CVB FINANCIAL CORP

1. BUSINESS

The condensed consolidated financial statements include CVB Financial Corp. (referred to herein on an unconsolidated basis as “CVB” and on a consolidated basis as “we”, “our” or the “Company”) and its wholly owned subsidiary, Citizens Business Bank, National Association (the “Bank” or “CBB”), after elimination of all intercompany transactions and balances. The Company hasone inactive subsidiary, Chino Valley Bancorp.

On April 17, 2026, the Company completed its acquisition of Heritage Commerce Corp and its wholly-owned banking subsidiary, Heritage Bank of Commerce (collectively, “Heritage”). The conversion of Heritage's banking systems was completed during the second quarter of 2026. The acquisition was an all-stock transaction accounted for under the acquisition method of accounting as a business combination. See Note 4 —Business Combination for additional information.

The Company’s primary operations are related to traditional banking activities. This includes the acceptance of deposits and the lending and investing of money through the operations of the Bank. The Bank also provides trust and investment-related services to customers through its CitizensTrust Division. The Bank’s customers consist primarily of small to mid-sized businesses and individuals located throughout California. As a result of the Heritage acquisition, CSNK Working Capital Finance Corp., a California corporation doing business as Bay View Funding (“BVF”), became a wholly owned subsidiary of CBB. BVF provides working capital factoring financing to various industries throughout the United States.

As of June 30, 2026, the Bank operated 78 banking centers, one loan production office in Temecula, CA, andthree trust office locations. The Company is headquartered in the city of Ontario, California.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q and conform to practices within the banking industry and include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments that are necessary for a fair presentation of financial results for the interim periods presented. The Company’s financial results for the three and six months ended June 30, 2026, included 74 days of Heritage's operations, post-merger, which impacts the comparability of the current period's results to prior periods. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results anticipated for another interim period or the full year ending December 31, 2026. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements, accounting policies and financial notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 Form 10-K”), filed with the SEC. A summary of the significant accounting policies consistently applied in the preparation of the accompanying unaudited condensed consolidated financial statements follows.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except as discussed below, our accounting policies are described in Note 3 – Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2025 Form 10-K. As of June 30, 2026, there were no significant changes to accounting policies from those disclosed in our audited consolidated financial statements included in our 2025 Form 10-K.

Use of Estimates in the Preparation of Financial Statements —The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for credit losses.

Other significant estimates, which may be subject to change, include fair value determinations and disclosures, impairment of investments, goodwill and loans, as well as valuation of deferred tax assets.

Business Segments— We regularly assess our strategic plans, operations, reporting structures and financial information provided to the Chief Executive Officer, our chief operating decision maker (“CODM”), to identify our reportable segments. At June 30, 2026 and since September 30, 2018, we have operated as one reportable segment. Changes to our reportable segments are expected to be infrequent.

The factors considered in making this determination included the nature of products and services offered, geographic regions in which we operate, the applicable regulatory environment, and the materiality of discrete financial information reviewed by our CODM. Through our network of banking centers, we provide relationship-based banking products, services and solutions for small to mid-sized companies, real estate investors, non-profit organizations, professionals and other individuals. Our products include loans for commercial businesses, commercial real estate, multi-family, construction, land, dairy & livestock and agribusiness, consumer and government-guaranteed small business loans. We also provide business deposit products and treasury cash management services, as well as deposit products to the owners and employees of the businesses we serve. Our operations are throughout the state of California.

The Company has determined that all of its banking divisions meet the aggregation criteria of Accounting Standards Updates (“ASU”) 2023-07, Segment Reporting, as its current operating model is structured whereby banking divisions serve a similar base of primarily commercial clients utilizing a company-wide offering of similar products and services managed through similar processes and platforms, and therefore operates one line of business that is collectively reviewed by the CODM. The CODM regularly assesses performance of the aggregated single reporting segment and decides how to allocate resources based on net income calculated on the same basis as net income reported in the Company's consolidated statements of earnings and comprehensive income. The CODM is also regularly provided with expense information at a level consistent with that disclosed in the Company's consolidated statements of earnings and comprehensive income. No additional qualitative segment disclosures are required based on this assessment.

Adoption of New Accounting Standards

Recently Issued Accounting Standards Not Yet Adopted

4. BUSINESS COMBINATION

On April 17, 2026, the Company completed its previously announced acquisition of Heritage Commerce Corp and its wholly-owned banking subsidiary, Heritage Bank of Commerce, in an all-stock transaction pursuant to the Agreement and Plan of Reorganization and Merger, dated as of December 17, 2025 (the “Merger Agreement”), by and between CVB and Heritage. On the Closing Date, Heritage Commerce Corp merged with and into CVB, with CVB continuing as the surviving entity. Immediately thereafter, Heritage Bank of Commerce merged with and into Citizens Business Bank, N.A. Under the terms of the Merger Agreement, Heritage shareholders received 0.65 shares of the Company’s common stock for each share of Heritage common stock owned. As consideration for the acquisition, the Company issued approximately 40,621,024 shares of common stock, net of shares withheld for applicable taxes related to Heritage equity awards, valued at $20.68 per share based on the closing price of the Company's common stock as of the acquisition date. In addition, the Company paid $1.6 million in cash in lieu of fractional shares and for the cash settlement of certain Heritage stock options and assumed substitute restricted stock units with a fair value of $129,000. Total merger consideration was $845.5 million. The acquisition accelerated the Company's expansion into the Bay area and enhanced its geographic presence across major business banking markets in California.

