HANMI FINANCIAL CORP

Previous wording

The following is management’s discussion and analysis of our results of operations and financial condition as of and for the three and six months ended June 30, 2025. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report on Form 10-K”) and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the period ended June 30, 2025 (this “Report”).

Current wording

The following is management’s discussion and analysis of our results of operations and financial condition as of and for the three and nine months ended September 30, 2025. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report on Form 10-K”) and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the period ended September 30, 2025 (this “Report”).

Previous wording

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

Current wording

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

Previous wording

For additional information concerning risks we face, see “Part II, Item 1A. Risk Factors” in this Report and “Item 1A. Risk Factors” in Part I of the 2024 Annual Report on Form 10-K. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

Current wording

For additional information concerning risks we face, see “Part II, Item 1A. Risk Factors” in this Report and in the Quarterly Report on Form 10-Q for the period ended June 30, 2025 and “Item 1A. Risk Factors” in Part I of the 2024 Annual Report on Form 10-K. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made, except as required by law.

Previous wording

We have established various accounting policies that govern the application of GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the consolidated financial statements in our 2024 Annual Report on Form 10-K. We had no significant changes in what constituted our accounting policies since the filing of our 2024 Annual Report on Form 10-K.

Current wording

We have established various accounting policies in accordance with GAAP in the preparation of our financial statements. Our significant accounting policies are described in the Notes to the consolidated financial statements in our 2024 Annual Report on Form 10-K. We had no significant changes in our accounting policies since the filing of our 2024 Annual Report on Form 10-K.

Previous wording

Net income was $15.1 million, or $0.50 per diluted share, for the three months ended June 30, 2025 compared with $14.5 million, or $0.48 per diluted share, for the same period a year ago. The increase in net income was driven by a $8.5 million increase in net interest income, offset by a $6.6 million increase in credit loss expense, a $1.1 million increase in noninterest expense, and a $0.1 million higher income tax expense. Credit loss expense for the second quarter of 2025 was $7.6 million compared with a $1.0 million expense for the second quarter of 2024.

Current wording

Net income was $22.1 million, or $0.73 per diluted share, for the three months ended September 30, 2025 compared with $14.9 million, or $0.49 per diluted share, for the same period a year ago. The increase in net income was driven by a $11.0 million increase in net interest income, and a $1.4 million increase in noninterest income, partially offset by a $2.3 million increase in noninterest expense, and a $3.2 million increase in income tax expense. Credit loss expense for the third quarter of 2025 was $2.1 million compared with $2.3 million for the third quarter of 2024.

Previous wording

Net income was $32.8 million, or $1.08 per diluted share, for the six months ended June 30, 2025 compared with $29.6 million, or $0.97 per diluted share, for the same period a year ago. The $3.2 million increase in net income was driven by a $13.0 million increase in net interest income and a $0.4 million decrease in noninterest expense, offset by increases in credit loss expense of $9.2 million and income tax expense of $1.0 million. Credit loss expense for the six months ended June 30, 2025 was $10.4 million compared with credit loss expense of $1.2 million for the six months ended June 30, 2024.

Current wording

Net income was $54.9 million, or $1.82 per diluted share, for the nine months ended September 30, 2025 compared with $44.5 million, or $1.47 per diluted share, for the same period a year ago. The $10.4 million increase in net income was driven by a $24.0 million increase in net interest income and a $1.4 million increase in noninterest income, partially offset by a $9.0 million increase in credit loss expense, a $1.9 million increase in noninterest expense, and a $4.2 million increase in income tax expense. Credit loss expense for the nine months ended September 30, 2025 was $12.5 million compared with credit loss expense of $3.5 million for the nine months ended September 30, 2024.

Previous wording

Return on average assets and return on average stockholders’ equity for the six months ended June 30, 2025 were 0.86% and 8.19%, respectively, as compared with 0.79% and 7.70%, respectively for the six months ended June 30, 2024.

Current wording

Return on average assets and return on average stockholders’ equity for the three months ended September 30, 2025 were 1.12% and 10.69%, respectively, as compared with 0.79% and 7.55%, respectively, for the three months ended September 30, 2024. Return on average assets and return on average stockholders’ equity for the nine months ended September 30, 2025 were 0.95% and 9.04%, respectively, as compared with 0.79% and 7.65%, respectively, for the nine months ended September 30, 2024. The increase in both ratios, for the quarter to date and year to date comparisons presented, was driven by net income growth that was primarily due to an increase in net interest income.

Previous wording

Loans receivable increased by $58.0 million, or 0.94%, to $6.24 billion as of June 30, 2025, compared with $6.18 billion as of December 31, 2024. The net increase was due to loan production of $0.7 billion, offset by payoffs, loan sales, and prepayments of $0.6 billion.

