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, 2026. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 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, 2026 (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, 2026. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 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, 2026 (this “Report”).

Previous wording

inflation and fluctuations in interest rates that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, the level of loan sales and the cost we pay to retain and attract deposits and secure other types of funding;

Current wording

inflation and fluctuations in interest rates and the shape of the yield curve that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, the level of loan sales and the cost we pay to retain and attract deposits and secure other types of funding;

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 the 2025 Annual Report on Form 10-K. We had no significant changes in what constituted our accounting policies since the filing of the 2025 Annual Report on Form 10-K.

Current 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 the 2025 Annual Report on Form 10-K. We had no significant changes in our accounting policies since the filing of the 2025 Annual Report on Form 10-K.

Previous wording

Our primary source of revenue is net interest income, which is the difference between interest derived from assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on loans are affected principally by changes to market interest rates, the demand for loans, the supply of money available for lending purposes, and other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve.

Current wording

Our primary source of revenue is net interest income, which is the difference between interest derived from assets, and interest paid on liabilities obtained to fund those assets. Our net interest income is affected by changes in the level and mix of interest-earning assets and interest-bearing liabilities, referred to as volume changes. Net interest income is also affected by changes in the yields earned on assets and rates paid on liabilities, referred to as rate changes. Interest rates charged on loans are affected principally by changes to market interest rates, the demand for loans, our loan composition, the supply of money available for lending purposes, and other competitive factors. Those factors are, in turn, affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the Federal Reserve.

Previous wording

Net interest margin, on a taxable equivalent basis, increased 29 basis points to 3.36% for the three months ended June 30, 2026, from 3.07% for the same period in 2025. This increase was primarily due to a decline in the cost of interest-bearing liabilities of 47 basis points to 3.21% for the three months ended June 30, 2026, from 3.68% for the same period in 2025, due to the decline in interest rates.

Current wording

Net interest margin, on a taxable equivalent basis, increased 22 basis points to 3.44% for the three months ended September 30, 2026, from 3.22% for the same period in 2025. This increase was primarily due to a decline in the cost of interest-bearing liabilities of 36 basis points to 3.24% for the three months ended September 30, 2026, from 3.60% for the same period in 2025, due to the decline in interest rates.

Previous wording

Net interest income for the three months ended June 30, 2026 and 2025 was $63.9 million and $57.1 million, respectively, reflecting an increase of $6.8 million, or 11.8%. This increase was primarily due to a $5.9 million effect from a decrease in interest rates on liabilities and a $2.4 million effect from an increase in the average balance of loans, partially offset by a $1.2 million effect from an increase in the average balance of interest-bearing liabilities.

Current wording

Net interest income increased 10.6%, or $6.5 million, to $67.6 million for the three months ended September 30, 2026 from $61.1 million for the three months ended September 30, 2025. This increase was primarily due to a $4.7 million effect from a decrease in interest rates on liabilities and a $4.0 million effect from an increase in the average balance of interest-earning assets, partially offset by a $1.6 million effect from an increase in the average balance of interest-bearing liabilities.

Previous wording

The $5.9 million impact from the decrease in interest rates on liabilities was primarily driven by money market and savings accounts and time deposits, which increased net interest income by $3.4 million and $2.5 million, respectively, for the three months ended June 30, 2026, compared with the same period in 2025. The $2.4 million volume-driven increase in interest income on loans was primarily due to a higher average balance of commercial and industrial loans, partially offset by a decline in the average balance of equipment financing agreements. The $1.2 million offsetting increase in interest expense was primarily due to the $2.1 million impact of a higher average balance of time deposits, partially offset by a lower average balance of money market and savings accounts and borrowings.

Current wording

The $4.7 million impact from the decrease in interest rates on liabilities was primarily driven by money market and savings accounts and time deposits, which increased net interest income by $2.9 million and $2.0 million, respectively, for the three months ended September 30, 2026, compared with the same period in 2025. The $4.0 million volume-driven increase in interest income on interest-earning assets was primarily due to a higher average balance of loans. The $1.6 million offsetting increase in interest expense was due to the $1.6 million impact of a higher average balance of time deposits.

Previous wording

The average balance of interest-earning assets increased $162.0 million, or 2.2%, to $7.63 billion for the three months ended June 30, 2026, from $7.47 billion for the three months ended June 30, 2025, primarily due to growth in the average balance of commercial and industrial loans. The average balance of interest-bearing liabilities increased $114.1 million, or 2.4%, to $4.93 billion for the three months ended June 30, 2026, compared with $4.82 billion for the three months ended June 30, 2025, primarily due to a higher average balance of time deposits.