The acquisition of Heritage was accounted for as a business combination under ASC 805, Business Combination. Accordingly, the assets acquired and liabilities assumed were recorded at fair value as of the acquisition date. Fair value estimates were based on information available as of the acquisition date and are considered preliminary as of June 30, 2026. The determination of fair value requires management to make estimates related to discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and subject to change. These preliminary estimates, including deferred tax assets, may be revised during the measurement period, which ends no later than one year after the acquisition date. Adjustments may occur as additional information becomes available regarding facts and circumstances that existed at the acquisition date.

The following table presents the allocation of purchase price consideration to the estimated fair values of assets acquired and liabilities assumed from Heritage as of April 17, 2026.

In connection with the acquisition of Heritage, the Company recorded approximately $334.1 million of goodwill and core deposit intangible assets of $116.6 million. The preliminary goodwill primarily reflects the expected synergies, operational efficiencies, expanded market opportunities and other factors to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired. Goodwill recognized in this transaction is not deductible for income tax purposes. See Note 7 - Goodwill and other intangible assets for additional information.

The following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed.

Cash and cash equivalents: The carrying amounts approximate fair value due to the short-term nature of these assets.

Investment securities available-for-sale: Fair values were based on third-party pricing services, dealer quotes, or subsequent sale prices, where available. If quoted market prices were not available, fair value estimates were based on observable inputs including quoted market prices for similar instruments, quoted market prices that were not in an active market or other inputs that were observable in the market. In the absence of observable inputs, fair value was estimated based on market-based inputs and valuation models using discounted cash flow methodologies.

Loans: Certain SFR mortgage loan pools acquired from Heritage were classified as held-for-sale and were sold by the Company at a fair value of $327.5 million. Fair valuewas determined based on bids from third-party investors. Fair values for loans held for investment were estimated on a loan level basis using a discounted cash flow methodology that considered factors including loan types, interest rates, contractual term, amortization status, current market rates, loan-to-value ratios, loss exposures, and remaining balances. The discounted cash flow incorporates the credit losses directly in the projected cash flows using assumptions for probability of defaults, loss given defaults, recovery lags, prepayment rate, and discount rates. The discount rates used for loans were based on alternative cost of funds, current market interest rates, servicing costs and include liquidity adjustments. Expected future cash flows from the loans were estimated and discounted to present value over the remaining life using a discount rate that reflected credit risks.

Purchased loans that exhibited more-than-insignificant deterioration of credit quality from origination were classified as purchased credit deteriorated loans. For PCD loans, the initial estimate of expected credit losses is recognized through allowance for credit losses (“ACL”) with an offsetting gross-up adjustment to the acquired loan balances and the related purchase accounting mark. In addition, the Company adopted ASU 2025-08 effectively January 1, 2026. Accordingly, the initial ACL established on acquired loans included both PCD and non-PCD loans that qualified as purchased seasoned loans under the guidance.

The following table provides a summary of the acquired PCD and PSL loans as of April 17, 2026.

Premises and equipment: Fair values were determined using a market approach, supported by third-party appraisals and broker opinions of value for land and office buildings.

Core Deposit intangible assets (“CDI”): Core deposit intangible assets represent the value of acquired deposit relationships. Fair value was estimated using a discounted cash flow methodology based on the present value of expected cost savings from utilizing core deposit funding compared to alternative funding sources. Key assumptions included expected customer attrition rates, net maintenance costs of the deposit base, alternative funding costs, and interest costs associated with customer deposits. The discount rate used was derived based on the estimated cost of equity, risk-free rate of return, market risk premium and specific risk related to the asset’s cash flows. The core deposit intangible is being amortized over 10 years using the sum-of-the-years'-digits method, reflecting the pattern of expected economic benefits.

Deposits: The fair values for demand and savings deposits were assumed to equal the amounts payable on demand at the acquisition date. The fair values for time deposits were estimated using a discounted cash flow approach that applied current market interest rates to the contractual terms on such deposits.

Subordinated debt: The fair value of subordinated debt was determined by using a discounted cash flow method using a discount rate based on the 10-year treasury yield as of the valuation date, adjusted for a market spread of comparable debt or preferred securities offerings. The Company expects to repay the subordinated debt in May 2027. Accordingly, the projected cash flows were modeled through the expected repayment date in May 2027 rather than the contractual maturity date.

Effective from the closing date of April 17, 2026, Heritage’s financial results were included in the Company’s consolidated results of operations for the three and six months ended June 30, 2026. During the three and six months ended June 30, 2026, the Company incurred $31.4 million and $32.5 million of non-recurring acquisition-related expenses, respectively.