Current wording

Loans receivable increased by $277.2 million, or 4.5%, to $6.46 billion as of September 30, 2025, compared with $6.18 billion as of December 31, 2024. The net increase was due to loan production of $1.2 billion, offset by payoffs, loan sales, prepayments, and other decreases of $1.0 billion.

Previous wording

Deposits were $6.73 billion at June 30, 2025 compared with $6.44 billion at December 31, 2024 as money market and savings accounts increased by $159.3 million, time deposits increased by $115.5 million, and demand deposits increased by $18.9 million.

Current wording

Deposits were $6.77 billion at September 30, 2025 compared with $6.44 billion at December 31, 2024 as time deposits increased by $173.4 million, money market and savings accounts increased by $160.5 million, and demand deposits increased by $6.5 million.

Previous wording

The average balance of interest earning assets increased $202.7 million, or 2.8%, to $7.47 billion for the three months ended June 30, 2025, from $7.27 billion for the three months ended June 30, 2024. The average balance of loans increased $168.3 million, or 2.8%, to $6.26 billion for the three months ended June 30, 2025, from $6.09 billion for the three months ended June 30, 2024. The average balance of securities was $1.0 billion for the three months ended June 30, 2025 and 2024. The average balance of interest-bearing deposits at other banks increased $20.1 million, or 11.1%, to $200.3 million for the three months ended June 30, 2025, from $180.2 million for the three months ended June 30, 2024.

Current wording

The average balance of interest earning assets increased $248.9 million, or 3.4%, to $7.55 billion for the three months ended September 30, 2025, from $7.30 billion for the three months ended September 30, 2024. The average balance of loans increased $192.1 million, or 3.1%, to $6.30 billion for the three months ended September 30, 2025, from $6.11 billion for the three months ended September 30, 2024. The average balance of securities was $985.9 million and $986.0 million for the three months ended September 30, 2025 and 2024, respectively. The average balance of interest-bearing deposits at other banks increased $57.0 million, or 31.1%, to $240.0 million for the three months ended September 30, 2025, from $183.0 million for the three months ended September 30, 2024.

Previous wording

The average yield on interest-earning assets, on a taxable equivalent basis, decreased two basis points to 5.44% for the six months ended June 30, 2025, from 5.46% for the six months ended June 30, 2024. The average yield on loans decreased to 5.94% for the six months ended June 30, 2025, from 6.00% for the six months ended June 30, 2024. The average yield on securities, on a taxable equivalent basis, increased to 2.52% for the six months ended June 30, 2025, from 2.12% for the six months ended June 30, 2024. The increase in the average yield on securities was primarily due to the Company using the proceeds from lower-coupon maturing securities to reinvest into higher-coupon securities.

Current wording

The average yield on interest-earning assets, on a taxable equivalent basis, increased six basis points to 5.54% for the three months ended September 30, 2025, from 5.48% for the three months ended September 30, 2024. The average yield on loans increased to 6.03% for the three months ended September 30, 2025, from 6.00% for the three months ended September 30, 2024. The average loan yield during the three months ended September 30, 2025 benefited by four basis points from the $0.6 million recovery. The average yield on securities, on a taxable equivalent basis, increased to 2.70% for the three months ended September 30, 2025, from 2.27% for the three months ended September 30, 2024. The increase in the average yield on securities was primarily due to the Company using the proceeds from lower-coupon maturing securities to reinvest into higher-coupon securities.

Previous wording

The average balance of interest-bearing liabilities increased $132.0 million, or 2.8%, to $4.82 billion for the three months ended June 30, 2025 compared with $4.68 billion for the three months ended June 30, 2024. The average balances of money market and savings accounts and increased $263.4 million, offset partially by decreases in borrowings of $109.4 million and in interest-bearing demand deposits and time deposits of $4.1 million and $18.5 million, respectively. The increase in average balances of money market and savings accounts was due to an increase in new commercial accounts. The decrease in the average balance of time deposits was due to the shift to money market and savings accounts as market rates decreased. The decrease in the average balance of borrowings during the three months ended June 30, 2025 was due to the increase in the average balance on interest-bearing deposits.

Current wording

The average balance of interest-bearing liabilities increased $191.6 million, or 4.1%, to $4.86 billion for the three months ended September 30, 2025 compared with $4.67 billion for the three months ended September 30, 2024. The average balances of money market and savings accounts increased $237.2 million and the average balance of time deposits increased $66.5 million offset partially by decreases in borrowings of $115.7 million. The increase in average balances of money market and savings accounts was due to an increase in new commercial accounts. The decrease in the average balance of borrowings during the three months ended September 30, 2025 was due to the increase in the average balance on interest-bearing deposits.