Current wording

The average balance of interest-earning assets increased 2.6%, or $196.7 million, to $7.66 billion for the nine months ended September 30, 2026, from $7.47 billion for the nine months ended September 30, 2025, primarily due to growth of $219.8 million in the average balance of commercial and industrial loans. The average balance of interest-bearing liabilities increased $124.6 million, or 2.6%, to $4.94 billion for the nine months ended September 30, 2026, compared with $4.82 billion for the nine months ended September 30, 2025, primarily due to a $184.0 million increase in the average balance of time deposits.

Previous wording

Net interest margin, on a taxable equivalent basis, increased 32 basis points to 3.37% for the six months ended June 30, 2026, from 3.05% for the same period in 2025. This increase was primarily due to a decline in the cost of interest-bearing liabilities of 49 basis points to 3.23% for the six months ended June 30, 2026, from 3.72% for the same period in 2025, due to the decline in interest rates.

Current wording

Net interest margin, on a taxable equivalent basis, increased 29 basis points to 3.40% for the nine months ended September 30, 2026, from 3.11% for the same period in 2025. This increase was primarily due to a decline in the cost of interest-bearing liabilities of 45 basis points to 3.23% for the nine months ended September 30, 2026, from 3.68% for the same period in 2025, due to the decline in interest rates.

Previous wording

Net interest income for the six months ended June 30, 2026 and 2025 was $127.1 million and $112.2 million, respectively, reflecting an increase of $14.9 million, or 13.2%. This increase was primarily due to an $11.9 million effect from a decrease in interest rates on liabilities and a $5.4 million effect from an increase in the average balance of loans, partially offset by a $2.0 million impact from an increase in the average balance of interest-bearing liabilities.

Current wording

Net interest income increased 12.3%, or $21.3 million, to $194.6 million for the nine months ended September 30, 2026 from $173.3 million for the nine months ended September 30, 2025. This increase was primarily due to a $16.6 million effect from a decrease in interest rates on liabilities and an $8.7 million effect from an increase in the average balance of loans, partially offset by a $3.6 million impact from an increase in the average balance of interest-bearing liabilities.

Previous wording

The $11.9 million effect from the decrease in interest rates on liabilities was primarily driven by money market and savings accounts and time deposits, which increased net interest income by $6.9 million and $4.8 million, respectively, for the six months ended June 30, 2026, compared with the same period in 2025. The $5.4 million volume-driven increase in interest income on loans was primarily due to a higher average balance of commercial and industrial loans, partially offset by a decline in the average balance of equipment financing agreements. The $2.0 million offsetting increase in interest expense was primarily due to a $4.0 million impact of a higher average balance of time deposits, partially offset by a lower average balance of borrowings.

Current wording

The $16.6 million effect from the decrease in interest rates on liabilities was primarily driven by money market and savings accounts and time deposits, which increased net interest income by $9.8 million and $6.8 million, respectively, for the nine months ended September 30, 2026, compared with the same period in 2025. The $8.7 million volume-driven increase in interest income on loans was primarily due to a higher average balance of commercial and industrial loans, partially offset by a decline in the average balance of equipment financing agreements. The $3.6 million offsetting increase in interest expense was primarily due to a $5.6 million impact of a higher average balance of time deposits, partially offset by a lower average balance of borrowings.

Previous wording

For the second quarter of 2026, the Company recorded $1.2 million of credit loss expense, comprising a $1.3 million provision for loan losses and a $0.1 million recovery for off-balance sheet items. For the same period in 2025, the Company recorded $7.6 million of credit loss expense, comprising a $7.5 million provision for loan losses and a $0.1 million provision for off-balance sheet items. The $6.2 million decrease in the provision for loan losses was primarily due to lower net charge-offs. Net charge-offs for the three months ended June 30, 2026 were $1.3 million, $10.1 million lower than the $11.4 million recognized for the three months ended June 30, 2025. Charge-offs for the three months ended June 30, 2025 included an $8.6 million charge-off of a syndicated commercial real estate office loan.

Current wording

For the third quarter of 2026, the Company recorded $4.5 million of credit loss expense, comprising a $4.7 million provision for loan losses and a $0.2 million recovery for off-balance sheet items. For the same period in 2025, the Company recorded $2.1 million of credit loss expense, comprising a $2.5 million provision for loan losses that was partially offset by a $0.4 million recovery recorded for off-balance sheet items. The $2.2 million increase in the provision for loan losses was primarily due to higher net charge-offs, which were $4.3 million for the three months ended September 30, 2026, compared with $0.5 million in net recoveries for the three months ended September 30, 2025.

