BayCom Corp

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BayCom Corp (the “Company”), a California corporation, is the bank holding company for United Business Bank (the “Bank”), a California state-chartered bank. The Company is primarily engaged in the business of planning, directing and coordinating the business activities of the Bank, its wholly owned operating subsidiary.

The Bank, formerly known as Bay Commercial Bank, opened for business on July 20, 2004. The Bank provides a broad range of financial services primarily to local small and mid-sized businesses, service professionals and individuals through its 34 full-service banking branches. The main office is located in Walnut Creek, California and branch offices are located in Oakland, Castro Valley, Mountain View, Stockton, Pleasanton, Livermore, San Jose, Long Beach, Sacramento, San Francisco, Buena Park, Los Angeles, Garden Grove, Waterloo and Irvine, California; Las Vegas, Nevada; Seattle, Washington; New Mexico (5); and Colorado (11). The Company is subject to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”). The Bank is subject to regulation by the California Department of Financial Protection and Innovation (“DFPI”), which until September 29, 2020 was known as the California Department of Business Oversight, and as a state-member bank, by the Federal Reserve.

The Company has two subsidiary grantor trusts, First ULB Statutory Trust I (“FULB Trust”) and Bethlehem Capital Trust (“BFC Trust”) (collectively, the “Grantor Trusts”) which were established in connection with the issuance of trust preferred securities (see Note 12). In accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), the accounts and transactions of the Trusts are not included in the accompanying consolidated financial statements. The Grantor Trusts were acquired through acquisitions.

The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. The accounting and reporting policies of the Company conform to U.S. GAAP, general practice, and regulatory guidance within the banking industry. All material intercompany transactions and accounts have been eliminated in consolidation. For financial reporting purposes, the Grantor Trusts are accounted for under the equity method and are included in other assets on the consolidated balance sheets. The junior subordinated debentures issued and guaranteed by the Company and held by the Grantor Trusts are reflected as liabilities on the Company’s consolidated balance sheets.

The accounting preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the consolidated financial statements include the allowance for credit losses on loans. Actual results could differ from these estimates. Dollar amounts presented in the consolidated financial statements and footnote tables are rounded and presented to the nearest thousands of dollars except per share amounts. If the amount is above $1.0 million, it is rounded one decimal point, and if it is above $1.0 billion, it is rounded two decimal points.

Segment Reporting

The Company operates asone operating segment which is reported in a manner consistent with the internal consolidated reporting provided to the chief operating decision-maker (“CODM”). The CODM is responsible for the allocation of resources and assessing the performance of the operating segment and has been identified as the Chief Executive Officer of the Company. The CODM monitors financial performance and evaluates the revenue streams of the Company’s various products, services, locations, and operations on a company-wide basis. Accordingly, we consider all of our operations to be aggregated inone reportable operating segment. Refer to Note 23—Segment Information for additional information.

Business Combinations

We apply the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity in a business combination recognizes all the identifiable assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes prevailing valuation techniques appropriate for the asset or liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition related costs are expensed as incurred unless they are directly attributable to the issuance of the Company’scommon stock in a business combination. The acquired assets and assumed liabilities, both tangible and intangible for all acquisitions were measured at estimated fair values, as required by the acquisition method of accounting for business combinations, Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations. Management made significant estimates and exercised significant judgment in accounting for the acquisition.

Cash and Cash Equivalents

Cash equivalents are defined as short-term, highly liquid investments both readily convertible into known amounts of cash and so near maturity that there is insignificant risk of change in value because of changes in interest rates. Generally, only investments with original maturities of three months or less at the time of purchase qualify as cash equivalents. Cash and cash equivalents include cash and due from banks and federal funds sold. Generally, banks are required to maintain noninterest bearing cash reserves equal to a percentage of certain deposits. For the years ended December 31, 2025 and 2024, $164.7 million and$160.3 million in reserve balances were required, respectively.

As of December 31, 2025 and 2024, the Company had cash deposits at other financial institutions in excess of Federal Deposit Insurance Corporation (“FDIC”) insured limits. The Company places these deposits with major financial institutions and management monitors the financial condition of these institutions and believes the risk of loss to be minimal. At both December 31, 2025 and December 31, 2024, the Company did not hold interest bearing money market accounts in these financial institutions.

Interest Bearing Time Deposits in Banks

The Company invests in time deposits with other banks. At December 31, 2025, there wereno time deposits with other banks, compared to$249,000 at December 31, 2024, which had a weighted average yield of 2.25%. These deposits did not exceed FDIC limits and matured withinone year.

Investment Debt Securities Available-for-Sale

Investment debt securities AFS include bonds, notes, mortgage-backed securities, and debentures not classified as held-to-maturity securities. These securities are carried at estimated fair value with unrealized holding gains and losses, net of tax impact, if any, reported as a net amount in a separate component of shareholders’ equity, accumulated other comprehensive income (loss), until realized. Gains and losses on the sale of AFS debt securities are determined using the specific identification method. The amortization of premiums and accretion of discounts are recognized as adjustments to interest income over the period to maturity.

Investments with fair values that are less than amortized costs are considered impaired. Impairment may result from either a decline in the financial condition of the issuing entity or in the case of fixed interest rate investments, from rising interest rates. At each financial statement date management assesses each investment to determine if impaired investments are temporarily impaired or if the impairment is other than temporary. This assessment includes a determination of whether the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered other than temporarily impaired and that the Company does not intend to sell and will not be required to sell prior to recovery of the amortized cost basis, the amount of impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is calculated as the difference between the security’s amortized costs basis and the present value of its expected future cash flows.

The remaining difference between the security’s fair value and the present value of the future expected cash flow is deemed to be due to factors that are not credit related and is recognized in other comprehensive income (loss).

Allowance for Credit Losses for Investment Debt Securities Available-For-Sale

Prior to the adoption of Accounting Standards Update (“ASU”) 2016-13, declines in the fair value of securities below their cost deemed to be other-than-temporary impairment ("OTTI") were reflected in operations as realized losses. Upon adoption of ASU 2016-13, for investment debt securities AFS in a loss position, the Company evaluates whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Impairment may result from either a decline in the financial condition of the issuing entity or in the case of fixed interest rate investments, from rising interest rates. In making this assessment, management considers the length of time and the extent to which fair value is less than amortized cost, the nature of the security, the underlying collateral, and the financial condition and prospects of the issuer, among other factors. This assessment also includes a determination of whether the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses.

Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Changes in the allowance for AFS securities are recorded as provision for (or reversal of) credit loss. However, if the uncollectibility of an AFS security is confirmed or if the Company intends to sell an impaired AFS debt security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount is recognized in earnings with a corresponding adjustment to the security's amortized cost basis.

Investment Equity Securities

Equity securities include marketable preferred stock. These securities are carried at estimated fair value with changes in unrealized holding gains and losses reported as part of non-interest income on the consolidated statement of income. Gains and losses on the sale of equity securities are determined using the specific identification method. The amortization of premiums and accretion of discounts are recognized as adjustments to interest income over the period to maturity.

Federal Home Loan Bank Stock

As a member of the FHLB, the Bank is required to own common stock in the FHLB based on the level of borrowings and outstanding FHLB advances. FHLB stock is carried at cost and is periodically evaluated for impairment based on ultimate recovery of par value. Cash dividends from the FHLB are reported as interest income.

Federal Reserve Bank Stock

As a member of the FRB, the Bankis required to own stock in the FRB of San Francisco based on a specified ratio relative to our capital. FRB stock is recorded at cost and redeemable at par value. FRB stock is periodically evaluated for impairment based on ultimate recovery of par value. Cash dividends are reported as interest income.

Loans

Loans are stated at the principal amount outstanding, net of the allowance for credit losses, net deferred fees, and unearned discounts, if any. The Company holds loans receivable primarily for investment purposes. The Company purchases and sells interests in certain loans referred to as participations. The participations are sold without recourse.

Interest on loans is calculated and accrued daily using the simple interest method based on the daily amount of principal outstanding. Generally, loans with temporarily impaired values and loans to borrowers experiencing financial difficulties are placed on nonaccrual even though the borrowers continue to repay the loans as scheduled.

When the ability to fully collect nonaccrual loan principal is in doubt, cash payments received are applied first to principal until such time as full collection of the remaining recorded balance is expected. Loans are returned to accrual basis when principal and interest payments are being paid currently and full payment of principal and interest is probable.