Previous wording

The average cost of interest-bearing liabilities was 3.68% and 4.30% for the three months ended June 30, 2025 and 2024, respectively. The average cost of interest-bearing deposits decreased 63 basis points to 3.64% for the three months ended June 30, 2025, compared with 4.27% for the three months ended June 30, 2024. The average cost of time deposits decreased 73 basis points to 4.05% for the three months ended June 30, 2025 compared with 4.78% for the three months ended June 30, 2024. The average cost of money market and savings accounts decreased 47 basis points to 3.30% for the three months ended June 30, 2024 compared with 3.77% for the three months ended June 30, 2024. The decrease in the cost of deposits was due to a decrease in deposit market rates. The average cost of borrowings increased to 4.58% for the three months ended June 30, 2025 compared with 4.50% for the three months ended June 30, 2024, as the lower-rate borrowings matured or were paid off.

Current wording

The average cost of interest-bearing liabilities was 3.60% and 4.29% for the three months ended September 30, 2025 and 2024, respectively. The average cost of interest-bearing deposits decreased 71 basis points to 3.56% for the three months ended September 30, 2025, compared with 4.27% for the three months ended September 30, 2024. The average cost of time deposits decreased 82 basis points to 3.97% for the three months ended September 30, 2025 compared with 4.79% for the three months ended September 30, 2024. The average cost of money market and savings accounts decreased 55 basis points to 3.22% for the three months ended September 30, 2025 compared with 3.77% for the three months ended September 30, 2024. The decrease in the cost of deposits was primarily due to a decrease in market interest rates. The average cost of borrowings increased to 4.63% for the three months ended September 30, 2025 compared with 4.33% for the three months ended September 30, 2024, as lower-rate borrowings matured or were paid off.

Previous wording

For the three months ended June 30, 2025 and 2024, net interest income was $57.1 million and $48.6 million, respectively. The increase of $8.5 million was due to a decrease in interest expense and an increase in interest and dividend income. The net interest spread and net interest margin, on a taxable equivalent basis, for the quarter ended June 30, 2025, were 1.76% and 3.07%, respectively, compared with 1.16% and 2.69%, respectively, for the same period in 2024. Interest and dividend income increased $2.7 million, or 2.7%, to $101.3 million for the three months ended June 30, 2025 from $98.7 million for the same period in 2024 primarily due to an increase in the average balance of loans. Interest expense decreased $5.8 million, or 11.7%, to $44.2 million for the three months ended June 30, 2025 from $50.0 million for the same period in 2024 primarily due to decreases in deposit rates.

Current wording

For the nine months ended September 30, 2025 and 2024, net interest income was $173.3 million and $149.3 million, respectively. The increase of $24.0 million was primarily due to a $19.5 million rate driven decrease in interest expense primarily due to decreases in deposit rates and a $7.9 million increase in interest income primarily due to an increase in the average balance of loans. The net interest spread and net interest margin, on a taxable equivalent basis, for the nine months ended September 30, 2025, were 1.80% and 3.11%, respectively, compared with 1.21% and 2.74%, respectively, for the same period in 2024. Interest and dividend income increased $7.1 million, or 2.4%, to $305.8 million for the nine months ended September 30, 2025 from $298.7 million for the same period in 2024. Interest expense decreased $16.8 million, or 11.3%, to $132.5 million for the nine months ended September 30, 2025 from $149.3 million for the same period in 2024 primarily due to decreases in deposit rates.

Previous wording

The average balance of interest earning assets increased $130.5 million, or 1.8%, to $7.43 billion for the six months ended June 30, 2025, from $7.30 billion for the six months ended June 30, 2024. The average balance of loans increased $110.2 million, or 1.8%, to $6.22 billion for the six months ended June 30, 2025, from $6.11 billion for the six months ended June 30, 2024. The average balance of securities was $1.00 billion for the six months ended June 30, 2025 and 2024. The average balance of interest-bearing deposits at other banks decreased $2.7 million, or 1.4%, to $188.2 million for the six months ended June 30, 2025, from $191.0 million for the six months ended June 30, 2024.

Current wording

The average balance of interest earning assets increased $170.4 million, or 2.3%, to $7.47 billion for the nine months ended September 30, 2025, from $7.30 billion for the nine months ended September 30, 2024. The average balance of loans increased $137.8 million, or 2.3%, to $6.25 billion for the nine months ended September 30, 2025, from $6.11 billion for the nine months ended September 30, 2024. The average balance of securities was $993.7 million and $978.4 million for the nine months ended September 30, 2025 and 2024, respectively. The average balance of interest-bearing deposits at other banks increased $17.4 million, or 9.2%, to $205.7 million for the nine months ended September 30, 2025, from $188.3 million for the nine months ended September 30, 2024.