Pro forma financial information (unaudited)

The following presents unaudited financial information as if the acquisition had occurred on January 1, 2025. Pro forma adjustments reflect changes in interest income from the accretion of discounts and premiums on acquired loans and leases, changes in interest expense from the amortization or accretion of fair value adjustments on interest-bearing deposits, and the amortization of core deposit intangibles as if the deposits had been acquired in January 1, 2025. This pro forma information is provided for illustrative purposes only and is not necessarily indicative of the results that would have occurred had the acquisition been completed at the beginning of the prior year. The amounts do not reflect anticipated operating cost savings, revenue enhancements, or other synergies expected to result from the acquisition. Actual results may differ from the unaudited pro forma information presented.

(1)

Pro forma net income for the three and six months ended June 30, 2026 was adjusted to excluded acquisition-related costs of $31.4 million and $50.2 million respectively, including Heritage acquisition related costs incurred during those periods. Pro forma net income for the six months ended June 30, 2025 was adjusted to include the acquisition-related costs of $75.0 million. Pro forma net income assumes acquisition-related costs were incurred after the first quarter of 2025.

5. INVESTMENT SECURITIES

The amortized cost and estimated fair value of available-for-sale (“AFS”) and held-to-maturity (“HTM”) investment securities are summarized below. Fair value is generally determined based on quoted prices for similar assets in active markets or quoted prices for identical assets in markets that are not active. Estimated fair values were obtained from an independent pricing service utilizing observable market data.

(1)

Represents the amount of portfolio layer method basis adjustments related to AFS mortgage-backed securities (“MBS”) securities hedged in a closed portfolio. Under GAAP, these basis adjustments are not allocated to individual securities, however the amounts impact the unrealized gains or losses of the hedged AFS securities. Refer to Note 11 for additional information.

(2)

Represents Commercial Property Assessed Clean Energy (“C-PACE”) bonds.

The following table provides information about the amount of interest income earned on investment securities which is fully taxable, and interest income on investment securities which is exempt from regular federal income tax.

The following table presents the Company’s AFS and HTM investment securities, by investment category, in an unrealized loss position for which an allowance for credit losses has not been recorded as of June 30, 2026 and December 31, 2025.

The allowance for credit losses on investment securities is evaluated for both the AFS and HTM classifications of the investment portfolio in accordance with ASC 326. The Company reviews investment securities in an unrealized loss position to determine whether the decline in fair value a is attributable to credit-related factors or non-credit-related factors, such as changes in interest rates and general market conditions, changes in issuer credit ratings. Unrealized losses on AFS securities attributable to non-credit-related factors are not recorded through an ACL. Such declines are recorded in accumulated other comprehensive income, net. If the Company intends to sell an AFS security, or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the amortized cost basis of the security is written down to fair value through earnings. Management determined that no credit losses exist for securities in an unrealized loss position as of June 30, 2026 and December 31, 2025. Accordingly, no allowance for credit losses was recorded on the Company's investment securities portfolio.

At June 30, 2026, investment securities with carrying values of $2.74 billion were pledged to secure various types of deposits, including $1.03 billion of public funds. In addition, investment securities with carrying values of $2.36 billion were pledged to secure$708.5 million for repurchase agreements,$1.58 billion for unused borrowing capacity, and approximately $71.7 million for other purposes as required or permitted by law.

At December 31, 2025, investment securities with carrying values of $2.74 billion were pledged to secure various types of deposits, including $942.0 million of public funds. In addition, investment securities with carrying values of $2.0 billion were pledged to secure $548.6 million for repurchase agreements, $1.35 billion for unused borrowing capacity, and approximately $57.0 million for other purposes as required or permitted by law.

The amortized cost and fair value of debt securities at June 30, 2026, by contractual maturity, are shown in the following table. Although mortgage-backed securities and CMO/REMIC securities have weighted average remaining contractual maturities of appro ximately 25 years, expected maturities will differ from contractual maturities because borrowers may have the right to prepay such obligations without penalty. Mortgage-backed securities and CMO/REMIC securities are included in maturity categories based upon estimated average lives which incorporate estimated prepayment speeds.

Investment in Federal Home Loan Bank and Federal Reserve Bank of San Francisco Stock

The Bank is a member of the Federal Home Loan Bank (“FHLB”), and members are required to own a certain amount of FHLB stock based on the level of borrowings and other factors. The Bank is also a member of the Federal Reserve Bank of San Francisco (“FRB”) Systemand is required to subscribe a certain amount of FRB stock based on the Bank's capital and surplus. The investments in FHLB and FRB stock are carried at cost and are periodically evaluated for impairment based on, among other things, the capital adequacy and overall financial condition of the FHLB and FRB. No impairment losses were recorded as of June 30, 2026.

6. LOANS AND LEASE FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

The following table provides a summary of total loans and lease finance receivables by type.

As of June 30, 2026, 77.6% of the Company’s total loan portfolio consisted of real estate loans, with commercial real estate loans representing 74.8% of total loans. The Company’s real estate loans and construction loans are secured by real properties primarily located in California. As of June 30, 2026, $418.3 million, or 4.7% of the total commercial real estate loans included loans secured by farmland, compared to $424.5 million, or 6.46%, at December 31, 2025. The loans secured by farmland included $124.4 million for loans secured by dairy & livestock land and$293.8 million for loans secured by agricultural land at June 30, 2026, compared to $119.0 million for loans secured by dairy & livestock land and $305.5 million for loans secured by agricultural land at December 31, 2025. As of June 30, 2026, dairy & livestock and agribusiness loans of $281.0 million were comprised of $239.1 million of dairy & livestock loans and $41.9 million of agribusiness loans, compared to $431.6 million comprised of $386.1 million of dairy & livestock loans and $45.5 million of agribusiness loans at December 31, 2025.