Previous wording

For the six months ended June 30, 2026, the Company recorded $4.1 million of credit loss expense, comprising a $4.4 million provision for loan losses and a $0.3 million recovery for off-balance sheet items. For the same period in 2025, the Company recorded $10.4 million of credit loss expense, comprising a $9.9 million provision for loan losses and a $0.5 million provision for off-balance sheet items. The $5.5 million decrease in the provision for loan losses was primarily due to lower net charge-offs. Charge-offs for the six months ended June 30, 2025 included the previously mentioned $8.6 million charge-off.

Current wording

For the nine months ended September 30, 2026, the Company recorded $8.6 million of credit loss expense, comprising a $9.1 million provision for loan losses and a $0.5 million recovery for off-balance sheet items. For the same period in 2025, the Company recorded $12.5 million of credit loss expense, comprised of a $12.5 million provision for loan losses. The $3.4 million decrease in the provision for loan losses was primarily due to lower net charge-offs, which were $8.2 million for the nine months ended September 30, 2026 and $12.8 million for the nine months ended September 30, 2025.

Previous wording

For the three months ended June 30, 2026, noninterest income was $8.3 million, an increase of $0.2 million compared with noninterest income of $8.1 million for the three months ended June 30, 2025. The increase was due to a $0.4 million increase in gain on the sale of residential mortgage loans, a $0.4 million increase in trade finance and other service charges and fees due to a higher balance of outstanding letters of credit, and a $0.2 million increase in loan servicing income because of a decline in prepayments. Partially offsetting these increases to noninterest income was a $0.8 million decline in gain on sales of SBA loans, due to a lower volume of loans sold.

Current wording

Noninterest income decreased 8.6%, or $0.9 million, to $9.0 million for the three months ended September 30, 2026 from $9.9 million for the three months ended September 30, 2025. The decrease was due to a $0.9 million decrease in BOLI income due to lower death benefits and a $0.9 million decrease in gain on the sale of residential mortgage loans due to a lower volume of loans sold, partially offset by a $0.4 million increase in gain on sale of SBA loans due to higher trade premiums.

Previous wording

During the three months ended June 30, 2026, the Company sold $20.9 million of SBA loans, recognizing a net gain of $1.3 million and trade premiums of 7.88%, compared with $35.4 million of SBA loans sold for a net gain of $2.2 million and trade premiums of 7.61% for the three months ended June 30, 2025. The Company sold $30.6 million of residential mortgage loans for a net gain of $0.4 million and trade premiums of 2.00% for the three months ended June 30, 2026. There were no residential loan sales for the three months ended June 30, 2025.

Current wording

During the three months ended September 30, 2026, the Company sold $34.0 million of SBA loans, recognizing a net gain of $2.3 million and trade premiums of 8.10%, compared with $32.6 million of SBA loans sold for a net gain of $1.9 million and trade premiums of 6.95% for the three months ended September 30, 2025. The Company sold $13.4 million of residential mortgage loans for a net gain of $0.3 million and trade premiums of 1.83% for the three months ended September 30, 2026. The Company sold $67.8 million of residential mortgage loans for a net gain of $1.2 million and trade premiums of 2.42% for the three months ended September 30, 2025.

Previous wording

For the six months ended June 30, 2026, noninterest income was $16.9 million, an increase of $1.1 million compared with noninterest income of $15.8 million for the six months ended June 30, 2025. The increase was due to a $0.7 million increase in gain on the sale of residential mortgage loans due to a higher volume of loans sold, a $0.5 million increase in trade finance and other service charges and fees, a $0.4 million increase in bank-owned life insurance income due to higher death benefit proceeds, and a $0.3 million increase in loan servicing income because of lower prepayments. Partially offsetting these increases to noninterest income was a $0.7 million decline in gain on sales of SBA loans due to a lower volume of loans sold.

Current wording

Noninterest income increased 0.9%, or $0.2 million, to $25.9 million for the nine months ended September 30, 2026 from $25.7 million for the nine months ended September 30, 2025. The increase was due to a $0.9 million increase in trade finance and other service charges and fees due primarily to the issuance of higher value letters of credit and a $0.4 million increase in all other operating income due primarily to higher loan servicing income, partially offset by a $0.5 million decrease in BOLI income due to lower death benefit proceeds, a $0.3 million decrease in gain on sale of SBA loans, and a $0.2 million decrease in gain on sale of residential mortgage loans.