Previous wording

The average yield on interest-earning assets, on a taxable equivalent basis, decreased two basis points to 5.44% for the three months ended June 30, 2025, from 5.46% for the three months ended June 30, 2024. The average yield on loans decreased to 5.93% for the three months ended June 30, 2025, from 5.99% for the three months ended June 30, 2024. The average yield on securities, on a taxable equivalent basis, increased to 2.55% for the three months ended June 30, 2025, from 2.17% for the three months ended June 30, 2024. The increase in the average yield on securities was primarily due to the Company using the proceeds from lower-coupon maturing securities to reinvest into higher-coupon securities.

Current wording

The average yield on interest-earning assets, on a taxable equivalent basis, increased one basis point to 5.48% for the nine months ended September 30, 2025, from 5.47% for the nine months ended September 30, 2024. The average yield on loans decreased to 5.97% for the nine months ended September 30, 2025, from 6.00% for the nine months ended September 30, 2024. The average yield on securities, on a taxable equivalent basis, increased to 2.58% for the nine months ended September 30, 2025, from 2.17% for the nine months ended September 30, 2024. The increase in the average yield on securities was primarily due to the Company using the proceeds from lower-coupon maturing securities to reinvest into higher-coupon securities.

Previous wording

The average balance of interest-bearing liabilities increased $101.2 million, or 2.2%, to $4.8 billion for the six months ended June 30, 2025 compared with $4.6 billion for the six months ended June 30, 2024 due to a $147.1 million increase in the average balance of interest-bearing deposits offset by a $46.5 million decrease in the average balance of borrowings. The average balances of money market and savings accounts increased by $242.9 million while the average balance of time deposits decreased $90.2 million. The increase in average balances of money market and savings accounts was due to an increase in new commercial accounts. The decrease in the average balance of time deposits was due to the shift to money market and savings accounts as market rates decreased. The decrease in the average balance of borrowings was due to an increase in the average balance of interest-bearing deposits.

Current wording

The average balance of interest-bearing liabilities increased $131.7 million, or 2.8%, to $4.82 billion for the nine months ended September 30, 2025 compared with $4.69 billion for the nine months ended September 30, 2024 due to a $201.0 million increase in the average balance of interest-bearing deposits, partially offset by a $69.9 million decrease in the average balance of borrowings. The average balances of money market and savings accounts increased by $241.1 million while the average balance of time deposits decreased $37.5 million. The increase in average balances of money market and savings accounts was due to an increase in new commercial accounts. The decrease in the average balance of time deposits was due to the shift to money market and savings accounts as market rates decreased. The decrease in the average balance of borrowings was due to an increase in the average balance of interest-bearing deposits.

Previous wording

The average cost of interest-bearing liabilities was 3.72% and 4.24% for the six months ended June 30, 2025 and 2024, respectively. The average cost of interest-bearing deposits decreased 55 basis points to 3.66% for the six months ended June 30, 2025, compared with 4.21% for the six months ended June 30, 2024. The average cost of time deposits decreased 62 basis points to 4.10% for the six months ended June 30, 2025 compared with 4.72% for the six months ended June 30, 2024. The average cost of money market and savings accounts decreased 43 basis points to 3.29% for the six months ended June 30, 2024 compared with 3.72% for the six months ended June 30, 2024. The decrease in the cost of deposits was due to a decrease in deposit market rates. The average cost of borrowings increased to 4.57% for the six months ended June 30, 2025 compared with 4.30% for the six months ended June 30, 2024, as the lower-rate borrowings matured or were paid off.

Current wording

The average cost of interest-bearing liabilities was 3.68% and 4.26% for the nine months ended September 30, 2025 and 2024, respectively. The average cost of interest-bearing deposits decreased 60 basis points to 3.63% for the nine months ended September 30, 2025, compared with 4.23% for the nine months ended September 30, 2024. The average cost of time deposits decreased 68 basis points to 4.06% for the nine months ended September 30, 2025 compared with 4.74% for the nine months ended September 30, 2024. The average cost of money market and savings accounts decreased 48 basis points to 3.26% for the nine months ended September 30, 2025 compared with 3.74% for the nine months ended September 30, 2024. The decrease in the cost of deposits was primarily due to a decrease in market interest rates. The average cost of borrowings increased to 4.58% for the nine months ended September 30, 2025 compared with 4.31% for the nine months ended September 30, 2024, as lower-rate borrowings matured or were paid off.

Previous wording

For the second quarter of 2025, the Company recorded $7.6 million of credit loss expense, comprised of a $7.5 million provision for loan losses and a $0.1 million provision recorded for off-balance sheet items. For the same period in 2024, the Company recorded $1.0 million of credit loss expense, comprised of a $1.2 million provision for loan losses, partially offset by a $0.2 million recovery for off-balance sheet items. The $6.6 million increase in credit loss expense reflected an increase in net charge-offs as well as an increase in quantitative and qualitative estimated loss rates. Net charge-offs included an $8.6 million loan charge-off on a syndicated commercial real estate office loan designated as nonaccrual, which had an associated specific allowance of $6.2 million assigned in the first quarter of 2025.