In connection with the acquisition of Heritage, the Company’s factoring receivables are from the operations of BVF, the Bank's subsidiary, whose primary business is purchasing and collecting factored receivables on a nation-wide basis. Factored receivables are receivables that have been transferred by the originating organization and typically have not been subject to previous collection efforts. These receivables are acquired from a variety of companies, including but not limited to service providers, transportation companies, manufacturers, distributors, wholesalers, apparel companies, advertisers, and temporary staffing companies. As of June 30, 2026, the portfolio of factored receivables totaled $106.8 million and is included in the Company’s commercial loan portfolio.

At June 30, 2026 and December 31, 2025, loans totaling$7.56 billion and $6.47 billion, respectively, were pledged to secure available lines of credit from the FHLB and the Federal Reserve Bank.

There wereno outstanding loans held-for-sale as of June 30, 2026 and December 31, 2025.

Credit Quality Indicators

We monitor credit quality by evaluating various risk attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. Internal credit risk ratings, within our loan risk rating system, are the credit quality indicators that we most closely monitor.

An important element of our approach to credit risk management is our loan risk rating system. The originating officer assigns each loan an initial risk rating, which is reviewed and confirmed or changed, as appropriate, by credit management. Approvals are made based upon the amount of inherent credit risk specific to the transaction and are reviewed for appropriateness by senior line and credit management personnel. Credits are monitored by line and credit management personnel for deterioration or improvement in a borrower’s financial condition, which would impact the ability of the borrower to perform under the contract. Risk ratings are adjusted as necessary.

Loans are risk rated into the following categories: Pass, Special Mention, Substandard, Doubtful and Loss. Each of these groups is assessed for the proper amount to be used in determining the adequacy of our allowance for losses. These categories can be described as follows:

Pass — These loans, including loans on the Bank’s internal watch list, range from minimal credit risk to lower than average, but still acceptable, credit risk. Watch list loans usually require more than normal management attention. Loans on the watch list may involve borrowers with adverse financial trends, higher debt/equity ratios, or weaker liquidity positions, but not to the degree of being considered a defined weakness or problem loan where risk of loss may be apparent.

Special Mention — Loans assigned to this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard — Loans classified as substandard are inadequately protected by the current financial strength and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected.

Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or the liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loss — Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset with insignificant value even though partial recovery may be affected in the future.

The following tables summarize loans by type and origination year, according to our internal risk ratings as of the dates presented.

Allowance for Credit Losses (“ACL”)

The Company's allowance models calculate reserves over the average life of the loan, which includes the remaining time to maturity, adjusted for estimated prepayments applied as an adjustment to our commercial real estate and commercial and industrial loans. Our allowance for credit losses is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. A majority of the ACL relates to loans within the Commercial Real Estate and Commercial and Industrial methodologies, each evaluated on a collective basis. Our ACL amounts are largely driven by portfolio characteristics, including loss history, internal risk grading, various risk attributes, and the economic outlook for certain macroeconomic variables. Risk attributes for commercial real estate loans include original loan to value ratios, origination year, loan seasoning, and macroeconomic variables that include Real GDP growth, commercial real estate price index and unemployment rate. Risk attributes for commercial and industrial loans include internal risk ratings, borrower industry sector, loan credit spreads and macroeconomic variables that include unemployment rate and BBB spread. The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans. The Commercial and Industrial methodology is applied over a substantial portion of the Company’s commercial and industrial loans, all dairy & livestock and agribusiness loans, municipal lease receivables, as well as the remaining portion of SBA loans. The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction loans. In addition to determining the quantitative life of loan loss rate to be applied against the amortized cost basis of the portfolio segments, management reviews current conditions and forecasts to determine whether adjustments are needed to ensure that the life of loan loss rates reflect both the current state of the portfolio, and expectations for macroeconomic changes. The Company’s ACL estimate incorporates a reasonable and supportable forecast of various macroeconomic variables over the remaining average life of our loans. This forecast incorporates an assumption that each macroeconomic variable will revert to a long-term expectation, starting in years two through three, of the reasonable and supportable forecast period, with the reversion largely completed within the first five years of the forecast. The economic forecast is based on probability weighted scenarios to address macroeconomic uncertainty. Our methodology for assessing the appropriateness of the allowance is reviewed on a regular basis and considers overall risks in the Bank’s loan portfolio. Refer to Note 3 –Summary of significant Accounting Policies included in the 2025 Form 10-K for a more detailed discussion concerning the allowance for credit losses.

