RBB Bancorp

Previous wording

A sensitivity analysis of our ACL was performed as of December 31, 2024. Based on this sensitivity analysis, a positive 25% change in loan prepayment speeds would result in a $1.4 million, or 2.8%, decrease to the ACL. Conversely, a negative 25% change in loan prepayment speeds would result in a $1.5 million, or 3.2%, increase to the ACL. Additionally, a one percentage point increase in the unemployment rate would result in a $966,000, or 2.0%, increase to the ACL and a one percentage point decrease in the unemployment rate would result in a $1.1 million, or 2.2%, decrease to the ACL. Management reviews the results using the comparison scenario for sensitivity analysis and considered the results when evaluating the qualitative factor adjustments.

Current wording

A sensitivity analysis of our ACL was performed as of December 31, 2025. Based on this sensitivity analysis, a 25% increase in loan prepayment speeds would result in a $891,000, or 2.0%, decrease to the ACL. Conversely, a 25% decrease in loan prepayment speeds would result in a $1.1 million, or 2.5%, increase to the ACL. Additionally, a one percentage point increase in the forecasted unemployment rate would result in a $1.0 million, or 2.4%, increase to the ACL and a one percentage point decrease in the forecasted unemployment rate would result in a $943,000, or 2.1%, decrease to the ACL. Management reviews the results using the comparison scenario for sensitivity analysis and considered the results when evaluating the qualitative factor adjustments.

Previous wording

On a quarterly basis, we stress test the qualitative factors, which are lending policy, procedures & strategies, economic conditions, changes in nature and volume of the portfolio, credit & lending staff, problem loan trends, loan review results, collateral value, concentrations and regulatory and business environment by creating two scenarios, moderate risk and major risk. In the Moderate Stress scenario, the status of all nine risk factors across all pooled loan segments were set at “Moderate Risk.” In the Major Stress scenario, the status of all nine risk factors across all pooled loan segments were set at “Major Risk.” Under the Moderate Stress scenario, ACL increased by $8.7 million, or 18.0%, as of December 31, 2024. Under the Major Stress scenario, ACL increased by $23.7 million or 48.8% as of December 31, 2024.

Current wording

On a quarterly basis, we stress test the qualitative factors, which are lending policy, procedures & strategies, economic conditions, changes in nature and volume of the portfolio, credit & lending staff, problem loan trends, loan review results, collateral value, concentrations and regulatory and business environment by creating two scenarios, moderate risk and major risk. In the Moderate Stress scenario, the status of all nine risk factors across all pooled loan segments were set at “Moderate Risk.” In the Major Stress scenario, the status of all nine risk factors across all pooled loan segments were set at “Major Risk.” Under the Moderate Stress scenario, ACL increased by $11.0 million, or 24.8%, as of December 31, 2025. Under the Major Stress scenario, ACL increased by $31.2 million or 70.6% as of December 31, 2025.

Previous wording

The allowance for loan losses ("ALL") was $47.7 million at December 31, 2024, reflecting an increase of $5.8 million from $41.9 million at December 31, 2023. During 2024, there was a $9.8 million provision for loan losses compared to $3.9 million for 2023. The increase in the 2024 provision for loan losses was due to a higher level of specific reserves and net charge-offs and increases in nonperforming and classified loans. The ALL to loans HFI outstanding was 1.56% and 1.38% as of December 31, 2024 and December 31, 2023.

Current wording

The allowance for loan losses ("ALL") was $43.9 million at December 31, 2025, reflecting a decrease of $3.8 million from $47.7 million at December 31, 2024. During 2025, the provision for loan losses totaled $10.6 million compared to $9.8 million for 2024. The increase in the 2025 provision for loan losses was due to loan growth and the level of net charge-offs. The ALL as a percentage of loans HFI outstanding was 1.32% and 1.56% as of December 31, 2025 and December 31, 2024.

Previous wording

Shareholders’ equity decreased $3.4 million, or 0.7%, to $507.9 million as of December 31, 2024 from $511.3 million at December 31, 2023. The decrease during 2024 was primarily due to common stock repurchases of $20.7 million, common stock cash dividends paid of $11.7 million and higher net unrealized losses on AFS securities of $745,000, partially offset by net income of $26.7 million and equity compensation activity of $3.2 million. As a result, book value per share increased 4.3% to $28.66 from $ 27.47 and tangible book value per share increased 4.4% to $24.51 from $23.48.

Current wording

Shareholders’ equity increased $15.5 million, or 3.1%, to $523.4 million as of December 31, 2025, from $507.9 million at December 31, 2024. The increase during 2025 was primarily due to net income of $31.9 million, lower unrealized losses on available for sale ("AFS") securities, net of taxes, of $6.9 million, and equity compensation activity of $1.9 million, partially offset by common stock repurchases of $14.0 million and common stock cash dividends paid of $11.3 million. As a result, book value per share increased 7.1% to $30.69 from $28.66 and tangible book value per share increased 7.8% to $26.42 from $24.51. SeeNon-GAAP Financial Measures for a reconciliation of these measures to their most comparable GAAP measures.

Previous wording

Our capital ratios under the Basel III capital framework regulatory standards remain well capitalized. As of December 31, 2024, Bancorp’s Tier 1 leverage capital ratio was 11.92%, common equity Tier 1 ratio was 17.94%, Tier 1 risk-based capital ratio totaled 18.52%, and total risk-based capital ratio was 24.49%. As of December 31, 2023, Bancorp’s Tier 1 leverage capital ratio was 11.99%, common equity Tier 1 ratio was 19.07%, Tier 1 risk-based capital ratio totaled 19.69%, and total risk-based capital ratio was 25.92%.

Current wording

Our capital ratios under the Basel III capital framework regulatory standards remain well capitalized. As of December 31, 2025, Bancorp’s Tier 1 leverage capital ratio was 11.60%, common equity Tier 1 ratio was 17.49%, Tier 1 risk-based capital ratio totaled 18.06%, and total risk-based capital ratio was 23.83%. As of December 31, 2024, Bancorp’s Tier 1 leverage capital ratio was 11.92%, common equity Tier 1 ratio was 17.94%, Tier 1 risk-based capital ratio totaled 18.52%, and total risk-based capital ratio was 24.49%.

Previous wording

In 2024, we generated fully-taxable equivalent net interest income of $99.5 million, a decrease of $19.9 million, or 16.7%, from $119.4 million in 2023. The $19.9 million decrease was due to a $15.4 million increase in interest expense and a $4.5 million decrease in interest income. The decrease in interest income was mostly due to lower interest income on total loans of $9.7 million offset by higher interest income on interest-earning deposits of $4.7 million. The decrease in loan interest income was mostly due to a lower average total loan balance of $164.3 million. The increase in cash and investment interest income was attributed to higher average cash balances and a higher investment portfolio yield, offset by a lower average balance of investment securities. The increase in interest expense was mostly due to a 72 basis point increase in total average interest-bearing deposit rates and higher average interest-bearing deposits of $30.1 million in the year ended December 31, 2024. The weighted average Federal Funds Rate was 5.15% for the year ended December 31, 2024 compared to 5.03% for the year ended December 31, 2023.

Current wording

In 2025, we generated fully-taxable equivalent net interest income of $112.4 million, an increase of $12.9 million, or 13.0%, from $99.5 million in 2024. This increase was due to an $8.5 million decrease in interest expense and a $4.5 million increase in interest income. The increase in interest income was mostly due to higher interest and fee income on total loans of $9.3 million and securities of $2.7 million, partially offset by lower interest income on cash balances of $7.6 million. The increase in loan interest income was mostly due to a higher average total loan balance of $157.3 million, while the average loan yield remained relatively unchanged. The decrease in interest income from cash balances was attributed to a decrease in the overnight Fed Funds rate and the impact of lower average cash balances as excess liquidity was deployed to the loans and securities portfolios. The decrease in interest expense was mostly due to a 64 basis point decrease in total average interest-bearing deposit costs, partially offset by the impact of higher average interest-bearing deposits of $134.8 million in 2025 compared to 2024. The average overnight Federal Funds Rate was 4.21% for the year ended December 31, 2025, compared to 5.15% for the year ended December 31, 2024.

Previous wording

Our net interest margin ("NIM") was 2.70% for the year ended December 31, 2024, a decrease of 46 basis points from 3.16% for the year ended December 31, 2023. The decrease was due to a 55 basis point increase in the overall cost of funds, partially offset by a 2 basis point increase in the yield on average interest-earning assets. The yield on average interest-earning assets increased to 5.88% for the year ended December 31, 2024 compared to the prior year due mainly to a 12 basis point increase in the yield on average cash and cash equivalents to 5.53%, and an 18 basis point increase in the investment portfolio yield, offset by the impact of the change in the mix of interest-earning assets. Average total loan balances decreased $164.3 million year over year and average loans represented 83% of average interest-earning assets during 2024 compared to 85% during 2023.

Current wording

Our net interest margin ("NIM") was 2.95% for the year ended December 31, 2025, an increase of 25 basis points from 2.70% for the year ended December 31, 2024. The increase was due to a 38 basis point decrease in the overall cost of funds, partially offset by an 8 basis point decrease in the yield on average interest-earning assets. The yield on average interest-earning assets decreased to 5.80% for the year ended December 31, 2025, compared to the prior year due mainly to a 92 basis point decrease in the yield on average cash and cash equivalents to 4.61% and an 18 basis point decrease in the yield on our securities portfolio as short term market rates decreased, partially offset by the impact of the change in the mix of interest-earning assets. Average total loan balances increased $157.3 million year over year and average loans represented 84% of average interest-earning assets during 2025 compared to 83% during 2024. We maintained the overall loan yield at 6.06% for the year ended December 31, 2025, compared to the prior year.

Previous wording

The overall cost of funds increased to 3.49% in the year ended December 31, 2024 from 2.94% in the year ended December 31, 2023 due to a higher average cost of interest-bearing deposits in response to higher average market interest rates. The overall funding mix for December 31, 2024 remained relatively unchanged from the prior year with a ratio of average noninterest-bearing deposits to average total funding sources of 16%.

Current wording

The overall cost of funds decreased to 3.11% for the year ended December 31, 2025, from 3.49% for the year ended December 31, 2024, due to a lower average cost of interest-bearing deposits in response to lower average market interest rates. The overall funding mix for December 31, 2025, remained relatively unchanged from the prior year with a ratio of average noninterest-bearing deposits to average total funding sources of 15%.

Previous wording

Tax equivalent interest income from our securities portfolio increased $304,000, or 2.2%, to $14.4 million in 2024. The increase was primarily due to an 18 basis point increase in the tax equivalent yield due to increases in market interest rates, partially offset by the impact of a $7.0 million, or 2.1%, decrease in the average balance of securities.

Current wording

Tax equivalent interest income from our securities portfolio increased $2.7 million, or 19.0%, to $17.2 million in 2025. The increase was primarily due to the impact of a $79.7 million, or 24.2%, increase in the average balance of securities, partially offset by an 18 basis point decrease in the tax equivalent yield due to decreases in market interest rates.

Previous wording

Interest income on our cash and cash equivalents increased $4.7 million, or 40.2%, to $16.4 million in 2024. The increase was primarily due to an $80.5 million increase in the average balance of cash and cash equivalents combined with a 12 basis point increase in yield. The increase in the average balance resulted from a decrease in average loan balances, offset partially by a decrease in the average balance of total deposits.

Current wording

Interest income on our cash and cash equivalents decreased $7.6 million, or 46.0%, to $8.9 million in 2025. The decrease was primarily due to a $104.7 million decrease in the average balance of cash and cash equivalents combined with a 92 basis point decrease in the yield. The decrease in average cash balances was offset by increases in average loan and securities balances as excess liquidity was deployed into these higher yielding assets.

Previous wording

*Interest Expense.*Interest expense on total interest-bearing liabilities increased $15.4 million, or 15.2%, to $117.3 million in 2024 primarily due to a 58 basis point increase in the average rate on these total interest-bearing liabilities, partially offset by a $29.1 million decrease in the average balance of total interest-bearing liabilities.

Current wording

*Interest Expense.*Interest expense on total interest-bearing liabilities decreased $8.5 million, or 7.2%, to $108.8 million in 2025 primarily due to a 47 basis point decrease in the average rate on these total interest-bearing liabilities, while the average balance of total interest-bearing liabilities increased $135.4 million to fund loan growth.

Previous wording

Our average cost of total deposits was 3.54% for 2024, compared to 2.87% for 2023. The increase was due to a 72 basis point increase in the average rate paid on interest-bearing deposits due to increases in market interest rates coupled with peer bank competition for deposits.

Current wording

Our average cost of total deposits was 3.04% for 2025 compared to 3.54% for 2024. The decrease was due to a 64 basis point decrease in the average rate paid on interest-bearing deposits due to decreases in market interest rates and competition for such deposits.

Previous wording

Interest expense on interest-bearing deposits increased to $108.4 million in 2024 compared to $89.0 million in 2023. The $19.3 million, or 21.7%, increase was primarily due to a 72 basis point increase in the average rate paid on average interest-bearing deposits, and a $42.0 million increase in the average balance of interest-bearing non-maturity deposits, partially offset by an $11.9 million decrease in the average balance of time deposits. Average noninterest-bearing deposits decreased $70.8 million to $531.5 million from $602.3 million in 2023 as customers looked to higher yielding deposit products in response to higher market interest rates.

Current wording

Interest expense on interest-bearing deposits decreased to $97.1 million in 2025 compared to $108.4 million in 2024. The $11.3 million, or 10.4%, decrease was primarily due to a 64 basis point decrease in the average rate paid on average interest-bearing deposits, partially offset by a $134.8 million increase in the average balance of interest-bearing deposits. Average noninterest-bearing deposits totaled $529.7 million, and represented 17% of total average deposits in 2025 compared to $531.5 million, or 17% of total average deposits, in 2024.

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 on 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 tax rate of 21% for 2024, 2023 and 2022. 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. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, and in the growth and maturity of earning assets. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity Management and Item 7A. Quantitative and Qualitative Disclosures About Market Risk 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 on 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 tax rate of 21% for 2025, 2024, and 2023. 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. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income by affecting changes in the mix of interest-earning assets and interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to the level of interest-earning assets, and through the growth and maturity of earning assets. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity Management and Item 7A. Quantitative and Qualitative Disclosures About Market Risk included herein.

Previous wording

The provision for credit losses was $9.9 million for the year ended December 31, 2024, an increase of $6.5 million from $3.4 million in 2023. The provision for credit losses for the year ended December 31, 2024 included a provision for loan losses of $9.8 million and a provision for unfunded commitments of $89,000. The increase in the 2024 provision for loan losses was primarily due to an increase in specific reserves of $6.1 million, an increase in net charge-offs and increases in nonperforming and classified loans as compared to the prior year. Specific reserves totaled $6.9 million at December 31, 2024 and $816,000 at December 31, 2023 and net charge-offs totaled $3.9 million for 2024 compared to $3.1 million for 2023.

Current wording

The provision for credit losses totaled $10.4 million for the year ended December 31, 2025, compared to a $9.9 million provision for credit losses for the year ended December 31, 2024. The 2025 provision for credit losses reflected a provision for loan losses of $10.6 million and a negative provision for unfunded commitments of $245,000. The 2024 provision for credit losses reflected a provision for loan losses of $9.8 million and a provision for unfunded commitments of $89,000. The 2025 provision for loan losses was due to loan growth of 8.6% in 2025 and the resolution of certain nonperforming assets resulting in charge-offs during the year. The provision also took into consideration factors such as changes in the outlook for economic conditions and market interest rates, and changes in credit quality metrics. Net charge-offs totaled $14.4 million, or 0.45% of average loans, for the year ended December 31, 2025, compared to $3.9 million, or 0.13% of average loans, for the year ended December 31, 2024.

Previous wording

*Loan servicing income, net of amortization.*Loan servicing income, net of amortization, decreased by $311,000 to $2.3 million for 2024 compared to $2.6 million for 2023. Loan servicing income, net of amortization decreased due to lower interest rates, resulting in higher pre-payment speeds. The following table presents information on loan servicing income for the years indicated:

Current wording

*Loan servicing income, net of amortization.*Loan servicing income, net of amortization, decreased by $16,000 to $2.3 million for 2025 compared to 2024. Loan servicing income, net of amortization, for SFR mortgage loans decreased due to a lower average balance of mortgage loans serviced for others in 2025 compared to 2024, while servicing income for SBA loans increased due to lower amortization of servicing assets due to lower prepayments in 2025. The following table presents information on loan servicing income for the years indicated:

Previous wording

The following table presents the total loans being serviced for others as of the dates indicated:

Current wording

As of December 31, 2025, we were servicing SFR mortgage loans for other financial institutions, FHLMC, and FNMA, and SBA loans where we have sold the guaranteed portion in the secondary market. The following table presents the total loans being serviced for others as of the dates indicated:

Previous wording

As of December 31, 2024, we were servicing SFR mortgage loans for other financial institutions, FHLMC, FNMA and SBA loans. The decline in the respective servicing portfolios reflects the repayment of underlying loans, which exceeds the additions from loans being sold with servicing retained during 2023 and 2024.

Current wording

The decline in the respective servicing portfolios reflects the repayment of underlying loans, which exceeds the additions from loans being sold with servicing retained during 2025 and 2024.

Previous wording

Gain on sale of loans. Gains on sale of loans are comprised primarily of gains on sale of SFR mortgage loans and SBA loans. Gains on sale of loans totaled $1.6 million in 2024, compared to $374,000 in 2023. The $1.2 million increase was due to a higher volume of loans sold in both categories, and an increase in the margins for gains on the sale of SFR mortgage loans sold.

Current wording

Gain on sale of loans. Gains on sale of loans are comprised primarily of gains on sale of SFR mortgage loans and SBA loans. Gains on sale of loans totaled $1.2 million in 2025, compared to $1.6 million in 2024. The $430,000 decrease was primarily due to a decrease in the volume and margins of SBA loans sold in 2025 compared to 2024.

Previous wording

The following table presents information on loans sold and gain on loans sold for the years indicated:

Current wording

The following table presents information on loans sold and the net gain (loss) on the sale of such loans for the years indicated:

Previous wording

The weighted-average life on the total investment portfolio at December 31, 2024 was 5.0 years compared to a weighted-average life of 5.1 years at December 31, 2023. The weighted-average life is the average number of years that each dollar of unpaid principal due remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal pay-downs.

Current wording

The weighted-average life on the total investment portfolio at December 31, 2025, was 4.9 years compared to a weighted-average life of 5.0 years at December 31, 2024. The weighted-average life is the average number of years that each dollar of unpaid principal due remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, weighted by the dollar amounts of the principal pay-downs.

Previous wording

Approximately 24.3% of the securities in the total investment portfolio at December 31, 2024, are issued by the U.S. government or U.S. government-sponsored agencies and enterprises, which have the implied guarantee of payment of principal and interest. As of December 31, 2024, no U.S. government agency bonds are callable.

Current wording

Approximately 33.0% of the securities in the total investment portfolio at December 31, 2025, were issued by the U.S. government or U.S. government-sponsored agencies and enterprises, which have the implied guarantee of payment of principal and interest. As of December 31, 2025, no U.S. government agency bonds are callable.

Previous wording

The tables below show our investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and December 31, 2023. The unrealized losses on these securities were primarily attributed to changes in interest rates. The issuers of these securities have not evidenced any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. However, we have the ability and the intention to hold these securities until their fair values recover to cost or maturity. As such, management does not deem these securities to be impaired under the current expected credit loss model. A summary of our analysis of these securities and the unrealized losses is described more fully in Item 8. Financial Statements and Supplementary Data - Note 3**—**Investment Securitiesin the notes to the consolidated financial statements included in this Annual Report.

Current wording

The tables below show our investment securities’ gross unrealized losses and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2025, and December 31, 2024. The unrealized losses on these securities were primarily attributed to changes in interest rates. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. The issuers of these securities have not evidenced any cause for default on these securities. We have the ability and the intention to hold these securities until their fair values recover to cost or maturity. As such, management does not deem these securities to be impaired under the current expected credit loss model. A summary of our analysis of these securities and the unrealized losses is described more fully in Item 8. Financial Statements and Supplementary Data - Note 3**—**Investment Securitiesin the notes to the consolidated financial statements included in this Annual Report.

Previous wording

We monitor our securities portfolio to ensure all of our investments have adequate credit support and we consider the lowest credit rating for identification of potential credit impairment. As of December 31, 2024 and 2023, we determined there was no credit impairment and accordingly there was no ACL on the HTM securities portfolio as of these dates. In addition, we did not have the current intent to sell securities with a fair value below amortized cost at December 31, 2024, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. As of December 31, 2024, all of our investment securities in an unrealized loss position received an investment grade credit rating. The overall net decreases in fair value during the period were attributable to a combination of changes in interest rates and market conditions.

Current wording

We monitor our securities portfolio to ensure all of our investments have adequate credit support and we consider the lowest credit rating for identification of potential credit impairment. As of December 31, 2025 and 2024, we determined there was no credit impairment and accordingly there was no ACL on the HTM securities portfolio as of these dates. In addition, we did not have the current intent to sell securities with a fair value below amortized cost at December 31, 2025, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. As of December 31, 2025, all of our investment securities in an unrealized loss position received an investment grade credit rating. The overall net unrealized losses in our securities portfolio were attributable to a combination of changes in interest rates and market conditions.

Previous wording

The loan portfolio is the largest category of our earning assets, which is almost entirely held for investment as of December 31, 2024. Loans HFI totaled $3.1 billion, a net increase of $21.4 million, or 0.7%, as compared to $3.0 billion at December 31, 2023. Loans HFS totaled $11.2 million at December 31, 2024 compared to $1.9 million at December 31, 2023. The net increase in loans HFI was primarily due to net increases in CRE loans of $33.6 million and SFR mortgage loans of $6.2 million, partially offset by decreases in C&D loans of $8.2 million, SBA loans of $4.8 million, and other loans of $4.9 million. The 2024 loan activity included $441.3 million in total originations and $61.5 million in loans sold, mainly SFR mortgages and the guaranteed portion of SBA loans. SFR mortgage loans represent approximately 48.9% of our total loans as of December 31, 2024, and this ratio is relatively unchanged from 49.1% as of the end of 2023.

Current wording

The loan portfolio is the largest category of our earning assets, which is almost entirely held for investment as of December 31, 2025. Loans HFI totaled $3.3 billion, an increase of $261.1 million, or 8.6%, as compared to $3.1 billion at December 31, 2024. Loans HFS totaled $2.1 million at December 31, 2025, compared to $11.3 million at December 31, 2024. The increase in loans HFI was primarily due to increases in SFR mortgage loans of $161.4 million, CRE loans of $101.6 million, C&I loans of $10.5 million, and SBA loans of $8.7 million, partially offset by decreases in C&D loans of $17.8 million and other loans of $3.3 million. The 2025 loan activity included $712.7 million in new originations and $135.9 million in advances on existing loans, offset by payoffs/paydowns of $499.6 million, loan sales of $74.0 million, and charge-offs of $14.7 million. SFR mortgage loans represent approximately 50.0% of our total loans as of December 31, 2025, compared to 48.9% as of the end of 2024.

Previous wording

The majority of our loan portfolio is based on collateral or businesses in California and New York, which represent 88% of our loan portfolio. Loans secured by collateral in other states represented approximately 12% of our portfolio and the majority of these loans are secured by real estate with a weighted average LTV of 55.4% at December 31, 2024.

Current wording

The majority of our loan portfolio is based on collateral or businesses in California and New York, which represent approximately 88.0% of our loan portfolio. Loans secured by collateral in other states represented approximately 12.0% of our portfolio and the majority of these loans are secured by real estate with a weighted average LTV of 55.7% at December 31, 2025.

Previous wording

We originate qualified SFR mortgage loans and non-qualified, alternative documentation SFR mortgage loans through wholesale channels and retail channels, including our branch network, to accommodate the needs of the Asian-centric market. The qualified SFR mortgage loans are 15-year and 30-year conforming mortgages and may be sold directly to FNMA and FHLMC. We originate non-qualified SFR mortgage loans both to sell and hold for investment. In addition, our SFR mortgage lending unit originates mortgage warehouse lines of credit to certain correspondent banks. These loans are included in our C&I loans and totaled zero as of December 31, 2024 and $4.2 million as of December 31, 2023.

Current wording

We originate qualified SFR mortgage loans and non-qualified, alternative documentation SFR mortgage loans through wholesale channels and retail channels, including our branch network, to accommodate the needs of the Asian-centric market. The qualified SFR mortgage loans are 15-year and 30-year conforming mortgages and may be sold directly to FNMA and FHLMC. We originate non-qualified SFR mortgage loans both to sell and hold for investment. In addition, our SFR mortgage lending unit originates mortgage warehouse lines of credit to certain correspondent banks. These loans are included in our C&I loans and totaled $2.8 million as of December 31, 2025. There were no such loans at December 31, 2024.

Previous wording

During 2024, we originated $183.2 million of SFR mortgage loans including $102.8 million through our retail channel and $80.4 million through our wholesale channels. These amounts included $22.2 million in FNMA loans, all of which were sold to FNMA. In addition, we also sold $1.9 million to FHLMC and $23.6 million of SFR mortgage loans during 2024 to other third parties.

Current wording

During 2025, we originated $413.7 million of SFR mortgage loans including $202.8 million through our retail channel and $210.9 million through our wholesale channels. These amounts included $6.2 million in FNMA loans, all of which were sold to FNMA. In addition, we also sold $51.9 million of SFR mortgage loans during 2025 to other third parties.

Previous wording

For SFR mortgage loans sold to FNMA, FHLMC and to other third parties such as investment funds or other banks, we provide limited representations and warranties and with a repurchase and premium refund for loans that become delinquent in the first 90-days or a premium refund if paid-off in the first 90-days with respect to all loans sold. In certain loan sales to other banks, loans are sold with no representations or warranties and provide a replacement feature for the first six months if any loans pay off early. As a condition of the sale for all loans, the buyer must have the loans audited for underwriting and compliance standards.

Current wording

For SFR mortgage loans sold to FNMA, FHLMC and to other third parties such as investment funds or other banks, we provide limited representations and warranties and with a repurchase and premium refund for loans that become delinquent in the first 90-days or a premium refund if paid-off in the first 90-days with respect to all loans sold. In certain loan sales to other banks, loans are sold with no representations or warranties and provide a replacement feature for the first six months if any loans pay off early. As a condition of the sale for all loans, the buyer must have the loans audited for underwriting and compliance standards. There were $2.1 million and $11.3 million of SFR loans HFS at December 31, 2025 and 2024.

Previous wording

Commercial Real Estate Loans. CRE loans totaled $1.2 billion, or 39.3%, of the loan portfolio as of December 31, 2024 compared to $1.2 billion, or 38.5% of the loan portfolio as of December 31, 2023. The CRE portfolio had net growth of $33.6 million, or 2.9%, during 2024 due mostly to a net increase in multi-family residential loans.

Current wording

Commercial Real Estate Loans. CRE loans totaled $1.3 billion, or 39.3%, of the loan portfolio as of December 31, 2025, of which $154.7 million was secured by owner occupied properties, compared to $1.2 billion, or 39.3% of the loan portfolio as of December 31, 2024, of which $160.2 million was secured by owner occupied properties. The CRE portfolio had net growth of $101.6 million, or 8.5%, during 2025 due mostly to a net increase in multi-family residential loans.

Previous wording

CRE loans include owner-occupied and non-occupied commercial real estate, multi-family residential and SFR loans originated for a business purpose. Except for the multi-family residential loan portfolio, the interest rate for the majority of these loans are Prime rate based and have a maturity of five years or less except for the SFR loans originated for a business purpose which may have a maturity of one year. The multi-family residential loans generally have interest rates based on the 5-year treasury, 10-year maturity with a five year fixed rate period followed by a five year floating rate period, and have a declining prepayment penalty over the first five years.

Current wording

CRE loans include owner occupied and non-owner occupied commercial real estate, multi-family residential and SFR loans originated for a business purpose. Except for the multi-family residential loan portfolio, the interest rate for the majority of these loans are Prime rate based and have a maturity of five years or less except for the SFR loans originated for a business purpose which may have a maturity of one year. The multi-family residential loans generally have interest rates based on the 5-year treasury, 10-year maturity with a five year fixed rate period followed by a five year floating rate period, and have a declining prepayment penalty over the first five years.

Previous wording

The largest sub-set of CRE loans was the multi-family residential loan portfolio, which totaled $605.5 million as of December 31, 2024 and $573.4 million as of December 31, 2023. The SFR loan portfolio originated for a business purpose totaled $54.1 million as of December 31, 2024 and $48.7 million as of December 31, 2023.

Current wording

The largest sub-set of CRE loans was the multi-family residential loan portfolio, which totaled $745.3 million as of December 31, 2025, and $605.5 million as of December 31, 2024. Also included in CRE loans are SFR loans originated for a business purpose, which totaled $40.6 million at December 31, 2025, and $54.1 million at December 31, 2024.

Previous wording

The following table presents the LTV ratios at origination for CRE loans by state as of the date indicated:

Current wording

The following table presents the LTV ratios at origination for CRE loans by states where the Company operates branches as of the date indicated:

Previous wording

Construction and Land Development Loans. C&D loans totaled $173.3 million, or 5.7% of the loan portfolio, at December 31, 2024. C&D loans decreased $8.2 million, or 4.5%, during 2024 due to a decrease in residential construction loans, offset by an increase in commercial construction loans. Our C&D loans are comprised of residential construction, commercial construction and land acquisition and development construction. Interest reserves are generally established on real estate construction loans. These loans are typically Prime rate based and have maturities of less than 18 months.

Current wording

Construction and Land Development Loans. C&D loans totaled $155.5 million, or 4.7% of the loan portfolio, at December 31, 2025. C&D loans decreased $17.8 million, or 10.3%, during 2025 due to decreases in land development loans and residential construction loans, offset by an increase in commercial construction loans. Our C&D loans are comprised of residential construction, commercial construction and land acquisition and development construction. Interest reserves are generally established on real estate construction loans. These loans are typically Prime rate based and have maturities of less than 18 months.

Previous wording

*Commercial and Industrial Loans.*C&I loans totaled $ 129.6 million, or 4.2% of the loan portfolio, as of December 31, 2024. The net decrease in C&I loans was $511,000 due in part to a decrease in mortgage warehouse lines of credit, offset by growth in other C&I loans.

Current wording

*Commercial and Industrial Loans. *C&I loans totaled $140.1 million, or 4.2% of the loan portfolio, as of December 31, 2025. C&I loans increased $10.5 million, or 8.1%, during 2025 due in part to an increase in commercial term loans of $9.1 million along with an increase in mortgage warehouse lines of credit of $2.8 million.

Previous wording

At December 31, 2024, $6.3 million of C&I loans were on nonaccrual status, including a $4.7 million loan that is secured by a personal residence. For additional discussion on nonperforming loans, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations**—Analysis of Financial Condition– Problem Loans.

Current wording

At December 31, 2025, C&I loans on nonaccrual status totaled $5.1 million, including a $4.7 million loan secured by a personal residence. For additional discussion on nonperforming loans, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations**—Analysis of Financial Condition– Problem Loans.

Previous wording

*SBA Guaranteed Loans.*SBA loans totaled $ 47.3 million, or 1.5% of the loan portfolio at December 31, 2024 compared to $52.1 million, or 1.8% of the loan portfolio at December 31, 2023. SBA loans decreased $4.8 million, or 9.2%, due to $31.2 million in originations being more than offset by payoffs and payments of $22.2 million and loan sales of $13.8 million. Our 2024 originations included $27.5 million of SBA 7A loans and $3.7 million of SBA 504 loans.

Current wording

*SBA Loans. *SBA loans totaled $56.0 million, or 1.7% of the loan portfolio at December 31, 2025, compared to $47.3 million, or 1.5% of the loan portfolio at December 31, 2024. SBA loans increased $8.7 million, or 18.4%, due to $27.2 million in originations and $428,000 of advances, partially offset by sales of $10.8 million, payoffs and payments of $7.0 million, and transfers to OREO of $1.2 million. Our 2025 originations included $23.1 million of SBA 7A loans and $4.1 million of SBA 504 loans.

Previous wording

As of December 31, 2024, our SBA portfolio totaled $47.3 million, of which $2.0 million was guaranteed by the SBA and $45.3 million was unguaranteed. The unguaranteed portion included $39.9 million, which was secured by real estate and $5.4 million was unsecured or secured by business assets. We monitor the unguaranteed portfolio by type of collateral. As of December 31, 2024, $23.8 million or 52.6% was secured by hotel/motels; $9.4 million or 20.7% by warehouses; $2.0 million or 4.5% by retail; $1.8 million or 4.0% by gas stations; and $8.3 million or 18.2% of other real estate types. As of December 31, 2024, $27.7 million or 61.2% was located in California; $3.7 million or 8.1% was located in Texas; $3.5 million or 7.6% was located in Washington; $3.2 million or 7.0% was located in Oregon; and $7.2 million or 16.1% was located in other states.

Current wording

At December 31, 2025, our SBA portfolio included $10.9 million guaranteed by the SBA and $45.1 million which was unguaranteed. We monitor the unguaranteed portfolio by type of collateral. The unguaranteed portion included $38.3 million secured by real estate and $6.8 million secured by business assets. At December 31, 2025, of the unguaranteed portfolio, $20.3 million, or 45.0%, was secured by hotel/motels; $12.8 million, or 28.3%, by warehouses; $2.2 million, or 4.8%, by retail; $1.8 million, or 4.0%, by gas stations; and $8.0 million, or 17.9%, of other real estate types. At December 31, 2025, of the unguaranteed portfolio, $30.1 million, or 66.8%, was located in California; $3.2 million, or 7.1%, was located in Washington; $2.8 million, or 6.1%, was located in Oregon; $2.7 million, or 6.0%, was located in Texas; and $6.3 million, or 14.0%, was located in other states.

Previous wording

We account for credit losses on loans in accordance with ASC 326, which requires us to record an estimate of expected lifetime credit losses for loans at the time of origination. The ACL includes the ALL and the reserve for unfunded commitments and is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated balance sheet. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL for loans is performed by collectively evaluating loans with similar risk characteristics. We have elected to utilize a discounted cash flow approach for all segments except consumer loans and warehouse mortgage loans, for these a remaining life approach was elected.

Current wording

We account for credit losses on loans in accordance with ASC 326, which requires us to record an estimate of expected lifetime credit losses for loans at the time of origination. The ACL includes the ALL and the reserve for unfunded commitments ("RUC") and is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated balance sheets. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL for loans is performed by collectively evaluating loans with similar risk characteristics. We have elected to utilize a discounted cash flow approach for all segments except consumer loans and warehouse mortgage loans, for these a remaining life approach was elected.

Previous wording

Our discounted cash flow loss rate methodology incorporates a probability of default, loss given default and exposure at default to derive expected loss within the CECL model, as well as expectations of future economic conditions, using reasonable and supportable forecasts. We use both internal and external qualitative factors within the CECL model including: lending policies, procedures, and strategies; changes in nature and volume of the portfolio; credit and lending personnel experience; changes in volume and trends in classified, delinquent, and nonaccrual loans; concentration risk; collateral values; regulatory and business environment; loan review results; and economic conditions.

Current wording

Our discounted cash flow loss rate methodology incorporates a probability of default, loss given default and exposure at default to derive expected loss within the CECL model, as well as expectations of future economic conditions, using reasonable and supportable forecasts. We use both internal and external data to determine qualitative factors within the CECL model including: lending policies, procedures, and strategies; changes in nature and volume of the portfolio; credit and lending personnel experience; changes in volume and trends in classified, delinquent, and nonaccrual loans; concentration risk; collateral values; regulatory and business environment; loan review results; and economic conditions.