Current wording

For the third quarter of 2025, the Company recorded $2.1 million of credit loss expense, comprised of a $2.5 million provision for loan losses partially offset by a $0.4 million recovery recorded for off-balance sheet items. For the same period in 2024, the Company recorded $2.3 million of credit loss expense, comprised of a $2.3 million provision for loan losses, partially offset by a $26,000 recovery for off-balance sheet items.

Previous wording

For the six months ended June 30, 2025, the Company recorded $10.4 million of credit loss expense, comprised of a $9.9 million provision for loan losses and a $0.5 million provision recorded for off-balance sheet items. For the same period in 2024, the Company recorded $1.2 million of credit loss expense, comprised of a $1.7 million provision for loan losses, partially offset by a $0.5 million recovery for off-balance sheet items. The $8.2 million increase in provision for loan losses was the result of a $9.9 million increase in net charge-offs, partially offset by a $2.7 million decrease in specific allowances.

Current wording

For the nine months ended September 30, 2025, the Company recorded $12.5 million of credit loss expense, comprised of a $12.5 million provision for loan losses. For the same period in 2024, the Company recorded $3.5 million of credit loss expense, comprised of a $4.0 million provision for loan losses, partially offset by a $0.5 million recovery for off-balance sheet items. The $9.0 million increase in provision for loan losses was primarily the result of a $8.5 million increase in net charge-offs.

Previous wording

During the second quarter of 2025, the Company sold $35.4 million of SBA loans, recognizing a net gain of $2.2 million. There were no residential mortgage loans sold during the second quarter of 2025. During the second quarter of 2024, the Company sold $19.5 million of residential loans, recognizing a net gain of $0.4 million, and sold $23.5 million of SBA loans, recognizing a net gain of $1.6 million. Trade premiums on SBA loan sales were 7.61% and 8.54% for the three months ended June 30, 2025 and 2024, respectively.

Current wording

During the third quarter of 2025, the Company sold $67.8 million of residential mortgage loans, recognizing a net gain of $1.2 million and sold $32.6 million of SBA loans, recognizing a net gain of $1.9 million. During the third quarter of 2024, the Company sold $20.9 million of residential loans, recognizing a net gain of $0.3 million, and sold $23.0 million of SBA loans, recognizing a net gain of $1.5 million. Trade premiums on SBA loan sales were 6.95% and 8.54% for the three months ended

Previous wording

For the six months ended June 30, 2025 and 2024, noninterest income was $15.8 million. The $1.0 million increase in gain on sale of SBA loans and $0.2 million increase in trade finance and other service charges was offset by a $0.6 million decrease in gain on sale of residential mortgage loans and $0.5 million decrease in service charges on deposit accounts due to reductions in the number of transactions eligible for service charges.

Current wording

For the nine months ended September 30, 2025 and 2024, noninterest income was $25.7 million and $24.2 million, respectively. The $1.3 million increase in gain on sale of SBA loans and $1.0 million increase in bank-owned life insurance income was offset by a $0.9 million decrease in gain on sale of bank premises and a $0.6 million decrease in service charges on deposit accounts. The increase in bank-owned life insurance income is due to a $1.0 million increases in death benefits. The decrease in gain on sale of bank premises was due to a $0.9 million gain on a branch sale in 2024 that did not recur in 2025. The decrease in service charges on deposit accounts was due to reductions in the number of transactions eligible for service charges.

Previous wording

During the six months ended June 30, 2025, the Company sold $10.0 million of residential mortgage loans, recognizing a gain of $0.2 million, and sold $67.6 million of SBA loans, recognizing a net gain of $4.2 million. During the six months ended June 30, 2024, the Company sold $49.2 million of residential loans, recognizing a net gain of $0.8 million, and sold $49.1 million of SBA loans, recognizing a net gain of $3.1 million. Trade premiums on SBA loans sales were 7.71% and 7.85% for the six months ended June 30, 2025 and 2024, respectively.