The ACL totaled $126.7 million at June 30, 2026, compared to $77.2 million at December 31, 2025. The $49.5 million increase in the ACL from December 31, 2025 to June 30, 2026 was primarily driven by the ACL recorded for loans acquired in the Heritage acquisition. At June 30, 2026, the ACL as a percentage of total loans and leases, at amortized cost, was 1.05%, compared to 0.89% at December 31, 2025. Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. These U.S. economic forecasts include a baseline forecast as well as multiple forecasts weighted for both upside and downside risks to the baseline forecast. The baseline forecast continues to represent the largest weighting in our multi-weighted forecast scenario, with upside and downside risks weighted among multiple forecasts. As of June 30, 2026, the resulting weighted forecast reflects Real GDP growth declining throughout 2026 and staying below 2% through 2027. The unemployment rate is forecasted to increase, with unemployment rate reaching 5% by the beginning of 2027 and remaining above 5% through 2028. Commercial real estate values are forecasted to continue their decline through the end of 2027, before experiencing growth in 2028.

Management believes that the ACL was appropriate at June 30, 2026 and December 31, 2025. Due to inflationary pressures, changing interest rates, lower commercial real estate values, international tariffs, and geopolitical events, no assurance can be given that economic conditions that adversely affect the Company’s service areas or other circumstances will not be reflected in increased provisions for credit losses in the future.

The following tables present the balance and activity related to the allowance for credit losses for held-for-investment loans by type for the periods presented.

Past Due and Nonperforming Loans

We seek to manage asset quality and control credit risk through diversification of the loan portfolio and the application of policies designed to promote sound underwriting and loan monitoring practices. The Bank’s Credit Management Division is responsible for monitoring asset quality, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures across the Bank. Reviews of nonperforming, past due loans and larger credits, designed to identify potential charges to the allowance for credit losses, are conducted on a regular and ongoing basis. These reviews consider such factors as the financial strength of borrowers and any guarantors, the value of the applicable collateral, loan loss experience, estimated credit losses, growth in the loan portfolio, prevailing economic conditions and other factors. Refer to Note 3 –Summary of Significant Accounting Policies, included in the 2025 Form 10-K, for additional discussion concerning the Bank’s policy for past due and nonperforming loans.

The following table presents the recorded investment in, and the aging of, past due loans (including nonaccrual loans), by type of loans as of the dates presented.

(1)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

It is the Company's policy to discontinue accruing interest when principal or interest payments are 90 days or more past due, unless the loan is both well secured and in the process of collection, or when full collection of principal and interest is not expected. The following table presents nonaccrual loans, including loans with no related allowance for credit losses, by loan type as of June 30, 2026 and December 31, 2025.

(1)

As of June 30, 2026, $6.7 million of nonaccruing loans were current, $670,000 were 30-59 days past due, $1.4 million were 60-89 days past due, and $7.8 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

(3)

Excludes $3,000 of guaranteed portion of nonaccrual SBA loans that are in process of collection.

(1)

As of December 31, 2025, $4.7 million were 90+ days past due.

(2)

Excludes $3,000 of guaranteed portion of nonaccrual SBA loans that are in process of collection.

Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the recorded investment in collateral-dependent loans by type of loans as of the dates presented.

Reserve for Unfunded Loan Commitments

The allowance for off-balance sheet credit exposure relates to unfunded loan commitments, letters of credit, and undisbursed funds on lines of credit and is recorded in other liabilities on the consolidated balance sheets, with the related expense in other noninterest expense. The Company estimates expected credit losses associated with off-balance-sheet credit exposures using a methodology consistent with that used for the loan portfolio. As of June 30, 2026 and December 31, 2025, the reserve for unfunded loan commitments was $13.0 million and $8.3 million, respectively. The increase was primarily attributable to the initial reserve established for the unfunded commitments acquired in the Heritage acquisition though the provision for unfunded loan commitments. The provision for unfunded loan commitments was $4.3 million and $4.8 million, respectively, for the three and six months ended June 30, 2026, compared tono provision and a $500,000 provision for the three and six months ended June 30, 2025, respectively.

Modifications of Loans to Borrowers Experiencing Financial Difficulty

There were two loans to borrowers experiencing financial difficulty that were modified during the three months ended June 30, 2026 with an amortized cost totaling $2.7 million as of June 30, 2026, including one commercial real estate loan for$1.7 million and one dairy & livestock loan for $1.0 million.

The tables below reflect the amortized cost of loans by type made to borrowers experiencing financial difficulty that were modified during the three and six months ended June 30, 2026 by loan class and modification type.

The tables below reflect the amortized cost of loans by type made to borrowers experiencing financial difficulty that were modified as of June 30, 2025 by loan class and modification type.

During the three and six months ended June 30, 2026 and 2025, there was no modified loans that subsequently defaulted within twelve months of the modification date. Payment default is defined as movement to nonaccrual (nonperforming) status, foreclosure or charge-off, whichever occurs first.

The following table presents the recorded investment in, and the aging of, past due loans at amortized cost (including nonaccrual loans), by type of loans, made to borrowers experiencing financial difficulty as of June 30, 2026 and June 30, 2025.

7. GOODWILL AND OTHER INTANGIBLES

In connection with the Heritage acquisition, the Company recorded core deposit intangible assets of $116.6 million and goodwill of $334.1 million. For additional information on the acquisition of Heritage, see Note 4 -Business Combination.

The following table presents the changes in the carrying value of goodwill as of the periods presented.

The following table summarizes changes in core deposit intangible assets and the related accumulated amortization for the periods presented.

