~~our ~~them~~available incash ~~paying~~and ~~the~~current ~~U.S.~~and ~~federal~~anticipated ~~income~~cash ~~taxes~~needs, oncapital requirements, our ~~taxable~~ability ~~income~~to ~~that~~service ~~was~~debt ~~“passed~~obligations ~~through”~~senior to ~~them~~our common stock, asbanking ~~well~~regulations, ascontractual, ~~additional~~legal, ~~amounts~~tax, ~~for~~and ~~returns~~regulatory onrestrictions, ~~capital.~~and ~~Following~~limitations on the ~~completion~~payment of dividends by us to our ~~IPO~~shareholders or by the Bank to us, and such other factors as our ~~dividend~~board ~~policy~~of ~~and~~directors ~~practice~~may ~~has~~deem ~~changed~~relevant. Further, aswhile we ~~are~~expect ~~now~~to ~~taxed~~continue asour acurrent Cpractice ~~Corporation~~of paying quarterly cash dividends with respect to our common stock, this practice is subject to our board of directors’ discretion to modify or terminate it at any time and for any reason without prior notice. As of December 31, ~~therefore~~2025, nothere ~~longer~~was ~~pay~~$103.8 ~~distributions~~million available for payment of dividends by the Bank to ~~provide~~the Company, under applicable laws and regulations. For a discussion of dividend restrictions on our ~~shareholders~~common ~~with~~stock, ~~funds~~or of restrictions on dividends from the Company’s subsidiaries to ~~pay~~the UCompany, see the sections entitled “Part I, Item 1.S. ~~federal~~Business—Supervision ~~income~~and ~~tax~~Regulation—Supervision onand ~~their~~Regulation ~~pro~~of ~~rata~~the ~~portion~~Company—Payment of ~~our~~Dividends ~~taxable~~and ~~income~~Stock Repurchases” and “Part I, Item 1. Business—Supervision and Regulation—Supervision and Regulation of the Bank—Payment of Dividends.”

It is currently the intention of the board of directors of the Company to continue payment of cash dividends on a quarterly basis. There is no assurance, however, that any dividends will be paid since they are dependent on a number of factors, including general and economic conditions, industry standards, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, our ability to service debt obligations senior to our common stock, banking regulations, contractual, legal, tax, and regulatory restrictions, and limitations on the payment of dividends by us to our shareholders or by the Bank to us, and such other factors as our board of directors may deem relevant. As of December 31, 2024, there was $94.6 million available for payment of dividends by the Bank to the Company, under applicable laws and regulations. For a discussion of dividend restrictions on our common stock, or of restrictions on dividends from the Company’s subsidiaries to the Company, see the sections entitled “Part I, Item 1. Business—Supervision and Regulation—Supervision and Regulation of the Company—Payment of Dividends and Stock Repurchases” and “Part I, Item 1. Business—Supervision and Regulation—Supervision and Regulation of the Bank—Payment of Dividends.”

Securities Authorized for Issuance Under Equity Compensation Plans

See “Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.”

Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

Not applicable.

Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

None.

Stock Performance

The following graph presents the cumulative total yearly shareholder return from investing $100 on May 5, 2021, the Company’s IPO date, in each of our common stock, the S&P 500 Index, and the KBW Nasdaq Regional Banking Index. Total return assumes the reinvestment of all dividends.

	Period Ending
Index	May 5, 2021	December 31, 2021	December 31, 2022	December 31, 2023	December 31, 2024	December 31, 2025
Five Star Bancorp	100.00	125.24	116.25	115.55	137.10	167.35
S&P 500 Index	100.00	115.45	94.54	119.40	149.27	175.96
KBW Nasdaq Regional Banking Index	100.00	99.86	92.94	92.57	104.79	111.61

The stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities Act of 1933, as amended or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

Item 6. [Reserved]

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

The following discussion and analysis presents management’s perspective on our financial condition and results of operations on a consolidated basis. However, because we conduct all of our material business operations through our bank subsidiary, Five Star Bank, the discussion and analysis relate to activities primarily conducted by the Bank. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and the accompanying notes presented elsewhere in this Annual Report on Form 10-K. Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances.

To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to containing historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Part I, Item 1A. Risk Factors.” We assume no obligation to update any of these forward-looking statements, except to the extent required by law.

Set forth below is a comparison of the results of operations and changes in financial condition for the fiscal years ended December 31, ~~2024~~2025 and December 31, ~~2023~~2024. For a discussion of our financial results for the fiscal year ended December 31, ~~2022~~2023, see the section entitled “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2023~~2024.

Company Overview

Headquartered in the greater Sacramento metropolitan area of California, Five Star Bancorp (“Bancorp” or the “Company”) is a bank holding company that operates through its wholly owned subsidiary, Five Star Bank, a California state-chartered non-member bank. We provide a broad range of banking products and services to small and medium-sized businesses, professionals, and individuals primarily in Northern California through ~~eight~~nine branch offices. Our mission is to strive to become the top business bank in all markets we serve through exceptional service, deep connectivity, and customer empathy. We are dedicated to serving real estate, agricultural, faith-based, and small to medium-sized enterprises. We aim to consistently deliver value that meets or exceeds the expectations of our shareholders, customers, employees, business partners, and community. We refer to our mission as “purpose-driven and integrity-centered banking.” At December 31, ~~2024~~2025, we had total assets of $4.18 billion, total loans held for investment of $34.51 billion, and total deposits of $34.62 billion.

Key Factors Affecting our Business

Interest Rates

Net interest income is the most significant contributor to our net income and is the difference between the interest and fees earned on interest-earning assets and the interest expense incurred in connection with interest-bearing liabilities. Net interest income is primarily a function of the average balances and yields of these interest-earning assets and interest-bearing liabilities. These factors are influenced by internal considerations such as product mix and risk appetite as well as external influences such as economic conditions, competition for loans and deposits, and market interest rates.

The cost of our deposits and short-term borrowings is primarily based on short-term interest rates, which are largely driven by the Federal Reserve’s actions and market competition. The yields generated by our loans and securities are typically affected by short-term and long-term interest rates, which are driven by market competition and market rates often impacted by the Federal Reserve’s actions. The level of net interest income is influenced by movements in such interest rates and the pace at which such movements occur.

Interest rates have risen significantly following the historically low levels during the COVID-19 pandemic. Due to elevated levels of inflation and corresponding pressure to raise interest rates, the Federal Reserve announced in January 2022 that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time. The Federal Open Market Committee (“FOMC”) then increased the target range eleven times throughout 2022 and 2023. During 2024 and 2025, the Federal Reserve decreased the federal funds rate three times each year. As of December 31, ~~2024~~2025, the target range for the federal funds rate had been decreased to 43.2550% to 43.5075%, and the FOMC ~~signaled~~projects ~~that~~one ~~current~~additional ~~economic~~decrease ~~data and the interest rate environment are more balanced, projecting two decreases~~ in ~~2025~~2026, as part of a strategy to return inflation to normalized levels while keeping unemployment low.

We anticipate that interest rates may be lowered over the next few years. Based on our ~~liability~~ sensitivity analysis, a steepened yield curve could have a ~~beneficial~~slight negative impact on our net interest income over the next year. Additionally, a continued flat yield curve would be expected to maintain our net interest income. over the next year.

Factors Affecting Comparability of Financial Results

S Corporation Status

Beginning at our inception, we elected to be taxed for U.S. federal income tax purposes as an S Corporation. In conjunction with our IPO, we filed consents from the requisite amount of our shareholders to revoke our S Corporation election with the IRS, resulting in the commencement of our taxation as a C Corporation for U.S. federal and California state income tax purposes in the second quarter of fiscal year 2021. Prior to such revocation, our earnings were not subject to and we did not pay U.S. federal income tax, and we were not required to make any provision or recognize any liability for U.S. federal income tax in our consolidated financial statements. While we were not subject to and did not pay U.S. federal income tax, we were subject to and paid California S Corporation income tax at a current rate of 3.50%. Upon the termination of our status as an S Corporation, we commenced paying U.S. federal income tax and a higher California state income tax on our

taxable earnings for each year (including the short year beginning on the date our status as an S Corporation terminated), and our consolidated financial statements reflect a provision for U.S. federal income tax and a higher California state income tax from that date forward. As a result of this change, the net income and EPS data presented in our historical financial statements for periods prior to the termination of our S Corporation status and the other related financial information set forth in this filing, which (unless otherwise specified) do not include any provision for U.S. federal income tax or the higher California state income tax rate, will not be comparable with our net income and EPS in periods after we commenced being taxed as a C Corporation. As a C Corporation, our net income is calculated by including a provision for U.S. federal income tax and a higher state income tax rate at a combined statutory rate of 29.11%.

The termination of our status as an S Corporation may also affect our financial condition and cash flows. Historically, we made quarterly cash distributions to our shareholders in amounts estimated by us to be sufficient for them to pay estimated individual U.S. federal and California state income tax liabilities resulting from our taxable income that was “passed through” to them. However, these distributions were not consistent, as sometimes the distributions were less than or in excess of the shareholders’ estimated U.S. federal and California state income tax liabilities resulting from their ownership of our stock. In addition, these estimates were based on individual income tax rates, which may differ from the rates imposed on the income of C Corporations. As a C Corporation, no income is “passed through” to any shareholders, but, as noted above, we commenced paying U.S. federal income tax and a higher California state income tax. However, in the event of an adjustment to our reported taxable income for periods prior to the termination of our S Corporation status, it is possible that our pre-IPO shareholders would be liable for additional income taxes for those prior periods. Pursuant to the Tax Sharing Agreement we entered into with such shareholders, upon our filing any tax return (amended or otherwise), in the event of any restatement of our taxable income or pursuant to a determination by, or a settlement with, a taxing authority, for any period during which we were an S Corporation, depending on the nature of the adjustment, we may be required to make a payment to such shareholders, who accepted distribution of the estimated balance of our federal AAA of $31.9 million under the Tax Sharing Agreement, in an amount equal to such shareholders’ incremental tax liability (including interest and penalties). In addition, the Tax Sharing Agreement provides that we will indemnify such shareholders with respect to unpaid income tax liabilities (including interest and penalties) to the extent that such unpaid income tax liabilities are attributable to an adjustment to our taxable income for any period after our S Corporation status terminated. The amounts that we have historically distributed to our shareholders may not be indicative of the amount of U.S. federal and California state income tax that we will be required to pay going forward. Depending on our effective tax rate and our future dividend rate, our future cash flows and financial condition could be positively or adversely affected compared to our historical cash flows and financial condition.

Furthermore, deferred tax assets and liabilities were recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of our existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of the change in tax rates resulting from becoming a C Corporation was recognized in net income in the year ended December 31, 2021.

Allowance for Credit Losses (“ACL”)

On January 1, 2023, the Company adopted ASC 326, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model applies to estimated credit losses on loans receivable, held-to-maturity debt securities, unfunded loan commitments, and certain other financial assets measured at amortized cost. Under ASC 326, available-for-sale debt securities are evaluated for impairment if fair value is less than amortized cost, with any estimated credit losses recorded through a credit loss expense and an allowance, rather than a write-down of the investment. Changes in fair value that are not credit-related continue to be recorded in other comprehensive income. Under the CECL model, the calculated allowance for credit losses was $5.3 million higher on January 1, 2023 than the allowance under the incurred loss model. For further information, please see Note 2, Recently ~~Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K.~~

Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue, and expenses. We have identified certain policies and estimates as critical to our business operations and the understanding of our past or present consolidated financial condition and results of operations. These policies and estimates are considered critical because they have a material impact, or they have the potential to have a material impact, on our consolidated financial statements and because they require us to make significant judgments, assumptions, or estimates. We believe that the judgments, estimates, and assumptions used in the preparation of our financial statements are reasonable and appropriate, based on the information available at the time they were made. However, actual results may differ from those estimates, and these differences may be material.

46Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), as an emerging growth company, we can elect to opt out of the extended transition period for adopting any new or revised accounting standards. We have elected not to opt out of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public and private companies, we may adopt the standard on the application date for private companies. However, we may early adopt certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies to the extent early adoption is permitted.

material impact, on our consolidated financial statements and because they require us to make significant judgments, assumptions, or estimates. We believe that the judgments, estimates, and assumptions used in the preparation of our financial statements are reasonable and appropriate, based on the information available at the time they were made. However, actual results may differ from those estimates, and these differences may be material.

Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), as an emerging growth company, we can elect to opt out of the extended transition period for adopting any new or revised accounting standards. We have elected not to opt out of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public and private companies, we may adopt the standard on the application date for private companies.

We have elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as we qualify as an emerging growth company.

ACL

The ACL represents the estimated probable credit losses in our loan and investment portfolios and is estimated as of December 31, ~~2024~~2025 using CECL. The ACL is established through a provision for credit losses charged to operations. Loans and investments are charged against the ACL when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged-off amounts, if any, are credited to the ACL.

The ACL is evaluated on a regular basis by management in consideration of optimistic, moderate, and pessimistic current conditions, and is based on management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions specifically impacting each loan type by purpose and by geography, and concentrations within the loan portfolio. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

A significant amount of the ACL is measured on a collective (pool) basis by loan and investment security type when similar risk characteristics exist. Pools are determined based primarily on regulatory reporting codes as the loans and investment securities within each pool share similar risk characteristics and there is sufficient historical peer loss data from the FFIEC to provide statistically meaningful support in the models developed. Reserves for credit losses identified on a pooled basis are then adjusted for qualitative ~~and other environmental~~ factors to reflect current conditions. The most significant components of qualitative ~~and environmental~~ factors used to estimate the allowance for credit losses are adjustments relating to prevailing economic conditions, concentrations within the loan portfolio, and external factors. These qualitative factors are subject to significant judgment and carry a higher degree of uncertainty. The prevailing economic conditions factor is estimated based on a range of potential economic conditions and is applied at both the portfolio and individual concentration level based on various factors. This estimate is subject to significant judgment and could potentially add $23.42 million based on existing loan balances, ~~if not more,~~ to the allowance for credit losses while using severely adverse economic conditions in the estimate. The concentrations within the loan portfolio factor is estimated based on concentrations at the loan pool level. This estimate is subject to significant judgment and could potentially add $912.40 million based on existing loan balances, ~~if not more,~~ to the allowance for credit losses while using a severely adverse market outlook for the specifically identified concentrations. The external factor is estimated based on current external factors, such as environmental factors, which could impact the loan portfolio. This estimate is subject to significant judgment and could potentially add $6.9.5 million based on existing loan balances, ~~if not more,~~ to the allowance for credit losses while using severely adverse external factors in the estimate. Other qualitative factors within

During the twelve months ended December 31, 2024, we refined our methodology of measuring the ACL on three pools of loans: Multifamily, C&I SBA, and CRE Non-Owner Occupied loans. Within the Multifamily pool, Manufactured Home Community (“MHC”) loans were segregated from traditional Multifamily as we identified a data source to provide sufficient historical peer loss data specific to MHC loans. This segregation now adjusts for differences in the risk characteristics and performance of MHCs compared to traditional Multifamily properties. Losses are estimated using a discounted cash flow analysis using individual probability of default and loss given default rates on a loan-by-loan basis. Applying this adjusted loss rate led to a decrease in the ACL for the MHC pool as of June 30, 2024 of approximately $5.8 million. During routine monitoring of charge-off activity within the C&I SBA pool, we identified an increased level of charge-offs during the first six months of 2024, reflecting a change in the credit quality of the pool. In response to this, we increased the expected loss rates to be more in line with net charge-off rates during the first six months of 2024, as this time period reflects what is expected based on our current economic outlook for loans in the C&I SBA pool. This adjustment reflects our estimate for future loss rates and increased the required reserves related to the C&I SBA pool by approximately 46

47the ACL relate to items which carry a lower degree of judgment using internally generated data. These factors include, but are not limited to, policy exception rates, volume of loan growth, and results of internal and external audits.