Current wording

During the nine months ended September 30, 2025, the Company sold $77.9 million of residential mortgage loans, recognizing a gain of $1.3 million, and sold $100.2 million of SBA loans, recognizing a net gain of $6.0 million. During the nine months ended September 30, 2024, the Company sold $70.0 million of residential loans, recognizing a net gain of $1.1 million, and sold $72.1 million of SBA loans, recognizing a net gain of $4.7 million. Trade premiums on SBA loans sales were 7.46% and 8.07% for the nine months ended September 30, 2025 and 2024, respectively. Premiums on residential mortgage loan sales were 2.43% and 2.21% for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

For the three months ended June 30, 2025, noninterest expense was $36.3 million, an increase of $1.1 million, or 3.0%, compared with $35.3 million for the same period in 2024. The increase was mainly attributed to a $1.6 million increase in salaries and employee benefits, a $0.6 million increase in all other operating expenses, and a $0.1 million increase in advertising and promotion, partially offset by a $0.3 million decrease in occupancy and equipment due to branch consolidations and a $0.5 million increase in other real estate owned income due to the gain on sale of other real estate owned. The increase in salaries and employee benefits was mainly attributed to annual merit increases and a decrease in capitalized salaries related to loan originations for the three months ended June 30, 2025 compared with the same period in 2024. Advertising and promotion increased $0.1 million due to new branch promotional expenses. The increase in other operating expenses was due to loan and deposit operations.

Current wording

For the three months ended September 30, 2025, noninterest expense was $37.4 million, an increase of $2.3 million, or 6.5%, compared with $35.1 million for the same period in 2024. The increase was mainly attributed to a $1.3 million increase in salaries and employee benefits, a $0.8 million increase in all other operating expenses, and a $0.5 million increase in professional fees, partially offset by a $0.2 million decrease in repossessed personal property expense and a $0.1 million decrease in supplies and communications. The increase in salaries and employee benefits was mainly attributed to increased wages, incentives and insurance benefit premiums. The increase in all other operating expenses was mainly due to a $0.8 million increase in loan and deposit-related expenses. The increase in professional fees was mainly attributed to a $0.5 million increase in legal fees and related expenses. The decrease in repossessed personal property expense was due to a decrease in losses on sale of repossessed equipment lease assets. The decrease in supplies and communication was due to one-time costs associated with branch closures in 2024 that did not recur in 2025.

Previous wording

For the six months ended June 30, 2025, noninterest expense was $71.3 million, a decrease of $0.4 million, or 0.5%, compared with $71.7 million for the same period in 2024. The decrease was mainly attributed to a $0.4 million decrease in professional fees, a $0.2 million decrease in advertising and promotion, a $0.3 million branch consolidation expense during the six months ended June 30, 2024, a $0.4 million increase in other real estate owned income due to the sale of other real estate owned and $0.4 million decrease in repossessed personal property expense, offset by a $1.0 million increase in salaries and benefits. The increase in salaries and employee benefits was primarily due to an increase in annual merit raises and promotions. Professional fees decreased $0.4 million for the six months ended June 30, 2025 due to the completion of a loan system implementation in 2024. Advertising and promotion decreased $0.2 million due to a decrease in deposit marketing campaign expenses.

Current wording

For the nine months ended September 30, 2025, noninterest expense was $108.7 million, an increase of $1.9 million, or 1.8%, compared with $106.8 million for the same period in 2024. The increase was mainly attributed to a $2.3 million increase in salaries and employee benefits and a $0.3 million increase in data processing, partially offset by a $0.6 million decrease in repossessed personal property expense, and a $0.3 million decrease in supplies and communications. The increase in salaries and employee benefits was primarily due to an increase in annual merit raises and promotions. The increase in data processing was mainly due to an increase in software licenses and related costs. The decrease in repossessed personal property expense was due to a decrease in loss on sale of repossessed equipment lease assets. The decrease in other-real-estate-owned (income) expense was due to a $0.6 million gain on a sale of an other-real-estate-owned property in the second quarter of 2025. The decreases in branch consolidation expense and supplies and communications were due to costs associated with branch closures in 2024 that did not recur in 2025.

Previous wording

Income tax expense was $6.1 million and $6.0 million, representing an effective income tax rate of 28.8% and 29.3% for the three months ended June 30, 2025 and 2024, respectively. Income tax expense was $13.6 million and $12.5 million, representing an effective income tax rate of 29.3% and 29.7% for the six months ended June 30, 2025 and 2024, respectively.

Current wording

Income tax expense was $9.4 million and $6.2 million, representing an effective income tax rate of 29.9% and 29.5% for the three months ended September 30, 2025 and 2024, respectively. Income tax expense was $23.0 million and $18.8 million, representing an effective income tax rate of 29.5% and 29.7% for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

As of June 30, 2025, our securities portfolio consisted of U.S. government agency and sponsored agency mortgage-backed securities, collateralized mortgage obligations and debt securities, tax-exempt municipal bonds and U.S. Treasury securities. Most of these securities carry fixed interest rates. Other than holdings of U.S. government agency and sponsored agency obligations, there were no securities of any one issuer exceeding 10% of stockholders’ equity as of June 30, 2025 or December 31, 2024.