The following table reflects the estimated amortization expense for other intangible assets as of the date indicated.

8. BORROWINGS

Customer Repurchase Agreements

The Bank offers a repurchase agreement product to its customers, known as Citizens Sweep Manager. Under this program, the Bank sells investment securities overnight to customers under an agreement to repurchase (“repurchase agreement”) the securities the next business day at a price reflecting the market value of the use of funds for the period. These repurchase agreements are entered into with customers whose demand deposit account balances exceed a pre-determined threshold. Excess funds above this threshold are invested in overnight repurchase agreements, which earn interest for the customer. As of June 30, 2026, total funds borrowed under these agreements were $563.4 million, with a weighted average interest rate of 1.95%, compared to $490.6 million at December 31, 2025, with a weighted average interest rate of 1.72%.

Federal Home Loan Bank Advances and Other Borrowings

As of June 30, 2026 and December 31, 2025, FHLB advances and other borrowings totaled $500 million, consisting entirely of FHLB advances. During the three months ended June 30, 2026, $300 million of FHLB advances bearing a fixed interest rate of 4.73% matured and were not renewed. During the second quarter of 2026, the Company replaced$300 million of three-month term brokered certificates of deposit designated in a cash flow hedge relationships with two $150 million three-month FHLB advances bearing a weighted average fixed interest rate of 3.99% and maturing in August and September 2026. At June 30, 2026, FHLB advances consisted of $300 million of three-month FHLB advances and a $200 million FHLB advance bearing a fixed interest rate of 4.27% and maturing in May 2027.

As of June 30, 2026,$7.56 billion of loans and $5.10 billion of investment securities, at carrying value, were pledged to secure public deposits, repurchase agreements, borrowing lines, and for other purposes as required or permitted by law. At December 31, 2025, $6.47 billion of loans and $3.35 billion of investment securities, at carrying value, were pledged to secure public deposits, repurchase agreements, borrowing lines, and for other purposes as required or permitted by law.

At June 30, 2026, the Bank's secured borrowing capacity with the FHLB and FRB totaled$6.48 billion, of which$6.17 billion was available as of June 30, 2026. The Bank also has$305.0 million in unsecured Fed Funds lines of credit with other major U.S. banks. These lines of credit are available for overnight borrowings. At December 31, 2025, the Bank's secured borrowing capacity with the FHLB and FRB totaled $5.78 billion, of which $5.28 billion was available as of December 31, 2025. The Bank also has $305.0 million in unsecured Fed Funds lines of credit with other major U.S. banks. These lines of credit are available for overnight borrowings.

Subordinated Debentures

In connection with the acquisition of Heritage, the Company assumed $40.0 million of fixed-to-floating rate subordinated notes due May 15, 2032. The notes bear interest at a fixed rate of 5.0% per year until May 15, 2027. From and including May 15, 2027, interest will accrue at a variable rate of three-month Secured Overnight Financing Rate (“SOFR”) plus 227 basis points. The Company may redeem the subordinated notes, in whole or in part, on or after May 15, 2027. At June 30, 2026, the carrying value of the subordinated notes was $39.0 million, net of purchase accounting fair value adjustments of $1.0 million, and qualified as Tier 2 capital for the Company.

9. EARNINGS PER SHARE RECONCILIATION

Basic earnings per common share are computed by dividing income allocated to common stockholders by the weighted-average number of common shares outstanding during each period. The computation of diluted earnings per common share considers the number of shares issuable upon the assumed exercise of outstanding common stock options. Antidilutive common shares are not included in the calculation of diluted earnings per common share. For the three and six months ended June 30, 2026, shares deemed to be antidilutive, and thus excluded from the computation of earnings per common share, were 297,000 and 390,000, respect ively. For the three and six months ended June 30, 2025, shares deemed to be antidilutive, and thus excluded from the computation of earnings per common share, were 762,000 and 746,000, respectively.

The table below shows earnings per common share and diluted earnings per common share and reconciles the numerator and denominator of both earnings per common share calculations.

10. FAIR VALUE INFORMATION

Fair Value Hierarchy

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The valuation methodologies for financial assets and liabilities measured at fair value on a recurring and non-recurring basis are described in Note 17 —Fair Value Information, included in the 2025 Form 10-K.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis as of the dates presented.

AFS investment securities -AFS investment securities are generally valued using quotes obtained from independent third-party pricing services for identical or similar assets. Observable market inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data are considered as part of the evaluation. These inputs are related directly to the security being evaluated, or indirectly to a similarly situated security. Market assumptions and market data are utilized in the valuation models. The Company reviews the market prices provided by the third-party pricing service for reasonableness. The fair value of these securities are classified as Level 2 within the fair value hierarchy.

Equity Securities - The Company’s equity securities consist of investments in publicly traded mutual funds that qualify for CRA purposes. The fair value is based on publicly available net asset value per share and is classified as Level 1 within the fair value hierarchy.

Derivative assets and liabilities - Derivatives consists of interest rate contracts, which are valued using a discounted cash flow method that incorporates observable market inputs, including current market interest rates. These derivatives are classified as level 2.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We may be required to measure certain assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or fair value accounting or impairment write-downs of individual assets.