Previous wording

During the six months ended June 30, 2026, the Company sold $53.5 million of SBA loans, recognizing a net gain of $3.4 million and trade premiums of 7.89%, compared with $67.6 million of SBA loans sold for a net gain of $4.2 million and trade premiums of 7.71% for the six months ended June 30, 2025. The Company sold $62.3 million of residential mortgage loans for a net gain of $0.8 million and trade premiums of 2.25% for the six months ended June 30, 2026, compared with $10.0 million of residential mortgage loans sold for a net gain of $0.2 million and trade premiums of 2.50% for the six months ended June 30, 2025.

Current wording

During the nine months ended September 30, 2026, the Company sold $87.4 million of SBA loans, recognizing a net gain of $5.7 million and trade premiums of 7.97%, compared with $100.2 million of SBA loans sold for a net gain of $6.0 million and trade premiums of 7.46% for the nine months ended September 30, 2025. The Company sold $75.8 million of residential mortgage loans for a net gain of $1.1 million and trade premiums of 2.18% for the nine months ended September 30, 2026, compared with $77.9 million of residential mortgage loans sold for a net gain of $1.3 million and trade premiums of 2.43% for the nine months ended September 30, 2025.

Previous wording

Income tax expense was $8.5 million and $6.1 million, representing effective income tax rates of 26.5% and 28.8% for the three months ended June 30, 2026 and 2025, respectively. Income tax expense for the six months ended June 30, 2026 and 2025 was $16.4 million and $13.6 million, respectively, representing effective tax rates of 26.3% and 29.3%, respectively. The lower effective tax rate for the three and six months ended June 30, 2026 reflects the tax benefit arising from the first-quarter vesting of performance stock units, as well as a favorable change in the State of California's apportionment calculation.

Current wording

Income tax expense was $8.5 million and $9.4 million, representing effective income tax rates of 26.5% and 29.9% for the three months ended September 30, 2026 and 2025, respectively. Income tax expense for the nine months ended September 30, 2026 and 2025 was $24.9 million and $23.0 million, respectively, representing effective tax rates of 26.3% and 29.5%, respectively. The lower effective tax rate for the three and nine months ended September 30, 2026 reflects the tax benefit arising from the first-quarter vesting of performance stock units, as well as a favorable change in the State of California's apportionment calculation.

Previous wording

Securities increased $16.0 million to $896.6 million at June 30, 2026 from $880.6 million at December 31, 2025, mainly attributed to $169.1 million in purchases (primarily U.S. Treasury securities), partially offset by $147.8 million in maturities and principal paydown.

Current wording

Securities decreased $11.1 million to $869.5 million at September 30, 2026 from $880.6 million at December 31, 2025, mainly attributed to $217.2 million in principal paydowns, calls, and maturities and $44.5 million from the sale of U.S. Treasury securities, partially offset by $279.8 million in purchases.

Previous wording

As of June 30, 2026 and December 31, 2025, loans (excluding loans held for sale), net of deferred loan fees and costs, discounts and the allowance for credit losses, were $6.46 billion and $6.49 billion, respectively. For the six months ended June 30, 2026, there was $749.8 million in new loan production, offset by $474.8 million in loan sales and payoffs, and amortization and other reductions of $303.1 million. Loan production consisted of commercial real estate loans of $301.5 million, residential mortgage loans of $79.1 million, commercial and industrial loans of $223.9 million, equipment financing agreements of $67.5 million and SBA loans of $77.8 million.

Current wording

Loans (excluding loans held for sale), net of deferred loan fees and costs, discounts and the allowance for credit losses, increased $4.4 million to $6.50 billion at September 30, 2026 from $6.49 billion at December 31, 2025. For the nine months ended September 30, 2026, there was $1.29 billion in new loan production, offset by $805.6 million in loan sales and payoffs, and amortization and other reductions of $482.4 million. Loan production consisted of commercial real estate loans of $528.4 million, residential mortgage loans of $156.2 million, commercial and industrial loans of $394.2 million, equipment financing agreements of $95.7 million, and SBA loans of $118.8 million.

Previous wording

Nonperforming loans consist of nonaccrual loans and loans 90 days or more past due and still accruing interest. Nonperforming assets consist of nonperforming loans and OREO. Loans are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless we believe the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on nonaccrual status earlier, depending upon the individual circumstances surrounding the loan’s delinquency. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans may be restored to accrual status when principal and interest become current and full repayment is expected, which generally occurs after sustained payment of six months. Interest income is recognized on the accrual basis for loans not meeting the criteria for nonaccrual. OREO consists of properties acquired by foreclosure or similar means.