Current wording

As of September 30, 2025, our securities portfolio, which is all available for sale, consisted of U.S. government agency and sponsored agency mortgage-backed securities, collateralized mortgage obligations and debt securities, tax-exempt municipal bonds and U.S. Treasury securities. Most of these securities carry fixed interest rates. Other than holdings of U.S. government agency and sponsored agency obligations, there were no securities of any one issuer exceeding 10% of stockholders’ equity as of September 30, 2025 or December 31, 2024.

Previous wording

Securities increased $12.3 million to $918.1 million at June 30, 2025 from $905.8 million at December 31, 2024, mainly attributed to $101.0 million in securities purchases and a decrease in unrealized losses on securities, net of tax, of $15.9 million during the six months ended June 30, 2025, partially offset by $109.6 million in payments and maturities.

Current wording

Securities decreased $1.1 million to $904.7 million at September 30, 2025 from $905.8 million at December 31, 2024, mainly attributed to $169.5 million in payments and maturities, partially offset by $139.3 million in securities purchases and a decrease in unrealized losses on securities, net of tax, of $22.3 million during the nine months ended September 30, 2025.

Previous wording

As of June 30, 2025 and December 31, 2024, loans receivable (excluding loans held for sale), net of deferred loan fees and costs, discounts and allowance for credit losses, were $6.24 billion and $6.18 billion, respectively. For the six months ended June 30, 2025, there was $675.5 million in new loan production, offset partially by $321.8 million in loan sales and payoffs, and amortization and other reductions of $258.1 million. Loan production consisted of commercial real estate loans of $258.6 million, residential mortgages of $138.8 million, commercial and industrial loans of $95.8 million, equipment financing agreements of $80.3 million and SBA loans of $102.1 million.

Current wording

As of September 30, 2025 and December 31, 2024, loans receivable (excluding loans held for sale), net of deferred loan fees and costs, discounts and allowance for credit losses, were $6.46 billion and $6.18 billion, respectively. The increase of $277.2 million was primarily due to $1.2 billion in new loan production, offset partially by $565.2 million in loan sales and payoffs, and amortization and other reductions of $403.8 million. Loan production consisted of commercial real estate loans of $435.4 million, residential mortgages of $242.0 million, commercial and industrial loans of $307.2 million, equipment financing agreements of $114.6 million and SBA loans of $147.0 million.

Previous wording

The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses as of June 30, 2025. In addition, the table shows the distribution of such loans between those with floating or variable interest rates and those with fixed or predetermined interest rates.

Current wording

The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses as of September 30, 2025. In addition, the table shows the distribution of such loans between those with variable interest rates (including floating, adjustable and hybrids) and those with fixed or predetermined interest rates.

Previous wording

The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses, with floating or variable interest rates (including floating, adjustable and hybrids), as of June 30, 2025.

Current wording

The table below shows the maturity distribution of outstanding loans, before the allowance for credit losses, with variable interest rates (including floating, adjustable and hybrids), as of September 30, 2025.

Previous wording

Loans 30 to 89 days past due and still accruing were $11.0 million at June 30, 2025, compared with $18.5 million at December 31, 2024.

Current wording

Loans 30 to 89 days past due and still accruing were $11.6 million at September 30, 2025, compared with $18.5 million at December 31, 2024.

Previous wording

Activity in criticized loans was as follows for the periods indicated:

Current wording

Criticized loans include special mention and classified loans. Activity in criticized loans was as follows for the periods indicated:

Previous wording

Special mention loans were $12.7 million and $139.6 million at June 30, 2025 and December 31, 2024, respectively. The $126.9 million decrease in the first six months of 2025 reflected loan upgrades of $105.8 million on a commercial and industrial loan during the first quarter and two commercial real estate loans during the second quarter, paydowns of $20.0 million and amortization of $1.5 million, offset by downgrades of $0.4 million. The $28.4 million decrease in special mention loans during the six months ended June 30, 2024 reflected upgrades to pass loans of $19.4 million, downgrades to classified loans of $8.0 million, and paydowns and payoffs of $3.7 million, offset by downgrades from pass loans of $2.7 million. The upgrades to pass loans were primarily attributable to upgrades of two commercial and industrial loans totaling $13.6 million and one commercial real estate loan of $4.3 million during the second quarter of 2024.

Current wording

Special mention loans were $16.8 million and $139.6 million at September 30, 2025 and December 31, 2024, respectively. The $122.8 million decrease in the first nine months of 2025 reflected loan upgrades of $105.8 million on a commercial and industrial loan during the first quarter and two commercial real estate loans during the second quarter, paydowns of $20.0 million and amortization of $1.7 million, offset by downgrades of $4.7 million.