Loans Purchased and Acquired

From time to time, the Company may purchase whole loans, including multi-family residential, single-family residential and commercial and industrial loans, both inside and outside its markets, to augment our loan portfolio. The purchase decision is usually based on several factors, including current loan origination volumes, market interest rates, excess liquidity, our continuous efforts to meet the credit needs of certain borrowers under the Community Reinvestment Act (“CRA”), as well as other asset/liability management strategies. All purchased loans are selected using the Bank’s normal underwriting criteria at the time of purchase, or in some cases guaranteed by third parties. Discounts or premiums on purchased loans are accreted or amortized to interest income using the effective interest method or straight-line method over the remaining period to contractual maturity.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchase credit impaired (“PCI”) and accounted for under ASC 310-30. In accordance with ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. The remaining noncredit discount (based on the adjusted amortized costs basis) will be accreted into interest income at the effective interest rate as of adoption. An allowance for credit losses is established as of the acquisition date or upon the adoption of CECL for loans previously classified as acquired impaired, as PCD loans are no longer recorded net of a credit-related acquisition adjustment.

Acquired PCD loans

The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are loans acquired at a discount that is due, in part, to credit quality deterioration since origination which may be determined through observation of missed payments, downgrade in risk rating, deterioration of a borrower's financial trends or other observable factors including subjectivity utilized by management. PCD loans are initially recorded at fair value, by taking the sum of the present value of expected future cash flows and an allowance for credit losses, at acquisition. The allowance for credit losses for PCD loans is recorded through a gross-up of reserves on the consolidated balance sheets. An allowance for credit losses is determined using the same methodology as other loans held for investment. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent to acquisition, the allowance for credit losses for PCD loans will generally follow the same forward-looking estimation, provision, and charge-off process as non-PCD acquired and originated loans. Subsequent changes to the allowance for credit losses are recorded through credit loss expense.

Acquired non-PCD loans

Acquired non-PCD loans under business combinations are accounted for under ASC Subtopic 310-20,Receivables Nonrefundable Fees and Other Costs ("ASC 310-20"). The difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the life of the loan. While credit discounts are included in the determination of the fair value from non-PCD loans, since these discounts are expected to be accreted over the life of the loans, they cannot be used to offset the allowance for credit losses that must be recorded at the acquisition date. As a result, an allowance for credit losses is determined at the acquisition date using the same methodology as other loans held for investment and is recognized as a provision for credit losses in the consolidated statement of operations. Any subsequent deterioration (improvement) in credit quality is recognized by recording a provision for (recapture of) credit losses.

Loan Fees and Costs

Loan origination fees, commitment fees, direct loan origination costs and purchase premiums and discounts on loans are deferred and recognized as an adjustment of yield, to be amortized to interest income over the contractual term of the loan. Other loan fees and charges which represent income from delinquent payment charges, and miscellaneous loan or letter of credit services, are recognized as noninterest income when collected.

Salaries, employee benefits and other expenses totaling $2.1 million, $1.3 million and$663,000 were deferred as loan origination costs for the years ended December 31, 2025, 2024 and 2023, respectively.

Allowance for Credit Losses on Loans

The allowance for credit losses represents management’s estimate of current expected credit losses over the life of a financial asset carried at amortized cost. The Company’s method for assessing the appropriateness of the allowance for credit losses includes specific allowances for individually analyzed loans, a pooled loans component incorporating both quantitative and qualitative factors, and a reserve for unfunded loan commitments. The allowance for credit losses for loans is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "Interest payable and other liabilities" on the consolidated balance sheets. The amortized cost basis of loans does not include accrued interest receivable, which is included in "Interest receivable and other assets" on the consolidated balance sheets. The "Provision for credit losses" on the consolidated statements of income comprises the provision for credit losses for loans, unfunded loan commitments, and investment securities AFS.

The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes uncollectibility of the loan is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off. Periodically, the Company charges current earnings with provisions for estimated probable losses of loans receivable. Regardless of the determination that a charge-off is appropriate for financial accounting purposes, the Company manages its loan portfolio by continually monitoring, where possible, a borrower's ability to pay through the collection of financial information, delinquency status, borrower discussion and the encouragement to repay in accordance with the original contract or modified terms, if appropriate.

Management estimates the allowance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The CECL model utilizes a discounted cash flow ("DCF") method to measure the expected credit losses on loans collectively evaluated that are sub-segmented by loan pools with similar credit risk characteristics, which generally correspond to federal regulatory reporting codes (i.e., Call Report codes), with PCD assets pooled separately by similar loan pools to evaluate and measure the allowance for credit losses. In its loss forecasting framework, the Company incorporates forward-looking information through the use Federal Reserve Economic Data, more specifically, macroeconomic forecasts such as national unemployment rates and national gross domestic product.

A loan may be considered to be placed on nonaccrual when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as nonaccrual.

Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral, adjusted for undiscounted selling costs as appropriate. When the discounted cash flow method is used to determine the allowance for credit losses, management does not adjust the effective interest rate used to discount expected cash flows to incorporate expected prepayments, or the loan’s obtainable market price.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a loan modification will be executed with anindividual borrower, or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Portfolio segments identified by the Company include commercial and industrial, construction and land, commercial real estate, including multifamily, residential real estate and consumer. This evaluation is inherently subjective and requires estimates that are susceptible to significant change as additional or new information becomes available. Relevant risk characteristics for the Company’s loan portfolio segments include vintage of the loan, debt service coverage, loan-to-value ratios and other financial performance ratios.

The Company evaluates and assigns a risk grade to each loan based on certain criteria to assess the credit quality of each loan. The assignment of a risk rating is done for each individual loan. Loans are graded from inception and on a continuing basis until the debt is repaid. Any adverse or beneficial trends will trigger a review of the loan risk rating. Each loan is assigned a risk grade based on its characteristics. Loans with low to average credit risk are assigned a lower risk grade than those with higher credit risk as determined by the individual loan characteristics. See Note 4 of the Notes to Consolidated Financial Statements for loan risk rating definitions.

PCD assets are assets acquired at a discount that is due, in part, to credit quality deterioration since origination which may be determined through observation of missed payments, downgrade in risk rating, deterioration of a borrower's financial trends or other observable factors including subjectivity utilized by management. PCD assets are initially recorded at fair value, by taking the sum of the present value of expected future cash flows and an allowance for credit losses, at acquisition. The allowance for credit losses for PCD assets is recorded through a gross-up of reserves on the consolidated balance sheets, while the allowance for acquired non-PCD assets, such as loans, is recorded through the provision for credit losses on the consolidated statements of income, consistent with originated loans. Subsequent to acquisition, the allowance for credit losses for PCD loans will generally follow the same forward-looking estimation, provision, and charge-off process as non-PCD acquired and originated loans.

For additional information regarding our allowance for credit losses, see “Critical Accounting Estimates” in “Item 7- Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Reserve for Unfunded Commitments

The reserve for unfunded commitments is established through a provision for credit losses-unfunded commitments, the changes of which are recorded in provision for credit losses and the reserve amount is included within “Interest payable and other liabilities” on the consolidated balance sheets. The reserve for unfunded commitments is an amount that management believes will be adequate to absorb probable losses inherent in existing commitments, including unused portions of revolving lines of credit and other loans, standby letters of credit, and unused deposit account overdraft privileges. The reserve for unfunded commitments is based on evaluations of the collectability and prior loss experience of unfunded commitments. The evaluations take into consideration such factors as changes in the nature and size of the

loan portfolio, overall loan portfolio quality, loan concentrations, specific problem loans and related unfunded commitments, and current economic conditions that may affect the borrower’s or depositor’s ability to pay.

Modifications for Financial Difficulty

Modified loans and leases are reviewed to determine if the modification was done for borrowers experiencing financial difficulty. The concessions may be granted in various forms, including a reduction in the stated interest rate, reduction in the loan balance or accrued interest, extension of the maturity date, or a combination of these. The Company measures any loss on the modified loan to a borrower experiencing financial difficulty in accordance with the guidance concerning individually evaluated loans set forth above. Additionally, modified loans to borrowers experiencing financial difficulties are generally placed on nonaccrual status at the time of restructuring. These loans are returned to accrual status after the borrower demonstrates performance with the modified terms for a sustained period of time (generally six months) and has the capacity to continue to perform in accordance with the modified terms of the restructured debt.

Other Real Estate Owned

OREO acquired through, or in lieu of, foreclosure is held-for-sale and initially recorded at fair value, less selling expenses. At transfer, any write-downs to fair value are charged to the allowance for credit losses. Costs to hold OREO are expensed when incurred. After transfer, the Company obtains updated appraisals or market valuation analyses on all OREO and is able to update information collected at time of transfer. If the periodic valuation indicates a decline in the fair value below recorded carrying value, an additional write-down or valuation allowance for OREO losses is established as a charge to earnings. Fair value is based on current market conditions, appraisals, and estimated sales values of similar properties. Operating expenses of such properties, net of related income, are included in other expenses.