Current wording

Nonperforming loans consist of nonaccrual loans and loans 90 days or more past due and still accruing interest. Nonperforming assets consist of nonperforming loans and OREO. Loans are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless we believe the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on nonaccrual status earlier, depending upon the individual circumstances surrounding the loan’s delinquency. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans may be restored to accrual status when principal and interest become current and full repayment is expected, which generally occurs after sustained payment of six months. Interest income is recognized on the accrual basis for loans not meeting the criteria for nonaccrual status. OREO consists of properties acquired by foreclosure or similar means.

Previous wording

Nonperforming loans were $9.9 million and $18.1 million as of June 30, 2026 and December 31, 2025, respectively, representing a decrease of $8.2 million, or 45.2%. The decrease was primarily due to a $9.7 million payment received during the three months ended March 31, 2026 on a commercial real estate office loan that was designated as nonaccrual during the first quarter of 2025. As of June 30, 2026 and December 31, 2025, 1.2% and 1.3% of equipment financing agreements were on nonaccrual status, respectively. At June 30, 2026 and December 31, 2025, there were no loans 90 days or more past due and still accruing interest.

Current wording

Nonperforming loans decreased 50.6%, or $9.2 million, to $8.9 million at September 30, 2026 from $18.1 million at December 31, 2025. The decrease was primarily due to a $9.7 million payment received during the three months ended March 31, 2026 on a commercial real estate office loan that was designated as nonaccrual during the first quarter of 2025. Additionally, the $21.2 million commercial real estate loan mentioned previously was included in downgrades into nonperforming loans and subsequently included in charge-offs and transfers to loans held for sale during the three months ended September 30, 2026. As of September 30, 2026 and December 31, 2025, 1.0% and 1.3% of equipment financing agreements were on nonaccrual status, respectively. At September 30, 2026 and December 31, 2025, there were no loans 90 days or more past due and still accruing interest.

Previous wording

The $9.9 million of nonperforming loans as of June 30, 2026 had specific allowances of $2.6 million, compared with $18.1 million of nonperforming loans with specific allowances of $3.4 million as of December 31, 2025.

Current wording

The $8.9 million of nonperforming loans as of September 30, 2026 had specific allowances of $1.9 million, compared with $18.1 million of nonperforming loans with specific allowances of $3.4 million as of December 31, 2025.

Previous wording

Nonperforming assets were $9.9 million at June 30, 2026, or 0.12% of total assets, compared to $20.1 million, or 0.26% of total assets, at December 31, 2025. Excluded from nonperforming assets is repossessed personal property associated with equipment finance agreements of $0.3 million and $0.6 million at June 30, 2026 and December 31, 2025, respectively.

Current wording

Nonperforming assets decreased $10.1 million to $10.0 million, or 0.12% of total assets, at September 30, 2026 from $20.1 million, or 0.26% of total assets at December 31, 2025. The $10.1 million decrease reflects the impact of the previously mentioned payment received on a commercial real estate office loan. Excluded from nonperforming assets is repossessed personal property associated with equipment finance agreements of $0.3 million and $0.6 million at September 30, 2026 and December 31, 2025, respectively.

Previous wording

The modified loan above was current at June 30, 2026. The Company has not committed to lend any additional amounts to the borrower included in the table above as of June 30, 2026. During the six months ended June 30, 2026 and 2025, there were no payment defaults on loans modified within the preceding 12 months.

Current wording

The modified loan above was current at September 30, 2026. The Company has not committed to lend any additional amounts to the borrower included in the table above as of September 30, 2026. During the nine months ended September 30, 2026 and 2025, there were no payment defaults on loans modified within the preceding 12 months.

Previous wording

No loans were modified to borrowers experiencing financial difficulty during the three months ended June 30, 2026 or during the six months ended June 30, 2025.

Current wording

No loans were modified to borrowers experiencing financial difficulty during the three months ended September 30, 2026 or during the nine months ended September 30, 2025.

Previous wording

The allowance for credit losses was $70.5 million and $69.9 million at June 30, 2026 and December 31, 2025, respectively. The allowance attributed to individually evaluated loans was $2.6 million and $3.4 million as of June 30, 2026 and December 31, 2025, respectively. The allowance attributed to collectively evaluated loans was $67.9 million and $66.5 million as of June 30, 2026 and December 31, 2025, respectively.

Current wording

The allowance for credit losses increased $0.9 million to $70.8 million at September 30, 2026 from $69.9 million at December 31, 2025. The allowance attributed to individually evaluated loans increased $3.7 million to $7.1 million at September 30, 2026 from $3.4 million at December 31, 2025, respectively. The allowance attributed to collectively evaluated loans decreased $2.8 million to $63.7 million at September 30, 2026 from $66.5 million at December 31, 2025.

Previous wording

As of June 30, 2026 and December 31, 2025, the allowance for credit losses related to off-balance sheet items, primarily unfunded loan commitments, was $2.0 million and $2.3 million, respectively. The Bank closely monitors each borrower’s repayment capabilities while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality, prevailing economic conditions and economic forecasts, we believe these allowances were adequate for current expected lifetime losses in the loan portfolio and off-balance sheet exposure as of June 30, 2026.

Current wording

The allowance for credit losses related to off-balance sheet items, primarily unfunded loan commitments, decreased $0.5 million to $1.8 million at September 30, 2026 from $2.3 million at December 31, 2025. The Bank closely monitors each borrower’s repayment capabilities while funding existing commitments to ensure losses are minimized. Based on management’s evaluation and analysis of portfolio credit quality, prevailing economic conditions and economic forecasts, we believe these allowances were adequate for current expected lifetime losses in the loan portfolio and off-balance sheet exposure as of September 30, 2026.

Previous wording

For the three months ended June 30, 2026, gross charge-offs decreased $10.5 million from the same period in 2025. Gross recoveries for the three months ended June 30, 2026 decreased $0.4 million from the same period in 2025. Gross charge-offs for the three months ended June 30, 2026 and 2025 included $1.6 million and $2.9 million of equipment finance agreement charge-offs, respectively. Gross charge-offs for the three months ended June 30, 2025 also included an $8.6 million charge-off of a commercial real estate loan designated as nonaccrual in the first quarter of 2025. Gross recoveries for the three months ended June 30, 2026 and 2025 included $0.6 million of recoveries on equipment finance agreements for both periods.

Current wording

September 30, 2026 included a $3.2 million charge-off of a $21.2 million commercial real estate loan upon its transfer to the held-for-sale category. Gross charge-offs for the three months ended September 30, 2026 and 2025 included $1.4 million and $2.4 million of equipment finance agreement charge-offs, respectively. Gross recoveries for the three months ended September 30, 2026 and 2025 included $0.6 million and $0.8 million of recoveries on equipment finance agreements, respectively.

Previous wording

For the six months ended June 30, 2026, gross charge-offs decreased $10.5 million from the same period in 2025. Gross recoveries for the six months ended June 30, 2026 decreased $1.1 million from the same period in 2025. Gross charge-offs for the six months ended June 30, 2026 and 2025 included $4.5 million and $5.7 million of equipment finance agreement charge-offs, respectively. Gross charge-offs for the six months ended June 30, 2025 also included the previously mentioned $8.6 million charge-off of a commercial real estate loan. Gross recoveries for the six months ended June 30, 2026 and 2025 included $1.0 million and $1.4 million of recoveries on equipment financing agreements, respectively.

Current wording

Gross charge-offs decreased $8.1 million to $10.1 million for the nine months ended September 30, 2026 from $18.2 million for the nine months ended September 30, 2025. Gross recoveries decreased $3.5 million to $1.9 million for the nine months ended September 30, 2026 from $5.4 million for the nine months ended September 30, 2025. Gross charge-offs for the nine months ended September 30, 2026 and 2025 included $5.9 million and $8.1 million of equipment finance agreement charge-offs, respectively. Gross charge-offs for the nine months ended September 30, 2025 also included an $8.6 million charge-off of a commercial real estate loan. Gross recoveries for the nine months ended September 30, 2026 and 2025 included $1.7 million and $2.2 million of recoveries on equipment financing agreements, respectively.

Previous wording

Includes State of California time deposits of $90.0 million and $60.0 million at June 30, 2026 and December 31, 2025, respectively.

Current wording

Includes State of California time deposits of $90.8 million and $90.6 million at September 30, 2026 and December 31, 2025, respectively.

Previous wording

Includes State of California time deposits of $90.0 million at June 30, 2026 and December 31, 2025.

Current wording

Includes State of California time deposits of $90.5 million and $60.2 million at September 30, 2026 and December 31, 2025, respectively.

Previous wording

Total deposits were $6.96 billion and $6.68 billion as of June 30, 2026 and December 31, 2025, respectively, representing an increase of $277.7 million, or 4.2%. While all deposit types increased, deposit growth was primarily driven by a $151.1 million increase in time deposits and a $120.2 million increase in noninterest-bearing demand deposits. At June 30, 2026, the loan-to-deposit ratio was 94.0% compared to 98.3% at December 31, 2025.

Current wording

Total deposits increased 5.7%, or $378.1 million, to $7.06 billion at September 30, 2026 from $6.68 billion at December 31, 2025. While all deposit types increased, growth was primarily driven by a $130.8 million increase in noninterest-bearing demand deposits and a $128.7 million increase in time deposits. At September 30, 2026, the loan-to-deposit ratio was 93.1% compared to 98.3% at December 31, 2025.

Previous wording

As of June 30, 2026 and December 31, 2025, the aggregate amount of uninsured deposit accounts (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $3.12 billion and $2.92 billion, respectively. For time deposits, the aggregate amount exceeding the insurance limit was $919.1 million and $750.8 million, respectively. Other uninsured deposits, such as demand and money market and savings deposits, were $2.20 billion and $2.17 billion, respectively. At June 30, 2026 and December 31, 2025, $1.47 billion and $1.34 billion of total uninsured deposits, respectively, were in accounts with balances of $5.0 million or more.

Current wording

As of September 30, 2026 and December 31, 2025, the aggregate amount of uninsured deposit accounts (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance) was $3.25 billion and $2.92 billion, respectively. For time deposits, the aggregate amount exceeding the insurance limit was $891.4 million and $750.8 million, respectively. Other uninsured deposits, such as demand and money market and savings deposits, were $2.36 billion and $2.17 billion, respectively. At September 30, 2026 and December 31, 2025, $1.64 billion and $1.34 billion of total uninsured deposits, respectively, were in accounts with balances of $5.0 million or more.

Previous wording

The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits, and State of California time deposits. As of June 30, 2026, the Bank had no outstanding FHLB advances, compared with $150.0 million of FHLB advances as of December 31, 2025.

Current wording

The Bank’s wholesale funds historically consisted of FHLB advances, brokered deposits, and State of California time deposits. As of September 30, 2026, the Bank had no outstanding FHLB advances, compared with $150.0 million of FHLB advances as of December 31, 2025. During the third quarter of 2026, the Company entered into a pay-fixed, receive-variable interest rate swap designated as a cash flow hedge of interest rate risk on our State of California time deposits, which had a total balance of $181.3 million at September 30, 2026. See “Note 15 – Derivatives and Hedging Activities" for more details.

Previous wording

Borrowings mostly take the form of FHLB advances. At June 30, 2026, there were no outstanding FHLB advances. At December 31, 2025, FHLB advances were $150.0 million, all of which were term advances. Funds from deposit growth not used to fund loan production were used to pay off borrowings. The weighted-average interest rate of all FHLB advances at December 31, 2025 was 4.02%. There were no FHLB advances outstanding at any month-end date during the six months ended June 30, 2026. The maximum amount of FHLB advances outstanding at any month-end date during the six months ended June 30, 2025 was $150.0 million. There were no contractual maturities of FHLB advances greater than twelve months at December 31, 2025.

Current wording

Borrowings mostly take the form of FHLB advances. At September 30, 2026, there were no outstanding FHLB advances. At December 31, 2025, FHLB advances were $150.0 million, all of which were term advances. Funds from deposit growth not used to fund loan production were used to pay off borrowings. The weighted-average interest rate of all FHLB advances at December 31, 2025 was 4.02%. There were no FHLB advances outstanding at any month-end date during the nine months ended September 30, 2026. The maximum amount of FHLB advances outstanding at any month-end date during the nine months ended September 30, 2025 was $150.0 million. There were no contractual maturities of FHLB advances greater than twelve months at December 31, 2025.

Previous wording

Subordinated debentures were $130.8 million and $130.5 million as of June 30, 2026 and December 31, 2025, respectively. Subordinated debentures included fixed-to-floating subordinated notes of $108.8 million and $108.7 million as of June 30, 2026 and December 31, 2025, respectively, and junior subordinated deferrable interest debentures of $21.9 million and $21.7 million as of June 30, 2026 and December 31, 2025, respectively. On July 30, 2026, the Company issued $55.0 million of 6.50% Fixed-to-Floating Subordinated Notes with a maturity date of July 31, 2036 and provided notice to the trustee of its intent to redeem all of $110.0 million of existing subordinated debentures. See “Note 8 – Borrowings and Subordinated Debentures” and “Note 17 - Subsequent Events” for more details.

Current wording

Subordinated debentures decreased $54.4 million to $76.1 million at September 30, 2026 from $130.5 million at December 31, 2025. During the third quarter of 2026, the Company issued $55.0 million of 6.50% Fixed-to-Floating Subordinated Notes with a maturity date of July 31, 2036 and redeemed all $110.0 million of existing Fixed-to-Floating subordinated debentures, which had a maturity date of September 1, 2031. See “Note 8 – Borrowings and Subordinated Debentures” for more details.

Previous wording

Stockholders’ equity was $812.7 million and $796.4 million as of June 30, 2026 and December 31, 2025, respectively. The $16.3 million increase included net income of $46.1 million and share-based compensation of $1.6 million, partially offset by $16.9 million of dividends paid, $9.6 million in share repurchases, a $3.3 million increase in unrealized after-tax losses on securities available for sale, and $1.5 million in shares purchased to satisfy employees’ tax liabilities for the vesting of stock compensation. The Company repurchased 345,707 shares of common stock during the six months ended June 30, 2026, at an average share price of $27.90. At June 30, 2026, 1,991,495 shares remain under the Company’s share repurchase program.

Current wording

Stockholders’ equity increased $11.9 million to $808.3 million at September 30, 2026 from $796.4 million at December 31, 2025. The increase included net income of $69.7 million and share-based compensation of $2.6 million, partially offset by $25.2 million of dividends paid, $14.4 million in share repurchases, a $19.8 million increase in unrealized after-tax losses on securities available for sale, and $1.6 million in shares purchased to satisfy employees’ tax liabilities for the vesting of stock compensation. The Company repurchased 496,755 shares of common stock during the nine months ended September 30, 2026, at an average share price of $29.08. At September 30, 2026, 1,840,447 shares remain under the Company’s share repurchase program.

Previous wording

The Company’s ability to pay dividends to stockholders depends in part upon dividends it receives from the Bank. California law restricts the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to stockholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the Department of Financial Protection and Innovation (“DFPI”), in an amount not exceeding the greater of: (1) retained earnings of the Bank; (2) net income of the Bank for its last fiscal year; or (3) the net income of the Bank for its current fiscal year. The Company paid dividends of $16.9 million ($0.56 per share) for the six months ended June 30, 2026 and $32.6 million ($1.08 per share) for the year 2025. As of July 1, 2026, the Bank had the ability to pay dividends of approximately $44.4 million, after giving effect to the $0.28 dividend declared on July 23, 2026, for the third quarter of 2026, without the prior approval of the Commissioner of the DFPI.

Current wording

The Company’s ability to pay dividends to stockholders depends in part upon dividends it receives from the Bank. California law restricts the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to stockholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the Department of Financial Protection and Innovation (“DFPI”), in an amount not exceeding the lesser of: (1) retained earnings of the Bank; or (2) net income of the Bank for its last three fiscal years, less the amount of any distributions made by the Bank or by any majority-owned subsidiary of the Bank to the shareholders of the Bank during such period. The Company paid dividends of $25.2 million ($0.84 per share) for the nine months ended September 30, 2026 and $32.6 million ($1.08 per share) for the year 2025. As of October 1, 2026, the Bank had the ability to pay dividends of approximately $26.4 million, after giving effect to the $0.28 dividend declared on October 29, 2026, for the fourth quarter of 2026, without the prior approval of the Commissioner of the DFPI.

Previous wording

At June 30, 2026, the Bank’s total risk-based capital ratio of 14.48%, Tier 1 risk-based capital ratio of 13.40%, common equity Tier 1 capital ratio of 13.40% and Tier 1 leverage capital ratio of 11.71% placed the Bank in the “well capitalized” category pursuant to capital rules, which is defined as institutions with a total risk-based capital ratio equal to or greater than 10.00%, Tier 1 risk-based capital ratio equal to or greater than 8.00%, common equity Tier 1 capital ratios equal to or greater than 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.

Current wording

At September 30, 2026, the Bank’s total risk-based capital ratio of 14.30%, Tier 1 risk-based capital ratio of 13.25%, common equity Tier 1 capital ratio of 13.25% and Tier 1 leverage capital ratio of 11.43% placed the Bank in the “well capitalized” category pursuant to capital rules, which is defined as institutions with a total risk-based capital ratio equal to or greater than 10.00%, Tier 1 risk-based capital ratio equal to or greater than 8.00%, common equity Tier 1 capital ratios equal to or greater than 6.50%, and Tier 1 leverage capital ratio equal to or greater than 5.00%.