Previous wording

Classified loans were $33.9 million and $25.7 million at June 30, 2025 and December 31, 2024, respectively. The $8.2 million increase in classified loans for the six months ended June 30, 2025 resulted from $25.2 million of loan downgrades and $5.8 million of additions to classified loans. The increase in loan downgrades was primarily the result of a $20.0 million commercial real estate office loan designated as nonaccrual during the first quarter of 2025. Additions were offset by $14.6 million of charge-offs, including an $8.6 million charge-off during the second quarter of 2025 on the previously mentioned office loan and $5.6 million of equipment financing charge-offs, $4.3 million of upgrades, $2.6 million of amortization and paydowns and $1.3 million of payoffs. The $2.5 million increase in classified loans during the six months ended June 30, 2024 was primarily driven by new downgrades to classified of $17.6 million, offset by payoffs of $8.3 million, charge-offs of $3.7 million, and paydowns and amortization of $3.1 million.

Current wording

Classified loans were $28.6 million and $25.7 million at September 30, 2025 and December 31, 2024, respectively. The $2.9 million increase in classified loans for the nine months ended September 30, 2025 resulted from $29.2 million of loan downgrades and $8.9 million of additions to classified loans. The loan downgrades were primarily the result of a $20.0 million commercial real estate office loan designated as nonaccrual during the first quarter of 2025. Additions were offset by $17.2 million of charge-offs, including an $8.6 million charge-off during the second quarter of 2025 of an office loan and $8.0 million of equipment financing charge-offs, $8.1 million of upgrades, $3.8 million of amortization and paydowns and $4.1 million of payoffs and a $2.0 million transfer to other-real-estate-owned.

Previous wording

Nonaccrual loans were $26.0 million and $14.3 million as of June 30, 2025 and December 31, 2024, respectively, representing an increase of $11.7 million, or 82.6%. The increase was due to the previously mentioned commercial real estate office loan designated as nonaccrual during the first quarter of 2025. As of June 30, 2025 and December 31, 2024, 1.57% and 1.81% of equipment financing agreements were on nonaccrual status, respectively. At June 30, 2025, there were no loans 90 days or more past due and still accruing interest. At December 31, 2024, all loans 90 days or more past due were classified as nonaccrual.

Current wording

Nonaccrual loans were $19.4 million and $14.3 million as of September 30, 2025 and December 31, 2024, respectively, representing an increase of $5.1 million, or 35.7%. As of September 30, 2025 and December 31, 2024, 1.62% and 1.81% of equipment financing agreements were on nonaccrual status, respectively. At September 30, 2025, there were no loans 90 days or more past due and still accruing interest. At December 31, 2024, all loans 90 days or more past due were classified as nonaccrual.

Previous wording

The $26.0 million of nonperforming loans as of June 30, 2025 had individually evaluated allowances of $4.1 million, compared with $14.3 million of nonperforming loans with individually evaluated allowances of $6.2 million as of December 31, 2024.

Current wording

The $19.4 million of nonperforming loans as of September 30, 2025 had individually evaluated allowances of $4.4 million, compared with $14.3 million of nonperforming loans with individually evaluated allowances of $6.2 million as of December 31, 2024.

Previous wording

Nonperforming assets were $26.0 million at June 30, 2025, or 0.33% of total assets, compared with $14.4 million, or 0.19%, at December 31, 2024. Additionally, not included in nonperforming assets were repossessed personal property assets associated with equipment finance agreements of $0.6 million and $0.6 million at June 30, 2025 and December 31, 2024, respectively.

Current wording

Nonperforming assets were $21.4 million at September 30, 2025, or 0.27% of total assets, compared with $14.4 million, or 0.19%, at December 31, 2024. Additionally, not included in nonperforming assets were repossessed personal property assets associated with equipment finance agreements of $0.4 million and $0.6 million at September 30, 2025 and December 31, 2024, respectively.

Previous wording

Individually evaluated loans were $23.0 million and $14.3 million as of June 30, 2025 and December 31, 2024, respectively, representing a increase of $8.7 million, or 60.8%. Specific allowances associated with individually evaluated loans decreased $2.1 million to $4.1 million as of June 30, 2025 compared with $6.2 million as of December 31, 2024. due to increased charge-offs, offset by new specific allowances on individually evaluated loans.

Current wording

Individually evaluated loans were $19.4 million and $14.3 million as of September 30, 2025 and December 31, 2024, respectively, representing an increase of $5.1 million, or 35.7%. Specific allowances associated with individually evaluated loans decreased $1.8 million to $4.4 million as of September 30, 2025 compared with $6.2 million as of December 31, 2024, due to increased charge-offs, offset by new specific allowances on individually evaluated loans.

Previous wording

During the three and six months ended June 30, 2025 and 2024, there were no payment defaults on loans modified within the preceding 12 months.

Current wording

During the three and nine months ended September 30, 2025 and 2024, there were no payment defaults on loans modified within the preceding 12 months.