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at historical cost less accumulated depreciation or amortization. Depreciation is determined using the straight-line method based on the estimated useful lives of the assets.

When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is recognized in noninterest income. The cost of maintenance and repairs is charged to expense as incurred. At the end of each year, the Company evaluates premises and equipment for impairment to the extent events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.

Operating Lease Right of Use Assets and Liabilities

The Company determines if a lease is present at the inception of an agreement. Operating leases are capitalized at commencement and are discounted using the Company’s FHLB borrowing rate for a similar term borrowing unless the lease defines an implicit rate within the contract.

The operating lease right of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and the operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. Some of the Company's lease agreements include options to renew at the Company's discretion. The extensions are not reasonably certain to be exercised; therefore, they were not considered in the calculation of the ROU assets and lease liabilities. No significant judgments or assumptions were involved in developing the estimated operating lease liabilities as the Company’s operating lease liabilities largely represent future rental expenses associated with operating leases and the borrowing rates are based on publicly available interest rates.

Goodwill, Core Deposit Intangible and Long-Lived Assets

Goodwill is determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquired assets, over the fair value of the net assets acquired and the liabilities assumed as of the acquisition date. Goodwill is reviewed for impairment annually, or between annual assessments if a triggering event occurs or circumstances change that would more likely than not result in the fair value of a reporting unit being below its carrying amount. We make a qualitative assessment whether it is more likely than not that the fair value of a reporting unit where goodwill is assigned is less than its carrying amount. Such indicators may include, among others: a significant adverse change in legal factors or in the general business climate; significant decline in the Company’s stock price and market capitalization; unanticipated competition; and an adverse action or assessment by a regulator. Any adverse changes in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our financial condition and results of operations. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Core deposit intangible represents the estimated future benefit of deposits related to an acquisition and is booked separately from the related deposits and amortized over an estimated useful life ofthree toten years. The Company performed its annual impairment analysis and determinedno impairment existed as of December 31, 2025.

Bank Owned Life Insurance

BOLI policies are maintained on certain key current and former officers. BOLI is recorded on the consolidated balance sheets at the amount that can be realized based on cash surrender value.

Transfers of Financial Assets

Transfers of an entire financial asset, a group of financial assets, or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

The Company may sell certain portions of government guaranteed loans in the secondary market. These sales are recorded by the Company when control is surrendered and any warranty period or recourse provision expires.

Servicing Assets and Liabilities

In connection with the sale of the Company’s Small Business Administration (“SBA”) loans, the Company recognizes servicing assets when servicing rights are retained. The gain or loss on sale of loans depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer. All servicing assets and liabilities are initially measured at fair value. The Company initially recognizes and measures at fair value servicing rights obtained by SBA loan sales. The Company subsequently measures these servicing assets by using the amortization method, which amortizes servicing assets in proportion to, and over the period of, estimated net servicing income. The amortization of the servicing assets is analyzed periodically for impairment and is adjusted to reflect changes in prepayment rates and other estimates. The servicing asset and the related amortization are netted against other non-operating income in the consolidated statement of income. Gain or loss on sale of loans is included in noninterest income.

Loans serviced for others totaled $136.1 million and $164.8 million as of December 31, 2025 and 2024, respectively. Servicing assets, included in interest receivable and other assets in the consolidated statements of financial condition, totaled $388,000 and $673,000 as of December 31, 2025 and 2024, respectively. There wereno servicing liabilities included in interest payable and other liabilities on the consolidated balance sheets at both December 31, 2025 and December 31, 2024.

Loans Held for Sale

Periodically, the Company sells loans and retains the servicing rights. The gain or loss on sale of loans depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer.

The portions of the SBA loans that are guaranteed by the SBA are classified by management as loans held for sale since the Company intends to sell these loans. Loans held for sale are recorded at the lower of their aggregate cost or estimated fair value. During 2025, the Company sold $5.1 million of SBA loans (guaranteed portion) in the secondary market, all of which settled by end of year 2025. During 2024, the Company sold$3.6 million of SBA loans (guaranteed portion) in the secondary market, all of which settled by end of year 2024.

The fair value of SBA loans held for sale is based primarily on prices that secondary markets are currently offering for loans with similar characteristics. Net unrealized losses, if any, are recognized through a valuation allowance charged to income. The carrying value of SBA loans held for sale is net of premiums as well as deferred origination fees and costs. Premiums and net origination fees and costs are deferred and included in the basis of the loans in calculating gains or losses upon sale. SBA loans are generally secured by the borrowing entities’ assets such accounts receivable, property and equipment and other business assets. The Company generally recognizes gains and losses on these loan sales based on the differences between the sales proceeds received and the allocated carrying value of the loans sold (which can include deferred premiums and net origination fees and costs). The non-guaranteed portion of the SBA loans is not typically sold by the Company and is classified as held for investment.

Income Taxes

The Company and the Bank file a United States consolidated federal income tax return and file state income tax returns, most notably in California, Colorado and New Mexico. Income taxes are accounted for using the asset and liability method. Under such method, deferred tax assets and liabilities are recognized for the future tax consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis (temporary differences). Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in the period of change. A valuation allowance is established to reduce the deferred tax asset to the level at which it is “more likely than not” that the tax asset or benefits will be realized. Realization of tax benefits of deductible temporary differences and operating loss carry forwards depends on having sufficient taxable income of an appropriate character within the carry forward periods. The determination, recognition, and measurement of deferred tax assets and the requirement for a related valuation allowance is based on estimated future taxable income.

The tax effects from an uncertain tax position can be recognized in the financial statements only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities. Accrued interest and penalties related to unrecognized tax benefits in tax expense.

Revenue Recognition

The Company records revenue from contracts with clients in accordance with ASC Topic 606, “Revenue from Contracts with Clients” (“Topic 606”). Under Topic 606, the Company must identify the contract with a client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation.

Most of our revenue-generating transactions are not subject to Topic 606, including revenue generated from financial instruments, such as our loans and investment securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not within the scope of the new guidance. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values.

Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with clients and therefore has not experienced significant contract balances. As of December 31, 2025 and December 31, 2024, the Company did not have any significant contract balances. The following are descriptions of revenues within the scope of ASC 606.

Deposit fees and service charges

The Company earns fees from its deposit clients for account maintenance, transaction-based and overdraft services. Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts monthly. The performance obligation is satisfied and the fees are recognized monthly as the service period is completed. Transaction-based fees on deposit accounts are charged to deposit clients for specific services provided to the client, such as non-sufficient fund fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the client.

Debit and ATM interchange fee income and expenses

Debit and ATM interchange income represent fees earned when a debit card issued by the Company is used. The Company earns interchange fees from debit cardholder transactions through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholder’s debit card. Certain expenses directly associated with the debit card are recorded on a net basis with the interchange income.

Merchant fee income

Merchant fee income represents fees earned by the Company for card payment services provided to its merchant clients. The Company outsources these services to a third party to provide card payment services to these merchants. The third-party provider passes the payments made by the merchants through to the Company. The Company, in turn, pays the third-party provider for the services it provides to the merchants. These payments to the third party provider are recorded as expenses as a net reduction against fee income. In addition, a portion of the payment received represents interchange fees which are passed through to the card issuing bank. Income is primarily earned based on the dollar volume and number of transactions processed. The performance obligation is satisfied and the related fee is earned when each payment is accepted by the processing network.

Gain/loss on other real estate owned, net

The Company records a gain or loss from the sale of other real estate owned when control of the property transfers to the buyer, which generally occurs at the time of execution of a deed of trust. When the Company finances the sale of other real estate owned to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on sale, the Company adjusts the transaction price and related gain or loss on sale if a significant financing component is present.

Stock Based Compensation

Restricted Equity Grants

The Company granted restricted stock to directors and employees in 2025 and 2024. The grant-date fair value of the award is amortized on the straight-line basis over the requisite service period, which is generally the vesting period, as compensation expense in salaries and benefits for employees and other noninterest expense for directors.

Earnings per Share

Earnings per share (“EPS”) is computed using the two-class method. Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, excluding any participating securities. Participating securities include unvested restricted shares. Unvested restricted shares are considered participating securities because holders of these securities receive non-forfeitable dividends at the same rate as the holders of the Company’s common stock. Diluted EPS is computed by dividing net income available to common stockholders adjusted for reallocation of undistributed earnings of unvested restricted shares by the weighted average number of common shares determined for the basic EPS plus the dilutive effect of common stock equivalents using the treasury stock method based on the average market price for the period. Therefore, under the two-class method the difference in EPS is not significant for these participating securities.

Repurchase of Common Stock

In May 2024, the Company’s Board of Directors approved a stock repurchase program authorizing the repurchase of up to 560,000 shares, or approximately 5.0%, of the Company’s outstanding common stock, with no set expiration date. Under the repurchase program, the Company is authorized to repurchase its common stock through open market purchases, privately-negotiated transactions, or pursuant to any trading plan adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in compliance with Rule 10b-18 under the Exchange Act. The repurchase program does not obligate the Company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time. As of December 31, 2025,202,444 shares of Company common stock remained available for future purchases under the repurchase program.

Comprehensive Income (Loss)

Comprehensive income (loss) includes disclosure of other comprehensive income or loss that historically has not been recognized in the calculation of net income or loss. Unrealized gains and losses on the Company’s AFS investment debt securities are included in other comprehensive income or loss. Total comprehensive income or loss and the components of accumulated other comprehensive income are presented as a separate statement of comprehensive income.

Loss Contingencies and Legal Claims

In the normal course of business, the Company may be subject to claims and lawsuits. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits, if any, will not have a material adverse effect on the financial position of the Company.

Recent Accounting Guidance Adopted

*Income Taxes – Improvements to Income Tax Disclosures (Topic 740) –*In December 2023, the FASB issued ASU 2023-09 to provide additional transparency into an entity’s income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The standard requires that public business entities disclose, on an annual basis, specific categories in the rate reconciliation and additional information for reconciling items meeting a certain quantitative threshold. The amendments also require that entities disclose on an annual basis: 1) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and 2) the income taxes paid (net of refunds received) disaggregated by individual jurisdictions exceeding 5% of total income taxes paid (net of refunds received). The amendments are effective for public business entities for annual periods beginning after December 15, 2024 and must be applied prospectively to all prior periods presented in the financial statements. The disclosure requirements of this update did not have a material effect on the Company’s consolidated financial statements and related disclosures. See Note 14 – Income Taxes.

Recent Accounting Guidance Not Yet Effective

In November 2024, the FASB issued ASU 2024-03,Income Statement (Topic 220) – Reporting Comprehensive Income – Expense Disaggregation Disclosures, to address investor requests for more detailed information about certain

expense types. The new standard requires public business entities to disclose disaggregated information about specific natural expense categories underlying relevant expense captions presented on the face of the income statement within continuing operations, such as employee compensation, depreciation, and intangible asset amortization. The amendments are effective for public business entities for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Entities are required to adopt the amendments prospectively. In January 2025, the FASB issued ASU 2025-01,Income Statement (Topic 220) – Reporting Comprehensive Income – Expense Disaggregation Disclosures: Clarifying the Effective Date, to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual periods beginning after December 15, 2027. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05 to simplify the estimation of expected credit losses for current accounts receivable and contract assets arising from revenue transaction within the scope of Topic 606, Revenue from Contracts with Customers. The amendments introduce a practical expedient that allows entities to assume that conditions existing as of the balance sheet date remain unchanged over the remaining life of the asset, and for entities other than public business entities, permit the use of subsequent cash collections when estimating credit losses. The amendments are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual periods. Early adoption is permitted. The amendments should be applied prospectively. The Company is currently evaluating the accounting and disclosure requirements of this update and does not expect the adoption of this standard to have a material effect on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03,Income Statement (Topic 220) – Reporting Comprehensive Income – Expense Disaggregation Disclosures, to address investor requests for more detailed information about certain expense types. The new standard requires public business entities to disclose disaggregated information about specific natural expense categories underlying relevant expense captions presented on the face of the income statement within continuing operations, such as employee compensation, depreciation, and intangible asset amortization. The amendments are effective for public business entities for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Entities are required to adopt the amendments prospectively. In January 2025, the FASB issued ASU 2025-01,Income Statement (Topic 220) – Reporting Comprehensive Income – Expense Disaggregation Disclosures: Clarifying the Effective Date, to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual periods beginning after December 15, 2027. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05 to simplify the estimation of expected credit losses for current accounts receivable and contract assets arising from revenue transaction within the scope of Topic 606, Revenue from Contracts with Customers. The amendments introduce a practical expedient that allows entities to assume that conditions existing as of the balance sheet date remain unchanged over the remaining life of the asset, and for entities other than public business entities, permit the use of subsequent cash collections when estimating credit losses. The amendments are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual periods. Early adoption is permitted. The amendments should be applied prospectively. The Company is currently evaluating the accounting and disclosure requirements of this update and does not expect the adoption of this standard to have a material effect on its consolidated financial statements.

*Purchased Loans – Financial Instruments Credit losses (Topic 326) –*In November 2025, the FASB issued ASU 2025-08 to improve the accounting for certain acquired loans, specifically purchased seasoned loans (“PSLs”). The amendments expand the application of the gross-up approach to qualifying purchased loans acquired without significant credit deterioration. Under the amendments, and allowance for credit losses is recorded at acquisition with a corresponding adjustment to the loan’s amortized cost basis, eliminating the recognition of a Day 1 credit loss expense for such loans. The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim reporting periods within those annual periods, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

*Interim Reporting (Topic 270) –*In December 2025, the FASB issued ASU 2025-11 to clarify interim disclosure requirements by providing a comprehensive list of disclosures that are required in interim reporting periods. The amendments also introduce a disclosure principle requiring entities to disclose events and changes that occur after the end of most recent annual reporting period that have a material impact on the entity. The amended guidance is effective for the Company on January 1, 2028, with early adoption permitted. The amendments may be applied on either a prospective or retrospective basis. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

Subsequent Events

Management has evaluated subsequent events for potential recognition and disclosure through the date the financial statements were issued.

Reclassifications

Certain prior year amounts are reclassified to conform to the current year presentation. None of the reclassifications impact net income or earnings per common share.

2. INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as AFS at the dates indicated are summarized as follows:

Amortized cost and fair values exclude accrued interest receivable of$1.3 million at both December 31, 2025 and 2024, which is included ininterest receivable and other assets in the consolidated balance sheets.

For the years ended December 31, 2025, 2024 and 2023, the Company soldno securities AFS.

The amortized cost and estimated fair value of securities AFS at the dates indicated by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

At both December 31, 2025 and 2024, there wereno securities pledged.

The estimated fair value and gross unrealized losses for securities AFS aggregated by the length of time that individual securities have been in a continuous unrealized loss position at the dates indicated are as follows:

At December 31, 2025, the Company held 318 investment securities, of which 168 were in an unrealized loss position for more than twelve months and 21 were in an unrealized loss position for less than twelve months. At December 31, 2024, the Company held 352 investment securities, of which 212 were in an unrealized loss position for more than twelve months and 53 were in an unrealized loss position for less than twelve months. The Company anticipates full recovery of amortized cost with respect to these securities at maturity or sooner in the event of a more favorable market interest rate environment.

Allowance for credit losses on investment debt securities AFS

The securities that were in an unrealized loss position as of December 31, 2025, were evaluated to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or changes in required yields by investors in these types of securities, among other factors. This assessment first includes a determination of whether the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit losses. In making this assessment, management considers the nature of the security and any related government guarantees, any changes to the rating of the security by a rating agency, creditworthiness of the issuers/guarantors, the underlying collateral, the financial conditions and prospects of the issuer, and any adverse conditions specifically related to the security, among other factors.

As of December 31, 2025, the Company expected to recover the amortized cost of its securities, had no intent to sell any investment securities with unrealized losses, it was more likely than not that the Company would not be required to sell such securities before recovery of their amortized cost and the decline in fair value was largely attributed to changes in interest rates and other market conditions. As of December 31, 2025, the issuers of these securities were continuing to make timely principal and interest payments. No allowances for credit losses have been recognized on investment debt securities AFS in an unrealized loss position, as management does not believe any of the securities were impaired due to reasons of credit quality at December 31, 2025.

Equity Securities

The Company recognized a net loss on equity securities of$230,000 for the year ended December 31, 2025, due to an decrease in the fair value of equity securities**,** and recognized a net gain on equity securities of$463,000 and a net loss on equity securities of$1.1 million for the years ended December 31, 2024 and 2023, respectively, due to a change in fair value of the equity securities. Equity securities were$12.6 million and$13.1 million as of December 31, 2025 and 2024, respectively.

3. LOANS

The Company’s loan portfolio at the dates indicated is summarized below:

Net loans exclude accrued interest receivable of$6.6 million and$6.7 million at December 31, 2025 and December 31, 2024, respectively, which is included ininterest receivable and other assets in the consolidated balance sheets.

At both December 31, 2025 and 2024, the Company had floating or variable rate loans totaling $1.4 billion and $1.3 billion, respectively. As of December 31, 2025, a total of $1.0 billion of these loans had interest rate floors, of which $674.2 million were at their floors. As of December 31, 2024, a total of $992.5 million of the loans had interest rate floors, of which $713.3 million were at their floors.

As of December 31, 2025 and 2024, purchased loans outstanding totaled $131.0 million and $186.6 million respectively. At December 31, 2025, $419,000 in purchase premiums remained on the purchased loans, compared to

$521,000 in purchase premiums at December 31, 2024. As of both December 31, 2025 and 2024, none of the purchased loans were past due 30 days or more. None of the purchased loans during 2025 represented PCD loans. These loans are reserved for under the Company’s general allowance component, and at December 31, 2025 and 2024, the Company had allocated approximately $2.4 million and $3.2 million, respectively, of the allowance for credit losses to the purchased loans.

The Company’s total individually evaluated loans, including nonaccrual loans, modified loans to borrowers experiencing financial difficulty and accreting PCD loans that have experienced post-acquisition declines in cash flows expected to be collected are summarized as follows:

For the years ended December 31, 2025 and 2024, the recorded investment in individually evaluated loans on nonaccrual were$13.4 million and$9.2 million, respectively.

The Company may modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may result in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically does not offer principal forgiveness. An assessment of whether a borrower is experiencing financial difficulty is made on the date of modification. The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses on loans because of the measurement methodologies used to estimate the allowance.

During the years ended December 31, 2025 and 2024, there wereno modifications of loans to borrowers experiencing financial difficulty.

A summary of modified loans to borrowers experiencing financial difficulty by type of concession and type of loan, as of the dates indicated, is set forth below (number of loans not in thousands):

For the years ended December 31, 2025 and 2024, the Company recordedno charge-offs and $1.3 million of charge-offs for modified loans to borrowers experiencing financial difficulty, respectively.

As of December 31, 2025 and 2024, individually evaluated modified loans to borrowers experiencing financial difficulty hadno related allowance and a related allowance of $24,000, respectively. As of both December 31, 2025 and 2024, none of the modified loans to borrowers experiencing financial difficulty were performing in accordance with their modified terms. Accruing modified loans to borrowers experiencing financial difficulty are included in the loans individually evaluated as part of the calculation of the allowance for credit losses for loans.

Risk Rating System

The Company evaluates and assigns a risk grade to each loan based on certain criteria to assess the credit quality of the loan. The assignment of a risk rating is done for each individual loan. Loans are graded from inception and on a continuing basis until the debt is repaid. Any adverse or beneficial trends will trigger a review of the loan risk rating. Each loan is assigned a risk grade based on its characteristics. Loans with low to average credit risk are assigned a lower risk grade than those with higher credit risk as determined by the individual loan characteristics.

“Pass” loans include loans with acceptable business or individual credit risk where the borrower’s operations, cash flow or financial condition provides evidence of low to average levels of risk.

Loans that are assigned higher risk grades are loans that exhibit the following characteristics:

“Special Mention” loans have potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. A Special Mention rating is a temporary rating, pending the occurrence of an event that would cause the risk rating either to improve or to be downgraded.

Loans in this category would be characterized by any of the following situations:

“Substandard” loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans classified substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. The potential loss does not have to be recognizable in an individual credit for that credit to be risk rated Substandard. A loan can be fully and adequately secured and still be considered Substandard.

Some characteristics of Substandard loans are:

“Doubtful” loans have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and value, highly questionable and improbable. Doubtful loans have a high probability of loss, yet certain important and reasonably specific pending factors may work toward the strengthening of the credit.

“Loss” loans are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. Losses are recognized as charges to the allowance when the loan or portion of the loan is considered uncollectible or at the time of foreclosure. Recoveries on loans previously charged off are credited to the allowance for credit losses.

Revolving loans that are converted to term loans are treated as new originations in the tables below and are presented by year of initial origination. During the year ended December 31, 2025 and 2024, none and $867,000, respectively, of the Company’s revolving loans were converted to term loans.

The following tables present a summary of loans by type, internally assigned risk grade, year of origination and current period gross charge-offs at the dates indicated:

The following tables provide an aging of the Company’s loans receivable as of the dates indicated:

Nonaccrual loans totaled $13.4 million and $9.2 million at December 31, 2025 and 2024, respectively. Nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, were $1.7 million at December 31, 2025 and $2.0 million at December 31, 2024.

At December 31, 2025, nonaccrual loans included $562,000 of loans 30-89 days past due and $9.4 million of loans less than 30 days past due. At December 31, 2024, nonaccrual loans included $643,000 of loans 30-89 days past due and the $4.4 million of loans less than 30 days past due. At December 31, 2025, the $562,000 in nonaccrual loans past due 30-89 days was comprised ofthree loans, and the $9.4 million of loans less than 30 days past due was comprised of 15 loans. All of these loans were placed on nonaccrual due to concerns over the borrowers’ financial condition.

At December 31, 2025, there wereno loans 90 days or more past due and still accruing. At December 31, 2024, there weretwo such loans, totaling $220,000.

Interest foregone on nonaccrual loans was approximately $1.1 million for the year ended December 31, 2025 compared to $1.3 million for the year ended December 31, 2024. Interest income recognized on nonaccrual loans was $424,000, $19,000 and $208,000 for the years ended December 31, 2025, 2024 and 2023, respectively.

Purchased Credit Deteriorated Loans

The unpaid principal balance and carrying value of the Company’s PCD loans at the years indicated are as follows:

Pledged Loans

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $1.10 billion and $1.04 billion at December 31, 2025 and 2024, respectively. For additional information, see Note 11, Other Borrowings.

4. ALLOWANCE FOR CREDIT LOSSES FOR LOANS

The following tables summarize the Company’s allowance for credit losses for loans, reserve for unfunded commitments, and loan balances individually and collectively evaluated by type of loan as of or for the year ended December 31, 2025 and 2024:

For the year ended December 31, 2025, the $4.3 million provision for credit losses on loans was primarily driven by loan growth, charge-offs during the current year, and increased reserves on both pooled loans and individually evaluated loans. The decrease in the provision for credit loss for unfunded commitments of $190,000 for the year ended December 31, 2025 was primarily due to a reduction in construction commitments being funded, partially offset by increased loss rates. Net charge-offs totaled $948,000 for the year ended December 31, 2025 compared to $5.0 million for the year ended December 31, 2024. Charge-offs in 2024 included a $3.2 million charge-off related to a loan for which a specific reserve had been established as of December 31, 2023.

The increase in the allowance for credit losses on pooled loans primarily reflected higher quantitative reserves resulting from the Company’s annual update to its CECL model methodology. The update incorporated more recent economic data and revised segment-specific peer group comparisons, which together contributed to a higher modeled reserve level. To a lesser extent, the increase also reflected updated economic forecasts, including a higher projected national unemployment rate and a weaker outlook for national gross domestic product compared to the assumptions used as of December 31, 2024. In addition, loan growth during the year and changes in the risk level associated with certain qualitative factors contributed to the increase. The allowance for credit losses on individually evaluated loans increased during the year primarily due to three commercial real estate loans placed on nonaccrual status for which updated appraisals indicated collateral shortfalls.

The following table summarizes the amortized cost basis of individually evaluated collateral-dependent loans by loan and collateral type at December 31, 2025 and December 31, 2024.

The following table shows the amortized cost and allowance for credit losses for loans on nonaccrual status as of December 31, 2025 and 2024, respectively.

As part of its acquisition of Pacific Enterprise Bancorp (“PEB”) in 2022, the Company acquired certain small business loans to borrowers qualified under The California Capital Access Program (“CalCAP”) for Small Business, a state loan loss reserve program, funded by the federal State Small Business Credit Initiative, and administered by the California Pollution Control Financing Authority. PEB ceased originating loans under this loan program in 2017, and the Company does not currently originate any loans under the program. Under this loan program, the borrower, CalCAP and the participating lender contributed funds to a loss reserve account that is held in a demand deposit account at the participating lender. The borrower contributions to the loss reserve account are attributed to the participating lender. Losses on qualified loans are charged to this account after approval by CalCAP. Under the program, if a loan defaults, the participating lender has immediate coverage of 100% of the loss. The participating lender must return recoveries from the borrower, less expenses, to the loan loss reserve account. The funds in the loss reserve account are the property of CalCAP; however, in the event that the participating lender leaves the program, any excess funds, after all loans have been repaid or unenrolled from the program by the participating lender, and provided there are no pending claims for reimbursement, are distributed to CalCAP and the participating lender based on their respective contributions to the loss reserve account. Funds contributed by the participating lender to the loss reserve account are treated as a receivable from CalCAP and evaluated for impairment quarterly. As of December 31, 2025, the Company had $9.3 million of loans enrolled in this loan program. The Company had a loss reserve account of $6.6 million as of December 31, 2025.

In addition, as successor to PEB, the Company was approved by CalCAP, in partnership with the California Air Resources Board, to originate loans to California truckers in the On-Road Heavy-Duty Vehicle Air Quality Loan Program. Under this loan program, CalCAP solely contributes funds to a loss reserve account that is held in a demand deposit account at the participating lender. Losses are handled in the same manner as described above. The funds are the property of CalCAP and are payable upon termination of the program. When the loss reserve account balance exceeds the total associated loan balance, the excess is to be remitted to CalCAP. The Company originated $12.2 million of loans under this program during the year ended December 31, 2025. As of December 31, 2025, the Company had $19.0 million of loans enrolled in this program and a loss reserve account of $4.9 million.

5. PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at the dates indicated:

Depreciation and amortization included in occupancy and equipment expense totaled $2.0 million for both the year ended December 31, 2025 and the year ended December 31, 2024, compared to $1.7 million for year ended December 31, 2023.

6. LEASES

The Company leased 19 branches under noncancelable operating leases as of December 31, 2025. These leases expire on various dates through 2030. Many of these lease agreements include one or more renewal options, exercisable at the Company’s discretion. When the Company determines at lease commencement that it is reasonably certain to exercise a renewal option, the extended lease term is included in the measurement of the ROU asset and corresponding lease liability.

The Company uses the discount rate implicit in the lease when it is readily determinable. In instances where the implicit rate is not available, which is typically the case, the Company applies its incremental borrowing rate, determined on a collateralized basis and over a term comparable to the lease term, as of the lease commencement date.

The below maturity schedule represents the undiscounted lease payments for the five-year period and thereafter as of December 31, 2025:

The following table presents the remaining weighted average lease term and discount rate at the date indicated:

The following table presents certain information related to the operating lease costs included in occupancy and equipment expense on the consolidated statements of income for the dates indicated:

7. OTHER REAL ESTATE OWNED

The Company hadno other real estate owned as of December 31, 2025 and 2024. At both of December 31, 2025 and 2024, there wereno residential mortgage loans in the process of foreclosure.

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company’s goodwill balance was $38.8 million at both December 31, 2025 and 2024. There wereno changes in the Company’s goodwill for the years ended December 31, 2025 and 2024.

As of December 31, 2025, based on the Company’s qualitative assessment, which considered the Company’s continued profitability, positive equity, average community bank merger deal values realized during 2025, net interest margin, allowance for credit losses, and continued growth in its core deposit portfolio, the Company concluded that the goodwill of the Company’s reporting unit, the Bank, was not more likely than not impaired.

Core Deposit Intangible

Changes in the Company’s core deposit intangible for the periods indicated were as follows:

Estimated annual amortization at December 31, 2025 is as follows:

9. INTEREST RECEIVABLE AND OTHER ASSETS

The Company’s interest receivable and other assets at the dates indicated consisted of the following:

10. DEPOSITS

The Company’s deposits consisted of the following at the dates indicated:

Included in time deposits above wereno brokered deposits as of December 31, 2025, compared to $35.5 million of brokered deposits as of December 31, 2024.

At December 31, 2025, aggregate annual maturities of time deposits were as follows:

Interest expense, net of early withdrawal penalty, recognized on interest bearing deposits at the dates indicated consisted of the following:

11. OTHER BORROWINGS

The Company has an approved secured borrowing facility with the FHLB for up to 25% of total assets for a term not to exceed five years under a blanket lien of certain types of loans. At both December 31, 2025 and December 31, 2024, the Company hadno FHLB advances outstanding.

The Bank has been approved for discount window advances from the FRB of San Francisco secured by certain types of loans. At December 31, 2025 and December 31, 2024, we had the ability to borrow up to $49.3 million and $41.9 million, respectively, from the FRB of San Francisco. At both December 31, 2025 and December 31, 2024, we hadno FRB of San Francisco advances outstanding.

The Company has Federal Funds lines with four correspondent banks. Cumulative available commitments totaled $65.0 million at both December 31, 2025 and December 31, 2024. There areno amounts outstanding under these facilities at December 31, 2025 and December 31, 2024.

12. JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

The Company acquired the BFC Trust in the acquisition of BFC. The BFC Trust was formed in Delaware with capital of $93,000 for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by BFC. The BFC Trust issued Floating Rate Capital Trust Pass-Through Securities (“BFC Trust Preferred Securities”), with a liquidation value of $1,000 per security, for gross proceeds of $3.1 million prior to the BFC acquisition and the liability was assumed in the acquisition. The entire proceeds of the issuance were invested by the BFC Trust in $3.1 million of Floating Rate Junior Subordinated Deferrable Interest Debentures issued by BFC, with identical maturities, repricing and payment terms as the BFC Trust Preferred Securities. The subordinated debentures have a variable interest rate based on the three months SOFR plus 2.75%, with quarterly repricing. The debentures are redeemable by the Company subject to prior approval from the Federal Reserve on any March 15, June 15, September 15, or December 15. The redemption price is par plus accrued and unpaid interest, except in the case of redemption under a special event, which is defined in the terms of the debentures. The BFC Trust Preferred Securities are subject to mandatory redemption to the extent of any early redemption of the subordinated debentures or upon the maturity of the subordinated debentures on June 17, 2034.

The Company acquired the FULB Trust in the acquisition of FULB. The FULB Trust was formed in Delaware with capital of $192,000 for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by FULB. The FULB Trust issued 6,200 Floating Rate Capital Trust Pass-Through Securities (“FULB Trust Preferred Securities”), with a liquidation value of $1,000 per security, for gross proceeds of $6.2 million prior to the FULB acquisition and the liability was assumed in the acquisition. The entire proceeds of the issuance were invested by the FULB Trust in $6.4 million of Floating Rate Junior Subordinated Deferrable Interest Debentures issued by FULB, with identical maturities, repricing and payment terms as the FULB Trust Preferred Securities. The subordinated debentures have a variable interest rate based on the three months SOFR plus 2.5%, with quarterly repricing. The debentures are redeemable by the Company subject to prior approval from the Federal Reserve, on any March 15, June 15, September 15, or December 15. The redemption price is par plus accrued and unpaid interest, except in the case of redemption under a special event, which is defined in the terms of the debentures. The FULB Trust Preferred Securities are subject to mandatory redemption to the extent of any early redemption of the subordinated debentures or upon the maturity of the subordinated debentures on September 15, 2034.

Holders of the trust preferred securities issued by the Grantor Trusts are entitled to a cumulative cash distribution on the liquidation amount of $1,000 per security. Each of the Grantor Trusts has the option to defer payment of the distributions for a period of up to five years, as long as the Company is not in default of the payment of interest on the subordinated debentures. The trust preferred securities were sold and issued in private transactions pursuant to an exemption from registration under the Securities Act of 1933, as amended. The Company has guaranteed, on a subordinated basis, distributions and other payments due on the trust preferred securities.

The acquired debentures were recorded on the Company’s books at their fair values on the acquisition date. The related fair value discounts to face value of these debentures are amortized over the remaining period in which their values are fully allowed to be included in the Company's capital ratio calculations using the effective interest method.

The following is a summary of the contractual terms of the subordinated debentures due to the Grantor Trusts at the date indicated:

13. SUBORDINATED DEBT

On August 6, 2020, the Company issued and sold $65.0 million aggregate principal amount of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes. The offering of the Notes closed on August 10, 2020. The Notes initially bore a fixed interest rate of 5.25% per year. Commencing on September 15, 2025, the interest rate on the Notes reset quarterly to the three-month Secured Overnight Financing rate (“SOFR”) plus a spread of 521 basis points (5.21%), payable quarterly in arrears. Interest on the Notes was payable semi-annually on March 15 and September 15 of each year through September 15, 2025 and quarterly thereafter on March 15, June 15, September 15 and December 15 of each year through the maturity date or early redemption date. The Company had the option to redeem the Notes, in whole or in part, on any interest payment date on or after September 15, 2025, without a premium. During the third quarter of 2025, the Company redeemed all outstanding Notes. As of December 31, 2025, the Company hadno outstanding subordinated debt evidenced by the Notes, net of issuance costs, compared to $63.7 million, net of issuance costs, as of December 31, 2024.

14. INCOME TAXES

Income tax expense for the years indicated consisted of the following:

Income tax expense resulted in effective tax rates that differed from the statutory federal income tax rate for the years indicated as follows (as reported under ASU 2023-09 on a prospective basis):

(a) State taxes in California make up the majority (greater than 50%) of the tax effect in this category.

(b) Tax credits are net of associated investment impacts, such as proportional amortization and tax benefits of flow through losses.

Income tax expense resulted in effective tax rates that differed from the statutory federal income tax rate for the years indicated as follows (before adoption of ASU 2023-09):

The Company is subject to U.S. federal income tax as well as state income tax in multiple states, most notably in California, Colorado and New Mexico. Federal income tax returns for the years ended on or after December 31, 2022 are open to audit by the federal authorities and, with limited exception, state income tax returns for the years ended on or after December 31, 2021 are open to audit by state authorities.

Deferred tax assets included as a component of interest receivable and other assets in the consolidated balance sheets consisted of the following at the dates indicated:

The utilization of the net operating losses (“NOLs”) is subject to an annual limit pursuant to Section 382 of the Internal Revenue Code. The annual limitation for Federal and California Franchise Tax purposes is $1.1 million and if not fully utilized, the NOLs will begin to expire in 2028. Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are expected to be deductible, management believes it is more likely than not that we will realize the benefit of the remaining deferred tax assets. Accordingly, no valuation allowance was established as of December 31, 2025 or 2024. At December 31, 2025, Federal, California and Colorado NOLs included in the deferred tax asset totaled $6.8 million, $9.6 million and $1.9 million, respectively.

During the years ended December 31, 2025, 2024 and 2023, the Company didnot recognize any interest or penalties. The Company hadno unrecognized tax benefits as of December 31, 2025 and 2024.

Cash paid for income taxes, net of refunds, were as follows:

15. COMMITMENTS AND CONTINGENCIES

Lending and Letter of Credit Commitments

In the normal course of business, the Company enters into various commitments to extend credit which are not reflected in the financial statements. These commitments consist of the undisbursed balance on personal and commercial lines of credit, including commercial real estate secured lines of credit, and of the undisbursed funds on construction and development loans. The Company also issues standby letter of credit commitments, primarily for the third-party performance obligations of clients.

The following table presents a summary of commitments described above as of the dates indicated:

Commitments generally have fixed expiration dates or other termination clauses. The actual liquidity needs or credit risk that the Company will experience will be lower than the contractual amount of commitments to extend credit because a significant portion of these commitments are expected to expire without being drawn upon. The commitments are generally variable rate and include unfunded home equity lines of credit, commercial real estate construction loans whereby disbursement is made over the course of construction, commercial revolving lines of credit, and unsecured personal lines of credit. The Company’s outstanding loan commitments are made using the same underwriting standards as comparable outstanding loans. The reserve associated with these commitments included in interest payable and other liabilities on the consolidated balance sheets was $410,000 and $600,000 at December 31, 2025 and 2024, respectively.

Commercial Real Estate Concentrations

At December 31, 2025 and 2024, in management’s judgment, a concentration of loans existed in commercial real estate related loans. The Company’s commercial real estate loans are secured by owner-occupied and non-owner occupied commercial real estate and multifamily properties. Although management believes that loans within these concentrations have no more than the normal risk of collectability, a decline in the performance of the economy in general or a decline in real estate values in the Company’s primary market areas in particular could have an adverse impact on collectability.

Other Assets

The Company has commitments to fund investments in LIHTC partnerships and an SBIC fund. At December 31, 2025, the remaining commitments to the LIHTC partnerships and SBIC fund were approximately $4.7 million and $122,000, respectively. At December 31, 2024, the remaining commitment to the LIHTC partnerships and SBIC fund were $4.9 million and $122,000, respectively.

Deposits

At December 31, 2025, approximately $235.8 million, or 11.7%, of the Company’s deposits were derived from its top ten depositors. At December 31, 2024, approximately $304.5 million, or 13.6% of the Company’s deposits were derived from the top ten depositors.

Local Agency Deposits

In the normal course of business, the Company accepts deposits from local agencies. The Company is required to provide collateral for certain local agency deposits in the states of California, Colorado, New Mexico and Washington. As of December 31, 2025 and 2024, the FHLB issued letters of credit on behalf of the Company totaling $41.6 million and $41.1 million, respectively, as collateral for local agency deposits.

16. EMPLOYEE BENEFIT PLANS

401(k) Plan

Effective January 1, 2005, the Company adopted a qualified 401(k) profit sharing plan (the “401(k) Plan”) that covers substantially all full-time employees. The 401(k) Plan permits voluntary contributions by participants and provides for voluntary matching contributions by the Company after 90 days of employment. For the years ended December 31, 2025, 2024 and 2023, the Company made contributions to the plan of $962,000, $921,000 and $964,000 respectively.

Salary Continuation Plan

In 2014, the Company established a salary continuation plan forone of its executive officers. In 2017, the Company extended coverage totwo additional executive officers. Under the salary continuation plan agreements, as amended, the Company provides the executives, or their designated beneficiaries, with annual benefits forfifteen years after retirement or death. The contributions are based on the executive’s performance related to the Company’s financial performance. These benefits are substantially equivalent to those available under insurance policies purchased by the Company on the lives of the executives.

At December 31, 2025 and 2024, approximately $715,000 and $830,000, respectively, of the plan obligations related to plans acquired through prior acquisitions. The Company is not required to make any additional contributions to fund these acquired plans, as they are fully covered.

In 2025, Company recognized $489,000 of contribution expense related to the salary continuation plan in salaries and benefits in the consolidated statements of income, compared tono expense recognized in 2024 and 2023, as the applicable performance metrics were not met in those years.

17. EQUITY INCENTIVE PLANS

2024 Omnibus Equity Incentive Plan

The Company’s shareholders approved the Company’s 2024 Omnibus Equity Incentive Plan (“2024 Plan”) in June 2024. The 2024 Plan provides for thegrant of equity incentive awards to employees and directors (including emeritus and advisory directors) of the Company and its subsidiaries. The 2024 Plan permits the granting of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance shares and performance units. Factors generally considered by the Board in awarding equity incentives to officers and employees include the performance of the Company, the employee’s or officer’s job performance, the importance of his or her position, and his or her contribution to the organization’s goals for the award period.

Generally, awards under the 2024 Plan are subject to a minimum vesting period ofone year (at least three years for full vesting for the chief executive officer), provided that awards for up to 5% of the maximum shares available under the 2024 Plan (for any participant other than the chief executive officer) may provide for a shorter vesting period. Subject to adjustment as provided in the 2024 Plan, the maximum number of shares of common stock available for issuance under the 2024 Plan is 500,000, and awards granted under the 2024 Plan to any one participant in any one calendar year are subject to the following limitations: (i) aggregate grants of stock options or stock appreciation rights to any one participant are subject to an annual limit of the lesser of 100,000 shares or$2.0 million in fair market value as of the date of grant; (ii) aggregate grants of restricted stock or restricted stock units to any one participant are subject to an

annual limit of the lesser of 50,000 shares or$2.0 million in fair market value as of the date of grant; and (iii) aggregate grants of performance shares or performance units to any one participant are subject to an annual limit of the lesser of 50,000 shares or$2.0 million in fair market value as of the date of grant. In addition, subject to adjustment as provided in the 2024 Plan, the maximum aggregate number of shares that may be covered by awards granted under the 2024 Plan to any non-employee director in any one calendar year is 25,000 shares. As of December 31, 2025, a total of 464,178 shares were available for future issuance under the 2024 Plan.

2017 Omnibus Equity Incentive Plan

The Company’s shareholders approved the Company’s 2017 Omnibus Equity Incentive Plan (“2017 Plan”) in November 2017. The 2017 Plan provides for the awarding by the Company’s Board of Directors of equity incentive awards to employees and non-employee directors. An equity incentive award under the 2017 Plan may be an option, stock appreciation right, restricted stock units, stock award, other stock-based award or performance award. Factors considered by the Board in awarding equity incentives to employees include the performance of the Company, the employee’s job performance, the importance of his or her position, and his or her contribution to the organization’s goals for the award period. Generally, awards have a vesting period ofone tofive years. Subject to adjustment as provided in the 2017 Plan, a maximum of 450,000 shares of common stock may be delivered pursuant to awards granted under the plan. The 2017 Plan establishes annual restricted stock grant limits of 50,000 shares or a value of $2.0 million per officer or employee, and 25,000 shares per director. All unvested restricted stock awards vest in the event of a change in control of the Company. Restricted stock awards granted to non-employee directors generally vestone year from the date of grant. Awards granted to executive officers typically vest over three- orfive-year periods, with initial vesting on theone-year anniversary of the grant date. As of December 31, 2025, no shares remained available for issuance under the 2017 Plan, as the approval of the 2024 Plan by shareholders terminated the ability to grant further awards under the 2017 Plan.

The Company recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the award date. For the years ended December 31, 2025, 2024 and 2023, total compensation expense for these plans was $653,000, $588,000 and $726,000, respectively.

As of December 31, 2025, there was $1.1 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards. The cost is expected to be recognized over the remaining weighted-average vesting period of approximately four years.

The following table provides the restricted stock grant activity for the years indicated:

18. REGULATORY MATTERS

Dividends

The Company’s ability to pay cash dividends is dependent on dividends or other capital distributions paid to it by the Bank and is limited by state corporation law. Generally, under California law, a California corporation may pay dividends to its shareholders if the corporation’s retained earnings equal at least the amount of the proposed distribution plus the preferential dividend arrears amount (if any) of the corporation, or if immediately after the distribution, the value of the corporation’s assets would equal or exceed its total liabilities plus the preferential dividend arrears amount (if any).

Dividends from the Bank to the Company are restricted under California law to the lesser of the Bank’s retained earnings or the Bank’s net income for the latest three fiscal years, less dividends previously declared during that period or, with the approval of the DFPI, to the greater of the retained earnings of the Bank, the net income of the Bank for its last fiscal year, or the net income of the Bank for its current fiscal year. During both the year ended December 31, 2025 and the year ended December 31, 2024 the Bank paid $15.0 million of dividends to the Company.

Regulatory Capital

The Company is a bank holding company subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve, except that, pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act, effective August 30, 2018, a bank holding company with consolidated assets of less than $3 billion is generally not subject to the Federal Reserve’s capital regulations.

Under the capital regulations, the minimum capital ratios are: (1) a common equity Tier 1 capital ratio (“CET1 capital”) of 4.5% of risk-weighted assets; (2) a Tier 1 capital ratio of 6.0% of risk-weighted assets (“Tier 1 capital”); (3) a total risk-based capital ratio of 8.0% of risk-weighted assets; and (4) a leverage ratio (the ratio of Tier 1 capital to average total consolidated assets) of 4.0%. CET1 capital generally consists of common stock, retained earnings, accumulated other comprehensive income (“AOCI”) unless an institution elects to exclude AOCI from regulatory capital, and certain minority interests (all of which are subject to applicable regulatory adjustments and deductions). Tier 1 capital generally consists of CET1 capital and noncumulative perpetual preferred stock. Tier 2 capital generally consists of other preferred stock and subordinated debt which meet certain conditions, plus an amount of the allowance for loan and lease losses up to 1.25% of assets. Total capital is the sum of Tier 1 and Tier 2 capital.

The Bank is subject to various regulatory capital requirements administered by the Federal Reserve. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines of the regulatory framework for prompt corrective action, the Bank must meet specific capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices and until August 30, 2018, the Company was subject to similar capital regulations. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier 1 capital to total average assets (as defined), and minimum ratios of Tier 1 capital (as defined) and CET1 capital to risk-weighted assets (as defined).

Management reviews capital ratios on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet our anticipated future needs. As of December 31, 2025, the most recent regulatory notifications from the Federal Reserve categorized the Bank as “Well Capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes would have changed the category.

The following is a summary of actual capital amounts and ratios as of the dates indicated, for the Company (assuming it was subject to regulatory capital requirements) and the Bank compared to the requirements for minimum capital adequacy and classification as Well Capitalized:

In addition to the minimum CET1 capital, Tier 1 capital, leverage ratio and total capital ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

19. RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company may enter into transactions with related parties, including directors, shareholders, officers and their associates. These transactions are on substantially the same terms, including interest rates and collateral, as loans to unrelated parties and do not involve more than normal risk of collection.

The following is a summary of the aggregate loan activity involving related party borrowers for the dates and years indicated:

At December 31, 2025 and 2024, the Company had depositor relationships with directors, officers and their associates which totaled approximately $8.9 million and $13.8 million, respectively.

20. OTHER EXPENSES

For the years ended December 31, 2025, 2024 and 2023, other expenses consisted of the following:

The Company expenses marketing and promotions costs as they are incurred. Advertising expense included in marketing and promotions totaled $37,000, $49,000 and $48,000 for the years ended December 31, 2025, 2024 and 2023, respectively.

21. FAIR VALUE MEASUREMENTS

ASC Topic 820, “Fair Value Measurement,” defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. The hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

Level 1— Quoted prices (unadjusted) for identical assets or liabilities in active markets that the reporting entity has the ability to access at the measurement date.

Level 2— Observable prices in active markets for similar assets and liabilities; prices for identical or similar assets or liabilities in markets that are not active; directly observable market inputs for substantially the full term of the asset and liability; market inputs that are not directly observable but are derived from or corroborated by observable market data.

Level 3— Unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

We use fair value to measure certain assets and liabilities on a recurring basis, primarily securities AFS. For assets measured at the lower of cost or fair value, the fair value measurement criteria may or may not be met during a reporting period and such measurements are therefore considered “nonrecurring” for purposes of disclosing our fair value measurements. Fair value is used on a nonrecurring basis to adjust carrying values for individually evaluated loans and other real estate owned and to record impairment on certain assets, such as goodwill, core deposit intangible, and other long-lived assets.

In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy. In such cases, the lowest level of inputs that is significant to the measurement is used to determine the hierarchy level for the entire asset or liability. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with our quarterly valuation process. There wereno transfers between levels during 2025 and 2024.

The following assets are measured at fair value on a recurring basis at the dates indicated:

The following assets are measured at fair value on a nonrecurring basis as of the dates indicated:

The Company does not record loans at fair value on a recurring basis. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are placed on nonaccrual and individually evaluated. The fair value of individually evaluated loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise and liquidation value and discounted cash flows. Those loans not requiring an allowance for credit losses represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the individually evaluated loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is below the appraised value or the appraised value contains a significant assumption and there is no observable market price, the Company records the individually evaluated loan as nonrecurring Level 3. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also incorporates assumptions regarding market trends or other relevant factors and selling and commission costs ranging from 5% to 10%. Such adjustments and assumptions are typically significant and result in a Level 3 classification of the inputs for determining fair value.

The Company records OREO at fair value on a nonrecurring basis based on the collateral value of the property. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the OREO as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is below the appraised value or the appraised value contains a significant assumption, and there is no observable market price, the Company records the individually evaluated loan as nonrecurring Level 3. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also incorporates assumptions regarding market trends or other relevant factors and selling and commission costs ranging from 5% to 10%. Such adjustments and assumptions are typically significant and result in a Level 3 classification of the inputs for determining fair value.

22. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value disclosure for financial instruments:

Cash and cash equivalents— Cash and cash equivalents include cash and due from banks, Federal funds sold and interest-bearing balances in banks and are valued at their carrying amounts because of the short-term nature of these instruments.

Time deposits in banks— Interest bearing time deposits in banks are valued based on quoted interest rates for comparable instruments with similar remaining maturities.

Investment securities*—*The fair values of securities AFS are based on quoted market prices, where available. If quoted market prices are not available, fair values are estimated using quoted market prices for similar securities and indications of value provided by brokers.

Equity securities*—*The fair values of equity securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are estimated using quoted market prices for similar securities and indications of value provided by brokers.

Investment in FHLB and FRB Stock— The carrying value of the FHLB and FRB stock approximates the fair value because the stock is redeemable at par.

Loans held for sale*—*Since the loans designated by the Company as AFS are typically sold shortly after making the decision to sell them, realized gains and losses are usually recognized within the same period and fluctuations in fair value are thus not relevant for reporting purposes. If the AFS loans stay on our books for an extended period of time, the fair value of those loans is determined using quoted secondary-market prices.

Loans—Loans with variable interest rates are valued at the current carrying value, because these loans are regularly adjusted to market rates. The fair values of fixed rate loans with remaining maturities in excess of one year are determined by discounting the estimated future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. The allowance for credit losses on loans is considered to be a reasonable estimate of the loan discount related to credit risk.

Interest receivable and payable— The accrued interest receivable and payable balance approximates its fair value.

Deposits— The fair value of noninterest bearing deposits, interest bearing transaction accounts and savings accounts is the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting the future cash flows using current rates offered for deposits of similar remaining maturities.

Other borrowings— The fair value is estimated by discounting the future cash flows using current rates offered for similar borrowings. The discount rate is equal to the market rate of currently offered similar products.

Junior Subordinated Deferrable Interest Debentures— The fair value of junior subordinated deferrable interest debentures is determined based on rates and/or discounted cash flow analysis using interest rates offered in inactive markets for instruments of a similar maturity and structure resulting in a Level 3 classification. The debentures are carried at the current carrying value because the debentures regularly adjust to market rates.

Subordinated Debt— The fair value of subordinated debt is determined based on rates and/or discounted cash flow analysis using interest rates offered in inactive markets for instruments of a similar maturity and structure resulting in a Level 2 classification.

Undisbursed loan commitments and standby letters of credit— The fair value of the off-balance sheet items is based on discounted cash flows of expected funding.

The carrying amounts and fair values of the Company’s financial instruments at the dates indicated are presented below: