CVB FINANCIAL CORP

Previous wording

CRITICAL ACCO UNTING POLICIES

Current wording

CRITICAL ACCO UNTING POLICIES AND ESTIMATES

Previous wording

The discussion and analysis of the Company’s unaudited condensed consolidated financial statements are based upon the Company’s unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

The discussion and analysis of the Company’s unaudited condensed consolidated financial statements are based upon the Company’s unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures at the date of and for the periods presented in the financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Previous wording

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following is a summary of the more judgmental and complex accounting estimates and principles. In each area, we have identified the variables we believe are most important in our estimation process. We utilize information available to us to make the necessary estimates to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in the key variables and information could change future valuations and impact the results of operations.

Current wording

Certain accounting policies include critical accounting estimates that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company's financial condition or results of operations. The following is a summary of the Company's critical accounting estimates. In each area, we have identified the variables we believe are most important in our estimation process. We utilize information available to us to make the necessary estimates to value the related assets and liabilities. Actual results may differ from our estimates, and future changes in significant assumptions or other information used in making these estimates could change future valuations and affect the results of operations.

Previous wording

Our significant accounting policies are described in greater detail in our 2025 Form 10-K in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 3 – Summary of Significant Accounting Policies included in the 2025 Form 10-K.

Current wording

There have been no material changes to the methodologies used in developing these estimates during the three and nine months ended September 30, 2026. Our critical accounting estimates and significant accounting policies are described in greater detail in our 2025 Form 10-K in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 3 – Summary of Significant Accounting Policies included in the 2025 Form 10-K.

Previous wording

The Company's financial results for the three and six months ended June 30, 2026 reflect the impact of the acquisition of Heritage completed on April 17, 2026.

Current wording

The Company's financial results for the three and nine months ended September 30, 2026 include the results of operations of Heritage from the April 17, 2026 acquisition date, which affects the comparability of the current periods to prior periods.

Previous wording

For the second quarter of 2026, we reported net earnings of $48.3 million, or diluted earnings per share of $0.29, compared with $50.6 million, or diluted earnings per share of $0.37 for the second quarter of 2025. Net earnings for the second quarter of 2026 generated an annualized return on average equity (“ROAE”) of 6.41%, an annualized return on average tangible common equity (“ROATCE”) of 10.85%, and an annualized return on average assets (“ROAA”) of 0.97%, compared with 9.06%, 14.08%, and 1.34%, respectively, for the second quarter of 2025. Our net interest margin (“NIM”), on a tax equivalent basis, was 3.72% for the second quarter of 2026, while our efficiency ratio was 63.75%. Excluding acquisition expense and provision for unfunded commitments, our adjusted efficiency ratio was 43.88% for the second quarter of 2026, compared with 45.55% for the second quarter of 2025. ROATCE and the adjusted efficiency ratio are non-GAAP financial measures. For additional details, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — GAAP to Non-GAAP Reconciliations in this Form 10-Q.

Current wording

For the third quarter of 2026, we reported net earnings of $78.1 million, or diluted earnings per share of $0.44, compared with $52.6 million, or diluted earnings per share of $0.38 for the third quarter of 2025. Net earnings for the third quarter of 2026 generated an annualized return on average equity (“ROAE”) of 9.70%, an annualized return on average tangible common equity (“ROATCE”) of 16.22%, and an annualized return on average assets (“ROAA”) of 1.48%, compared with 9.19%, 14.11%, and 1.35%, respectively, for the third quarter of 2025. Our net interest margin (“NIM”), on a tax-equivalent basis, was 3.89% for the third quarter of 2026, while our efficiency ratio was 46.27%, compared with a NIM of 3.33% and an efficiency ratio of 45.56% for the same period last year. Excluding acquisition expense and provision for unfunded commitments, our adjusted efficiency ratio was 42.10% for the third quarter of 2026, compared with 45.17% for the third quarter of 2025. ROATCE and the adjusted efficiency ratio are non-GAAP financial measures. For additional details, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — GAAP to Non-GAAP Reconciliation in this Form 10-Q.

Previous wording

For the six months ended June 30, 2026, net earnings was $99.3 million, or diluted earnings per share of $0.65, compared with $101.7 million, or diluted earnings per share of $0.73 for the six months ended June 30, 2025. Net earnings for the six months ended June 30, 2026 produced an annualized ROAE of 7.47%, ROATCE of 11.99%, and ROAA of 1.13% compared with 9.18%, 14.29%, and 1.35%, respectively, for the same period last year. Our NIM, on a tax equivalent basis, was 3.60% for six months ended June 30, 2026, while our efficiency ratio was 56.15%, compared with a NIM of 3.31% and an efficiency ratio of 46.12% for the same period last year. Excluding acquisition expense and the provision for unfunded commitments, our adjusted efficiency ratio was 44.19% for the six months ended June 30, 2026, compared with 45.92% for the same period last year.

Current wording

For the nine months ended September 30, 2026, net earnings were $177.4 million, or diluted earnings per share of $1.11, compared with $154.3 million, or diluted earnings per share of $1.11 for the nine months ended September 30, 2025. Net earnings for the nine months ended September 30, 2026 generated an annualized ROAE of 8.31%, ROATCE of 13.55%, and ROAA of 1.26%, compared with 9.18%, 14.23%, and 1.35%, respectively, for the same period last year. Our NIM, on a tax-equivalent basis, was 3.71% for the nine months ended September 30, 2026, while our efficiency ratio was 52.34%, compared with a NIM of 3.32% and an efficiency ratio of 45.93% for the same period last year. Excluding acquisition expense and the provision for unfunded commitments, our adjusted efficiency ratio was 43.38% for the nine months ended September 30, 2026, compared with 45.67% for the same period last year.

Previous wording

For the second quarter of 2026, net interest income was $162.4 million, an increase of $50.8 million, or 45.5%, from the second quarter of 2025. The increase was primarily attributable to a $57.9 million increase in interest income driven by a $4.01 billion increase in average interest-earning assets and a 34 basis point increase in the yield on earning assets. The increase in interest income was offset by a $7.1 million increase in interest expense attributable to a $2.83 billion increase in average interest-bearing deposits and customer repurchase agreements. For the six months ended June 30, 2026, net interest income was $280.3 million, an increase of $58.2 million, or 26.2%, compared with the same period last year.

Current wording

For the third quarter of 2026, net interest income was $179.1 million, an increase of $63.5 million, or 54.9%, from the third quarter of 2025. The increase was primarily attributable to a $70.5 million increase in interest income driven by a $4.58 billion increase in average interest-earning assets and a 47 basis point increase in the yield on interest-earning assets. The increase in interest income was partially offset by a $7.0 million increase in interest expense primarily attributable to a $2.86 billion increase in average interest-bearing deposits and customer repurchase agreements, partially offset by a 7 basis point decrease in the cost of deposits and customer repurchase agreements. For the nine months ended September 30, 2026, net interest income was $459.3 million, an increase of $121.7 million, or 36.0%, from the same period last year.

Previous wording

At June 30, 2026, total assets were $21.18 billion, an increase of $5.55 billion, or 35.52%, from total assets of $15.63 billion at December 31, 2025. Interest-earning assets were $18.69 billion at June 30, 2026, an increase of $4.69 billion, or 33.56%, compared with $13.99 billion at December 31, 2025. The increase in interest-earning assets was primarily due to a $3.32 billion increase in total loans, a $728.0 million increase in cash and cash equivalents, and a $722.8 million increase in investment securities. The increase in total assets primarily reflected the impact of the Heritage acquisition completed on April 17, 2026, which added approximately $5.41 billion of assets, partially offset by balance sheet optimization activities during the quarter.

Current wording

At September 30, 2026, total assets were $20.52 billion, an increase of $4.89 billion, or 31.3%, from $15.63 billion at December 31, 2025. Interest-earning assets were $18.02 billion at September 30, 2026, an increase of $4.03 billion, or 28.8%, from $13.99 billion at December 31, 2025. The increase in interest-earning assets was primarily due to a $3.42 billion increase in total loans and a $769.7 million increase in investment securities, partially offset by a $120.3 million decrease in cash and cash equivalents. The increase in total assets primarily reflected the impact of the Heritage acquisition completed on April 17, 2026, which added approximately $5.41 billion of assets, partially offset by balance sheet optimization activities following the acquisition.

Previous wording

Total investment securities were $5.68 billion at June 30, 2026, an increase of $722.8 million, or 14.6%, from $4.95 billion at December 31, 2025. The increase was primarily attributable to $1.02 billion of investment securities acquired in the Heritage acquisition, of which $519.0 million was retained and $488.2 million were sold upon completion of the merger as part of the Company's balance sheet optimization strategy, as well as approximately $511.5 million of purchases of AFS securities during the second quarter of 2026. At June 30, 2026, investment securities held-to-maturity (“HTM”) totaled $2.22 billion, a decrease of $51.9 million, or 2.3%, from $2.27 billion at December 31, 2025. At June 30, 2026, available-for-sale (“AFS”) investment securities totaled $3.46 billion, inclusive of a pre-tax net unrealized loss of $323.5 million. AFS securities increased by $774.7 million, or 28.87%, from $2.68 billion at December 31, 2025. The pre-tax unrealized loss increased by $15.7 million from December 31, 2025. Our average tax equivalent yield on investments was 2.74% for the second quarter of 2026, compared to 2.62% for the second quarter of 2025.

Current wording

Total investment securities were $5.72 billion at September 30, 2026, an increase of $769.7 million, or 15.5%, from $4.95 billion at December 31, 2025. The increase was primarily attributable to $1.02 billion of investment securities acquired in the Heritage acquisition, of which $528.2 million was retained and $488.2 million was sold following completion of the acquisition as part of the Company's balance sheet optimization strategy, as well as approximately $796.9 million of purchases of AFS securities during the first nine months of 2026. At September 30, 2026, investment securities held-to-maturity (“HTM”) totaled $2.20 billion, a decrease of $75.1 million, or 3.3%, from $2.27 billion at December 31, 2025. At September 30, 2026, AFS investment securities totaled $3.53 billion, inclusive of a pre-tax net unrealized loss of $439.0 million. AFS securities increased by $844.8 million, or 31.5%, from $2.68 billion at December 31, 2025. The pre-tax unrealized loss increased by $131.2 million from December 31, 2025. Our average tax-equivalent yield on investments was 2.97% for the third quarter of 2026, compared to 2.66% for the third quarter of 2025.

Previous wording

Fair value hedging transactions with $700 million notional pay-fixed interest rate swaps, had a fair value which totaled $3.8 million and was reflected as an asset at June 30, 2026. The fair value of these instruments totaled $8.6 million and were reflected as a liability at December 31, 2025. These instruments generated negative interest income of $100,000 for the second quarter of 2026, compared to interest income of $1.2 million for the second quarter of 2025. Refer to Note 11 –Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.

Current wording

Pay-fixed interest rate swaps designated as fair value hedges with an aggregate notional amount of $700 million had a fair value which totaled $23.7 million and was reflected as an asset at September 30, 2026. At December 31, 2025, the fair value of these instruments totaled $8.6 million and was reflected as a liability. These instruments resulted in negative interest income of $165,000 for the third quarter of 2026, compared to interest income of $1.3 million for the third quarter of 2025. Refer to Note 11 –Derivative Financial Instruments of the notes to the consolidated financial statements of this report for additional information.

Previous wording

Total loans and leases, at amortized cost, of $12.02 billion at June 30, 2026, increased by $3.32 billion, or 38.1%, from December 31, 2025. The increase was primarily attributable to the Heritage acquisition, which added $3.10 billion of loans held for investment recorded at fair value as of the acquisition date, as well as organic loan growth. To further optimize the balance sheet, the Company sold SFR mortgage pools acquired from Heritage at their fair value of $327.5 million during the second quarter of 2026. The increase in total loans and leases included increases of $2.41 billion in commercial real estate loans, $505.3 million in commercial and industrial loans, $172.2 million in construction loans, $166.2 million in consumer loans, $159.2 million in SBA loans, and $59.6 million in SFR mortgage loans. Our average loan yields were 5.53% for the quarter ended June 30, 2026, compared with 5.22% for the second quarter of 2025.

Current wording

Total loans and leases, at amortized cost, of $12.12 billion at September 30, 2026, increased by $3.42 billion, or 39.4%, from December 31, 2025. The increase was primarily attributable to the Heritage acquisition, which added $3.10 billion of loans held for investment recorded at fair value as of the acquisition date, as well as organic loan growth. To further optimize the balance sheet, the Company sold SFR mortgage loan pools acquired from Heritage at their fair value of $327.5 million during the second quarter of 2026 and redeployed the proceeds into higher-yielding investment securities. The increase in total loans and leases included increases of $2.46 billion in commercial real estate loans, $466.2 million in commercial and industrial loans, $191.2 million in construction loans, $187.9 million in SBA loans, $158.0 million in consumer and other loans, and $56.6 million in SFR mortgage loans. Our average loan yields were 5.66% for the quarter ended September 30, 2026, compared with 5.25% for the third quarter of 2025.

Previous wording

The allowance for credit losses totaled $126.7 million at June 30, 2026, compared with $77.2 million at December 31, 2025. There was no provision for credit losses for either the second quarter of 2026 or 2025. The $49.5 million increase was primarily the result of the $46.9 million allowance for credit losses established for the loans acquired from Heritage and a $3 million provision for credit losses incurred in the first quarter of 2026.

Current wording

The allowance for credit losses totaled $125.6 million at September 30, 2026, compared with $77.2 million at December 31, 2025. The $48.4 million increase was primarily the result of the $46.6 million initial allowance for credit losses established for the loans acquired from Heritage.

Previous wording

Noninterest-bearing deposits were $8.61 billion at June 30, 2026, an increase of $1.81 billion, or 26.6%, compared with $6.80 billion at December 31, 2025. The increase was primarily the result of $1.2 billion of noninterest-bearing deposits assumed in the Heritage merger. At June 30, 2026, noninterest-bearing deposits were 52.8% of total deposits, compared with 56.33% at December 31, 2025. The decline in the proportion of noninterest-bearing deposits reflected the mix of deposits assumed in the Heritage acquisition.

Current wording

Noninterest-bearing deposits were $8.42 billion at September 30, 2026, an increase of $1.62 billion, or 23.8%, compared with $6.80 billion at December 31, 2025. The increase was primarily the result of $1.2 billion of noninterest-bearing deposits assumed in the Heritage acquisition. At September 30, 2026, noninterest-bearing deposits were 53.50% of total deposits, compared with 56.33% at December 31, 2025. The decline in the proportion of noninterest-bearing deposits primarily reflected the deposit mix acquired in the Heritage acquisition, which included a higher proportion of interest-bearing deposits.

Previous wording

Interest-bearing deposits were $7.68 billion at June 30, 2026, an increase of $2.41 billion, or 45.7%, when compared with $5.27 billion at December 31, 2025. The increase in interest-bearing deposits primarily reflected $3.5 billion of interest-bearing deposits assumed in connection with the Heritage acquisition, partially offset by the maturity of $300.0 million of brokered CDs that were not renewed during the second quarter of 2026. Customer repurchase agreements totaled $563.4 million at June 30, 2026, compared with $490.6 million at December 31, 2025.

Current wording

Interest-bearing deposits were $7.31 billion at September 30, 2026, an increase of $2.04 billion, or 38.8%, when compared with $5.27 billion at December 31, 2025. The increase in interest-bearing deposits primarily reflected $3.5 billion of interest-bearing deposits assumed in connection with the Heritage acquisition, partially offset by the maturity of $300 million of brokered CDs that were not renewed during the second quarter of 2026 and decreases in legacy deposits. Customer repurchase agreements totaled $571.9 million at September 30, 2026, compared with $490.6 million at December 31, 2025.

Previous wording

Total deposits and customer repurchase agreements totaled $16.85 billion at June 30, 2026, an increase from December 31, 2025 of $4.29 billion, including $4.75 billion of total deposits assumed in the Heritage acquisition. Our average cost of total deposits including customer repurchase agreements was 0.86% for the quarter ended June 30, 2026, compared to 0.87% for the quarter ended June 30, 2025.

Current wording

Total deposits and customer repurchase agreements totaled $16.30 billion at September 30, 2026, an increase of $3.74 billion from December 31, 2025. The Heritage acquisition added approximately $4.75 billion of total deposits at acquisition date. There were no brokered deposits at September 30, 2026, compared to $300 million at December 31, 2025. Our average cost of total deposits including customer repurchase agreements was 0.83% for the quarter ended September 30, 2026, compared to 0.90% for the quarter ended September 30, 2025.

Previous wording

At June 30, 2026, total borrowings were $539.0 million, consisting of $500.0 million of FHLB advances and $39.0 million of subordinated debt assumed in the Heritage acquisition, compared with $500.0 million of FHLB advances at December 31, 2025. At June 30, 2026, FHLB advances consisted of $300.0 million of three-month advances that replaced maturing brokered CDs and were designated in related pay-fixed, receive-floating interest rate swaps accounted for as cash flow hedges, under which the Company pays a fixed rate of 4.10% and receives SOFR and a $200.0 million advance bearing interest at 4.27% maturing in May 2027.

Current wording

At September 30, 2026, total FHLB and other borrowings were $579.3 million, consisting of $540 million of FHLB advances and $39.3 million of subordinated debt assumed in the Heritage acquisition, compared with $500 million of FHLB advances at December 31, 2025. At September 30, 2026, FHLB advances consisted of two $150 million three-month FHLB advances bearing a weighted average fixed interest rate of 4.22%, a $200 million advance bearing a fixed rate of 4.27% and maturing in May 2027, and a $40.0 million overnight advance bearing interest at 4.36%, which matured on October 1, 2026. The two $150 million three-month advances replaced maturing brokered CDs during the second quarter of 2026 and were designated as hedged transactions under the related pay-fixed, receive-floating interest rate swaps, which mature in the first quarter of 2027.

Previous wording

Total stockholders' equity was $3.17 billion at June 30, 2026, an increase of $874.5 million compared with $2.30 billion at December 31, 2025. The increase was primarily attributable to $840.2 million of common shares issued and exchanged as a result of the Heritage acquisition and $99.3 million in net earnings, partially offset by $62.5 million in cash dividends declared and $5.1 million of common stock repurchases. During the second quarter of 2026, the Company repurchased 241,034 shares under the 2026 Repurchase Program at an average price of $21.06 per share for an aggregate purchase price of $5.1 million. Our tangible book value per share at June 30, 2026 was $11.07, which compares to $11.24 at December 31, 2025. Tangible book value per share is a non-GAAP financial measure. For additional details, refer to Item 2. –MD&A — GAAP to Non-GAAP Reconciliation.

Current wording

Total stockholders' equity was $3.13 billion at September 30, 2026, an increase of $835.1 million compared with $2.30 billion at December 31, 2025. The increase was primarily attributable to $840.2 million of common shares issued and exchanged as a result of the Heritage acquisition and $177.4 million in net earnings, partially offset by $97.8 million in cash dividends declared and $22.7 million of common stock repurchases. During the first nine months of 2026, the Company purchased approximately 1.0 million shares under the 2026 Repurchase Program, at an average price of $22.22 per share for an aggregate purchase price of $22.6 million. Our tangible book value per share was $10.92 at September 30, 2026, compared with $11.24 at December 31, 2025. Tangible book value per share is a non-GAAP financial measure. For additional details, refer to Item 2. –MD&A — GAAP to Non-GAAP Reconciliation.

Previous wording

Our capital ratios under the revised capital framework referred to as Basel III remain well-above regulatory requirements. As of June 30, 2026, the Company’s Tier 1 leverage capital ratio was 11.7%, Common Equity Tier 1 (“CET1”) ratio was 14.7%, Tier 1 risk-based capital ratio was 14.7%, and total risk-based capital ratio was 15.6%. Refer to Item 2. –MD&A —Analysis of Financial Condition – Capital Resources.

Current wording

Our regulatory capital ratios remained well above applicable regulatory requirements at September 30, 2026. As of September 30, 2026, the Company’s Tier 1 leverage capital ratio was 11.24%, Common Equity Tier 1 (“CET1”) ratio was 14.82%, Tier 1 risk-based capital ratio was 14.82%, and total risk-based capital ratio was 15.69%. Refer to Item 2. –MD&A —Analysis of Financial Condition – Capital Resources.

Previous wording

The return on average tangible common equity is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance. The following is a reconciliation of net income, adjusted for tax-effected amortization of intangibles, to net income computed in accordance with GAAP, a reconciliation of average tangible common equity to the Company's average stockholders' equity computed in accordance with GAAP, as well as a calculation of return on average tangible common equity.

Current wording

The return on average tangible common equity is a non-GAAP disclosure. The following is a reconciliation of net income, adjusted for tax-effected amortization of intangibles, to net income computed in accordance with GAAP, a reconciliation of average tangible common equity to the Company's average stockholders' equity computed in accordance with GAAP, as well as a calculation of return on average tangible common equity.

Previous wording

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax equivalent (“TE”) basis by adjusting interest income utilizing the federal statutory corporate tax rates of 21% in effect for the three and six months ended June 30, 2026 and 2025. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. We manage interest rate risk within policy limits approved by the Board of Directors, which guides and limits the interest rate risk over short-term and long-term horizons. Sources of interest rate risk include differences in maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, and embedded options in assets or liabilities. The mix of interest-earning assets as well as the mix of noninterest-bearing deposits and interest-bearing liabilities impacts our ability to manage net interest income during changing interest rate conditions. We also utilize certain derivative instruments to partially hedge interest rate risk. See Item 2 –MD&A – Asset/Liability and Market Risk Management – Interest Rate Sensitivity Management included herein.

Current wording

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax-equivalent (“TE”) basis by adjusting interest income utilizing the federal statutory corporate tax rates of 21% in effect for the three and nine months ended September 30, 2026 and 2025. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. We manage interest rate risk within policy limits approved by the Board of Directors, which guides and limits the interest rate risk over short-term and long-term horizons. Sources of interest rate risk include differences in maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, and embedded options in assets or liabilities. The mix of interest-earning assets as well as the mix of noninterest-bearing deposits and interest-bearing liabilities impacts our ability to manage net interest income during changing interest rate conditions. We also utilize certain derivative instruments to partially hedge interest rate risk. See Item 2 –MD&A – Asset/Liability and Market Risk Management – Interest Rate Sensitivity Management included herein.

Previous wording

Includes TE adjustments utilizing federal statutory corporate rates of 21% in effect for the three months ended June 30, 2026 and June 30, 2025. The non-TE rates for total investment securities were 2.70% and 2.57% for the three months ended June 30, 2026 and June 30, 2025, respectively.

Current wording

Includes TE adjustments utilizing federal statutory corporate rates of 21% in effect for the three months ended September 30, 2026 and September 30, 2025. The non-TE rates for total investment securities were 2.92% and 2.62% for the three months ended September 30, 2026 and September 30, 2025, respectively.

Previous wording

Includes loan fees of $1.2 million and $615,000 for the three months ended June 30, 2026 and 2025, respectively. Prepayment penalty fees of $527,000 and $680,000 are included in interest income for the three months ended June 30, 2026 and 2025, respectively. Average balances include nonperforming loans.

Current wording

Includes loan fees of $922,000 and $781,000 for the three months ended September 30, 2026 and 2025, respectively. Prepayment penalty fees of $790,000 and $643,000 are included in interest income for the three months ended September 30, 2026 and 2025, respectively. Average balances include nonperforming loans.

Previous wording

Includes TE adjustments utilizing federal statutory corporate rates of 21% in effect for the six months ended June 30, 2026 and June 30, 2025. The non-TE rates for total investment securities were 2.65% and 2.59% for the three months ended June 30, 2026 and June 30, 2025, respectively.

Current wording

Includes TE adjustments utilizing federal statutory corporate rates of 21% in effect for the nine months ended September 30, 2026 and 2025. The non-TE rates for total investment securities were 2.80% and 2.59% for the nine months ended September 30, 2026 and 2025, respectively.

Previous wording

Includes loan fees of $2.4million and $1.3 million for the six months ended June 30, 2026 and 2025, respectively. Prepayment penalty fees of $1.0 million and $1.6 million were included in interest income for the six months ended June 30, 2026 and 2025, respectively. Average balances include nonperforming loans.

Current wording

Includes loan fees of $3.3 million and $2.1 million for the nine months ended September 30, 2026 and 2025, respectively. Prepayment penalty fees of $1.8 million and $2.3 million were included in interest income for the nine months ended September 30, 2026 and 2025, respectively. Average balances include nonperforming loans.

Previous wording

The following table presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average interest-earning assets and average interest-bearing liabilities for the periods indicated. Changes in interest income or expense attributable to volume changes are calculated by multiplying the change in volume by the initial average interest rate. The change in interest income or expense attributable to changes in interest rates is calculated by multiplying the change in interest rate by the initial volume. The net change resulting from the combined impact of volume and interest rates changes has been allocated proportionately between changes attributable to volume and changes attributable to rates.

Current wording

The following table presents a comparison of interest income and interest expense resulting from changes in the volumes and rates on average interest-earning assets and average interest-bearing liabilities for the periods indicated. Changes in interest income or expense attributable to volume changes are calculated by multiplying the change in volume by the initial average interest rate. The change in interest income or expense attributable to changes in interest rates is calculated by multiplying the change in interest rate by the initial volume. The net change resulting from the combined impact of volume and interest rate changes has been allocated proportionately between changes attributable to volume and changes attributable to rates.

Previous wording

Net interest income, before provision for credit losses, of $162.4 million for the second quarter of 2026 increased by $50.8 million, or 45.5%, from the second quarter of 2025. The increase was driven by a $57.9 million increase in interest income, partially offset by a $7.1 million increase in interest expense. The year-over-year increase in net interest income largely reflected the impact of operating as a combined company for approximately two and a half months following the Heritage acquisition.

Current wording

Net interest income, before provision for credit losses, was $179.1 million for the third quarter of 2026, an increase of $63.5 million, or 54.9%, from the third quarter of 2025. The increase was driven by a $70.5 million increase in interest income, partially offset by a $7.0 million increase in interest expense, and largely reflected the impact of operating as a combined company for the full quarter following the Heritage acquisition.

Previous wording

Our tax-equivalent net interest margin increased 41 basis points to 3.72% for the second quarter of 2026, compared with the second quarter of 2025. The expansion in net interest margin was primarily due to a 34 basis point increase in the yield on average interest-earning assets, as well as a seven basis point decrease in the cost of funds.

Current wording

Our tax-equivalent net interest margin increased 56 basis points to 3.89% for the third quarter of 2026, compared with the third quarter of 2025. The increase was primarily due to a 47 basis point increase in the yield on average interest-earning assets and a nine basis point decrease in the cost of funds.

Previous wording

Total interest income and fees on loans for the second quarter of 2026 were $159.2 million, an increase of $50.4 million, or 46.3%, from the second quarter of 2025. This increase in income was due to the $3.19 billion increase in average loan balances and a 31 basis point increase in average loan yields from 5.22% for the second quarter of 2025 to 5.53% for the second quarter of 2026. In addition to the impact of originating new loans at higher yields than the existing loan portfolio, the increase in average loan yields reflected the Heritage acquisition and the addition of higher-yielding acquired assets, including factored receivables that averaged approximately $86.1 million during the second quarter of 2026. Through the Heritage acquisition, the Company acquired CSNK Working Capital Finance Corp., doing business as Bay View Funding, a wholly owned subsidiary of the Bank that provides working capital factoring financing to businesses throughout the United States. During the second quarter of 2026, the average yield on factored receivables was 18.04%.

Current wording

Total interest income and fees on loans for the third quarter of 2026 were $171.5 million, an increase of $60.7 million, or 54.7%, from the third quarter of 2025. The increase was attributable to the $3.65 billion increase in average loan balances and a 41 basis point increase in average loan yields from 5.25% for the third quarter of 2025 to 5.66% for the third quarter of 2026. The increase in average loan yields reflected new loan originations at yields higher than the existing loan portfolio, adjustable rate loans resetting at higher interest rates, and the Heritage acquisition and the addition of higher-yielding acquired assets, including factored receivables that averaged approximately $103.4 million during the third quarter of 2026. During the third quarter of 2026, the average yield on factored receivables was 17.21%.

Previous wording

Interest income from investment securities was $35.6 million for the second quarter of 2026, an increase of $4.4 million, or 14.0%, from the second quarter of 2025. A nine basis point increase in yields on investment securities was partially offset by a decrease in the interest income derived from the pay-fixed swaps designated as fair value hedges on AFS securities. The spread between daily SOFR and the fixed rate paid on these swaps decreased from 0.50% in the second quarter of 2025 to negative 0.09% in the second quarter of 2026, resulting in a $1.4 million decrease in interest income. Excluding the impact of the pay-fixed swaps, the average yield on investment securities increased by 25 basis points, due to the higher yield on investment securities purchased and acquired during the first six months of 2026.

Current wording

Interest income from investment securities was $41.6 million for the third quarter of 2026, an increase of $9.9 million, or 31.2%, from the third quarter of 2025. The increase was attributable to a $924.6 million increase in average investment securities balances and a 31 basis point increase in average yields on investment securities from 2.66% for the third quarter of 2025 to 2.97% for the third quarter of 2026, partially offset by lower interest income from the pay-fixed swaps designated as fair value hedges on AFS securities. The spread between daily SOFR and the fixed rate paid on these swaps decreased from 0.52% in the third quarter of 2025 to negative 0.09% in the third quarter of 2026, resulting in a $1.5 million decrease in interest income. Excluding the impact of the pay-fixed swaps, the average yield on investment securities increased 42 basis points, reflecting higher yield on investment securities purchased and acquired during the first nine months of 2026. These increases were partially offset by a 75 basis point decrease in the yield on funds deposited at the Federal Reserve, reflecting Federal Open Market Committee (“FOMC”) rate cuts during the latter part of 2025. The 25 basis point increase in the federal funds target rate at the end of the third quarter of 2026 had minimal impact on the third quarter’s interest income.

Previous wording

Net interest income, before provision for credit losses, was $280.3 million for the six months ended June 30, 2026, an increase of $58.2 million, or 26.21%, compared with $222.1 million for the same period last year. The increase was attributable to higher balance and yields on average interest-earning assets as well as lower cost of funds, partially offset by an increase in the balance of interest-bearing liabilities. The increases in average interest-earning assets and interest-bearing liabilities reflected the impact of interest-earning assets and interest-bearing liabilities acquired in connection with the Heritage acquisition, as well as organic growth.

Current wording

Net interest income, before provision for credit losses, was $459.3 million for the nine months ended September 30, 2026, an increase of $121.7 million, or 36.0%, from $337.6 million for the same period last year. The increase was attributable to higher balances and yields on average interest-earning assets and a lower cost of funds, partially offset by higher average interest-bearing liabilities. The increases in average interest-earning assets and interest-bearing liabilities primarily reflected the impact of interest-earning assets and interest-bearing liabilities acquired in connection with the Heritage acquisition, as well as organic growth.

Previous wording

Total interest income and fees on loans for the six months ended June 30, 2026 were $272.5 million, an increase of $54.6 million, or 25.04%, from the same period last year. This increase in income was due to the $1.68 billion increase in average loan balances and a 22 basis point increase in average loan yields from 5.22% for the six months ended June 30, 2025, to 5.44% for the six months ended June 30, 2026.

Current wording

Total interest income and fees on loans for the nine months ended September 30, 2026 were $444.0 million, an increase of $115.2 million, or 35.0%, from the same period last year. The increase was attributable to a $2.35 billion increase in average loan balances and a 29 basis point increase in average loan yields to 5.52% for the nine months ended September 30, 2026 from 5.23% for the same period last year.

Previous wording

Interest income from investment securities was $67.4 million for the six months ended June 30, 2026, an increase of $4.5 million, or 7.0%, from the same period last year. A 12 basis point increase in yields on investment securities was partially offset by a decrease in the interest income derived from the pay-fixed swaps designated as fair value hedges on AFS securities. The spread between daily SOFR and the fixed rate paid on these swaps decreased from 0.47% for the six months ended June 30, 2025 to a negative 0.07% for the six months ended June 30, 2026, resulting in a $2.6 million decrease in interest income.

Current wording

Interest income from investment securities was $109.0 million for the nine months ended September 30, 2026, an increase of $14.4 million, or 15.2%, from the same period last year. The increase reflected a 16 basis point increase in yields on investment securities, partially offset by lower interest income derived from the pay-fixed swaps designated as fair value hedges of AFS securities. The spread between daily SOFR and the fixed rate paid on these swaps decreased to negative 0.08% for the nine months ended September 30, 2026 from 0.69% for the same period in 2025, resulting in a $4.0 million decrease in interest income.

Previous wording

The provision for (recapture of) credit losses is a charge to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected lifetime losses in the loan portfolio as of the balance sheet date.

Current wording

The provision for (recapture of) credit losses is an adjustment to earnings to maintain the allowance for credit losses at a level consistent with management’s assessment of expected lifetime credit losses in the loan portfolio as of the balance sheet date.

Previous wording

For the six months ended June 30, 2026, the provision for credit losses was $3.0 million, compared with $2.0 million recapture of credit losses for the same period last year. Net charge-offs were $128,000 for the six months ended June 30, 2026, compared with net charge-offs of $119,000 for the same period last year. The provision for credit losses for the six months ended June 30, 2026 was largely attributable to a $3.2 million increase in specific reserves, primarily related to one commercial and industrial credit relationship.

Current wording

For the nine months ended September 30, 2026, the provision for credit losses was $2.0 million, compared with a $1.0 million recapture of credit losses for the same period last year. Net charge-offs were $148,000 for the nine months ended September 30, 2026, compared with net recoveries of $214,000 for the same period last year.

Previous wording

No assurance can be given that economic conditions affecting the Company’s service areas or other circumstances will or will not be reflected in future changes in the level of our allowance for credit losses and the resulting provision for, or recapture of, credit losses. The process to estimate the allowance for credit losses requires considerable judgment and economic forecasts may continue to vary due to the uncertainty of the future impact from geopolitical events, trade barriers, including tariff policies, inflationary pressures, future interest rates, unemployment levels, and overall economic conditions, all of which may impact our customers. Refer to Item 2 –MD&A - Analysis of Financial Condition - Allowance for Credit Losses for a discussion of changes in the credit quality of our loan portfolio as well as refinements to the Company's ACL methodology.

Current wording

No assurance can be given that economic conditions affecting the Company’s service areas or other circumstances will or will not be reflected in future changes in the level of our allowance for credit losses and the resulting provision for, or recapture of, credit losses. The process to estimate the allowance for credit losses requires considerable judgment, and economic forecasts may vary as a result of uncertainty related to geopolitical events, trade barriers, including tariff policies, inflationary pressures, interest rates, unemployment levels, and overall economic conditions, all of which may impact our customers. Refer to Item 2 –MD&A - Analysis of Financial Condition - Allowance for Credit Losses for a discussion of changes in the credit quality of our loan portfolio as well as refinements to the Company's ACL methodology.

Previous wording

Trust and investment services revenue is generated through the Company's CitizensTrust division, which provides wealth management, investment management, financial planning, estate planning, retirement planning, trustee, and probate services. Investment Services offers self-directed brokerage, 401(k) plans, mutual funds, insurance products, and other non-insured investment products. At June 30, 2026, CitizensTrust had approximately $5.18 billion in assets under management and administration, including $3.81 billion in assets under management. CitizensTrust generated fee income of $4.2 million for the second quarter of 2026, compared to $3.7 million for the same period last year.

Current wording

Trust and investment services revenue is generated through the Company's CitizensTrust division, which provides wealth management, investment management, financial planning, estate planning, retirement planning, trustee, and probate services. Investment Services offers self-directed brokerage, 401(k) plans, mutual funds, insurance products, and other non-insured investment products. At September 30, 2026, CitizensTrust had approximately $4.94 billion in assets under management and administration, including $3.81 billion in assets under management. CitizensTrust generated fee income of $3.8 million for the third quarter of 2026, compared with $3.9 million for the same period last year.

Previous wording

Noninterest income for the six months ended June 30, 2026 increased by $316,000, or 1.02%, compared with the same period last year. The increase was primarily driven by increases in service charges, trust revenue, and BOLI income, reflecting the combined operations following the acquisition of Heritage, partially offset by a $2.2 million gain on sale of OREO during the six months ended June 30, 2025. Trust and investment fees grew by $781,000 or 10.96% due primarily to increased assets under management. BOLI income increased by $572,000, or 9.44%, including changes in net asset value of policies related to deferred compensation arrangements.

Current wording

Noninterest income for the nine months ended September 30, 2026 increased by $3.8 million, or 8.7%, compared with the same period last year. The increase was primarily driven by higher BOLI income, service charges on deposit accounts, and trust and investment service revenue. The first nine months of 2025 included the impact of an $8.2 million loss on the sale of AFS investment securities, revenue from a $6.0 million legal settlement and a $2.2 million gain on sale of OREO. Service charges on deposits increased by $989,000, due primarily to the acquisition of Heritage. Trust and investment services revenue grew by $731,000 or 6.6%, primarily due to increased assets under management. BOLI income increased by $1.4 million, or 14.8%, reflecting changes in the net asset value of insurance policies.

Previous wording

Our ability to control noninterest expenses in relation to asset growth can be measured in terms of total noninterest expenses as a percentage of average assets. Noninterest expense as a percentage of average assets was 2.31% for the second quarter of 2026, compared with 1.52% for the second quarter of 2025. Noninterest expense as a percentage of average assets was 1.99% for the six months ended June 30, 2026, compared with 1.55% for the same period last year. The ratio of noninterest expense to average assets was negatively impacted by acquisition-related expense and the provision for unfunded loan commitments.

Current wording

Our ability to control noninterest expense in relation to asset growth can be measured by total noninterest expense as a percentage of average assets. Noninterest expense as a percentage of average assets was 1.71% for the third quarter of 2026, compared with 1.50% for the third quarter of 2025. Noninterest expense as a percentage of average assets was 1.89% for the nine months ended September 30, 2026, compared with 1.53% for the same period last year. The increases in the ratios of noninterest expense to average assets primarily reflected acquisition-related expenses and the provision for unfunded loan commitments.

Previous wording

Our ability to control noninterest expenses in relation to the level of total revenue (net interest income before provision for credit losses plus noninterest income) can be measured by the efficiency ratio and indicates the percentage of net revenue that is used to cover expenses. The efficiency ratio was 63.75% for the second quarter of 2026, compared with 45.55% for the second quarter of 2025. For the six months ended June 30, 2026, the efficiency ratio was 56.15%, compared with 46.12% for the same period last year. Our efficiency ratio adjusted for acquisition expense and the provision for unfunded loan commitments declined from 45.55% in the second quarter of 2025 to 43.88% in the second quarter of 2026. Adjusted efficiency ratio is a non-GAAP measure. For additional details, refer to Item 2.–MD&A—GAAP to Non-GAAP Reconciliation.

Current wording

Our ability to control noninterest expense in relation to total revenue (net interest income before provision for credit losses plus noninterest income) can be measured by the efficiency ratio, which indicates the percentage of total revenue used to cover noninterest expenses. The efficiency ratio was 46.27% for the third quarter of 2026, compared with 45.56% for the third quarter of 2025. For the nine months ended September 30, 2026, the efficiency ratio was 52.34%, compared with 45.93% for the same period last year. Our efficiency ratio adjusted for acquisition expense and the provision for unfunded loan commitments was 42.10% in the third quarter of 2026, compared with 45.17% in the third quarter of 2025. The adjusted efficiency ratio is a non-GAAP measure. For additional details, refer to Item 2.–MD&A—GAAP to Non-GAAP Reconciliation.