For assets measured at fair value on a non-recurring basis that were held on the balance sheet at June 30, 2026 and December 31, 2025, the following tables provide the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets that had losses during the period.

Fair Value of Financial Instruments

The following disclosure presents the estimated fair value of our financial instruments. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company may realize in a current market exchange as of June 30, 2026 and December 31, 2025, respectively. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The fair value estimates presented herein are based on pertinent information available to management as of June 30, 2026 and December 31, 2025, respectively. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented above.

11. DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives Not Designated as Hedging Instruments

As part of its ongoing asset/liability management strategy, the Company utilizes interest rate swap agreements (“swaps”) to manage exposure to interest rate risk. As of June 30, 2026, the Company has entered into 97 interest-rate swap agreements with customers with an aggregate notional amount totaling $277.6 million. Under the terms of the interest rate swap agreements with customers, the Company pays a variable rate and receives a fixed rate. Concurrently, the Company entered into a corresponding offsetting swap with a third-party financial institution to mitigate the Company's interest rate risk exposure arising from the customer swap. The net effect of these arrangements allows the Company to retain a variable rate loan exposure, while providing the customer with economic equivalent of a fixed rate loan. The variable rate received by the Company is based on Secured Overnight Financing Rate (“SOFR”) plus a contractual spread.

These swaps do not qualify for hedge accounting and are accounted for as freestanding derivatives. Accordingly, these instruments are recorded at fair value as components of other assets and other liabilities on the Company’s consolidated balance sheet. Changes in the fair value of these swaps are recognized in the Company’s statement of earnings as a component of noninterest income. The changes in the fair value of the customer swaps and the corresponding counterparty swaps generally offset each other; therefore, these derivative instruments are not expected to have a material impact on the Company’s results of operations. However, the Company is exposed to credit risk related to both customer and counterparty’s performance under these agreements. The swaps are subject to a master netting arrangement with its counterparties and include provisions that require the posting of collateral when the fair value of the derivative exceeds certain agreed upon threshold limits.

Management believes that the potential credit risk associated with customer interest rate swaps is mitigated through the loan underwriting process that consider the additional exposure arising from the related derivative, as well as through ongoing monitoring of counterparty creditworthiness. Nevertheless, these derivatives are subject to market and counterparty credit risk, and there can be no assurance that mitigation efforts will be fully effective.

Derivatives Designated as Hedging Instruments

Fair Value Hedges

To manage interest rate risk associated with our AFS MBS securities portfolio, the Company entered into pay-fixed, receive-floating interest rate swap contracts to hedge exposure to changes in the fair value of the hedged portfolio attributable to changes in interest rates. These interest rate swap contracts are designated as fair value hedges that qualify for hedge accounting under ASC 815, Derivatives and Hedging. The Company has elected to apply the portfolio layer method for these fair value hedges in accordance with ASU 2022-01. Under this method, the hedged item is defined as a stated amount of the closed AFS portfolio. Basis adjustments resulting from hedge accounting are recorded at the portfolio level and are not allocated to individual securities. These basis adjustments impact the unrealized gains and losses of the AFS securities within the closed portfolio and are reflected in accumulated other comprehensive income (“AOCI”). The related interest rate swaps are recorded within other assets and other liabilities on our consolidated balance sheet. For qualifying fair value hedges, changes in the fair value of the derivative instruments are recorded through earnings and offset against changes in the fair value of the hedged portfolio layer attributable to the hedged risk. Amounts recognized in earnings are recorded in “investment securities available-for-sale” as part of interest income in the consolidated statements of earnings, consistent with the classification of the hedged AFS securities.

In May 2025, the Company terminated $700 million notional of pay-fixed interest rate swaps with a weighted average fixed rate of approximately 3.7%, which were originally scheduled to mature in June of 2028. These swaps were replaced with new pay-fixed interest rate swaps with maturity dates in May of 2029, 2030 and 2031, with a weighted pay-fixed rate of 3.68%. At June 30, 2026 and December 31, 2025, interest rate swaps with an aggregate notional amount of $700 million were designated as fair value hedges.

Cash Flow Hedges

To manage our interest rate risk associated with brokered certificates of deposit (“CDs”), FHLB advances or other fixed rate advances, the Company enters into interest rate derivative contracts designated as qualifying cash flow hedges to mitigate the exposure to variability in expected future cash flows attributable to changes in a contractually specified interest rate. In 2024, the Company issued $300 million of three-month term brokered CDs and entered into three-year pay-fixed, receive-floating interest rate swaps with a notional amount of $300 million maturing in the first quarter of 2027. The swaps carry a weighted average fixed rate of approximately 4.10%, with the Company receiving daily SOFR. During the second quarter of 2026, upon the maturity of the brokered CDs, the Company replaced the funding with two $150 million, three-month FHLB advancesand redesignated the related interest rate swaps as cash flow hedges of the variable cash flows associated with those advances.