$4.6 million as of June 30, 2024. Within the CRE Non-Owner Occupied portfolio, RV Park loans were segregated from traditional CRE Non-Owner Occupied as we identified a data source to provide sufficient historical peer loss data specific to RV Park loans. This segregation now adjusts for differences in the risk characteristics and performance of RV Park loans compared to traditional CRE Non-Owner Occupied properties. We used calculations of individual probability of default and loss given default on a loan-by-loan basis to derive an estimated loss rate. Applying this adjusted loss rate led to a decrease in the ACL for the RV Park pool of approximately $3.3 million as of September 30, 2024.

Executive Summary

Our strategic focus is to continue to grow organically by leveraging our existing core competencies and positioning our business for success in the evolving banking landscape. In leveraging our core competencies, we intend to:

•continue our organic ~~lending~~ growth in our market through our “purpose-driven and integrity-centered” approach to banking;

•continue to focus on and ~~grow~~expand ~~each~~our ofoperations ~~the~~in ~~diverse~~our ~~industry~~unique ~~clusters~~lines of business throughout our ~~market~~geographic service areas;

•build upon the strength of our brand to deepen and broaden client relationships and grow our deposit base;

•attract additional banking professionals with track records of driving revenue growth;

•maintain our disciplined credit underwriting and robust risk management;

•enhance our disciplined cost management culture;

•leverage our technology platforms to improve our efficiency; and

•further engage in the economic development of our communities and market areas.

Highlights of the financial results are presented in the following tables:

Table 1: Highlights of Financial Results
(dollars in thousands)	December 31, ~~2024~~2025			December 31, ~~2023~~2024
Selected financial condition data:
Total assets	$	4,~~053~~754,~~278~~861		$	34,~~593~~053,~~125~~278
Total loans held for investment	34,~~532~~074,~~686~~929			3,~~081~~532,~~719~~686
Total deposits	34,~~557~~201,~~994~~084			3,~~026~~557,~~896~~994
Total subordinated notes, net	7374,~~895~~041			73,~~749~~895
Total shareholders’ equity	~~396~~445,~~624~~832			~~285~~396,~~774~~624
Asset quality ratios:
Allowance for credit losses to total loans held for investment	1.0709		%	1.1207		%
Allowance for credit losses to nonperforming loans	2114.~~02x~~34x			1721.~~53x~~02x
Nonperforming loans to total loans held for investment	0.0508		%	0.0605		%
Capital ratios:
Total capital (to risk-weighted assets)	13.9933		%	1213.3099		%
Tier 1 capital (to risk-weighted assets)	1110.0258		%	911.0702		%
Common equity Tier 1 capital (to risk-weighted assets)	1110.0258		%	911.0702		%
Tier 1 leverage	109.0570		%	810.7305		%
Total shareholders’ equity to total assets	9.7938		%	79.9579		%
Tangible shareholders’ equity to tangible assets1	9.7938		%	79.9579		%

4847

Table 2: Highlights of Financial Results (continued)
(dollars in thousands, except share and per share data)	For the year ended
	December 31, 2024			December 31, 2023
	December 31, 2025			December 31, 2024
Selected operating data:
Net interest income	$	~~119~~151,~~711~~905		$	~~110~~119,~~880~~711
Provision for credit losses	69,~~950~~700			46,~~000~~950
Non-interest income	6,~~453~~535			76,~~511~~453
Non-interest expense	5465,~~493~~008			4754,~~775~~493
Net income	4561,~~671~~606			4745,~~734~~671
Per common share data:
Earnings per common share:
Basic	$	2.2690		$	2.7826
Diluted	$	2.2690		$	2.7826
Book value per share	$	1820.6087		$	1618.5660
Tangible book value per share2	$	1820.6087		$	1618.5660
Shares outstanding data:
Weighted average basic common shares outstanding	2021,~~154~~224,~~385~~788			1720,~~166~~154,~~592~~385
Weighted average diluted common shares outstanding	2021,~~205~~273,~~440~~552			1720,~~187~~205,~~969~~440
Shares outstanding at end of period	21,~~319~~367,~~083~~387			1721,~~256~~319,~~989~~083
Performance and other financial ratios:
ROAA	1.2341		%	1.4423		%
ROAE	1214.7274		%	1712.8572		%
Net interest margin	3.3255		%	3.4232		%
Cost of funds	2.6447		%	2.1064		%
Efficiency ratio	4341.1903		%	4043.3519		%
Average equity to average assets	9.7155		%	89.0571		%
Cash dividend payout ratio on common stock3	3527.4559		%	2635.9845		%

1Tangible shareholders’ equity to tangible assets is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measure. Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets at the end of each of the periods indicated.

2Tangible book value per share is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measure. Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated.

3Cash dividend payout ratio on common stock is calculated as dividends on common shares divided by basic earnings per common share.

4948

RESULTS OF OPERATIONS

The following discussion of our results of operations compares the year ended December 31, ~~2024~~2025 to the year ended December 31, ~~2023~~2024.

Net Interest Income

Net interest income is the most significant contributor to our net income. Net interest income represents interest income from interest-earning assets, such as loans and investments, less interest expense on interest-bearing liabilities, such as deposits, subordinated notes, and other borrowings, which are used to fund those assets. In evaluating our net interest income, we measure and monitor yields/rates on our interest-earning assets and interest-bearing liabilities as well as trends in our net interest margin. Net interest margin is a ratio calculated as net interest income divided by total interest-earning assets for the same period. We manage our earning assets and funding sources in order to maximize this margin while limiting credit risk and interest rate sensitivity to our established risk appetite levels. Changes in market interest rates and competition in our market typically have the largest impact on periodic changes in our net interest margin.

Net interest income increased by $832.82 million, or 726.9689%, for the year ended December 31, ~~2024~~2025, compared to the year ended December 31, ~~2023~~2024, while our net interest margin ~~decreased~~increased 1023 basis points during the same period. The increase in net interest income was primarily due to an increase in interest income driven by higher average balances and yields on loans, partially offset by an increase in interest expense due to higher average balances ~~and~~of ~~rates on~~ deposits. Additional detail relating to net interest margin in each period is provided below.

Average balance sheet, interest, and yield/rate analysis. Table 3 presents average balance sheet information, interest income, interest expense, and the corresponding average yield earned or rate paid for each period reported. The average balances are daily averages and include both performing and nonperforming loans.

Table 3: Average Balances, Interest, and Yield/Rate
(dollars in thousands)	For the year ended December 31, ~~2024~~2025						For the year endedDecember 31, ~~2023~~2024
	Average Balance		Interest Income/Expense		Average Yield/Rate		Average Balance		Interest Income/Expense		Average Yield/Rate
Assets
Interest-earning deposits in banks1	$	~~218~~407,~~156~~884	$	1117,~~080~~421	54.0827	%	$	~~184~~218,~~103~~156	$	911,~~069~~080	45.9308	%
Investment securities1,2	~~106~~98,~~289~~242		2,~~530~~298		2.3834	%	~~113~~106,~~515~~289		2,~~600~~530		2.2938	%
Loans held for investment and sale1, 3	3,~~283~~767,~~874~~199		~~193~~229,~~341~~214		56.8908	%	23,~~947~~283,~~603~~874		~~162~~193,~~713~~341		5.5289	%
Total interest-earning assets1	34,~~608~~273,~~319~~325		~~206~~248,~~951~~933		5.7483	%	3,~~245~~608,~~221~~319		~~174~~206,~~382~~951		5.3774	%
Interest receivable and other assets, net4	90105,~~061~~775						7590,~~741~~061
Total assets	$	34,~~698~~379,~~380~~100					$	3,~~320~~698,~~962~~380
Liabilities and shareholders’ equity
Interest-bearing transaction accounts1	$	~~298~~306,~~137~~983	$	4,~~716~~529	1.5848	%	$	~~312~~298,~~944~~137	$	34,~~321~~716	1.0658	%
Savings accounts1	~~124~~130,~~208~~079		3,~~584~~363		2.8959	%	~~140~~124,~~060~~208		3,~~073~~584		2.1989	%
Money market accounts1	1,~~533~~767,~~405~~137		5356,~~750~~323		3.5119	%	1,~~263~~533,~~539~~405		3353,~~932~~750		23.6951	%
Time accounts1	~~412~~661,~~007~~321		2028,~~348~~167		4.9426	%	~~372~~412,~~557~~007		1720,~~535~~348		4.7194	%
Subordinated notes and other borrowings1	7773,~~335~~974		4,~~842~~646		6.2628	%	9377,~~279~~335		54,~~641~~842		6.0526	%
Total interest-bearing liabilities	2,~~445~~939,~~092~~494		8797,~~240~~028		3.5730	%	2,~~182~~445,~~379~~092		6387,~~502~~240		23.9157	%
Demand accounts	~~858~~988,~~789~~447						~~844~~858,~~057~~789
Interest payable and other liabilities	3533,~~331~~090						2735,~~127~~331
Shareholders’ equity	~~359~~418,~~168~~069						~~267~~359,~~399~~168
Total liabilities and shareholders’ equity	$	34,~~698~~379,~~380~~100					$	3,~~320~~698,~~962~~380
Net interest spread5					2.1753	%					2.4617	%
Net interest income/margin6			$	~~119~~151,~~711~~905	3.3255	%			$	~~110~~119,~~880~~711	3.4232	%

5049

1Interest income/expense is divided by the actual number of days in the period multiplied by the actual number of days in the year to correspond to stated interest rate terms, where applicable.

2Yields on available-for-sale securities are calculated based on fair value. Investment security interest is earned on a 30/360 day basis monthly. Yields are not calculated on a tax-equivalent basis.

3Non-accrual loans are included in total loan balances. No adjustment has been made for these loans in the yield calculations. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. Allowance for credit losses is not included in total loan balances.

4Allowance for credit losses is included in interest receivable and other assets, net.

5Net interest spread represents the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.

6Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets, then annualized based on the number of days in the given period.

Analysis of changes in interest income and expenses. Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average yields/rates. Table 4 shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the current period’s average yield/rate. The effect of rate changes is calculated by multiplying the change in average yield/rate by the previous period’s volume. Changes not solely attributable to volume or yields/rates have been allocated in proportion to the respective volume and yield/rate components.

Table 4: Interest Income and Expense Change Analysis

(dollars in thousands)

For the year ended December 31, ~~2024~~2025 compared to the year ended December 31, ~~2023~~2024

Variance due to

Volume

Yield/Rate

Total

Interest-earning deposits with banks

18,~~730~~103

~~281~~(1,762)

26,~~011~~341

Investment securities

(~~172~~188)

~~102~~(44)

(70232)

Loans held for investment and sale

1929,~~798~~408

106,~~830~~465

3035,~~628~~873

Total interest-earning assets

2137,~~356~~323

114,~~213~~659

3241,~~569~~982

Interest-bearing transaction accounts

~~(234)~~131

~~1,629~~(318)

~~1,395~~(187)

Savings accounts

~~(457)~~152

~~968~~(373)

~~511~~(221)

Money market accounts

97,~~460~~451

10(4,~~358~~878)

192,~~818~~573

Time accounts

110,~~948~~619

~~865~~(2,800)

27,~~813~~819

Subordinated notes and other borrowings

(~~998~~212)

~~199~~16

(~~799~~196)

Total interest-bearing liabilities

918,~~719~~141

14(8,~~019~~353)

239,~~738~~788

Changes in net interest income/margin

1119,~~637~~182

(213,~~806)~~012

832,~~831~~194

Net interest income during the year ended December 31, ~~2024~~2025 increased $832.82 million, or 726.9689%, to $~~119~~151.79 million, as compared to $~~110~~119.97 million during the year ended December 31, ~~2023~~2024. Net interest margin totaled 3.3255% for the year ended December 31, ~~2024~~2025, aan ~~decrease~~increase of 1023 basis points compared to the prior year. The increase in net interest income is primarily attributable to an additional $3035.69 million in loan interest income due to a $~~336~~483.3 million, or 1114.4172%, increase in the average balance of loans and a 3719 basis point improvement in the average yield on loans as compared to the prior year. The increase in interest income was partially offset by an additional $2410.50 million in deposit interest expense due to a $~~293~~627.4 million, or 1019.0045%, increase in the average balance of deposits ~~and~~during athe 58year. ~~basis~~The ~~point~~average ~~increase~~cost inof deposits was 2.40% for the ~~average~~year ~~cost~~ended December 31, 2025, a decrease of ~~deposits~~16 basis points compared to the prior year which helped to moderate the increase in interest expense related to deposits.

5150

Provision for Credit Losses

The provision for credit losses is based on management’s assessment of the adequacy of our allowance for credit losses. Factors impacting the provision include inherent risk characteristics in our loan portfolio, the level of nonperforming loans and net charge-offs, both current and historic, local economic and credit conditions, the direction of the change in collateral values, and the funding probability on unfunded lending commitments. The provision for credit losses is charged against earnings in order to maintain our allowance for credit losses, which reflects management’s best estimate of forecasted life of credit losses inherent in our loan portfolio at the balance sheet date.

Beginning January 1, 2023, we adopted ASC 326, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model calculates reserves over the life of a financial instrument and is largely driven by portfolio characteristics, economic outlook, and other key methodology assumptions. Under the CECL model, the calculated allowance for credit losses was $5.3 million higher on January 1, 2023 than the allowance under the incurred loss model.

We recorded a $79.07 million provision for credit losses in the year ended December 31, ~~2024,~~2025 compared to a $47.0 million provision for credit losses for the year ended December 31, ~~2023~~2024. The provision for credit losses increased $32.08 million, or 7339.7557%, primarily due to increases in loan growth asand ~~loan~~an ~~originations~~overall increase in ~~the~~loss ~~year~~rates ~~ended~~related ~~December 31,~~to ~~2024~~the ~~were~~annual ~~almost~~CECL ~~double~~model ~~those~~refresh ~~for~~during the ~~year~~three months ended December 31, ~~2023~~2025, as compared to the prior year.

Non-interest Income

Non-interest income is a secondary contributor to our net income, following interest income. Non-interest income consists of service charges on deposit accounts, ~~net~~ gain on sale of ~~securities, gain on sale of~~ loans, loan-related fees, FHLB stock dividends, earnings on BOLI, and other income.

Table 5 details the components of non-interest income for the periods indicated.

Table 5: Non-interest Income
(dollars in thousands)	For the year ended				$ Change		% Change
	December 31, 2024		December 31, 2023
	December 31, 2025		December 31, 2024
Service charges on deposit accounts	$	~~721~~755	$	~~575~~721	$	~~146~~34	254.3972	%
Net gain (loss) on sale of securities	—		(167)		167		(100.00)	%
Gain on sale of loans	244		1,274		(1,030)		(80.85)	%
Gain on sale of loans	1,274		1,952		(678)		(34.73)	%
Loan-related fees	2,156		1,605		551		34.33	%
Loan-related fees	1,605		1,719		(114)		(6.63)	%
FHLB stock dividends	1,317		1,320		(3)		(0.23)	%
FHLB stock dividends	1,320		970		350		36.08	%
Earnings on BOLI	824		644		180		27.95	%
Earnings on BOLI	644		510		134		26.27	%
Other income	1,239		889		350		39.37	%
Other income	889		1,952		(1,063)		(54.46)	%
Total non-interest income	$	6,535	$	6,453	$	82	1.27	%
Total non-interest income	$	6,453	$	7,511	$	(1,058)	(14.09)	%

~~Service~~Gain ~~charges~~ on ~~deposit~~sale ~~accounts~~of loans. The ~~increase~~decrease ~~resulted~~related primarily ~~from~~to aan ~~$0.2~~overall ~~million~~decline ~~increase~~ in ~~wire~~the ~~transfer~~volume ~~fees~~of ~~recognized,~~loans ~~partially~~sold ~~offset~~due byto a ~~small~~strategic, ~~decrease~~intentional reduction in ~~other~~originations ~~fees~~of ~~recognized~~loans held for sale during the second half of the year ended December 31, ~~2024~~2025. During the year ended December 31, 2025, approximately $3.3 million of loans were sold with an effective yield of 7.41%, as compared to approximately $18.3 million of loans sold with an effective yield of 6.96% during the year ended December 31, ~~2023~~2024.

~~Net~~Loan-related ~~gain (loss) on sale of securities~~fees. The ~~decrease~~increase inwas ~~the~~primarily ~~net~~a ~~loss~~result ~~on sale~~ of ~~securities~~a ~~resulted~~$0.5 ~~from~~million ~~the~~increase ~~sale~~in offees ~~two~~from ~~municipal~~swap ~~securities~~referrals ~~with~~and a ~~par value of approximately~~ $0.82 million ~~for~~increase ain ~~loss~~income offrom ~~approximately~~credit ~~$0.2~~card ~~million~~activity, ~~during~~partially ~~the~~offset ~~year~~by ~~ended~~a ~~December 31,~~$0.1 ~~2023,~~million ~~with~~decrease noin ~~sales~~fees ~~occurring~~from ~~during~~SBA ~~the~~7(a) ~~year ended December 31, 2024~~loans.

~~Gain~~Earnings on ~~sale of loans~~BOLI. The ~~decrease~~increase ~~related~~was primarily todue ~~an overall decline in the volume of loans sold during the year ended December 31, 2024 compared~~ to ~~the~~additional ~~year~~policies ~~ended~~purchased ~~December 31,~~between ~~2023. During the year ended~~ December 31, 2024, 56and SBA 7(a) loans with government guaranteed portions totaling approximately $18.3 million were sold with an effective yield of 6.96%, as compared to approximately $36.5 million of loans sold with an effective yield of 5.35% during the year ended December 31, ~~2023~~2025.

~~Loan-related~~Other ~~fees~~income. The ~~decrease~~increase ~~was~~related primarily ato ~~result~~an ofoverall aimprovement ~~$0.2~~in ~~million~~earnings ~~net~~related ~~decrease~~to equity investments in ~~income~~venture-backed ~~earned~~funds ~~from~~during the ~~credit~~year ~~card~~ended ~~program~~December 31, ~~partially~~2025 ~~offset~~compared byto athe ~~small~~year ~~increase~~ended inDecember 31, ~~loan fee income earned on various loan types and services~~2024.

5251

FHLB stock dividends. The increase primarily relates to a 50 basis point increase in the annualized dividend rate earned year-over-year, while the average shares outstanding remained consistent.

Earnings on BOLI. The increase was primarily due to additional policies purchased between December 31, 2024 and December 31, 2023.

Other income. The decrease resulted primarily from $0.5 million in income received on equity investments in venture-backed funds during the year ended December 31, 2024, as compared to $1.7 million in income received on equity investments in venture-backed funds during the year ended December 31, 2023.

Non-interest Expense

Non-interest expense includes salaries and employee benefits, occupancy and equipment, data processing and software, FDIC insurance, professional services, advertising and promotional, loan-related expenses, and other operating expenses. In evaluating our level of non-interest expense, we closely monitor the Company’s efficiency ratio, which is calculated as non-interest expense divided by the sum of net interest income and non-interest income. We constantly seek to identify ways to streamline our business and operate more efficiently in order to reduce our non-interest expense over time as a percentage of our revenue, while continuing to achieve growth in total loans and assets.

Over the past several years, we have ~~invested~~continued to invest significant resources in personnel, technology, and infrastructure. As we execute initiatives based on growth, we expect non-interest expense to continue to grow. Non-interest expense has increased throughout the periods presented below; however, we expect our efficiency ratio will improve going forward due, in part, to our past investment in infrastructure.

Table 6 details the components of non-interest expense for the periods indicated.

Table 6: Non-interest Expense

(dollars in thousands)

For the year ended

$ Change

% Change

December 31, 2024

December 31, 2023

December 31, 2025

December 31, 2024

Salaries and employee benefits

3137,~~709~~885

2731,~~097~~709

46,~~612~~176

1719.0248

Occupancy and equipment

2,~~547~~782

2,~~218~~547

~~329~~235

149.8323

Data processing and software

56,~~088~~121

45,~~015~~088

1,~~073~~033

2620.7230

FDIC insurance

1,~~635~~950

1,~~557~~635

78315

519.0127

Professional services

3,~~078~~723

23,~~575~~078

~~503~~645

1920.5396

Advertising and promotional

23,~~411~~178

2,~~403~~411

8767

031.3381

Loan-related expenses

1,~~207~~423

1,~~192~~207

15216

117.2690

Other operating expenses

67,~~818~~946

6,~~718~~818

~~100~~1,128

116.4954

Total non-interest expense

5465,~~493~~008

4754,~~775~~493

610,~~718~~515

1419.0630

Salaries and employee benefits. The increase was the result of: (i) a $36.5 million increase in salaries, benefits, and ~~bonuses~~bonus expense, ~~of which approximately $3.3 million~~ related to ~~employees~~the ~~hired~~13.66% toincrease ~~support~~in ~~expansion~~employee ~~into~~headcount ~~the~~between ~~San~~December 31, ~~Francisco~~2024 ~~Bay~~and ~~Area~~December 31, 2025; and (ii) a $1.42 million increase in commissions ~~paid,~~expense ~~primarily~~due to ~~employees~~higher inloan ~~the San Francisco Bay Area~~production. The increase was partially offset by a $01.35 million increase in deferred loan origination costs due to higher loan production, ~~net of purchased consumer loans,~~ period-over-period.

Occupancy and equipment. The increase ~~related~~was toprimarily ~~rent~~due ~~expense~~to ~~for~~higher ~~the~~rent ~~San Francisco branch office~~ and aproperty ~~new~~management ~~office~~expenses ~~lease~~for ~~to support back office staff during~~ the ~~year~~Walnut ~~ended~~Creek ~~December 31,~~and ~~2024,~~San ~~which~~Francisco ~~did~~branch ~~not~~offices ~~exist for the full year ended December 31, 2023~~period-over-period.

Data processing and software. The increase related to: (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) an increased number of licenses required for new users on our loan origination and documentation system.

~~Professional~~FDIC ~~services~~Insurance. The increase was primarily due to ana $571.8 million increase in ~~audit, IT support, and other consulting fees for services provided for~~ the ~~year~~assessment ~~ended~~base ~~December 31, 2024 compared to the year ended December 31, 2023~~period-over-period.

53Professional services. The increase was due to: (i) $0.1 million in fees paid for compensation consulting services that did not occur during 2024; (ii) a $0.2 million increase in expenses related to business development consulting services; (iii) a $0.1 million increase in legal expenses; and (iv) a $0.1 million increase in recruiter fees related to the 13.66% increase in employee headcount between December 31, 2024 and December 31, 2025.

~~Other~~Advertising ~~operating~~and ~~expenses~~promotional. The increase iswas primarily ~~related~~due to aan additional $0.2 million ~~increase~~ in ~~IntraFi~~donations ~~Network~~and ~~fees~~$0.2 ~~resulting~~million ~~from~~related anto ~~overall~~sponsored ~~increase~~events inand ~~balances~~partnerships, ~~carried~~combined inwith $0.4 million of additional expenses incurred to support the ~~network,~~expansion ~~partially~~of ~~offset~~the byBank’s abusiness ~~$0.1~~development ~~million~~teams, ~~decrease~~specifically inrelated ~~conference~~to client and ~~training~~prospective client development expenses.

Loan-related expenses. The increase was due to an increase of $0.1 million in inspection fees and an increase of $0.1 million in loan-related legal expenses, both due to loan growth between December 31, 2024 and December 31, 2025.

Other operating expenses. The increase was due to: (i) a $0.4 million increase in employee-related expenses, such as travel, conferences, training, and professional association memberships; (ii) a $0.2 million increase in armored car and courier expenses; (iii) a $0.2 million increase in administrative charges, including subscription services and bank charges; (iv) a $0.1 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network; (v) a $0.1 million increase in office expenses, such as check printing and supplies; and (vi) a $0.1 million increase in regulatory assessment fees.

Provision for Income Taxes

~~Provision~~On ~~for~~July ~~income~~4, ~~taxes~~2025, ~~increased~~the byPresident $0signed H.~~2 million~~R. 1, orthe ~~0.89%~~“One Big Beautiful Bill Act,” tointo ~~$19~~law.~~1 million~~ The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the ~~year~~restoration ~~ended~~of ~~December 31~~immediate expensing of domestic R&D expenditures, ~~2024~~reinstatement of 100% bonus depreciation, ~~compared~~and tomore ~~$18.9 million~~favorable rules for determining the ~~year~~limitation ~~ended~~on ~~December 31,~~business ~~2023~~interest expense. ~~This~~The ~~increase~~Act isalso ~~due~~made certain changes to athe ~~$0.6~~deductibility ~~million~~of ~~provision~~the tocost ~~return~~of ~~true-up~~meals ~~recorded~~and ~~during~~charitable ~~the~~contributions ~~year~~that ~~ended~~are effective for tax years beginning after December 31, ~~2024,~~2025. ~~partially~~These ~~offset~~changes bywere anot ~~decline~~reflected in ~~taxable~~the income ~~year-over-year.~~tax ~~The~~provision ~~effective~~for ~~tax~~the ~~rate~~period ~~was~~ended ~~29.43%~~December ~~and~~31, 282025.~~34%~~ ~~for~~The Company evaluated the ~~years~~impact ~~ended~~on ~~December 31,~~future ~~2024~~periods and ~~December 31,~~the ~~2023,~~legislation ~~respectively~~is not expected to have a significant impact on the Company’s consolidated financial statements.

Provision for income taxes increased by $3.1 million, or 16.15%, to $22.1 million for the year ended December 31, 2025, as compared to $19.1 million for the year ended December 31, 2024. This increase is primarily due to a 29.37% increase in pre-tax income recognized during the year ended December 31, 2025. This was partially offset by: (i) a $0.9 million benefit recorded during the quarter ended December 31, 2025 related to the purchase of transferable federal tax credits; and (ii) a net $0.2 million reduction to the provision recorded during the quarter ended June 30, 2025. This adjustment related to a tax law change for the state of California effective as of June 30, 2025, which requires a transition from a three-factor apportionment formula to a single-sales-factor formula for determining state income tax. As such, the Company recorded a net benefit of approximately $0.9 million relating to the current year provision, which was partially offset by a $0.7 million expense relating to the remeasuring of the deferred tax assets and liabilities as of June 30, 2025. The effective tax rate was 26.42% and 29.43% for the years ended December 31, 2025 and December 31, 2024, respectively.

FINANCIAL CONDITION SUMMARY

The following discussion compares our financial condition as of December 31, ~~2024~~2025 to our financial condition as of December 31, ~~2023~~2024. Table 7 summarizes selected components of our consolidated balance sheet as of December 31, ~~2024~~2025 and December 31, ~~2023~~2024.

Table 7: Selected Components of Consolidated Balance Sheets

(dollars in thousands)

December 31, ~~2024~~2025

December 31, ~~2023~~2024

Total assets

4,~~053~~754,~~278~~861

34,~~593~~053,~~125~~278

Cash and cash equivalents

~~352~~506,~~343~~851

~~321~~352,~~576~~343

Total investments

~~100~~96,~~914~~889

~~111~~100,~~160~~914

Loans held for investment

34,~~532~~074,~~686~~929

3,~~081~~532,~~719~~686

Total deposits

34,~~557~~201,~~994~~084

3,~~026~~557,~~896~~994

Subordinated notes, net

7374,~~895~~041

73,~~749~~895

Total shareholders’ equity

~~396~~445,~~624~~832

~~285~~396,~~774~~624

Total Assets

At December 31, ~~2024~~2025, total assets were $4.18 billion, an increase of $~~460~~701.26 million from $34.61 billion at December 31, ~~2023~~2024, primarily due to a $~~451~~542.02 million increase in total loans held for investment and a $30154.85 million increase in cash and cash equivalents~~, partially offset by a $10~~.~~2 million decrease in investments.~~

Cash and Cash Equivalents

Total cash and cash equivalents were $~~352~~506.39 million at December 31, ~~2024~~2025, an increase of $30154.85 million from $~~321~~352.63 million at December 31, ~~2023~~2024. The increase in cash and cash equivalents was primarily due to ~~increases in deposits of $531.1 million, $80.9 million in net proceeds from~~ the ~~2024 Public Offering (as defined below), and pre-tax income of $64.7 million, partially offset by loan originations,~~ net ofincrease ~~repayments, of $442.8 million and a decrease~~ in ~~borrowings of $170.0 million.~~

cash inflows from growth in total deposits of $643.1 million and cash outflows from growth in total loans held for investment of $542.2 million.

Investment Portfolio

Our investment portfolio is primarily comprised of U.S. government agency securities, mortgage-backed securities, and obligations of states and political subdivisions, which are high-quality liquid investments. We manage our investment portfolio according to written investment policies approved by our board of directors. Our investment strategy ~~aims~~is designed to maximize earnings while maintaining liquidity in securities with minimal credit risk and interest rate risk that is reflective of the yields obtained on those securities. Most of our securities are classified as available-for-sale, although we have one long-term, fixed rate municipal security classified as held-to-maturity.

Our total securities available-for-sale and held-to-maturity amounted to $~~100~~96.9 million at December 31, ~~2024~~2025 and $~~111~~100.29 million at December 31, ~~2023~~2024, a decrease of $104.20 million year-over-year. The decrease was primarily due to ~~principal~~maturities, ~~paydowns~~prepayments, and ~~amortization~~calls of $9.03 million, partially offset by ana ~~improvement~~purchase inof ~~the~~a $1.0 million security and an unrealized ~~loss~~gain on securities of $05.91 million, ~~primarily~~with inthe ~~our~~remainder ~~municipal~~of ~~securities~~the ~~portfolios.~~change ~~The~~due ~~improvement~~to inamortization of premiums. For the ~~unrealized~~year ~~loss~~ended ~~was~~December 31, ~~recognized~~2025, asother acomprehensive ~~result~~gain ofwas ~~interest~~$3.2 million, primarily due to rate ~~decreases~~changes ~~that~~and ~~occurred~~other market conditions on securities during the period.

Table 8 presents the carrying value of our securities by their stated maturities, as well as the weighted average yields for each maturity range, as of the dates shown.

Table 8: Stated Maturities and Weighted Average Yields - Investment Securities
	Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years				Total
(dollars in thousands)	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
December 31, 2025
Available-for-sale:
U.S. government agency securities	$	198	2.00	%	$	619	5.27	%	$	298	2.01	%	$	6,246	5.58	%	$	7,361	5.31	%
Mortgage-backed securities	—		—	%	—		—	%	4,677		1.33	%	43,509		1.79	%	48,186		1.75	%
Obligations of states and political subdivisions	—		—	%	1,196		1.26	%	12,385		1.64	%	23,383		1.70	%	36,964		1.67	%
Collateralized mortgage obligations	—		—	%	—		—	%	231		1.76	%	—		—	%	231		1.76	%
Corporate bonds	1,957		1.25	%	—		—	%	—		—	%	—		—	%	1,957		1.25	%
Total available-for-sale	2,155		1.32	%	1,815		2.63	%	17,591		1.57	%	73,138		2.09	%	94,699		1.98	%
Held-to-maturity:
Obligations of states and political subdivisions	170		6.00	%	865		6.00	%	1,155		6.00	%	—		—	%	2,190		6.00	%
Total	$	2,325	1.66	%	$	2,680	3.72	%	$	18,746	1.84	%	$	73,138	2.09	%	$	96,889	2.07	%
December 31, 2024
Available-for-sale:
U.S. government agency securities	$	—	—	%	$	1,583	5.00	%	$	338	2.01	%	$	6,424	5.65	%	$	8,345	5.38	%
Mortgage-backed securities	—		—	%	—		—	%	508		2.74	%	50,062		1.74	%	50,570		1.75	%
Obligations of states and political subdivisions	—		—	%	737		1.17	%	8,108		1.62	%	28,292		1.79	%	37,137		1.74	%
Collateralized mortgage obligations	—		—	%	—		—	%	279		1.76	%	—		—	%	279		1.76	%
Corporate bonds	—		—	%	1,863		1.25	%	—		—	%	—		—	%	1,863		1.25	%
Total available-for-sale	—		—	%	4,183		2.65	%	9,233		1.70	%	84,778		2.05	%	98,194		2.04	%
Held-to-maturity:
Obligations of states and political subdivisions	210		6.00	%	945		6.00	%	1,380		6.00	%	185		6.00	%	2,720		6.00	%
Total	$	210	6.00	%	$	5,128	3.27	%	$	10,613	2.26	%	$	84,963	2.06	%	$	100,914	2.15	%
December 31, 2023
Available-for-sale:
U.S. government agency securities	$	—	—	%	$	800	3.44	%	$	2,010	5.36	%	$	7,731	5.77	%	$	10,541	5.51	%
Mortgage-backed securities	—		—	%	—		—	%	609		2.74	%	56,364		1.76	%	56,973		1.77	%
Obligations of states and political subdivisions	—		—	%	367		0.84	%	5,838		1.71	%	32,254		1.76	%	38,459		1.74	%
Collateralized mortgage obligations	—		—	%	—		—	%	332		1.76	%	—		—	%	332		1.76	%
Corporate bonds	—		—	%	1,778		1.25	%	—		—	%	—		—	%	1,778		1.25	%
Total available-for-sale	—		—	%	2,945		1.79	%	8,789		2.62	%	96,349		2.08	%	108,083		2.12	%
Held-to-maturity:
Obligations of states and political subdivisions	277		6.00	%	935		6.00	%	1,365		6.00	%	500		6.00	%	3,077		6.00	%
Total	$	277	6.00	%	$	3,880	2.81	%	$	10,154	3.07	%	$	96,849	2.10	%	$	111,160	2.22	%

Weighted average yield for securities available-for-sale is the projected yield to maturity given current cash flow projections for U.S. government agency securities, mortgage-backed securities, and collateralized mortgage obligations. For callable municipal securities and corporate bonds, weighted average yield is a yield to worst. Weighted average yield for securities held-to-maturity is the stated coupon of the bond. Yields on tax-exempt securities are not presented on a tax-equivalent basis.

Loan Portfolio

Our loan portfolio is our largest class of interest-earning assets and typically provides higher yields than other types of interest-earning assets. Associated with the higher yields is an inherent amount of credit risk, which we attempt to mitigate with strong underwriting standards. As of December 31, ~~2024~~2025 and ~~2023~~2024, our total loans amounted to $34.51 billion and $3.15 billion, respectively. Table 9 presents the balance and associated percentage of each major product type within our portfolio as of the dates indicated.

Table 9: Loans Outstanding
	As of
(dollars in thousands)	December 31, ~~2024~~2025				December 31, ~~2023~~2024
	Amount		% of Loans		Amount		% of Loans
Loans held for investment:
Real estate:
Commercial	$	23,~~857~~305,~~173~~713	8081.7508	%	$	2,~~685~~857,~~419~~173	8680.7675	%
Commercial land and development	31,~~849~~352		0.1103	%	153,~~551~~849		0.5011	%
Commercial construction	~~111~~96,~~318~~760		32.1537	%	62111,~~863~~318		23.0315	%
Residential construction	48,~~561~~389		0.1321	%	154,~~456~~561		0.5013	%
Residential	3237,~~774~~566		0.9392	%	2532,~~893~~774		0.8493	%
Farmland	4759,~~241~~606		1.3446	%	5147,~~669~~241		1.6734	%
Commercial:
Secured	~~170~~251,~~548~~736		46.8217	%	~~165~~170,~~109~~548		54.3382	%
Unsecured	2740,~~558~~422		0.7899	%	2327,~~850~~558		0.7778	%
Consumer and other	~~279~~275,~~584~~475		76.9077	%	38279,~~166~~584		17.2390	%
Loans held for investment, gross	34,~~534~~077,~~606~~019		99100.9100	%	3,~~083~~534,~~976~~606		99.6391	%
Loans held for sale:
Commercial	~~3,247~~—		~~0.09~~—	%	113,~~464~~247		0.3709	%
Total loans, gross	34,~~537~~077,~~853~~019		100.00	%	3,~~095~~537,~~440~~853		100.00	%
Net deferred loan fees	(12,~~920~~090)				(21,~~257~~920)
Total loans	$	34,~~535~~074,~~933~~929			$	3,~~093~~535,~~183~~933

Commercial real estate loans consist of term loans secured by a mortgage lien on the real property, such as office and industrial buildings, manufactured home communities, self-storage facilities, hospitality properties, faith-based properties, retail shopping centers, and apartment buildings, as well as commercial real estate construction loans that are offered to builders and developers.

Commercial land and development and commercial construction loans consist of loans made to fund commercial land acquisition and development and commercial construction, respectively. The real estate purchased with these loans is generally located in or near our market.

Residential real estate and construction real estate loans consist of loans secured by single-family and multifamily residential properties, which are both owner-occupied and investor-owned.

Farmland loans consist of loans used to purchase, refinance, or improve farmland secured by farming properties themselves. The farmland is generally located in or near our market.

Commercial loans consist of financing for commercial purposes in various lines of business, including manufacturing, service industry, and professional service areas. Commercial loans can be secured or unsecured but are generally secured with the assets of the company and/or the personal guaranty of the business owner(s).

Consumer and other loans consist primarily of loans purchased in a loan purchase program with a non-bank lender, generally made to professionals for the purpose of large personal or household purchases. The loans are unsecured, fixed

rate loans. Consumer and other loans also include loans purchased or originated through financing partnerships which are no longer active.

Table 10 presents the commercial real estate loan balance, associated percentage of commercial real estate concentrations, estimated real estate collateral values, and related loan-to-value (“LTV”) ranges by collateral type as of the dates indicated. Revolving lines of credit with zero balance and 0.00% LTV are excluded from this table. Collateral values are determined at origination using third-party real estate appraisals or evaluations. Updated appraisals, which are included in the table below, may be obtained for loans that are downgraded to watch or substandard. Loans over $2.0 million are reviewed annually, at which time an internal assessment of collateral values is completed.

Table 10: Commercial Real Estate Loans
(dollars in thousands)	Loan Balance		% of Commercial Real Estate		Collateral Value		Minimum LTV		Maximum LTV
December 31, 2025
Manufactured home community	$	1,025,386	31.02	%	$	1,820,597	16.16	%	73.59	%
RV Park	412,955		12.49	%	742,097		17.56	%	74.70	%
Retail	317,536		9.61	%	668,216		6.23	%	74.23	%
Multifamily	286,064		8.65	%	618,588		7.56	%	79.21	%
Industrial	247,368		7.48	%	563,631		0.99	%	91.33	%
Faith-based	193,362		5.85	%	513,107		8.66	%	75.00	%
Mini storage	190,252		5.76	%	381,810		14.63	%	70.00	%
Office	175,767		5.32	%	404,727		4.62	%	74.95	%
All other types1	457,023		13.82	%	966,325		0.79	%	134.52	%
Total2	$	3,305,713	100.00	%	$	6,679,098
December 31, 2024
Manufactured home community	$	891,935	31.22	%	$	1,586,109	14.24	%	74.52	%
RV Park	371,733		13.01	%	648,272		17.94	%	75.00	%
Retail	283,394		9.92	%	569,677		6.49	%	72.80	%
Industrial	224,860		7.87	%	500,307		4.56	%	73.91	%
Faith-based	184,151		6.45	%	492,030		9.35	%	74.67	%
Mini storage	177,854		6.22	%	361,437		16.23	%	69.19	%
Multifamily	172,592		6.04	%	371,634		14.35	%	75.00	%
Office	145,986		5.11	%	338,474		5.03	%	73.64	%
All other types1	404,668		14.16	%	855,084		4.00	%	112.07	%
Total2	$	2,857,173	100.00	%	$	5,723,024
December 31, 2023
Manufactured home community	$	813,687	30.30	%	$	1,430,224	16.80	%	74.52	%
RV Park	343,817		12.80	%	599,691		18.29	%	75.00	%
Retail	273,100		10.17	%	540,660		6.89	%	74.07	%
Multifamily	211,598		7.88	%	427,948		13.12	%	75.00	%
Faith-based	184,799		6.88	%	488,160		8.33	%	74.54	%
Mini storage	176,380		6.57	%	358,395		16.56	%	70.00	%
Industrial	173,192		6.45	%	417,439		7.48	%	83.26	%
Office	135,928		5.06	%	298,989		9.07	%	73.52	%
All other types1	372,918		13.89	%	756,541		4.00	%	152.33	%
Total2	$	2,685,419	100.00	%	$	5,318,047

1Types of collateral in the “all other types” category are those that individually make up less than 5.00% of the commercial real estate concentration.

2Minimum LTV and maximum LTV not shown for aggregated totals, as such values are meaningful only when presented by specific category.

Over the past several years, we have experienced significant growth in our loan portfolio, although the relative composition of the portfolio has not changed materially. Our primary focus remains commercial real estate lending (including commercial, commercial land and development, and commercial construction), which constitutes 8483.0949% of loans held for investment at December 31, ~~2024~~2025. Commercial secured lending represents 46.8317% of loans held for investment at December 31, ~~2024~~2025. We sell the guaranteed portion of all SBA 7(a) loans in the secondary market and will continue to do so as long as market conditions continue to be favorable.

We recognize that our commercial real estate loan concentration is significant within our balance sheet. Commercial real estate loan balances as a percentage of risk-based capital were ~~571~~594.9117% and ~~682~~571.7291% as of December 31, ~~2024~~2025 and

December 31, ~~2023~~2024, respectively. We have established internal concentration limits in the loan portfolio for commercial real estate loans by sector (e.g., manufactured home communities, self-storage, hospitality, etc.). All loan sectors were within our established limits as of December 31, ~~2024~~2025. Additionally, our loans are geographically concentrated with borrowers and collateralized properties primarily in California.

We believe that our past success is attributable to focusing on products and markets where we have significant expertise. Given our concentrations, we have established strong risk management practices, including risk-based lending standards, self-established product and geographical limits, annual evaluations of income property loans, and semi-annual top-down and bottom-up stress testing. We expect to continue growing our loan portfolio. We do not expect our product or geographic concentrations to materially change.

Table 11 sets forth the contractual maturities and sensitivity to interest rate changes of our loan portfolio as of the dates shown.

Table 11: Contractual Maturities - Gross Loans
(dollars in thousands)	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years through 15 years		Due after 15 years		Total
December 31, 2024
Real estate:
Commercial	$	35,682	$	362,077	$	2,383,655	$	75,759	$	2,857,173
Commercial land and development	2,433		438		978		—		3,849
Commercial construction	9,378		64,407		37,533		—		111,318
Residential construction	3,310		1,251		—		—		4,561
Residential	324		9,486		22,045		919		32,774
Farmland	—		6,632		40,609		—		47,241
Commercial:
Secured	56,630		46,722		70,035		408		173,795
Unsecured	2,500		10,552		14,506		—		27,558
Consumer and other	161		13,964		265,459		—		279,584
Total	$	110,418	$	515,529	$	2,834,820	$	77,086	$	3,537,853
December 31, 2023
Real estate:
Commercial	$	57,443	$	271,306	$	2,284,482	$	72,188	$	2,685,419
Commercial land and development	11,406		3,353		792		—		15,551
Commercial construction	27,078		10,377		25,408		—		62,863
Residential construction	11,543		3,913		—		—		15,456
Residential	286		5,916		18,735		956		25,893
Farmland	2,835		3,932		44,902		—		51,669
Commercial:
Secured	36,844		48,491		90,826		412		176,573
Unsecured	574		10,789		12,487		—		23,850
Consumer and other	857		5,638		31,671		—		38,166
Total	$	148,866	$	363,715	$	2,509,303	$	73,556	$	3,095,440

Table 12 sets forth the sensitivity to interest rate changes of our loan portfolio as of the dates shown.


Table 11: Contractual Maturities and Sensitivity to Interest Rate Changes - Gross Loans
(dollars in thousands)	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years through 15 years		Due after 15 years		Total
December 31, 2025
Loans with fixed interest rates:
Real estate:
Commercial	$	31,238	$	275,099	$	366,518	$	3,571	$	676,426
Commercial land and development	—		176		—		—		176
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Residential	24		5,741		1,313		412		7,490
Farmland	—		—		4,612		—		4,612
Commercial:
Secured	3,187		36,461		16,118		—		55,766
Unsecured	58		5,781		23,417		—		29,256
Consumer and other	72		17,779		257,472		—		275,323
Total loans with fixed interest rates	34,579		341,037		669,450		3,983		1,049,049

Loans with floating or adjustable interest rates:
Real estate:
Commercial	29,907		274,098		2,257,847		67,435		2,629,287
Commercial land and development	602		500		74		—		1,176
Commercial construction	1,429		49,478		32,749		13,104		96,760
Residential construction	4,790		3,267		332		—		8,389
Residential	4,344		4,931		20,485		316		30,076
Farmland	1,775		12,829		40,390		—		54,994
Commercial:
Secured	57,918		67,862		59,623		10,567		195,970
Unsecured	4,524		6,642		—		—		11,166
Consumer and other	—		152		—		—		152
Total loans with floating or adjustable interest rates	105,289		419,759		2,411,500		91,422		3,027,970

Total:
Real estate:
Commercial	61,145		549,197		2,624,365		71,006		3,305,713
Commercial land and development	602		676		74		—		1,352
Commercial construction	1,429		49,478		32,749		13,104		96,760
Residential construction	4,790		3,267		332		—		8,389
Residential	4,368		10,672		21,798		728		37,566
Farmland	1,775		12,829		45,002		—		59,606
Commercial:
Secured	61,105		104,323		75,741		10,567		251,736
Unsecured	4,582		12,423		23,417		—		40,422
Consumer and other	72		17,931		257,472		—		275,475
Total loans	$	139,868	$	760,796	$	3,080,950	$	95,405	$	4,077,019

Table 12: Sensitivity to Interest Rates - Gross Loans
(dollars in thousands)	Fixed Interest Rates		Floating or Adjustable Rates		Total
December 31, 2024
Real estate:
Commercial	$	587,825	$	2,269,348	$	2,857,173
Commercial land and development	1,416		2,433		3,849
Commercial construction	—		111,318		111,318
Residential construction	—		4,561		4,561
Residential	4,495		28,279		32,774
Farmland	4,873		42,368		47,241
Commercial:
Secured	48,587		125,208		173,795
Unsecured	19,988		7,570		27,558
Consumer and other	279,458		126		279,584
Total	$	946,642	$	2,591,211	$	3,537,853
December 31, 2023
Real estate:
Commercial	$	570,385	$	2,115,034	$	2,685,419
Commercial land and development	10,081		5,470		15,551
Commercial construction	—		62,863		62,863
Residential construction	3,913		11,543		15,456
Residential	1,272		24,621		25,893
Farmland	5,848		45,821		51,669
Commercial:
Secured	38,029		138,544		176,573
Unsecured	16,343		7,507		23,850
Consumer and other	38,081		85		38,166
Total	$	683,952	$	2,411,488	$	3,095,440


Table 11: Contractual Maturities and Sensitivity to Interest Rate Changes - Gross Loans (continued)
(dollars in thousands)	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years through 15 years		Due after 15 years		Total
December 31, 2024
Loans with fixed interest rates:
Real estate:
Commercial	$	17,022	$	184,493	$	386,310	$	—	$	587,825
Commercial land and development	645		—		771		—		1,416
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Residential	—		3,737		325		433		4,495
Farmland	—		—		4,873		—		4,873
Commercial:
Secured	2,238		30,458		15,891		—		48,587
Unsecured	—		5,482		14,506		—		19,988
Consumer and other	161		13,838		265,459		—		279,458
Total loans with fixed interest rates	20,066		238,008		688,135		433		946,642

Loans with floating or adjustable interest rates:
Real estate:
Commercial	18,660		177,584		1,997,345		75,759		2,269,348
Commercial land and development	1,788		438		207		—		2,433
Commercial construction	9,378		64,407		37,533		—		111,318
Residential construction	3,310		1,251		—		—		4,561
Residential	324		5,749		21,720		486		28,279
Farmland	—		6,632		35,736		—		42,368
Commercial:
Secured	54,392		16,264		54,144		408		125,208
Unsecured	2,500		5,070		—		—		7,570
Consumer and other	—		126		—		—		126
Total loans with floating or adjustable interest rates	90,352		277,521		2,146,685		76,653		2,591,211

Total:
Real estate:
Commercial	35,682		362,077		2,383,655		75,759		2,857,173
Commercial land and development	2,433		438		978		—		3,849
Commercial construction	9,378		64,407		37,533		—		111,318
Residential construction	3,310		1,251		—		—		4,561
Residential	324		9,486		22,045		919		32,774
Farmland	—		6,632		40,609		—		47,241
Commercial:
Secured	56,630		46,722		70,035		408		173,795
Unsecured	2,500		10,552		14,506		—		27,558
Consumer and other	161		13,964		265,459		—		279,584
Total loans	$	110,418	$	515,529	$	2,834,820	$	77,086	$	3,537,853

Asset Quality

We manage the quality of our loans based upon trends at the overall loan portfolio level, as well as within each product type. We measure and monitor key factors that include the level and trend of classified, delinquent, non-accrual, and nonperforming assets, collateral coverage, credit scores, and debt service coverage, where applicable. These metrics directly impact our evaluation of the adequacy of our allowance for credit losses.

Our primary objective is to maintain a high level of asset quality in our loan portfolio. We believe our underwriting policies and practices, executed by experienced professionals, appropriately govern the risk profile for our loan portfolio. These policies are continually evaluated and updated as necessary. All loans are assessed and assigned a risk classification at origination based on underlying characteristics of the transaction, such as collateral cash flow, collateral coverage, and borrower strength. We believe that we have a comprehensive methodology to proactively monitor our credit quality after the origination process. Particular emphasis is placed on our commercial portfolio, where risk assessments are reevaluated as a result of reviewing commercial property operating statements and borrower financials. On an ongoing basis, we also monitor payment performance, delinquencies, and tax and property insurance compliance. We design our practices to facilitate the early detection and remediation of problems within our loan portfolio. Assigned risk classifications are an integral part of management’s assessment of the adequacy of our ACL. We periodically employ the use of an independent consulting firm to evaluate our underwriting and risk assessment process. Like other financial institutions, we are subject to the risk that our loan portfolio will be exposed to increasing pressures from deteriorating borrower credit due to general economic conditions and rising interest rates.

the risk that our loan portfolio will be exposed to increasing pressures from deteriorating borrower credit due to general economic conditions and rising interest rates.

Nonperforming Assets

Our nonperforming assets consist of nonperforming loans and foreclosed real estate, if any. Nonperforming loans consist of non-accrual loans and loans contractually past due by 90 days or more and still accruing. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full and timely collection of interest or principal or when a loan becomes contractually past due by 90 days or more with respect to interest or principal. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current period interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest.

SBA Loans

During 2025, the Company sold 10 SBA 7(a) loans with government-guaranteed portions totaling approximately $3.3 million. The decrease in sales from prior years is due to a strategic, intentional reduction in originations of loans held for sale. The Company received gross proceeds of $3.5 million on the loans sold in 2025, resulting in a net gain on sale of $0.2 million.

During 2024, the Company sold 56 SBA 7(a) loans with government-guaranteed portions totaling approximately $18.3 million. The Company received gross proceeds of $19.6 million on the loans sold in 2024, resulting in a net gain on sale of $1.3 million.

During 2023, the Company sold 143 SBA 7(a) loans with government-guaranteed portions totaling approximately $36.5 million. The Company received gross proceeds of $38.4 million on the loans sold in 2023, resulting in a net gain on sale of $2.0 million.61

Non-accrual Loans

Table 1312 provides details of our nonperforming and restructured assets and certain other related information as of the dates presented:

Table 13: Nonperforming and Restructured Assets
Table 12: Nonperforming and Restructured Assets
(dollars in thousands)	December 31, ~~2024~~2025			December 31, ~~2023~~2024
Non-accrual loans
Non-accrual loans:
Real estate:
Commercial	$	12,~~750~~666		$	1,~~893~~750
Commercial:
Secured	48430			7248
Total non-accrual loans	13,~~798~~096			1,~~965~~798
Loans past due 90 days or more and still accruing
Loans past due 90 days or more and still accruing:
Total loans past due 90 days or more and still accruing	—			—
Total loans past due and still accruing	—			—
Total nonperforming loans	13,~~798~~096			1,~~965~~798
Real estate owned	87—			—87
Total nonperforming assets	$	13,~~885~~096		$	1,~~965~~885
Performing LMs (not included above)	$	—		$	—
Allowance for credit losses to period end nonperforming loans	21,~~101~~434.7840		%	12,~~752~~101.7078		%
Nonperforming loans to loans held for investment	0.0508		%	0.0605		%
Nonperforming assets to total assets	0.0507		%	0.05		%
Nonperforming loans plus performing LMs to loans held for investment	0.0508		%	0.0605		%

The ratio of nonperforming loans to loans held for investment was 0.0508% at December 31, 2025, increasing from 0.05% as of December 31, 2024. The ratio of non-accrual loans to loans held for investment was also 0.08% at December 31, ~~decreasing~~2025, increasing from 0.0605% as of December 31, ~~2023~~2024.

60The ratio of the allowance for credit losses to period end nonperforming loans decreased from 2,101.78% as of December 31, 2024 to 1,434.40% as of December 31, 2025. This decrease was due to a 72.19% increase in nonperforming loans year-over-year, partially offset by a 17.51% increase in the allowance for credit losses year-over-year. The increase in nonperforming loans resulted mainly from the occurrence of two separate faith-based real estate loans entering nonperforming status.

The ratio of the allowance for credit losses to period end nonperforming loans increased from 1,752.70% as of December 31, 2023 to 2,101.78% as of December 31, 2024. This increase was due to: (i) a 9.76% increase in the allowance for credit losses year-over-year; and (ii) an 8.50% decrease in nonperforming loans year-over-year.

Potential Problem Loans

We utilize a risk grading system for our loans to aid us in evaluating the overall credit quality of our real estate loan portfolio and assessing the adequacy of our ~~ACL~~allowance for credit losses. All loans are grouped into a risk category at the time of origination. Commercial real estate loans over $2.0 million are reevaluated at least annually for proper classification in conjunction with our review of property and borrower financial information. All loans are reevaluated for proper risk grading as new information such as payment patterns, collateral condition, and other relevant information comes to our attention.

~~The banking industry defines loans graded substandard or doubtful as “classified” loans. Table 14 shows loans by credit quality risk rating as of the periods indicated.~~62

Table 14: Gross Loans Held for Investment by Credit Quality Risk Rating
(dollars in thousands)	Pass		Watch		Substandard		Doubtful		Total
December 31, 2024
Real estate:
Commercial	$	2,746,594	$	107,992	$	2,587	$	—	$	2,857,173
Commercial land and development	3,849		—		—		—		3,849
Commercial construction	111,318		—		—		—		111,318
Residential construction	4,561		—		—		—		4,561
Residential	32,774		—		—		—		32,774
Farmland	45,948		1,293		—		—		47,241
Commercial:
Secured	156,381		14,119		48		—		170,548
Unsecured	27,558		—		—		—		27,558
Consumer and other	279,575		—		9		—		279,584
Total	$	3,408,558	$	123,404	$	2,644	$	—	$	3,534,606
December 31, 2023
Real estate:
Commercial	$	2,658,504	$	25,023	$	1,892	$	—	$	2,685,419
Commercial land and development	15,551		—		—		—		15,551
Commercial construction	62,863		—		—		—		62,863
Residential construction	15,456		—		—		—		15,456
Residential	25,893		—		—		—		25,893
Farmland	51,669		—		—		—		51,669
Commercial:
Secured	150,451		14,586		72		—		165,109
Unsecured	23,850		—		—		—		23,850
Consumer and other	38,139		15		12		—		38,166
Total	$	3,042,376	$	39,624	$	1,976	$	—	$	3,083,976

Loans designated as “watch” are internal bank designations and are not considered adversely classified. However, loans designated as “substandard” or “doubtful” are considered adversely classified. Table 13 shows loans by credit quality risk rating as of the periods indicated.

Loans designated as watch and substandard, which are not considered adversely classified, increased to $126.0 million at December 31, 2024 from $41.6 million at December 31, 2023. The increase related primarily to an $83.8 million increase in loans designated as watch for loans which have indicators of deficient loan quality and potential significant issues which are expected to be temporary in nature. There were no loans with doubtful risk grades at December 31, 2024 or December 31, 2023.


Table 13: Gross Loans Held for Investment by Credit Quality Risk Rating
(dollars in thousands)	Pass		Watch		Substandard		Doubtful		Total
December 31, 2025
Real estate:
Commercial	$	3,208,223	$	76,118	$	21,372	$	—	$	3,305,713
Commercial land and development	1,352		—		—		—		1,352
Commercial construction	81,840		14,920		—		—		96,760
Residential construction	8,389		—		—		—		8,389
Residential	37,566		—		—		—		37,566
Farmland	59,021		585		—		—		59,606
Commercial:
Secured	240,511		10,272		953		—		251,736
Unsecured	40,422		—		—		—		40,422
Consumer and other	275,469		—		6		—		275,475
Total	$	3,952,793	$	101,895	$	22,331	$	—	$	4,077,019

December 31, 2024
Real estate:
Commercial	$	2,746,594	$	107,992	$	2,587	$	—	$	2,857,173
Commercial land and development	3,849		—		—		—		3,849
Commercial construction	111,318		—		—		—		111,318
Residential construction	4,561		—		—		—		4,561
Residential	32,774		—		—		—		32,774
Farmland	45,948		1,293		—		—		47,241
Commercial:
Secured	156,381		14,119		48		—		170,548
Unsecured	27,558		—		—		—		27,558
Consumer and other	279,575		—		9		—		279,584
Total	$	3,408,558	$	123,404	$	2,644	$	—	$	3,534,606

61Loans designated as watch decreased from $123.4 million to $101.9 million between December 31, 2024 and December 31, 2025. Consequently, loans designated as substandard increased from $2.6 million to $22.3 million between December 31, 2024 and December 31, 2025, primarily attributable to the downgrade of one borrower experiencing financial difficulty with a special purpose commercial real estate loan and a commercial line of credit. There were no loans with doubtful risk grades at December 31, 2025 or December 31, 2024.

Allowance for Credit Losses

The allowance for credit losses is established through a provision for credit losses charged to operations. Provisions are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged-off amounts, if any, are credited to the allowance for credit losses.

The allowance for credit losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. ~~This~~Historical ~~evaluation~~loss isrates ~~inherently~~within ~~subjective,~~the ascommercial itsecured ~~requires~~pool ~~estimates that~~ are ~~susceptible~~also toevaluated ~~significant~~by ~~revision as more information becomes available.~~

At December 31, 2024, the Company’s allowance for credit losses was $37.8 million, compared to $34.4 million at December 31, 2023. The $3.4 million increase in the allowance is due to a $7.5 million provision for credit losses, partially offset by net charge-offs of $4.1 million during the year ended December 31, 2024, mainly attributable to commercial and industrial loans, during the same period.

While the entire allowance for credit losses is available to absorb losses from any and all loans, Table 15 represents management’s allocation of our allowance for credit losses by loan category, and the balance of loans in each category as a percentage of total loans, for the periods indicated.

Table 15: Allocation of the Allowance for Credit Losses
	December 31, 2024				December 31, 2023
(dollars in thousands)	Allowance for Credit Losses		% of Loans to Total Loans		Allowance for Credit Losses		% of Loans to Total Loans
Real estate:
Commercial	$	25,864	80.75	%	$	29,015	86.76	%
Commercial land and development	78		0.11	%	178		0.50	%
Commercial construction	2,268		3.15	%	718		2.03	%
Residential construction	64		0.13	%	89		0.50	%
Residential	270		0.93	%	151		0.84	%
Farmland	607		1.34	%	399		1.67	%
Commercial:
Secured	5,866		4.91	%	3,314		5.70	%
Unsecured	278		0.78	%	189		0.77	%
Consumer and other	2,496		7.90	%	378		1.23	%
Total	$	37,791	100.00	%	$	34,431	100.00	%

The ratio of allowance for credit losses to total loans held for investment was 1.07% at December 31, 2024, as compared to 1.12% at December 31, 2023.

Table 16 provides information on the activity within the allowance for credit losses as of and for the periods indicated.

Table 16: Activity Within the Allowance for Credit Losses
	As of and for the year ended
	December 31, 2024					December 31, 2023
(dollars in thousands)	Activity			% of Average Loans Held for Investment		Activity			% of Average Loans Held for Investment
Average loans held for investment	$	3,276,841				$	2,937,899
Allowance for credit losses	$	34,431				$	28,389
Effect of adoption of ASC 326	—					5,262
Net (charge-offs) recoveries:
Commercial:
Secured	(4,042)			(0.12)	%	(3,073)			(0.10)	%
Unsecured	(41)			—	%	(6)			—	%
Consumer and other	(7)			—	%	(111)			—	%
Net charge-offs	(4,090)			(0.12)	%	(3,190)			(0.11)	%
Provision for credit losses	7,450					3,970
Allowance for credit losses	$	37,791				$	34,431
Loans held for investment	$	3,532,686				$	3,081,719
Allowance for credit losses to loans held for investment	1.07		%			1.12		%

The allowance for credit losses to loans held for investment decreased from 1.12% as of December 31, 2023 to 1.07% as of December 31, 2024. Net charge-offs as a percent of average loans held for investment increased from 0.11% to 0.12% for the years ended December 31, 2023 and December 31, 2024, respectively.

Liabilities

During 2024, total liabilities increased by $349.3 million from $3.3 billion at December 31, 2023 to $3.7 billion at December 31, 2024. This increase was primarily attributable to an increase in deposits of $531.1 million, partially offset by a decrease in other borrowings of $170.0 million. The $531.1 million increase in deposits was largely due to increases in money market, time, and non-interest-bearing demand deposits of $242.9 million, $203.6 million, and $91.5 million, respectively, partially offset by decreases in interest-bearing transaction and savings deposits of $5.1 million and $1.8 million, respectively.

Deposits

Representing 97.30% of our total liabilities as of December 31, 2024, deposits are our primary source of funding for our business operations.

Total deposits increased by $531.1 million, or 17.55%, to $3.6 billion at December 31, 2024 from $3.0 billion as of December 31, 2023. Deposit increases were primarily attributable to an increase in the number of new relationships, as well as normal fluctuations in our existing accounts. Non-interest-bearing deposits increased by $91.5 million in 2024 to $922.6 million, and represented 25.93% of total deposits at December 31, 2024, compared to 27.46% of total deposits at December 31, 2023. Our loan to deposit ratio was 99.38% at December 31, 2024, compared to 102.19% at December 31, 2023. We closely monitor the loan to deposit ratio for purposes of both operational objectives and regulatory capital compliance. We intend to continue to operate our business with close monitoring of the loan to deposit ratio.

~~Table~~management 17on ~~summarizes~~a ~~our~~regular ~~deposit~~basis ~~composition~~to byestimate ~~average~~the ~~deposits~~allowance ~~and~~for ~~average~~credit ~~rates~~losses. ~~paid~~This ~~for~~evaluation ~~the~~is ~~periods~~inherently ~~indicated~~subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

Table 17: Deposit Composition by Average Balances and Average Rates Paid
	For the year ended
	December 31, 2024						December 31, 2023
(dollars in thousands)	Average Amount		Average Rate Paid		% of Total Deposits		Average Amount		Average Rate Paid		% of Total Deposits
Interest-bearing transaction accounts	$	298,137	1.58	%	9.24	%	$	312,944	1.06	%	10.67	%
Money market and savings accounts	1,657,613		3.46	%	51.37	%	1,403,599		2.64	%	47.85	%
Time accounts	412,007		4.94	%	12.77	%	372,557		4.71	%	12.70	%
Demand accounts	858,789		—	%	26.62	%	844,057		—	%	28.78	%
Total deposits	$	3,226,546	2.56	%	100.00	%	$	2,933,157	1.97	%	100.00	%

At December 31, 2025, the Company’s allowance for credit losses was $44.4 million compared to $37.8 million at December 31, 2024. The $6.6 million increase in the allowance is due to a $9.8 million provision for credit losses, partially offset by net charge-offs of $3.1 million during the year ended December 31, 2025, mainly attributable to commercial and industrial loans, during the same period.

~~Uninsured~~While ~~and~~the ~~uncollateralized~~entire ~~deposits~~allowance ~~totaled~~for ~~$1.2 billion~~credit losses is available to absorb losses from any and ~~$1.0 billion~~all atloans, ~~December 31~~Table 14 represents management’s allocation of our allowance for credit losses by loan category, ~~2024~~the allocation of our allowance for credit losses as a percent of the total allowance for credit losses, and ~~2023~~the balance of loans in each category as a percentage of total loans, ~~respectively~~for the periods indicated.

As of December 31, 2024, our 49 largest deposit relationships, each accounting for more than $10.0 million, totaled $1.8 billion, or 50.35% of our total deposits. The average age on deposit relationships of more than $5.0 million was approximately 9.13 years. As of December 31, 2023, our 40 largest deposit relationships, each accounting for more than $10.0 million, totaled $1.5 billion, or 49.80% of our total deposits. Overall, our large deposit relationships have been relatively consistent over time and have helped to continue to grow our deposit base. Table 18 shows the entity types making up our large deposit relationships at the dates indicated.


Table 14: Allocation of the Allowance for Credit Losses
(dollars in thousands)	Allowance for Credit Losses		% of Allowance for Credit Losses		% of Loans to Total Loans
December 31, 2025
Real estate:
Commercial	$	25,219	56.77	%	81.08	%
Commercial land and development	56		0.13	%	0.03	%
Commercial construction	4,050		9.12	%	2.37	%
Residential construction	213		0.48	%	0.21	%
Residential	362		0.82	%	0.92	%
Farmland	467		1.05	%	1.46	%
Commercial:
Secured	11,204		25.23	%	6.17	%
Unsecured	482		1.09	%	0.99	%
Consumer and other	2,356		5.31	%	6.77	%
Total	$	44,409	100.00	%	100.00	%

December 31, 2024
Real estate:
Commercial	$	25,864	68.44	%	80.75	%
Commercial land and development	78		0.21	%	0.11	%
Commercial construction	2,268		6.00	%	3.15	%
Residential construction	64		0.17	%	0.13	%
Residential	270		0.71	%	0.93	%
Farmland	607		1.61	%	1.34	%
Commercial:
Secured	5,866		15.52	%	4.91	%
Unsecured	278		0.74	%	0.78	%
Consumer and other	2,496		6.60	%	7.90	%
Total	$	37,791	100.00	%	100.00	%

Table 18: Composition of Large Deposit Relationships
(dollars in thousands)	December 31, 2024		December 31, 2023
Municipalities	$	674,094	$	693,685
Non-profits	211,480		188,252
Businesses	605,894		525,193
Brokered deposits	299,961		100,128
Total	$	1,791,429	$	1,507,258

The ratio of allowance for credit losses to total loans held for investment was 1.09% at December 31, 2025, as compared to 1.07% at December 31, 2024.

Our largest single deposit relationship at December 31, 2024 related to brokered deposits. The balance for this customer was $300.0 million, or approximately 8.43% of total deposits as of December 31, 2024. At December 31, 2023, our largest single deposit relationship related to a government agency and had a balance of $260.0 million, or 8.59% of total deposits as of December 31, 2023. As our demand deposits fluctuate, we have purchased brokered deposits as needed to supplement liquidity. We do not consider brokered deposits as core deposits, but as another deposit funding source for our loan growth.

Table 19 sets forth the maturity of time deposits as of December 31, 2024.

Table 19: Scheduled Maturities of Time Deposits
(dollars in thousands)	$250,000 or Greater		Less than $250,000		Total		Uninsured Portion
Remaining maturity:
Three months or less	$	299,572	$	306,005	$	605,577	$	293,361
Over three through six months	27,338		16,164		43,502		23,838
Over six through twelve months	14,814		2,982		17,796		10,313
Over twelve months	2,405		874		3,279		1,156
Total	$	344,129	$	326,025	$	670,154	$	328,668

Table 15 provides information on the activity within the allowance for credit losses as of and for the periods indicated.


Table 15: Activity Within the Allowance for Credit Losses
	As of and for the year ended
	December 31, 2025					December 31, 2024
(dollars in thousands)	Activity			% of Average Loans Held for Investment		Activity			% of Average Loans Held for Investment
Average loans held for investment	$	3,766,410				$	3,276,841

Allowance for credit losses	$	37,791				$	34,431


Net (charge-offs) recoveries:
Real estate:
Commercial	(280)			(0.01)	%	—			—	%





Commercial:
Secured	(2,738)			(0.07)	%	(4,042)			(0.12)	%
Unsecured	(50)			—	%	(41)			—	%

Consumer and other	(64)			—	%	(7)			—	%
Net charge-offs	(3,132)			(0.08)	%	(4,090)			(0.12)	%

Provision for credit losses	9,750					7,450

Allowance for credit losses	$	44,409				$	37,791

Loans held for investment	$	4,074,929				$	3,532,686
Allowance for credit losses to loans held for investment	1.09		%			1.07		%

The allowance for credit losses to loans held for investment increased from 1.07% as of December 31, 2024 to 1.09% as of December 31, 2025. Net charge-offs as a percent of average loans held for investment decreased from 0.12% to 0.08% for the years ended December 31, 2024 and December 31, 2025, respectively.

Liabilities

During 2025, total liabilities increased by $652.4 million from $3.7 billion at December 31, 2024 to $4.3 billion at December 31, 2025. This increase was primarily attributable to an increase in deposits of $643.1 million. The $643.1 million increase in deposits was largely due to increases in money market, non-interest-bearing demand, interest-bearing transaction, and savings deposits of $553.3 million, $161.9 million, $29.0 million, and $14.5 million, respectively. These increases were partially offset by decreases in time deposits of $115.5 million, largely driven by a $95.0 million decrease in wholesale deposits.

Deposits

Representing 97.49% of our total liabilities as of December 31, 2025, deposits are our primary source of funding for our business operations.

Total deposits increased by $643.1 million, or 18.07%, to $4.2 billion at December 31, 2025 from $3.6 billion as of December 31, 2024. Deposit increases were primarily attributable to an increase in the number of new relationships, as well as normal fluctuations in our existing accounts. Non-interest-bearing deposits increased by $161.9 million in 2025 to $1.1 billion, and represented 25.82% of total deposits at December 31, 2025, compared to 25.93% of total deposits at December 31, 2024. Our loan to deposit ratio was 97.00% at December 31, 2025, compared to 99.38% at December 31,

2024. We closely monitor the loan to deposit ratio for purposes of both operational objectives and regulatory capital compliance. We intend to continue to operate our business with close monitoring of the loan to deposit ratio.

Table 16 summarizes our deposit composition by average deposits and average rates paid for the periods indicated.


Table 16: Deposit Composition by Average Balances and Average Rates Paid
	For the year ended
	December 31, 2025						December 31, 2024
(dollars in thousands)	Average Amount		Average Rate Paid		% of Total Deposits		Average Amount		Average Rate Paid		% of Total Deposits
Interest-bearing transaction accounts	$	306,983	1.48	%	7.97	%	$	298,137	1.58	%	9.24	%
Money market and savings accounts	1,897,216		3.15	%	49.22	%	1,657,613		3.46	%	51.37	%
Time accounts	661,321		4.26	%	17.16	%	412,007		4.94	%	12.77	%
Demand accounts	988,447		—	%	25.65	%	858,789		—	%	26.62	%
Total deposits	$	3,853,967	2.40	%	100.00	%	$	3,226,546	2.56	%	100.00	%

Uninsured and uncollateralized deposits totaled $1.4 billion and $1.2 billion at December 31, 2025 and 2024, respectively.

As of December 31, 2025, our 53 largest deposit relationships, each accounting for more than $10.0 million, totaled $2.0 billion, or 47.82% of our total deposits. The average age on deposit relationships of more than $5.0 million was approximately 7.67 years. As of December 31, 2024, our 49 largest deposit relationships, each accounting for more than $10.0 million, totaled $1.8 billion, or 50.35% of our total deposits. Overall, our large deposit relationships have been relatively consistent over time and have helped to continue to grow our deposit base. Table 17 shows the entity types making up our large deposit relationships at the dates indicated.


Table 17: Composition of Large Deposit Relationships
(dollars in thousands)	December 31, 2025		December 31, 2024
Municipalities	$	789,643	$	674,094
Non-profits	283,666		211,480
Businesses	760,516		605,894
Brokered deposits	174,981		299,961
Total	$	2,008,806	$	1,791,429

Our largest single deposit relationship at December 31, 2025 related to a government agency. The balance for this customer was $290.0 million, or approximately 6.90% of total deposits as of December 31, 2025. At December 31, 2024, our largest single deposit relationship related to brokered deposits and had a balance of $300.0 million, or 8.43% of total deposits as of December 31, 2024. As our demand deposits fluctuate, we have purchased brokered deposits as needed to supplement liquidity. We do not consider brokered deposits as core deposits, but as another deposit funding source for our loan growth.

Table 18 sets forth the maturity of time deposits as of December 31, 2025.


Table 18: Scheduled Maturities of Time Deposits
(dollars in thousands)	$250,000 or Greater		Less than $250,000		Total		Uninsured Portion
Remaining maturity:
Three months or less	$	332,954	$	182,057	$	515,011	$	324,494
Over three through six months	8,245		15,208		23,453		4,745
Over six through twelve months	7,482		6,924		14,406		3,982
Over twelve months	1,351		390		1,741		601
Total	$	350,032	$	204,579	$	554,611	$	333,822

FHLB Advances and Other Borrowings

From time to time, we utilize short-term collateralized FHLB borrowings to maintain adequate liquidity. There were no borrowings outstanding as of December 31, ~~2024~~2025 and ~~borrowings of $170.0 million outstanding from the FHLB as of~~ December 31, ~~2023~~2024, respectively.

In 2022, we issued subordinated notes of $75.0 million. This debt was issued to investors in private placement transactions. See Note 9, Long Term Debt and Other Borrowings, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding these subordinated notes. The proceeds of the notes qualify as Tier 2 capital for the Company under the regulatory capital rules of the federal banking agencies.

Table 2019 is a summary of our outstanding subordinated notes as of December 31, ~~2024~~2025.

Table 20: Subordinated Notes Outstanding

Table 19: Subordinated Notes Outstanding

(dollars in thousands)

Issuance Date

Amount of Notes

Prepayment Right

Maturity Date

Subordinated notes

August 2022

75,000

August 17, 2027

September 1, 2032

Fixed at 6.00% through September 1, 2027, then three-month Term SOFR plus 329.0 basis points (7.93% as of December 31, 2024) through maturity

Fixed at 6.00% through September 1, 2027, then three-month Term SOFR plus 329.0 basis points (6.94% as of December 31, 2025) through maturity

Shareholders’ Equity

Shareholders’ equity totaled $~~396~~445.68 million at December 31, ~~2024~~2025 and $~~285~~396.86 million at December 31, ~~2023~~2024. The increase in shareholders’ equity was primarily ~~a result of $80.9 million of additional common stock issued and outstanding in 2024 and~~ net income recognized of $4561.76 million, partially offset by $1617.21 million in cash dividends paid during the period.

Liquidity and Capital Resources

Liquidity Management

We manage liquidity based upon factors that include the level of diversification of our funding sources, the composition of our deposit types, the availability of unused funding sources, our off-balance sheet obligations, the amount of cash and liquid securities we hold, and the availability of assets to be readily converted into cash without undue loss. As the primary federal regulator of the Bank, the FDIC evaluates our liquidity on a stand-alone basis pursuant to applicable guidance and policies.

Liquidity refers to our capacity to meet our cash obligations at a reasonable cost. Our cash obligations require us to have cash flow that is adequate to fund loan growth and maintain on-balance sheet liquidity while meeting present and future obligations of deposit withdrawals, borrowing maturities, and other contractual cash obligations. In managing our cash flows, management regularly confronts situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints in accessing sources of funds, and the ability to convert assets into cash. Changes in economic conditions or exposure to borrower credit quality, capital markets, and operational, legal, or reputational risks could also affect the Bank’s liquidity risk profile and are considered in the assessment of liquidity management.

The Company is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity, including liquidity required to meet its debt service requirements on its subordinated notes. The Company’s main source of cash flow is dividends declared and paid to it by the Bank. There are statutory and regulatory limitations that affect the ability of the Bank to pay dividends to the Company, including various legal and regulatory provisions that limit the amount of dividends the Bank can pay to the Company without regulatory approval. Under the California Financial Code, payment of a dividend from the Bank to the Company without advance regulatory approval is restricted to the lesser of the Bank’s retained earnings or the amount of the Bank’s net income from the previous three fiscal years less the amount of dividends paid during that period. We believe that these limitations will not impact our ability to meet our ongoing short-term cash obligations. For contingency purposes, the Company maintains a minimum level of cash to fund one year’s projected operating cash flow needs plus two years’ subordinated notes debt service. We continually monitor our liquidity position in order to meet all reasonably foreseeable short-term, long-term, and strategic liquidity demands. Management has established a comprehensive process for identifying, measuring, monitoring, and controlling liquidity risk. Because of its critical importance to the viability of the Bank, liquidity risk management is fully integrated into our risk management processes. Critical elements of our liquidity risk management include effective corporate governance, consisting of oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures, and

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~~oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures, and~~ limits used to manage and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems, including stress tests, that are commensurate with the complexity of our business activities; active management of intraday liquidity and collateral; an appropriately diverse mix of existing and potential future funding sources; adequate levels of highly liquid marketable securities free of legal, regulatory, or operational impediments that can be used to meet liquidity needs in stress situations; comprehensive contingency funding plans that sufficiently address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes sufficient to determine the adequacy of the Bank’s liquidity risk management process.

Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our liquidity requirements are met primarily through our deposits, Federal Reserve Discount Window advances, FHLB advances, and the principal and interest payments we receive on loans and investment securities. Cash on hand, cash at third-party banks, investments available-for-sale, and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are routinely available to us include funds from retail and wholesale deposits, advances from the FHLB and the Federal Reserve Discount Window, and proceeds from the sale of loans. Less commonly used sources of funding include borrowings from established federal funds lines from unaffiliated commercial banks, and the issuance of debt or equity securities. We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary.

In addition, as of December 31, 2025, we ~~have~~had a shelf registration statement on file with the SEC registering the offer and sale by us of up to $250.0 million ~~for~~of any combination of equity or debt securities, depository shares, warrants, purchase contracts, purchase units, subscription rights, and units in one or more offerings. ~~Specific information on the terms of any securities being offered, including the expected use of proceeds from the sale of such securities, are provided at the time of the offering.~~ In April 2024, we sold an aggregate of 3,967,500 shares of our common stock at a price of $21.75 per share in a public offering (the “2024 Public Offering”), for net proceeds to us, after deducting underwriting discounts and commissions and offering expenses payable by us, of approximately $80.9 million, to be used for general corporate purposes and to support continued growth, including through investments in the Bank to pursue growth opportunities, and for working capital. The 2024 Public Offering used approximately $86.3 million of our shelf registration statement on file with the SEC, leaving approximately $163.7 million available for future offerings as of December 31, 2025. In February 2026, our new shelf registration statement became effective, registering the offer and sale by us of up to $300.0 million of any combination of equity or debt securities, depository shares, warrants, purchase contracts, purchase units, subscription rights, and units in one or more offerings, and replacing our prior shelf registration statement. Specific information on the terms of any securities being offered, including the expected use of proceeds from the sale of such securities, are provided at the time of the offering.

Sources and Uses of Cash

Our executive officers and board of directors review our sources and potential uses of cash in connection with our annual budgeting process. Generally speaking, our principal funding source is cash from deposits, and our principal uses of cash include funding of loans, operating expenses, income taxes, and dividend payments, as described below. As of December 31, ~~2024~~2025, management believes the above-mentioned sources will provide adequate liquidity during the next twelve months for the Bank to meet its operating needs. In addition, in April 2024, the Company closed the 2024 Public Offering. The proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses payable by the Company, were approximately $80.9 million, providing additional cash to support the Company’s ongoing operating needs.

Based on our current capital allocation objectives, during ~~2025~~2026, we project spending $0.75 million related to continued build-out of our IT systems and processes and allocating $1721.14 million of cash for dividends on our common stock.

For the 12-month period ending December 31, ~~2025~~2026, we project that our fixed commitments could potentially include: (i) approximately $~~433~~503.63 million to fund off-balance sheet commitments outstanding at December 31, ~~2024~~2025; (ii) $79.64 million for IT services, IT support, and compliance expenditures; and (iii) $12.60 million for operating leases. In future years, we expect that our main sources and uses of cash will relate primarily to regular operating activities.

Loans

Loans are a significant use of cash in daily operations, and a source of cash as customers make payments on their loans or as loans are sold to other financial institutions. Cash flows from loans are affected by the timing and amount of customer payments and prepayments, changes in interest rates, the general economic environment, competition, and the political environment.

During the year ended December 31, ~~2024~~2025, we had cash outflows of $~~442~~544.82 million in loan originations and advances, net of principal collected, and $211.74 million in loans originated for sale.

Additionally, in the ordinary course of business, we enter into commitments to extend credit, such as commitments to fund new loans and undisbursed construction funds. While these commitments represent contractual cash requirements, a

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portion of these commitments to extend credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. At December 31, ~~2024~~2025, off-balance sheet commitments totaled $~~433~~503.63 million. We expect to fund these commitments to the extent utilized primarily through the repayment of existing loans, deposit growth, and liquid assets.

Deposits

Deposits are our primary source of funding for our business operations, and the cost of deposits has a significant impact on our net interest income and net interest margin.

Our deposits are primarily made up of money market, interest-bearing transaction, time, and non-interest-bearing demand deposits. Aside from commercial and business clients, a significant portion of our deposits are from municipalities and non-profit organizations. Cash flows from deposits are impacted by the timing and amount of customer deposits, changes in market rates, and collateral availability.

During the year ended December 31, ~~2024~~2025, we had cash inflows related to an increase in deposits of $~~531~~643.1 million.

During the twelve months following December 31, ~~2024~~2025, approximately $~~666~~552.9 million of time deposits are expected to mature, which includes $~~300~~175.0 million of brokered deposits. In addition, we expect $31.37 million of time deposits to mature through ~~2029~~2030. These deposits may or may not renew due to general competition. We expect the outflow will not be significant and can be replenished through our organic growth in deposits. We believe our emphasis on local deposits and our San Francisco Bay Area expansion provide a stable funding base.

At December 31, ~~2024~~2025, cash and cash equivalents represented 912.9006% of total deposits.

Investment Securities

Our investment securities totaled $~~100~~96.9 million at December 31, ~~2024~~2025. Mortgage-backed securities and obligations of states and political subdivisions comprised 5049.1073% and 3940.5041% of our investment portfolio, respectively. Cash proceeds from mortgage-backed securities result from payments of principal and interest by borrowers. Cash proceeds from obligations of states and political subdivisions occur when these securities are called or mature. Assuming the current prepayment speed and interest rate environment, we expect to receive approximately $89.05 million from our securities over the next twelve months. In future periods, we expect to maintain approximately the same level of cash flows from our securities. Depending on market yield and our liquidity, we may purchase securities as a use of cash in our interest-earning asset portfolio.

During the year ended December 31, ~~2024~~2025, we had cash proceeds from sales, maturities, calls and prepayments of securities of $89.43 million and cash outflows from the purchase of a security for $1.0 million. Additionally, at December 31, ~~2024~~2025, securities available-for-sale totaled $9894.27 million, of which $9589.17 million has been pledged as collateral for borrowings and other commitments.

Future Contractual Obligations

Our estimated future obligations as of December 31, ~~2024~~2025 include both current and long-term obligations. Under our operating leases as discussed in Note 15, Commitments and Contingencies, of the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K, we have a current obligation of $12.60 million and a long-term obligation of $612.65 million. We also have a current obligation of $~~666~~552.9 million and a long-term obligation of $31.37 million related to time deposits, as discussed in Note 8, Interest-Bearing Deposits, of the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K. We have net subordinated notes of $7374.90 million, all of which are long-term obligations. Finally, we have ~~one~~two significant ~~contract~~contracts, one for core processing services. ~~While~~and the other for a digital and mobile banking platform. The actual ~~obligation~~obligations isunder both contracts are unknown and dependent on certain factors, including volume and activity,. ~~when~~Based ~~using~~on our ~~2024~~ average monthly ~~expense~~expenses ~~extrapolated~~for 2025, and extrapolating those figures over the remaining ~~life~~term of the core processing services contract, we estimate ~~that~~our current obligation to be approximately $2.1 million, with a long-term obligation of $9.3 million. For the digital and mobile banking platform contract, using the same methodology, our current obligation under this contract is estimated at $01.91 million. We do not have aany long-term obligation under this contract until it is renewed.

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Total Liquidity

Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth in Table 2120) was approximately $12.93 billion as of December 31, ~~2024~~2025.

Table 21: Total Liquidity

Table 20: Total Liquidity

December 31, 2024

December 31, 2025

(dollars in thousands)

Line of Credit

Letters of Credit Issued

Borrowings

Available

FHLB advances

1,~~212~~518,~~209~~680

~~701~~887,500

—

~~510~~631,~~709~~180

Federal Reserve Discount Window

~~862~~957,~~136~~362

—

~~862~~957,~~136~~362

Correspondent bank lines of credit

~~175~~185,000

—

~~175~~185,000

Cash and cash equivalents

—

~~352~~506,~~343~~851

Total

2,~~249~~661,~~345~~042

~~701~~887,500

—

12,~~900~~280,~~188~~393

FHLB Financing

The Bank is a shareholder of the FHLB, which enables the Bank to have access to lower-cost FHLB financing when necessary. At December 31, ~~2024~~2025, the Bank had no outstanding FHLB financing borrowings and a total financing availability of $~~510~~631.72 million, net of letters of credit issued of $~~701~~887.5 million.

Federal Reserve Discount Window

The Company has the ability to borrow from the Federal Reserve Discount Window when necessary. At December 31, ~~2024~~2025, the Bank had no outstanding Federal Reserve Discount Window borrowings and a total financing availability of $~~862~~957.14 million.

Correspondent Bank Lines of Credit

At December 31, ~~2024~~2025, the unused and available amount for borrowing from correspondent bank lines of credit was $~~175~~185.0 million.

Dividends

A use of liquidity for the Company is shareholder dividends. ~~Bancorp~~The Company paid dividends to its shareholders totaling $1617.21 million during the year ended December 31, ~~2024~~2025.

We expect to continue our current practice of paying quarterly cash dividends with respect to our common stock, subject to our board of directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. We believe our quarterly dividend rate per share, as approved by our board of directors, enables us to balance our multiple objectives of managing our business and returning a portion of our earnings to our shareholders. Assuming continued payment during ~~2025~~2026 at a rate of $0.2025 per share, our average total dividend paid each quarter would be approximately $45.3 million based on the number of currently outstanding shares if there are no increases or decreases in the number of shares, and given that unvested RSAs share equally in dividends with outstanding common stock.

Impact of Inflation

Our consolidated financial statements and related notes have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of operations. Unlike industrial companies, nearly all of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods or services.

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Historical Information

Table 2221 summarizes our consolidated cash flow activities.

Table 22: Consolidated Cash Flow Activities

Table 21: Consolidated Cash Flow Activities

(dollars in thousands)

For the year ended December 31,

$ Change

2024

2023

2025

2024

Net cash provided by operating activities

5172,~~786~~612

3851,~~914~~786

1220,~~872~~826

Net cash used in investing activities

(~~446~~544,~~744~~109)

(~~279~~446,~~278~~744)

~~(167~~97,~~466)~~365

Net cash provided by financing activities

~~425~~626,~~725~~005

~~301~~425,~~949~~725

~~123~~200,~~776~~280

Operating Activities

Net cash provided by operating activities increased by $1220.98 million for the year ended December 31, ~~2024~~2025 compared to the year ended December 31, ~~2023~~2024, primarily due to lower loans originated for sale, higher net income, higher net change in interest ~~receivable~~payable and other ~~assets~~liabilities, and a higher provision for credit losses. These sources of cash were partially offset by lower gross proceeds from sale of loans, lower net change in interest receivable and other assets, and lower purchase of transferable tax credits. Cash provided by operating activities is subject to variability period-over-period as a result of timing differences, including with respect to the collection of receivables and payments of interest expense, accounts payable, and bonuses.

For additional information about our operating results, see “Results of Operations” above.

Investing Activities

Net cash used in investing activities increased by $~~167~~97.54 million for the year ended December 31, ~~2024~~2025 compared to the year ended December 31, ~~2023~~2024, primarily due to higher originations of loans held for investment, net of repayments~~, and higher investments in low income housing tax credits~~.

Financing Activities

Net cash provided by financing activities increased by $~~123~~200.83 million for the year ended December 31, ~~2024~~2025 compared to the year ended December 31, ~~2023~~2024, primarily due to an increase in deposits and ~~proceeds~~lower ~~from the 2024 Public Offering~~borrowings, partially offset by ~~payments~~proceeds onfrom ~~other~~the ~~borrowings~~2024 Public Offering.

Capital Adequacy

We manage our capital by tracking our level and quality of capital with consideration given to our overall financial condition, our asset quality, our level of allowance for credit losses, our geographic and industry concentrations, and other risk factors on our balance sheet, including interest rate sensitivity.

Bancorp and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements as set forth in Tables 2322 and 2423 can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on our consolidated financial statements.

Under federal regulations implementing the Basel III framework, the Bank is subject to minimum risk-based and leverage capital requirements. The Bank is also subject to regulatory thresholds that must be met for an insured depository institution to be classified as “well-capitalized” under the prompt corrective action framework. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. Capital amounts for Bancorp and the Bank, and the Bank’s prompt corrective action classification, are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors. As of December 31, ~~2024~~2025, both Bancorp and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank qualified as “well-capitalized” under the prompt corrective action framework.

Management reviews capital ratios on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet our anticipated future needs. For all periods presented, the Bank’s ratios exceed the regulatory definition of “well-capitalized” under the regulatory framework for prompt corrective action, and Bancorp’s ratios exceed the minimum ratios required for it to be considered a well-capitalized bank holding company.

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~~The~~definition ~~capital adequacy ratios as~~ of ~~December 31,~~“well-capitalized” ~~2024~~under ~~and 2023 for Bancorp and~~ the ~~Bank~~regulatory ~~are~~framework ~~presented~~for inprompt ~~Tables~~corrective ~~23 and 24. As of December 31~~action, ~~2024~~ and ~~2023,~~ Bancorp’s ~~Tier~~ratios 2exceed ~~capital included subordinated notes, which were not included at~~ the ~~Bank~~minimum ~~level.~~ratios ~~Eligible~~required ~~amounts~~for ofit ~~subordinated~~to ~~notes included in Tier 2 capital will~~ be ~~phased~~considered ~~out~~a bywell-capitalized ~~20%~~bank ~~per~~holding ~~year beginning five years before the maturity date of the notes~~company.

Table 23: Capital Ratios for Bancorp
(dollars in thousands)	Actual Ratio				Required for Capital Adequacy Purposes1				Ratio to be Well-Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount	Ratio
December 31, 2024
Total capital (to risk-weighted assets)	$	519,722	13.99	%	$	332,622	8.00	%	N/A	N/A
Tier 1 capital (to risk-weighted assets)	$	409,514	11.02	%	$	222,940	6.00	%	N/A	N/A
Common equity tier 1 capital (to risk-weighted assets)	$	409,514	11.02	%	$	167,205	4.50	%	N/A	N/A
Tier 1 leverage	$	409,514	10.05	%	$	162,960	4.00	%	N/A	N/A
December 31, 2023
Total capital (to risk-weighted assets)	$	404,829	12.30	%	$	259,090	8.00	%	N/A	N/A
Tier 1 capital (to risk-weighted assets)	$	298,749	9.07	%	$	197,534	6.00	%	N/A	N/A
Common equity tier 1 capital (to risk-weighted assets)	$	298,749	9.07	%	$	148,150	4.50	%	N/A	N/A
Tier 1 leverage	$	298,749	8.73	%	$	136,953	4.00	%	N/A	N/A

The capital adequacy ratios as of December 31, 2025 and 2024 for Bancorp and the Bank are presented in Tables 22 and 23. As of December 31, 2025 and 2024, Bancorp’s Tier 2 capital included subordinated notes, which were not included at the Bank level. Eligible amounts of subordinated notes included in Tier 2 capital will be phased out by 20% per year beginning five years before the maturity date of the notes.

Table 24: Capital Ratios for the Bank
Table 22: Capital Ratios for Bancorp
(dollars in thousands)	Actual Ratio				Required for Capital Adequacy Purposes1				Ratio to be Well-Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2025
Total capital (to risk-weighted assets)	$	572,874	13.33	%	$	343,779	8.00	%	N/A		N/A
Tier 1 capital (to risk-weighted assets)	$	454,830	10.58	%	$	257,834	6.00	%	N/A		N/A
Common equity tier 1 capital (to risk-weighted assets)	$	454,830	10.58	%	$	193,376	4.50	%	N/A		N/A
Tier 1 leverage	$	454,830	9.70	%	$	187,499	4.00	%	N/A		N/A
December 31, 2024
Total capital (to risk-weighted assets)	$	~~504~~519,~~896~~722	13.5999	%	$	~~297~~332,~~216~~622	8.00	%	$N/A	~~371,520~~	~~10.00~~N/A	%
Tier 1 capital (to risk-weighted assets)	$	~~468~~409,~~584~~514	1211.6102	%	$	222,~~912~~940	6.00	%	$N/A	~~297,216~~	~~8.00~~N/A	%
Common equity tier 1 capital (to risk-weighted assets)	$	~~468~~409,~~584~~514	1211.6102	%	$	167,~~184~~205	4.50	%	$N/A	~~241,488~~	~~6.50~~N/A	%
Tier 1 leverage	$	~~468~~409,~~584~~514	1110.5005	%	$	162,~~942~~960	4.00	%	$N/A	~~203,677~~	~~5.00~~N/A	%
December 31, 2023
Total capital (to risk-weighted assets)	$	392,114	11.93	%	$	262,947	8.00	%	$	328,684	10.00	%
Tier 1 capital (to risk-weighted assets)	$	359,783	10.95	%	$	197,211	6.00	%	$	262,947	8.00	%
Common equity tier 1 capital (to risk-weighted assets)	$	359,783	10.95	%	$	147,908	4.50	%	$	213,645	6.50	%
Tier 1 leverage	$	359,783	10.52	%	$	136,757	4.00	%	$	170,946	5.00	%


Table 23: Capital Ratios for the Bank
(dollars in thousands)	Actual Ratio				Required for Capital Adequacy Purposes1				Ratio to be Well-Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2025
Total capital (to risk-weighted assets)	$	554,071	12.92	%	$	342,984	8.00	%	$	428,729	10.00	%
Tier 1 capital (to risk-weighted assets)	$	510,067	11.89	%	$	257,238	6.00	%	$	342,984	8.00	%
Common equity tier 1 capital (to risk-weighted assets)	$	510,067	11.89	%	$	192,928	4.50	%	$	278,674	6.50	%
Tier 1 leverage	$	510,067	10.89	%	$	187,409	4.00	%	$	234,261	5.00	%
December 31, 2024
Total capital (to risk-weighted assets)	$	504,896	13.59	%	$	297,216	8.00	%	$	371,520	10.00	%
Tier 1 capital (to risk-weighted assets)	$	468,584	12.61	%	$	222,912	6.00	%	$	297,216	8.00	%
Common equity tier 1 capital (to risk-weighted assets)	$	468,584	12.61	%	$	167,184	4.50	%	$	241,488	6.50	%
Tier 1 leverage	$	468,584	11.50	%	$	162,942	4.00	%	$	203,677	5.00	%


1			The listed capital adequacy ratios exclude capital conservation buffers.

Recent Accounting Pronouncements

For a discussion of the expected impact of accounting pronouncements recently adopted and accounting pronouncements recently issued but not yet adopted by us as of December 31, ~~2024~~2025, see Note 2, Recently Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K.

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Non-GAAP Financial Measures

Some of the financial measures discussed herein are non-GAAP financial measures. In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated statements of income, balance sheets, statements of shareholders’ equity, or statements of cash flows.

Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. Management believes that tangible shareholders’ equity to tangible assets is a useful financial measure because it enables management, investors, and others to assess the Company’s financial health based on tangible capital. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets at the end of each of the periods indicated.

Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. Management believes that tangible book value per share is a useful financial measure because it enables management, investors, and others to assess the Company’s value and use of equity. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated.

We believe that these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations, and cash flows computed in accordance with GAAP. However, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those we use for the non-GAAP financial measures we disclose, but may calculate them differently. You should understand how we and other companies each calculate non-GAAP financial measures when making comparisons.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. As a financial institution, the Company experiences market risk arising primarily from interest rate risk inherent in lending and deposit-taking activities. Because the interest rates on the Company’s assets and liabilities do not necessarily change at the same speed or rate as market interest rates, sudden and/or substantial changes in interest rates may adversely impact our earnings. In particular, the Company’s financial results are sensitive to significant changes in the treasury yield curve, the federal funds rate, and the Wall Street Prime Index.

The Company’s total interest income was $5766.74 million for the three months ended December 31, ~~2024~~2025 and $~~207~~248.09 million for the year ended December 31, ~~2024~~2025. Our total interest expense was $24.34 million for the three months ended December 31, ~~2024~~2025 and $8797.20 million for the year ended December 31, ~~2024~~2025. Overall, our net interest income was $3342.51 million for the three months ended December 31, ~~2024~~2025 and $~~119~~151.79 million for the year ended December 31, ~~2024~~2025.

Economic value of equity (“EVE”) measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time for a given set of market rate assumptions. An increase in EVE due to a specified rate change indicates an improvement in the long-term earnings capacity of the balance sheet, assuming that the rate change remains in effect over the life of the current balance sheet. As of December 31, ~~2024~~2025, the Company carried a slightly higher balance of ~~liabilities~~assets than ~~assets~~liabilities that will reprice within the next twelve months in the event that interest rates fall.

Our policies and procedures provide management with guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. This is overseen and adjusted as needed by our Management Asset Liability Committee on a monthly basis and our Director Asset Liability Committee on a quarterly basis. We have historically managed our sensitivity position within our established guidelines. With the intent of stabilizing or increasing net interest income, management typically deploys the Company’s excess liquidity and seeks to migrate certain earning assets into higher-yielding categories (from investment securities into loans, for example). However, in situations where deposit balances contract, management relies upon various borrowing facilities and/or the use of brokered deposits. The Company monitors the impact of interest rate risk on EVE by reviewing and managing assets and liabilities with varying interest rate risks, such as cash and time deposits. Assets and liabilities are subject to fluctuations at each measurement date based on the composition of the balance sheet at each measurement date. EVE results are compared to previous periods and established policies on a quarterly basis.

7173

Asdeposits. ofThe ~~December 31,~~Company ~~2024,~~monitors the ~~overnight~~impact ~~federal~~of ~~funds~~interest rate ~~(the~~risk ~~rate~~on ~~used~~EVE inby ~~the~~reviewing ~~interest~~and ~~rate~~managing ~~shock~~assets ~~scenarios~~and ~~listed~~liabilities ~~below)~~with ~~was~~varying ~~4.33%~~interest rate risks, asuch ~~decrease~~as ~~from~~cash 5and time deposits.~~33%~~ atAssets ~~December 31,~~and ~~2023.~~liabilities ~~The~~are ~~scenarios~~subject ~~presented~~to ~~assume~~fluctuations ~~that~~at ~~interest~~each ~~rates~~measurement ~~change~~date ~~instantaneously~~based ~~(“shock”)~~on ~~and~~the ~~that~~composition ~~there~~of ~~are~~the nobalance ~~significant~~sheet ~~changes~~at ineach ~~the~~measurement ~~structure~~date. ofEVE ~~the~~results ~~Company’s~~are ~~balance~~compared ~~sheet~~to ~~over~~previous ~~the~~periods ~~twelve~~and ~~months~~established ~~being~~policies ~~measured~~on a quarterly basis.

~~Table~~As 25of ~~summarizes~~December 31, 2025, the ~~estimated~~overnight ~~effect~~federal onfunds ~~net~~rate ~~interest~~(the ~~income~~rate ~~and~~used ~~EVE~~in ~~from~~the ~~changing~~ interest ~~rates~~rate asshock ~~measured~~scenarios ~~against~~listed abelow) ~~flat~~was ~~rate~~3.64%, ~~(no~~a ~~interest~~decrease ~~rate~~from ~~change)~~4.33% ~~instantaneous~~at ~~parallel~~December 31, ~~shock~~2024. ~~scenario~~The ~~over~~scenarios apresented ~~twelve-month~~assume ~~period~~that ~~utilizing~~interest anrates ~~interest~~change ~~sensitivity~~instantaneously (~~GAP~~“shock”) ~~analysis~~and ~~based~~that onthere ~~the~~are ~~Company’s~~no ~~specific~~significant ~~mix~~changes ofin ~~interest-earning~~the ~~assets~~structure ~~and~~of ~~interest-bearing~~the ~~liabilities~~Company’s asbalance ofsheet ~~December 31,~~over ~~2024~~the ~~and~~twelve ~~2023.~~months being measured.

Table 25: Estimated Effect on Net Interest Income and EVE from Changing Interest Rates
	December 31, 2024				December 31, 2023
Change in Interest Rates	Estimated Change in NII(as % of NII)		Estimated Change in EVE(as % of EVE)		Estimated Change in NII(as % of NII)		Estimated Change in EVE(as % of EVE)
(in basis points)
+300 (shock)	(6.32)	%	(12.51)	%	(13.73)	%	(22.17)	%
+200 (shock)	(4.09)	%	(8.70)	%	(9.02)	%	(15.23)	%
+100 (shock)	(2.15)	%	(4.29)	%	(4.63)	%	(7.90)	%
+ 0 (flat)	—	%	—	%	—	%	—	%
-100 (shock)	2.14	%	3.93	%	4.43	%	8.09	%
-200 (shock)	4.80	%	6.40	%	8.93	%	14.76	%
-300 (shock)	7.95	%	10.12	%	13.72	%	22.38	%

Table 24 summarizes the estimated effect on net interest income and EVE from changing interest rates as measured against a flat rate (no interest rate change) instantaneous parallel shock scenario over a twelve-month period utilizing an interest sensitivity (GAP) analysis based on the Company’s specific mix of interest-earning assets and interest-bearing liabilities as of December 31, 2025 and 2024.


Table 24: Estimated Effect on Net Interest Income and EVE from Changing Interest Rates
	December 31, 2025				December 31, 2024
Change in Interest Rates	Estimated Change in NII (as % of NII)		Estimated Change in EVE (as % of EVE)		Estimated Change in NII (as % of NII)		Estimated Change in EVE (as % of EVE)
(in basis points)
+300 (shock)	(1.72)	%	(9.70)	%	(6.32)	%	(12.51)	%
+200 (shock)	(1.19)	%	(6.77)	%	(4.09)	%	(8.70)	%
+100 (shock)	(0.47)	%	(3.55)	%	(2.15)	%	(4.29)	%
+ 0 (flat)	—	%	—	%	—	%	—	%
-100 (shock)	0.86	%	2.45	%	2.14	%	3.93	%
-200 (shock)	2.82	%	4.07	%	4.80	%	6.40	%
-300 (shock)	9.44	%	8.79	%	7.95	%	10.12	%

The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions, which are based upon our experience and published industry experience including, but not limited to, assumptions relating to expected maturities, hypothetical changes in interest rates, decay rates, and deposit betas. Such assumptions may not necessarily reflect the manner or timing in which our interest-earning assets and interest-bearing liabilities respond to changes in market rates. Because these assumptions are inherently uncertain, actual results will differ from simulated results.

7274

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

			Page
Report of Independent Registered Public Accounting Firm (Moss Adams LLP; PCAOB ID# 659)			74
Report of Independent Registered Public Accounting Firm (Baker Tilly US LLP; PCAOB ID# 23)			76
Consolidated Balance Sheets as of December 31, 2024 and 2023			75
Consolidated Balance Sheets as of December 31, 2025 and 2024			77
Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022			76
Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023			78
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022			77
Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024, and 2023			79
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2024, 2023, and 2022			78
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2025, 2024, and 2023			80
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022			79
Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024, and 2023			81
Notes to Consolidated Financial Statements			8183

7375

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Five Star Bancorp and Subsidiary

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Five Star Bancorp (and subsidiary) (the “Company”) as of December 31, ~~2024~~2025 and ~~2023~~2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, ~~2024~~2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, ~~2024~~2025 and ~~2023~~2024, and the consolidated results of its operations and its cash flows

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