To qualify for hedge accounting, the Company performs a formal effectiveness assessment at inception using statistical regression analysis, and continues to monitor effectiveness each reporting period through quantitative or qualitative methods. If a hedge is determined to be ineffective, hedge accounting is discontinued and any gain or loss in AOCI is recognized in earnings immediately. The cash flow hedges are recorded at fair value in other assets or other liabilities on the consolidated balance sheets with changes in fair value recorded in AOCI, net of tax. All related cash flows are reported in the operating activities section of the consolidated statement of cash flows. Amounts recorded to AOCI are reclassified into earnings in the same period in which the hedged asset or liability affects earnings and are presented in the same income statement line item as the hedged item. As of June 30, 2026, the Company estimates that a net loss of approximately $293,000 reported in AOCI will be reclassified into earnings within the next 12 months.

Balance Sheet Classification of Derivative Financial Instruments

As of June 30, 2026 and December 31, 2025, the notional amount, the location of the asset and liability, and their respective fair values, are summarized in the tables below.

The following table presents amounts recorded on our condensed consolidated balance sheet related to cumulative basis adjustments for fair value hedges as of the dates indicated.

(1)

These amounts were included in the amortized cost basis of closed portfolios of available-for-sale securities designated in hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. At June 30, 2026 and December 31, 2025, the amortized cost basis of the closed portfolios used in these hedging relationships was $1.6 billion and $1.7 billion, respectively. The cumulative basis adjustments associated with these hedging relationships were ($2.0) million and $10.9 million, respectively, of which $1.5 million and $1.5 million, respectively, related to discontinued hedging relationships. At June 30, 2026 and December 31, 2025, the notional amount of the designated hedged items was $700.0 million.

The Effect of Derivatives Financial Instruments on the Condensed Consolidated Statements of Earnings

The following table summarizes the effect of derivatives not designated as hedging instruments on the condensed consolidated statements of earnings for the periods presented.

The following table summarizes the effect of fair value and cash flow hedge on the condensed consolidated statements of earnings for the periods presented.

12. BALANCE SHEET OFFSETTING

Assets and liabilities relating to certain financial instruments, including, derivative instruments and securities sold under repurchase agreements, may be eligible for offset in the condensed consolidated balance sheets as permitted under accounting guidance. As noted above, our interest rate swap derivatives are subject to master netting arrangements. Our interest rate swap derivatives require the Company to pledge investment securities as collateral based on certain risk thresholds. Investment securities that have been pledged by the Company to counterparties continue to be reported in the Company’s condensed consolidated balance sheets unless the Company defaults. The Company offers a repurchase agreement product to our customers, which include master netting agreements that allow for the netting of collateral positions. This product, known as Citizens Sweep Manager, involves the sale of certain securities overnight to customers under agreements to repurchase the securities the next business day. The repurchase agreements are not offset in the Company’s condensed consolidated balances.

The following tables summarize gross and net information about financial instruments and derivative instruments that are offset in the consolidated balance sheets that are subject to enforceable master netting arrangement at June 30, 2026 and December 31, 2025.

(1)

Represents the fair value of securities pledged with counterparty bank.

(2)

Represents cash collateral received from or pledged with counterparty bank. Amounts are limited to the derivative asset or liability balance and, accordingly, do not include excess collateral, if any, received or pledged.

13. OTHER COMPREHENSIVE INCOME

The table below provides a summary of the components of OCI for the periods presented.

14. LEASES

The Company’s operating leases, where the Company is a lessee, include real estate, such as office space and banking centers. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease and is reflected in the consolidated statement of earnings. Right-of-use (“ROU”) assets and lease liabilities are included in other assets and other liabilities, respectively, on the Company’s condensed consolidated balance sheet.

While the Company has, as a lessor, certain equipment finance leases, such leases are not material to the Company’s consolidated financial statements.

In connection with the Heritage acquisition, the Company assumed Heritage's $28.0 million ROU assets and $28.0 million lease liabilities at the acquisition date.

The tables below present the components of lease costs and supplemental information related to leases as of and for the periods presented.

(1)

Includes short-term leases and variable lease costs, which are immaterial.

The Company’s lease arrangements that have not yet commenced as of June 30, 2026 and the Company’s short-term lease costs and variable lease costs, for the six months ended June 30, 2026 and 2025 are not material to the consolidated financial statements. The future lease payments required for leases that have initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2026, excluding property taxes and insurance, are as follows:

15. REVENUE RECOGNITION

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the periods indicated.

Refer to Note 3 –Summary of Significant Accounting Policies and Note 22 –Revenue Recognition, included in our Annual Report on Form 10-K for the year ended December 31, 2025 for a more detailed discussion about noninterest revenue streams that are in-scope of Topic 606.

16. INCOME TAXES

The Company invests in low-income housing tax credit and solar tax funds that are designed to generate a return primarily through the realization of federal tax credits. The Company accounts for these investments using the proportional amortization method, under which the cost of the investments is amortized over the life of the investment in proportion to the tax credits and other tax benefits received. The amortization of tax credit investments is included as a component of the provision for income taxes in the consolidated statements of earnings and comprehensive income.

The following table presents the balances of the Company's tax credit investments recorded in other assets and related unfunded commitments recorded in other liabilities on the consolidated balance sheets at June 30, 2026 and December 31, 2025:

The following table presents income tax credits and other tax benefits, as well as amortization expense, associated with the Company's tax credit investments for the periods indicated: