# EDGAR Filing Document

**Accession Number:** 0001053352
**File Stem:** 0001628280-26-016050
**Filing Date:** 2026-3
**Character Count:** 704011
**Document Hash:** aa1dc1744bfaadde2cdde615bf77d1f0
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001628280-26-016050.hdr.sgml**: 20260309

**ACCESSION NUMBER**: 0001628280-26-016050

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 152

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260309

**DATE AS OF CHANGE**: 20260309

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** HERITAGE COMMERCE CORP
- **CENTRAL INDEX KEY:** 0001053352
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **ORGANIZATION NAME:** 02 Finance
- **EIN:** 770469558
- **STATE OF INCORPORATION:** CA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-23877
- **FILM NUMBER:** 26735486

**BUSINESS ADDRESS:**
- **STREET 1:** 224 AIRPORT PARKWAY
- **CITY:** SAN JOSE
- **STATE:** CA
- **ZIP:** 95110
- **BUSINESS PHONE:** 4089476900

**MAIL ADDRESS:**
- **STREET 1:** 224 AIRPORT PARKWAY
- **CITY:** SAN JOSE
- **STATE:** CA
- **ZIP:** 95110

?xml version='1.0' encoding='ASCII'? htbk-20251231

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

___________________________________

**FORM 10-K**

___________________________________

---

| | |
|:---|:---|
| **(MARK ONE)** | |
| ⌧ | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

---

**For the fiscal year ended December 31, 2025**

**OR**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THE TRANSITION PERIOD FROM &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TO&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;** 

**Commission file number 000-23877** 

**Heritage Commerce Corp**

*(Exact name of Registrant as Specified in its Charter)*

---

| | |
|:---|:---|
| California<br>*(State or Other Jurisdiction of*<br>*Incorporation or Organization)* | **77-0469558**<br>*(I.R.S. Employer*<br>*Identification Number)* |

---

 **224 Airport Parkway**

**San Jose, California 95110**

*(Address of Principal Executive Offices including Zip Code)*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(408) 947-6900**

*(Registrant's Telephone Number, Including Area Code)*

**Securities registered pursuant to Section 12(b) of the Act:**

---

| | | |
|:---|:---|:---|
| **Title of Each Class** | **Trading Symbol** | **Name of each exchange on which Registered** |
| Common Stock, No Par Value | HTBK | The Nasdaq Stock Market LLC |
| | | (The Nasdaq Global Select Market) |

---

**Securities registered pursuant to Section 12(g) of the Act: None**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes □ No ⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes □ No ⌧

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No □

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ⌧ No □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| Large accelerated filer | □ | Accelerated filer | ⌧ | Non-accelerated filer | □ | Smaller reporting company | □ |
| | | | | | | Emerging growth company | □ |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report ⌧

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. □

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). □

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes □ No ⌧

The aggregate market value of the common stock held by non-affiliates of the Registrant as of June 30, 2025, based upon the closing price on that date of $9.93 per share as reported on the Nasdaq Global Select Market, and 48,013,310 shares held, was approximately $476.8 million.

As of February 19, 2026, there were 61,593,284 shares of the Registrant's common stock (no par value) outstanding.

**DOCUMENTS INCORPORATED BY REFERENCE**

None.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**HERITAGE COMMERCE CORP**

**INDEX TO ANNUAL REPORT ON FORM 10-K**

**FOR YEAR ENDED DECEMBER 31, 2025**

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| | | |
|:---|:---|:---|
| | | **Page** |
| | **<u>[PART I.](#i24baf52b287841329ec8f7b68eab379b_13)</u>** | |
| <u>[Item 1.](#i24baf52b287841329ec8f7b68eab379b_16)</u> | <u>[Business](#i24baf52b287841329ec8f7b68eab379b_16)</u> | <u>[7](#i24baf52b287841329ec8f7b68eab379b_16)</u> |
| <u>[Item 1A.](#i24baf52b287841329ec8f7b68eab379b_19)</u> | <u>[Risk Factors](#i24baf52b287841329ec8f7b68eab379b_19)</u> | <u>[17](#i24baf52b287841329ec8f7b68eab379b_19)</u> |
| <u>[Item 1B.](#i24baf52b287841329ec8f7b68eab379b_22)</u> | <u>[Unresolved Staff Comments](#i24baf52b287841329ec8f7b68eab379b_22)</u> | <u>[42](#i24baf52b287841329ec8f7b68eab379b_22)</u> |
| <u>[Item 1C.](#i24baf52b287841329ec8f7b68eab379b_25)</u> | <u>[Cybersecurity](#i24baf52b287841329ec8f7b68eab379b_25)</u> | <u>[42](#i24baf52b287841329ec8f7b68eab379b_25)</u> |
| <u>[Item 2.](#i24baf52b287841329ec8f7b68eab379b_28)</u> | <u>[Properties](#i24baf52b287841329ec8f7b68eab379b_28)</u> | <u>[44](#i24baf52b287841329ec8f7b68eab379b_28)</u> |
| <u>[Item 3.](#i24baf52b287841329ec8f7b68eab379b_31)</u> | <u>[Legal Proceedings](#i24baf52b287841329ec8f7b68eab379b_31)</u> | <u>[46](#i24baf52b287841329ec8f7b68eab379b_31)</u> |
| <u>[Item 4.](#i24baf52b287841329ec8f7b68eab379b_34)</u> | <u>[Mine Safety Disclosures](#i24baf52b287841329ec8f7b68eab379b_34)</u> | <u>[46](#i24baf52b287841329ec8f7b68eab379b_34)</u> |
|  | **<u>[PART II.](#i24baf52b287841329ec8f7b68eab379b_37)</u>** |  |
| <u>[Item 5.](#i24baf52b287841329ec8f7b68eab379b_40)</u> | <u>[Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#i24baf52b287841329ec8f7b68eab379b_40)</u> | <u>[46](#i24baf52b287841329ec8f7b68eab379b_40)</u> |
| <u>[Item 6.](#i24baf52b287841329ec8f7b68eab379b_43)</u> | <u>[\[RESERVED\]](#i24baf52b287841329ec8f7b68eab379b_43)</u> | <u>[48](#i24baf52b287841329ec8f7b68eab379b_43)</u> |
| <u>[Item 7.](#i24baf52b287841329ec8f7b68eab379b_46)</u> | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#i24baf52b287841329ec8f7b68eab379b_46)</u> | <u>[49](#i24baf52b287841329ec8f7b68eab379b_46)</u> |
| <u>[Item 7A.](#i24baf52b287841329ec8f7b68eab379b_67)</u> | <u>[Quantitative and Qualitative Disclosures About Market Risk](#i24baf52b287841329ec8f7b68eab379b_67)</u> | <u>[94](#i24baf52b287841329ec8f7b68eab379b_67)</u> |
| <u>[Item 8.](#i24baf52b287841329ec8f7b68eab379b_70)</u> | <u>[Financial Statements and Supplementary Data](#i24baf52b287841329ec8f7b68eab379b_70)</u> | <u>[94](#i24baf52b287841329ec8f7b68eab379b_70)</u> |
| <u>[Item 9.](#i24baf52b287841329ec8f7b68eab379b_73)</u> | <u>[Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](#i24baf52b287841329ec8f7b68eab379b_73)</u> | <u>[94](#i24baf52b287841329ec8f7b68eab379b_73)</u> |
| <u>[Item 9A.](#i24baf52b287841329ec8f7b68eab379b_76)</u> | <u>[Controls and Procedures](#i24baf52b287841329ec8f7b68eab379b_76)</u> | <u>[94](#i24baf52b287841329ec8f7b68eab379b_76)</u> |
| <u>[Item 9B.](#i24baf52b287841329ec8f7b68eab379b_79)</u> | <u>[Other Information](#i24baf52b287841329ec8f7b68eab379b_79)</u> | <u>[95](#i24baf52b287841329ec8f7b68eab379b_79)</u> |
| <u>[Item 9C.](#i24baf52b287841329ec8f7b68eab379b_82)</u> | <u>[Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i24baf52b287841329ec8f7b68eab379b_82)</u> | <u>[95](#i24baf52b287841329ec8f7b68eab379b_82)</u> |
|  | **<u>[PART III.](#i24baf52b287841329ec8f7b68eab379b_85)</u>** |  |
| <u>[Item 10.](#i24baf52b287841329ec8f7b68eab379b_88)</u> | <u>[Directors, Executive Officers and Corporate Governance](#i24baf52b287841329ec8f7b68eab379b_88)</u> | <u>[96](#i24baf52b287841329ec8f7b68eab379b_88)</u> |
| <u>[Item 11.](#i24baf52b287841329ec8f7b68eab379b_91)</u> | <u>[Executive Compensation](#i24baf52b287841329ec8f7b68eab379b_91)</u> | <u>[96](#i24baf52b287841329ec8f7b68eab379b_91)</u> |
| <u>[Item 12.](#i24baf52b287841329ec8f7b68eab379b_94)</u> | <u>[Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#i24baf52b287841329ec8f7b68eab379b_94)</u> | <u>[97](#i24baf52b287841329ec8f7b68eab379b_94)</u> |
| <u>[Item 13.](#i24baf52b287841329ec8f7b68eab379b_97)</u> | <u>[Certain Relationships and Related Transactions and Director Independence](#i24baf52b287841329ec8f7b68eab379b_97)</u> | <u>[98](#i24baf52b287841329ec8f7b68eab379b_97)</u> |
| <u>[Item 14.](#i24baf52b287841329ec8f7b68eab379b_100)</u> | <u>[Principal Accountant Fees and Services](#i24baf52b287841329ec8f7b68eab379b_100)</u> | <u>[98](#i24baf52b287841329ec8f7b68eab379b_100)</u> |
|  | **<u>[PART IV.](#i24baf52b287841329ec8f7b68eab379b_103)</u>** |  |
| <u>[Item 15.](#i24baf52b287841329ec8f7b68eab379b_106)</u> | <u>[Exhibits and Financial Statement Schedules](#i24baf52b287841329ec8f7b68eab379b_106)</u> | <u>[98](#i24baf52b287841329ec8f7b68eab379b_106)</u> |
| <u>[Item 16.](#i24baf52b287841329ec8f7b68eab379b_109)</u> | <u>[Form 10-K Summary](#i24baf52b287841329ec8f7b68eab379b_109)</u> | <u>[100](#i24baf52b287841329ec8f7b68eab379b_109)</u> |
| <u>[Signatures](#i24baf52b287841329ec8f7b68eab379b_112)</u> | <u>[Signatures](#i24baf52b287841329ec8f7b68eab379b_112)</u> | <u>[101](#i24baf52b287841329ec8f7b68eab379b_112)</u> |
| <u>[Financial Statements](#i24baf52b287841329ec8f7b68eab379b_115)</u> | <u>[Financial Statements](#i24baf52b287841329ec8f7b68eab379b_115)</u> | <u>[102](#i24baf52b287841329ec8f7b68eab379b_115)</u> |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**Cautionary Note Regarding Forward-Looking Statements**

This Annual Report on Form 10-K contains various statements that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, Rule 3b-6 promulgated thereunder and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements often can be, but are not always, identified by the use of words such as "assume," "expect," "intend," "plan," "project," "believe," "estimate," "predict," "anticipate," "may," "might," "should," "could," "goal," "potential" and similar expressions. We base these forward-looking statements on our current expectations and projections about future events, our assumptions regarding these events and our knowledge of facts at the time the statements are made. Forward-looking statements may include, among other things, statements relating to our projected growth, anticipated future financial performance, management's long-term performance goals and operational strategies, the performance of our loan and investment portfolios, as well as statements relating to the anticipated effects of those conditions, events and developments on the Company's financial condition and results of operations.

These forward looking statements are subject to various risks and uncertainties that may be outside our control and our actual results could differ materially from our projected results. Risks and uncertainties that could cause our financial performance to differ materially from our goals, plans, expectations and projections expressed in forward-looking statements include those set forth in our filings with the Securities and Exchange Commission ("SEC"), Item 1A of this Annual Report on Form 10-K, and the following listed below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• cybersecurity risks that may affect us directly or may impact us indirectly by virtue of their effects on our clients, markets or vendors, including our ability to identify and address cybersecurity risks, including those posed by the increasing use of artificial intelligence (such as, but not limited to, ransomware, data security breaches, "denial of service" attacks, "hacking" and identity theft) affecting us, our clients, and our third-party vendors and service providers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• events that affect our ability to attract, recruit, and retain qualified officers and other personnel to implement our strategic plan, and that enable current and future personnel to protect and develop our relationships with clients, and to promote our business, results of operations and growth prospects;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• media items and consumer confidence as those factors affect our clients' confidence in the banking system generally and in our bank specifically;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• market, geographic and sociopolitical factors that arise by virtue of the fact that we operate primarily in the general San Francisco Bay Area of Northern California;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• risks of geographic concentration of our client base, our loans, and the collateral securing our loans, as those clients and assets may be particularly subject to natural disasters and to events and conditions that directly or indirectly affect those regions, including the particular risks of natural disasters (including earthquakes, fires, and flooding) and other events that disproportionately affect that region;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• political events that have accompanied or that may in the future accompany or result from recent political changes, particularly including the impact of a prolonged U.S. federal government shutdown, the imposition of tariffs or retaliatory tariffs, sociopolitical events and other conditions that result from political conflicts and law enforcement activities that may adversely affect our markets or our clients;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to estimate accurately, and to establish adequate reserves against, the risk of loss associated with our loan and lease portfolios and our factoring business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inflationary pressures and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans to clients, whether held in the portfolio or in the secondary market;

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• factors that affect the value and liquidity of our investment portfolios, particularly the values of securities available-for-sale, including any impairment or other charges in connection with declines in asset values or repositioning of securities held in our investment portfolio;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• factors that affect our liquidity and our ability to meet client demands for withdrawals from deposit accounts and undrawn lines of credit, including our cash on hand and the availability of funds from our own lines of credit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increased capital requirements for our continual growth or as imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise, particularly including but not limited to the effects of recent and ongoing developments in California labor and employment laws, regulations and court decisions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which we are highly dependent; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our success in managing the risks involved in the foregoing factors.

In addition, this Annual Report on Form 10-K includes forward-looking statements regarding the plans, objectives and expectations in connection with the proposed merger of the Company with CVB Financial Corp. ("CVBF"). Such statements are subject to numerous assumptions, risks, estimates, uncertainties and other important factors that change over time and could cause actual results to differ materially from any results, performance, or events expressed or implied by such forward-looking statements. Although there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements or historical performance:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• difficulties and delays in integrating the Company's business, key personnel and clients into CVBF's business and operations, and achieving anticipated synergies, cost savings and other benefits from the transaction; higher than anticipated transaction costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• deposit attrition, operating costs, client loss and other business disruption following the merger, including difficulties in maintaining relationships with employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• supply and demand for commercial or residential real estate and periodic deterioration in real estate prices and/or values in California or other states where CVBF and the Company lend; a sharp or prolonged slowdown or decline in real estate construction, sales or leasing activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• CVBF's or the Company's ability to retain and increase market share, to retain and grow client and to control expenses; the costs or effects of mergers, acquisitions or dispositions CVBF may make, whether CVBF and the Company are able to obtain any required governmental approvals in connection with any such mergers, acquisitions or dispositions, and/or CVBF's ability to realize the contemplated financial or business benefits associated with any such mergers, acquisitions or dispositions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• CVBF's timely development and implementation of new banking products and services and the perceived overall value of these products and services by client and potential clients;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• CVBF's or the Company's relationships with and reliance upon outside vendors with respect to certain of CVBF's or the Company's key internal and external systems, applications and controls;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate Agreement and Plan of Reorganization and Merger to which CVBF and the Company are parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in commercial or consumer spending, borrowing and savings patterns, preferences or behaviors;

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• technological changes and the expanding use of technology in banking and financial services (including the adoption of mobile banking, funds transfer applications, electronic marketplaces for loans, blockchain technology, fintech, artificial intelligence, and other financial products, systems or services);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in the financial performance and/or condition of CVBF's or the Company's borrowers or depositors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• fluctuations in CVBF's or the Company's share price before closing, and the resulting impact on CVBF's ability to raise capital or to make acquisitions, including as a result of the financial performance of the other party prior to closing, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• CVBF's ability to recruit and retain key executives, board members and other employees; the failure of CVBF or the Company to obtain regulatory or shareholder approvals, as applicable, or to satisfy any of the other conditions to the closing of the proposed merger on a timely basis or at all, and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company after the closing of the proposed transaction or adversely affect the expected benefits of the proposed transaction; the dilution caused by the issuance of shares of CVBF's common stock in the transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• possible impairment charges to goodwill, including any impairment that may result from increased volatility in CVBF's or the Company's stock price;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• possible credit-related impairments or declines in the fair value of loans and securities held by CVBF or the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• volatility in the credit and equity markets and its effect on the general economy, and local, regional, national and international economic and market conditions, political events and public health developments and the impact they may have on CVBF or the Company, their clients and their capital, deposits, assets and liabilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• CVBF's or the Company's ability to attract deposits and other sources of funding or liquidity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in general economic, political, or industry conditions, and in conditions impacting the banking industry specifically; catastrophic events or natural disasters, including earthquakes, drought, climate change or extreme weather events that may affect CVBF's or the Company's assets, communications or computer services, clients, employees or third-party vendors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• public health crises and pandemics, and their effects on the economic and business environments in which CVBF and the Company operate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in the competitive environment among banks and other financial services and technology providers, and competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers including retail businesses and technology companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the strength of the United States economy and the strength of the local economies in which we conduct business; the effects of, and changes in, immigration, trade, tariff, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inflation/deflation, interest rate, market and monetary fluctuations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in interest rates that could significantly reduce net interest income and negatively affect asset yields and valuations and funding sources, including impacts on prepayment speeds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the impact of changes in financial services policies, laws, regulations, and ongoing or unanticipated regulatory or legal proceedings or outcomes, including those concerning banking, taxes, securities, and insurance, and the application thereof by regulatory agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effectiveness of CVBF's or the Company's risk management framework, quantitative models and ability to manage the risks involved in regulatory, legal or policy changes; the risks associated with CVBF's or the Company's loan portfolios, including the risks of any geographic and industry concentrations;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the impact of systemic or non-systemic failures, crisis or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• cybersecurity threats and fraud and the costs of defending against them, including the costs of compliance with legislation or regulations to combat fraud and cybersecurity threats;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of any legal proceedings relating to the proposed merger (including any securities, shareholder class actions, lender liability, bank operations, check or wire fraud, financial product or service, data privacy, health and safety, consumer or employee class action litigation);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• CVBF's or the Company's ongoing relations with various federal and state regulators, including, but not limited to, the SEC, Federal Reserve Board, FDIC, Office of the Comptroller of the Currency, and California DFPI;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• and other factors that may affect the future results of CVBF and the Company.

Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. *You should consider any forward looking statements in light of this explanation, and we caution you about relying on forward-looking statements.*

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**PART I**

**ITEM 1. *BUSINESS***

**General**

We are a bank holding company formed in 1997 as the sole shareholder of Heritage Bank of Commerce ("HBC" or the "Bank"), a California-chartered, FDIC-insured community-focused business bank headquartered in San Jose, California, since its formation in 1994. We provide a full line of banking services and products to business and individual clients, with a focus on small and medium-sized business and their owners, managers and employees. We have an extensive suite of online banking services, but our business is based largely on our network of sixteen full-service branches around the San Francisco Bay and Silicon Valley areas of coastal Central California, including locations in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo and Santa Clara counties.

The year 2025 was a consequential time for the Company and we are proud of the way our team worked to deliver solid growth and results, driven by steady performance across the business, sustained client momentum and strong credit quality. The recently announced proposed merger with CVBF represents an exciting next step in the Company's journey, building on the strength of our franchise and the consistent performance we delivered throughout 2025. As we work toward the completion of the transaction, we remain fully focused on executing our strategy and continuing to support our clients, colleagues, and communities. Among these critical steps, during 2025 we:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Delivered meaningful balance-sheet growth and expanded operating leverage through disciplined expense management.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Continued our positive credit trends during 2025, with nonperforming assets and net charge-offs remaining low at December 31, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Hired a new Chief Accounting Officer, Jeannie Tam, who brings more than 15 years of financial leadership experience in accounting operations, financial close, and finance transformation within financial services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Hired a new Chief Financial Officer, Seth Fonti, who brings more than two decades of financial and strategic leadership experience across global and domestic banking institutions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Company successfully advanced its long-term succession strategy across the enterprise and the Board of Directors, highlighted by the planned elevation of the Vice Chair to Chair of the Board of Directors in May 2025 and the appointment of a new independent director in August 2025, ensuring both leadership continuity and refreshment.

We are proud and confident in our more routine accomplishments, as well. We believe our loan portfolio is well-diversified among the commercial, real estate, construction and land development, consumer and Small Business Administration ("SBA") sectors. Both our loan and deposit bases are originated primarily on the basis of our physical presence through our branch offices. We offer a wide range of deposit products and loans for business banking and retail markets. We offer a multitude of other products and services to complement those lending and deposit services. Through the Bank's Bay View Funding subsidiary, we also provide factoring financing to small businesses located throughout the United States.

When we use "we", "us", "our" or the "Company", we mean the Company on a consolidated basis with Heritage Bank of Commerce. When we refer to "HCC" or the "holding company", we are referring to Heritage Commerce Corp on a standalone basis. When we use the "Bank" or "HBC", we mean Heritage Bank of Commerce on a standalone basis.

The Internet address of the Company's website is "http://www.heritagecommercecorp.com," and the Bank's website is "http://www.heritagebankofcommerce.com." The contents of our websites are not incorporated into and do not form a part of this or any other report or document we file with the SEC. The Company makes available free of charge through the Company's website, the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports. The Company makes these reports available on its website on the same day they appear on the SEC's website.

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**Heritage Bank of Commerce**

HBC is a California state-chartered bank headquartered in San Jose, California. It was incorporated in November 1993 and opened for business in June 1994. HBC operates through sixteen full-service branch offices.

***Lending Activities***

We offer a diversified mix of business loans encompassing the following loan products: (i) commercial and industrial loans; (ii) commercial real estate loans; (iii) construction loans; and (iv) SBA loans. From time to time the Company has purchased single family residential mortgage loans. We also offer home equity lines of credit, to accommodate the needs of business owners and individual clients, as well as consumer loans (both secured and unsecured). While no specific industry concentration is considered significant, our lending operations are located in market areas dependent on technology and real estate industries and their supporting companies. In the event creditworthy loan clients' borrowing needs exceed our legal lending limit, we have the ability to sell participations in those loans to other banks. Our focus on relationship banking allows us to obtain a substantial portion of each borrower's banking business, including deposit accounts, and provide long-term credit and deposit solutions to support our clients and their businesses.

***Deposit Products***

As a full-service commercial bank, we focus deposit generation on relationship accounts, encompassing non-interest bearing demand, interest bearing demand, and money market accounts. In order to facilitate the generation of non-interest bearing demand deposits, we require, depending on the circumstances and the type of relationship, our borrowers to maintain deposit balances with us as a typical condition of granting loans. We also offer certificates of deposit and savings accounts. We offer "remote deposit capture" and "mobile deposit capture" products that allow deposits to be made via computer at the client's business location or the client's mobile phone. We also offer clients "e-statements" that allows clients to receive statements electronically, which is more convenient and secure than receiving paper statements.

For clients seeking full Federal Deposit Insurance Corporation ("FDIC") insurance on certificates of deposit in excess of $250,000, we offer the Insured Cash Sweep ("ICS") and Certificate of Deposit Account Registry Service ("CDARS") programs, which allows HBC to place the deposits with other participating banks to maximize the clients' FDIC insurance. HBC also receives reciprocal deposits from other participating financial institutions.

***Electronic Banking***

While personalized, service-oriented banking is the cornerstone of our business plan, we use technology and the Internet as a secondary means for servicing clients, to compete with larger banks and to provide a convenient platform for clients to review and transact business. We offer sophisticated electronic or "internet banking" opportunities that permit commercial clients to conduct much of their banking business remotely from their home or business, with the additional assistance of third party products designed to mitigate fraud risk. All of HBC's electronic banking services allow clients to review transactions and statements, review images of paid items, transfer funds between accounts at HBC, place stop orders, pay bills and export to various business and personal software applications. HBC online commercial banking also allows clients to initiate domestic wire transfers and ACH transactions. However, our clients always have the opportunity to personally discuss specific banking needs with knowledgeable bank officers and staff who are directly accessible in the branches and offices as well as by telephone and email.

***Other Banking Services***

We offer a multitude of other products and services to complement our lending and deposit services. These include cashier's checks, bank by mail, night depositories, safe deposit boxes, direct deposit, automated payroll services, electronic funds transfers, online bill pay, homeowner association services, and other customary banking services. HBC currently operates ATMs at five different locations. In addition, we have established a convenient client service group accessible by toll free telephone to answer questions and promote a high level of client service. HBC does not have a trust department. In addition to the traditional financial services offered, HBC offers remote deposit capture and mobile deposit capture, automated clearing house origination, electronic data interchange and check imaging. HBC continues to investigate products and services that it believes address the growing needs of its clients and to analyze other markets for potential expansion opportunities.

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***Investments***

Our investment policy is established by the Board of Directors (the "Board"). The general investment strategies are developed and authorized by our Finance and Investment Committee of the Board. The investment policy is reviewed annually by the Finance and Investment Committee, and any changes to the policy are subject to approval by the full Board. The overall objectives of the investment policy are to maintain a portfolio of high quality investments to maximize interest income over the long term and to minimize risk, to manage liquidity, to provide collateral for borrowings, and to provide additional earnings when loan production is low. The policy dictates that investment decisions take into consideration the safety of principal, liquidity requirements and interest rate risk management. All securities transactions are reported to the Board's Finance and Investment Committee on a quarterly basis.

**Correspondent Banks**

Correspondent bank deposit accounts are maintained to enable the Company to transact types of activity that it would otherwise be unable to perform or would not be cost effective due to the size of the Company or volume of activity. The Company has utilized several correspondent banks to process a variety of transactions.

**Competition**

The banking and financial services business in California generally, and in the Company's market areas specifically, is highly competitive. The industry continues to consolidate and unregulated competitors have entered banking markets with products targeted at highly profitable client segments. Many larger unregulated competitors are able to compete across geographic boundaries, and provide clients with meaningful alternatives to most significant banking services and products. These consolidation trends are likely to continue. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems, and the consolidation among financial service providers.

With respect to commercial bank competitors, the business is dominated by a relatively small number of major banks that operate a large number of offices within our geographic footprint. For the combined Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara county region, the seven counties within which the Company operates, the top three institutions are all multi-billion dollar entities with an aggregate of 506 offices that control a combined 69.58% of deposit market share based on June 30, 2025 FDIC market share data. HBC ranks fourteenth with 0.74% share of total deposits based on June 30, 2025 market share data. Larger institutions have, among other advantages, the ability to finance wide-ranging advertising campaigns and to allocate their resources to regions of highest yield and demand. Larger banks are seeking to expand lending to small businesses, which are traditionally community bank clients. They can also offer certain services that we do not offer directly, but may offer indirectly through correspondent institutions. By virtue of their greater total capitalization, these banks also have substantially higher lending limits than we do. For clients whose needs exceed our legal lending limit, we arrange for the sale, or "participation," of some of the balances to financial institutions that are not within our geographic footprint.

In addition to other large regional banks and local community banks, our competitors include savings institutions, securities and brokerage companies, asset management groups, mortgage banking companies, credit unions, finance and insurance companies, internet-based companies, and money market funds. In recent years, we have also witnessed increased competition from specialized companies that offer wholesale finance, credit card, and other consumer finance services, as well as services that circumvent the banking system by facilitating payments via the internet, wireless devices, prepaid cards, or other means. Technological innovations have lowered traditional barriers of entry and enabled many of these companies to compete in financial services markets. Such innovation has, for example, made it possible for non-depository institutions to offer clients automated transfer payment services that previously were considered traditional banking products. In addition, many clients now expect a choice of delivery channels, including telephone and smart phones, mail, personal computer, ATMs, self-service branches, and/or in-store branches.

Strong competition for deposits and loans among financial institutions and non-banks alike affects interest rates and other terms on which financial products are offered to clients. Mergers between financial institutions have placed additional pressure on other banks within the industry to remain competitive by streamlining operations, reducing expenses, and increasing revenues.

In order to compete with the other financial service providers, the Company principally relies upon community-oriented, personalized service, local promotional activities, personal relationships established by officers, directors, and

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team members with its clients, and specialized services tailored to meet its clients' needs. Our "preferred lender" status with the Small Business Administration allows us to approve SBA loans faster than many of our competitors. In those instances where the Company is unable to accommodate a client's needs, the Company seeks to arrange for such loans on a participation basis with other financial institutions or to have those services provided in whole or in part by its correspondent banks. See Item 1 — "*Business — Correspondent Banks.*"

HBC is a California state-chartered bank headquartered in San Jose, California. It was incorporated in November 1993 and opened for business in June 1994. HBC operates through sixteen full-service branch offices. The locations of HBC's current offices and the administrative office of CSNK Working Capital Finance Corp. d/b/a Bay View Funding ("Bay View Funding") are:

---

| | | | |
|:---|:---|:---|:---|
| San Jose: | Administrative Office | Oakland: | Branch Office |
|  | Main Branch |  | 1111 Broadway |
|  | 224 Airport Parkway |  | Suite 1650 |
|  | Suite 100 |  | Oakland, CA 94607 |
|  | San Jose, CA 95110 |  |  |
| Danville: | Branch Office | Palo Alto: | Branch Office |
|  | 387 Diablo Road |  | 325 Lytton Avenue |
|  | Danville, CA 94526 |  | Suite 100 |
|  |  |  | Palo Alto, CA 94301 |
| Fremont: | Branch Office | Pleasanton: | Branch Office |
|  | 3137 Stevenson Boulevard |  | 300 Main Street |
|  | Fremont, CA 94538 |  | Pleasanton, CA 94566 |
| Hollister: | Branch Office | San Francisco: | Branch Office |
|  | 351 Tres Pinos Road |  | 120 Kearny Street |
|  | Suite 102A |  | Suite 2300 |
|  | Hollister, CA 95023 |  | San Francisco, CA 94108 |
| Livermore: | Branch Office | San Mateo: | Branch Office |
|  | 1987 First Street |  | 400 S. El Camino Real |
|  | Livermore, CA 94550 |  | Suite 150 |
|  |  |  | San Mateo, CA 94402 |
| Los Altos: | Branch Office | San Rafael: | Branch Office |
|  | 419 South San Antonio Road |  | 999 5th Avenue |
|  | Los Altos, CA 94022 |  | Suite 100 |
|  |  |  | San Rafael, CA 94901 |
| Los Gatos: | Branch Office | Walnut Creek: | Branch Office |
|  | 15575 Los Gatos Boulevard |  | 1990 N. California Boulevard |
|  | Bldg. B |  | Suite 100 |
|  | Los Gatos, CA 95032 |  | Walnut Creek, CA 94596 |

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| | | | |
|:---|:---|:---|:---|
| Morgan Hill: | Branch Office | Bay View Funding: | Administrative Office |
| | 18625 Sutter Boulevard | | 224 Airport Parkway |
| | Suite 100 | | Suite 200 |
| | Morgan Hill, CA 95037 | | San Jose, CA 95110 |
| Redwood City: | Branch Office | | |
| | 2400 Broadway | | |
| | Suite 100 | | |
| | Redwood City, CA 94063 | | |

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**HUMAN CAPITAL** 

We strive to be the employer of choice among banks in our markets, by building a reputation as a place where every team member can thrive. We believe deeply that team members drive our Company's stability and success. With this in mind, we are dedicated to recruiting, nurturing, advancing and retaining a workforce that embraces and cultivates a culture of excellence, teamwork, client focus, engagement, equity, inclusivity, belonging, and accountability. We constantly work on finding ways to improve our culture, recruitment strategies, training and retention. Progress on these human capital efforts and programming are shared regularly with the Board's Personnel and Compensation Committee throughout the year because we believe their perspective and feedback are invaluable to our continuous improvement. Our ultimate goal is to deepen client and community relationships and to deliver exceptional experience to all whom we serve.

**The Culture We Are Building: Engagement**

In 2025 we administered our first-ever employee engagement survey, with overall engagement measured at 70%. We believe our engagement initiative will continue to provide a strong foundation that correlates our client-facing net promoter scores to overall business success. We will focus on correlating employee and client engagement, and we are optimistic that this evolution will continue to foster our team members' interests and capabilities in serving our clients.

Management continued to provide development opportunities as evidenced in the roll out of a foundational coaching series. This workshop grounded leaders in effective coaching context and practices, serving as the entry point for related future management development learning experiences. Additionally, this content was harmonized with sales coaching training underway in our commercial bank.

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In 2025, our Core Values focus continued:

![Image_2.jpg](htbk-20251231_g1.jpg)

Continuing in our core value of serving with purpose and passion, our Heritage Hearts Committee continued with a mission to source nonprofit volunteer and board opportunities for Company team members across the Bay Area. In 2025, we contributed more than 2,175 hours to strengthen our relationship with local nonprofit organizations. More than 50 team members serve on over 60 boards. Our broad outreach efforts cover a variety of focus areas like economic development, education, financial literacy, health and human services, housing and homelessness, small business and entrepreneurship support, animal services, environmental, arts and culture.

We continued to expand on existing communication efforts such as our anonymous "Ask CEO" portal with our Chief Executive Officer providing answers and updates during regularly scheduled all-hands meetings throughout the year. In 2025, we continued our CEO welcome luncheon so all new team members can establish a direct connection to the CEO. We also encourage team members to submit suggestions through our "Big Idea" electronic portal. Furthermore, multiple executives facilitate periodic cross-functional focus groups to gather input on our strengths and areas where we can further improve.

**Compensation**

Our Company's pay-for-performance compensation philosophy offers all team members the opportunity to earn annual bonuses in addition to base salaries depending on individual, team, and company performance results. The company reviews its compensation model regularly to ensure equitable pay practices. When we identify chances to enhance pay equity, we proactively take steps to address them.

We adhere to the California Senate Bill 1162 Pay Transparency Regulations, both as to specific requirements and the spirit behind the bill. We use a balanced performance evaluation approach to assess four core areas: Business Results, Internal/External Client Experience, Teamwork/Leadership and Risk/Compliance/Controls.

**Talent Development and Succession Planning**

Throughout the year, team members are offered a variety of opportunities to participate in learning and education programs such as attending internal and external seminars/workshops, on-line training courses, panel discussions and trade group conferences to enrich one's own development. Additionally, we offer a generous tuition reimbursement to support team members' desire to pursue higher education degrees. Team members also have the opportunity to earn industry related and/or role related professional certifications, and our Company reimburses for classes, materials, test fees, and

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ongoing required education costs. Each year, we also offer certain identified leaders an opportunity to attend Pacific Coast Banking School as part of their career development plan.

In 2025, aside from the coaching series mentioned earlier, we enhanced our succession planning efforts to identify those roles most critical to achieving our strategy. Once those roles were identified we then ensured employees in those roles had customized development plans in place. While a new approach for us—it nonetheless strengthened our overall market positioning. Moreover, we shared our results with our Board to highlight our progress made in this important initiative.

**Culture and Conduct**

Teamwork is not only promoted but celebrated through various recognition programs. Our "Core Values Champions" continues to recognize individuals who demonstrate our Company's Core Values through their work and interactions. Throughout the year, team members are encouraged to nominate colleagues who go above and beyond their regular duties in showcasing one or more of our core values. The CEO highlights and publicly applauds Core Value Champions' stories, celebrating their exemplary accomplishments and contributions.

We continually promote a speak-up culture, so our workplace feels welcoming and safe. We expect team members always to treat clients and stakeholders with courtesy and respect. Our Company's Code of Ethics and Conduct continues to offer specificity to directors and team members across different sections, embodying such principles as workplace safety, protection of client and team member information, conflict of interest guidelines, anti-retaliation policy, and procedures for reporting concerns. Every team member must annually confirm their acknowledgement of the Company's Code of Ethics and Conduct, and senior leadership team members are subject to a more restrictive Executive and Principal Financial Officer Code of Ethics, as well. Team members can report concerns to their manager, any company leader, Human Resources, or via the anonymous hotline and intranet site. We take all complaints seriously and promptly investigate concerns. We have a zero-tolerance anti-retaliation policy.

**Health, Safety and Wellbeing**

Our team members are our most valuable resource, and their safety, health, and wellbeing are key to our Company's success. We support the wellness of all colleagues through various programs, including Employee Assistance Program ("EAP"), health seminars, education programs and health club memberships. All team members are eligible to take advantage of our EAP programs which offer counseling services, family support, help on financial and legal issues, and mental health support. In 2025, we continued offering employee assistance program (EAP) private counseling sessions, monthly fitness stipend for all team members and hosted in-person and virtual meditation sessions to promote the importance of self-care.

**Supervision and Regulation**

***General***

Like all depositary institutions, both Heritage Commerce Corp and Heritage Bank of Commerce, as well as their operating subsidiaries and affiliates, are regulated extensively under federal and state law. The effects of these laws and regulations affect our ability to make management decisions and to conduct our operations, and over recent years the volume, scope and complexity of these regulations have expanded substantially. The combined application of these laws and regulations applies to virtually every aspect of our business, and to a substantial degree affects our relationships with clients, vendors, and affiliates as well. Further, the cost of complying with these laws and regulations, and the potential penalties, liabilities or other consequences of failure to comply, has risen dramatically in recent years.

With respect to the Company, we are regulated and examined by the California Department of Financial Protection and Innovation ("DFPI"), and the Federal Reserve Bank of San Francisco. Heritage Bank of Commerce files reports with and is examined by the Federal Reserve Bank of San Francisco, the FDIC, the DFPI, and the Consumer Financial Protection Bureau ("CFPB"). In addition to banking and financial institutions laws and regulations, we are subject to a broad swath of other regulatory frameworks applicable to public companies generally, including federal and state tax laws, accounting rules developed by the Financial Accounting Standards Board ("FASB"), and federal and state securities laws. These statutes, regulations, regulatory policies and rules are significant to the financial condition and results of operations of the Company and its subsidiaries, including HBC. This section offers a brief summary of the most significant aspects of applicable banking laws and regulations, but the implications and effects of these laws and

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regulations upon our business is far too extensive to be described completely, and readers should refer to the section of this Report entitled "Item 1A, Risk Factors," for certain effects of these laws and regulations that may have a particular effect on our assets, results of operations and financial condition. We have not attempted to summarize laws of general applicability, such as corporate, tax, securities and accounting regulations, or other laws, such as employment laws, that may also have a material impact upon our business.

**Regulatory Capital Requirements**

The Company and HBC are subject to a comprehensive capital framework (the "Capital Rules") adopted by Federal banking regulators (including the Federal Reserve and the FDIC). The Capital Rules implement the Basel III framework for strengthening the regulation, supervision and risk management of banks, as well as certain provisions of Dodd-Frank. The Capital Rules generally recognize three components, or tiers, of capital: common equity Tier 1 capital, additional Tier 1 capital and Tier 2 capital. Common equity Tier 1 capital generally consists of retained earnings and common stock instruments (subject to certain adjustments), as well as accumulated other comprehensive income ("AOCI"). Additional Tier 1 capital generally includes non-cumulative preferred stock and related surplus subject to certain adjustments and limitations. Tier 2 capital generally includes certain capital instruments (such as subordinated debt) and portions of the amounts of the allowance for credit losses, subject to certain requirements and deductions. The term "Tier 1 capital" means common equity Tier 1 capital plus additional Tier 1 capital, and the term "total capital" means Tier 1 capital plus Tier 2 capital.

The Capital Rules generally measure an institution's capital using four capital measures or ratios. The common equity Tier 1 capital ratio is the ratio of the institution's common equity Tier 1 capital to its total risk-weighted assets. The Tier 1 risk-based capital ratio is the ratio of the institution's Tier 1 capital to its total risk-weighted assets. The total risk-based capital ratio is the ratio of the institution's total capital to its total risk-weighted assets. The Tier 1 leverage ratio is the ratio of the institution's Tier 1 capital to its average total consolidated assets. To determine risk-weighted assets, assets of an institution are generally placed into a risk category as prescribed by the regulations and given a percentage weight based on the relative risk of that category. An asset's risk-weighted value will generally be its percentage weight multiplied by the asset's value as determined under generally accepted accounting principles. In addition, certain off-balance-sheet items are converted to balance-sheet credit equivalent amounts, and each amount is then assigned to one of the risk categories.

To be adequately capitalized, both the Company and HBC are required to have a common equity Tier 1 capital ratio of at least 4.5% or more, a Tier 1 leverage ratio of 4.0% or more, a Tier 1 risk-based ratio of 6.0% or more and a total risk-based ratio of 8.0% or more. In addition to the preceding requirements, both the Company and HBC are required to maintain a "conservation buffer" consisting of common equity Tier 1 capital, which is at least 2.5% above each of the required minimum levels. An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers.

The Capital Rules also prescribe the methods for mitigating the impact of intangible assets on our capital ratios, and for calculating risk-based assets and ratios. Higher or more sensitive risk weights are assigned to various categories of assets, among which are credit facilities that finance the acquisition, development or construction of real property, certain exposures or credits that are 90 days past due or are nonaccrual, foreign exposures, certain corporate exposures, securitization exposures, equity exposures and in certain cases mortgage servicing rights and deferred tax assets. An institution's federal regulator also may require the institution to hold more capital than would otherwise be required under the Capital Rules if the regulator determines that the institution's capital requirements under the Capital Rules are not commensurate with the institution's credit, market, operational or other risks.

**Supervision and Regulation of Heritage Commerce Corp**

***General***. As a bank holding company, HCC is subject to regulation, supervision and periodic examination by the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and by the DFPI in accordance with the California Financial Code. HCC is required to file with the Federal Reserve periodic reports of its operations and such additional information as the Federal Reserve may require. In accordance with Federal Reserve laws and regulations, HCC is required to act as a source of financial strength to HBC and to commit resources to support HBC in circumstances where HCC might not otherwise do so.

***Permitted Activities***. The BHCA generally prohibits HCC from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank or whose business is not "closely related to

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banking." The Federal Reserve has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the Federal Reserve has reasonable grounds to believe that continuing such activity, ownership or control constitutes a serious risk to a subsidiary's financial soundness, safety or stability.

***Source of Strength Doctrine***. Federal Reserve policy historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. Dodd-Frank codified this policy as a statutory requirement. HCC is required to act as a source of strength to HBC and to commit capital and financial resources to support HBC, including at times when HCC may not be in a financial position to do so. HCC must stand ready to use its available resources to provide adequate capital to HBC during periods of financial stress or adversity. HCC must also maintain the financial flexibility and capital raising capacity to obtain additional resources for assisting HBC. HCC's failure to meet its source of strength obligations may constitute an unsafe and unsound practice, a violation of the Federal Reserve's regulations, or both. The source of strength doctrine most directly affects bank holding companies whose subsidiary bank fails to maintain adequate capital levels. In such situation, the subsidiary bank will be required by the bank's federal regulator to take "prompt corrective action." Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of the bank. In the event of a bank holding company's bankruptcy, its commitment to a federal bank regulatory agency to maintain the capital of its subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

***Dividend Payments, Stock Redemptions and Repurchases***. In addition to the requirements of the California Corporations Code, which imposes certain solvency tests and board-level approval requirements, the Federal Reserve may require a bank holding company to eliminate, defer or significantly reduce dividends to shareholders if: (i) the bank holding company's net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the prospective rate of earnings retention is inconsistent with the bank holding company's capital needs and overall current and prospective financial condition; or (iii) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. The Capital Rules also require that a holding company seeking to pay dividends must maintain 2.5% in common equity Tier 1 capital attributable to the capital conservation buffer. See "Supervision and Regulation—Regulatory Capital Requirements," above.

***Acquisitions, Activities and Change in Control***. The BHCA and the California Financial Code also substantially govern an institution's ability to grow by acquisition. These regulations include extensive application filing and approval requirements as well as substantive regulation over the projected operations and financial performance of institutions proposing to merge or to be acquired. These laws and regulations afford regulators, including the Federal Reserve, the FDIC and the DFPI with expansive authority and discretion and may affect the availability, timing and cost of initiatives that financial institutions might take as a means to effectuate strategic growth.

**Supervision and Regulation of Heritage Bank of Commerce**

***General***. HBC is a California state-chartered commercial bank that is a member of the Federal Reserve System and whose deposits are insured by the FDIC. HBC is thus subject to regulation, supervision, and regular examination by the DFPI and the Federal Reserve as HBC's primary federal regulator. The regulations of these agencies govern most aspects of a bank's business.

***Brokered Deposit Restrictions***. Well capitalized institutions are not subject to limitations on brokered deposits, while an adequately capitalized institution is able to accept, renew or roll over brokered deposits only with a waiver from the FDIC and subject to certain restrictions on the yield paid on such deposits. Undercapitalized institutions are generally not permitted to accept, renew, or roll over brokered deposits. As of December 31, 2025, HBC was eligible to accept brokered deposits without limitations.

***Loans to One Borrower***. With certain limited exceptions, the maximum amount that a California bank may lend to any borrower at any one time (including the obligations to the bank of certain related entities and related persons of the borrower) may not exceed 25% (and unsecured loans may not exceed 15%) of the bank's shareholders' equity, allowance for credit losses on loans, and any capital notes and debentures of the bank. We generally do not have banking relationships that approach these limitations.

***Tie in Arrangements***. Federal law prohibits a bank holding company and any subsidiary banks from engaging in certain tie in arrangements in connection with the extension of credit. For example, HBC may not extend credit, lease or

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sell property, furnish any services, fix or vary the consideration for any of the foregoing on the condition that: (i) the client must obtain or provide some additional credit, property or services from or to HBC other than a loan, discount, deposit or trust services; (ii) the client must obtain or provide some additional credit, property or service from or to HCC or HBC; or (iii) the client must not obtain some other credit, property or services from competitors, except reasonable requirements to assure soundness of credit extended.

***Deposit Insurance***. Deposit accounts at HBC are insured through the Deposit Insurance Fund ("DIF") administered by the FDIC. The amount of federal deposit insurance coverage is $250,000 per depositor, for each account ownership category at each depository institution. The $250,000 amount is subject to periodic adjustments. In order to maintain the DIF, insured depository institutions are assessed insurance premiums based on an insured institution's average consolidated total assets less its average tangible equity capital.

Each institution is provided an assessment rate, which is generally based on the risk that the institution presents to the DIF. Institutions with less than $10 billion in assets generally have an assessment rate that can range from 2.5 to 32 basis points per annum. However, the FDIC has flexibility to adopt assessment rates without additional rule-making provided that the total base assessment rate increase or decrease does not exceed 2 basis points.

***Dividend Payments***. Heritage Commerce Corp has paid a quarterly dividend to our shareholders every quarter since 2013. The primary source of funds for HCC is dividends from HBC. Under the California Financial Code, HBC is permitted to pay a dividend in the following circumstances: (i) without the consent of either the DFPI or HBC's shareholders, in an amount not exceeding the lesser of (a) the retained earnings of HBC; or (b) the net income of HBC for its last three fiscal years, less the amount of any distributions made during the prior period; (ii) with the prior approval of the DFPI, in an amount not exceeding the greatest of: (a) the retained earnings of HBC; (b) the net income of HBC for its last fiscal year; or (c) the net income for HBC for its current fiscal year; and (iii) with the prior approval of the DFPI and HBC's shareholders (i.e., HCC) in connection with a reduction of its contributed capital. Unless the Federal Reserve approves, HBC is not permitted to pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds its net income during the current calendar year and the retained net income of the prior two calendar years. Federal Reserve and shareholder approval is also required for HBC to pay a dividend that (i) would exceed its undivided profits or (ii) would result in a withdrawal of permanent capital.

***Risk Management***. Bank regulatory agencies have emphasized the importance of sound risk management processes and strong internal controls when evaluating the activities of the financial institutions they supervise. Properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets. The agencies have identified a spectrum of risks facing a banking institution including, but not limited to, credit, market, liquidity, operational, and legal risk. HBC is expected to have active board and senior management oversight; adequate policies, procedures, and limits; adequate risk measurement, monitoring, and management information systems; and comprehensive internal controls.

***Anti-Money Laundering and Office of Foreign Assets Control Regulation***. We are subject to federal laws aiming to counter money laundering and terrorist financing, as well as transactions with persons, companies and foreign governments sanctioned by the United States. These laws and regulations are intended to detect, identify, track and prevent money-laundering, money transfers to prohibited nations and entities, and certain types of financial crimes. These laws and regulations impose strict reporting and compliance obligations on financial institutions, and violations can carry substantial fines, civil money penalties and other sanctions, as well as restrictions on an institution's business. Regulatory authorities routinely examine financial institutions for compliance with these obligations, and failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations.

***Concentrations in Commercial Real Estate***. Concentration risk exists when a financial institution deploys too many assets to a specific industry or segment of the economy with the potential to produce losses large enough to threaten the financial institution's health. Concentration stemming from CRE is one area of regulatory concern. Regulatory guidance provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant CRE loan concentrations that may warrant greater supervisory scrutiny: (i) CRE loans exceeding 300% of capital and increasing 50% or more in the preceding three years; or (ii) construction and

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land development loans exceeding 100% of capital. The guidance does not limit banks' levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their CRE concentrations. As of December 31, 2025, using regulatory definitions in the CRE Concentration Guidance, our CRE loans represented 319% of HBC total risk-based capital, as compared to 311% as of December 31, 2024. If the regulatory agencies become concerned about our CRE loan concentrations, they could limit our ability to grow by restricting approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities.

Readers also should note that in addition to the formal concentration guidance, substantially all our activities, operations and assets are located in the San Francisco Bay Area of Central California, or in other areas of that State. Accordingly, we are subject to geographic concentration risks that are described in greater detail in "Item 1A, Risk Factors."

***Consumer Protection***. We are subject to a number of federal and state consumer protection laws that extensively govern our relationship with our clients. These laws include, among others, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, the Military Lending Act, and these laws' respective state law counterparts, as well as state usury laws and laws regarding unfair, deceptive or abusive acts and practices ("UDAAP"). The consumer protection laws applicable to us, among other things, require disclosures of the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit UDAAP practices, restrict our ability to raise interest rates and subject us to substantial regulatory oversight. Many states and local jurisdictions have consumer protection laws analogous to those listed above.

Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by clients, including actual and statutory damages, restitution and attorneys' fees. Federal bank regulators, state attorneys general, and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, client rescission rights, and civil money penalties. Non-compliance with consumer protection requirements may also result in our failure to obtain any required bank regulatory approval for merger or acquisition transactions we may wish to pursue or prohibition from engaging in such transactions even if approval is not required.

***Enforcement Powers of Federal and State Banking Agencies***. The federal bank regulatory agencies have broad enforcement powers, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or receiver for financial institutions. Failure to comply with applicable laws and regulations could subject us and our officers and directors to administrative sanctions and potentially substantial civil money penalties. The DFPI also has broad enforcement powers over us, including the power to impose orders, remove officers and directors, impose fines and appoint supervisors and conservators.

**ITEM 1A. *RISK FACTORS***

*Our business, financial condition and results of operations are subject to various risks, including those discussed below. The risks discussed below are those that we believe are the most significant risks, although additional risks not presently known to us or that we currently deem less significant may also materially and adversely affect our business, financial condition and results of operations.*

**Summary of Risk Factors**

***Risks Related to the Merger***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Termination of the merger agreement could negatively impact us

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Market value of the merger consideration may fluctuate

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The merger may be more difficult, costly or time consuming than expected to realize and the combined company may fail to realize the anticipated benefits of the merger

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The combined company may be unable to retain key personnel after completion of the merger

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Required regulatory approvals may not be obtained in a timely manner

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Announcement of the merger could disrupt our business relationships

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our shareholders will have a reduced ownership and voting interest in the combined company

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We may incur costs or other negative impacts as a result of shareholder litigation

***Risks Related to Our Operations***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Interruptions, cyberattacks, fraud and other security breaches

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Difficulties from our third-party providers

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Failure to attract and retain well-qualified directors, management and other skilled professionals

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The soundness of other financial institutions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Failure of our risk management framework

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Team member misconduct

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Inaccurate information provided to us by clients or counterparties

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Environmental, social and governance practices

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Severe weather, natural disasters, pandemics, acts of war or terrorism, social unrest and other external events

***Risks Related to Our Business***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Geographic concentration in the Greater San Francisco Bay Area

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Failure to maintain a favorable reputation with our clients and communities

***Risks Related to Our Loans***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Negative changes affecting real estate values and liquidity

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Risks involved with land and construction development loans

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Increased scrutiny by regulators of commercial real estate concentrations

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Unreliability of loan appraisals used in real property loan decisions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Commercial loans are more sensitive to the borrower's successful operations or property development

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Small and medium business loans are subject to greater risks from adverse business developments

***Risks Related to Our SBA Loan Program***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Dependence on U.S. federal government SBA loan program

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Recognition of gains on sale of loans and servicing asset valuations reflect certain assumptions we use

***Risks Related to Our Credit Quality***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Managing credit risk

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The allowance for credit losses on loans may be insufficient

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nonperforming assets can affect our financial results and require management time to resolve

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exposure to environmental liabilities on foreclosed real estate collateral

***Risks Related to our Growth Strategy***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Risks associated with acquisitions, including availability of suitable targets and integration risks

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Impairment of the goodwill recorded from an acquisition

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Managing our franchise growth strategy

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Managing risks of adding new lines of business and new products

***Risks Related to Our Financial Strength and Liquidity***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Actual or perceived reduction in our financial strength

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Increased challenges in credit markets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Fluctuations in interest rates may reduce net income and impact our business

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Failure to maintain effective internal controls over financial reporting

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Significant deferred tax assets may not be fully realized

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Unrealized losses on our securities portfolio, particularly from the impact of increased interest rates on our securities available-for-sale portfolio

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adverse changes in credit ratings

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Liquidity risks, particularly from limited access to lines of credit, deposits, and other traditional forms of funding

***Risks Related to Our Capital***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• More stringent capital requirements

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***Risks Related to Our Legal and Regulatory Environment***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Complexity and scope of regulatory oversight and the costs of managing compliance with applicable laws and regulations

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in accounting standards

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Risks of uninsured liabilities and reputational harm in the event of regulatory sanctions or litigation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Inaccurate or inadequate estimates regarding expected losses from litigation

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Costs and effects of litigation, investigations or similar matters

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Costs and risks associated with potential data breaches and associated litigation or regulatory actions

***Risks from Competition***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Competition for client deposits and other business

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Rapid technological developments in the financial services industry

***Risks Related to Our Common Stock***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Investment in our common stock is not an insured deposit

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Dilution affect resulting from the issuance of common stock consideration for acquisitions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Limited trading volume

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Volatile trading price of our common stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Dividends may change without notice and payment thereof is subject to restrictions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Limitations on director liability for monetary damages for failure to exercise their fiduciary duty

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Issuance of preferred stock which may have rights and preferences over our common stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Holders of our debt obligations may have rights and preferences over holders of our common stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our charter documents and California law may have an anti-takeover effect limiting changes of control

**Risks Relating to the Merger**

***Termination of the merger agreement could negatively affect us****.*

If the merger is not completed for any reason, including as a result of our shareholders failing to approve our merger proposal or CVBF shareholders failing to approve the CVBF merger proposal, there may be various adverse consequences and we may experience negative reactions from the financial markets and from our clients and employees. For example, our business may have been affected adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of our common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. If the merger agreement is terminated under certain circumstances, we may be required to pay a termination fee of approximately $32.5 million to the other party.

Additionally, we have incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, including legal, accounting and financial advisory costs, as well as the costs and expenses of filing, printing and mailing the joint proxy statement/prospectus, and all filing and other fees paid to the SEC in connection with the merger. If the merger is not completed, we would have to pay these expenses without realizing the expected benefits of the merger.

***Because the market price of CVBF common stock may fluctuate, holders of our common stock cannot be certain of the market value of the merger consideration they will receive.***

In the merger, each share of our common stock issued and outstanding immediately prior to the effective time of the merger will be converted into 0.65 shares of CVBF common stock. This exchange ratio is fixed and will not be adjusted for changes in the market price of either CVBF common stock or our common stock. Changes in the price of CVBF common stock between now and the time of the merger will affect the value that holders of our common stock will receive in the merger. Neither CVBF nor we are permitted to terminate the merger agreement solely as a result of any increase or decrease in the market price of CVBF common stock or our common stock. For more information regarding the merger, the merger agreement, the bank merger and the bank merger agreement, please refer to the Current Report on Form 8-K that we filed with the United States Securities and Exchange Commission on December 23, 2025.

Stock price changes may result from a variety of factors, including general market and economic conditions, changes in CVBF's and/or our businesses, operations and prospects, the performance of peer companies and other financial

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companies, volatility in the prices of securities in global financial markets, including market prices of us, CVBF, and other banking companies, the effects of proposed or imposed tariffs by the U.S. government and retaliatory tariffs proposed or imposed by U.S. trading partners and the risk of any recession or slowdown in economic growth, particularly in the western United States, inflation and interest rates, and regulatory considerations and tax laws, many of which are beyond CVBF's and our control.

***Combining us and CVBF may be more difficult, costly or time-consuming than expected, and the combined company may fail to realize the anticipated benefits of the merger.***

The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of us and CVBF. To realize the anticipated benefits and cost savings from the merger, we and CVBF must successfully integrate and combine our businesses in a manner that permits those cost savings to be realized without adversely affecting current revenues and future growth. If we and CVBF are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.

An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of the combined company following the completion of the merger, which may adversely affect the value of the common stock of the combined company following the completion of the merger.

We and CVBF have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company's ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect the companies' respective abilities to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts between the companies may also divert management attention and resources. These integration matters could have an adverse effect on us during this transition period and for an undetermined period after completion of the merger on the combined company.

***The combined company may be unable to retain our or CVBF's legacy personnel successfully after the completion of the merger.***

The success of the merger will depend in part on the combined company's ability to retain the talent and dedication of key employees currently employed by us. It is possible that these employees may decide not to remain with us or CVBF, as applicable, while the merger is pending or with the combined company after the completion of the merger. If we or CVBF are unable to retain key employees, including management, who are critical to the successful integration and future operations of the combined company following the merger, we and CVBF could face disruptions in our operations, loss of existing clients, loss of loans and/or deposits, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the completion of the merger, if key employees terminate their employment, the combined company's business activities following the merger may be adversely affected, and management's attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company's business following the merger to suffer. We and CVBF also may not be able to locate or retain suitable replacements for key employees.

***Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on CVBF following the merger****.* 

Before the merger with CVBF and the subsequent merger of Citizens Business Bank and the Bank (the "bank merger") may be completed, various approvals, consents and non-objections must be obtained from the Federal Reserve, the OCC and other regulatory authorities without the imposition of any materially burdensome regulatory condition. In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each party. These approvals could be delayed or not obtained at all, including due to any or all of the following: an adverse development in either party's regulatory standing; governmental, political, community or supervisory inquiries or opposition; or changes in legislation, regulatory policy or the political environment, including changes in the leadership of regulatory agencies.

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Any approvals that are granted may impose terms, conditions, limitations, obligations or costs, or place restrictions on the conduct of the surviving corporation's business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions, or that any such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of the merger, imposing additional material costs on or materially limiting the revenues of the surviving corporation following the merger, or otherwise reducing the anticipated benefits of the merger. In addition, there can be no assurance that any such conditions, limitations, obligations or restrictions will not result in the delay or abandonment of the merger. Completion of the merger is also conditioned on the absence of certain orders, injunctions or decrees by any governmental entity that would prohibit or make illegal the completion of the merger.

Although we and CVBF have agreed to use our commercially reasonable efforts to obtain the required regulatory approvals, neither we nor CVBF are required under the merger agreement to agree to any condition or restriction that would reasonably be expected to result in a materially burdensome regulatory condition.

***The announcement of the proposed merger could disrupt our relationships with our employees, clients, suppliers, business partners and others, as well as their operating results and business generally.***

Whether or not the merger is ultimately consummated, as a result of uncertainty related to the proposed transactions, risks relating to the impact of the announcement of the merger on our business include the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our employees may experience uncertainty about their future roles, which might adversely affect the ability of us or the Bank to retain and hire key personnel and other employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• clients, suppliers, business partners and other parties with which we and our subsidiaries maintain business relationships may experience uncertainty about their future and seek alternative relationships with third parties, seek to alter their business relationships with us or our subsidiaries or fail to extend existing relationships with us or our subsidiaries; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we have expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the proposed merger.

If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact our results of operations and financial condition.

***Holders of our common stock will have a reduced ownership and voting interest in CVBF after the merger and will exercise less influence over management****.* 

Our shareholders currently have the right to vote in the election of the board of directors and on other matters affecting us. When the merger is completed, each holder of our common stock who receives shares of CVBF common stock will become a CVBF shareholder, with a percentage ownership of CVBF that is smaller than the holder's percentage ownership of us. Based on the number of shares of CVBF and our common stock outstanding as of the close of business on the respective record dates, and based on the number of shares of CVBF common stock expected to be issued in the merger, the former holders of our common stock, as a group, are estimated to own approximately twenty-three percent (23%) of the fully diluted shares of CVBF immediately after the merger. Because of this, our shareholders may have less influence on the management and policies of CVBF than they now have on our management and policies.

***Litigation related to the merger has been filed against us, and additional litigation may be filed against us, which could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact our business and operations.***

Litigation related to the merger has been filed against us, CVBF and our board of directors, and it is possible that additional litigation related to the merger may be filed against us and/or our board of directors in the future. Among other remedies, litigation that has been filed seeks, and additional litigation in the future could seek, to enjoin the merger. If any plaintiff were successful in obtaining an injunction prohibiting us from completing the merger, then such injunction may delay or prevent the consummation of the merger and could result in significant costs to us. We may incur costs in connection with the defense or settlement of any such litigation. Such litigation could have an adverse effect on our financial condition and results of operations and could prevent or delay the consummation of the merger.

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**Risks Relating to Our Operations**

***Interruptions, cyberattacks, fraudulent activity or other security breaches may have a material adverse effect on our business.***

In the normal course of business, we (directly or through third parties) collect, store, share, process and retain sensitive and confidential information regarding our clients. We also rely heavily upon electronic infrastructure that we own or that we obtain via license or other contractual arrangements with third parties. This infrastructure is essential in the conduct of our business, including for allowing our clients to access and transfer funds, initiate and pay loans and leases, communicating with our client service teams, and a variety of other activities that form the foundation of modern financial services businesses. There have been a number of recent and well-publicized incidents involving various types of cybersecurity lapses, and many of these have had substantial impacts upon targeted businesses and on clients of even some of the world's most prominent cybersecurity firms. Similarly, extremely sophisticated criminal and nation-state organizations routinely target and exploit information technology networks, data systems, and other critical infrastructure.

We devote significant financial and management resources to ensure the integrity of our systems against cybercriminals and similar actors, as well as against threats from fires and other natural disasters; power or telecommunications failures; acts of terrorism or wars or other catastrophic events; breaches, physical break-ins or errors resulting in interruptions and unauthorized disclosure of confidential information, through information security and business continuity programs.

Notwithstanding these efforts, cybersecurity measures are, by their nature, largely reactive, and threats are constantly evolving. We expect that the development of AI-based technology will cause a rapid expansion in both the number and the sophistication of these threats. While we believe we maintain state-of-the-art defensive measures, we routinely experience attempts to exploit our networks and systems, and we must continue investing in increasingly sophisticated (and concomitantly expensive) technology to counteract these threats. Further, if our systems cannot timely detect and mitigate vulnerabilities, or cannot promptly respond to threats, we may experience damage to or interruptions in the availability of our computer networks, or we may experience a loss of data, unauthorized use or disclosure of client information, or a loss of client funds as a result of unauthorized access to client accounts.

Additionally, as financial institutions and technology systems become more interconnected and more complex, any operational incident at a third party, such as a vendor or client, may increase our operational risks, including from information breaches or loss, breakdowns, disruptions or failures of their own systems or infrastructure, or any deficiencies in the performance of their responsibilities. These risks are increased to the extent we rely on a single-source vendor or provider.

The access by unauthorized persons to, or the improper disclosure by us or our third-party vendors of, confidential information regarding our clients or our own proprietary information, software, methodologies and business secrets, failures or disruptions in our communications, information and technology systems, or our failure to adequately address them, could negatively affect our client relationship management, online banking, accounting or other systems. We cannot assure readers that such breaches, failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by us or the third parties on which we rely. Our insurance may not fully cover all types of losses.

Accordingly, any failures or interruptions of our communications, information and technology systems could damage our reputation, result in a loss of client business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition or results of operations.

***Our operations could be disrupted by our third-party service providers experiencing difficulty in providing their services, terminating their services or failing to comply with banking regulations.***

We depend to a significant extent on relationships with third-party service providers. Specifically, we utilize third party core banking services and receive credit card and debit card services, branch capture services, Internet banking services and services complementary to our banking products from various third party service providers. These types of third-party relationships are subject to increasingly demanding regulatory requirements that require us to maintain and continue to enhance our due diligence and ongoing monitoring and control over our third-party vendors. We may be required to renegotiate our agreements to meet these enhanced requirements, which could increase our costs or which may be impracticable. If our service providers experience difficulties or terminate their services and we are unable to replace

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them, our operations could be interrupted. It may be difficult for us to timely replace some of our service providers, which may be at a higher cost due to the unique services they provide. A third-party provider may fail to provide the services we require, or meet contractual requirements, comply with applicable laws and regulations, or suffer a cyberattack or other security breach. We expect that our regulators would hold us responsible for deficiencies of our third-party relationships which could result in enforcement actions, including civil money penalties or other administrative or judicial penalties or fines, or client remediation, any of which could have a material adverse effect on our business, financial condition and results of operations.

***Commercial banking requires substantial board and management expertise, knowledge, and community and industry relationships. If we cannot retain our existing Board or leadership team or recruit experienced, well-qualified successors, our business may suffer.***

***Our ability to access markets for funding and acquire and retain clients could be adversely affected by the deterioration of other financial institutions or the financial service industry's reputation.***

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty and other relationships. We have exposure to different industries and counterparties, and through transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks and other institutional clients. As a result, defaults by, or even rumors or questions about the financial soundness of one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions, as well as impact the trading prices of our common stock. These losses or defaults could have a material adverse effect on our business, financial condition and results of operations.

Several high-profile bank failures within recent years, including two of our regional participants, have generated significant market volatility among publicly traded bank holding companies. These market developments have negatively impacted client confidence in the safety and soundness in the financial services industry. We cannot offer assurances that the risks underlying negative publicity and public opinion have ameliorated or that adverse media stories, other bank failures, or geopolitical and market conditions will not exacerbate or continue these conditions. Partly as a result of these conditions, some community and regional bank depositors have chosen to place their deposits with larger financial institutions or to invest in higher yielding short-term fixed income securities, all of which have unfavorably affected, and may continue to materially adversely impact our liquidity, cost of funding, loan funding capacity, net interest margin, capital, and results of operations. In connection with high-profile bank failures, uncertainty and concern has been, and may be in the future, compounded by advances in technology that increase the speed at which deposits can be moved, as well as the speed and reach of media attention, including social media, and its ability to disseminate concerns or rumors, in each case potentially exacerbating liquidity concerns. Further, any current or future measures announced by the Department of the Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation ("FDIC") intended to reassure depositors of the availability of their deposits may not be successful in restoring client confidence in the banking system.

Events such as these may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the imposition of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business.

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***Our risk management framework may not be effective in mitigating risks and/or losses to us.***

Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our risk management framework may not be effective under all circumstances and may not adequately mitigate any risk or loss. If our risk management framework is not effective, or if the underlying data used in our risk management framework is inaccurate or insufficient, we could suffer unexpected losses and our business, financial condition and results of operations could be materially and adversely affected. We may also be subject to potentially adverse regulatory consequences.

***Team member misconduct could expose us to significant legal liability and reputational harm.***

We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of our clients are of critical importance. Conduct by our team members that reflects fraudulent, illegal, wrongful or suspicious activities, or they act in a manner that results in consumer harm, may adversely affect our clients and/or our business. The precautions we take to detect and prevent such misconduct may not always be effective and could result in regulatory sanctions and/or penalties, criminal or civil penalties and, serious harm to our reputation, financial condition, client relationships, team member relationships and ability to attract new clients. In addition, improper use or disclosure of confidential information by our team members, even if inadvertent, could result in serious harm to our reputation, financial condition and current and future business relationships. If our internal controls against operational risks fail to prevent or detect an occurrence of such team member error or misconduct, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.

***We depend on the accuracy and completeness of information provided by clients and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.***

In deciding whether to extend credit or to enter into other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties, including financial statements and other financial information. Some of the information regarding clients provided to us is also used in our proprietary credit decision making and scoring models, which we use to determine whether to do business with clients, Further, the risk profiles of such clients may subsequently be utilized by counterparties who may lend us capital to fund our operations. We may also rely on representations of clients and counterparties as to the accuracy and completeness of that information. In deciding whether to extend credit, we may rely upon our clients' representations that their financial statements conform to stated accounting principles and present fairly, in all material respects, the financial condition, results of operations and cash flows of the client. We also may rely on client representations and certifications, or other audit or accountants' reports, with respect to the business and financial condition of our clients. Whether a misrepresentation is made by the applicant, another third party or one of our team members, we generally bear the risk of loss associated with the misrepresentation. We may not detect all misrepresented information in our originations or from service providers we engage to assist in the approval process. Any such misrepresented information could have a material adverse effect on our business, financial condition and results of operations.

***Diverging and evolving expectations from clients, regulators, investors, and other stakeholders about environmental, social and governance practices may subject us to new or conflicting legal and regulatory requirements and stakeholder expectations, impose additional costs on us, or expose us to new or additional risks.***

In recent years, clients, regulators, investors, and other stakeholders have more heavily scrutinized public companies' environmental, social and governance ("ESG") practices and the related disclosures. For example, certain states, such as California, have enacted or proposed laws addressing climate change and other sustainability issues, including greenhouse gas emissions data and climate-related financial risk disclosure requirements. On the other hand, certain states have enacted or proposed laws or regulations or taken other actions to prohibit the consideration of environmental and social factors in state investments and contracting. In addition, in August 2025, President Trump signed Executive Order 14331, "Guaranteeing Fair Banking Access for All Americans," which states that it is the policy of the United States that no American should be denied access to financial services because of their constitutionally or statutorily protected beliefs, affiliations, or political views. These, as well as other laws, regulations, guidance and expectations, may subject us to additional or conflicting requirements, may necessitate adjustments to our business practices, and may result in increased compliance costs. In addition, increased ESG-related compliance costs for us as well as among our suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational costs. Moreover, as a result of the diverging viewpoints among stakeholders on these issues, we face increased risk that our actual

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or perceived actions or inactions may be viewed negatively by certain stakeholders, which could result in harm to our business. Failure to adapt to or comply with evolving regulatory requirements or investor or stakeholder expectations and standards could negatively impact our brand, ability to do business with certain partners, access to capital, and our stock price.

***Severe weather, natural disasters, pandemics, acts of war or terrorism, social unrest and other external events could significantly impact our operations.***

Severe weather, natural disasters (including fires, earthquakes, and floods), wide spread disease or pandemics, such as the COVID-19 pandemic, acts of war or terrorism, social unrest and other adverse external events have had in the past and could have in the future a significant impact on our ability to conduct business and create significant volatility and disruption in global and U.S. economies. Such events could affect the financial markets, reduce access to liquidity, impair our client's financial condition, affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. The majority of our branches are located in the San Jose, San Francisco, Oakland areas, which in the past have experienced both severe earthquakes and wildfires. Further, other areas of California, particularly including the Los Angeles Basin, have recently experienced extensive losses and business interruptions as a result of a well-publicized series of wildfires, and these and other areas that affect our markets, our clients, and the collateral securing our loans present significant risk to our operations and our assets. We do not carry earthquake insurance on our properties, and we do not require clients to carry such insurance on the real property that secures our mortgage and commercial real estate loans. Fire insurance, which we do carry on our properties and which we require our clients to carry, may prove inadequate to insure fully against potential losses. Accordingly, earthquakes, wildfires or other natural disasters could severely disrupt our or our clients' operations. Operations in our market could be disrupted by both the evacuation of large portions of the population as well as damage to and/or lack of access to our banking and operation facilities. Although management has established disaster recovery policies and procedures, there is no guarantee that such policies and procedures will be successful, and the occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

**Risks Relating to Our Business**

***Our profitability is dependent upon the geographic concentration of the markets in which we operate.***

We operate primarily in the general San Francisco Bay Area of California in the counties of Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara and, as a result, our business, financial condition and results of operations are subject to the demand for our products in those areas and is also subject to changes in the economic conditions in those areas. Our success depends upon the business activity, population, income levels, deposits and real estate activity in these markets. Although Bay View Funding, the Bank's factoring subsidiary, and our clients' business and financial interests may extend well beyond these market areas, adverse economic conditions that affect these market areas could reduce our growth rate, affect the ability of our clients to repay their loans to us, could impair the value of the collateral securing our loans, or otherwise generally could affect our business, financial condition and results of operations. Because of our geographic concentration, we are less able than regional or national financial institutions to diversify demand for our products or our credit risks across multiple markets.

Similarly, geologic, weather-related, and other hazards such as wildfires, earthquakes, droughts, floods and storms, frequently threaten our markets, and in certain circumstances could be expected to have a disproportionate effect on our business as compared to financial institutions whose client and asset bases are more diversified. Such events may harm our business directly or may harm our clients and prospective clients in a way that increases the risks of defaults on our loans, reduces the value of our collateral, and increases clients' need for liquidity, thus reducing our deposit base and potentially increasing our costs of funds.

***Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our business, financial condition and results of operations.***

We are a community bank, and our reputation is one of the most valuable components of our business. Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, team member misconduct, cybersecurity failures or disruptions, failure to deliver minimum standards of service or quality, compliance deficiencies, and fraudulent activities of our clients or third parties. Negative publicity regarding our industry, business, team members, or clients, with or without merit, may result in the loss of clients, investors and team

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members, costly litigation, a decline in revenues and increased governmental regulation and have a material adverse effect on business, financial condition and results of operations.

**Risks Related to Our Loans**

***Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes affecting real estate values and liquidity could impair the value of collateral securing our loans and result in loan and other losses.***

Real estate lending (including commercial, land development and construction, home equity, multifamily, and residential mortgage loans) is a large portion of our loan portfolio. At December 31, 2025, approximately $3.1 billion, or 85% of our loan portfolio, was comprised of loans with real estate as a primary or secondary component of collateral. Included in CRE loans were owner occupied loans of $623.3 million, or 17% of total loans. The real estate securing our loan portfolio is concentrated in California. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, the rate of unemployment, fluctuations in interest rates and the availability of loans to potential purchasers, fluctuations in vacancy rates, changes in tax laws and other governmental statutes, regulations and policies, access to insurance coverage, and acts of nature, such as wildfires, earthquakes and other natural disasters or adverse events. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses, which would adversely affect profitability. Such declines and losses would have a material adverse effect on our business, financial condition, and results of operations.

***Our land and construction development loans are based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate and we may be exposed to more losses on these projects than on other loans.***

At December 31, 2025, land and construction loans, (including land acquisition and development loans) totaled $133.6 million or 4% of our portfolio. Of these loans, 17% were comprised of owner occupied and 83% non-owner occupied land and construction loans. These loans involve additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated or market values or rental rates decline, we may have inadequate security for the repayment of the loan upon completion of project construction. If we are forced to foreclose on a project prior to or at completion due to a default, we may not be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.

***Increased scrutiny by regulators of commercial real estate concentrations could restrict our activities and impose financial requirements or limits on the conduct of our business.***

Banking regulators are giving commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for credit losses on loans and capital levels as a result of commercial real estate lending growth and exposures. Therefore, we could be required to raise additional capital or restrict our future growth as a result of our higher level of commercial real estate loans.

***Our use of appraisals in deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral.***

In considering whether to make a loan secured by real property we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is conducted, and an error in fact or judgment could adversely affect the reliability of an appraisal. In addition, events occurring after the initial appraisal

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may cause the value of the real estate to decrease. As a result of any of these factors the value of collateral securing a loan may be less than estimated, and if a default occurs, we may not recover the outstanding balance of the loan.

***Many of our loans are to commercial borrowers, which may have a higher degree of risk than other types of borrowers.***

At December 31, 2025, commercial loans totaled $550.4 million or 15% of our loan portfolio (including SBA loans, asset-based lending, and factored receivables). Commercial loans are often larger and involve greater risks than other types of lending. Because payments on such loans are often dependent on the successful operation or development of the property or business involved, repayment of such loans is often more sensitive than other types of loans to adverse conditions in the real estate market or the general business climate and economy. Accordingly, a downturn in the real estate market and a challenging business and economic environment may increase our risk related to commercial loans, particularly commercial real estate loans. Unlike home mortgage loans, which generally are made on the basis of the borrowers' ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial loans typically are made on the basis of the borrowers' ability to make repayment from the cash flow of the commercial venture. Our commercial and industrial loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans. Most often, collateral consists of accounts receivable, inventory and equipment and may incorporate a personal guarantee. Inventory and equipment may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. Accounts receivable may be uncollectable. If the cash flow from business operations is reduced, the borrower's ability to repay the loan may be impaired. Vacancy rates can also negatively impact cash flows from business operations. Thus, HBC's borrowers and their guarantors could be adversely impacted by a downturn in these sectors of the economy which could further impact the borrower's ability to repay their loans. Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse effect on our business, financial condition and results of operations.

***The small and medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower's ability to repay a loan, and such impairment could adversely affect our business, financial condition and results of operation.***

We target our business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower's ability to repay a loan. In addition, the success of a small and medium-sized business often depends on the management talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan. Negative general economic conditions in our markets where we operate that adversely affect our medium-sized business borrowers may impair the borrower's ability to repay a loan and such impairment could have a material adverse effect on our business, financial condition and results of operation.

**Risks Related to our SBA Loan Program**

***Small Business Administration lending is an important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.***

At December 31, 2025, SBA loans totaled $25.8 million, which are included in the commercial loan portfolio. SBA loans held-for-sale totaled $1.3 million at December 31, 2025. Our SBA lending program is dependent upon the U.S. federal government. As an approved participant in the SBA Preferred Lender's Program (an "SBA Preferred Lender"), we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender's SBA Preferred Lender status. If we lose our status as an SBA Preferred Lender, we may lose some or all of our clients to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect to our financial results. Any changes to the SBA program, including but not limited to changes to the level of guarantee provided by the federal government on SBA loans, changes to program specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress may also have a material adverse effect on our business. In addition, any

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default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could have a material adverse effect on our business, financial condition and results of operations.

The SBA's 7(a) Loan Program is the SBA's primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes. Generally, we sell the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales result in premium income for us at the time of sale and create a stream of future servicing income, as we retain the servicing rights to these loans. For the reasons described above, we may not be able to continue originating these loans or sell them in the secondary market. Furthermore, even if we are able to continue to originate and sell SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans or the premiums may decline due to economic and competitive factors. When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a client defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us. Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially adversely affect our business, financial condition and results of operations.

In addition, the Company's SBA loans include loans under the U.S. Department of Agriculture guaranteed lending programs.

The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies and especially our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably.

***The recognition of gains on the sale of loans and servicing asset valuations reflect certain assumptions.***

We expect that gains on the sale of U.S. government guaranteed loans will contribute to noninterest income. The gains on such sales recognized for the year ended December 31, 2025 was $215,000. The determination of these gains is based on assumptions regarding the value of unguaranteed loans retained, servicing rights retained and deferred fees and costs, and net premiums paid by purchasers of the guaranteed portions of U.S. government guaranteed loans. The value of retained unguaranteed loans and servicing rights are determined based on market derived factors such as prepayment rates, current market conditions and recent loan sales. Deferred fees and costs are determined using internal analysis of the cost to originate loans. Significant errors in assumptions used to compute gains on sale of loans or servicing asset valuations could result in material revenue misstatements, which may have a material adverse effect on our business, financial condition and results of operations.

We originated $35.7 million of SBA loans for the year ended December 31, 2025. We sold $2.9 million of the guaranteed portion of our SBA loans for the year ended December 31, 2025. We generally retain the non-guaranteed portions of the SBA loans that we originate. Consequently, as of December 31, 2025, we held $27.0 million of SBA loans (including loans held-for-sale) on our balance sheet, $15.4 million of which consisted of the non-guaranteed portion of SBA loans, and $11.6 million of which consisted of the guaranteed portion of SBA loans. At December 31, 2025, $1.3 million, or 4.90%, consisted of the guaranteed portion of SBA loans which we intend to sell in 2026. The non-guaranteed portion of SBA loans have a higher degree of credit risk and risk of loss as compared to the guaranteed portion of such loans and make up a substantial majority of our remaining SBA loans.

When we sell the guaranteed portion of SBA loans in the ordinary course of business, we are required to make certain representations and warranties to the purchaser about the SBA loans and the manner in which they were originated. Under these agreements, we may be required to repurchase the guaranteed portion of the SBA loan if we have breached any of these representations or warranties, in which case we may record a loss. In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolios, our liquidity, results of operations and financial condition could be adversely affected. Further, we generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations could be adversely impacted.

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**Risks Related to our Credit Quality**

***Our business depends on our ability to successfully manage credit risk.***

The operation of our business requires us to manage credit risk. As a lender, we are exposed to the risk that our borrowers will be unable to repay their loans according to their terms, and that the collateral securing repayment of their loans, if any, may not be sufficient to ensure repayment. In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual borrowers. In order to successfully manage credit risk, we must, among other things, maintain disciplined and prudent underwriting standards and ensure that our bankers follow those standards. The weakening of these standards for any reason, a lack of discipline or diligence by our team members in underwriting and monitoring loans, the inability of our team members to adequately adapt policies and procedures to changes in economic or any other conditions affecting borrowers and the quality of our loan portfolio, may result in loan defaults, foreclosures and additional charge-offs and may necessitate that we significantly increase our allowance for credit losses on loans, each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have a material adverse effect on our business, financial condition and results of operations.

***Our allowance for credit losses on loans may prove to be insufficient to absorb potential losses in our loan portfolio.***

We maintain an allowance for credit losses on loans to provide for loan defaults and non-performance, which reflects our estimate of the current expected credit losses in our loan portfolio at the relevant balance sheet date. Our allowance for credit losses was $50.0 million, or 1.37% expressed as a percentage of loans, at December 31, 2025. Allowance for credit losses on loans is funded from a provision for credit losses on loans, which is a charge to our income statement. The Company had a provision for credit losses on loans of $1.8 million for the year ended December 31, 2025. The processes we use to estimate the allowance for credit losses on loans and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depends upon the use of analytical models which takes into account known risks, composition and growth of the loan portfolio and economic forecasts. These models may not be accurate, particularly in times of market stress, unforeseen circumstances or due to flaws in input data or the model's design or implementation. If the models we use for interest rate risk and asset-liability management are inadequate, or the underlying data or assumptions used in such models are inaccurate or insufficient, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models we use for determining the allowance for credit losses on loans are inadequate, or the underlying data or assumptions used in such models are inaccurate or insufficient, the allowance for credit losses on loans may not be sufficient to support future charge-offs. If the models we use to measure the fair value of financial instruments are inadequate, or the underlying data or assumptions used in such models are inaccurate or insufficient, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Any such failure in our analytical models could result in losses that could have a material adverse effect on our business, financial condition and results of operations.

In addition, we evaluate all loans identified as individually evaluated loans and allocate an allowance based upon our estimation of the potential loss associated with those problem loans. While we strive to carefully manage and monitor credit quality and to identify loans that may be deteriorating, at any time there are loans included in the portfolio that may result in losses, but that have not yet been identified as nonperforming or potential problem loans. Through established credit practices, we attempt to identify deteriorating loans and adjust the allowance for credit losses on loans accordingly. However, because future events are uncertain and because we may not successfully identify all deteriorating loans in a timely manner, there may be loans that deteriorate in an accelerated time frame. We cannot be sure that we will be able to identify deteriorating loans before they become nonperforming assets, or that we will be able to limit losses on those loans that have been so identified.

Although management believes that the allowance for credit losses on loans is adequate to absorb losses on any existing loans that may become uncollectible, we may be required to take additional provisions for credit losses on loans in the future to further supplement the allowance for credit losses on loans, either due to management's decision to do so or because our banking regulators require us to do so. Our bank regulatory agencies will periodically review our allowance for credit losses on loans and the value attributed to nonaccrual loans or to real estate acquired through foreclosure and may require us to adjust our determination of the value for these items. If our allowance for credit losses on loans is inaccurate, for any of the reasons discussed above (or other reasons), and is inadequate to cover the loan losses that we actually

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experience, the resulting losses could have a material adverse effect on our business, financial condition and results of operations.

***Nonperforming assets adversely affect our results of operations and financial condition, and take significant time to resolve.***

As of December 31, 2025, our nonperforming loans (which consist of nonaccrual loans, loans past due 90 days or more and still accruing interest) totaled $2.8 million, or 0.08% of our loan portfolio, and our nonperforming assets (which include nonperforming loans plus other real estate owned) also totaled $2.8 million, or 0.05% of total assets.

Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or other real estate owned, thereby adversely affecting our net interest income, net income and returns on assets and equity, and our loan administration costs increase, which together with reduced interest income adversely affects our efficiency ratio. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. Subsequently, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. When we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its then-fair market value, which may result in a loss. These nonperforming loans and other real estate owned also increase our risk profile and the level of capital our regulators believe is appropriate for us to maintain in light of such risks. The resolution of nonperforming assets requires significant time commitments from management and can be detrimental to the performance of their other responsibilities. If we experience increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have a material adverse effect on our business, financial condition and results of operations.

***We could be exposed to risk of environmental liabilities with respect to properties to which we take title.***

In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. Significant environmental liabilities could have a material adverse effect on our business, financial condition, and results of operations.

**Risks Related to Our Growth Strategy**

***We face risks related to any future acquisitions we make.***

We plan to continue to grow our business organically. However, from time to time, we may consider opportunistic strategic acquisitions that we believe support our long-term business strategy. We face significant competition from numerous other financial services institutions, many of which will have greater financial resources than we do, when considering acquisition opportunities. Additionally, the process for obtaining any required regulatory approvals has become substantially more difficult, which could affect our evaluation or completion of strategic and competitively significant business opportunities. Accordingly, attractive acquisition opportunities may not be available to us. We may not be successful in identifying or completing any future acquisitions, and we may incur expenses as a result of seeking these opportunities regardless of whether they are consummated. Acquisitions of financial institutions involve operational risks and uncertainties and acquired companies may have unforeseen liabilities, exposure to asset quality problems, key employee and client retention problems and other problems that could negatively affect our organization.

If we complete any future acquisitions, we may not be able to successfully integrate the operations, management, products and services of the entities that we acquire and eliminate redundancies. The integration process could result in the loss of key employees or disruption of the combined entity's ongoing business that adversely affect our ability to maintain relationships with clients and employees or achieve the anticipated benefits of the transaction. The integration process may also require significant time and attention from our management that they would otherwise direct at servicing existing business and developing new business. We may not be able to realize any projected cost savings, synergies or other benefits associated with any such acquisition we complete. We cannot determine all potential events, facts and

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circumstances that could result in loss and our investigation or mitigation efforts may be insufficient to protect against any such loss.

***If the goodwill that we recorded in connection with a business acquisition becomes impaired, it could require charges to earnings, which would have a negative impact on our financial condition and results of operations.***

Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets we acquired in connection with the purchase. At December 31, 2025, our acquisition-related goodwill as reflected on our balance sheet was $167.6 million. Management assesses whether it is necessary to perform a quantitative impairment test of goodwill on a quarterly basis. In addition, the Company hires a third-party vendor to test goodwill for impairment annually as of November 30, or on an interim basis if an event triggering impairment assessment may have occurred. We determine impairment by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. Estimates of fair value are determined based on a complex model using cash flows, the fair value of our Company as determined by our stock price, and company comparisons. If management's estimates of future cash flows are inaccurate, fair value determined could be inaccurate and impairment may not be recognized in a timely manner. If the carrying amount (book value) of the reporting unit exceeds the fair value of the reporting unit, an impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in our results of operations in the periods in which they become known. There can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations.

***We must effectively manage our franchise growth strategy.***

We seek to expand our franchise safely and consistently. A successful growth strategy requires us to manage multiple aspects of our business simultaneously, such as following adequate loan underwriting standards, balancing loan and deposit growth without increasing interest rate risk or compressing our net interest margin, maintaining sufficient capital, maintaining proper system and controls, and recruiting, training and retaining qualified professionals. We also may experience a lag in profitability associated with new branch openings. As part of our general growth strategy we may expand into additional communities or attempt to strengthen our position in our current markets by opening new offices, subject to any regulatory constraints on our ability to open new offices. To the extent that we are able to open additional offices, we are likely to experience the effects of higher operating expenses relative to operating income from the new operations for a period of time which could have a material adverse effect on our business, financial condition and results of operations.

***New lines of business or new products and services may subject us to additional risks.***

From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and new products and services we may invest significant time and resources. We may not achieve target timetables for the introduction and development of new lines of business and new products or services and price and profitability targets may not prove feasible. External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations.

**Risks Related to Our Financial Strength and Liquidity** 

***An actual or perceived reduction in our financial strength may cause others to reduce or cease doing business with us, which could result in a decrease in our net interest income and fee revenues.***

Our clients rely upon our financial strength and stability and evaluate the risks of doing business with us. If we experience diminished financial strength or stability, actual or perceived, including due to market or regulatory developments, announced or rumored business developments or results of operations, or a decline in stock price, clients may withdraw their deposits or otherwise seek services from other banking institutions and prospective clients may select other service providers. The risk that we may be perceived as less creditworthy relative to other market participants is

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increased in the current market environment, where the consolidation of financial institutions, including major global financial institutions, is resulting in a smaller number of much larger counterparties and competitors. If clients reduce their deposits with us or select other service providers for all or a portion of the services that we provide them, net interest income and fee revenues will decrease accordingly, and could have a material adverse effect on our results of operations.

***Changing interest rates, economic conditions and tariff policies, immigration policies, and the effects on our current and future borrowers have adversely affected, and in the future may adversely affect, our loan portfolio and may result in losses or increasing provision expense.***

With the succession of a new Presidential administration in January 2025, the United States has experienced a substantial shift in federal policies that may have an adverse impact on our borrowers and, accordingly, on the performance of our loan portfolio. These shifts, many of which are ongoing and are subject to extensive litigation and uncertainties as to timing and effect, pose risks to a wide variety of business and individual clients. The application of tariffs announced by the federal government have had a pronounced effect on our business clients, particularly those dependent on exports and imports, and also have implications for general economic conditions that are affected by employment and interest rates.

These events also appear to have created uncertainty in both the equity capital markets and in the interest rate environment. Although the Federal Reserve System (commonly referred to as "the Fed") has recently made modest incremental reductions in benchmark interest rates, the current interest rate environment remains elevated from those of the recent past, and future interest rates remain uncertain. Interest rates affect both our ability to reprice variable-rate loans and to originate new fixed-rate loans, and in times of significant uncertainty about interest rates, such as the present, clients and prospective investors often reduce their borrowing levels, which tends to have a deflating effect on our outstanding loan balances and thus on our interest income.

During the third and fourth quarters of 2024, the Federal Reserve Open Markets Committee cut benchmark interest rates three times and for the first time since 2020. Although the Fed has indicated after its meetings in January and March, 2025, that economic conditions appeared to have stabilized, the committee held benchmark rates instead, and, as a result, we are unable to predict changes in future interest rates. Further, even if adjustments are made, the effect on overall markets remains uncertain, and reflect in part a perceived increase in risks of political instability associated with the new presidential administration and subsequent governmental and economic reactions. If rates resume increasing, or if they continue to remain at relatively elevated levels for prolonged periods, our borrowers may experience increasing difficulty in repaying their loans. Further, borrowers may defer additional borrowing decisions pending the resolution of both the political uncertainties and the potential for further market adjustments in response to those matters and to general economic conditions.

To the extent interest rates remain relatively elevated, or if economic conditions affecting our borrowers worsen, our allowance for credit losses and related provision could be negatively impacted, which would result in a reduction in net income for the corresponding period, or in some cases we may experience losses in excess of established reserves, which would have a similar effect. At the same time, even if interest rates stabilize or if reductions are less significant than clients expect, we may confront a loss of demand that adversely affects our interest earning assets. Either of these outcomes, alone or in combination with other factors, may have a material adverse effect on our results of operations.

***Fluctuations in interest rates may reduce net interest income and otherwise negatively affect our business, financial condition and results of operations.***

Shifts in short-term interest rates may reduce net interest income, which is the principal component of our earnings. Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid by us on our interest-bearing liabilities. When interest rates rise, the rate of interest we receive on our assets, such as floating interest rate loans, rises more quickly than the rate of interest that we pay on our interest-bearing liabilities, such as deposits, which may cause our profits to increase. When interest rates decrease, the rate of interest we receive on our assets, such as floating interest rate loans, declines more quickly than the rate of interest that we pay on our interest-bearing liabilities, such as deposits, which may cause our profits to decrease.

Changes in interest rates could influence our ability to originate loans and deposits. Historically, there has been an inverse correlation between the demand for loans and interest rates. Loan origination volume usually declines during periods of rising or high interest rates and increases during periods of declining or low interest rates.

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Changes in interest rates can also affect the level of loan refinancing activity, which impacts the amount of prepayment penalty income we receive on loans we hold. Because prepayment penalties are recorded as interest income when received, the extent to which they increase or decrease during any given period could have a significant impact on the level of net interest income and net income we generate during that time. A decrease in our prepayment penalty income resulting from any change in interest rates or as a result of regulatory limitations on our ability to charge prepayment penalties could therefore adversely affect our net interest income, net income or results of operations.

An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. Subsequently, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income.

Changes in interest rates also can affect the value of loans, securities and other assets. Rising interest rates will result in a decline in value of the fixed-rate debt securities we hold in our investment securities portfolio. The unrealized losses resulting from holding these securities would be recognized in accumulated other comprehensive income and reduce total shareholders' equity. Unrealized losses do not negatively impact our regulatory capital ratios. However, tangible common equity and the associated ratios would be reduced. If debt securities in an unrealized loss position are sold, such losses become realized and will reduce our regulatory capital ratios.

***Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price.***

We are required to comply with the Securities and Exchange Commission's ("SEC") rules implementing Section 302, Section 404, and Section 906 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report as to the effectiveness of controls over financial reporting. If we identify any material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors, counterparties and clients may lose confidence in the accuracy and completeness of our financial statements and reports; our liquidity, access to capital markets and perceptions of our creditworthiness could be adversely affected; and the market price of our common stock could decline. In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, the Federal Reserve, the FDIC, the California Department of Financial Protection and Innovation ("DFPI") or other regulatory authorities, which could require additional financial and management resources. These events could have a material adverse effect on our business and stock price.

***We have significant deferred tax assets and cannot assure that they will be fully realized.***

Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and tax basis of assets and liabilities computed using enacted tax rates. We regularly assess available positive and negative evidence to determine whether it is more likely than not that our net deferred tax assets will be realized. Realization of a deferred tax asset requires us to apply significant judgment and is inherently speculative because it requires estimates that cannot be made with certainty. At December 31, 2025, we had a net deferred tax asset of $29.7 million. If we were to determine at some point in the future that we will not achieve sufficient future taxable income to realize our net deferred tax asset, we would be required, under generally accepted accounting principles, to establish a full or partial valuation allowance which would require us to incur a charge to income for the period in which the determination was made.

***Fluctuations in market interest rates may have a material effect on the value of the Company's securities portfolio.***

As of December 31, 2025, the fair value of our securities portfolio was approximately $1.1 billion, of which approximately $593.0 million were categorized as available-for-sale. Fixed-rate investment securities, such as bonds, treasuries and mortgage-backed securities, generally decline in value when interest rates rise above the rates applicable to such securities. Correspondingly, declining interest rates tend to increase the value of fixed-rate securities issued in times of relatively higher rates, but those declines also affect our net interest income because they force us to pay above-market

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rates on certificates of deposit and other longer-term obligations, and clients tend to exit those investments less frequently under those conditions because their earning capacity in other investments is relatively less attractive.

In response to inflationary pressures and other general economic conditions, the Federal Open Market Committee of the Board of Governors of the Fed rapidly and significantly increased interest rates between early 2022 and mid-2024, which resulted in declines in the carrying value of both our held-to-maturity and, particularly, our available-for-sale securities portfolios. Market interest rates have declined modestly in response to the Fed's recent interest rate reductions. However, the economy remains highly uncertain with respect to various factors, including inflation and employment statistics, and it is thus extremely difficult for management to predict when, to what degree, or in which direction the Fed may attempt to adjust rates further. Such fluctuations have in the past resulted in declines, and in the future may cause further declines, in the carrying value of our available-for-sale securities portfolio and our portfolio of fixed rate loans, as well as the value of securities pledged as collateral for certain borrowing lines. These trends can be exacerbated if the Company were required to sell such securities to meet liquidity needs, including in the event of deposit outflows or slower deposit growth. Correspondingly, additional rate reductions may affect our net interest income as we seek to price our deposit products in a way that remains competitive and attractive to clients, while also mitigating the risk that future declines may leave us with elevated borrowing costs.

Additional factors beyond our control can further significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. Additional factors include, but are not limited to, rating agency downgrades of the securities or our own analysis of the value of the security, defaults by the issuer or individual mortgagors with respect to the underlying securities, and continued instability in the credit markets. Any of the foregoing factors could cause credit-related impairment in future periods and result in realized losses. The process for determining whether impairment is credit related usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting interest rates, we may recognize realized and/or unrealized losses in future periods, or we may face periods of compressed net interest margins, either of which could have a material adverse effect on our business, financial condition and results of operations.

***Adverse changes to our credit ratings could limit our access to funding and increase our borrowing costs.***

Credit ratings are subject to ongoing review by rating agencies, which consider a number of factors, including our financial strength, performance, prospects and operations as well as factors not under our control. Other factors that influence our credit ratings include changes to the rating agencies' methodologies for our industry or certain security types; the rating agencies' assessment of the general operating environment for financial services companies; our relative positions in the markets in which we compete; our various risk exposures and risk management policies and activities; pending litigation and other contingencies; our reputation; our liquidity position, diversity of funding sources and funding costs; the current and expected level and volatility of our earnings; our capital position and capital management practices; our corporate governance; current or future regulatory and legislative initiatives; and the agencies' views on whether the U.S. government would provide meaningful support to us or our subsidiaries in a crisis. Rating agencies could make adjustments to our credit ratings at any time, and there can be no assurance that they will maintain our ratings at current levels or that downgrades will not occur.

Any downgrade in our credit ratings could potentially adversely affect the cost and other terms upon which we are able to borrow or obtain funding, increase our cost of capital and/or limit our access to capital markets. Credit rating downgrades or negative watch warnings could negatively impact our reputation with lenders, investors and other third parties, which could also impair our ability to compete in certain markets or engage in certain transactions. In particular, holders of deposits may perceive such a downgrade or warning negatively and withdraw all or a portion of such deposits. While certain aspects of a credit rating downgrade are quantifiable, the impact that such a downgrade would have on our liquidity, business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency pre-downgrade, individual client behavior and future mitigating actions we might take.

***Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations.***

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and/or investment securities, and from other sources could have a substantial negative effect on our liquidity. Our most important source of funds consists of our client deposits. If the Company is unable to maintain or grow its deposits, it may

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be subject to paying higher funding costs. The composition of our deposit base, and particularly the extent to which our deposits are not federally insured, may present a heightened risk of withdrawal. Such deposit balances can decrease during periods of economic uncertainty or when clients perceive alternative investments are providing a better risk/return tradeoff. Our measures to mitigate these risks, including correspondent deposit relationships, may not be completely effective in retaining and reassuring clients about their deposits and may increase the costs of maintaining or growing those deposits resulting in higher funding costs. Further, significant economic fluctuations, or clients' expectations about such events (whether or not those expectations materialize) may exacerbate depositors' sensitivity to the availability of cash to fund immediate withdrawals. If clients move money out of bank deposits and into other investments, we could face a material decrease in the volume of our deposits and lose a relatively low cost source of funds, thereby increasing our funding costs and reducing net interest income and net income. We could have to raise interest rates to retain deposits or seek alternative, more costly sources of funding, thereby increasing our funding costs and reducing net interest income and net income.

Additional liquidity is provided by our ability to borrow from the Federal Reserve Bank of San Francisco and the Federal Home Loan Bank of San Francisco. We also may borrow from third-party lenders from time to time. Our access to funding sources in amounts adequate to finance or capitalize our activities on terms that are acceptable to us could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry.

Any decline in available funding could adversely impact our ability to continue to implement our strategic plan, including our ability to originate loans, invest in securities, meet our expenses, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse effect on our liquidity, business, financial condition and results of operations.

**Risks Related to Our Capital** 

***We may be subject to more stringent capital requirements in the future.***

We are subject to current and changing regulatory requirements specifying minimum amounts and types of capital that we must maintain. The failure to meet applicable regulatory capital requirements could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could affect client and investor confidence, our costs of funds and FDIC insurance costs, our ability to pay dividends on our common stock, our ability to fund share repurchases, our ability to make acquisitions, and could materially adversely affect our business, financial condition and results of operations.

We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.

We face significant capital and other regulatory requirements as a financial institution. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financing acquisitions. Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. Any occurrence that may limit our access to the capital markets may adversely affect our capital costs and our ability to raise capital. Moreover, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would have to compete with those institutions for investors. We, therefore, may not be able to raise additional capital if needed or on terms acceptable to us.

**Risks Related to Our Legal and Regulatory Environment**

***We are subject to extensive and complex regulations which are costly to comply with and may subject us to significant penalties for noncompliance.***

Our operations are subject to extensive regulation by federal, state and local governmental authorities, including the FDIC, the Federal Reserve and the California Department of Financial Protection and Innovation, and to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. Further, California law permits certain categories of plaintiffs, particularly current and former employees or clients, to assert private rights of action under California's Private Attorney General Act, or PAGA, even if government authorities do not make such claims. Many of the applicable laws are complex, especially those governing fair lending, predatory or unfair or

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deceptive practices, and other consumer-focused practices, as well as labor and employment matters. Similarly, these laws and regulations have expanded substantially in terms of scope and complexity in recent years, and this expansion can be expected to continue. The complexity of those rules creates additional potential liability for us because noncompliance could result in significant regulatory action, including restrictions on operations and fines, and could lead to class action lawsuits from shareholders, consumers and employees. In addition, various states, particularly California, where substantially all our operations and banking activities take place, have their own laws and regulations governing a wide area of our business that may differ significantly from federal laws and regulations or from the laws or regulations of other states. These state-specific regulations include heightened data privacy, labor and employment law and consumer protection regulations, and the cost of complying with state rules that differ from federal rules can significantly increase compliance costs. Further, in certain instances, such as lending and deposit activities that involve clients or assets located in other states, we may be subject to the laws of those jurisdictions, which may vary from, or in limited circumstances may be in conflict with, California law.

Our consumer business, including our mortgage and other consumer lending and non-lending businesses, is also governed by policies enacted or regulations adopted by the Consumer Financial Protection Bureau, or CFPB, which under the Dodd-Frank Act has broad rulemaking authority over consumer financial products and services. Our regulators, including the FDIC, use interpretations from the CFPB and relevant statutory citations in certain parts of their assessments of our regulatory compliance, including the Real Estate Settlement Procedures Act, the Final Integrated Disclosure Rule, known as TRID, and the Home Mortgage Disclosure Act, adding to the complexity of our regulatory requirements, increasing our data collection requirements and increasing our costs of compliance. The laws, rules and regulations to which we are subject evolve and change frequently, including changes that come from judicial or administrative agency interpretations of laws and regulations outside of the legislative process that may be more difficult to anticipate, and changes to our regulatory environment are often driven by shifts of political power in the federal government. In addition, we are subject to various examinations by our regulators during the course of the year. Regulatory authorities who conduct these examinations have extensive discretion in their interpretation of various laws and regulations and in their supervisory and enforcement activities, including the authority to restrict our operations and certain corporate actions. Administrative and judicial interpretations of the rules that apply to our business may change the way such rules are applied, which also increases our compliance risk if the interpretation differs from our understanding or prior practice. Moreover, an increasing amount of the regulatory authority that pertains to financial institutions is in the form of informal "guidance" such as handbooks, guidelines, examination manuals, field interpretations by regulators or similar provisions that could affect our business or require changes in our practices in the future even if they are not formally adopted as laws or regulations. Any such changes could adversely affect our cost of doing business and our profitability and may create operational and legal risks that are difficult to anticipate or to mitigate.

In addition, changes in regulation of our industry have the potential to create higher costs of compliance, including short-term costs to meet new compliance standards, limit our ability to pursue business opportunities and increase our exposure to potential fines, penalties and litigation.

***Changes in accounting standards could materially impact our financial statements.***

From time to time, the Financial Accounting Standards Board or the SEC, may change the financial accounting and reporting standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing accounting and reporting standards. In addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these standards should be applied. These changes may be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently, also retrospectively, in each case resulting in our needing to revise or restate prior period financial statements. Restating or revising our financial statements may result in reputational harm or may have other adverse effects on us.

***Significant legal claims or regulatory actions could subject us to substantial uninsured liabilities and reputational harm and have a material adverse effect on our business and results of operations.***

We are from time to time subject to legal claims or regulatory actions related to our operations. These matters may include supervisory or enforcement actions by our regulators, criminal proceedings by prosecutorial authorities, or claims by clients or by current or former employees. Civil claims may be asserted as class, collective and representative actions, as well as certain claims that may be asserted under PAGA. We also may be subject to environmental lawsuits or enforcement actions arising in connection with property that we may acquire and hold following a foreclosure action in the course of our business. Such actions can pose substantial management distraction and could involve large monetary claims, including civil money penalties or fines imposed by government authorities and significant defense costs.

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To mitigate the cost of some of these claims, we maintain insurance coverage in amounts and with deductibles that we believe are appropriate for our operations. However, our insurance coverage does not cover any civil monetary penalties or fines imposed by government authorities and may not cover all other claims that might be brought against us, including certain wage and hour class, collective and representative actions brought by clients, employees or former employees, whether under state or federal labor and employment laws or regulations. In addition, such insurance coverage may not continue to be available to us at a reasonable cost or at all. Further, in some cases carriers may deny or contest coverage for claims that we expect to be fully or partially insured. As a result of any or a combination of these factors, we may be exposed to substantial uninsured liabilities, which could adversely affect our business, prospects, financial condition, results of operations and capital position. Substantial legal liability or significant regulatory action against us could cause significant reputational harm to us and/or could have a material adverse impact on our business, prospects, financial condition, results of operations and capital position.

***We make estimates from time to time regarding expected losses from litigation, and those estimates may prove inaccurate or inadequate.***

Our financial statements reflect management's estimates of costs that may be incurred in various litigation matters. Generally speaking, we expense our litigation costs, such as attorney fees, as they are incurred. We also record an expense to establish and maintain a reserve for contingent losses based upon a determination that a liability is probable that a loss will be incurred and when the amount of the loss is reasonably estimable. As with all accounting estimates, loss contingencies estimates reflect judgments as to the potential value of currently known exposures, and they are subject to change based upon developing facts and circumstances. Accordingly, we may adjust estimates to reflect our current expectations based on information that is subject to change, and these estimates may prove inadequate. If we incur a loss that exceeds the amount of an established reserve, or if our estimates are insufficient to reflect the actual amount of a loss, we will record an expense to reflect the incurrence of that loss to the extent it exceeds then-existing reserves, if any. Losses that are larger than estimated, or that were not predicted or anticipated by management, may therefore have a material adverse impact on our business, financial condition or results of operations.

***The costs and effects of litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, financial condition and results of operations.***

We are and will continue to be involved from time to time in a variety of litigation, investigations or similar matters arising out of our business. It is inherently difficult to assess the outcome of these matters, and we may not prevail in any proceedings or litigation. Any claims and lawsuits, and the disposition of such claims and lawsuits, whether through settlement, or litigation, could be time-consuming and expensive to resolve, divert management attention from executing our business plan, and lead to attempts on the part of other parties to pursue similar claims. Any claims asserted against us, regardless of merit or eventual outcome may harm our reputation. To mitigate the cost of some of these claims, we maintain insurance coverage in amounts and with deductibles that we believe are appropriate for our operations. However, our insurance coverage does not cover any civil monetary penalties, punitive damages or fines imposed by government authorities and may not cover all other claims that might be brought against us, including certain wage and hour class, collective and representative actions brought by clients, team members or former team members. In addition, such insurance coverage may not continue to be available to us at a reasonable cost or at all. As a result, we may be exposed to substantial uninsured liabilities. Substantial legal liability or significant regulatory action against us could cause significant reputational harm to us and could have a material adverse impact on our business, financial condition, and results of operations.

***The failure to protect our clients' confidential information, data and privacy could adversely affect our business.***

We are subject to federal and state privacy regulations and confidentiality obligations, including the California Consumer Privacy Act of 2018 and the California Privacy Rights Act of 2020, that, among other things restrict the use and dissemination of, and access to, certain information that we produce, store or maintain in the course of our business and establishes a new state agency to enforce these rules. We also have contractual obligations to protect certain confidential information we obtain from our existing vendors and clients. These obligations generally include protecting such confidential information in the same manner and to the same extent as we protect our own confidential information, and in some instances may impose indemnity obligations on us relating to unlawful or unauthorized disclosure of any such information.

The continued development and enhancement of our information security controls, processes and practices designed to protect client information, our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for our management as we increase our online and mobile banking offerings. As cyber threats continue to evolve, including supply chain risks, our costs to combat the cybersecurity threat can be expected to increase. Nonetheless, our measures may be insufficient to prevent all physical and electronic break-ins, denial of service and other cyber-attacks or security breaches.

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If we do not properly comply with privacy regulations and contractual obligations that require us to protect confidential information, or if we experience a security breach or network compromise, we could face regulatory sanctions, penalties or fines, increased compliance costs, remedial costs such as providing credit monitoring or other services to affected clients, litigation and damage to our reputation, which in turn could result in decreased revenues and loss of clients, any or all of which would have a material adverse effect on our business, financial condition, results of operations and capital position.

**Risks from Competition** 

***We face strong competition from financial services companies and other companies that offer commercial banking services, which could harm our business.***

We face substantial competition in all phases of our operations from a variety of different competitors. Our competitors, including larger commercial banks, community banks, savings and loan associations, mutual savings banks, credit unions, consumer finance companies, insurance companies, securities dealers, brokers, mortgage bankers, investment advisors, money market mutual funds and other financial institutions, compete with lending and deposit gathering services offered by us. Many of these competing institutions have much greater financial and marketing resources than we have. Due to their size, many competitors can achieve larger economies of scale and may offer a broader range of products and services than we can. If we are unable to offer competitive products and services, our business may be negatively affected. Some of the financial services organizations with which we compete are not subject to the same degree of regulation as is imposed on bank holding companies and federally insured financial institutions or are not subject to increased supervisory oversight arising from regulatory examinations. As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various services.

We anticipate intense competition will continue for the coming year due to the recent consolidation of many financial institutions and more changes in legislation, regulation and technology. Further, we expect loan demand to continue to be challenging due to the uncertain economic climate and the intensifying competition for creditworthy borrowers, both of which could lead to loan rate concession pressure and could impact our ability to generate profitable loans. We expect we may see tighter competition in the industry as banks seek to take market share in the most profitable client segments, particularly the small business segment and the mass affluent segment, which offers a rich source of deposits as well as more profitable and less risky client relationships. Further, if there is a rebound of higher interest rates our deposit clients may perceive alternative investment opportunities as providing superior expected returns. Efforts and initiatives we undertake to retain and increase deposits, including deposit pricing, can increase our costs. When our clients move money into higher yielding deposits or in favor of alternative investments, we can lose a relatively inexpensive source of funds, thus increasing our funding costs.

New technology and other changes are allowing parties to effectuate financial transactions that previously required the involvement of banks. For example, consumers can maintain funds in brokerage accounts or mutual funds that would have historically been held as bank deposits. Consumers can also complete transactions such as paying bills and transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as "disintermediation," could result in the loss of fee income, as well as the loss of client deposits and the related income generated from those deposits.

Increased competition in our markets may result in reduced loans, deposits, and fee income, as well as reduced net interest margin and profitability. If we are unable to attract and retain banking clients and expand our loan and deposit growth, then we may be unable to continue to grow our business which could have a material adverse effect on our financial condition and results of operations.

***We have a continuing competitive need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.***

The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve clients and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our clients by using technology to provide products and services that will satisfy client demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements than we do. As a result, they may be able to offer additional or superior products to those that we will be able to offer, which would put us at a competitive disadvantage. We may not be able to effectively implement

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new, technology-driven products and services or be successful in marketing these products and services to our clients. In addition, the implementation of technological changes and upgrades to maintain current systems and integrate new ones may also cause service interruptions, transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws. Failure to successfully keep pace with technological change affecting the financial services industry and avoid interruptions, errors and delays could have a material adverse effect on our business, financial condition and results of operations.

**Risks Related to Our Common Stock**

***An investment in our common stock is not an insured deposit.***

An investment in our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in our common stock is inherently risky for the reasons described herein, and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose some or all of your investment.

***Issuing additional shares of our common stock to acquire other banks and bank holding companies or future equity raises may result in dilution for existing shareholders and may adversely affect the market price of our stock.***

In connection with our growth strategy, we have issued, and may issue in the future, shares of our common stock to acquire additional banks or bank holding companies that may complement our organizational structure or to raise capital. Sales and resales of substantial amounts of common stock in the public market and the potential of such sales could adversely affect the prevailing market price of our common stock and impair the market price of our stock and our ability to raise additional capital through the sale of equity securities. We sometimes must pay an acquisition premium above the fair market value of acquired assets for the acquisition of banks or bank holding companies. Paying this acquisition premium, in addition to the dilutive effect of issuing additional shares, may also adversely affect the prevailing market price of our common stock.

***The trading volume in our common stock is less than that of other larger financial services companies.***

Although our common stock is listed for trading on The Nasdaq Stock Market LLC ("Nasdaq"), its trading volume is less than that of other, larger financial services companies, and investors are not assured that a liquid market will exist at any given time for our common stock. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace at any given time of willing buyers and sellers of our common stock. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the lower trading volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause our stock price to fall.

***The price of our common stock may fluctuate significantly, and this may make it difficult for you to resell shares of common stock owned by you at times or at prices you find attractive.***

The stock market and, in particular, the market for financial institution stocks, has experienced significant volatility. In some cases, the markets have produced downward pressure on stock prices for certain issuers without regard to those issuers' underlying financial strength. As a result, the trading volume in our common stock may fluctuate more than usual and cause significant price variations to occur.

The trading price of the shares of our common stock will depend on many factors, which may change from time to time and which may be beyond our control, including, without limitation, our financial condition, performance, creditworthiness and prospects, future sales or offerings of our equity or equity related securities, and other factors identified above under "Cautionary Note Regarding Forward Looking Statements" and "Risk Factors" contained in this report. These broad market fluctuations have adversely affected and may continue to adversely affect the market price of our common stock, some of which are out of our control. Among the factors that could affect our stock price are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in business and economic condition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actual or anticipated quarterly fluctuations in our operating results and financial condition;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actual occurrence of one or more of the risk factors outlined above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• recommendations by securities analysts or failure to meet, securities analysts' estimates of our financial and operating performance, or lack of research reports by industry analysts or ceasing of coverage;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• speculation in the press or investment community generally or relating to our reputation, our operations, our market area, our competitors or the financial services industry in general;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• strategic actions by us or our competitors, such as acquisitions, restructurings, dispositions or financings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actions by institutional investors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• fluctuations in the stock price and operating results of our competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• future sales of our equity, equity related or debt securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• proposed or adopted regulatory changes or developments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• anticipated or pending investigations, proceedings, or litigation that involve or affect us;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the level and extent to which we do or are allowed to pay dividends;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• trading activities in our common stock, including short selling;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• deletion from well-known index or indices;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• domestic and international economic factors unrelated to our performance; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• general market conditions and, in particular, developments related to market conditions for the financial services industry.

***Our dividend policy may change without notice, and our future ability to pay dividends is subject to restrictions.***

Historically, our Board has declared quarterly dividends on our common stock. However, we have no obligation to continue doing so and may change our dividend policy at any time without notice to holders of our common stock. Holders of our common stock are only entitled to receive such cash dividends as our Board, in its discretion, may declare out of funds legally available for such payments. Furthermore, consistent with our strategic plans, growth initiatives, capital availability, projected liquidity needs, and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely impact the amount of dividends paid to holders of our common stock.

HCC is a separate and distinct legal entity from HBC. We receive substantially all of our revenue from dividends paid to us by HBC, which we use as the principal source of funds to pay our expenses and to pay dividends to our shareholders, if any. Various federal and/or state laws and regulations limit the amount of dividends that HBC may pay us. The Basel III capital rules also provide for risk-based capital, leverage and liquidity standards, including capital conservation buffers, that result in restrictions on HBC and the Company's ability to make dividend payments, redemptions or other capital distributions. If the HBC does not receive regulatory approval or does not maintain a level of capital sufficient to permit it to make dividend payments to us while maintaining adequate capital levels, our ability to pay our expenses and our business, financial condition and results of operations could be materially adversely impacted.

As a bank holding company, we are subject to regulation by the Fed. The Fed has indicated that bank holding companies should carefully review their dividend policy in relation to the organization's overall asset quality, current and prospective earnings and level, composition and quality of capital. The guidance provides that we inform and consult with the Fed prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in an adverse change to our capital structure, including interest on our debt obligations. If required

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payments on our debt obligations are not made or are deferred, or dividends on any preferred stock we may issue are not paid, we will be prohibited from paying dividends on our common stock.

***We have limited the circumstances in which our directors will be liable for monetary damages.***

We have included in our articles of incorporation a provision to eliminate the liability of directors for monetary damages to the maximum extent permitted by California law. The effect of this provision will be to reduce the situations in which we or our shareholders will be able to seek monetary damages from our directors.

Our bylaws also have a provision providing for indemnification of our directors and executive officers and advancement of litigation expenses to the fullest extent permitted or required by California law, including circumstances in which indemnification is otherwise discretionary. Also, we have entered into agreements with our officers and directors in which we similarly agreed to provide indemnification that is otherwise discretionary. Such indemnification may be available for liabilities arising in connection with future offerings.

***We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.***

Although there are currently no shares of our preferred stock issued and outstanding, our articles of incorporation authorize us to issue up to 10 million shares of one or more series of preferred stock. The board also has the power, without shareholder approval (subject to Nasdaq shareholder approval rules), to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, preferences over our common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. In the event that we issue preferred stock in the future that has preference over our common stock with respect to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of the holders of our common stock or the market price of our common stock could be adversely affected. In addition, the ability of our Board to issue shares of preferred stock without any action on the part of our shareholders may impede a takeover of us and prevent a transaction perceived to be favorable to our shareholders.

***The holders of our debt obligations will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest and dividends.***

The holders of our debt obligations will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest and dividends.

In any liquidation, dissolution or winding up of the Company, our common stock would rank below all claims of the holders of outstanding debt issued by the Company. As of December 31, 2025, we had $40.0 million principal amount of subordinated notes outstanding due May 15, 2032. In such event, holders of our common stock would not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution or winding up of the Company until after all of the Company's obligations to the debt holders were satisfied and holders of the subordinated debt had received any payment or distribution due to them. In addition, we are required to pay interest on the subordinated notes and if we are in default in the payment of interest we would not be able to pay any dividends on our common stock.

***Provisions in our charter documents and California law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.***

Our articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of shareholders that might discourage future takeover attempts. As a result, shareholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of our Board or management more difficult. Such provisions include a requirement that shareholder approval for any action proposed by the Company must be obtained at a shareholders meeting and may not be obtained by written consent. Our bylaws provide that shareholders seeking to make nominations of candidates for election as directors, or to bring other business before an annual meeting of the shareholders, must provide timely notice of their intent in writing and follow specific procedural steps in order for nominees or shareholder proposals to be brought before an annual meeting.

Provisions of our charter documents and the California General Corporation Law could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. Furthermore, with certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be "acting in

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concert" from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the Fed. Under the California Financial Code, no person may, directly or indirectly, acquire control of a California state bank or its holding company unless the DFPI has approved such acquisition of control. Moreover, the combination of these provisions effectively inhibits certain mergers or other business combinations, which, in turn, could adversely affect the market price of our common stock.

**ITEM 1B. *UNRESOLVED STAFF COMMENTS***

None.

**ITEM 1C. *CYBERSECURITY***

**Risk Management and Strategy**

Our cybersecurity program provides what we believe is an effective level of protection of client information and of our operating systems while also promoting the timely detection of, and defense against, cyberattacks and other unauthorized access to our information technology ("IT") systems. In order to accomplish these goals, we invest heavily in up-to-date information security and monitoring controls, which we believe provide the best mechanism to mitigate cybersecurity risks and threats. At the same time, cyberattacks are becoming increasingly common, sophisticated and destructive, and several highly sophisticated financial institutions have been successfully targeted in recent years, leading to significant losses of client data, denials and loss of online banking and other data services, and other critical functions that have become essential to modern banking. In order to mitigate these risks and the potential harm that may result, our Chief Information Security Officer, who reports directly to the Chief Operating Officer and who reports regularly to our Board's Audit Committee, oversees certain policies and procedures that are intended to guard against, detect, and respond to potential breaches of our IT systems. We also maintain and periodically review our cybersecurity disclosure procedures to assure the timely compliance with the Company's obligations under Item 1.05 of Form 8-K.

***Managing Material Risks & Integrated Overall Risk Management***

We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. Our Company's Information Security Program encompasses the guiding policies over our cybersecurity risk management. Additionally, our IT team uses industry-leading tools to help protect stakeholders against cybercriminals. We leverage the latest encryption practices and cyber technologies on our systems, devices, and third-party connections and further review vendor encryption to ensure proper information security safeguards are maintained. Our Company team members are responsible for complying with our cybersecurity standards and complete training to understand the behaviors and technical requirements necessary to keep information secure.

***Engaging Third Parties for Risk Management***

We recognize the complexity and evolving nature of cybersecurity threats, which is why we engage a range of external experts, including cybersecurity consultants, in evaluating and testing our risk management systems. Our IT security team partners with third-parties to perform annual penetration testing, vulnerability scanning, and monitoring of any potentially suspicious activity across the Company.

***Oversight of Third-party Risk***

The Company's Third-Party Relationship Risk Management ("TPRM") Policy governs of all aspects of third-party risk management. The Board has ultimate responsibility for providing oversight for third-party risk management and holding management accountable. The Board provides clear guidance to the Audit Committee and management regarding the Company's strategic goals and acceptable risk appetite with respect to third-party relationships. The Board reviews the TPRM Policy on at least an annual basis and ensures that appropriate implementation procedures and practices have been established by management. The Chief Risk Officer is responsible for development and implementation of third-party risk management policies, procedures, and practices, commensurate with the Company's strategic goals, risk appetite and the level of risk and complexity of its third-party relationships. The Chief Risk Officer periodically provides reports to the

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Audit Committee on third-party risk management activities. The Company's Internal Audit department determines the frequency and scope of independent third-party audits of the TPRM program and its effectiveness.

The Company recognizes that not all third-party relationships present the same level of risk, and therefore not all third-party relationships require the same level, degree or type of oversight or risk management. As part of its risk management program, management analyzes the specific risks associated with each third-party relationship, including but not limited to, cybersecurity and information security related risks.

***Risks from Cybersecurity Incidents***

We have not encountered cybersecurity risks or threats that have materially impaired our business strategy, results of operations, or financial condition.

**Governance**

The Board recognizes the importance of managing risks associated with cybersecurity threats. The Board has established robust oversight procedures to promote effective governance in managing cybersecurity risks because of the significance of these threats to our operational integrity and shareholder confidence.

***Board of Directors Oversight***

The Audit Committee is central to the Board's oversight of cybersecurity risks. The Audit Committee currently oversees risks relating to cybersecurity, technology, and finance, and in support of this objective, receives regular reports from the Chief Information Security Officer and other third party advisors, to assure the Board maintains appropriate expertise to assure the appropriate management of cybersecurity risk. The Audit Committee reports periodically to the Board on the effectiveness of cybersecurity risk management processes and cybersecurity risk trends. The Board also receives specific reports from senior management with oversight responsibility for cybersecurity risks within the Company. These reports include cybersecurity and related risks and our exposure to those risks. The Audit Committee conducts an annual review of the company's cybersecurity posture and the effectiveness of its risk management strategies. This review helps in identifying areas for improvement and ensuring the alignment of cybersecurity efforts with its overall risk management framework.

***Management's Role in Managing Risk***

The Chief Information Security Officer plays a pivotal role in informing the Audit Committee on cybersecurity risks. He reports quarterly to the Audit Committee on a range of topics, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Current cybersecurity landscape and risks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Status of ongoing cybersecurity incidents, threats and strategies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cybersecurity incident reporting and post-incident reviews; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Compliance with regulatory requirements and evolving industry trends.

The Chief Information Security Officer reports to the Chief Operating Officer, has a dotted line to the Audit Committee and the Chief Information Officer, and maintains independence in reporting on the status and impact of any information security related developments and strategic initiatives to the Audit Committee, and depending on the severity of the situation, directly to the Board of Directors. In addition to regular meetings, the Audit Committee, Chief Information Security Officer, Chief Information Officer, Chief Risk Officer and Chief Executive Officer maintain an ongoing dialogue regarding emerging or potential cybersecurity risks that we face, particularly as a financial institution. The Company's internal Risk Management Steering Committee also reports directly to the Audit Committee regarding our risk management initiatives. The Audit Committee also receives quarterly reports from the Risk Management Steering Committee, the Company's Internal Audit department, and IT department in order to stay informed on all aspects of cybersecurity risk affecting the Company.

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***Risk Management Personnel***

Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with our Chief Information Security Officer, who has more than 20 years of cybersecurity experience working with large financial institutions and actively maintains multiple information security certifications. Additionally, our Chief Information Security Officer oversees our cybersecurity incident disclosure and communications. Our Chief Risk Officer separately chairs our Risk Management Steering Committee.

***Risks of Cybersecurity Threats and Incidents***

The Company monitors cybersecurity events using multiple methods. The Company's 24/7 Security Operations Center ("SOC") has the ability to detect and respond to threats in real time and is authorized to shut threats down before they can harm the organization. Additionally, the SOC periodically performs pro-active "threat hunts," searching for potential indicators of compromise and bad actors on our network. Endpoint and network detection tools alert IT staff of security events that warrant further analysis. The Chief Information Security Officer is kept abreast of all active investigations. If an incident is identified, we attempt to contain the threat immediately, such as if systems could be taken offline to stop the spread of an attack. Eradication of an attacker's artifacts, such as user accounts and malicious code, would then be performed. The Company maintains Business Continuity and Disaster Recovery plans, processes, and technology to restore systems affected by a cybersecurity incident. The Chief Information Security Officer may determine that an incident has the potential to be materially relevant and would escalate that determination to the Cybersecurity Incident Disclosure Team comprised of the senior leaders, including the Chief Executive Officer, Chief Risk Officer, Chief Information Officer, Chief Financial Officer, General Counsel and other leaders and advisors to the Company. In addition, we maintain insurance that we believe is customary against certain insurable cybersecurity risks. However, certain aspects of cybersecurity risks are not insurable, and the availability, extent, and cost of coverage may limit our recourse to these sources of risk mitigation.

***Reporting to Board of Directors***

The Chief Information Security Officer, in his capacity as such, regularly reports to management and the Audit Committee on all aspects related to cybersecurity risks and incidents. This ensures that the highest levels of management are kept informed of our cybersecurity and the potential risks we face. In the event of certain cybersecurity matters which present increasing concern, our policies require escalating these cybersecurity and risk management decisions to the full Board.

**ITEM 2. *PROPERTIES***

The main and executive offices of Heritage Commerce Corp and Heritage Bank of Commerce are located at 224 Airport Parkway in San Jose, California 95110, with branch offices located at 15575 Los Gatos Boulevard in Los Gatos, California 95032, at 3137 Stevenson Boulevard in Fremont, California 94538, at 387 Diablo Road in Danville, California 94526, at 300 Main Street in Pleasanton, California 94566, at 1990 N. California Boulevard in Walnut Creek, California 94596, at 1987 First Street in Livermore, California 94550, at 18625 Sutter Boulevard in Morgan Hill, California 95037, at 351 Tres Pinos Road in Hollister, California 95023, at 419 S. San Antonio Road in Los Altos, California 94022, at 325 Lytton Avenue in Palo Alto, California 94301, at 400 S. El Camino Real in San Mateo, California, 94402, at 2400 Broadway in Redwood City, California 94063, at 120 Kearny Street in San Francisco, California 94108, at 999 5th Avenue in San Rafael, California 94901 and at 1111 Broadway in Oakland, California 94607. Bay View Funding's administrative offices are located at 224 Airport Parkway, San Jose, California 95110.

**Main Offices**

The main office of HBC, the San Jose branch office of HBC and the Bay View Funding administrative office are located at 224 Airport Parkway in San Jose, consisting of approximately 60,278 square feet in a six story Class A type office building, which are subject to a direct lease dated June 27, 2019, as amended, which expires on July 31, 2030. The current monthly rent payment is $251,443, subject to 3% annual increases. The Company has reserved the right to extend the term of the lease for one additional period of five years.

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**Branch Offices** 

In June of 2007, as part of the acquisition of Diablo Valley Bank, the Company took ownership of an 8,285 square foot one story commercial office building, including the land, located at 387 Diablo Road in Danville, California.

In October of 2025, the Company amended its lease for approximately 4,096 square feet in a one story stand alone office building located at 300 Main Street in Pleasanton, California. The current monthly rent payment is $24,448, subject to 3% annual increases, until the lease expires on April 30, 2031. The Company has reserved the right to extend the term of the lease for one additional period of five years.

In October of 2019, as part of the acquisition of Presidio Bank, the Company assumed a lease for approximately 7,029 square feet on the first floor in a multi-tenant office building located at 1990 N. California Boulevard in Walnut Creek, California. The current monthly rent payment is $32,474, subject to annual increases of 3%, until the lease expires December 31, 2027. The Company has reserved the right to extend the lease for one additional period of five years.

In October of 2019, also as part of the acquisition of Presidio Bank, the Company assumed a lease for approximately 3,063 square feet on the first floor in a multi-tenant office building located at 400 S. Camino Real in San Mateo, California, with a lease expiration date of October 31, 2024. In January 2020, The Company amended the lease expiration date to October 31, 2030, and executed a new lease for additional space on the tenth floor for approximately 5,023 square feet. The current monthly rent payment for the combined space of approximately 8,086 square feet is $67,922, subject to annual increases of 3%, until the lease expires October 31, 2030. The Company has reserved the right to extend the lease for two additional periods of five years.

In April of 2025, the Company amended and extended its lease for approximately 6,233 square feet on the twenty third floor in a multi-tenant office building located at 120 Kearny Street in San Francisco, California. The current monthly rent payment is $41,034, subject to annual increases of 3%, until the lease expires on August 31, 2031.

In May of 2021, the Company extended its lease for approximately 4,716 square feet in a one-story multi tenant office building located at 18625 Sutter Boulevard in Morgan Hill, California. The current monthly rent payment is $6,380, subject to annual increases of 2%, until the lease expires on October 31, 2026. The Company has reserved the right to extend the term of the lease for one additional period of five years.

In December of 2021, the Company entered into a new lease agreement for approximately 4,099 square feet on the sixteenth floor in a multi-tenant office building located at 1111 Broadway in Oakland, California. The current monthly rent payment is $25,754, subject to annual increases of 3%, until the lease expires on June 30, 2029. The Company has reserved the right to extend the term of the lease for one additional period of five years.

In August of 2022, the Company extended its lease for approximately 4,188 square feet on the first floor in a multi-tenant office building located at 999 5th Avenue in San Rafael, California. In May of 2023, the Company amended the lease to include an additional 916 square feet, for a total of 5,104 square feet. The current monthly rent payment for the combined space is $22,844, subject to annual increases of 3%, until the lease expires on December 31, 2027. The Company has reserved the right to extend the lease for one additional period of five years.

In January of 2023, the Company extended its lease for approximately 5,213 square feet on the first floor in a two-story multi tenant office building located at 419 S. San Antonio Road in Los Altos, California. The current monthly rent payment is $34,933, subject to annual increases of 3% until the lease expires on April 30, 2030. The Company has reserved the right to extend the term of the lease for one additional period of five years.

In October of 2023, the Company extended its lease for approximately 2,369 square feet on the first floor of a two-story multi-tenant multi-use building located at 2400 Broadway in Redwood City, California. The current monthly rent payment is $13,712, subject to annual increases of 3%, until the lease expires on October 31, 2028.

In November of 2023, the Company extended its lease for approximately 1,920 square feet in a one-story stand alone building located in an office complex at 15575 Los Gatos Boulevard in Los Gatos, California. The current monthly rent payment is $7,231, subject to annual increases of 3%, until the lease expires on November 30, 2028. The Company has reserved the right to extend the term of the lease for one additional period of five years.

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In February 2024, the Company extended its lease for approximately 3,172 square feet in a one-story multi-tenant multi-use building located at 3137 Stevenson Boulevard in Fremont, California. The current monthly rent payment is $11,174, subject to annual increases of 3%, until the lease expires on February 28, 2027.

In May of 2024, the Company extended its lease for an additional seven years for approximately 4,154 square feet on the first floor in a multi-tenant office building located at 325 Lytton Avenue in Palo Alto, California. The current monthly rent payment is $33,855, until the lease expires on January 31, 2032. The Company has reserved the right to extend the lease for one additional period of five years.

In July of 2024, the Company extended its lease for an additional five years for approximately 3,391 square feet in a two-story multi tenant commercial center located at 351 Tres Pinos in Hollister, California. The current monthly rent payment is $5,696, until the lease expires on June 30, 2029. The Company has reserved the right to extend the term of the lease for one additional period of five years.

In July of 2024, the Company extended its lease for approximately 3,772 square feet on the first and second floors in a two-story multi-tenant multi-use building located at 1987 First Street in Livermore, California. The current monthly rent payment is $9,456 until the lease expires on September 30, 2029. The Company has reserved the right to extend the term of the lease for one additional period of five years.

**Bay View Funding Office**

The Bay View Funding administrative office is located at 224 Airport Parkway in San Jose, California, consisting of approximately 7,849 square feet and is subject to a sublease with Heritage Bank of Commerce dated March 6, 2020. The current monthly rent payment is $31,793, which is included in the main office of HBC's total rent of $251,443, and is subject to 3% annual increases, until the sublease expires July 31, 2030.

For additional information on operating leases and rent expense, refer to Note 7 to the Consolidated Financial Statements following "Item 15 — *Exhibits and Financial Statement Schedules.*"

**ITEM 3. *LEGAL PROCEEDINGS***

We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and counterclaims, settlement or litigation potential and the expected effect on us. The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Any claims and other lawsuits, and the disposition of such claims and lawsuits, whether through settlement or litigation, could be time-consuming and expensive to resolve, divert our attention from executing our business plan, result in efforts to enjoin our activities, and lead to attempts by third parties to seek similar claims.

For more information regarding legal proceedings, see Note 15 "Commitments and Contingencies" to the consolidated financial statements.

**ITEM 4. *MINE SAFETY DISCLOSURES***

Not Applicable.

**PART II**

**ITEM 5. *MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES***

At December 31, 2025, the Company was authorized to repurchase up to $30.0 million of the Company's shares of its issued and outstanding common stock under a share repurchase program (the "Repurchase Program") adopted by the Board of Directors (the "Board") in July 2024, as amended on October 23, 2025. The following table shows the share repurchase activity during 2025, and the maximum value of the shares that may yet be purchased:

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| | | | | |
|:---|:---|:---|:---|:---|
|<br><br>**Period** |<br>**Total**<br>**Number**<br>**of Shares**<br>**Purchased** |<br>**Average**<br>**Price**<br>**Paid**<br>**per Share** | **Total Number of**<br>**Shares Purchased**<br>**as Part of Publicly**<br>**Announced Plans**<br>**or Programs** | **Maximum Value of**<br>**Shares that May Yet Be**<br>**Purchased Under the**<br>**Plans or Programs**<br>**(in thousands)** |
| First Quarter of 2025 |  | $— |  |  |
| April 1 - 30, 2025 | 32923 | 9.06 | 32923 |  |
| May 1- 31, 2025 | 175066 | 9.22 | 175066 |  |
| June 1 - 30, 2025 |  |  |  |  |
| Second Quarter of 2025 | 207989 | 9.19 | 207989 |  |
| July 1 - 31, 2025 |  |  |  |  |
| August 1- 31, 2025 | 231198 | 9.24 | 231198 |  |
| September 1 - 30, 2025 |  |  |  |  |
| Third Quarter of 2025 | 231198 | 9.24 | 231198 |  |
| Fourth Quarter of 2025 |  |  |  |  |
| Full Year 2025 | 439187 | $9.22 | 439187 | $25951 |

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**Market Information**

The Company's common stock is listed on the Nasdaq Global Select Market under the symbol "HTBK."

The closing price of our common stock on February 19, 2026 was $13.33 per share as reported by the Nasdaq Global Select Market.

As of February 19, 2026, there were approximately 709 holders of record of common stock. There are no other classes of common equity outstanding.

**Dividend Policy**

The amount of future dividends will depend upon our earnings, financial condition, capital requirements and other factors, and will be determined by our Board on a quarterly basis. It is Federal Reserve policy that bank holding companies generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. It is also Federal Reserve policy that bank holding companies not maintain dividend levels that undermine the holding company's ability to be a source of strength to its banking subsidiaries. Additionally, in consideration of the current financial and economic environment, the Federal Reserve has indicated that bank holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong. Under the federal Prompt Corrective Action regulations, the Federal Reserve or the FDIC may prohibit a bank holding company from paying any dividends if the holding company's bank subsidiary is classified as undercapitalized.

As a holding company, our ability to pay cash dividends is affected by the ability of our bank subsidiary, HBC, to pay cash dividends. The ability of HBC (and our ability) to pay cash dividends in the future and the amount of any such cash dividends is and could be in the future further influenced by bank regulatory requirements and approvals and capital guidelines.

The decision whether to pay dividends will be made by our Board in light of conditions then existing, including factors such as our results of operations, financial condition, business conditions, regulatory capital requirements and covenants under any applicable contractual arrangements, including agreements with regulatory authorities.

For information on the statutory and regulatory limitations on the ability of the Company to pay dividends and on HBC to pay dividends to HCC see "*Item 1 — Business — Supervision and Regulation — Heritage Commerce Corp – Dividend Payments, Stock Redemptions, and Repurchases and – Heritage Bank of Commerce – Dividend Payments.*"

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**Performance Graph**

The following graph compares the stock performance of the Company from December 31, 2020 to December 31, 2025, to the performance of several specific industry indices. The performance of the S&P 500 Index, NASDAQ Composite Index and KBW NASDAQ Bank Index were used as comparisons to the Company's stock performance. Management believes that a performance comparison to these indices provides meaningful information and has therefore included those comparisons in the following graph.

![3257](htbk-20251231_g2.jpg)

The following chart compares the stock performance of the Company from December 31, 2020 to December 31, 2025, to the performance of several specific industry indices. The performance of the S&P 500 Index, NASDAQ Composite Index and KBW NASDAQ Bank Index were used as comparisons to the Company's stock performance.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Period Ending** | **Period Ending** | **Period Ending** | **Period Ending** | **Period Ending** | **Period Ending** |
| **Index** | **12/31/20** | **12/31/21** | **12/31/22** | **12/31/23** | **12/31/24** | **12/31/25** |
| Heritage Commerce Corp \* | 100 | 141 | 160 | 129 | 130 | 175 |
| S&P 500 Index \* | 100 | 129 | 105 | 133 | 166 | 196 |
| NASDAQ Composite Index\* | 100 | 122 | 82 | 119 | 154 | 187 |
| KBW NASDAQ Bank Index\* | 100 | 138 | 109 | 108 | 148 | 196 |

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_______________________________________________________

\*Source: S&P Global Market Intelligence — (434) 977-1600

_______________________________________________________

**ITEM 6. *[RESERVED]***

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**ITEM 7. *MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS***

The following discussion provides information about the consolidated results of operations, financial condition, liquidity, and capital resources of Heritage Commerce Corp (the "Company" or "HCC"), its wholly-owned subsidiary, Heritage Bank of Commerce (the "Bank" or "HBC"), and HBC's wholly-owned subsidiary, CSNK Working Capital Finance Corp, a California Corporation, dba Bay View Funding. This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of operations. This discussion and analysis should be read in conjunction with our consolidated financial statements and the accompanying notes presented elsewhere in this report. Unless we state otherwise or the context indicates otherwise, references to the "Company," "Heritage," "we," "us," and "our," in this Report on Form 10-K refer to Heritage Commerce Corp and its subsidiaries.

***Merger Agreement with CVB Financial Corp.***

On December 17, 2025, CVB Financial Corp. ("CVBF") and the Company jointly announced that they have entered into a definitive merger agreement. Under the terms of the agreement, the Company will merge with and into CVBF in an all-stock transaction valued at approximately $811 million, or $13.00 per HTBK share, based on CVBF's closing stock price on December 16, 2025. The value of the transaction is based on a specified closing price and is subject to CVBF stock price fluctuations. Upon completion, the combination is expected to create a top-performing California business bank with approximately $22 billion in assets, more than 75 offices and branches, and a deeply rooted presence in the State's key economic centers. The proposed merger has been unanimously approved by the respective Boards of Directors of both companies and is expected to close in the second quarter of 2026, subject to customary regulatory approvals, the Company's and CVBF's shareholder approvals, and other closing conditions. For more information, please refer to the Company's Current Reports on Form 8-K filed with the Securities and Exchange Commission on December 17, 2025 and December 23, 2025.

**Critical Accounting Policies and Estimates**

Financial results are presented in accordance with the accounting principles generally accepted in the United States of America ("GAAP") and prevailing practices in the banking industry. The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expense in the financial statements. Various elements of our accounting policies, by their nature, involve the application of highly sensitive and judgmental estimates and assumptions. Some of these policies and estimates relate to matters that are highly complex and contain inherent uncertainties. It is possible that, in some instances, different estimates and assumptions could reasonably have been made and used by management, instead of those we applied, which might have produced different results that could have had a material effect on the financial statements.

Certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company's performance. These measures include "adjusted" operating metrics that have been adjusted to exclude notable expenses incurred in the second and fourth quarters of 2025 as well as other performance measures and ratios adjusted for notable items. Management believes these non-GAAP financial measures enhance comparability between periods and in some instances are common in the banking industry. These non-GAAP financial measures should be supplemental to primary GAAP financial measures and should not be read in isolation or relied upon as a substitute for primary GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures are presented in the tables under "*Reconciliation of Non-GAAP Financial Measures.*"

Our most significant accounting policies are described in Note 1 — Summary of Significant Accounting Policies in the consolidated financial statements included in this Form 10-K. Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on reported income or loss and on the carrying value of certain assets and liabilities, and we consider these policies to be our critical accounting estimates. These judgments and assumptions are based upon historical experience, future forecasts, or other factors that management believes to be reasonable under the circumstances. Because of the nature of the judgments and assumptions, actual results could differ from management's estimates, which could have a material effect on our financial condition and results of operations. The following accounting policies materially affect our reported earnings and financial condition and require significant judgments and estimates. Management has reviewed these critical accounting estimates and related disclosures with our Board of Director's Audit Committee.

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***Allowance for Credit Losses on Loans ("ACLL")***

The allowance for credit losses, or ACLL, on loans represents management's estimate of all expected credit losses over the expected contractual life of the loan portfolio, utilizing the current expected credit loss ("CECL") model. The ACLL is a valuation amount that is deducted from the amortized cost basis of loans, and is adjusted each period by an expense or credit for credit losses, which is recognized in earnings, and reduced by loan charge-offs, net of recoveries. Determining the appropriateness of the ACLL is complex and requires judgment by management about inherently uncertain factors.

Management utilizes a discounted cash flow methodology to estimate the ACLL. Expected cash flows are estimated for each loan and discounted using the contractual terms of the loan, calculated probabilities of default, loss given default, prepayment and curtailment estimates as well as qualitative factors. The probability-of-default estimates are generated using a regression model used to estimate the likelihood of a loan being charged-off within the life of the loan. The regression model uses combinations of variables to assess historical loss correlations to economic factors and these variables become model forecast inputs for economic factors that are updated in the model each period. Management uses an economic forecast provided by a third-party for these model inputs. These economic factors included variables such as California state gross product, California unemployment rate, California home price index, and a commercial real estate value index. Qualitative factors are also applied by management to reflect increased portfolio risks from such factors as collateral value risk, portfolio growth, or loan grade and performance trends that management has assessed as not being fully captured in the quantitative estimate.

The ACLL represents management's best estimate of potential loan losses, but significant changes in prevailing economic conditions could result in material changes in the allowance. Generally, an improving economic forecast generates a lower ACLL estimate than a weakening economic forecast. One of the most significant judgments used in estimating the ACLL is the reasonable and supportable macroeconomic forecast for the economic factors used in the model. Changes in the macroeconomic forecast, especially for California state gross product and the California unemployment rate, could significantly impact the calculated estimated credit loss. The economic forecast utilized for the ACLL model input is inherently uncertain and many external factors could impact these forecasts. Management reviews the forecast inputs to ensure they are reasonable and supportable, however, changes in local and national economic conditions will impact the allowance level and an increase in the California unemployment rate specifically would have the largest impact on the allowance level. While management utilizes its best judgment and current information available, the adequacy of the ACLL is significantly determined by certain factors outside the Company's control, such as the performance of our loan portfolio, changes in the economic environment including economic uncertainty, changes in interest rates, and any regulatory changes. Additionally, the level of ACLL may fluctuate based on the balance and mix of the loan portfolio.

Qualitative factors are evaluated each period and applied in instances when management assesses that additional risks not captured in the quantitative estimate should be factored into the overall ACLL estimate. These risks include loan performance trends, collateral value risk and portfolio growth characteristics. Changes in the assessment of these qualitative factors could significantly impact the calculated estimated credit loss.

Other key assumptions used to calculate the ACLL include the forecast and reversion to mean time periods for the economic factor inputs, and prepayment and curtailment assumptions. The model calculation is less sensitive to these assumptions than to the macroeconomic forecast and the application of qualitative factors.

***Reclassifications***

In 2025, we reclassified Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock dividends from interest income to noninterest income and the related average asset balances were reclassified from interest earning assets to other assets on the *"Net Interest Income and Net Interest Margin"* tables. The amounts for the prior periods were reclassified to conform to the current presentation. These reclassifications did not affect previously reported net income or shareholders' equity.

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**Executive Summary**

The Company conducts a general commercial banking business through the Bank. Our primary operations are located in the general San Francisco Bay Area of California in the counties of Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara. Our market includes the cities of Oakland, San Francisco, and San Jose, the headquarters of a number of technology based companies in the region known commonly as Silicon Valley. The Bank's clients are primarily closely held businesses and professionals. We also have limited operations in other regions primarily by virtue of Bay View Funding, the Bank's factoring subsidiary, which provides factoring and other alternative corporate financing services.

***Performance Overview***

2025 was a consequential year for the Company, as our renewed end-to-end strategic focus translated into solid growth and results, supported by consistent performance across the business, sustained client momentum, and strong credit quality.

This year reflects strong execution across the organization. We delivered double digit earnings per share growth and positive operating leverage. We had positive trends in loan and deposit growth, an expansion in our net interest margin, disciplined expense management, and an improvement in our asset quality. Loan and deposit growth was 5% and 2%, respectively, over the same period a year ago, and we continue to add clients in key markets across our footprint, while maintaining our underwriting and pricing criteria. Our financial foundation is solid — marked by high capital reserves, strong liquidity, and sound asset quality.

For the year ended December 31, 2025, net income was $47.8 million, or $0.78 per average diluted common share, compared to $40.5 million, or $0.66 per average diluted common share, for the year ended December 31, 2024, and $64.4 million, or $1.05 per average diluted common share for the year ended December 31, 2023. The Company's annualized return on average assets was 0.86%, the annualized return on average equity was 6.86%, and the annualized return on average tangible common equity was 9.12% for the year ended December 31, 2025, compared to 0.76%, 5.97% and 8.05%, respectively, for the year ended December 31, 2024, and 1.22%, 9.88% and 13.57%, respectively, for the year ended December 31, 2023. The annualized return on average tangible common equity is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP financial measures are presented in the tables under *"Reconciliation of Non-GAAP Financial Measures."*

During the second quarter of 2025, the Company recorded an accrual of $9.2 million, primarily due to pre-tax expenses related to the settlement of certain litigation matters, including the anticipated settlement of a previously disclosed class action and PAGA lawsuit that alleges the violation of certain California wage-and-hour and related laws and regulations, and charges related to the planned closure of a Bank branch. During the fourth quarter of 2025, the Company also recorded expenses of $2.1 million, due to pre-tax charges related to the announced pending merger with CVBF.

Adjusted net income, excluding the impact of the legal settlement, merger-related costs and other charges, was $56.4 million, or $0.91 per average diluted common share, for the year ended December 31, 2025. The adjusted annualized return on average assets was 1.01%, the adjusted annualized return on average equity was 8.09%, and adjusted annualized return on average tangible common equity was 10.77% for the year ended December 31, 2025, compared to 0.76% and 5.97% and 8.05%, respectively, for the year ended December 31, 2024, and 1.22% and 9.88% and 13.57%, respectively, for the year ended December 31, 2023. Adjusted net income, adjusted earnings per share, adjusted annualized return on average assets, adjusted annualized return on average equity, and adjusted annualized return on average tangible common equity are non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures are presented in the tables under *"Reconciliation of Non-GAAP Financial Measures."*

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

 **Highlights**

***Results of Operations:***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total revenue, which is defined as net interest income before provision for credit losses on loans plus noninterest income, increased $25.1 million, or 15%, to $197.5 million for the year ended December 31, 2025 from $172.4 million for the year ended December 31, 2024, due to both higher net interest income and noninterest income.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• For the year ended December 31, 2025, net interest income increased 15% to $185.4 million, compared to $161.3 million for the year ended December 31, 2024. The fully tax equivalent ("FTE") net interest margin increased 31 basis points to 3.56% for the year ended December 31, 2025, from 3.25% for the year ended December 31, 2024, primarily due to lower rates paid on client deposits, an increase in the average balance of interest-earning assets, and an increase in the average yields on loans and securities, partially offset by a decrease in the average yield on overnight funds. The FTE net interest margin is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP financial measures are presented in the tables under "*Reconciliation of Non-GAAP Financial Measures.*"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The average yield on the total loan portfolio increased to 5.61% for the year ended December 31, 2025, compared to 5.47% for the year ended December 31, 2024. Asset growth during the year reflected a strategic focus on a higher mix of factored receivables, while the Company maintained disciplined core loan growth and pricing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The average cost of total deposits decreased to 1.47% for the year ended December 31, 2025, compared to 1.70% for the year ended December 31, 2024. The average cost of funds decreased to 1.50% for the year ended December 31, 2025, compared to 1.74% for the year ended December 31, 2024. The Company took proactive actions to reprice deposits as part of its ongoing balance sheet and funding management strategy in a changing rate environment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• For the year ended December 31, 2025, total noninterest income increased 9% to $12.1 million, compared to $11.1 million for the year ended December 31, 2024, primarily driven by higher Bay View Funding origination, facility and termination fees, and a $386,000 recovery on an acquired loan that had been previously charged off, partially offset by lower gains on sales of SBA loans and the absence of a $219,000 gain on company-owned life insurance recorded in 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total noninterest expense for the year ended December 31, 2025 increased to $127.9 million, compared to $113.6 million for the year ended December 31, 2024. Adjusted noninterest expense for the year ended December 31, 2025, excluding the impact of the $11.3 million accrual for the legal settlement, merger-related costs and other charges, increased to $116.6 million, compared to $113.6 million for the year ended December 31, 2024, primarily due to higher salaries and employee benefits, as well as higher professional fees and information technology expenses related to ongoing investments in infrastructure enhancements, partially offset by a decrease in insurance expense for the year ended December 31, 2025. Adjusted noninterest expense is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP financial measures are presented in the tables under "*Reconciliation of Non-GAAP Financial Measures.*"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• For the year ended December 31, 2025, the Company's reported pre-provision net revenue ("PPNR"), which is defined as total revenue less noninterest expense, increased 18% to $69.6 million, compared to $58.8 million for the year ended December 31, 2024. For the year ended December 31, 2025, the Company's adjusted PPNR increased 37% to $80.9 million from $58.8 million for the year ended December 31, 2024. Adjusted PPNR is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP financial measures are presented in the tables under "*Reconciliation of Non-GAAP Financial Measures.*"

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• There was a provision for credit losses on loans of $1.8 million for the year ended December 31, 2025, compared to a $2.1 million provision for credit losses on loans for the year ended December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Income tax expense for the year ended December 31, 2025 was $20.0 million, compared to $16.1 million for the year ended December 31, 2024. The effective tax rate for the year ended December 31, 2025 was 29.4%, compared to 28.5% for the year ended December 31, 2024.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The efficiency ratio was 64.75% for the year ended December 31, 2025, compared to 65.88% for the year ended December 31, 2024. The adjusted efficiency ratio improved to 59.05% for the year ended December 31, 2025 from 65.88% for the year ended December 31, 2024, primarily due to higher total revenue, partially offset by higher noninterest expense. The adjusted efficiency ratio is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP financial measures are presented in the tables under "*Reconciliation of Non-GAAP Financial Measures.*"

***Current Financial Condition and Liquidity Position:***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cash, interest bearing deposits in other financial institutions and securities available-for-sale, at fair value, remained relatively flat at $1.2 billion at both December 31, 2025 and December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Securities held-to-maturity, at amortized cost, totaled $529.7 million at December 31, 2025, compared to $590.0 million at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Loans held-for-investment ("HFI"), increased $161.1 million, or 5%, to $3.7 billion at December 31, 2025, compared to $3.5 billion at December 31, 2024. Loans, excluding residential mortgages, increased $200.6 million, or 7%, to $3.2 billion at December 31, 2025, compared to $3.0 billion at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• There were 5 relationships included in nonperforming assets ("NPAs") totaling $2.8 million, or 0.05% of total assets, at December 31, 2025, compared to 9 relationships totaling $7.7 million, or 0.14% of total assets, at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Classified assets totaled $29.2 million, or 0.51% of total assets, at December 31, 2025, compared to $41.7 million, or 0.74% of total assets, at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net charge-offs totaled $770,000 for the year ended December 31, 2025, compared to $1.1 million for the year ended December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The allowance for credit losses on loans ("ACLL") at December 31, 2025, was $50.0 million, or 1.37% of total loans, representing 1,797% of nonperforming loans. The ACLL at December 31, 2024, was $49.0 million, or 1.40% of total loans, representing 638% of nonperforming loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total deposits increased $83.1 million or 2% to $4.9 billion at December 31, 2025, compared to $4.8 billion at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Company's total available liquidity and borrowing capacity was $3.3 billion at both December 31, 2025 and December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The ratio of noncore funding (which consists of time deposits of $250,000 and over, brokered deposits, securities under agreement to repurchase, subordinated debt and short-term borrowings) to total assets was 4.52% at December 31, 2025, compared to 4.37% at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The loan to deposit ratio was 74.51% at December 31, 2025, compared to 72.45% at December 31, 2024.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Capital Adequacy:***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Company's consolidated capital ratios exceeded regulatory guidelines and HBC's capital ratios exceeded the prompt corrective action ("PCA") regulatory guidelines for a well-capitalized financial institution, and the Basel III minimum regulatory requirements at December 31, 2025, as reflected in the following table:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | | | **Well-capitalized** | **Well-capitalized** | | |
| | | | | | **Regulatory** | **Regulatory** | **Regulatory** | **Regulatory** |
| | **Heritage** | **Heritage** | **Heritage** | **Heritage** | **Financial Institution** | **Financial Institution** | **Basel III Minimum** | **Basel III Minimum** |
| | **Commerce** | **Commerce** | **Bank of** | **Bank of** | **PCA Regulatory** | **PCA Regulatory** | **Regulatory** | **Regulatory** |
|<br><br>**Capital Ratios** | **Corp** | **Corp** | **Commerce** | **Commerce** | **Guidelines** | **Guidelines** | **Requirements** <sup>(1)</sup> | **Requirements** <sup>(1)</sup> |
| Total Capital | 15.1 | % | 14.8 | % | 10.0 | % | 10.5 | % |
| Tier 1 Capital | 12.9 | % | 13.6 | % | 8.0 | % | 8.5 | % |
| Common Equity Tier 1 Capital | 12.9 | % | 13.6 | % | 6.5 | % | 7.0 | % |
| Tier 1 Leverage | 9.6 | % | 10.1 | % | 5.0 | % | 4.0 | % |
| Tangible common equity / tangible assets <sup>(2)</sup> | 9.6 | % | 10.1 | % | N/A |  | N/A |  |

---

_______________________________________________________

(1)Basel III minimum regulatory requirements for both HCC and HBC include a 2.5% capital conservation buffer, except the Tier 1 Leverage ratio.

(2)This is a non-GAAP financial measure that represents shareholders' equity minus goodwill and other intangible assets divided by total assets minus goodwill and other intangible assets.

_______________________________________________________

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**RESULTS OF OPERATIONS**

The Company earns income from two primary sources. The first is net interest income, which is interest income generated by earning assets less interest expense on interest-bearing liabilities. The second is noninterest income, which primarily consists of gains on the sale of loans, FHLB and FRB stock dividends, loan servicing fees, client service charges and fees, and the increase in cash surrender value of life insurance. The majority of the Company's noninterest expenses are operating costs that relate to providing banking services to our clients.

***Net Interest Income and Net Interest Margin***

The level of net interest income depends on several factors in combination, including growth in earning assets, yields on earning assets, the cost of interest-bearing liabilities, the relative volumes of earning assets and interest-bearing liabilities, and the mix of products that comprise the Company's earning assets, deposits, and other interest-bearing liabilities. Net interest income can also be impacted by the reversal of interest on loans placed on nonaccrual status, and recovery of interest on loans that have been on nonaccrual and are either sold or returned to accrual status. To maintain its net interest margin, the Company must manage the relationship between interest earned and interest paid.

The following Distribution, Rate and Yield table presents for each of the past three years, the average amounts outstanding for the major categories of the Company's balance sheet, the average interest rates earned or paid thereon, and the resulting net interest margin on average interest earning assets for the periods indicated. Average balances are based on daily averages.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**Distribution, Rate and Yield**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** | **2023** | **2023** | **2023** |
| | **Average<br>Balance** | **Interest<br>Income /<br>Expense** | **Average<br>Yield /<br>Rate** | **Average<br>Balance** | **Interest<br>Income /<br>Expense** | **Average<br>Yield /<br>Rate** | **Average<br>Balance** | **Interest<br>Income /<br>Expense** | **Average<br>Yield /<br>Rate** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Assets:** |  |  |  |  |  |  |  |  |  |
| Loans, gross <sup>(1)(2)</sup> | $3506587 | $196823 | 5.61% | $3345662 | $182983 | 5.47% | $3262194 | $177628 | 5.45% |
| Securities — taxable | 910926 | 26451 | 2.90% | 905418 | 20817 | 2.30% | 1124190 | 27351 | 2.43% |
| Securities — exempt from Federal tax <sup>(3)</sup> | 29280 | 1051 | 3.59% | 31403 | 1127 | 3.59% | 33806 | 1196 | 3.54% |
| Other investments, interest-bearing deposits in other financial institutions and Federal funds sold <sup>(4)</sup> | 760977 | 32895 | 4.32% | 685099 | 35654 | 5.20% | 503064 | 26225 | 5.21% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest earning assets <sup>(3) (4)</sup> | 5207770 | 257220 | 4.94% | 4967582 | 240581 | 4.84% | 4923254 | 232400 | 4.72% |
| Cash and due from banks | 31788 |  |  | 33156 |  |  | 35955 |  |  |
| Premises and equipment, net | 9756 |  |  | 10252 |  |  | 9421 |  |  |
| Goodwill and other intangible assets | 173209 |  |  | 175220 |  |  | 177536 |  |  |
| Other assets | 161452 |  |  | 152495 |  |  | 143209 |  |  |
| &nbsp;&nbsp;&nbsp;Total assets | $5583975 |  |  | $5338705 |  |  | $5289375 |  |  |
| **Liabilities and shareholders' equity:** |  |  |  |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Demand, noninterest-bearing | $1197836 |  |  | $1174854 |  |  | $1393949 |  |  |
| &nbsp;&nbsp;&nbsp;Demand, interest-bearing | 943845 | 5732 | 0.61% | 916466 | 6439 | 0.70% | 1074523 | 6655 | 0.62% |
| &nbsp;&nbsp;&nbsp;Savings and money market | 1341411 | 32325 | 2.41% | 1175391 | 32734 | 2.78% | 1144032 | 19857 | 1.74% |
| &nbsp;&nbsp;&nbsp;Time deposits — under $100 | 10795 | 168 | 1.56% | 11112 | 184 | 1.66% | 11809 | 97 | 0.82% |
| &nbsp;&nbsp;&nbsp;Time deposits — $100 and over | 235744 | 8116 | 3.44% | 228388 | 8968 | 3.93% | 218131 | 6874 | 3.15% |
| &nbsp;&nbsp;&nbsp;ICS/CDARS <sup>(5)</sup> — interest-bearing demand, money market and time deposits | 1000406 | 23131 | 2.31% | 1007563 | 28574 | 2.84% | 625045 | 14074 | 2.25% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | 3532201 | 69472 | 1.97% | 3338920 | 76899 | 2.30% | 3073540 | 47557 | 1.55% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 4730037 | 69472 | 1.47% | 4513774 | 76899 | 1.70% | 4467489 | 47557 | 1.06% |
| Short-term borrowings | 20 |  | 0.00% | 24 |  | 0.00% | 27145 | 1365 | 5.03% |
| Subordinated debt, net of issuance costs | 39725 | 2152 | 5.42% | 39572 | 2152 | 5.44% | 39420 | 2152 | 5.46% |
| &nbsp;&nbsp;&nbsp;Total interest-bearing liabilities | 3571946 | 71624 | 2.01% | 3378516 | 79051 | 2.34% | 3140105 | 51074 | 1.63% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing liabilities and demand, noninterest-bearing / cost of funds | 4769782 | 71624 | 1.50% | 4553370 | 79051 | 1.74% | 4534054 | 51074 | 1.13% |
| Other liabilities | 116730 |  |  | 106792 |  |  | 102872 |  |  |
| &nbsp;&nbsp;&nbsp;Total liabilities | 4886512 |  |  | 4660162 |  |  | 4636926 |  |  |
| Shareholders' equity | 697463 |  |  | 678543 |  |  | 652449 |  |  |
| &nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $5583975 |  |  | $5338705 |  |  | $5289375 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income <sup>(3)</sup> / margin |  | 185596 | 3.56% |  | 161530 | 3.25% |  | 181326 | 3.68% |
| Less tax equivalent adjustment <sup>(3)</sup> |  | (221) |  |  | (237) |  |  | (251) |  |
| &nbsp;&nbsp;&nbsp;Net interest income |  | $185375 | 3.56% |  | $161293 | 3.25% |  | $181075 | 3.68% |

---

_______________________________________________________

<sup>(1)</sup> Includes loans held-for-sale. Nonaccrual loans are included in average balance.

<sup>(2)</sup> Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $935,000 for the year ended December 31, 2025, compared to $628,000 for the year ended December 31, 2024, and $742,000 for the year ended December 31, 2023. Prepayment fees totaled $1,065,000 for the year ended December 31, 2025, compared to $117,000 for the year ended December 31, 2024, and $484,000 for the year ended December 31, 2023.

<sup>(3)</sup> Reflects the non-GAAP FTE adjustment for Federal tax exempt income based on a 21% tax rate for the years ended December 31, 2025, 2024 and 2023.

<sup>(4)</sup> FHLB and FRB stock dividends were reclassed from interest income to noninterest income and the related average asset balances were reclassified from interest earning assets to other assets.

<sup>(5)</sup> Insured Cash Sweep ("ICS")/Certificate of Deposit Account Registry Service ("CDARS").

_______________________________________________________

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**Volume and Rate Variances**

The Volume and Rate Variances table below sets forth the dollar difference in interest earned and paid for each major category of interest-earning assets and interest-bearing liabilities for the noted periods, and the amount of such change attributable to changes in average balances (volume) or changes in average interest rates. Volume variances are equal to the increase or decrease in the average balance multiplied by prior period rates and rate variances are equal to the increase or decrease in the average rate multiplied by the prior period average balance. Variances attributable to both rate and volume changes are equal to the change in rate multiplied by the change in average balance and are included below in the average volume column.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31, <br>2025 vs. 2024** | **Year Ended December 31, <br>2025 vs. 2024** | **Year Ended December 31, <br>2025 vs. 2024** | **Year Ended December 31, <br>2024 vs. 2023** | **Year Ended December 31, <br>2024 vs. 2023** | **Year Ended December 31, <br>2024 vs. 2023** |
| | **Increase (Decrease)<br>Due to Change in:** | **Increase (Decrease)<br>Due to Change in:** | **Increase (Decrease)<br>Due to Change in:** | **Increase (Decrease)<br>Due to Change in:** | **Increase (Decrease)<br>Due to Change in:** | **Increase (Decrease)<br>Due to Change in:** |
| | **Average<br>Volume** | **Average<br>Rate** | **Net<br>Change** | **Average<br>Volume** | **Average<br>Rate** | **Net<br>Change** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Income from the interest earning assets:** | | | | | | |
| &nbsp;&nbsp;&nbsp;Loans, gross | $9131 | $4709 | $13840 | $4541 | $814 | $5355 |
| &nbsp;&nbsp;&nbsp;Securities — taxable | 194 | 5440 | 5634 | (5039) | (1495) | (6534) |
| &nbsp;&nbsp;&nbsp;Securities — exempt from Federal tax <sup>(1)</sup> | (76) |  | (76) | (87) | 18 | (69) |
| &nbsp;&nbsp;&nbsp;Other investments, interest-bearing deposits in other financial institutions and Federal funds sold | 3299 | (6058) | (2759) | 9495 | (66) | 9429 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest income on interest-earning assets | 12548 | 4091 | 16639 | 8910 | (729) | 8181 |
| **Expense from the interest-bearing liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Demand, interest-bearing | 142 | (849) | (707) | (1083) | 867 | (216) |
| &nbsp;&nbsp;&nbsp;Savings and money market | 3998 | (4407) | (409) | 930 | 11947 | 12877 |
| &nbsp;&nbsp;&nbsp;Time deposits — under $100 | (5) | (11) | (16) | (12) | 99 | 87 |
| &nbsp;&nbsp;&nbsp;Time deposits — $100 and over | 259 | (1111) | (852) | 395 | 1699 | 2094 |
| &nbsp;&nbsp;&nbsp;ICS/CDARS — interest-bearing demand, money market and time deposits | (144) | (5299) | (5443) | 10823 | 3677 | 14500 |
| &nbsp;&nbsp;&nbsp;Short-term borrowings |  |  |  |  | (1365) | (1365) |
| &nbsp;&nbsp;&nbsp;Subordinated debt, net of issuance costs | 7 | (7) |  | 8 | (8) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest expense on interest-bearing liabilities | 4257 | (11684) | (7427) | 11061 | 16916 | 27977 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | $8291 | $15775 | 24066 | $(2151) | $(17645) | (19796) |
| &nbsp;&nbsp;&nbsp;Less tax equivalent adjustment |  |  | 16 |  |  | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income |  |  | $24082 |  |  | $(19782) |

---

_______________________________________________________

<sup>(1)</sup> Reflects the non-GAAP FTE adjustment for Federal tax exempt income based on a 21% tax rate for the years ended December 31, 2025, 2024 and 2023.

_______________________________________________________

Net interest income increased 15% to $185.4 million for the year ended December 31, 2025, compared to $161.3 million for the year ended December 31, 2024. For the year ended December 31, 2024, the non-GAAP FTE net interest margin increased 31 basis points to 3.56% for the year ended December 31, 2025, compared to 3.25% for the year ended December 31, 2024, primarily due to a decrease in rates paid on client deposits, an increase in the average balance of interest-earning assets, and an increase in the average yields on loans and securities, partially offset by a lower yield on overnight funds.

Net interest income decreased 11% to $161.3 million for the year ended December 31, 2024, compared to $181.1 million for the year ended December 31, 2023. For the year ended December 31, 2024, the non-GAAP FTE net interest margin decreased 43 basis points to 3.25% for the year ended December 31, 2024, compared to 3.68% for the year ended December 31, 2023, primarily due to higher rates paid on client deposits, a decrease in the average balance of noninterest-

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

bearing deposits, and a lower average yield on investment securities, partially offset by an increase in the average balances of loans and overnight funds.

The following tables present the average balance of loans outstanding, interest income, and the average yield for the periods indicated:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** | **2023** | **2023** | **2023** |
| | **Average<br>Balance** | **Interest<br>Income** | **Average<br>Yield** | **Average<br>Balance** | **Interest<br>Income** | **Average<br>Yield** | **Average<br>Balance** | **Interest<br>Income** | **Average<br>Yield** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Loans, core bank | $3020109 | $166842 | 5.52% | $2848206 | $155690 | 5.47% | $2730789 | $147028 | 5.38% |
| Prepayment fees |  | 1065 | 0.04% |  | 117 | 0.00% |  | 484 | 0.02% |
| Bay View Funding factored receivables | 74189 | 14253 | 19.21% | 55717 | 10980 | 19.71% | 62642 | 13426 | 21.43% |
| Purchased residential mortgages | 414010 | 13987 | 3.38% | 444476 | 15038 | 3.38% | 472582 | 15309 | 3.24% |
| Loan credit mark / accretion | (1721) | 676 | 0.02% | (2737) | 1158 | 0.04% | (3819) | 1381 | 0.05% |
| &nbsp;&nbsp;Total loans (includes loans held-for-sale) | $3506587 | $196823 | 5.61% | $3345662 | $182983 | 5.47% | $3262194 | $177628 | 5.45% |

---

The average yield on the total loan portfolio increased to 5.61% for the year ended December 31, 2025, compared to 5.47% for the year ended December 31, 2024, primarily due to an increase in the yield on the core bank loan portfolio, a higher average balance of Bay View Funding factored receivables, and higher prepayment fees. The average yield on the total loan portfolio increased to 5.47% for the year ended December 31, 2024, compared to 5.45% for the year ended December 31, 2023, primarily due to an increase in the yield on the core bank loan portfolio.

The average cost of deposits was 1.47% for the year ended December 31, 2025, compared to 1.70% for the year ended December 31, 2024, and 1.06% for the year ended December 31, 2023. The decrease in the average cost of total deposits for the year ended December 31, 2025 was driven by proactive management of exception based deposit pricing and favorable noninterest-bearing deposit mix shift. The average cost of funds was 1.50% for the year ended December 31, 2025, compared to 1.74% for the year ended December 31, 2024, and 1.13% for the year ended December 31, 2023.

***Provision for Credit Losses on Loans***

Credit risk is inherent in the business of making loans. The Company establishes an allowance for credit losses on loans through charges to earnings, which are presented in the statements of income as the provision for credit losses on loans. Specifically identifiable and quantifiable known losses are promptly charged off against the allowance. The provision for credit losses on loans is determined by conducting a quarterly evaluation of the adequacy of the Company's allowance for credit losses on loans and charging the shortfall or excess, if any, to the current quarter's expense. This has the effect of creating variability in the amount and frequency of charges to the Company's earnings. The provision for credit losses on loans and level of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management's assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in the Company's market area. The provision for credit losses on loans and level of allowance for each period are also dependent on forecast data for the state of California including GDP and California state unemployment rate projections.

There was a $1.8 million provision for credit losses on loans for the year ended December 31, 2025, compared to a $2.1 million provision for credit losses on loans for the year ended December 31, 2024, and $749,000 provision for credit losses on loans for the year ended December 31, 2023. Provisions for credit losses on loans are charged to operations to bring the allowance for credit losses on loans to a level deemed appropriate by management based on the factors discussed under "*Credit Quality and Allowance for Credit Losses on Loans.*"

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Noninterest Income***

The following table sets forth the various components of the Company's noninterest income for the periods indicated:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended<br>December 31,** | **Year Ended<br>December 31,** | **Year Ended<br>December 31,** | **Increase<br>(decrease)<br>2025 versus 2024** | **Increase<br>(decrease)<br>2025 versus 2024** | **Increase<br>(decrease)<br>2024 versus 2023** | **Increase<br>(decrease)<br>2024 versus 2023** |
| | **2025** | **2024** | **2023** | **Amount** | **Percent** | **Amount** | **Percent** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | | |
| Service charges and fees on deposit accounts | $3688 | $3561 | $4341 | $127 | 4% | $(780) | (18)% |
| FHLB and FRB stock dividends | 2353 | 2355 | 2149 | (2) | —% | 206 | 10% |
| Increase in cash surrender value of life insurance | 2213 | 2097 | 2031 | 116 | 6% | 66 | 3% |
| Termination fees | 435 | 177 | 154 | 258 | 146% | 23 | 15% |
| Servicing income | 302 | 365 | 400 | (63) | (17)% | (35) | (9)% |
| Gain on sales of SBA loans | 215 | 473 | 482 | (258) | (55)% | (9) | (2)% |
| Gain on proceeds from company-owned life insurance |  | 219 | 125 | (219) | (100)% | 94 | 75% |
| Other | 2883 | 1856 | 1465 | 1027 | 55% | 391 | 27% |
| &nbsp;&nbsp;&nbsp;Total | $12089 | $11103 | $11147 | $986 | 9% | $(44) | —% |

---

For the year ended December 31, 2025, total noninterest income increased 9% to $12.1 million, compared to $11.1 million for the year ended December 31, 2024, primarily driven by higher Bay View Funding origination, facility and termination fees, and a $386,000 recovery on an acquired loan that had been previously charged off, partially offset by a lower gain on sales of SBA loans and the absence of a $219,000 gain on company-owned life insurance recorded in 2024.

For the year ended December 31, 2024, total noninterest income remained relatively flat at $11.1 million, compared to the year ended December 31, 2023.

A portion of the Company's noninterest income is associated with its SBA lending activity, as gain on sales of loans sold in the secondary market and servicing income from loans sold with servicing rights retained. During 2025, SBA loan sales resulted in a $215,000 gain, compared to a $473,000 gain on sales of SBA loans in 2024, and an $482,000 gain on sales of SBA loans in 2023.

The servicing assets that result from the sales of SBA loans with servicing retained are amortized over the expected term of the loans using a method approximating the interest method. Servicing income generally declines as the respective loans are repaid.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Noninterest Expense***

The following table sets forth the various components of the Company's noninterest expense for the periods indicated:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** | **Increase<br>(Decrease)<br>2025 versus 2024** | **Increase<br>(Decrease)<br>2025 versus 2024** | **Increase<br>(Decrease)<br>2024 versus 2023** | **Increase<br>(Decrease)<br>2024 versus 2023** |
| | **2025** | **2024** | **2023** | **Amount** | **Percent** | **Amount** | **Percent** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Salaries and employee benefits | $66537 | $63952 | $56862 | $2585 | 4% | $7090 | 12% |
| Occupancy and equipment | 9944 | 10226 | 9490 | (282) | (3)% | 736 | 8% |
| Legal settlement and other charges <sup>(1)</sup> | 9184 |  |  | 9184 | N/A |  | N/A |
| Professional fees | 6233 | 5416 | 4350 | 817 | 15% | 1066 | 25% |
| Data processing | 4374 | 3183 | 3429 | 1191 | 37% | (246) | (7)% |
| Insurance expense | 4267 | 6724 | 6264 | (2457) | (37)% | 460 | 7% |
| Client services | 4143 | 3920 | 2512 | 223 | 6% | 1408 | 56% |
| Software subscriptions | 3150 | 3046 | 2599 | 104 | 3% | 447 | 17% |
| Merger-related costs <sup>(2)</sup> | 2067 |  |  | 2067 | N/A |  | N/A |
| Other | 17960 | 17116 | 15548 | 844 | 5% | 1568 | 10% |
| &nbsp;&nbsp;&nbsp;Total noninterest expense | $127859 | $113583 | $101054 | $14276 | 13% | $12529 | 12% |

---

The following table indicates the percentage of noninterest expense in each category for the periods indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **Percent<br>of Total** | **2024** | **Percent<br>of Total** | **2023** | **Percent<br>of Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Salaries and employee benefits | $66537 | 52% | $63952 | 56% | $56862 | 56% |
| Occupancy and equipment | 9944 | 8% | 10226 | 9% | 9490 | 9% |
| Legal settlement and other charges <sup>(1)</sup> | 9184 | 7% |  | —% |  | —% |
| Professional fees | 6233 | 5% | 5416 | 5% | 4350 | 4% |
| Data processing | 4374 | 3% | 3183 | 3% | 3429 | 4% |
| Insurance expense | 4267 | 3% | 6724 | 6% | 6264 | 6% |
| Client services | 4143 | 3% | 3920 | 3% | 2512 | 3% |
| Software subscriptions | 3150 | 3% | 3046 | 3% | 2599 | 3% |
| Merger-related costs <sup>(2)</sup> | 2067 | 2% |  | —% |  | —% |
| Other | 17960 | 14% | 17116 | 15% | 15548 | 15% |
| &nbsp;&nbsp;&nbsp;Total noninterest expense | $127859 | 100% | $113583 | 100% | $101054 | 100% |

---

__________________________________________________________

<sup>(1)</sup> During the second quarter of 2025, the Company recorded expenses of $9.2 million, primarily due to pre-tax charges related to the settlement of certain litigation matters, including the anticipated settlement of a previously disclosed class action and PAGA lawsuit that alleged the violation of certain California wage-and-hour and related laws and regulations, and charges related to the planned closure of a Bank branch.

<sup>(2)</sup> During fourth quarter of 2025, the Company recorded expenses of $2.1 million, due to pre-tax charges related to the announced pending merger with CVBF.

_________________________________________________________

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Total noninterest expense for the year ended December 31, 2025 increased to $127.9 million, compared to $113.6 million for the year ended December 31, 2024. Adjusted noninterest expense for the year ended December 31, 2025, excluding the impact of the $11.3 million accrual for the legal settlement, merger-related costs and other charges, increased to $116.6 million, compared to $113.6 million for the year ended December 31, 2024, primarily due to higher salaries and employee benefits, partially offset by a decrease in insurance expense. The year ended December 31, 2025 was also impacted by higher professional fees and information technology expenses related to ongoing investments in infrastructure enhancements. Adjusted noninterest expense is a non-GAAP financial measure.

For the year ended December 31, 2024, total noninterest expense increased 12% to $113.6 million, compared to $101.1 million for the year ended December 31, 2023, primarily due to higher salaries and employee benefits, rent expense, professional fees, marketing related expenses, insurance expense, homeowner association third-party vendor payments, and ICS/CDARS fee expense.

Full-time equivalent employees were 342 at December 31, 2025, and 355 at December 31, 2024, and 349 at December 31, 2023.

***Income Tax Expense***

The Company computes its provision for income taxes on a monthly basis. The effective tax rate is determined by applying the Company's statutory income tax rates to pre-tax book income as adjusted for permanent differences between pre-tax book income and actual taxable income. These permanent differences include, but are not limited to increases in the cash surrender value of life insurance policies, interest on tax-exempt securities, certain expenses that are not allowed as tax deductions, and tax credits.

The following table shows the effective tax rate at the dates indicated:

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2024** | **2023** |
| Effective income tax rate | 29.4% | 28.5% | 28.7% |

---

The Company's Federal and state income tax expense in 2025 was $20.0 million, compared to $16.1 million in 2024, and $26.0 million in 2023.

Some items of income and expense are recognized in different years for tax purposes than when applying generally accepted accounting principles leading to timing differences between the Company's actual tax liability, and the amount accrued for this liability based on book income. These temporary differences comprise the "deferred" portion of the Company's tax expense or benefit, which is accumulated on the Company's books as a deferred tax asset or deferred tax liability until such time as they reverse.

Realization of the Company's deferred tax assets is primarily dependent upon the Company generating sufficient future taxable income to obtain benefit from the reversal of net deductible temporary differences and the utilization of tax credit carryforwards and the net operating loss carryforwards for Federal and state income tax purposes. The amount of deferred tax assets considered realizable is subject to adjustment in future periods based on estimates of future taxable income. Under generally accepted accounting principles a valuation allowance is required to be recognized if it is "more likely than not" that the deferred tax assets will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management's evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions.

The Company had the net deferred tax assets of $29.7 million and $27.8 million at December 31, 2025, and December 31, 2024, respectively. After consideration of the matters in the preceding paragraph, management determined that it is more likely than not that the net deferred tax assets at December 31, 2025 and December 31, 2024 will be fully realized in future years.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**FINANCIAL CONDITION**

At December 31, 2025, total assets increased 2% to $5.8 billion, compared to $5.6 billion at December 31, 2024, primarily related to growth in client deposits funding increases in loans and investment securities, partially offset by a decrease in overnight funds.

Securities available-for-sale, at fair value, were $593.0 million at December 31, 2025, an increase of 131% from $256.3 million at December 31, 2024, due to securities purchases, partially offset by maturities and paydowns. Securities held-to-maturity, at amortized cost, were $529.7 million at December 31, 2025, a decrease of 10% from $590.0 million at December 31, 2024, due to maturities and paydowns.

Loans, excluding loans held-for-sale, increased $161.1 million, or 5%, to $3.7 billion at December 31, 2025, compared to $3.5 billion at December 31, 2024. Loans, excluding residential mortgages, increased $200.6 million, or 7%, to $3.2 billion at December, 2025, compared to $3.0 billion at December 31, 2024.

Total deposits increased $83.1 million or 2% to $4.9 billion at December 31, 2025, compared to $4.8 billion at December 31, 2024.

***Securities Portfolio***

The following table reflects the balances for each category of securities at the dates indicated:

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale (at fair value): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $280919 | $70091 |
| &nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations | 256730 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | 55309 | 186183 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $592958 | $256274 |
| Securities held-to-maturity (at amortized cost): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $502381 | $559548 |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipals — exempt from Federal tax <sup>(1)</sup> | 27341 | 30480 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total <sup>(1)</sup> | $529722 | $590028 |

---

_______________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup>Gross of the allowance for credit losses of $11,000 at December 31, 2025 and $12,000 December 31, 2024.

_______________________________________________________

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The table below summarizes the weighted average life and weighted average yields of securities at December 31, 2025:

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| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** | **Weighted Average Life** |
| | | | | **After One and** | **After One and** | | **After Five and** | **After Five and** | | | | | | |
| | **Within One** | **Within One** | | **Within Five** | **Within Five** | | **Within Ten** | **Within Ten** | | **After Ten** | **After Ten** | | | |
| | **Year or Less** | **Year or Less** | | **Years** | **Years** | | **Years** | **Years** | | **Years** | **Years** | | **Total** | **Total** |
| | **Amount** | **Yield** | | **Amount** | **Yield** | | **Amount** | **Yield** | | **Amount** | **Yield** | | **Amount** | **Yield** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale (at fair value): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $478 | 2.25 | % | $129610 | 4.29 | % | $135866 | 4.59 | % | $14965 | 4.87 | % | $280919 | 4.46 |
| &nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations |  |  | % | 154928 | 4.85 | % | 101802 | 4.79 | % |  | 0.00 | % | 256730 | 4.83 |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | 15063 | 4.24 | % | 40246 | 4.29 | % |  |  | % |  | 0.00 | % | 55309 | 4.28 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $15541 | 4.18 | % | $324784 | 4.56 | % | $237668 | 4.68 | % | $14965 | 4.87 | % | $592958 | 4.60 |
| Securities held-to-maturity (at amortized cost): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $3831 | 1.90 | % | $80906 | 1.95 | % | $346151 | 1.84 | % | $71493 | 2.61 | % | $502381 | 1.97 |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipals — exempt from Federal tax <sup>(1) (2)</sup> | 7580 | 3.98 | % | 10181 | 3.35 | % | 9580 | 3.46 | % |  |  | % | 27341 | 3.56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total <sup>(2)</sup> | $11411 | 3.28 | % | $91087 | 2.11 | % | $355731 | 1.88 | % | $71493 | 2.61 | % | $529722 | 2.05 |

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______________________________________________________

(1)Reflects the non-GAAP FTE adjustment for Federal tax exempt income based on a 21% tax rate.

(2)Gross of the allowance for credit losses of ($11,000) at December 31, 2025.

_______________________________________________________

The securities portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to even out cash flows from the loan and deposit activities of clients; (iii) it can be used as an interest rate risk management tool, since it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and other funding sources of the Company; and (iv) it is an alternative interest-earning use of funds when loan demand is weak or when deposits grow more rapidly than loans.

The Company's portfolio may include: (i) U.S. Treasury securities and U.S. Government sponsored entities' debt securities for liquidity and pledging; (ii) mortgage-backed securities, which in many instances can also be used for pledging, and which generally enhance the yield of the portfolio; (iii) municipal obligations, which provide tax free income and limited pledging potential; (iv) single entity issue trust preferred securities, which generally enhance the yield on the portfolio; (v) corporate bonds, which also enhance the yield on the portfolio; (vi) money market mutual funds; (vii) certificates of deposit; (viii) commercial paper; (ix) bankers acceptances; (x) repurchase agreements; (xi) collateralized mortgage obligations; and (xii) asset-backed securities.

The Company classifies its securities as either available-for-sale or held-to-maturity at the time of purchase. Accounting guidance requires available-for-sale securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders' equity. Monthly adjustments are made to reflect changes in the fair value of the Company's available-for-sale securities.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table shows the net pre-tax unrealized and unrecognized gain (loss) on securities available-for-sale and securities held-to-maturity and the allowance for credit losses at the dates indicated:

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale pre-tax unrealized gain (loss): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $(561) | $(4148) |
| &nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations | 472 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | 622 | (912) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $533 | $(5060) |
| Securities held-to-maturity pre-tax unrecognized (loss): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $(63568) | $(91585) |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipals — exempt from Federal tax | (387) | (1431) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $(63955) | $(93016) |
| Allowance for credit losses on municipal securities | $(11) | $(12) |

---

The net pre-tax unrealized gain on the securities available-for-sale portfolio was $533,000, or $295,000 net of taxes, which was less than 1% of total shareholders' equity at December 31, 2025. The net pre-tax unrecognized loss on the securities held-to-maturity portfolio was $64.0 million, or $45.1 million net of taxes, which was 6% of total shareholders' equity at December 31, 2025. The unrealized gains and unrecognized losses in both the available-for-sale and held-to-maturity portfolios were due to higher interest rates at December 31, 2025 compared to when the securities were purchased. The issuers are of high credit quality and all principal amounts are expected to be repaid when the securities mature. The fair values of securities held-to-maturity are expected to recover as the securities approach their maturity date and/or interest rates decline.

***Loans***

The Company's loans represent the largest portion of earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing the Company's financial condition. Gross loans, excluding loans held-for-sale, represented 63% of total assets at December 31, 2025, compared to 62% at December 31, 2024. The loans to deposit ratio was 74.51% at December 31, 2025, compared to 72.45% at December 31, 2024.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Loan Distribution***

The Loan Distribution table that follows sets forth the Company's gross loans HFI outstanding and the percentage distribution in each category at the dates indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | | **December 31, 2024** | **December 31, 2024** | |
| | **Balance** | **% of Total** |<br>&nbsp;&nbsp;&nbsp;&nbsp; | **Balance** | **% of Total** |<br>&nbsp;&nbsp;&nbsp;&nbsp; |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $550362 | 15 | % | $531350 | 15 | % |
| Real estate: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Commercial Real Estate ("CRE") - owner occupied | 623293 | 17 | % | 601636 | 17 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - non-owner occupied | 1475061 | 40 | % | 1341266 | 38 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 133558 | 4 | % | 127848 | 4 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 126085 | 4 | % | 127963 | 4 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Multifamily | 295602 | 8 | % | 275490 | 8 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 432241 | 12 | % | 471730 | 14 | % |
| Consumer and other | 17366 | < 1 | % | 14837 | <1 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Loans | 3653568 | 100 | % | 3492120 | 100 | % |
| Deferred loan fees, net | (508) |  |  | (183) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans, net of deferred fees | 3653060 | 100 | % | 3491937 | 100 | % |
| Allowance for credit losses on loans | (49999) |  |  | (48953) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans, net | $3603061 |  |  | $3442984 |  |  |

---

The Company's loan portfolio is concentrated in commercial loans (primarily manufacturing, wholesale, and services-oriented entities) and CRE, with the remaining balance in land development and construction, home equity, purchased residential mortgages, and consumer loans. The Company does not have any material concentrations by industry or group of industries in its loan portfolio; however, 85% of its gross loans were secured by real property at December 31, 2025, and December 31, 2024. While no specific industry concentration is considered significant, the Company's bank lending operations are substantially located in areas that are dependent on the technology and real estate industries and their supporting companies.

The Company has established concentration limits in its loan portfolio for commercial real estate loans, commercial loans, construction loans and unsecured lending, among others. All loan types are within established limits. The Company uses underwriting guidelines to assess the borrowers' historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending to allow the Company to react to a borrower's deteriorating financial condition, should that occur. Stress testing and debt service on commercial real estate loans are reviewed quarterly.

The Company's commercial loans are made for working capital, financing the purchase of equipment or for other business purposes. Commercial loans include loans with maturities ranging from thirty days to two years and "term loans" with maturities normally ranging from one to five years. Short-term business loans are generally intended to finance current transactions and typically provide for periodic principal payments, with interest payable monthly. Term loans normally provide for floating interest rates, with monthly payments of both principal and interest.

The Company is an active participant in the SBA and U.S. Department of Agriculture guaranteed lending programs, and has been approved by the SBA as a lender under the Preferred Lender Program. The Company regularly makes such loans conditionally guaranteed by the SBA (collectively referred to as "SBA loans"). The guaranteed portion of these loans is typically sold in the secondary market depending on market conditions. When the guaranteed portion of an SBA loan is sold the Company retains the servicing rights for the sold portion. During 2025, loans were sold resulting in a gain on sales of SBA loans of $215,000, compared to a gain on sales of SBA loans of $473,000 for 2024, and $482,000 for 2023.

The Company's factoring receivables are from the operations of Bay View Funding, whose primary business is purchasing and collecting factored receivables on a nation-wide basis. Factored receivables are receivables that have been transferred by the originating organization and typically have not been subject to previous collection efforts. These receivables are acquired from a variety of companies, including, but not limited to, service providers, transportation companies, manufacturers, distributors, wholesalers, apparel companies, advertisers, and temporary staffing companies. The portfolio of factored receivables is included in the Company's commercial loan portfolio. The average life of the factored receivables was 34 days for the year ended December 31, 2025

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

and December 31, 2024, and 37 days for the year ended December 31, 2023. The following table shows the balance of factored receivables at period-end, average balances during the period, and full time equivalent employees of Bay View Funding at period-end:

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Total factored receivables at period-end | $118503 | $68897 |
| Average factored receivables: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;For the year ended | $74189 | $55717 |
| Total full time equivalent employees at period-end | 30 | 30 |

---

The commercial loan portfolio increased $19.0 million, or 4%, to $550.4 million at December 31, 2025, from $531.4 million at December 31, 2024. Commercial and industrial line utilization decreased to 32% at December 31, 2025, compared to 34% at December 31, 2024.

The Company's CRE loans consist primarily of loans based on the borrower's cash flow and are secured by deeds of trust on commercial property to provide a secondary source of repayment. The Company generally restricts real estate term loans to no more than 75% of the property's appraised value or the purchase price of the property depending on the type of property and its utilization. For each category of CRE, the Company has set its requirements for loan to appraised value or purchase price to a level that is below supervisory limits. The Company offers both fixed and floating rate loans. Maturities for CRE loans are generally between five and ten years (with amortization ranging from fifteen to twenty-five years and a balloon payment due at maturity), however, SBA, and certain other real estate loans that can be sold in the secondary market, may be granted for longer maturities.

The CRE owner occupied loan portfolio increased $21.7 million, or 4% to $623.3 million at December 31, 2025, from $601.6 million at December 31, 2024. CRE non-owner occupied loans increased $133.8 million, or 10% to $1.5 billion at December 31, 2025, from $1.3 billion at December 31, 2024. At December 31, 2025, 30% of the CRE loan portfolio was secured by owner occupied real estate, compared to 31% at December 31, 2024.

During the year ended December 31, 2025, there were 182 new owner occupied and non-owner occupied CRE loans originated totaling $359.7 million with a weighted average loan-to-value ("LTV") of 46%; the weighted average debt-service coverage ratio ("DSCR") for the non-owner occupied portfolio was 1.78 times. The average loan size for all CRE loans was $1.7 million, and the average loan size for office CRE loans was $1.8 million. The Company has personal guarantees on 91% of its CRE portfolio. A substantial portion of the unguaranteed CRE loans were made to credit-worthy non-profit organizations.

Total office exposure (excluding medical/dental offices) in the CRE portfolio was $467 million, including 30 loans totaling approximately $70 million in San Jose, 17 loans totaling approximately $25 million in San Francisco, and nine loans totaling approximately $16 million in Oakland at December 31, 2025. Non-owner occupied CRE with office exposure totaled $363 million at December 31, 2025. At December 31, 2025, the weighted average LTV and DSCR for the entire non-owner occupied office portfolio were 42% and 2.10 times, respectively. Total medical/dental office exposure in the non-owner occupied CRE portfolio consisted of 18 loans totaling $20 million, with a weighted average LTV and DSCR ratio of 41% and 2.70 times, respectively, at December 31, 2025.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table presents the weighted average LTV and DSCR by collateral type for CRE loans at December 31, 2025:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Owner Occupied** | **CRE - Owner Occupied** | **Total CRE** | **Total CRE** |
|<br>**Collateral Type** | **Outstanding** | **LTV** | **DSCR** | **Outstanding** | **LTV** | **Outstanding** | **LTV** |
| Retail | 26% | 37.1% | 2.08 | 14% | 46.0% | 23% | 38.5% |
| Industrial | 19% | 38.8% | 2.49 | 35% | 42.4% | 23% | 40.2% |
| Mixed-Use, Special |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purpose and Other | 18% | 42.0% | 1.91 | 33% | 40.3% | 22% | 41.3% |
| Office | 20% | 41.9% | 2.10 | 18% | 43.7% | 20% | 42.4% |
| Multifamily | 17% | 42.9% | 1.91 | 0% | 0% | 12% | 42.9% |
| Hotel/Motel | <1% | 15.7% | 0.64 | 0% | 0% | <1% | 15.7% |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 100% | 40.1% | 2.10 | 100% | 42.4% | 100% | 40.7% |

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The following table presents the weighted average LTV and DSCR by county for CRE loans at December 31, 2025:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Owner Occupied** | **CRE - Owner Occupied** | **Total CRE** | **Total CRE** |
|<br>**County** | **Outstanding** | **LTV** | **DSCR** | **Outstanding** | **LTV** | **Outstanding** | **LTV** |
| Alameda | 24% | 43.4% | 1.78 | 17% | 43.7% | 22% | 43.5% |
| Contra Costa | 7% | 39.7% | 1.90 | 9% | 43.3% | 7% | 40.9% |
| Marin | 6% | 44.8% | 2.01 | 3% | 56.1% | 5% | 46.5% |
| Monterey | 2% | 37.8% | 2.13 | 2% | 37.2% | 2% | 37.6% |
| Napa | <1% | 28.4% | 2.89 | 1% | 45.3% | <1% | 33.1% |
| Out of Area | 8% | 43.4% | 1.83 | 9% | 48.4% | 8% | 44.8% |
| San Benito | 1% | 37.3% | 2.15 | 2% | 38.8% | 1% | 38.0% |
| San Francisco | 9% | 38.3% | 2.26 | 4% | 40.3% | 8% | 38.5% |
| San Mateo | 13% | 40.3% | 2.20 | 15% | 40.5% | 14% | 40.4% |
| Santa Clara | 24% | 37.3% | 2.33 | 34% | 40.9% | 27% | 38.6% |
| Santa Cruz | 2% | 31.6% | 1.86 | 1% | 47.0% | 2% | 34.3% |
| Solano | 2% | 35.2% | 3.23 | 1% | 35.2% | 2% | 35.2% |
| Sonoma | 2% | 37.8% | 2.49 | 2% | 42.1% | 2% | 38.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 100% | 40.1% | 2.10 | 100% | 42.4% | 100% | 40.7% |

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The Company's land and construction loans are primarily to finance the development/construction of commercial and single family residential properties. The Company utilizes underwriting guidelines to assess the likelihood of repayment from sources such as sale of the property or availability of permanent mortgage financing prior to making the construction loan. Construction loans are provided primarily in our market area, and we have extensive controls for the disbursement process. Land and construction loans increased $5.7 million, or 4%, to $133.6 million at December 31, 2025, from $127.8 million at December 31, 2024.

The Company makes home equity lines of credit available to its existing clients. Home equity lines of credit are underwritten initially with a maximum 75% loan to value ratio. Home equity lines of credit decreased $1.9 million, or 1%, to $126.1 million at December 31, 2025, from $128.0 million at December 31, 2024

Multifamily loans increased $20.1 million, or 7%, to $295.6 million at December 31, 2025, compared to $275.5 million at December 31, 2024.

From time to time the Company has purchased single family residential mortgage loans. Purchases of residential loans have been an attractive alternative for replacing mortgage-backed security paydowns in the investment securities portfolio. Residential

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

mortgage loans decreased $39.5 million, or 8%, to $432.2 million at December 31, 2025, compared to $471.1 million at December 31, 2024.

Additionally, the Company makes consumer loans for the purpose of financing automobiles, various types of consumer goods, and other personal purposes. Consumer loans generally provide for the monthly payment of principal and interest. Most of the Company's consumer loans are secured by the personal property being purchased or, in the instances of home equity loans or lines of credit, real property. Consumer and other loans increased $2.5 million, or 17%, to $17.4 million at December 31, 2025, compared to $14.8 million at December 31, 2024.

With certain exceptions, state chartered banks are permitted to make extensions of credit to any one borrowing entity up to 15% of the bank's capital and reserves for unsecured loans and up to 25% of the bank's capital and reserves for secured loans. For HBC, these lending limits were $117.5 million and $195.9 million at December 31, 2025, respectively.

***Loan Maturities***

The following table presents the maturity distribution of the Company's loans (excluding loans held-for-sale), as of December 31, 2025. The table shows the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates. Floating rates generally fluctuate with changes in the prime rate and contractual repricing dates. At December 31, 2025, approximately 23% of the Company's loan portfolio consisted of floating interest rate loans.

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| | | | | |
|:---|:---|:---|:---|:---|
| |<br>**Due in**<br>**One Year**<br>**or Less** | **Over One**<br>**Year But**<br>**Less than**<br>**Five Years** |<br>**Over**<br>**Five Years** |<br><br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $393054 | $117877 | $39431 | $550362 |
| Real estate: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - owner occupied | 32222 | 262002 | 329069 | 623293 |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - non-owner occupied | 104733 | 612338 | 757990 | 1475061 |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 100186 | 30898 | 2474 | 133558 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 4995 | 23525 | 97565 | 126085 |
| &nbsp;&nbsp;&nbsp;&nbsp; Multifamily | 24931 | 153325 | 117346 | 295602 |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 3002 | 18707 | 410532 | 432241 |
| Consumer and other | 8591 | 7897 | 878 | 17366 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans | $671714 | $1226569 | $1755285 | $3653568 |
| Loans with variable interest rates | $421578 | 199306 | 217038 | $837922 |
| Loans with fixed interest rates | 250136 | 1027263 | 1538247 | 2815646 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans | $671714 | $1226569 | $1755285 | $3653568 |

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Loan Servicing***

At December 31, 2025, 2024, and 2023, SBA loans that the Company serviced for others totaled $41.1 million, $48.3 million, and $55.8 million, respectively. Activity for loan servicing rights was as follows for the periods indicated:

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $344 | $415 | $549 |
| Additions | 47 | 110 | 126 |
| Amortization | (140) | (181) | (260) |
| &nbsp;&nbsp;&nbsp;End of period balance | $251 | $344 | $415 |

---

Loan servicing rights are included in accrued interest receivable and other assets on the consolidated balance sheets and reported net of amortization. There was no valuation allowance at December 31, 2025 and 2024, as the fair value of the assets was greater than the carrying value.

Activity for the interest-only ("I/O") strip receivable was as follows for the periods indicated:

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $82 | $117 | $152 |
| Unrealized holding loss | (49) | (35) | (35) |
| &nbsp;&nbsp;&nbsp;End of period balance | $33 | $82 | $117 |

---

Management reviews the key economic assumptions used to estimate the fair value of I/O strip receivables on a quarterly basis. The fair value of the I/O strip can be adversely impacted by a significant increase in either the prepayment speed of the portfolio or the discount rate. At December 31, 2025, key economic assumptions and the sensitivity of the fair value of the I/O strip receivables to immediate changes to the CPR assumption of 10% and 20%, and changes to the discount rate assumption of 1% and 2%, are as follows:

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| | |
|:---|:---|
| | **(Dollars in thousands)** |
| Carrying amount/fair value of Interest-Only (I/O) strip | $33 |
| Prepayment speed assumption (annual rate) | 18.6% |
| Impact on fair value of 10% adverse change in prepayment speed (CPR 20.5%) | $(1) |
| Impact on fair value of 20% adverse change in prepayment speed (CPR 22.4%) | $(1) |
| Residual cash flow discount rate assumption (annual) | 13.5% |
| Impact on fair value of 1% adverse change in discount rate (13.6% discount rate) | $— |
| Impact on fair value of 2% adverse change in discount rate (13.7% discount rate) | $(1) |

---

***Off-Balance Sheet Arrangements***

In the normal course of business, the Company makes commitments to extend credit to its clients as long as there are no violations of any conditions established in contractual arrangements. These commitments are obligations that represent a potential credit risk to the Company, yet are not reflected in any form within the Company's consolidated balance sheets. Total unused commitments to extend credit were $1.2 billion and $1.0 billion at December 31, 2025 and December 31, 2024, respectively. Unused commitments represented 32% of outstanding gross loans at December 31, 2025 and 30% at December 31, 2024.

The effect on the Company's revenues, expenses, cash flows and liquidity from the unused portion of the commitments to provide credit cannot be reasonably predicted, because there is no certainty that the lines of credit will ever be fully utilized. For more

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

information regarding the Company's off-balance sheet arrangements, see Note 15 to the consolidated financial statements located elsewhere herein.

***Credit Quality and Allowance for Credit Losses on Loans***

Like all financial institutions, HBC has exposure to credit quality risk, which generally arises because we could potentially receive less than a full return of principal and interest if a debtor becomes unable or unwilling to repay. Since loans are the Company's most significant assets and generate the largest portion of its revenues, the Company's management of credit quality risk is focused primarily on loan quality. Banks have generally suffered their most severe earnings declines as a result of clients' inability to generate sufficient cash flow to service their debts and/or downturns in national and regional economies and declines in overall asset values, including real estate. In addition, certain debt securities that the Company may purchase have the potential of declining in value if the obligor's financial capacity to repay deteriorates.

The Company's policies and procedures identify market segments, set goals for portfolio growth or contraction, and establish limits on industry and geographic credit concentrations. In addition, these policies establish the Company's underwriting standards and the methods of monitoring ongoing credit quality. The Company's internal credit risk controls are centered in underwriting practices, credit granting procedures, training, risk management techniques, and familiarity with loan clients as well as the relative diversity and geographic concentration of our loan portfolio.

The Company's credit risk also may be affected by external factors such as the level of interest rates, employment, general economic conditions, real estate values, and trends in particular industries or geographic markets. As an independent community bank serving a specific geographic area, the Company must contend with the unpredictable changes in the general California market and, particularly, primary local markets. The Company's asset quality has suffered in the past from the impact of national and regional economic recessions, consumer bankruptcies, and depressed real estate values.

Nonperforming assets are comprised of the following: loans for which the Company is no longer accruing interest; restructured loans which have been current under six months; loans 90 days or more past due and still accruing interest (although they are generally placed on nonaccrual when they become 90 days past due, unless they are both well-secured and in the process of collection); and foreclosed assets. The following tables present the aging of past due loans by class at the dates indicated:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **30 - 59**<br>**Days**<br>**Past Due** | **60 - 89**<br>**Days**<br>**Past Due** | **90 Days or**<br>**Greater**<br>**Past Due** |<br>**Total**<br>**Past Due** |<br>**Current** |<br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $16058 | $4140 | $1046 | $21244 | $529118 | $550362 |
| Real estate: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - Owner Occupied |  |  | 31 | 31 | 623262 | 623293 |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - Non-Owner Occupied | 101 |  |  | 101 | 1474960 | 1475061 |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction |  |  | 1663 | 1663 | 131895 | 133558 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 131 |  |  | 131 | 125954 | 126085 |
| &nbsp;&nbsp;&nbsp;&nbsp; Multifamily |  |  |  |  | 295602 | 295602 |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 1057 | 833 |  | 1890 | 430351 | 432241 |
| Consumer and other |  |  |  |  | 17366 | 17366 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $17347 | $4973 | $2740 | $25060 | $3628508 | $3653568 |

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **30 - 59**<br>**Days**<br>**Past Due** | **60 - 89**<br>**Days**<br>**Past Due** | **90 Days or**<br>**Greater**<br>**Past Due** |<br>**Total**<br>**Past Due** |<br>**Current** |<br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $7364 | $2295 | $1393 | $11052 | $520298 | $531350 |
| Real estate: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - Owner Occupied | 1879 |  |  | 1879 | 599757 | 601636 |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - Non-Owner Occupied | 4479 |  |  | 4479 | 1336787 | 1341266 |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 4290 | 2323 | 5874 | 12487 | 115361 | 127848 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 78 | 750 |  | 828 | 127135 | 127963 |
| &nbsp;&nbsp;&nbsp;&nbsp; Multifamily |  |  |  |  | 275490 | 275490 |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 850 |  |  | 850 | 470880 | 471730 |
| Consumer and other |  | 117 | 213 | 330 | 14507 | 14837 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | $18940 | $5485 | $7480 | $31905 | $3460215 | $3492120 |

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The following table presents the past due loans on nonaccrual and current loans on nonaccrual at the dates indicated:

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Past due nonaccrual loans | $2004 | $7068 |
| Current nonaccrual loans | 44 | 110 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total nonaccrual loans | $2048 | $7178 |

---

Management's classification of a loan as "nonaccrual" is an indication that there is reasonable doubt as to the full recovery of principal or interest on the loan. At that point, the Company stops accruing interest income, and reverses any uncollected interest that had been accrued as income. The Company resumes recognizing interest income only as cash interest payments are received and it has been determined the collection of all outstanding principal is not in doubt. The loans may or may not be collateralized, and collection efforts are pursued. Loans may be restructured by management when a borrower has experienced some change in financial status, causing an inability to meet the original repayment terms and where the Company believes the borrower will eventually overcome those circumstances and make full restitution. Foreclosed assets consist of properties and other assets acquired by foreclosure or similar means that management is offering or will offer for sale.

There were no foreclosed assets on the balance sheet at December 31, 2025 or December 31, 2024. There were no Shared National Credits or material purchased participations included in NPAs or total loans at December 31, 2025 or December 31, 2024.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table summarizes the Company's nonperforming assets at the dates indicated:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | | **2024** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Nonaccrual loans — held-for-investment | $2048 |  | $7178 |  |
| Loans 90 days past due and still accruing | 735 |  | 489 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total nonperforming loans | 2783 |  | 7667 |  |
| Foreclosed assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total nonperforming assets | $2783 |  | $7667 |  |
| Nonperforming assets as a percentage of loans |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; plus foreclosed assets | 0.08 | % | 0.22 | % |
| Nonperforming assets as a percentage of total assets | 0.05 | % | 0.14 | % |

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The following table presents the amortized cost basis of nonperforming loans and loans past due over 90 days and still accruing at the dates indicated:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| |<br>**Nonaccrual**<br>**with no Specific**<br>**Allowance for**<br>**Credit**<br>**Losses** |<br>**Nonaccrual**<br>**with Specific**<br>**Allowance for**<br>**Credit**<br>**Losses** | **Restructured**<br>**Loans**<br>**over 90 Days**<br>**Past Due**<br> **and Still**<br>**Accruing** |<br><br><br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $41 | $313 | $735 | $1089 |
| Real estate: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - Owner Occupied | 31 |  |  | 31 |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 1663 |  |  | 1663 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $1735 | $313 | $735 | $2783 |

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Nonaccrual**<br>**with no Specific**<br>**Allowance for**<br>**Credit**<br>**Losses** | **Nonaccrual**<br>**with Specific**<br>**Allowance for**<br>**Credit**<br>**Losses** | **Loans**<br>**over 90 Days**<br>**Past Due**<br> **and Still**<br>**Accruing** |<br><br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $313 | $701 | $489 | $1503 |
| Real estate: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 5874 |  |  | 5874 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 77 |  |  | 77 |
| Consumer and other |  | 213 |  | 213 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $6264 | $914 | $489 | $7667 |

---

Loans with a well-defined weakness, which are characterized by the distinct possibility that the Company will sustain a loss if the deficiencies are not corrected, are categorized as "classified." Classified loans include all loans considered as substandard, substandard-nonaccrual, and doubtful, and may result from problems specific to a borrower's business or from economic downturns that affect the borrower's ability to repay or that cause a decline in the value of the underlying collateral (particularly real estate). Loans held for sale are carried at the lower of cost or estimated fair value, and are not allocated an allowance for credit losses.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The amortized cost basis of collateral-dependent loans at December 31, 2025 was $313,000, of which $270,000 were secured by real estate and $43,000 were secured by business assets. The amortized cost basis of collateral-dependent loans, collateralized by business assets, totaled $701,000 at December 31, 2024.

When management determines that foreclosures are probable, expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For loans for which foreclosure is not probable, but for which repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty, management has elected the practical expedient under ASC 326 to estimate expected credit losses based on the fair value of collateral, adjusted for selling costs as appropriate. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

Classified loans decreased to $29.2 million, or 0.51% of total assets, at December 31, 2025, compared to $41.7 million, or 0.74% of total assets at December 31, 2024. The increase in classified assets at December 31, 2025 reflects improvement in owner occupied CRE credit, and a number of residential related loans.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company's underwriting policy.

The ACLL is calculated by using the CECL methodology. The ACLL estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments. These segments are further disaggregated into loan classes, the level at which credit risk is monitored. When computing the level of expected credit losses, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.

The allowance level is influenced by loan volumes, loan risk rating migration or delinquency status, changes in historical loss experience, and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics. Descriptions of the Company's loan portfolio segments are included in Note 1 "*Summary of Significant Accounting Policies – Allowance for Credit Losses on Loans*" in this Form 10-K.

Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses on loans.

***Allocation of Allowance for Credit Losses on Loans***

As a result of the matters mentioned above, changes in the financial condition of individual borrowers, economic conditions, historical loss experience and the condition of the various markets in which collateral may be sold may all affect the required level of the allowance for credit losses on loans and the associated provision for credit losses on loans.

On an ongoing basis, we have engaged an outside firm to perform independent credit reviews of our loan portfolio on a sample basis, subject to review by the Federal Reserve Board and the California Department of Financial Protection and Innovation. Based on information currently available, management believes that the allowance for credit losses on loans is adequate. However, the loan portfolio can be adversely affected if economic conditions in general, and the real estate market in the San Francisco Bay Area market in particular, were to weaken further. Also, any weakness of a prolonged nature in the technology industry would have a negative impact on the local market. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased loan losses, which could adversely affect the Company's future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Changes in the allowance for credit losses on loans were as follows for the periods indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** | **2022** | **2021** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of year balance | $48953 | $47958 | $47512 | $43290 | $44400 |
| Charge-offs: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Commercial | (1241) | (1305) | (750) | (434) | (520) |
| &nbsp;&nbsp;&nbsp;&nbsp; Real estate: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CRE - owner occupied |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CRE - non-owner occupied |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Home equity |  |  | (246) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Consumer and other | (197) | (299) | (15) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total charge-offs | (1438) | (1604) | (1011) | (434) | (520) |
| Recoveries: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Commercial | 136 | 336 | 346 | 427 | 1354 |
| &nbsp;&nbsp;&nbsp;&nbsp; Real estate: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - owner occupied | 43 | 27 | 11 | 15 | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - non-owner occupied |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction |  |  |  |  | 884 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 296 | 97 | 351 | 105 | 93 |
| &nbsp;&nbsp;&nbsp;&nbsp; Consumer and other | 193 |  |  | 3343 | 197 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total recoveries | 668 | 460 | 708 | 3890 | 2544 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (charge-offs) recoveries | (770) | (1144) | (303) | 3456 | 2024 |
| Provision for (recapture of) credit losses on loans | 1816 | 2139 | 749 | 766 | (3134) |
| End of year balance | $49999 | $48953 | $47958 | $47512 | $43290 |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** |
| |<br>**Commercial** | **CRE**<br>**Owner**<br>**Occupied** | **CRE**<br>**Non-owner**<br>**Occupied** |<br>**Land &**<br>**Construction** |<br>**Home**<br>**Equity** |<br>**Multi-**<br>**Family** |<br>**Residential**<br>**Mortgages** |<br>**Consumer**<br>**and Other** |<br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $6060 | $5225 | $26779 | $1400 | $798 | $4735 | $3618 | $338 | $48953 |
| Charge-offs | (1241) |  |  |  |  |  |  | (197) | (1438) |
| Recoveries | 136 | 43 |  |  | 296 |  |  | 193 | 668 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net (charge-offs) recoveries | (1105) | 43 |  |  | 296 |  |  | (4) | (770) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | 418 | 816 | 1675 | 639 | (256) | (434) | (904) | (138) | 1816 |
| End of period balance | $5373 | $6084 | $28454 | $2039 | $838 | $4301 | $2714 | $196 | $49999 |
| Percent of ACLL to Total ACLL |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;at end of period | 11% | 12% | 57% | 4% | 2% | 9% | 5% | < 1% | 100% |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** |
| |<br>**Commercial** | **CRE**<br>**Owner**<br>**Occupied** | **CRE**<br>**Non-owner**<br>**Occupied** |<br>**Land &**<br>**Construction** |<br>**Home**<br>**Equity** |<br>**Multi-**<br>**Family** |<br>**Residential**<br>**Mortgages** |<br>**Consumer**<br>**and Other** |<br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $5853 | $5121 | $25323 | $2352 | $644 | $5053 | $3425 | $187 | $47958 |
| Charge-offs | (1305) |  |  |  |  |  |  | (299) | (1604) |
| Recoveries | 336 | 27 |  |  | 97 |  |  |  | 460 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net (charge-offs) recoveries | (969) | 27 |  |  | 97 |  |  | (299) | (1144) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | 1176 | 77 | 1456 | (952) | 57 | (318) | 193 | 450 | 2139 |
| End of period balance | $6060 | $5225 | $26779 | $1400 | $798 | $4735 | $3618 | $338 | $48953 |
| Percent of ACLL to Total ACLL |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;at end of period | 12% | 11% | 55% | 3% | 1% | 10% | 7% | < 1% | 100% |

---

The increase in the allowance for credit losses on loans of $1.0 million for the year ended December 31, 2025, was primarily attributed to loan growth.

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table provides a summary of the allocation of the allowance for credit losses on loans by class at the dates indicated. The allocation presented should not be interpreted as an indication that charges to the allowance for credit losses on loans will be incurred in these amounts or proportions, or that the portion of the allowance allocated to each category represents the total amount available for charge-offs that may occur within these classes.

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2025** | **2024** | **2024** | **2023** | **2023** | **2022** | **2022** | **2021** | **2021** |
| | **Allowance** | **Percent<br>of Loans<br>in each<br>category<br>to total<br>loans** | **Allowance** | **Percent<br>of Loans<br>in each<br>category<br>to total<br>loans** | **Allowance** | **Percent<br>of Loans<br>in each<br>category<br>to total<br>loans** | **Allowance** | **Percent<br>of Loans<br>in each<br>category<br>to total<br>loans** | **Allowance** | **Percent<br>of Loans<br>in each<br>category<br>to total<br>loans** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $5373 | 15% | $6060 | 15% | $5853 | 14% | $6617 | 16% | $8414 | 22% |
| Real estate: |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;CRE - owner occupied | 6084 | 17% | 5225 | 17% | 5121 | 17% | 5751 | 19% | 7954 | 19% |
| &nbsp;&nbsp;&nbsp;CRE - non-owner occupied | 28454 | 38% | 26779 | 38% | 25323 | 37% | 22135 | 32% | 17125 | 29% |
| &nbsp;&nbsp;&nbsp;Land and construction | 2039 | 4% | 1400 | 4% | 2352 | 4% | 2941 | 5% | 1831 | 5% |
| &nbsp;&nbsp;&nbsp;Home equity | 838 | 4% | 798 | 4% | 644 | 4% | 666 | 4% | 864 | 4% |
| &nbsp;&nbsp;&nbsp;Multifamily | 4301 | 8% | 4735 | 8% | 5053 | 8% | 3366 | 7% | 2796 | 7% |
| &nbsp;&nbsp;&nbsp;Residential mortgages | 2714 | 14% | 3618 | 14% | 3425 | 15% | 5907 | 16% | 4132 | 13% |
| Consumer and other | 196 | <1% | 338 | <1% | 187 | 1% | 129 | 1% | 174 | 1% |
| &nbsp;&nbsp;&nbsp;Total | $49999 | 100% | $48953 | 100% | $47958 | 100% | $47512 | 100% | $43290 | 100% |

---

The ACLL totaled $50.0 million, or 1.37% of total loans, at December 31, 2025, compared to $49.0 million, or 1.40% of total loans at December 31, 2024. The allowance for credit losses on loans to total nonperforming loans was 1,797% at December 31, 2025, compared to 638% at December 31, 2024. The Company had net charge-offs of $770,000, or 0.02% of average loans, for the year ended December 31, 2025, compared to $1.1 million, or 0.03% of average loans, for the year ended December 31, 2024, and $303,000, or 0.01% of average loans, for the year ended December 31, 2023.

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table shows the drivers of change in ACLL for the year ended December 31, 2025:

---

| | |
|:---|:---|
| | **(Dollars in thousands)** |
| ACLL at December 31, 2024 | $48953 |
| Portfolio changes during the first quarter of 2025 | (299) |
| Qualitative and quantitative changes during the first |  |
| quarter of 2025 including changes in economic forecasts | (392) |
| &nbsp;&nbsp;&nbsp;&nbsp; ACLL at March 31, 2025 | 48262 |
| Portfolio changes during the second quarter of 2025 | 716 |
| Qualitative and quantitative changes during the second |  |
| quarter of 2025 including changes in economic forecasts | (345) |
| &nbsp;&nbsp;&nbsp;&nbsp; ACLL at June 30, 2025 | 48633 |
| Portfolio changes during the third quarter of 2025 | 620 |
| Qualitative and quantitative changes during the third |  |
| quarter of 2025 including changes in economic forecasts | 174 |
| &nbsp;&nbsp;&nbsp;&nbsp; ACLL at September 30, 2025 | $49427 |
| Portfolio changes during the fourth quarter of 2025 | 1170 |
| Qualitative and quantitative changes during the fourth |  |
| quarter of 2025 including changes in economic forecasts | (598) |
| &nbsp;&nbsp;&nbsp;&nbsp; ACLL at December 31, 2025 | $49999 |

---

***Leases***

The Company recognizes the following for all leases, at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use ("ROU") asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. The Company's lease agreements include options to renew at the Company's discretion. The extensions are not reasonably certain to be exercised, therefore it was not considered in the calculation of the ROU asset and lease liability. Total assets and total liabilities included $28.5 million and $30.6 million at December 31, 2025 and December 31, 2024, respectively, as a result of recognizing right-of-use assets, which are included in other assets, and lease liabilities, included in other liabilities, related to non-cancelable operating lease agreements for office space. See Note 7 to the consolidated financial statements.

***Deposits***

The composition and cost of the Company's deposit base are important components in analyzing the Company's net interest margin and balance sheet liquidity characteristics, both of which are discussed in greater detail in other sections herein. The Company's liquidity is impacted by the volatility of deposits from the propensity of that money to leave the institution for rate-related or other reasons. Deposits can be adversely affected if economic conditions weaken in California, and the Company's market area in particular. Potentially, the most volatile deposits in a financial institution are jumbo certificates of deposit, meaning time deposits with balances that equal or exceed $250,000, as clients with balances of that magnitude are typically more rate-sensitive than clients with smaller balances.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table summarizes the distribution of deposits and the percentage of distribution in each category of deposits at the dates indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | | **December 31, 2024** | **December 31, 2024** |
| | **Balance** | **% of Total** | | **Balance** | **% of Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Demand, noninterest-bearing | $1308737 | 27 | % | $1214192 | 25 |
| Demand, interest-bearing | 957146 | 19 | % | 936587 | 19 |
| Savings and money market | 1380666 | 28 | % | 1325923 | 28 |
| Time deposits — under $250 | 31500 | 1 | % | 38988 | 1 |
| Time deposits — $250 and over | 220715 | 5 | % | 206755 | 4 |
| ICS/CDARS — interest-bearing demand, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;money market and time deposits | 1004322 | 20 | % | 1097586 | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total deposits | $4903086 | 100 | % | $4820031 | 100 |

---

&nbsp;&nbsp;&nbsp;&nbsp;

The Company obtains deposits from a cross-section of the communities it serves. The Company's business is not generally seasonal in nature. Public funds were less than 1% of deposits at December 31, 2025 and December 31, 2024.

Total deposits increased $83.1 million, or 2% to $4.9 billion at December 31, 2025, compared to $4.8 billion at December 31, 2024.

The Company had 25,324 deposit accounts at December 31, 2025, with an average balance of $194,000, compared to 25,427 deposit accounts, with an average balance of $190,000 at December 31, 2024.

Deposits from the Bank's top 100 client relationships, representing 23% of the total number of accounts, totaled $2.4 billion, representing 49% of total deposits, with an average account size of $415,000 at December 31, 2025. At December 31, 2024, deposits from the Bank's top 100 client relationships, representing 22% of the total number of accounts, totaled $2.2 billion, representing 47% of total deposits, with an average account size of $400,000.

The Bank's uninsured deposits were approximately $2.4 billion, or 48% of total deposits, at December 31, 2025, compared to $2.2 billion, or 45% of total deposits, at December 31, 2024.

At December 31, 2025, the $1.0 billion ICS/CDARS deposits were comprised of $433.1 million of interest-bearing demand deposits, $285.2 million of money market accounts and $276.0 million of time deposits. At December 31, 2024, the $1.1 billion ICS/CDARS deposits were comprised of $433.4 million of interest-bearing demand deposits, $345.5 million of money market accounts and $318.7 million of time deposits.

The following table indicates the contractual maturity schedule of the Company's uninsured time deposits in excess of $250,000 at December 31, 2025:

---

| | | |
|:---|:---|:---|
| | **Balance** | **% of Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Three months or less | $50122 | 30 |
| Over three months through six months | 38560 | 23 |
| Over six months through twelve months | 50321 | 31 |
| Over twelve months | 25712 | 16 |
| Total | $164715 | 100 |

---

The Company focuses primarily on providing and servicing business deposit accounts that are frequently over $250,000 in average balance per account. As a result, certain types of business clients that the Company serves typically carry average deposits in excess of $250,000. The account activity for some account types and client types necessitates appropriate liquidity management practices by the Company to ensure its ability to fund deposit withdrawals.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The contractual maturity of total deposits at December 31, 2025, are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Less Than<br>One Year** | **One to<br>Three Years** | **Three to<br>Five Years** | **After<br>Five Years** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Deposits <sup>(1)</sup> | $4854872 | $47662 | $269 | $283 | $4903086 |

---

_______________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup>Deposits with indeterminate maturities, such as demand, savings and money market accounts, are reflected as obligations due in less than one year.

_______________________________________________________

***Return on Equity and Assets***

The following table indicates the ratios for return on average assets and average equity, and average equity to average assets for the periods indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** | **Year Ended** |
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** |  | **2024** | | **2023** |
| Return on average assets | 0.86 | % | 0.76 | % | 1.22 |
| Return on average tangible assets <sup>(1)</sup> | 0.88 | % | 0.78 | % | 1.26 |
| Return on average equity | 6.86 | % | 5.97 | % | 9.88 |
| Return on average tangible common equity <sup>(1)</sup> | 9.12 | % | 8.05 | % | 13.57 |
| Average equity to average assets ratio | 12.49 | % | 12.71 | % | 12.62 |
| Adjusted: |  |  |  |  |  |
| Return on average assets <sup>(1)</sup> | 1.01 | % | 0.76 | % | 1.22 |
| Return on average tangible common equity <sup>(1)</sup> | 10.77 | % | 8.05 | % | 13.57 |

---

_______________________________________________________

<sup>(1)</sup> This is a non-GAAP financial measure. A reconciliation of GAAP to non-GAAP financial measures are presented in the tables under "*Reconciliation of Non-GAAP Financial Measures.*"

_______________________________________________________

***Liquidity, Asset/Liability Management and Available Lines of Credit***

The Company's liquidity position supports its ability to maintain cash flows sufficient to fund operations, meet all of its financial obligations and commitments, and accommodate unexpected sudden changes in balances of loans and demand for deposits in a timely manner. At various times the Company requires funds to meet short term cash requirements brought about by loan growth or deposit outflows, the purchase of assets, or repayment of liabilities. An integral part of the Company's ability to manage its liquidity position appropriately is derived from its large base of core deposits which are generated by offering traditional banking services in its service area and which have historically been a stable source of funds.

The Company manages liquidity to be able to meet unexpected sudden changes in levels of its assets or deposit liabilities without maintaining excessive amounts of balance sheet liquidity. In order to meet short term liquidity needs the Company utilizes overnight Federal funds purchase arrangements and other borrowing arrangements with correspondent banks, solicits brokered deposits if cost effective deposits are not available from local sources, and maintains collateralized lines of credit with the FHLB and FRB.

The Company monitors its liquidity position and funding strategies on a daily basis, but recognizes that unexpected events, economic or market conditions, earnings issues or situations beyond its control could cause either a short or long term liquidity crisis. The Company has a detailed Contingency Funding Plan that will be used in the event of a "Liquidity Event" defined as a reduction in liquidity such that a normal deposit and liquidity environment cannot meet funding needs. In addition to other tools used to monitor liquidity and funding, the Company prepares liquidity stress scenarios that include lower-probability, higher impact scenarios, with various levels of severity. The liquidity stress scenarios incorporate the impact of moderate risk and higher risk situations, at least on a

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

quarterly basis, or more often as circumstances require. The liquidity stress scenarios include a dashboard showing key liquidity ratios compared to established target limits and estimated cash flows for the next several quarters.

One of the measures of liquidity is the loan to deposit ratio. The loan to deposit ratio was 74.51% at December 31, 2025, compared to 72.45% at December 31, 2024.

The Company's total liquidity and borrowing capacity at December 31, 2025 was $3.3 billion, all of which remained available. The available liquidity and borrowing capacity was 67% of the Company's total deposits and approximately 140% of the Bank's estimated uninsured deposits at December 31, 2025.

HBC has off-balance sheet liquidity in the form of Federal funds purchase arrangements with correspondent banks, and lines of credit from the FHLB and FRB. HBC maintains a collateralized line of credit with the FHLB of San Francisco. Under this line, HBC can borrow from the FHLB on a short-term (typically overnight) or long-term (over one year) basis. HBC can also borrow from the FRB discount window. The following table shows the collateral value of loans and securities pledged for the lines of credit (if collateralized), total available lines of credit, the amounts outstanding, and the remaining available at the dates indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **Collateral**<br>**Value** | **Total**<br>**Available** |<br>**Outstanding** | **Remaining**<br>**Available** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| FHLB collateralized borrowing capacity | $1229392 | $816066 | $— | $816066 |
| FRB discount window collateralized line of credit | 1497471 | 1193854 |  | 1193854 |
| Federal funds purchase arrangements | N/A | 75000 |  | 75000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | $2726863 | $2084920 | $— | $2084920 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Collateral**<br>**Value** | **Total**<br>**Available** |<br>**Outstanding** | **Remaining**<br>**Available** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| FHLB collateralized borrowing capacity | $1233768 | $815760 | $— | $815760 |
| FRB discount window collateralized line of credit | 1755347 | 1383149 |  | 1383149 |
| Federal funds purchase arrangements | N/A | 90000 |  | 90000 |
| Holding company line of credit | N/A | 25000 |  | 25000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | $2989115 | $2313909 | $— | $2313909 |

---

HBC may also utilize securities sold under repurchase agreements to manage our liquidity position. There were no securities sold under agreements to repurchase at December 31, 2025 and 2024.

***Capital Resources***

The Company uses a variety of measures to evaluate capital adequacy. Management reviews various capital measurements on a regular basis and takes appropriate action to ensure that such measurements are within established internal and external guidelines. The external guidelines, which are issued by the Federal Reserve and the FDIC, establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures.

At December 31, 2025, the Company was authorized to repurchase up to $30.0 million of the Company's shares of its issued and outstanding common stock under a share repurchase program (the "Repurchase Program") adopted by the Board of Directors (the "Board") in July 2024, and amended as of October 23, 2025. Under the Repurchase Program, the Company is authorized to purchase its common stock from time-to-time in open market transactions, made pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The actual timing, price, value and amount of any repurchases under the Repurchase Program will depend on various factors, including the market price of the Company's common stock, trading volume, general market conditions and other corporate and economic considerations, including the best interests of our shareholders. During 2025, the Company repurchased 439,187 shares of its common stock with a weighted average price of $9.22 per share for a total of $4.0 million. At December 31, 2025, the remaining capacity under the Repurchase Program was $26.0 million.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

On May 11, 2022, the Company completed a private placement offering of $40.0 million aggregate principal amount of its 5.00% fixed-to-floating rate subordinated notes due May 15, 2032 ("Sub Debt due 2032"). The Company used the net proceeds of the Sub Debt due 2032 for general corporate purposes, including the repayment on June 1, 2022 of the Company's $40.0 million aggregate principal amount of 5.25% fixed-to-floating rate subordinated notes due June 1, 2027. The Sub Debt due 2032, net of unamortized issuance costs of $195,000, totaled $39.8 million at December 31, 2025, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank.

The following table summarizes risk based capital, risk weighted assets, and risk based capital ratios of the consolidated Company under the Basel III requirements at the dates indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31,**<br>**2025** |<br>**&nbsp;&nbsp;&nbsp;&nbsp;** | **December 31,**<br>**2024** | | **December 31,**<br>**2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Capital components:** |  |  |  |  |  |
| Common Equity Tier 1 capital | $539415 |  | $524204 |  | $511799 |
| Additional Tier 1 capital |  |  |  |  |  |
| Tier 1 Capital | 539415 |  | 524204 |  | 511799 |
| Tier 2 Capital | 90537 |  | 86439 |  | 82572 |
| Total Capital | $629952 |  | $610643 |  | $594371 |
| Risk-weighted assets | $4168429 |  | $3917931 |  | $3838667 |
| Average assets for capital purposes | $5590318 |  | $5436274 |  | $5100600 |
| **Capital ratios:** |  |  |  |  |  |
| Total Capital | 15.1 | % | 15.6 | % | 15.5 |
| Tier 1 Capital | 12.9 | % | 13.4 | % | 13.3 |
| Common Equity Tier 1 Capital | 12.9 | % | 13.4 | % | 13.3 |
| Tier 1 Leverage<sup>(1)</sup> | 9.6 | % | 9.6 | % | 10.0 |

---

_______________________________________________________

<sup>(1)</sup> Tier 1 capital divided by quarterly average assets (excluding intangible assets and disallowed deferred tax assets).

_______________________________________________________

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table summarizes risk-based capital, risk-weighted assets, and risk-based capital ratios of HBC under the Basel III requirements at the dates indicated:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31,**<br>**2025** |<br>**&nbsp;&nbsp;&nbsp;&nbsp;** | **December 31,**<br>**2024** |<br>**&nbsp;&nbsp;&nbsp;&nbsp;** | **December 31,**<br>**2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Capital components:** |  |  |  |  |  |
| Common Equity Tier 1 capital | $564489 |  | $543872 |  | $529836 |
| Additional Tier 1 capital |  |  |  |  |  |
| Tier 1 Capital | 564489 |  | 543872 |  | 529836 |
| Tier 2 Capital | 50732 |  | 46786 |  | 43071 |
| Total Capital | $615221 |  | $590658 |  | $572907 |
| Risk-weighted assets | $4164918 |  | $3914648 |  | $3835419 |
| Average assets for capital purposes | $5586763 |  | $5432806 |  | $5097382 |
| **Capital ratios:** |  |  |  |  |  |
| Total Capital | 14.8 | % | 15.1 | % | 14.9 |
| Tier 1 Capital | 13.6 | % | 13.9 | % | 13.8 |
| Common Equity Tier 1 Capital | 13.6 | % | 13.9 | % | 13.8 |
| Tier 1 Leverage<sup>(1)</sup> | 10.1 | % | 10.0 | % | 10.4 |

---

_______________________________________________________

<sup>(1)</sup> Tier 1 capital divided by quarterly average assets (excluding intangible assets and disallowed deferred tax assets).

_______________________________________________________

The following table presents the applicable well-capitalized regulatory guidelines and the standards for minimum capital adequacy requirements under Basel III and the regulatory guidelines for a "well-capitalized" financial institution under prompt corrective action ("PCA") regulations:

---

| | | |
|:---|:---|:---|
| | **Minimum**<br>**Regulatory**<br>**Requirements** <sup>(1)</sup> | **Well-capitalized<br>Financial<br>Institution PCA<br>Regulatory<br>Guidelines** |
| **Capital ratios:** | | |
| &nbsp;&nbsp;&nbsp;Total Capital | 10.5% | 10.0% |
| &nbsp;&nbsp;&nbsp;Tier 1 Capital | 8.5% | 8.0% |
| &nbsp;&nbsp;&nbsp;Common equity Tier 1 Capital | 7.0% | 6.5% |
| &nbsp;&nbsp;&nbsp;Tier 1 Leverage | 4.0% | 5.0% |

---

_______________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Includes 2.5% capital conservation buffer, except the leverage ratio.

_______________________________________________________

The Basel III capital rules introduced a "capital conservation buffer," for banking organizations to maintain a common equity Tier 1 ratio more than 2.5% above these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

At December 31, 2025, the Company's consolidated capital ratio exceeded regulatory guidelines and HBC's capital ratios exceed the highest regulatory capital requirement of "well-capitalized" under Basel III prompt corrective action provisions. Quantitative measures established by regulation to help ensure capital adequacy require the Company and HBC to maintain minimum amounts and ratios of total risk-based capital, Tier 1 capital, and common equity Tier 1 (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes that, as of December 31, 2025, December 31, 2024, and December 31, 2023, the Company and HBC met all capital adequacy guidelines to which they were subject. There are

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

no conditions or events since December 31, 2025, that management believes have changed the categorization of the Company or HBC as well-capitalized.

At December 31, 2025, the Company had total shareholders' equity of $708.6 million, compared to $689.7 million at December 31, 2024. At December 31, 2025, total shareholders' equity included $509.6 million in common stock, $203.7 million in retained earnings, and ($4.7) million of accumulated other comprehensive loss. The book value per share was $11.55 at December 31, 2025, compared to $11.24 at December 31, 2024. Tangible common equity was $536.3 million at December 31, 2025, compared to $515.7 million at December 31, 2024. The tangible book value per share was $8.74 at December 31, 2025, compared to $8.41 at December 31, 2024. Tangible common equity and tangible book value per share are non-GAAP financial measures.

The following table reflects the components of accumulated other comprehensive loss, net of taxes, at the dates indicated:

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| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
|<br>**Accumulated Other Comprehensive Loss** | **2025** | **2024** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Actuarial losses associated with: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Supplemental executive retirement plan | $(2747) | $(2173) |
| &nbsp;&nbsp;&nbsp;&nbsp;Split dollar insurance contracts | (2296) | (2339) |
| Unrealized gain (loss) on securities available-for-sale | 295 | (3656) |
| Unrealized gain on interest-only strip from SBA loans | 28 | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total accumulated other comprehensive loss | $(4720) | $(8105) |

---

***Market Risk***

Market risk is the risk of loss of future earnings, fair values, or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributed to all market risk sensitive financial instruments, including securities, loans, deposits and borrowings, as well as the Company's role as a financial intermediary in client-related transactions. The objective of market risk management is to avoid excessive exposure of the Company's earnings and equity to loss and to reduce the volatility inherent in certain financial instruments.

***Interest Rate Management***

The Company's market risk exposure is primarily that of interest rate risk. Interest rate risk arises when the maturity or re-pricing periods and interest rated indices of the interest-earning assets and interest-bearing liabilities are different. It is the risk that changes in the level of market interest rates will result in disproportionate changes in the value of, and the net earnings generated from, the Company's interest-earning assets and interest-bearing liabilities. Management has established policies and procedures to monitor and limit earnings and balance sheet exposure to changes in interest rates. The Company does not engage in the trading of financial instruments, nor does the Company have exposure to currency exchange rates.

The principal objective of interest rate risk management (often referred to as "asset/liability management") is to manage the financial components of the Company in a manner that will optimize the risk/reward equation for earnings and capital in relation to changing interest rates. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. Management realizes certain risks are inherent, and that the goal is to identify and manage the risks. Management primarily uses an interest rate shock simulation model to manage interest rate risk.

The planning of asset and liability maturities is an integral part of the management of an institution's net interest margin. To the extent maturities of assets and liabilities do not match in a changing interest rate environment, the net interest margin may change over time. Even with perfectly matched repricing of assets and liabilities, risks remain in the form of prepayment of loans or securities or in the form of delays in the adjustment of rates of interest applying to either earning assets with floating rates or to interest-bearing liabilities.

Interest rate changes do not affect all categories of assets and liabilities equally or at the same time. Varying interest rate environments can create unexpected changes in prepayment levels of assets and liabilities, which may have a significant effect on the net interest margin and may not be fully reflected in the interest sensitivity analysis table.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The Company uses modeling software for asset/liability management in order to simulate the effects of potential interest rate changes on the Company's net interest margin, and to calculate the estimated fair values of the Company's financial instruments under different interest rate scenarios. The program imports current balances, interest rates, maturity dates and repricing information for individual financial instruments, and incorporates assumptions on the characteristics of embedded options along with pricing and duration for new volumes to project the effects of a given interest rate change on the Company's interest income and interest expense. Rate scenarios consisting of key rate and yield curve projections are run against the Company's investment, loan, deposit and borrowed funds' portfolios. These rate projections can be shocked (an immediate and parallel change in all base rates, up or down) and ramped (an incremental increase or decrease in rates over a specified time period), based on current trends and econometric models or stable economic conditions (unchanged from current actual levels). Critical assumptions in the Company's interest rate risk model, like deposit betas, deposit rate change lags and decay rate assumptions, are reviewed and updated regularly to reflect current market conditions.

The following tables set forth the estimated changes in the Company's annual net interest income and economic value of equity (a non-GAAP financial measure) that would result from the designated instantaneous parallel shift in interest rates noted, and assuming a flat balance sheet with consistent product mix, as of December 31, 2025:

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| | | |
|:---|:---|:---|
| | **Increase/(Decrease) in** | **Increase/(Decrease) in** |
| | **Estimated Net** | **Estimated Net** |
| | **Interest Income** <sup>(1)</sup> | **Interest Income** <sup>(1)</sup> |
| | **Amount** | **Percent** |
|<br><br>**Change in Interest Rates**<br>**(basis points)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| +400 | $14125 | 6.5 |
| +300 | $10620 | 4.9 |
| +200 | $7133 | 3.3 |
| +100 | $3653 | 1.7 |
| 0 |  |  |
| -100 | $(6318) | (2.9) |
| -200 | $(15742) | (7.2) |
| -300 | $(29276) | (13.4) |
| -400 | $(40646) | (18.6) |

---

_______________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Computations of prospective effects of hypothetical interest rate changes are for illustrative purposes only, are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. These projections are forward-looking and should be considered in light of the "*Cautionary Note Regarding Forward-Looking Statements*" on page 3. Actual rates paid on deposits may differ from the hypothetical interest rates modeled due to competitive or market factors, which could affect any actual impact on net interest income.

_______________________________________________________

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

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| | | |
|:---|:---|:---|
| | **Increase/(Decrease) in** | **Increase/(Decrease) in** |
| | **Estimated Economic** | **Estimated Economic** |
| | **Value of Equity** <sup>(1)</sup> | **Value of Equity** <sup>(1)</sup> |
| | **Amount** | **Percent** |
|<br><br>**Change in Interest Rates**<br>**(basis points)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| +400 | $(3294) | (0.2) |
| +300 | $1424 | 0.1 |
| +200 | $4070 | 0.3 |
| +100 | $4349 | 0.3 |
| 0 |  |  |
| -100 | $(31732) | (2.1) |
| -200 | $(86896) | (5.8) |
| -300 | $(167070) | (11.2) |
| -400 | $(249532) | (16.8) |

---

_______________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)Computations of prospective effects of hypothetical interest rate changes are for illustrative purposes only, are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. These projections are forward-looking and should be considered in light of the "*Cautionary Note Regarding Forward-Looking Statements*" on page 3. Actual rates paid on deposits may differ from the hypothetical interest rates modeled due to competitive or market factors, which could affect any actual impact on net interest income.

_______________________________________________________

As with any method of gauging interest rate risk, there are certain shortcomings inherent to the methodology noted above. The model assumes interest rate changes are instantaneous parallel shifts in the yield curve. In reality, rate changes are rarely instantaneous. The use of the simplifying assumption that short-term and long-term rates change by the same degree may also misstate historic rate patterns, which rarely show parallel yield curve shifts. Further, the model assumes that certain assets and liabilities of similar maturity or period to repricing will react in the same way to changes in rates. In reality, certain types of financial instruments may react in advance of changes in market rates, while the reaction of other types of financial instruments may lag behind the change in general market rates. Additionally, the methodology noted above does not reflect the full impact of annual and lifetime restrictions on changes in rates for certain assets, such as adjustable rate loans. When interest rates change, actual loan prepayments and actual early withdrawals from certificates may deviate significantly from the assumptions used in the model. Finally, this methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan clients' ability to service their debt. All of these factors are considered in monitoring the Company's exposure to interest rate risk.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Selected Financial Data***

The following table presents a summary of selected financial information that should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto following Item 15 — *Exhibits and Financial Statement Schedules*.

**SELECTED FINANCIAL DATA**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **AT OR FOR THE YEAR ENDED DECEMBER 31,** | **AT OR FOR THE YEAR ENDED DECEMBER 31,** | **AT OR FOR THE YEAR ENDED DECEMBER 31,** | **AT OR FOR THE YEAR ENDED DECEMBER 31,** | **AT OR FOR THE YEAR ENDED DECEMBER 31,** |
| | **2025** | **2024** | **2023** | **2022** | **2021** |
| | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** |
| **INCOME STATEMENT DATA:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | $256999 | $240344 | $232149 | $186882 | $151362 |
| &nbsp;&nbsp;&nbsp;Interest expense | 71624 | 79051 | 51074 | 8948 | 7131 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income before provision for credit losses on loans | 185375 | 161293 | 181075 | 177934 | 144231 |
| &nbsp;&nbsp;&nbsp;Provision for (recapture of) credit losses on loans | 1816 | 2139 | 749 | 766 | (3134) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision for credit losses on loans | 183559 | 159154 | 180326 | 177168 | 147365 |
| &nbsp;&nbsp;&nbsp;Noninterest income | 12089 | 11103 | 11147 | 12057 | 11582 |
| &nbsp;&nbsp;&nbsp;Noninterest expense | 127859 | 113583 | 101054 | 94859 | 93077 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 67789 | 56674 | 90419 | 94366 | 65870 |
| &nbsp;&nbsp;&nbsp;Income tax expense | 19959 | 16146 | 25976 | 27811 | 18170 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $47830 | $40528 | $64443 | $66555 | $47700 |
| **PER COMMON SHARE DATA:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic earnings per share | $0.78 | $0.66 | $1.06 | $1.10 | $0.79 |
| &nbsp;&nbsp;&nbsp;Diluted earnings per share | $0.78 | $0.66 | $1.05 | $1.09 | $0.79 |
| &nbsp;&nbsp;&nbsp;Book value per share | $11.55 | $11.24 | $11.00 | $10.39 | $9.91 |
| &nbsp;&nbsp;&nbsp;Tangible book value per share <sup>(1)</sup> | $8.74 | $8.41 | $8.12 | $7.46 | $6.91 |
| &nbsp;&nbsp;&nbsp;Dividend payout ratio |  | 78.61% | 49.25% | 47.32% | 65.56% |
| &nbsp;&nbsp;&nbsp;Weighted average number of shares outstanding — basic | 61407520 | 61270730 | 61038857 | 60602962 | 60133821 |
| &nbsp;&nbsp;&nbsp;Weighted average number of shares outstanding — diluted | 61702095 | 61527372 | 61311318 | 61090290 | 60689062 |
| &nbsp;&nbsp;&nbsp;Common shares outstanding at period-end | 61368708 | 61348095 | 61146835 | 60852723 | 60339837 |
| **BALANCE SHEET DATA:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Securities (available-for sale and held-to-maturity) | $1122669 | $846290 | $1093201 | $1204586 | $760649 |
| &nbsp;&nbsp;&nbsp;Total loans HFI, net of deferred fees | $3653060 | $3491937 | $3350378 | $3298550 | $3087326 |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses on loans | $(49999) | $(48953) | $(47958) | $(47512) | $(43290) |
| &nbsp;&nbsp;&nbsp;Loans, net | $3603061 | $3442984 | $3302420 | $3251038 | $3044036 |
| &nbsp;&nbsp;&nbsp;Goodwill and other intangible assets | $172256 | $174070 | $176258 | $178664 | $181299 |
| &nbsp;&nbsp;&nbsp;Total assets | $5764697 | $5645006 | $5194095 | $5157580 | $5499409 |
| &nbsp;&nbsp;&nbsp;Total deposits | $4903086 | $4820031 | $4378458 | $4389604 | $4759412 |
| &nbsp;&nbsp;&nbsp;Subordinated debt, net of issuance costs | $39805 | $39653 | $39502 | $39350 | $39925 |
| &nbsp;&nbsp;&nbsp;Total shareholders' equity | $708566 | $689727 | $672901 | $632456 | $598028 |
| &nbsp;&nbsp;&nbsp;Tangible common equity <sup>(1)</sup> | $536310 | $515657 | $496643 | $453792 | $416729 |
| **SELECTED PERFORMANCE METRICS:** <sup>(2)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Return on average assets | 0.86% | 0.76% | 1.21% | 1.23% | 0.92% |
| &nbsp;&nbsp;&nbsp;Return on average tangible assets <sup>(1)</sup> | 0.88% | 0.78% | 1.26% | 1.27% | 0.96% |
| &nbsp;&nbsp;&nbsp;Return on average equity | 6.86% | 5.97% | 9.88% | 10.95% | 8.15% |
| &nbsp;&nbsp;&nbsp;Return on average tangible common equity <sup>(1)</sup> | 9.12% | 8.05% | 13.57% | 15.57% | 11.86% |
| &nbsp;&nbsp;&nbsp;Net interest margin (FTE) <sup>(1)</sup> | 3.56% | 3.25% | 3.68% | 3.55% | 3.03% |
| &nbsp;&nbsp;&nbsp;Total revenue | $197464 | $172396 | $192222 | $189991 | $155813 |
| &nbsp;&nbsp;&nbsp;Pre-provision net revenue | $69605 | $58813 | $91168 | $95132 | $62736 |
| &nbsp;&nbsp;&nbsp;Efficiency ratio | 64.75% | 65.88% | 52.57% | 49.93% | 59.74% |
| &nbsp;&nbsp;&nbsp;Average net loans as a percentage of average deposits <sup>(3)</sup> | 73.06% | 73.01% | 71.89% | 66.10% | 61.39% |
| &nbsp;&nbsp;&nbsp;Average total shareholders' equity as a percentage |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of average total assets | 12.49% | 12.71% | 12.29% | 11.25% | 11.33% |
| **SELECTED CREDIT QUALITY DATA:** <sup>(4)</sup> |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net charge-offs (recoveries) to average loans | 0.02% | 0.03% | 0.01% | (0.11)% | (0.07)% |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses on loans to total loans | 1.37% | 1.40% | 1.43% | 1.44% | 1.40% |
| &nbsp;&nbsp;&nbsp;Nonperforming loans to total loans | 0.08% | 0.22% | 0.23% | 0.07% | 0.12% |
| &nbsp;&nbsp;&nbsp;Nonperforming assets to total assets | 0.05% | 0.14% | 0.15% | 0.05% | 0.07% |
| &nbsp;&nbsp;&nbsp;Nonperforming assets | $2783 | $7667 | $7707 | $2425 | $3738 |
| &nbsp;&nbsp;&nbsp;Classified assets | $29223 | $41661 | $31763 | $14544 | $33846 |
| **HERITAGE COMMERCE CORP CAPITAL RATIOS:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tangible common equity to tangible assets <sup>(1)</sup> | 9.59% | 9.43% | 9.90% | 9.11% | 7.84% |
| &nbsp;&nbsp;&nbsp;Total capital ratio | 15.1% | 15.6% | 15.5% | 14.8% | 14.4% |
| &nbsp;&nbsp;&nbsp;Tier 1 capital ratio | 12.9% | 13.4% | 13.3% | 12.7% | 12.3% |
| &nbsp;&nbsp;&nbsp;Common equity Tier 1 capital ratio | 12.9% | 13.4% | 13.3% | 12.7% | 12.3% |
| &nbsp;&nbsp;&nbsp;Tier 1 leverage ratio | 9.6% | 9.6% | 10.0% | 9.2% | 7.9% |

---

_______________________________________________________

Notes:

<sup>(1)</sup> This is a non-GAAP financial measure. See "*Reconciliation of Non-GAAP Financial Measures*" below.

<sup>(2)</sup> Average balances used in this table are based on daily averages.

<sup>(3)</sup> Average loans net of the average allowance for credit losses on loans and exclude loans held-for-sale.

<sup>(4)</sup> Average loans and total loans exclude loans held-for-sale.

_______________________________________________________

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Quarterly Financial Data (Unaudited)***

The following table discloses the Company's selected unaudited quarterly financial data for the periods indicated:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Quarter Ended** | **Quarter Ended** | **Quarter Ended** | **Quarter Ended** |
| | **12/31/2025** | **9/30/2025** | **6/30/2025** | **3/31/2025** |
| | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** |
| Interest income | $67048 | $65094 | $63025 | $61832 |
| Interest expense | 16626 | 18306 | 18220 | 18472 |
| &nbsp;&nbsp;&nbsp;Net interest income before provision for credit losses on loans | 50422 | 46788 | 44805 | 43360 |
| Provision for credit losses on loans | 610 | 416 | 516 | 274 |
| &nbsp;&nbsp;&nbsp;Net interest income after provision for credit losses on loans | 49812 | 46372 | 44289 | 43086 |
| Noninterest income | 3199 | 3217 | 2977 | 2696 |
| Noninterest expense <sup>(1)</sup> | 31042 | 29026 | 38335 | 29456 |
| &nbsp;&nbsp;&nbsp;Income before income taxes | 21969 | 20563 | 8931 | 16326 |
| Income tax expense | 6852 | 5865 | 2542 | 4700 |
| &nbsp;&nbsp;&nbsp;Net income | $15117 | $14698 | $6389 | $11626 |
| Earnings per common share |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $0.25 | $0.24 | $0.10 | $0.19 |
| &nbsp;&nbsp;&nbsp;Diluted | $0.25 | $0.24 | $0.10 | $0.19 |
| Average total deposits | $4895841 | $4687294 | $4618007 | $4717517 |
| Average total loans | $3565638 | $3521005 | $3506768 | $3431304 |
| Average noninterest-bearing deposits | $1288941 | $1187357 | $1146494 | $1167330 |

---

_______________________________________________________

<sup>(1)</sup> During the second quarter of 2025, the Company recorded expenses of $9.2 million, primarily due to pre-tax charges related to the settlement of certain litigation matters, including the anticipated settlement of a previously disclosed class action and PAGA lawsuit that alleged the violation of certain California wage-and-hour and related laws and regulations, and charges related to the planned closure of a Bank branch. During the fourth of 2025, the Company recorded expenses of $2.1 million due to pre-tax charges related to the announced pending merger with CVBF.

_______________________________________________________

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Quarter Ended** | **Quarter Ended** | **Quarter Ended** | **Quarter Ended** |
| | **12/31/2024** | **9/30/2024** | **6/30/2024** | **3/31/2024** |
| | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** |
| Interest income | $64043 | $60852 | $58489 | $56960 |
| Interest expense | 20448 | 21523 | 19622 | 17458 |
| &nbsp;&nbsp;&nbsp;Net interest income before provision for credit losses on loans | 43595 | 39329 | 38867 | 39502 |
| Provision for credit losses on loans | 1331 | 153 | 471 | 184 |
| &nbsp;&nbsp;&nbsp;Net interest income after provision for credit losses on loans | 42264 | 39176 | 38396 | 39318 |
| Noninterest income | 2775 | 2826 | 2864 | 2638 |
| Noninterest expense | 30304 | 27555 | 28188 | 27536 |
| &nbsp;&nbsp;&nbsp;Income before income taxes | 14735 | 14447 | 13072 | 14420 |
| Income tax expense | 4114 | 3940 | 3838 | 4254 |
| &nbsp;&nbsp;&nbsp;Net income | $10621 | $10507 | $9234 | $10166 |
| Earnings per common share |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $0.17 | $0.17 | $0.15 | $0.17 |
| &nbsp;&nbsp;&nbsp;Diluted | $0.17 | $0.17 | $0.15 | $0.17 |
| Average total deposits | $4771491 | $4525946 | $4394545 | $4360150 |
| Average total loans | $3390989 | $3361140 | $3329861 | $3299989 |
| Average noninterest-bearing deposits | $1222393 | $1172304 | $1127145 | $1177078 |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**RECONCILIATION OF NON-GAAP FINANCIAL MEASURES**

The accounting and reporting policies of the Company conform to GAAP in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company's performance. The Company believes these non-GAAP financial measures are common in the banking industry, and may enhance comparability for peer comparison purposes. These non-GAAP financial measures should be supplemental to primary GAAP financial measures and should not be read in isolation or relied upon as a substitute for primary GAAP financial measures.

Management considers adjusted performance metrics, which exclude the $9.2 million of pre-tax charges primarily related to a legal settlement in the second quarter of 2025 and $2.1 million of pre-tax merger-related costs in the fourth quarter of 2025, for the year ended December 31, 2025, and $4.5 million of pre-tax charges primarily related to a reserve for a legal settlement during the year ended December 31, 2021, a useful measurement of the Company's profitability compared to other periods presented.

During the second quarter of 2025, the Company recorded pre-tax expenses of $9.2 million included in the other noninterest expense on the Company's consolidated income statement, primarily due to charges related to the settlement of certain litigation matters, including the anticipated settlement of a previously disclosed class action and California Private Attorneys General Act ("PAGA") lawsuit that alleged the violation of certain California wage-and-hour and related laws and regulations, and charges related to the planned closure of a Bank branch. During the fourth quarter of 2025, the Company recorded pre-tax expenses of $2.1 million included in the other noninterest expense on the Company's consolidated income statement, primarily due to charges related to investment banker and legal fees resulting from the pending merger with CVBF. Certain merger-related costs are not tax deductible. During the year ended December 31, 2021, the Company recorded pre-tax charges of $4.5 million primarily related to a reserve for a litigation matter that settled in second quarter of 2021.

The following table summarizes components of net income and diluted earnings per share for the periods indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2023** | **2022** | **2021** |
| | **(Dollars in thousands, except per share amount)** | **(Dollars in thousands, except per share amount)** | **(Dollars in thousands, except per share amount)** | **(Dollars in thousands, except per share amount)** | **(Dollars in thousands, except per share amount)** |
| Reported net income (GAAP) | $47830 | $40528 | $64443 | $66555 | $47700 |
| Add: pre-tax legal settlement, merger and other charges | 11251 |  |  |  | 4500 |
| Less: related income taxes | (2633) |  |  |  | (1283) |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted net income (non-GAAP) | $56448 | $40528 | $64443 | $66555 | $50917 |
| Weighted average shares outstanding - diluted | 61702095 | 61527372 | 61311318 | 61090290 | 60689062 |
| Reported diluted earnings per share (GAAP) | $0.78 | $0.66 | $1.05 | $1.09 | $0.79 |
| Adjusted diluted earnings per share (non-GAAP) | $0.91 | $0.66 | $1.05 | $1.09 | $0.84 |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Management reviews yields on certain asset categories and the net interest margin of the Company on a FTE basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources.

The following table summarizes components of FTE net interest income of the Company for the periods indicated:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | | **2024** | | **2023** | | **2022** | | **2021** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Net interest income before |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; credit losses on loans (GAAP) | $185375 |  | $161293 |  | $181075 |  | $177934 |  | $144231 |
| Tax-equivalent adjustment on securities - exempt from Federal tax | 221 |  | 237 |  | 251 |  | 288 |  | 419 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net interest income, FTE (non-GAAP) | $185596 |  | $161530 |  | $181326 |  | $178222 |  | $144650 |
| Average balance of total interest earning assets | $5207770 |  | $4967582 |  | $4923254 |  | $5019807 |  | $4773597 |
| Net interest margin (annualized net interest income divided by the |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; average balance of total interest earnings assets) (GAAP) | 3.56 | % | 3.25 | % | 3.68 | % | 3.54 | % | 3.02 |
| Net interest margin, FTE (annualized net interest income, FTE, divided |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; by the average balance of total interest earnings assets) (non-GAAP) | 3.56 | % | 3.25 | % | 3.68 | % | 3.55 | % | 3.03 |

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Management views its PPNR as a key metric for assessing the Company's earnings power. The following table summarizes the components of PPNR for the periods indicated:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2023** | **2022** | **2021** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Net interest income before credit losses on loans | $185375 | $161293 | $181075 | $177934 | $144231 |
| Noninterest income | 12089 | 11103 | 11147 | 12057 | 11582 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 197464 | 172396 | 192222 | 189991 | 155813 |
| Less: Noninterest expense | (127859) | (113583) | (101054) | (94859) | (93077) |
| &nbsp;&nbsp;&nbsp;&nbsp; Reported PPNR | 69605 | 58813 | 91168 | 95132 | 62736 |
| Add: pre-tax legal settlement, merger and other charges | 11251 |  |  |  | 4500 |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted PPNR | $80856 | $58813 | $91168 | $95132 | $67236 |

---

The efficiency ratio is a non-GAAP financial measure, which is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income), and measures how much it costs to produce one dollar of revenue. The following table summarizes components of the efficiency ratio of the Company for the periods indicated:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2025** | **2024** | | **2023** | | **2022** | | **2021** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Reported noninterest expense (GAAP) | $127859 |  | $113583 |  | $101054 |  | $94859 |  | $93077 |
| Less: pre-tax legal settlement, merger and other charges | (11251) |  |  |  |  |  |  |  | (4500) |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted noninterest expense (non-GAAP) | $116608 |  | $113583 |  | $101054 |  | $94859 |  | $88577 |
| Net interest income before provision |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; for credit losses on loans | $185375 |  | $161293 |  | $181075 |  | $177934 |  | $144231 |
| Noninterest income | 12089 |  | 11103 |  | 11147 |  | 12057 |  | 11582 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total revenue | $197464 |  | $172396 |  | $192222 |  | $189991 |  | $155813 |
| Reported efficiency ratio (noninterest expense |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; divided by total revenue) (GAAP) | 64.75 | % | 65.88 | % | 52.57 | % | 49.93 | % | 59.74 |
| Adjusted efficiency ratio (adjusted noninterest |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; expense divided by total revenue) (non-GAAP) | 59.05 | % | 65.88 | % | 52.57 | % | 49.93 | % | 56.85 |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company's equity. The Company references the return on average tangible common equity as a measurement of profitability.

The following table summarizes components of the annualized return on average tangible assets and the annualized return on average tangible common equity for the periods indicated:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | | **2024** | | **2023** | | **2022** | | **2021** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Reported net income (GAAP) | $47830 |  | $40528 |  | $64443 |  | 66555 |  | 47700 |
| Add: pre-tax legal settlement, merger and other charges | 11251 |  |  |  |  |  |  |  | 4500 |
| Less: related income taxes | (2633) |  |  |  |  |  |  |  | (1283) |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted net income (non-GAAP) | $56448 |  | $40528 |  | $64443 |  | 66555 |  | 50917 |
| Average Assets (GAAP) | $5583975 |  | $5338705 |  | $5289375 |  | 5401220 |  | 5166294 |
| Reported annualized return on average assets (GAAP) | 0.86 | % | 0.76 | % | 1.22 | % | 1.23 | % | 0.92 |
| Adjusted annualized return on average assets (non-GAAP) | 1.01 | % | 0.76 | % | 1.22 | % | 1.23 | % | 0.99 |
| Average tangible common equity components: |  |  |  |  |  |  |  |  |  |
| Average Equity (GAAP) | $697463 |  | $678543 |  | $652449 |  | 607603 |  | 585156 |
| Less: Goodwill | (167631) |  | (167631) |  | (167631) |  | (167631) |  | (167631) |
| Less: Other Intangible Assets | (5578) |  | (7589) |  | (9905) |  | (12430) |  | (15256) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total Average Tangible Common Equity (non-GAAP) | $524254 |  | $503323 |  | $474913 |  | 427542 |  | 402269 |
| Reported annualized return on average equity (GAAP) | 6.86 | % | 5.97 | % | 9.88 | % | 10.95 | % | 8.15 |
| Adjusted annualized return on average equity (non-GAAP) | 8.09 | % | 5.97 | % | 9.88 | % | 10.95 | % | 8.70 |
| Reported annualized return on average tangible |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; common equity (non-GAAP) | 9.12 | % | 8.05 | % | 13.57 | % | $15.57 | % | $11.86 |
| Adjusted annualized return on average tangible |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; common equity (non-GAAP) | 10.77 | % | 8.05 | % | 13.57 | % | 15.57 | % | 12.66 |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table summarizes components of the tangible common equity to tangible assets ratio of the Company at the dates indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2023** | **2022** | **2021** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Capital components: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Total Equity (GAAP) | $708566 | $689727 | $672901 | $632456 | $598028 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Preferred Stock |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Common Equity | 708566 | 689727 | 672901 | 632456 | 598028 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Goodwill | (167631) | (167631) | (167631) | (167631) | (167631) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Other Intangible Assets | (4625) | (6439) | (8627) | (11033) | (13668) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Tangible Common Equity (non-GAAP) | $536310 | $515657 | $496643 | $453792 | $416729 |
| Asset components: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Total Assets (GAAP) | $5764697 | $5645006 | $5194095 | $5157580 | $5499409 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Goodwill | (167631) | (167631) | (167631) | (167631) | (167631) |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Other Intangible Assets | (4625) | (6439) | (8627) | (11033) | (13668) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Tangible Assets (non-GAAP) | $5592441 | $5470936 | $5017837 | $4978916 | $5318110 |
| Tangible common equity to tangible assets (non-GAAP) | 9.59% | 9.43% | 9.90% | 9.11% | 7.84% |

---

The following table summarizes components of the tangible common equity to tangible assets ratio of HBC at the dates indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2023** | **2022** | **2021** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Capital components: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Total Equity (GAAP) | $733802 | $709379 | $690918 | $649545 | $616108 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Preferred Stock |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Common Equity | 733802 | 709379 | 690918 | 649545 | 616108 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Goodwill | (167631) | (167631) | (167631) | (167631) | (167631) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Other Intangible Assets | (4625) | (6439) | (8627) | (11033) | (13668) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Tangible Common Equity (non-GAAP) | $561546 | $535309 | $514660 | $470881 | $434809 |
| Asset components: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Total Assets (GAAP) | $5760786 | $5641646 | $5190829 | $5157093 | $5496724 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Goodwill | (167631) | (167631) | (167631) | (167631) | (167631) |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Other Intangible Assets | (4625) | (6439) | (8627) | (11033) | (13668) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Tangible Assets (non-GAAP) | $5588530 | $5467576 | $5014571 | $4978429 | $5315425 |
| Tangible common equity to tangible assets (non-GAAP) | 10.05% | 9.79% | 10.26% | 9.46% | 8.18% |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table summarizes components of the tangible book value per share at the dates indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2023** | **2022** | **2021** |
| | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** |
| Capital components: |  |  |  |  |  |
| Total Equity (GAAP) | $708566 | $689727 | $672901 | $632456 | $598028 |
| Less: Preferred Stock |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total Common Equity | 708566 | 689727 | 672901 | 632456 | 598028 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: Goodwill | (167631) | (167631) | (167631) | (167631) | (167631) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: Other Intangible Assets | (4625) | (6439) | (8627) | (11033) | (13668) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Tangible Common Equity (non-GAAP) | 536310 | 515657 | 496643 | 453792 | 416729 |
| Add: pre-tax legal settlement, merger and other charges | 15751 | 4500 | 4500 | 4500 | 4500 |
| Less: related income taxes | (3916) | (1283) | (1283) | (1283) | (1283) |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted tangible common equity (non-GAAP) | $548145 | $518874 | $499860 | $457009 | $419946 |
| Common shares outstanding at period-end | 61368708 | 61348095 | 61146835 | 60852723 | 60339837 |
| Reported tangible book value per share (non-GAAP) | $8.74 | $8.41 | $8.12 | $7.46 | $6.91 |
| Adjusted tangible book value per share (non-GAAP) | $8.93 | $8.46 | $8.17 | $7.51 | $6.96 |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**ITEM 7A. *QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK***

As a financial institution, the Company's primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of the Company's assets and liabilities and the market value of all interest-earning assets, other than those which have a short term to maturity. Based upon the nature of the Company's operations, the Company is not subject to foreign exchange or commodity price risk. The Company has no market risk sensitive instruments held for trading purposes. At December 31, 2025, the Company did not use interest rate derivatives to hedge its interest rate risk.

The information concerning quantitative and qualitative disclosure or market risk called for by Item 305 of Regulation S-K is included as part of Item 7 of this report.

**ITEM 8. *FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA***

The financial statements and report of the Independent Registered Public Accounting Firm are set forth on pages 102 through 156.

**ITEM 9*. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES***

None.

**ITEM 9A. *CONTROLS AND PROCEDURES***

**Disclosure Control and Procedures**

The Company has carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures at December 31, 2025. As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported on a timely basis. Disclosure controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls were effective as of December 31, 2025, the period covered by this report.

**Management's Annual Report on Internal Control over Financial Reporting**

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, a company's principal executive and principal financial officers and effected by a company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It includes those policies and procedures that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and the board of directors of the company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company's assets that could have a material effect on its financial statements.

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Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company's management has used the criteria established in the 2013 *Internal Control — Integrated Framework* issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") to evaluate the effectiveness of the Company's internal control over financial reporting. Management has selected the COSO framework for its evaluation as it is a control framework recognized by the SEC and the Public Company Accounting Oversight Board, that is free from bias, permits reasonably consistent qualitative and quantitative measurement of the Company's internal controls, is sufficiently complete so that relevant controls are not omitted and is relevant to an evaluation of internal controls over financial reporting.

Based on our assessment, management has concluded that our internal control over financial reporting, based on criteria established in the 2013 *Internal Control — Integrated Framework* issued by COSO was effective at December 31, 2025.

The independent registered public accounting firm of Crowe LLP, as auditors of our consolidated financial statements, has issued an audit report on the effectiveness of the Company's internal control over financial reporting based on criteria established in the 2013 "*Internal Control — Integrated Framework,*" issued by COSO.

**Inherent Limitations on Effectiveness of Controls**

The Company's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

**Changes in Internal Control over Financial Reporting**

There was no change in our internal control over financial reporting that occurred during the year ended December 31, 2025 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

**ITEM 9B. *OTHER INFORMATION***

None.

**ITEM 9C. *DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS***

Not applicable.

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**PART III**

**ITEM 10. *DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE***

Information required by this item will be included in an amendment to this Annual Report on Form 10-K filed in accordance with General Instructions G(3).

We have adopted a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, and to our other principal financial officers, and other senior management personnel, as designated. The code of ethics is available at the Governance Documents section of our website at *www.heritagecommercecorp.com.* We intend to disclose future amendments to, or waivers from, certain provisions of our code of ethics on the above website.

We have adopted an Insider Trading Policy governing the purchase, sale, and/or other dispositions of our securities, as well as the securities of publicly traded companies with whom we have a business relationship, by directors, officers and employees, and consultants. Our Insider Trading Policy is designed to promote compliance with all applicable insider trading laws, listing standards, rules and regulations. A copy of our insider trading policy is incorporated by reference as Exhibit 19.1 to this Annual Report on Form 10-K.

**ITEM 11. *EXECUTIVE COMPENSATION***

Information required by this item will be included in an amendment to this Annual Report on Form 10-K filed in accordance with General Instructions G(3).

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**ITEM 12. *SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a) Securities Authorized for Issuance Under Equity Compensation Plans**

The following table provides information as of December 31, 2025 regarding equity compensation plans under which equity securities of the Company were authorized for issuance:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| |<br>**Number of securities to**<br>**be issued upon exercise of**<br>**outstanding options,**<br>**warrants and rights**<br>**(a)** |  |<br>**Weighted average**<br>**exercise price of**<br>**outstanding options,**<br>**warrants and rights**<br>**(b)** | **Number of securities**<br>**remaining available for**<br>**future issuance under**<br>**equity compensation plans**<br>**(excluding securities**<br>**reflected in column (a))**<br>**(c)** | |
| Equity compensation plans approved by |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;security holders | 1819990 | <sup>(1)</sup>  | $11.12 | 410508 | <sup>(2)</sup> |
| Equity compensation plans not approved by |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;security holders | N/A |  | N/A | N/A |  |

---

_____________________________________________________

(1)Consists of 1,673,916 options to acquire shares under the Company's 2013 Equity Incentive Plan, 20,000 options to acquire shares under the Company's 2023 Equity Incentive Plan, and the aggregate amount of 126,074 stock options assumed from the Presidio stock option and equity incentive plans.

(2)Available under the Company's 2023 Equity Incentive Plan.

_______________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** Information required by this item will be included in an amendment to this Annual Report on Form 10-K filed in accordance with General Instructions G(3).

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**ITEM 13. *CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE***

Information required by this item will be included in an amendment to this Annual Report on Form 10-K filed in accordance with General Instructions G(3).

**ITEM 14. *PRINCIPAL ACCOUNTANT FEES AND SERVICES***

Information required by this item will be included in an amendment to this Annual Report on Form 10-K filed in accordance with General Instructions G(3).

**PART IV**

**ITEM 15. *EXHIBITS AND FINANCIAL STATEMENT SCHEDULES***

**(1)FINANCIAL STATEMENTS**

The Financial Statements of the Company and the Report of Independent Registered Public Accounting Firm are set forth on pages 102 through 156.

**(2)FINANCIAL STATEMENT SCHEDULES**

All schedules to the Financial Statements are omitted because of the absence of the conditions under which they are required or because the required information is included in the Financial Statements or accompanying notes.

**(3)EXHIBITS** 

The exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10-K.

---

| | |
|:---|:---|
| **Exhibit<br>Number** | **Description** |
| \*2.1 | <u>[A](https://www.sec.gov/Archives/edgar/data/1053352/000110465925124217/tm2533554d10_ex2-1.htm)[greement and Plan of Reorganization and Merger](https://www.sec.gov/Archives/edgar/data/1053352/000110465925124217/tm2533554d10_ex2-1.htm)[, dated December 17, 2025, by a](https://www.sec.gov/Archives/edgar/data/1053352/000110465925124217/tm2533554d10_ex2-1.htm)[nd bet](https://www.sec.gov/Archives/edgar/data/1053352/000110465925124217/tm2533554d10_ex2-1.htm)[ween Heritage Commerce Corp and CVB Financial Corp](https://www.sec.gov/Archives/edgar/data/1053352/000110465925124217/tm2533554d10_ex2-1.htm)[(incorporated by reference to Exhibit 2.1 to the Registrant's Annual Report on Form 8-K filed on December](https://www.sec.gov/Archives/edgar/data/1053352/000110465925124217/tm2533554d10_ex2-1.htm)[17](https://www.sec.gov/Archives/edgar/data/1053352/000110465925124217/tm2533554d10_ex2-1.htm)[, 2025).](https://www.sec.gov/Archives/edgar/data/1053352/000110465925124217/tm2533554d10_ex2-1.htm)</u> |
| 3.1 | <u>[Heritage Commerce Corp Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K filed on March 16, 2009).](https://www.sec.gov/Archives/edgar/data/1053352/000105335209000031/exhibit3-1.htm)</u> |
| 3.2 | <u>[Certificate of Amendment of Articles of Incorporation of Heritage Commerce Corp, as filed with the California Secretary of State on June 1, 2010 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 filed July 23, 2010)](http://www.sec.gov/Archives/edgar/data/1053352/000110465910039331/a10-13975_1ex3d2.htm)</u>. |
| 3.3 | <u>[Certificate of Amendment of Articles of Incorporation of Heritage Commerce Corp, as filed with the California Secretary of State on August 29, 2019 (incorporated by reference to Exhibit 3.3 to the Registrant's Quarterly Report on Form 10-Q filed November 11, 2019)](http://www.sec.gov/Archives/edgar/data/1053352/000155837019010431/htbk-20190930ex33ac7355e.htm)</u>. |
| 3.4 | <u>[Heritage Commerce Corp Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on June 28, 2013).](https://www.sec.gov/Archives/edgar/data/1053352/000110465913052355/a13-15814_1ex3d1.htm)</u> |
| 4.1 | <u>[Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934 (incorporated herein by reference to the Registrant's Annual Report on Form 10-K filed on March 11, 2020)](https://www.sec.gov/Archives/edgar/data/1053352/000155837020002430/htbk-20191231ex44c3814cd.htm)</u>. |
| \*\*10.1 | <u>[Heritage Commerce Corp Management Cash Incentive Bonus Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed January 28, 2022).](https://www.sec.gov/Archives/edgar/data/1053352/000155837022000597/htbk-20220127xex10d1.htm)</u> |
| \*\*10.2 | <u>[Non-qualified Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K filed March 31, 2005)](http://www.sec.gov/Archives/edgar/data/1053352/000105335205000036/exh10-11.htm)</u>. |
| \*\*10.3 | <u>[Employment Agreement with Seth Fonti, dated July 24, 2025 (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed July 24, 2025).](https://www.sec.gov/Archives/edgar/data/1053352/000155837025009564/htbk-20250724xex10d1.htm)</u> |
| \*\*10.4 | <u>[Employment Agreement with Robertson Clay Jones, dated September 15, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed September 19, 2022)](https://www.sec.gov/Archives/edgar/data/1053352/000110465922100918/tm2225981d1_ex10-1.htm)</u>. |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

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| | |
|:---|:---|
| **Exhibit<br>Number** | **Description** |
| \*\*10.5 | <u>[Employment Agreement with Chris Edmonds-Waters, dated April 30, 2024 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on May 6, 2024).](https://www.sec.gov/Archives/edgar/data/1053352/000110465924057263/tm2413351d1_ex10-1.htm)</u> |
| \*\*10.6 | <u>[Employment Agreement with Deborah K. Reuter, dated March 23, 2023 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed March 27, 2023).](https://www.sec.gov/Archives/edgar/data/1053352/000110465923037198/tm2310433d1_ex10-1.htm)</u> |
| \*\*10.7† | <u>[Amended and Restated Employment Agreement with Glen Shu, dated February 1, 2024 (incorporated by reference to Exhibit 10.8 to the Registrant's Annual Report on Form 10-K filed March 11, 2024).](https://www.sec.gov/Archives/edgar/data/1053352/000155837024002846/htbk-20231231xex10d8.htm)</u> |
| \*\*10.8† | <u>[Employment Agreement with Thomas A. Sa, dated September 26, 2024 (incorporated by reference to Exhibit 10.01 to the Registrant's Current Report on Form 8-K filed on October 2, 2024).](https://www.sec.gov/Archives/edgar/data/1053352/000119312524231201/d900256dex1001.htm)</u> |
| \*\*10.9† | <u>[Amended and Restated Employment Agreement with Susan Just, dated February 1, 2024 (incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K filed March 11, 2024).](https://www.sec.gov/Archives/edgar/data/1053352/000155837024002846/htbk-20231231xex10d10.htm)</u> |
| \*\*10.10† | <u>[Employment Agreement with Dustin Warford, dated February 1, 2024 (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K filed March 11, 2024).](https://www.sec.gov/Archives/edgar/data/1053352/000155837024002846/htbk-20231231xex10d11.htm)</u> |
| \*\*10.11 | <u>[Employment Agreement with Janisha Sabnani, dated February 3, 2025 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed February 3, 2025).](https://www.sec.gov/Archives/edgar/data/1053352/000110465925008654/tm254986d1_ex10-1.htm)</u> |
| \*\*10.12 | <u>[Heritage Commerce Corp 2013 Equity Incentive Plan (incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-8 filed July 15, 2013).](https://www.sec.gov/Archives/edgar/data/1053352/000110465913054418/a13-16590_1ex4d4.htm)</u> |
| \*\*10.13 | <u>[Amendment No. 1 to Heritage Commerce Corp 2013 Equity Incentive Plan, dated May 25, 2017 (incorporated by reference to Exhibit A to the Registrant's Proxy Statement, filed April 19, 2017)](https://www.sec.gov/Archives/edgar/data/1053352/000104746917002718/0001047469-17-002718-index.htm)</u>. |
| \*\*10.14 | <u>[Amendment No. 2 to Heritage Commerce Corp 2013 Equity Incentive Plan, dated May 21, 2020 (incorporated by reference to Appendix A to the Registrant's Proxy Statement, filed April 15, 2020)](https://www.sec.gov/Archives/edgar/data/1053352/000104746920002333/a2241211zdef14a.htm)</u>. |
| \*\*10.15 | <u>[Form of Restricted Stock Agreement for 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-8 filed July 15, 2013)](http://www.sec.gov/Archives/edgar/data/1053352/000110465913054418/a13-16590_1ex10d1.htm)</u>. |
| \*\*10.16 | <u>[Form of Stock Option Agreement for 2013 Equity Incentive Plan (incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-8 filed July 15, 2013)](https://www.sec.gov/Archives/edgar/data/1053352/000110465913054418/a13-16590_1ex4d4.htm)</u>. |
| \*\*10.17 | <u>[Form of Restricted Stock Unit Agreement (serviced-based) for 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K filed March 9, 2023).](https://www.sec.gov/Archives/edgar/data/1053352/000155837023003189/htbk-20221231xex10d17.htm)</u> |
| \*\*10.18 | <u>[Form of Restricted Stock Unit Agreement (performance-based) for 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-K filed March 9, 2023).](https://www.sec.gov/Archives/edgar/data/1053352/000155837023003189/htbk-20221231xex10d18.htm)</u> |
| \*\*10.19 | <u>[Heritage Commerce Corp 2023 Equity Incentive Plan (incorporated by reference to Appendix A to the Registrant's Proxy Statement filed April 13, 2023).](https://www.sec.gov/ix?doc=/Archives/edgar/data/1053352/000110465923045018/tm231833d2_def14a.htm)</u> |
| \*\*10.20 | <u>[2005 Amended and Restated Heritage Commerce Corp Supplemental Retirement Plan (incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed September 30, 2008)](http://www.sec.gov/Archives/edgar/data/1053352/000110465908061257/a08-24594_1ex99d1.htm)</u>. |
| \*\*10.21 | <u>[Form of Endorsement Method Split Dollar Plan Agreement for Executive Officers (incorporated herein by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K filed March 17, 2008)](http://www.sec.gov/Archives/edgar/data/1053352/000105335208000014/exhibit10-20.htm)</u>. |
| \*\*10.22 | <u>[Form of Endorsement Method Split Dollar Plan Agreement for Directors (incorporated herein by reference to Exhibit 10.21 to the Registrant's Annual Report on Form 10-K filed March 17, 2008)](http://www.sec.gov/Archives/edgar/data/1053352/000105335208000014/exhibit10-21.htm)</u>. |
| \*\*10.23 | <u>[First Amended and Restated Director Compensation Benefits Agreement dated December 29, 2008 between Jack Conner and the Company (incorporated herein by reference to Exhibit 10.8 to the Registrant's Current Report on Form 8-K filed January 2, 2009)](http://www.sec.gov/Archives/edgar/data/1053352/000110465909000122/a08-31190_1ex10d8.htm)</u>. |
| \*\*10.24 | <u>[Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated herein by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed December 23, 2009)](http://www.sec.gov/Archives/edgar/data/1053352/000110465909071072/a09-35703_1ex99d1.htm)</u>. |
| \*\*10.25 | <u>[Presidio Bank Amended and Restated 2006 Stock Options Plan (incorporated by reference to Exhibit 99.1 to the Registrant's Statement on Form S-8 filed October 15, 2019)](http://www.sec.gov/Archives/edgar/data/1053352/000119312519267787/d814154dex991.htm)</u>. |

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

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| | |
|:---|:---|
| **Exhibit<br>Number** | **Description** |
| \*10.26 | <u>[Presidio Bank 2016 Equity Incentive Plan (incorporated by reference to Exhibit 99.2 to the Registrant's Statement on Form S-8 filed October 15, 2019)](http://www.sec.gov/Archives/edgar/data/1053352/000119312519267787/d814154dex992.htm)</u>.  |
| 19.1 | <u>[Heritage Commerce Corp Insider Trading Policy, filed herewith.](htbkex-191.htm)</u> |
| 21.1 | <u>[Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrant's Annual Report on Form 10-K, as filed March 3, 2017)](http://www.sec.gov/Archives/edgar/data/1053352/000155837017001341/htbk-20161231ex21110a69f.htm)</u>. |
| 23.1 | <u>[Consent of Crowe LLP](htbkex-231.htm)[, filed herewith.](htbkex-231.htm)</u> |
| 31.1 | <u>[Certification of Registrant's Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002, filed herewith.](htbkex-311.htm)</u> |
| 31.2 | <u>[Certification of Registrant's](htbkex-312.htm)[Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002, filed herewith.](htbkex-312.htm)</u> |
| \*\*\*32.1 | <u>[Certification of Registrant's Chief Executive Officer Pursuant to 18 U.S.C. Section 1350](htbkex-321.htm)</u>. |
| \*\*\*32.2 | <u>[Certification of Registrant's](htbkex-322.htm)[Chief Financial Officer Pursuant to 18 U.S.C. Section 1350](htbkex-322.htm)</u>. |
| 97.1 | <u>[Heritage Commerce Corp Incentive Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to the Registrant's Annual Report on Form 10-K filed March 11, 2024).](https://www.sec.gov/Archives/edgar/data/1053352/000155837024002846/htbk-20231231xex97d1.htm)</u> |
| 101.INS | Inline XBRL Instance Document, filed herewith. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document, filed herewith. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith. |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document, filed herewith. |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document, filed herewith. |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith. |
| 104 | Cover Page Interactive Data (formatted as inline XBRL and contained in Exhibits 101). |

---

_______________________________________________________

\* Confidential disclosure schedules omitted pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC. The Company undertakes to furnish supplemental copies of any omitted schedules to the SEC upon request.

\*\* Management contract or compensatory plan or arrangement.

\*\*\* Furnished and not filed.

†Certain identified information has been excluded from the exhibit pursuant to Regulation S-K Item 601(b)(10)(iv) because it is both (i) not material and (ii) is the type that the Company customarily treats as private or confidential.

_______________________________________________________

**ITEM 16. *FORM 10-K SUMMARY***

None.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**SIGNATURE**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
| | HERITAGE COMMERCE CORP | HERITAGE COMMERCE CORP |
| | BY: | /s/ ROBERTSON CLAY JONES |
| | | Robertson Clay Jones |
| DATE: March 9, 2026 | | *Chief Executive Officer* |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

---

| | | |
|:---|:---|:---|
| **Signature** | **Title** | **Date** |
| /s/ CHRISTOPHER J. ABATE | Director | March 9, 2026 |
| Christopher J. Abate | Director | March 9, 2026 |
| /s/ JULIANNE M. BIAGINI-KOMAS | Director and Chair of the Board | March 9, 2026 |
| Julianne M. Biagini-Komas | Director and Chair of the Board | March 9, 2026 |
| /s/ BRUCE H. CABRAL | Director | March 9, 2026 |
| Bruce H. Cabral | Director | March 9, 2026 |
| /s/ JACK W. CONNER | Director and Chair Emeritus of the Board | March 9, 2026 |
| Jack W. Conner | Director and Chair Emeritus of the Board | March 9, 2026 |
| /s/ SETH FONTI | Executive Vice President and Chief Financial Officer | March 9, 2026 |
| Seth Fonti | (Principal Financial Officer) | March 9, 2026 |
| /s/ STEPHEN G. HEITEL | Director | March 9, 2026 |
| Stephen G. Heitel | Director | March 9, 2026 |
| /s/ KAMRAN F. HUSAIN | Director | March 9, 2026 |
| Kamran F. Husain | Director | March 9, 2026 |
| /s/ ROBERTSON CLAY JONES | Director and Chief Executive Officer | March 9, 2026 |
| Robertson Clay Jones | (Principal Executive Officer) | March 9, 2026 |
| /s/ MARINA H. PARK SUTTON | Director | March 9, 2026 |
| Marina H. Park Sutton |  | March 9, 2026 |
| /s/ JEANNIE TAM | Senior Vice President and Chief Accounting Officer | March 9, 2026 |
| Jeannie Tam | (Principal Accounting Officer) | March 9, 2026 |

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**HERITAGE COMMERCE CORP**

**INDEX TO FINANCIAL STATEMENTS**

**DECEMBER 31, 2025**

---

| | |
|:---|:---|
| | **Page** |
| <u>[Report of Independent Registered Public Accounting Firm, Crowe LLP](#i24baf52b287841329ec8f7b68eab379b_118)</u> (PCAOB ID 173) | [103](#i24baf52b287841329ec8f7b68eab379b_118) |
| <u>[Consolidated Balance Sheets as of December 31, 2025 and 20](#i24baf52b287841329ec8f7b68eab379b_121)[24](#i24baf52b287841329ec8f7b68eab379b_121)</u> | [106](#i24baf52b287841329ec8f7b68eab379b_121) |
| <u>[Consolidated Statements of Income for the years ended December 31, 2025, 2024 and 2](#i24baf52b287841329ec8f7b68eab379b_124)[023](#i24baf52b287841329ec8f7b68eab379b_124)</u> | [107](#i24baf52b287841329ec8f7b68eab379b_124) |
| <u>[Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 20](#i24baf52b287841329ec8f7b68eab379b_127)[23](#i24baf52b287841329ec8f7b68eab379b_127)</u> | [108](#i24baf52b287841329ec8f7b68eab379b_127) |
| <u>[Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2025, 2](#i24baf52b287841329ec8f7b68eab379b_130)[0](#i24baf52b287841329ec8f7b68eab379b_130)[24](#i24baf52b287841329ec8f7b68eab379b_130)[and 2](#i24baf52b287841329ec8f7b68eab379b_130)[023](#i24baf52b287841329ec8f7b68eab379b_130)</u> | [109](#i24baf52b287841329ec8f7b68eab379b_130) |
| <u>[Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 20](#i24baf52b287841329ec8f7b68eab379b_133)[23](#i24baf52b287841329ec8f7b68eab379b_133)</u> | [110](#i24baf52b287841329ec8f7b68eab379b_133) |
| <u>[Notes to Consolidated Financial Statements](#i24baf52b287841329ec8f7b68eab379b_136)</u> | [111](#i24baf52b287841329ec8f7b68eab379b_136) |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors

of Heritage Commerce Corp

San Jose, California

**Opinions on the Financial Statements and Internal Control over Financial Reporting**

We have audited the accompanying consolidated balance sheets of Heritage Commerce Corp (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

**Basis for Opinions**

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

**Definition and Limitations of Internal Control Over Financial Reporting**

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

<u>Allowance for Credit Losses on Loans – Macroeconomic Variables</u>

As described in Notes 1 and 4 to the consolidated financial statements, the Allowance for Credit Losses on Loans ("ACLL") represents the Company's estimate of expected credit losses over the contractual life of the Company's held for investment loan portfolio. The estimate is based on historical experience, current conditions, and reasonable and supportable forecasts. As of December 31, 2025, the Company's ACLL was $49,999,000, and the provision for credit losses on loans was $1,816,000 for the year then ended.

The Company estimates expected credit losses using a quantitative model and qualitative adjustments. The quantitative component is calculated using a discounted cash flow (DCF) methodology that incorporates loan-level cash flow estimates by segment, based on peer and bank historical loss correlations with certain economic factors ("macroeconomic variables"). The macroeconomic variables the Company has selected include the California unemployment rate, California gross domestic product, California home price index, and a national CRE value index. These variables are evaluated and updated as economic conditions change. The Company then applies qualitative factor adjustments to the modeled results for risks not fully captured in the model, including changes in economic conditions, collateral values, concentrations of credit risk, portfolio credit quality, delinquency trends, and other internal and external factors.

We have identified auditing the macroeconomic variables used in the allowance for credit losses on loans as a critical audit matter as management's estimation of the allowance for credit losses on loans involves subjective judgments and assumptions, including the selection and application of the macroeconomic variables. As a result, our audit procedures required challenging and subjective auditor judgment and significant audit effort to evaluate management's judgments in developing macroeconomic variables, including the involvement of our valuation services specialists.

The primary audit procedures performed to address this critical audit matter included the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Testing the operating effectiveness of the Company's controls over the:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Review of the selection and application of macroeconomic variables and related forecast scenarios.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Review over the relevance and reliability of external data used in the analysis to select the macroeconomic variables.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Review of the reasonableness of the calculation output and tested the completeness and accuracy of inputs used in the quantitative model.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Substantive testing included:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Evaluating the relevance and reliability of the data and reasonableness of the macroeconomic variables used in the forecast model.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Evaluating the reasonableness of the selection and application of the macroeconomic variables used in the reasonable and supportable forecast period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Testing the completeness and accuracy of inputs used in the quantitative model.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Evaluating the reasonableness of the calculation output.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

---

| |
|:---|
| /s/ Crowe LLP |
| Crowe LLP |

---

We have served as the Company's auditor since 2005.

Oakbrook Terrace, Illinois

March 9, 2026

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**HERITAGE COMMERCE CORP**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
| | **<u>December 31,<br>2025</u>** | **<u>December 31,<br>2024</u>** |
| | **<u>(Dollars in thousands)</u>** | **<u>(Dollars in thousands)</u>** |
| **Assets** | | |
| Cash and due from banks | $21682 | $29864 |
| Other investments and interest-bearing deposits in other financial institutions | 625346 | 938259 |
| &nbsp;&nbsp;Total cash and cash equivalents | 647028 | 968123 |
| Securities available-for-sale, at fair value | 592958 | 256274 |
| Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $11 and $12,  |  |  |
| &nbsp;&nbsp; (fair value of $465,767 and $497,012, respectively) | 529711 | 590016 |
| Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs | 1322 | 2375 |
| Loans, net of deferred fees | 3653060 | 3491937 |
| Allowance for credit losses on loans | (49999) | (48953) |
| &nbsp;&nbsp;Loans, net | 3603061 | 3442984 |
| Federal Home Loan Bank ("FHLB"), Federal Reserve Bank ("FRB") stock and other investments, at cost | 32568 | 32556 |
| Company-owned life insurance | 83423 | 81211 |
| Premises and equipment, net | 9213 | 10140 |
| Goodwill | 167631 | 167631 |
| Other intangible assets | 4625 | 6439 |
| Accrued interest receivable and other assets | 93157 | 87257 |
| &nbsp;&nbsp;Total assets | $5764697 | $5645006 |
| **Liabilities and Shareholders' Equity** |  |  |
| Liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Deposits: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demand, noninterest-bearing | $1308737 | $1214192 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demand, interest-bearing | 957146 | 936587 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Savings and money market | 1380666 | 1325923 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time deposits - under $250 | 31500 | 38988 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time deposits - $250 and over | 220715 | 206755 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insured Cash Sweep ("ICS")/Certificates of Deposit Account Registry Service ("CDARS") - |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;interest-bearing demand, money market and time deposits | 1004322 | 1097586 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deposits | 4903086 | 4820031 |
| &nbsp;&nbsp;&nbsp;&nbsp;Subordinated debt, net of issuance costs | 39805 | 39653 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued interest payable and other liabilities | 113240 | 95595 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 5056131 | 4955279 |
| Shareholders' equity: |  |  |
| Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding  |  |  |
| &nbsp;&nbsp;at December 31, 2025 and December 31, 2024 |  |  |
| Common stock, no par value; 100,000,000 shares authorized;  |  |  |
| &nbsp;&nbsp;61,368,708 and 61,348,095 shares issued and outstanding, respectively | 509611 | 510070 |
| Retained earnings | 203675 | 187762 |
| Accumulated other comprehensive loss | (4720) | (8105) |
| &nbsp;&nbsp;Total shareholders' equity | 708566 | 689727 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $5764697 | $5645006 |

---

See notes to consolidated financial statements

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**HERITAGE COMMERCE CORP**

**CONSOLIDATED STATEMENTS OF INCOME**

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** |
| Interest income: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans, including fees | $196823 | $182983 | $177628 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities, taxable | 26451 | 20817 | 27351 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities, exempt from Federal tax | 830 | 890 | 945 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other investments, interest-bearing deposits |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; in other financial institutions and Federal funds sold | 32895 | 35654 | 26225 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest income | 256999 | 240344 | 232149 |
| Interest expense: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deposits | 69472 | 76899 | 47557 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term borrowings |  |  | 1365 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subordinated debt | 2152 | 2152 | 2152 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | 71624 | 79051 | 51074 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income before provision for credit losses on loans | 185375 | 161293 | 181075 |
| Provision for credit losses on loans | 1816 | 2139 | 749 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision for credit losses on loans | 183559 | 159154 | 180326 |
| Noninterest income: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service charges and fees on deposit accounts | 3688 | 3561 | 4341 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FHLB and FRB stock dividends | 2353 | 2355 | 2149 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in cash surrender value of life insurance | 2213 | 2097 | 2031 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Termination fees | 435 | 177 | 154 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Servicing income | 302 | 365 | 400 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sales of SBA loans | 215 | 473 | 482 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on proceeds from company owned life insurance |  | 219 | 125 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 2883 | 1856 | 1465 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | 12089 | 11103 | 11147 |
| Noninterest expense: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Salaries and employee benefits | 66537 | 63952 | 56862 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Occupancy and equipment | 9944 | 10226 | 9490 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional fees | 6233 | 5416 | 4350 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 45145 | 33989 | 30352 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | 127859 | 113583 | 101054 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 67789 | 56674 | 90419 |
| Income tax expense | 19959 | 16146 | 25976 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income | $47830 | $40528 | $64443 |
| Earnings per common share: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic | $0.78 | $0.66 | $1.06 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted | $0.78 | $0.66 | $1.05 |

---

See notes to consolidated financial statements

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**HERITAGE COMMERCE CORP**

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

---

| | | | |
|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Net income | $47830 | $40528 | $64443 |
| Other comprehensive income: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Change in net unrealized holding gains on |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; available-for-sale securities and I/O strips | 5544 | 4839 | 6148 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income taxes | (1628) | (1403) | (1783) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in unrealized gains on securities and I/O strips, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; net of deferred income taxes | 3916 | 3436 | 4365 |
| &nbsp;&nbsp;&nbsp;&nbsp; Change in net pension and other benefit plan liability adjustment | (771) | 1491 | (458) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income taxes | 240 | (302) | 219 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in pension and other benefit plan liability, net of |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; deferred income taxes | (531) | 1189 | (239) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income | 3385 | 4625 | 4126 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total comprehensive income | $51215 | $45153 | $68569 |

---

See notes to consolidated financial statements

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**HERITAGE COMMERCE CORP**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Years Ended December 31, 2025, 2024 and 2023** | **Years Ended December 31, 2025, 2024 and 2023** | **Years Ended December 31, 2025, 2024 and 2023** | **Years Ended December 31, 2025, 2024 and 2023** | **Years Ended December 31, 2025, 2024 and 2023** |
| | **Common Stock** | **Common Stock** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive<br>Income<br>(Loss)** | **Total<br>Shareholders'<br>Equity** |
| | **Shares** | **Amount** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive<br>Income<br>(Loss)** | **Total<br>Shareholders'<br>Equity** |
| | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** | **(Dollars in thousands, except per share data)** |
| **Balance, January 1, 2023** | 60852723 | $502923 | $146389 | $(16856) | $632456 |
| Net income |  |  | 64443 |  | 64443 |
| Other comprehensive income, net of taxes |  |  |  | 4126 | 4126 |
| Issuance of restricted stock awards, net | 73446 |  |  |  |  |
| Net amortization of restricted stock awards |  | 1404 |  |  | 1404 |
| Cash dividend declared $0.52 per share |  |  | (31740) |  | (31740) |
| Restricted stock units ("RSUs") and performance-based |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; restricted stock units ("PRSUs") expense, net of taxes |  | 392 |  |  | 392 |
| Stock option expense, net of forfeitures and taxes |  | 600 |  |  | 600 |
| Stock options exercised | 220666 | 1220 |  |  | 1220 |
| **Balance, December 31, 2023** | 61146835 | 506539 | 179092 | (12730) | 672901 |
| Net income |  |  | 40528 |  | 40528 |
| Other comprehensive income, net of taxes |  |  |  | 4625 | 4625 |
| Issuance of restricted stock awards, net | 25908 |  |  |  |  |
| Net amortization of restricted stock awards |  | 916 |  |  | 916 |
| Cash dividend declared $0.52 per share |  |  | (31858) |  | (31858) |
| RSUs and PRSUs expense, net of taxes |  | 1409 |  |  | 1409 |
| RSUs vested | 35837 |  |  |  |  |
| Stock option expense, net of forfeitures and taxes |  | 516 |  |  | 516 |
| Stock options exercised | 139515 | 690 |  |  | 690 |
| **Balance, December 31, 2024** | 61348095 | 510070 | 187762 | (8105) | 689727 |
| Net income |  |  | 47830 |  | 47830 |
| Other comprehensive income, net of taxes |  |  |  | 3385 | 3385 |
| Issuance of restricted stock awards, net | 77015 |  |  |  |  |
| Net amortization of restricted stock awards |  | 621 |  |  | 621 |
| Cash dividend declared $0.52 per share |  |  | (31917) |  | (31917) |
| RSUs and PRSUs expense, net of taxes |  | 965 |  |  | 965 |
| RSUs vested | 154893 |  |  |  |  |
| Stock option expense, net of forfeitures and taxes |  | 352 |  |  | 352 |
| Common stock repurchased | (439187) | (4049) |  |  | (4049) |
| Stock options exercised | 227892 | 1652 |  |  | 1652 |
| **Balance, December 31, 2025** | 61368708 | $509611 | $203675 | $(4720) | $708566 |

---

See notes to consolidated financial statements

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**HERITAGE COMMERCE CORP** 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |
| Net income | $47830 | $40528 | $64443 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
| Amortization of premiums and accretion of discounts on securities | (819) | (2582) | (4822) |
| Gain on sale of SBA loans | (215) | (473) | (482) |
| Proceeds from sale of SBA loans originated for sale | 3145 | 6469 | 8035 |
| SBA loans originated for sale | (2615) | (6166) | (7302) |
| Provision for credit losses on loans | 1816 | 2139 | 749 |
| Increase in cash surrender value of life insurance | (2213) | (2097) | (2031) |
| Depreciation and amortization | 1304 | 1341 | 1115 |
| Amortization of other intangible assets | 1814 | 2188 | 2406 |
| Stock option expense, net | 352 | 516 | 600 |
| RSUs and PRSUs expense | 965 | 1409 | 392 |
| Amortization of restricted stock awards, net | 621 | 916 | 1404 |
| Amortization of subordinated debt issuance costs | 152 | 151 | 152 |
| Gain on proceeds from company-owned life insurance |  | (219) | (125) |
| Effect of changes in: |  |  |  |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable and other assets | (7336) | 4044 | 2411 |
| &nbsp;&nbsp;&nbsp;Accrued interest payable and other liabilities | 16874 | (9193) | 6065 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 61675 | 38971 | 73010 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |
| Purchase of securities available-for-sale | (555713) | (30263) |  |
| Maturities/paydowns/calls of securities available-for-sale | 226147 | 225064 | 59014 |
| Maturities/paydowns/calls of securities held-to-maturity | 59599 | 59566 | 63376 |
| Net change in loans | (161155) | (142703) | (52131) |
| Changes in FHLB stock and other investments | (12) | (16) | (18) |
| Proceeds from redemption of company-owned life insurance |  | 594 | 1612 |
| Purchase of premises and equipment | (377) | (1624) | (1671) |
| &nbsp;&nbsp;&nbsp;Net cash (used in) provided by investing activities | (431511) | 110618 | 70182 |
| CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |
| Net change in deposits | 83055 | 441573 | (11146) |
| Exercise of stock options | 1652 | 690 | 1220 |
| Payment of cash dividends | (31917) | (31858) | (31740) |
| Repurchase shares of the Company common stock | (4049) |  |  |
| &nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | 48741 | 410405 | (41666) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase (decrease) in cash and cash equivalents | (321095) | 559994 | 101526 |
| Cash and cash equivalents, beginning of period | 968123 | 408129 | 306603 |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents, end of period | $647028 | $968123 | $408129 |
| Supplemental disclosures of cash flow information: |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest paid | $72076 | $77237 | $46834 |
| &nbsp;&nbsp;&nbsp;Income taxes paid, net | 21458 | 13219 | 28340 |
| Supplemental schedule of non-cash activity: |  |  |  |
| &nbsp;&nbsp;&nbsp;Recording of right of use assets in exchange for lease obligations |  | 3045 | 541 |
| &nbsp;&nbsp;&nbsp;Transfer of loans held-for-sale to loan portfolio | 738 |  |  |

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See notes to consolidated financial statements

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**HERITAGE COMMERCE CORP**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**1) Summary of Significant Accounting Policies**

***Description of Business and Basis of Presentation***

Heritage Commerce Corp ("HCC") operates as a registered bank holding company for its wholly-owned subsidiary Heritage Bank of Commerce ("HBC" or the "Bank"), collectively referred to as the "Company". HBC was incorporated on November 23, 1993 and commenced operations on June 8, 1994. HBC is a California state chartered bank which offers a full range of commercial and personal banking services to residents and the business/professional community in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California.

CSNK Working Capital Finance Corp. a California corporation, dba Bay View Funding ("Bay View Funding") is a wholly owned subsidiary of HBC. Bay View Funding's primary business operation is purchasing and collecting factored receivables. Factored receivables are receivables that have been transferred by the originating organization and typically have not been subject to previous collection efforts. In a factoring transaction Bay View Funding directly purchases the receivables generated by its clients at a discount to their face value. The transactions are structured to provide the clients with immediate working capital when there is a mismatch between payments to the client for a good and service and the payment of operating costs incurred to provide such good or service.

The consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States of America and general practices in the banking industry. The financial statements include the accounts of the Company. All inter-company accounts and transactions have been eliminated in consolidation.

***Merger Agreement with CVB Financial Corp.***

On December 17, 2025, CVB Financial Corp. ("CVBF") and the Company jointly announced that they have entered into a definitive merger agreement. Under the terms of the agreement, the Company will merge with and into CVBF in an all-stock transaction valued at approximately $811,000,000, or $13.00 per HTBK share, based on CVBF's closing stock price on December 16, 2025. The value of the transaction is based on a specified closing price and is subject to CVBF stock price fluctuations. Upon completion, the combination is expected to create a top-performing California business bank with approximately $22,000,000,000 in assets, more than 75 offices and branches, and a deeply rooted presence in the State's key economic centers. The proposed merger has been unanimously approved by the respective Boards of Directors of both companies and is expected to close in the second quarter of 2026, subject to customary regulatory approvals, the Company's and CVBF's shareholder approvals, and other closing conditions. For more information, please refer to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 17, 2025.

***Use of Estimates***

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

***Cash and Cash Equivalents***

Cash and cash equivalents include cash on hand, amounts due from banks, amounts held at the Federal Reserve Bank, and Federal funds sold. Federal funds are generally sold and purchased for one-day periods.

***Cash Flows***

Net cash flows are reported for client loan and deposit transactions, notes payable, repurchase agreements and other short-term borrowings.

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***Securities***

The Company classifies its securities as either available-for-sale or held-to-maturity at the time of purchase. Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of taxes.

Interest income includes amortization of purchase premiums or discounts. Premiums and discounts are amortized, or accreted, over the life of the related security, or the earliest call date for callable securities purchased at a premium, as an adjustment to income using a method that approximates the interest method. Realized gains and losses are recorded on the trade date and determined using the specific identification method for the cost of securities sold.

***Allowance for Credit Losses – Available-for-sale Securities***

For available-for-sale debt securities in an unrealized loss position, the Company assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding the intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by rating agency, and adverse conditions specifically related to the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as a provision (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

***Allowance for Credit Losses – Held-to-Maturity Securities***

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type and bond rating. The estimate of expected credit losses considers historical loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Management classifies the held-to-maturity portfolio in the following major security types: Agency mortgage-backed and municipal securities.

All the mortgage-backed securities held by the Company are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses.

Other securities are comprised primarily of tax exempt municipal securities. At December 31, 2025, all of these securities are rated A-AAA or equivalent (defined as investment grade). The issuers in these securities are primarily municipal entities and school districts.

***Loan Sales and Servicing***

The Company holds for sale the conditionally guaranteed portion of certain loans guaranteed by the Small Business Administration or the U.S. Department of Agriculture (collectively referred to as "SBA loans"). These loans are carried at the lower of aggregate cost or fair value. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

Gains or losses on SBA loans held-for-sale are recognized upon completion of the sale, based on the difference between the selling price and the carrying value of the related loan sold.

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SBA loans are sold with servicing retained. Servicing assets recognized separately upon the sale of SBA loans consist of servicing rights and, for loans sold prior to 2009, interest-only strip receivables ("I/O strips"). The Company accounts for the sale and servicing of SBA loans based on the financial and servicing assets it controls and liabilities it has incurred, reversing recognition of financial assets when control has been surrendered, and reversing recognition of liabilities when extinguished. Servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sale of loans. Servicing rights are amortized in proportion to and over the period of net servicing income and are assessed for impairment on an ongoing basis. Impairment is determined by stratifying the servicing rights based on interest rates and terms. Any servicing assets in excess of the contractually specified servicing fees are reclassified at fair value as an I/O strip receivable and treated like an available for sale security. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance. The servicing rights, net of any required valuation allowance, and I/O strip receivable are included in other assets on the consolidated balance sheets.

Servicing income, net of amortization of servicing rights, is recognized as noninterest income. The initial fair value of I/O strip receivables is amortized against interest income on loans.

***Loans***

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the principal amount outstanding, net of deferred loan origination fees and costs on originated loans, or unamortized premiums or discounts on purchased or acquired loans, and an allowance for credit losses on loans. Accrued interest receivable is excluded from the estimate of credit losses. Interest on loans is accrued on the unpaid principal balance and is credited to income using the effective yield interest method. Interest on purchased or acquired loans and the accretion (amortization) of the related purchase discount (premium) is also credited to income using the effective yield interest method.

A loan portfolio segment is defined as the level at which the Company uses a systematic methodology to determine the allowance for credit losses on loans. A loan portfolio class is defined as a group of loans having similar risk characteristics and methods for monitoring and assessing risk.

For all loan classes, when a loan is classified as nonaccrual, the accrual of interest is discontinued, any accrued and unpaid interest is reversed, and the amortization of deferred loan fees and costs is discontinued. For all loan classes, loans are classified as nonaccrual when the payment of principal or interest is 90 days past due, unless the loan is well secured and in the process of collection. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for credit loss and individually evaluated loans. In certain circumstances, loans that are under 90 days past due may also be classified as nonaccrual. Any interest or principal payments received on nonaccrual loans are applied toward reduction of principal. Nonaccrual loans generally are not returned to performing status until the obligation is brought current, the loan has performed in accordance with the contract terms for a reasonable period of time, and the ultimate collectability of the contractual principal and interest is no longer in doubt.

Non-refundable loan fees and direct origination costs are deferred and recognized over the expected lives of the related loans using the effective yield interest method.

***Allowance for Credit Losses on Loans***

Loans are charged-off against the allowance when management determines that a loan balance has become uncollectible. Subsequent recoveries, if any, are credited to the allowance for credit losses on loans.

Management's methodology for estimating the allowance balance consists of several key elements, which include pooling loans with similar characteristics into segments and using a discounted cash flow calculation to estimate losses. The discounted cash flow model inputs include loan level cash flow estimates for each loan segment based on peer and bank historic loss correlations with certain economic factors. Management uses a four quarter forecast of each economic factor that is used for each loan segment and the economic factors are assumed to revert to the historic mean over an eight quarter period after the forecast period. The economic factors management has selected include the California unemployment rate, California gross domestic product, California home price index, and a national CRE value index. These factors are evaluated and updated as economic conditions change. Additionally, management uses qualitative adjustments to the discounted cash flow quantitative loss estimates in certain cases when management has determined an

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adjustment is necessary. These qualitative adjustments are applied by pooled loan segment and have been added for increased risk due to loan quality trends, collateral risk, or other risks management determines are not adequately captured in the discounted cash flow loss estimation. Specific allowances on individually evaluated loans are combined to the allowance on pools of loans with similar risk characteristics to derive the total allowance for credit losses on loans.

Management has also considered other qualitative risks such as collateral values, concentrations of credit risk (geographic, large borrower, and industry), economic conditions, changes in underwriting standards, experience and depth of lending staff, trends in delinquencies, and the level of criticized loans to address asset-specific risks and current conditions that were not fully considered by the macroeconomic variables driving the quantitative estimate.

The allowance for credit losses on loans was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. The loan portfolio is classified into eight segments of loans - commercial, commercial real estate – owner occupied, commercial real estate – non-owner occupied, land and construction, home equity, multifamily, residential mortgages and consumer and other.

The allowance for credit losses is an estimate of expected losses inherent with the Company's loans held-for-investment portfolio. In accordance with Accounting Standards Codification ("ASC") 326 the Company measures the allowance for credit losses on loans by segmenting these assets into pools with similar risk characteristics. The segmentation of these loans is generally based on various risk characteristics reflecting the level at which the Company monitors credit quality and portfolio trends.

In accordance with ASC 326, the Company elected to not measure an allowance for credit losses on accrued interest. As such accrued interest is written off in a timely manner when deemed uncollectible. Any such write-off of accrued interest will reverse previously recognized interest income. In addition, the Company elected to not include accrued interest within presentation and disclosures of the carrying amount of financial assets held at amortized cost. This election is applicable to the various disclosures included within the Company's financial statements. Accrued interest related to financial assets held at amortized cost is included within accrued interest receivable and other assets within the Company's Consolidated Balance Sheets and totaled $16,379,000 at December 31, 2025 and $14,940,000 at December 31, 2024.

The risk characteristics of each loan portfolio segment are as follows:

*Commercial*

Commercial loans primarily rely on the identified cash flows of the borrower for repayment and secondarily on the underlying collateral provided by the borrower. However, the cash flows of the borrowers may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable, inventory or equipment and may incorporate a personal guarantee; however, some loans may be unsecured. Included in commercial loans are $118,503,000 of Bay View Funding factored receivables at December 31, 2025, compared to $68,897,000 at December 31, 2024.

*Commercial Real Estate ("CRE")*

CRE loans rely primarily on the cash flows of the properties securing the loan and secondarily on the value of the property that is securing the loan. CRE loans comprise two segments differentiated by owner occupied CRE and non-owner occupied CRE. Owner occupied CRE loans are secured by commercial properties that are at least 50% occupied by the borrower or borrower affiliate. Although CRE loans often incorporate a personal guarantee, the commercial property collateral is typically sufficient and reliance on personal guarantees is minimal. Non-owner occupied CRE loans are secured by commercial properties that are less than 50% occupied by the borrower or borrower affiliate. CRE loans may be adversely affected by conditions in the real estate markets or in the general economy.

*Land and Construction*

Land and construction loans are generally based on estimates of costs and value associated with the completed project. Construction loans usually involve the disbursement of funds with repayment substantially dependent on the success of the completion of the project. Sources of repayment for these loans may be permanent loans from HBC or other lenders, or proceeds from the sales of the completed project. These loans are monitored by on-site inspections and are

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considered to have higher risk than other real estate loans due to the final repayment dependent on numerous factors including general economic conditions.

*Home Equity*

Home equity loans are secured by 1-4 family residences that are generally owner occupied. Repayment of these loans depends primarily on the personal income of the borrower and secondarily on the value of the property securing the loan which can be impacted by changes in economic conditions such as the unemployment rate and property values. These loans are generally revolving lines of credit.

*Multifamily*

Multifamily loans are loans on residential properties with five or more units. These loans rely primarily on the cash flows of the properties securing the loan for repayment and secondarily on the value of the properties securing the loan. The cash flows of these borrowers can fluctuate along with the values of the underlying property depending on general economic conditions.

*Residential Mortgages*

Residential mortgage loans are secured by 1-4 family residences which are generally owner-occupied. Repayment of these loans depends primarily on the personal income of the borrower and secondarily on the value of the property securing the loan which can be impacted by changes in economic conditions such as the unemployment rate and property values. These are term loans and are acquired.

*Consumer and Other*

Consumer and other loans are secured by personal property or are unsecured and rely primarily on the income of the borrower for repayment and secondarily on the collateral value for secured loans. Borrower income and collateral values can vary depending on economic conditions.

***Loan Commitments and Related Financial Instruments***

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet client financing needs. The face amount for these items represents the exposure to loss, before considering client collateral or ability to repay. Such financial instruments are recorded when they are funded. The notional amount of these commitments is not reflected in the consolidated financial statement until they are funded. The Company maintains an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans, modified to take into account the probability of a drawdown on the commitment. The allowance for credit losses on unfunded loan commitments is classified as a liability account on the balance sheet and is adjusted as a provision for credit loss expense included in other noninterest expense.

***Federal Home Loan Bank and Federal Reserve Bank Stock***

As a member of the Federal Home Loan Bank ("FHLB") system, the Bank is required to own common stock in the FHLB based on the Bank's level of borrowings and outstanding FHLB advances. FHLB stock is carried at cost and classified as a restricted security. Both cash and stock dividends from the FHLB are reported as income.

As a member of the Federal Reserve Bank ("FRB") of San Francisco, the Bank is required to own stock in the FRB of San Francisco based on a specified ratio relative to our capital. FRB stock is carried at cost and may be sold back to the FRB at its carrying value. Cash dividends received from the FRB are reported as income.

***Company-Owned Life Insurance and Split-Dollar Life Insurance Benefit Plan***

The Company has purchased life insurance policies on certain directors and officers. Company-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for charges or other amounts due that are probable at settlement. The purchased insurance is

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subject to split-dollar insurance agreements with the insured participants, which continues after the participant's employment and retirement.

Accounting guidance requires that a liability be recorded primarily over the participant's service period when a split-dollar life insurance agreement continues after a participant's employment or retirement. The required accrued liability is based on either the post-employment benefit cost for the continuing life insurance or the future death benefit depending on the contractual terms of the underlying agreement.

***Premises and Equipment***

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation and amortization are computed on the straight-line basis over the lesser of the respective lease terms or estimated useful lives. The Company owns one building which is being depreciated over 40 years. Furniture, equipment, and leasehold improvements are depreciated over estimated useful lives generally ranging from three to fifteen years. The Company evaluates the recoverability of long-lived assets on an ongoing basis.

***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 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 right of use assets and operating lease liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. 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.

***Business Combinations***

The Company accounts for acquisitions of businesses using the acquisition method of accounting. Under the acquisition method, assets acquired and liabilities assumed are recorded at their estimated fair values at the date of acquisition. Management utilizes various valuation techniques including discounted cash flow analyses to determine these fair values. Any excess of the purchase price over amounts allocated to the acquired assets, including identifiable intangible assets, and liabilities assumed is recorded as goodwill.

***Goodwill and Other Intangible Assets***

Goodwill represents the excess of the cost of a business acquisition over the fair value of net assets acquired. On a quarterly basis, management assesses whether it is necessary to perform a quantitative impairment test of goodwill. In accordance with accounting standards, goodwill is not amortized, but rather is tested for impairment on an annual basis or more frequently when events warrant, using a qualitative or quantitative approach.

Other intangible assets which have finite lives are amortized over their estimated useful lives and also are subject to impairment testing. Other intangible assets consist of a core deposit intangible, a below market lease, an above market lease liability, a customer relationship and brokered relationship intangible assets. The core deposits intangible assets from the acquisitions are being amortized on an accelerated method over ten years. The below market value lease intangible assets are being amortized on the straight line method over three years. The above market lease adjustment is being amortized on the straight line method over five years. The customer relationship and brokered relationship intangible assets are being amortized over ten years.

***Foreclosed Assets***

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through operations. Operating costs after acquisition are expensed. Gains and losses on disposition are included in noninterest expense. There were no foreclosed assets at December 31, 2025 and 2024.

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***Retirement Plans***

Expenses for the Company's non-qualified, unfunded defined benefits plan consists of service and interest cost and amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

***Loss Contingencies***

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company's accounting policy for legal costs related to loss contingencies is to accrue for the probable fees that can be reasonably estimated. The Company's accounting policy for uncertain recoveries is to recognize the anticipated recovery when realization is deemed probable.

***Income Taxes***

The Company files consolidated Federal and combined and separate state income tax returns. Income tax expense is the total of the current year income tax payable or refunded, the change in deferred tax assets and liabilities, and low income housing investment losses, net of tax benefits received. Some items of income and expense are recognized in different years for tax purposes when applying generally accepted accounting principles, leading to timing differences between the Company's actual tax liability and the amount accrued for this liability based on book income. These temporary differences comprise the "deferred" portion of the Company's tax expense or benefit, which is accumulated on the Company's books as a deferred tax asset or deferred tax liability until such time as they reverse.

Realization of the Company's deferred tax assets is primarily dependent upon the Company generating sufficient taxable income to obtain benefit from the reversal of net deductible temporary differences and utilization of tax credit carryforwards for Federal and California state income tax purposes. The amount of deferred tax assets considered realizable is subject to adjustment in future periods based on estimates of future taxable income. Under generally accepted accounting principles, a valuation allowance is required to be recognized if it is "more likely than not" that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management's evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions.

A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense.

***Stock-Based Compensation***

Compensation cost is recognized for stock options and restricted stock awards issued to team members and directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company's common stock at the date of grant is used for restricted stock awards, RSUs and PRSUs. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. Compensation cost recognized reflects estimated forfeitures, adjusted as necessary for actual forfeitures.

***Comprehensive Income (Loss)***

Total comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss) but are excluded from net income (loss) because they have been recorded directly in equity, net of tax, under the provisions of certain accounting guidance. The Company's sources of other comprehensive income (loss) are unrealized gains and losses on securities available-for-sale, and I/O strips, which are treated like available-for-sale securities, and the liabilities related to

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the Company's defined benefit pension plan and the split-dollar life insurance benefit plan. Reclassification adjustments result from gains or losses that were realized and included in net income (loss) of the current period that also had been included in other comprehensive income as unrealized holding gains and losses.

***Segment Reporting***

HBC is a commercial bank serving clients located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. Bay View Funding provides business essential working capital factoring financing to various industries throughout the United States. No client accounts for more than 10 percent of revenue for HBC or the Company. The Company has two reportable segments consisting of Banking and Factoring.

***Reclassifications***

Certain items in the consolidated financial statements for the years ended December 31, 2024 and 2023 were reclassified to conform to the 2025 presentation. These reclassifications did not affect previously reported net income or shareholders' equity.

***Adoption of New Accounting Standards***

In December 2023, FASB issued Accounting Standards Update ("ASU") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The updated accounting guidance requires expanded income tax disclosures, including the disaggregation of existing disclosures related to the tax rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024. Prospective application is required, with retrospective application permitted. The Company adopted this guidance, retrospectively, and the updated disclosures are included in "*Note 11 - Income Taxes.*"

***Issued But Not Yet Effective Accounting Standards***

In October 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-06 - Disclosure Improvements - Codification Amendments in Response to the Securities and Exchange Commission's ("SEC") Disclosure Update and Simplification Initiative. ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification ("ASC"). ASU 2023-06 was issued in response to the SEC's August 2018 final rule that updated and simplified disclosure requirements. In the final rule, the SEC identified 27 disclosure requirements that were incremental to those in the ASC and referred them to the FASB for potential incorporation into the generally accepted accounting principles. To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations if the FASB incorporated them into the relevant ASC subtopics. The disclosure requirements are currently included in either SEC Regulation S-X or SEC Regulation S-K. ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the ASC.

For entities like HCC that are subject to the SEC's existing disclosure requirements, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments are to be applied prospectively and, if by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the ASC and will not become effective for any entity. Management intends to adopt the provisions of ASU 2023-06 on their respective effective dates.

In November 2024, FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 was issued in order to improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. The amendments in ASU 2024-03 require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses in interim and year-end reporting periods. The amendments in this ASU apply to all public business entities and are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments are to be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company will update the related disclosures upon adoption.

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**2) Accumulated Other Comprehensive Income ("AOCI")**

The following table reflects the changes in AOCI by component for the periods indicated:

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2025 and 2024** | **Year Ended December 31, 2025 and 2024** | **Year Ended December 31, 2025 and 2024** |
| | **Unrealized<br>Gains/(Losses) on<br>Available-<br>for-Sale<br>Securities<br>and I/O<br>Strips** | **Defined** <br>**Benefit** <br>**Pension**<br>**Plan** <br>**Items** <sup>(1)</sup> | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning balance January 1, 2025, net of taxes | $(3593) | $(4512) | $(8105) |
| Other comprehensive income before reclassification, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; net of taxes | 3916 | (382) | 3534 |
| Amounts reclassified from other comprehensive loss, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; net of taxes |  | (149) | (149) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net current period other comprehensive income, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; net of taxes | 3916 | (531) | 3385 |
| Ending balance December 31, 2025, net of taxes | $323 | $(5043) | $(4720) |
| Beginning balance January 1, 2024, net of taxes | $(7029) | $(5701) | $(12730) |
| Other comprehensive income before reclassification, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; net of taxes | 3436 | 1263 | 4699 |
| Amounts reclassified from other comprehensive loss, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; net of taxes |  | (74) | (74) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net current period other comprehensive income, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; net of taxes | 3436 | 1189 | 4625 |
| Ending balance December 31, 2024, net of taxes | $(3593) | $(4512) | $(8105) |

---

_________________________________________________________

<sup>(1)</sup> This AOCI component is included in the computation of net periodic benefit cost (see Note 13—Benefit Plans) and includes split-dollar life insurance benefit plan.

_________________________________________________________

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Amounts Reclassified from<br>AOCI<br>Year Ended<br>December 31,** | **Amounts Reclassified from<br>AOCI<br>Year Ended<br>December 31,** | **Amounts Reclassified from<br>AOCI<br>Year Ended<br>December 31,** | **Affected Line Item Where<br>Net Income is Presented** |
| **Details About AOCI Components** | **2025** | **2024** | **2023** | **Affected Line Item Where<br>Net Income is Presented** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |  |
| Amortization of defined benefit pension plan items <sup>(1)</sup>  |  |  |  |  |
| &nbsp;&nbsp;Prior transition obligation and actuarial losses <sup>(2)</sup>  | $258 | $209 | $191 |  |
| &nbsp;&nbsp;Prior service cost and actuarial losses <sup>(3)</sup>  | (48) | (104) | (53) |  |
|  | 210 | 105 | 138 | Other noninterest expense |
|  | (61) | (31) | (40) | Income tax (expense) benefit |
|  | 149 | 74 | 98 | Net of tax |
| Total reclassification from AOCI for the period | $149 | $74 | $98 |  |

---

_________________________________________________________

<sup>(1)</sup> This AOCI component is included in the computation of net periodic benefit cost (see Note 13 — *Benefit Plans*).

<sup>(2)</sup> This is related to the split dollar life insurance benefit plan.

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

<sup>(3)</sup> This is related to the supplemental executive retirement plan.

_________________________________________________________

**3) Securities**

The amortized cost and estimated fair value of securities at year-end were as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2025** | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>(Losses)** | **Allowance<br>for Credit<br>Losses** | **Estimated<br>Fair<br>Value** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | $281480 | $1708 | $(2269) | $— | $280919 |
| &nbsp;&nbsp;&nbsp;&nbsp;Collateralized mortgage obligations | 256258 | 723 | (251) |  | 256730 |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury | 54687 | 622 |  |  | 55309 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $592425 | $3053 | $(2520) | $— | $592958 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2025** | **Amortized<br>Cost** | **Gross<br>Unrecognized<br>Gains** | **Gross<br>Unrecognized<br>(Losses)** | **Estimated<br>Fair<br>Value** | **Allowance<br>for Credit<br>Losses** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities held-to-maturity: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | $502381 | $289 | $(63857) | $438813 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipals - exempt from Federal tax | 27341 | 1 | (388) | 26954 | (11) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $529722 | $290 | $(64245) | $465767 | $(11) |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2024** | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>(Losses)** | **Allowance<br>for Credit<br>Losses** | **Estimated<br>Fair<br>Value** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury | $187095 | $— | $(912) | $— | $186183 |
| &nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | 74239 |  | (4148) |  | 70091 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $261334 | $— | $(5060) | $— | $256274 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2024** | **Amortized<br>Cost** | **Gross<br>Unrecognized<br>Gains** | **Gross<br>Unrecognized<br>(Losses)** | **Estimated<br>Fair<br>Value** | **Allowance<br>for Credit<br>Losses** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities held-to-maturity: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | $559548 | $— | $(91585) | $467963 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipals - exempt from Federal tax | 30480 |  | (1431) | 29049 | (12) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $590028 | $— | $(93016) | $497012 | $(12) |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Securities with unrealized losses at year end, for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in an unrealized loss position are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Less Than 12 Months** | **Less Than 12 Months** | **12 Months or More** | **12 Months or More** | **Total** | **Total** |
| **December 31, 2025** | **Fair<br>Value** | **Unrealized<br>(Losses)** | **Fair<br>Value** | **Unrealized<br>(Losses)** | **Fair<br>Value** | **Unrealized<br>(Losses)** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | $90437 | $(290) | $41717 | $(1979) | $132154 | $(2269) |
| &nbsp;&nbsp;&nbsp;&nbsp;Collateralized mortgage obligations | 103768 | (251) |  |  | 103768 | (251) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $194205 | $(541) | $41717 | $(1979) | $235922 | $(2520) |
| Securities held-to-maturity: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | $— | $— | $428790 | $(63857) | $428790 | $(63857) |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipals — exempt from Federal tax | 305 |  | 19758 | (388) | 20063 | (388) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $305 | $— | $448548 | $(64245) | $448853 | $(64245) |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Less Than 12 Months** | **Less Than 12 Months** | **12 Months or More** | **12 Months or More** | **Total** | **Total** |
| **December 31, 2024** | **Fair<br>Value** | **Unrealized<br>(Losses)** | **Fair<br>Value** | **Unrealized<br>(Losses)** | **Fair<br>Value** | **Unrealized<br>(Losses)** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury | $9778 | $(4) | $176405 | $(908) | $186183 | $(912) |
| &nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | 20383 | (100) | 49708 | (4048) | 70091 | (4148) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $30161 | $(104) | $226113 | $(4956) | $256274 | $(5060) |
| Securities held-to-maturity: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | $10280 | $(53) | $456906 | $(91532) | $467186 | $(91585) |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipals — exempt from Federal tax | 4076 | (65) | 23733 | (1366) | 27809 | (1431) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $14356 | $(118) | $480639 | $(92898) | $494995 | $(93016) |

---

There were no holdings of securities of any one issuer, other than the U.S. Government and its sponsored entities, in an amount greater than 10% of shareholders' equity. At December 31, 2025, the Company held 392 securities (141 available-for-sale and 251 held-to-maturity), of which 340 had fair values below amortized cost. The unrealized losses were due to higher interest rates at period end compared to when the securities were purchased. The issuers are of high credit quality and all principal amounts are expected to be paid when securities mature. The fair value is expected to recover as the securities approach their maturity date and/or market rates decline. The Company does not believe that it is more likely than not that the Company will be required to sell a security in an unrealized loss position prior to recovery in value.

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The amortized cost and fair value of debt securities as of December 31, 2025, by contractual maturity, are shown below. The expected maturities will differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

---

| | | |
|:---|:---|:---|
| | **Available-for-sale** | **Available-for-sale** |
| | **Amortized<br>Cost** | **Estimated<br>Fair Value** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Due after three months through one year | $14980 | $15063 |
| Due after one through five years | 39707 | 40246 |
| Agency mortgage-backed securities and |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; collateralized mortgage obligations | 537738 | 537649 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $592425 | $592958 |

---

---

| | | |
|:---|:---|:---|
| | **Held-to-maturity** | **Held-to-maturity** |
| | **Amortized**<br>**Cost** <sup>(1)</sup> | **Estimated<br>Fair Value** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Due after three months through one year | $690 | $686 |
| Due after one through five years | 12666 | 12490 |
| Due after five through ten years | 13985 | 13778 |
| Agency mortgage-backed securities | 502381 | 438813 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $529722 | $465767 |

---

_________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup>Gross of the allowance for credit losses of ($11,000) at December 31, 2025 and ($12,000) at December 31, 2024.

_________________________________________________________

Securities with amortized cost of $529,139,000 and $753,369,000 as of December 31, 2025 and 2024, respectively, were pledged to secure public deposits and for other purposes as required or permitted by law or contract.

The allowance for credit losses on the Company's held-to-maturity debt securities is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company's Consolidated Balance Sheet. The table below presents a roll-forward by major security type for the year ended December 31, 2025 of the allowance for credit losses on debt securities held-to-maturity held at period end:

---

| | |
|:---|:---|
| | **Municipals** |
| | **(Dollars in thousands)** |
| Beginning balance January 1, 2025 | $12 |
| Provision for (recapture of) credit losses | (1) |
| Ending balance December 31, 2025 | $11 |

---

The change in the allowance for credit losses on the Company's held-to-maturity debt securities was immaterial due to stable balances and bond ratings for the Company's municipal investment securities at December 31, 2025 compared to December 31, 2024.

**4) Loans and Allowance for Credit Losses on Loans**

The allowance for credit losses on loans was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. The loan portfolio is classified into eight segments of loans - commercial, commercial real estate – owner occupied, commercial real estate – non-owner occupied, land and construction, home equity, multifamily, residential mortgage and consumer and other. See Note 1 – *Summary of Significant Accounting Polices - Allowance for Credit Losses on Loans* for the summary of risk characteristics of each loan segment.

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Loan Distribution***

Loans by portfolio segment and the allowance for credit losses on loans were as follows at the dates indicated:

---

| | | |
|:---|:---|:---|
| | **December 31,<br>2025** | **December 31,<br>2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Loans held-for-investment: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial | $550362 | $531350 |
| &nbsp;&nbsp;&nbsp;&nbsp;Real estate: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CRE - owner occupied | 623293 | 601636 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CRE - non-owner occupied | 1475061 | 1341266 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Land and construction | 133558 | 127848 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Home equity | 126085 | 127963 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Multifamily | 295602 | 275490 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Residential mortgages | 432241 | 471730 |
| &nbsp;&nbsp;&nbsp;&nbsp;Consumer and other | 17366 | 14837 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans | 3653568 | 3492120 |
| Deferred loan fees, net | (508) | (183) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans, net of deferred fees | 3653060 | 3491937 |
| Allowance for credit losses on loans | (49999) | (48953) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans, net | $3603061 | $3442984 |

---

Changes in the allowance for credit losses on loans were as follows for the periods indicated:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** |
| | **Commercial** | **CRE<br>Owner <br>Occupied** | **CRE<br>Non-owner <br>Occupied** | **Land &<br>Construction** | **Home<br>Equity** | **Multi-<br>Family** | **Residential<br>Mortgages** | **Consumer<br>and Other** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $6060 | $5225 | $26779 | $1400 | $798 | $4735 | $3618 | $338 | $48953 |
| Charge-offs | (1241) |  |  |  |  |  |  | (197) | (1438) |
| Recoveries | 136 | 43 |  |  | 296 |  |  | 193 | 668 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (charge-offs) recoveries | (1105) | 43 |  |  | 296 |  |  | (4) | (770) |
| Provision for (recapture of) credit losses on loans | 418 | 816 | 1675 | 639 | (256) | (434) | (904) | (138) | 1816 |
| &nbsp;&nbsp;&nbsp;&nbsp;End of period balance | $5373 | $6084 | $28454 | $2039 | $838 | $4301 | $2714 | $196 | $49999 |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** |
| | **Commercial** | **CRE<br>Owner <br>Occupied** | **CRE<br>Non-owner <br>Occupied** | **Land &<br>Construction** | **Home<br>Equity** | **Multi-<br>Family** | **Residential<br>Mortgages** | **Consumer<br>and Other** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $5853 | $5121 | $25323 | $2352 | $644 | $5053 | $3425 | $187 | $47958 |
| Charge-offs | (1305) |  |  |  |  |  |  | (299) | (1604) |
| Recoveries | 336 | 27 |  |  | 97 |  |  |  | 460 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (charge-offs) recoveries | (969) | 27 |  |  | 97 |  |  | (299) | (1144) |
| Provision for (recapture of) credit losses on loans | 1176 | 77 | 1456 | (952) | 57 | (318) | 193 | 450 | 2139 |
| &nbsp;&nbsp;&nbsp;&nbsp;End of period balance | $6060 | $5225 | $26779 | $1400 | $798 | $4735 | $3618 | $338 | $48953 |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** |
| | **Commercial** | **CRE<br>Owner <br>Occupied** | **CRE<br>Non-owner <br>Occupied** | **Land &<br>Construction** | **Home<br>Equity** | **Multi-<br>Family** | **Residential<br>Mortgages** | **Consumer<br>and Other** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $6617 | $5751 | $22135 | $2941 | $666 | $3366 | $5907 | $129 | $47512 |
| Charge-offs | (750) |  |  |  | (246) |  |  | (15) | (1011) |
| Recoveries | 346 | 11 |  |  | 351 |  |  |  | 708 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (charge-offs) recoveries | (404) | 11 |  |  | 105 |  |  | (15) | (303) |
| Provision for (recapture of) credit losses on loans | (360) | (641) | 3188 | (589) | (127) | 1687 | (2482) | 73 | 749 |
| &nbsp;&nbsp;&nbsp;&nbsp;End of period balance | $5853 | $5121 | $25323 | $2352 | $644 | $5053 | $3425 | $187 | $47958 |

---

The following table presents the amortized cost basis of nonaccrual loans and loans past due over 90 days and still accruing at the dates indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **Nonaccrual<br>with no Specific<br>Allowance for<br>Credit<br>Losses** | **Nonaccrual<br>with Specific<br>Allowance for<br>Credit<br>Losses** | **Loans <br>over 90 Days<br>Past Due<br>and Still<br>Accruing** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $41 | $313 | $735 | $1089 |
| Real estate: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Owner Occupied | 31 |  |  | 31 |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Non-Owner Occupied |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Land and construction | 1663 |  |  | 1663 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $1735 | $313 | $735 | $2783 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Nonaccrual<br>with no Specific<br>Allowance for<br>Credit<br>Losses** | **Nonaccrual<br>with Specific<br>Allowance for<br>Credit<br>Losses** | **Loans <br>over 90 Days<br>Past Due<br>and Still<br>Accruing** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $313 | $701 | $489 | $1503 |
| Real estate: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Owner Occupied |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Non-Owner Occupied |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Land and construction | 5874 |  |  | 5874 |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity | 77 |  |  | 77 |
| Consumer and other |  | 213 |  | 213 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $6264 | $914 | $489 | $7667 |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following tables presents the aging of past due loans by class at the dates indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **30 - 59<br>Days<br>Past Due** | **60 - 89<br>Days<br>Past Due** | **90 Days or<br>Greater<br>Past Due** | **Total<br>Past Due** | **Current** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $16058 | $4140 | $1046 | $21244 | $529118 | $550362 |
| Real estate: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Owner Occupied |  |  | 31 | 31 | 623262 | 623293 |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Non-Owner Occupied | 101 |  |  | 101 | 1474960 | 1475061 |
| &nbsp;&nbsp;&nbsp;&nbsp;Land and construction |  |  | 1663 | 1663 | 131895 | 133558 |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity | 131 |  |  | 131 | 125954 | 126085 |
| &nbsp;&nbsp;&nbsp;&nbsp;Multifamily |  |  |  |  | 295602 | 295602 |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential mortgages | 1057 | 833 |  | 1890 | 430351 | 432241 |
| Consumer and other |  |  |  |  | 17366 | 17366 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $17347 | $4973 | $2740 | $25060 | $3628508 | $3653568 |

---

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **30 - 59<br>Days<br>Past Due** | **60 - 89<br>Days<br>Past Due** | **90 Days or<br>Greater<br>Past Due** | **Total<br>Past Due** | **Current** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $7364 | $2295 | $1393 | $11052 | $520298 | $531350 |
| Real estate: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Owner Occupied | 1879 |  |  | 1879 | 599757 | 601636 |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Non-Owner Occupied | 4479 |  |  | 4479 | 1336787 | 1341266 |
| &nbsp;&nbsp;&nbsp;&nbsp;Land and construction | 4290 | 2323 | 5874 | 12487 | 115361 | 127848 |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity | 78 | 750 |  | 828 | 127135 | 127963 |
| &nbsp;&nbsp;&nbsp;&nbsp;Multifamily |  |  |  |  | 275490 | 275490 |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential mortgages | 850 |  |  | 850 | 470880 | 471730 |
| Consumer and other |  | 117 | 213 | 330 | 14507 | 14837 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $18940 | $5485 | $7480 | $31905 | $3460215 | $3492120 |

---

The following table presents the past due loans on nonaccrual and current loans on nonaccrual at the dates indicated:

---

| | | |
|:---|:---|:---|
| | **December 31,<br>2025** | **December 31,<br>2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Past due nonaccrual loans | $2004 | $7068 |
| Current nonaccrual loans | 44 | 110 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total nonaccrual loans | $2048 | $7178 |

---

Management's classification of a loan as "nonaccrual" is an indication that there is reasonable doubt as to the full recovery of principal or interest on the loan. At that point, the Company stops accruing interest income, and reverses any uncollected interest that had been accrued as income. The Company resumes recognizing interest income only as cash interest payments are received and it has been determined the collection of all outstanding principal is not in doubt. The Company recognized interest income of $38,000 and $107,000 on nonaccrual loans in 2025 and 2024, respectively.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Credit Quality Indicators***

Concentrations of credit risk arise when a number of clients are engaged in similar business activities, or activities in the same geographic region, or have similar features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. The Company's loan portfolio is concentrated in commercial (primarily manufacturing, wholesale, and service) and real estate lending, with the remaining balance in consumer loans. While no specific industry concentration is considered significant, the Company's lending operations are located in the Company's market areas that are dependent on the technology and real estate industries and their supporting companies. Thus, the Company's borrowers and their guarantors could be adversely impacted by a downturn in these sectors of the economy which could reduce the demand for loans and adversely impact the borrowers' ability to repay their loans.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, and other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. Nonclassified loans generally include those loans that are expected to be repaid in accordance with their contractual loan terms. Loans categorized as special mention have potential weaknesses that may, if not checked or corrected, weaken the credit or inadequately protect the Company's position at some future date. These loans pose elevated risk, but their weaknesses do not yet justify a substandard classification. Classified loans are those loans that are assigned a substandard, substandard-nonaccrual, or doubtful risk rating using the following definitions:

*Special Mention*. A Special Mention asset has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the asset or in the credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

*Substandard*. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that will jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

*Substandard-Nonaccrual*. Loans classified as substandard-nonaccrual are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any, and it is probable that the Company will not receive payment of the full contractual principal and interest. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. In addition, the Company no longer accrues interest on the loan because of the underlying weaknesses.

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

*Loss*. Loans classified as loss are considered uncollectable or of so little value that their continuance as assets is not warranted. This classification does not necessarily mean that a loan has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. Loans classified as loss are immediately charged off against the allowance for credit losses on loans. Therefore, there is no balance to report as of December 31, 2025 and December 31, 2024.

Loans may be reviewed at any time throughout a loan's duration. If new information is provided, a new risk assessment may be performed if warranted.

The following tables present term loans amortized cost by vintage and loan grade classification, and revolving loans amortized cost by loan grade classification at December 31, 2025 and December 31, 2024. The loan grade classifications are based on the Bank's internal loan grading methodology. Loan grade categories for doubtful and loss rated loans are not included on the tables below as there are no loans with those grades at December 31, 2025 and December 31, 2024. The vintage year represents the period the loan was originated or in the case of renewed loans, the period last renewed. The amortized balance is the loan balance less any purchase discounts, plus any loan purchase

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

premiums. The loan categories are based on the loan segmentation in the Company's CECL reserve methodology based on loan purpose and type.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2025** | **Revolving<br>Loans<br>Amortized <br>Cost Basis** | **Total** |
| | **2025** | **2024** | **2023** | **2022** | **2021** | **Prior Periods** | **Revolving<br>Loans<br>Amortized <br>Cost Basis** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | $142797 | $25094 | $18107 | $11402 | $11761 | $26193 | $303074 | $538428 |
| &nbsp;&nbsp;Special Mention | 1792 | 931 | 516 | 214 | 157 | 262 | 3412 | 7284 |
| &nbsp;&nbsp;Substandard |  |  |  | 36 | 229 | 4031 |  | 4296 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  | 270 |  |  | 84 |  | 354 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 144589 | 26025 | 18893 | 11652 | 12147 | 30570 | 306486 | 550362 |
| CRE - Owner Occupied: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 79782 | 51885 | 27009 | 73180 | 94462 | 283512 | 6692 | 616522 |
| &nbsp;&nbsp;Special Mention |  |  |  |  | 52 | 1660 |  | 1712 |
| &nbsp;&nbsp;Substandard |  |  |  |  | 5028 |  |  | 5028 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  | 31 |  |  | 31 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 79782 | 51885 | 27009 | 73180 | 99573 | 285172 | 6692 | 623293 |
| CRE - Non-Owner Occupied: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 211924 | 132622 | 206860 | 216578 | 244859 | 427999 | 10526 | 1451368 |
| &nbsp;&nbsp;Special Mention |  |  |  | 3460 | 2113 | 1925 |  | 7498 |
| &nbsp;&nbsp;Substandard |  |  |  |  | 4322 | 11273 | 600 | 16195 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 211924 | 132622 | 206860 | 220038 | 251294 | 441197 | 11126 | 1475061 |
| Land and construction: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 64137 | 47572 | 14955 | 4833 |  | 398 |  | 131895 |
| &nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  | 685 | 978 |  | 1663 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 64137 | 47572 | 14955 | 4833 | 685 | 1376 |  | 133558 |
| Home equity: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass |  |  |  |  |  | 2510 | 121934 | 124444 |
| &nbsp;&nbsp;Special Mention |  |  |  |  |  | 131 |  | 131 |
| &nbsp;&nbsp;Substandard |  |  |  |  |  |  | 1510 | 1510 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  |  |  | 2641 | 123444 | 126085 |
| Multifamily: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 41685 | 19882 | 44436 | 33841 | 43390 | 108392 | 2006 | 293632 |
| &nbsp;&nbsp;Special Mention |  |  |  |  |  | 1970 |  | 1970 |
| &nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 41685 | 19882 | 44436 | 33841 | 43390 | 110362 | 2006 | 295602 |
| Residential mortgage: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 457 | 3691 | 1632 | 171185 | 226025 | 28272 |  | 431262 |
| &nbsp;&nbsp;Special Mention |  |  |  |  | 833 |  |  | 833 |
| &nbsp;&nbsp;Substandard |  |  |  |  |  | 146 |  | 146 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 457 | 3691 | 1632 | 171185 | 226858 | 28418 |  | 432241 |
| Consumer and other: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 6044 | 69 | 178 | 94 | 22 | 1882 | 8727 | 17016 |
| &nbsp;&nbsp;Special Mention |  |  |  |  |  |  | 350 | 350 |
| &nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 6044 | 69 | 178 | 94 | 22 | 1882 | 9077 | 17366 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total loans | $548618 | $281746 | $313963 | $514823 | $633969 | $901618 | $458831 | $3653568 |
| Risk Grades: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | $546826 | $280815 | $313177 | $511113 | $620519 | $879158 | $452959 | $3604567 |
| &nbsp;&nbsp;Special Mention | 1792 | 931 | 516 | 3674 | 3155 | 5948 | 3762 | 19778 |
| &nbsp;&nbsp;Substandard |  |  |  | 36 | 9579 | 15450 | 2110 | 27175 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  | 270 |  | 716 | 1062 |  | 2048 |
| &nbsp;&nbsp;&nbsp;&nbsp;Grand Total | $548618 | $281746 | $313963 | $514823 | $633969 | $901618 | $458831 | $3653568 |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2024** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2024** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2024** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2024** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2024** | **Term Loans Amortized Cost Basis by Originated Period as of December 31, 2024** | **Revolving<br>Loans<br>Amortized <br>Cost Basis** | **Total** |
| | **2024** | **2023** | **2022** | **2021** | **2020** | **Prior Periods** | **Revolving<br>Loans<br>Amortized <br>Cost Basis** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | $133643 | $27101 | $17114 | $16312 | $10444 | $28671 | $289147 | $522432 |
| &nbsp;&nbsp;Special Mention | 1927 |  | 327 | 86 |  | 358 | 423 | 3121 |
| &nbsp;&nbsp;Substandard |  | 146 |  | 32 |  | 4405 | 200 | 4783 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  | 591 | 209 |  | 214 |  | 1014 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 135570 | 27247 | 18032 | 16639 | 10444 | 33648 | 289770 | 531350 |
| CRE - Owner Occupied: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 57988 | 31688 | 81133 | 95939 | 65152 | 244430 | 6899 | 583229 |
| &nbsp;&nbsp;Special Mention |  |  |  | 7132 | 443 | 1342 |  | 8917 |
| &nbsp;&nbsp;Substandard |  |  |  | 6333 | 3157 |  |  | 9490 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 57988 | 31688 | 81133 | 109404 | 68752 | 245772 | 6899 | 601636 |
| CRE - Non-Owner Occupied: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 137935 | 222142 | 229993 | 250266 | 27031 | 442105 | 5356 | 1314828 |
| &nbsp;&nbsp;Special Mention |  |  | 4810 | 4890 |  |  |  | 9700 |
| &nbsp;&nbsp;Substandard |  |  |  | 4480 |  | 11658 | 600 | 16738 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 137935 | 222142 | 234803 | 259636 | 27031 | 453763 | 5956 | 1341266 |
| Land and construction: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 32691 | 45250 | 31599 | 9899 | 212 |  |  | 119651 |
| &nbsp;&nbsp;Special Mention |  |  |  |  |  | 2323 |  | 2323 |
| &nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  | 3815 | 978 | 1081 |  | 5874 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 32691 | 45250 | 31599 | 13714 | 1190 | 3404 |  | 127848 |
| Home equity: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass |  |  |  |  |  | 2378 | 122207 | 124585 |
| &nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard |  |  |  |  | 750 |  | 2551 | 3301 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  | 77 |  | 77 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  |  | 750 | 2455 | 124758 | 127963 |
| Multifamily: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 20218 | 46304 | 39609 | 53488 | 5249 | 109930 | 692 | 275490 |
| &nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 20218 | 46304 | 39609 | 53488 | 5249 | 109930 | 692 | 275490 |
| Residential mortgage: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 3757 | 1659 | 180979 | 251167 | 1006 | 32384 |  | 470952 |
| &nbsp;&nbsp;Special Mention |  |  |  | 607 |  |  |  | 607 |
| &nbsp;&nbsp;Substandard |  |  |  |  |  | 171 |  | 171 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 3757 | 1659 | 180979 | 251774 | 1006 | 32555 |  | 471730 |
| Consumer and other: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | 405 | 237 | 1338 | 43 |  | 2027 | 10574 | 14624 |
| &nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  | 213 | 213 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 405 | 237 | 1338 | 43 |  | 2027 | 10787 | 14837 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total loans | $388564 | $374527 | $587493 | $704698 | $114422 | $883554 | $438862 | $3492120 |
| Risk Grades: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Pass | $386637 | $374381 | $581765 | $677114 | $109094 | $861925 | $434875 | $3425791 |
| &nbsp;&nbsp;Special Mention | 1927 |  | 5137 | 12715 | 443 | 4023 | 423 | 24668 |
| &nbsp;&nbsp;Substandard |  | 146 |  | 10845 | 3907 | 16234 | 3351 | 34483 |
| &nbsp;&nbsp;Substandard-Nonaccrual |  |  | 591 | 4024 | 978 | 1372 | 213 | 7178 |
| &nbsp;&nbsp;&nbsp;&nbsp;Grand Total | $388564 | $374527 | $587493 | $704698 | $114422 | $883554 | $438862 | $3492120 |

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------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following table presents the gross charge-offs by class of loans and year of origination for the year ended December 31, 2025:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2025** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2025** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2025** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2025** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2025** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2025** | **Revolving<br>Loans** | **Total** |
| | **2025** | **2024** | **2023** | **2022** | **2021** | **Prior Periods** | **Revolving<br>Loans** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $70 | $— | $228 | $605 | $— | $138 | $200 | $1241 |
| Real estate: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;CRE - Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;CRE - Non-Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Land and construction |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Home equity |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Residential mortgages |  |  |  |  |  |  |  |  |
| Consumer and other |  |  | 192 |  |  | 5 |  | 197 |
| Total | $70 | $— | $420 | $605 | $— | $143 | $200 | $1438 |

---

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2024** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2024** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2024** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2024** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2024** | **Gross Charge-offs by Originated Period for the Year Ended December 31, 2024** | **Revolving<br>Loans** | **Total** |
| | **2024** | **2023** | **2022** | **2021** | **2020** | **Prior Periods** | **Revolving<br>Loans** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Commercial | $57 | $424 | $— | $— | $— | $675 | $149 | $1305 |
| Real estate: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;CRE - Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;CRE - Non-Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Land and construction |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Home equity |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Residential mortgages |  |  |  |  |  |  |  |  |
| Consumer and other |  |  |  |  |  |  | 299 | 299 |
| Total | $57 | $424 | $— | $— | $— | $675 | $448 | $1604 |

---

The amortized cost basis of collateral-dependent loans at December 31, 2025 was $313,000, of which $270,000 were secured by real estate and $43,000 were secured by business assets. The amortized cost basis of collateral-dependent loans, collateralized by business assets, totaled $701,000 at December 31, 2024.

When management determines that foreclosures are probable, expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For loans which foreclosure is not probable, but for which repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty, management has elected the practical expedient under ASC 326 to estimate expected credit losses based on the fair value of collateral, adjusted for selling costs as appropriate. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

***Loan Modifications***

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay, or interest reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

During the year ended December 31, 2025, there was one commercial loan modification with a term extension totaling $4,000, representing less than 0.01% of the total class of financing receivables, and included a weighted average

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

term extension of 11 months. During the year ended December 31, 2024, there were three commercial loan modifications with a term extension totaling $12,000, representing less than 0.01% of the total class of financing receivables, and included a weighted average term extension of 12 months.

The Company has not committed to lend any additional amounts to these borrowers. There were no payment defaults for loans modified for the years ended December 31, 2025 and December 31, 2024. No loans receiving such a modification was 30 days past due or greater at December 31, 2025 and December 31, 2024.

**5) Loan Servicing**

At December 31, 2025, 2024, and 2023, the Company serviced SBA loans sold to the secondary market of approximately $41,068,000, $48,286,000, and $55,845,000, respectively.

Servicing assets represent the servicing spread generated from the sold guaranteed portions of SBA loans. The weighted average servicing rate for all loans serviced was 1.04%, 1.08%, and 1.09% at December 31, 2025, 2024, and 2023, respectively.

Servicing rights are included in "accrued interest receivable and other assets" on the consolidated balance sheets. Activity for loan servicing rights follows:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of year balance | $344 | $415 | $549 |
| Additions | 47 | 110 | 126 |
| Amortization | (140) | (181) | (260) |
| &nbsp;&nbsp;&nbsp;End of year balance | $251 | $344 | $415 |

---

There was no valuation allowance for servicing rights at December 31, 2025, 2024, and 2023, because the estimated fair value of the servicing rights was greater than the carrying value. The estimated fair value of loan servicing rights was $515,000, $612,000, and $710,000, at December 31, 2025, 2024 and 2023, respectively. The fair value of servicing rights at December 31, 2025, was estimated using a weighted average constant prepayment rate ("CPR") assumption of 18.65%, and a weighted average discount rate assumption of 13.45%. The fair value of servicing rights at December 31, 2024, was estimated using a weighted average CPR assumption of 19.09%, and a weighted average discount rate assumption of 14.75%. The fair value of servicing rights at December 31, 2023, was estimated using a weighted average CPR assumption of 17.18%, and a weighted average discount rate assumption of 16.59%.

The weighted average discount rate and CPR assumptions used to estimate the fair value of the I/O strip receivables are the same as for the servicing rights. Management reviews the key economic assumptions used to estimate the fair value of I/O strip receivables on a quarterly basis. The fair value of the I/O strip can be adversely impacted by a significant increase in either the prepayment speed of the portfolio or the discount rate.

I/O strip receivables are included in "accrued interest receivable and other assets" on the consolidated balance sheets. Activity for I/O strip receivables follows:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of year balance | $82 | $117 | $152 |
| Unrealized loss | (49) | (35) | (35) |
| &nbsp;&nbsp;&nbsp;End of year balance | $33 | $82 | $117 |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**6) Premises and Equipment**

Premises and equipment at year-end were as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Building | $3638 | $3638 |
| Land | 2900 | 2900 |
| Furniture and equipment | 16543 | 15768 |
| Leasehold improvements | 6915 | 7142 |
|  | 29996 | 29448 |
| Accumulated depreciation and amortization | (20783) | (19308) |
| &nbsp;&nbsp;&nbsp;Premises and equipment, net | $9213 | $10140 |

---

Depreciation and amortization expense was $1,304,000, $1,341,000, and $1,115,000, in 2025, 2024, and 2023, respectively.

**7) Leases**

The Company recognizes the following for all leases, at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use ("ROU") asset, which is an asset that represents the lessee's right to use, or control the use, of a specified asset for the lease term. The Company is impacted as a lessee of the offices and real estate used for operations. The Company's lease agreements include options to renew at the Company's option. No lease extensions are reasonably certain to be exercised, therefore it was not considered in the calculation of the ROU asset and lease liability. As of December 31, 2025 and December 31, 2024, operating lease ROU assets, included in other assets and lease liabilities, included in other liabilities, totaled $28,471,000 and $30,566,000, respectively.

The following table presents the quantitative information for the Company's leases:

---

| | | |
|:---|:---|:---|
| | **Year Ended<br>December 31,** | **Year Ended<br>December 31,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Operating Lease Cost (Cost resulting from lease payments) | $6851 | $6853 |
| Operating Lease - Operating Cash Flows (Fixed Payments) | $6861 | $6943 |
| Operating Lease - ROU assets | $28471 | $30566 |
| Operating Lease - Liabilities | $28471 | $30566 |
| Weighted Average Lease Term - Operating Leases | 4.60 years | 5.08 years |
| Weighted Average Discount Rate - Operating Leases | 5.87% | 5.57% |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The following maturity analysis shows the undiscounted cash flows due on the Company's operating lease liabilities as of December 31, 2025:

---

| | |
|:---|:---|
| | **(Dollars in thousands)** |
| 2026 | $7138 |
| 2027 | 7175 |
| 2028 | 6597 |
| 2029 | 6346 |
| 2030 | 4297 |
| Thereafter | 1014 |
| Total undiscounted cash flows | 32567 |
| Discount on cash flows | (4096) |
| Total lease liability | $28471 |

---

**8) Goodwill and Other Intangible Assets**

***Goodwill***

At December 31, 2025, the carrying value of goodwill was $167,631,000, which included goodwill related to the acquisition of Bay View Funding, the Bank's factoring subsidiary, and from prior acquisitions of multiple regional business banks.

ASC 350-20 outlines the methodology used to determine if goodwill has been impaired and to measure any loss resulting from an impairment. The Company assesses goodwill for impairment annually as of November 30 or more frequently if events or changes in circumstances indicate that impairment may exist, in accordance with ASC 350-20. The Company first performs a qualitative assessment ("Step Zero") to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the qualitative assessment indicates it is more likely than not that the fair value of equity of a reporting unit is less than book value, then a quantitative impairment test is required. The quantitative assessment identifies if a reporting unit's fair value is less than its carrying value. If it is, then the Company will recognize goodwill impairment equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of goodwill.

On a quarterly basis, management assesses whether it is necessary to perform a quantitative impairment test of goodwill. In addition, the Company hires a third party vendor to perform a qualitative assessment annually as of November 30, or on an interim basis if an event triggering impairment assessment may have occurred. Potential impairment indicators considered include the condition of the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting units; performance of the Company's stock and other relevant events. The Company completed its annual goodwill impairment assessment as of November 30, 2025 with the assistance of a third party vendor. The goodwill related to the acquisition of Bay View Funding was evaluated separately for impairment under this analysis. The qualitative assessment indicated that it was more likely than not that the fair value of the reporting units exceeded the carrying value. No events or circumstances since the November 30, 2025 annual impairment test were noted that would indicate it was more likely than not a goodwill impairment exists.

The following table summarizes the carrying amount of goodwill by segment for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **December 31,<br>2025** | **December 31,<br>2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Banking | $154587 | $154587 |
| Factoring | 13044 | 13044 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Goodwill | $167631 | $167631 |

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Other Intangible Assets***

The Company's intangible assets are summarized as follows for the periods indicated:

---

| | | | |
|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **Gross<br>Carrying <br>Amount** | **Accumulated<br>Amortization** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Core deposit intangibles | $25023 | (20466) | $4557 |
| Below market leases | 110 | (42) | 68 |
| &nbsp;&nbsp;&nbsp;Total | $25133 | $(20508) | $4625 |

---

---

| | | | |
|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Gross<br>Carrying <br>Amount** | **Accumulated<br>Amortization** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Core deposit intangibles | $25023 | $(18670) | $6353 |
| Customer relationship and brokered relationship intangibles | 1900 | (1900) |  |
| Below market leases | 110 | (24) | 86 |
| &nbsp;&nbsp;&nbsp;Total | $27033 | $(20594) | $6439 |

---

As of December 31, 2025, the estimated amortization expense for future periods is as follows:

---

| | | | |
|:---|:---|:---|:---|
| **Year** | **Core<br>Deposit<br>Intangible** | **Below/<br>(Above)<br>Market<br>Lease** | **Total<br>Amortization<br>Expense** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| 2026 | $1510 | 18 | 1528 |
| 2027 | 1438 | 18 | 1456 |
| 2028 | 999 | 18 | 1017 |
| 2029 | 610 | 14 | 624 |
|  | $4557 | $68 | $4625 |

---

Impairment testing of the intangible assets is performed at the individual asset level. Impairment exists if the carrying amount of the asset is not recoverable and exceeds its fair value at the date of the impairment test. For intangible assets, estimates of expected future cash flows (cash inflows less cash outflows) that are directly associated with an intangible asset are used to determine the fair value of that asset. Management makes certain estimates and assumptions in determining the expected future cash flows from core deposit and customer relationship intangibles including account attrition, expected lives, discount rates, interest rates, servicing costs and other factors. Significant changes in these estimates and assumptions could adversely impact the valuation of these intangible assets. If an impairment loss exists, the carrying amount of the intangible asset is adjusted to a new cost basis. The new cost basis is then amortized over the remaining useful life of the asset. Based on its assessment, management concluded that there was no impairment of intangible assets at December 31, 2025 and December 31, 2024.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**9) Deposits**

The following table presents the scheduled maturities of all time deposits for the periods indicated:

---

| | |
|:---|:---|
| | **(Dollars in thousands)** |
| 2026 | $480026 |
| 2027 | 33373 |
| 2028 | 14289 |
| 2029 | 29 |
| 2030 | 240 |
| 2031 | 283 |
| &nbsp;&nbsp;&nbsp;Total | $528240 |

---

Time deposits of $250,000 and over were $220,715,000 and $206,755,000 at December 31, 2025 and 2024, respectively. ICS/CDARS time deposits totaled $276,025,000 and $318,704,000 at December 31, 2025 and 2024, respectively, and are included in the table above. ICS/CDARS interest-bearing demand deposits and money market deposits have no scheduled maturity date, and therefore, are excluded from the table above. ICS/CDARS were comprised of the following at the dates indicated:

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| | | |
|:---|:---|:---|
| | **December 31,<br>2025** | **December 31,<br>2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Interest-bearing demand deposits | $443115 | $433355 |
| Money market deposits | 285182 | 345527 |
| Time deposits | 276025 | 318704 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total ICS/CDARS | $1004322 | $1097586 |

---

The ICS/CDARS program allows clients with deposits in excess of FDIC-insured limits to obtain full coverage on time deposits through a network of banks within the ICS/CDARS program. Deposits gathered through these programs are not considered brokered deposits under current regulatory reporting guidelines.

The Bank's uninsured deposits were approximately $2.4 billion, or 48% of total deposits, at December 31, 2025, compared to $2.2 billion, or 45% of total deposits, at December 31, 2024. There were no brokered deposits at both December 31, 2025 and 2024. Deposits from executive officers, directors, and their affiliates were $970,000 and $833,000 at December 31, 2025 and 2024, respectively.

**10) Borrowing Arrangements**

***Federal Home Loan Bank Borrowings, Federal Reserve Bank Borrowings, and Available Lines of Credit***

HBC has off-balance sheet liquidity in the form of Federal funds purchase arrangements with correspondent banks, and lines of credit from the FHLB and FRB. HBC maintains a collateralized line of credit with the FHLB of San Francisco. Under this line, HBC can borrow from the FHLB on a short-term (typically overnight) or long-term (over one year) basis. HBC can also borrow from the FRB discount window. The following table shows the collateral value of loans

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

and securities pledged for the lines of credit (if collateralized), total available lines of credit, the amounts outstanding, and the remaining available at the dates indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **Collateral<br>Value** | **Total<br>Available** | **Outstanding** | **Remaining<br>Available** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| FHLB collateralized borrowing capacity | $1229391 | $816066 | $— | $816066 |
| FRB discount window collateralized line of credit | 1497471 | 1193854 |  | 1193854 |
| Federal funds purchase arrangements | N/A | 75000 |  | 75000 |
| &nbsp;&nbsp; Total | $2726862 | $2084920 | $— | $2084920 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Collateral<br>Value** | **Total<br>Available** | **Outstanding** | **Remaining<br>Available** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| FHLB collateralized borrowing capacity | $1233768 | $815760 | $— | $815760 |
| FRB discount window collateralized line of credit | 1755347 | 1383149 |  | 1383149 |
| Federal funds purchase arrangements | N/A | 90000 |  | 90000 |
| Holding company line of credit | N/A | 25000 |  | 25000 |
| &nbsp;&nbsp;&nbsp;Total | $2989115 | $2313909 | $— | $2313909 |

---

HBC may also utilize securities sold under repurchase agreements to manage our liquidity position. There were no securities sold under agreements to repurchase at December 31, 2025, and 2024.

***Subordinated Debt***

On May 11, 2022, the Company completed a private placement offering of $40,000,000 aggregate principal amount of its 5.00% fixed-to-floating rate subordinated notes due May 15, 2032 ("Sub Debt due 2032"). The Company used the net proceeds of the Sub Debt due 2032 for general corporate purposes, including the repayment on June 1, 2022 of the Company's $40,000,000 aggregate principal amount of 5.25% fixed-to-floating rate subordinated notes due June 1, 2027. The Sub Debt due 2032, net of unamortized issuance costs of $195,000, totaled $39,805,000 at December 31, 2025, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank. The debt issuance costs are amortized on a straight line basis through the maturity date of the subordinated notes.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**11) Income Taxes**

Income tax expense consisted of the following for the year ended December 31, 2025. The Company does not have pretax income from continuing foreign operations or foreign tax expense.

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Currently tax expense: |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal | $14797 | $9639 | $15888 |
| &nbsp;&nbsp;&nbsp;State | 8424 | 6029 | 9241 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current tax | 23221 | 15668 | 25129 |
| Deferred tax expense (benefit): |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal | (2199) | 582 | 616 |
| &nbsp;&nbsp;&nbsp;State | (1063) | (104) | 231 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax | (3262) | 478 | 847 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense | $19959 | $16146 | $25976 |

---

The effective tax rate differs from the Federal statutory rate for the years ended December 31, as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **2025** | **2025** | **2024** | **2024** | **2023** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| | **Amount** | **Percent** | **Amount** | **Percent** | **Amount** | **Percent** |
| Income before income tax expense | $67789 | N/A | $56674 | N/A | $90419 | N/A |
| Income tax expense components: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Statutory Federal income tax rate | 14235 | 21.0% | 11902 | 21.0% | 18988 | 21.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;State income taxes, net of federal tax benefit <sup>(1)</sup> | 5818 | 8.6% | 4675 | 8.3% | 7478 | 8.3% |
| Tax credits: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Low income housing credits, net of investment losses | (197) | (0.3)% | (124) | (0.2)% | (139) | (0.2)% |
| Nontaxable or nondeductible items: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Merger related costs | 424 | 0.6% |  | —% |  | —% |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-taxable interest income | (165) | (0.2)% | (177) | (0.3)% | (187) | (0.2)% |
| &nbsp;&nbsp;&nbsp;&nbsp;Increase in cash surrender value of life insurance | (465) | (0.7)% | (440) | (0.8)% | (426) | (0.5)% |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock option/restricted stock windfall tax benefit | (77) | (0.1)% | 280 | (0.2)% | 54 | 0.1% |
| Other, net | 386 | 0.5% | 30 | 0.7% | 208 | 0.2% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income tax expense and effective tax rate | $19959 | 29.4% | $16146 | 28.5% | $25976 | 28.7% |

---

_________________________________________________________

<sup>(1)</sup> State taxes in California made up the majority (greater than 50 percent) of the tax effect in this category).

_________________________________________________________

Income taxes paid, net of refunds received, for the year ended December 31 were as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Federal | $13700 | $7800 |
| State and local: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;California | 7650 | 5100 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other states | 108 | 319 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total income tax expense | $21458 | $13219 |

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Deferred tax assets and liabilities that result from the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes at December 31, are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Deferred tax assets: |  |  |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses on loans | $14687 | $14380 |
| &nbsp;&nbsp;&nbsp;Lease accounting | 8363 | 8979 |
| &nbsp;&nbsp;&nbsp;Defined postretirement benefit obligation | 7583 | 7451 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 5510 | 3241 |
| &nbsp;&nbsp;&nbsp;State income taxes | 1688 | 1266 |
| &nbsp;&nbsp;&nbsp;Stock compensation | 1427 | 1647 |
| &nbsp;&nbsp;&nbsp;Premises and equipment | 1230 | 1267 |
| &nbsp;&nbsp;&nbsp;California net operating loss carryforwards | 986 | 986 |
| &nbsp;&nbsp;&nbsp;Federal net operating loss carryforwards | 894 | 1148 |
| &nbsp;&nbsp;&nbsp;Split-dollar life insurance benefit plan | 79 | 75 |
| &nbsp;&nbsp;&nbsp;Nonaccrual interest | 59 | 97 |
| &nbsp;&nbsp;&nbsp;Securities available-for-sale |  | 1483 |
| &nbsp;&nbsp;&nbsp;Other | 225 | 296 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax assets | 42731 | 42316 |
| Deferred tax liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Lease accounting | (8363) | (8979) |
| &nbsp;&nbsp;&nbsp;Loan fees | (2385) | (2265) |
| &nbsp;&nbsp;&nbsp;Intangible liabilities | (1002) | (1337) |
| &nbsp;&nbsp;&nbsp;Prepaid expenses | (757) | (1531) |
| &nbsp;&nbsp;&nbsp;Securities available-for-sale | (159) |  |
| &nbsp;&nbsp;&nbsp;FHLB stock | (156) | (156) |
| &nbsp;&nbsp;&nbsp;I/O strips | (5) | (19) |
| &nbsp;&nbsp;&nbsp;Other | (213) | (212) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax liabilities | (13040) | (14499) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax assets | $29691 | $27817 |

---

At December 31, 2025, the Company's federal net operating loss ("NOL") carryforwards were $4,256,000 and the Company's California net operating loss carryforwards were $11,505,000. These amounts are attributable to the prior merger transactions. The realization of these NOL carryforwards for Federal and State tax purposes are limited on the amount of net operating losses that can be utilized annually under the current tax law. The above NOL carryforwards are presented net of the losses that will expire unutilized under current tax law. Since the NOL carryforwards are already presented net of the amounts that will expire by operation of current tax law, there is no need for a valuation allowance as the Company fully expects to utilize the amounts disclosed.

Under generally accepted accounting principles, a valuation allowance is required if it is "more likely than not" that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management's evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions. At December 31, 2025 and 2024 the Company recorded amount of uncertain tax positions was not considered significant for financial reporting and the Company does not expect this amount to significantly increase or decrease.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

At December 31, 2025 and December 31, 2024 the Company had net deferred tax assets of $29,691,000 and $27,817,000, respectively. At December 31, 2025 and December 31, 2024, management determined that a valuation allowance for deferred tax assets was not necessary.

The Company and its subsidiaries are subject to U.S. Federal income tax as well as income tax of the State of California. The Company is no longer subject to examination by Federal and state taxing authorities for years before 2022, and by the State of California taxing authority for years before 2021.

The following table reflects the carrying amounts of the low income housing investments included in accrued interest receivable and other assets, and the future commitments included in accrued interest payable and other liabilities for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **December 31,<br>2025** | **December 31,<br>2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Low income housing investments | $4709 | $2201 |
| Future commitments | $2695 | $475 |

---

The Company expects $874,000 of the future commitments to be paid in 2026, and $1,219,000 in 2027 through 2028.

For tax purposes, the Company recognized low income housing tax credits of $399,000 and $563,000 for the years ended December 31, 2025 and December 31, 2024, respectively, and low income housing investment expense of $905,000 and $594,000, respectively. The Company recognizes low income housing investment expenses as a component of income tax expense.

**12) Equity Plan**

On May 23, 2013, the Company's shareholders approved the 2013 Equity Incentive Plan (the "2013 Plan"). On May 21, 2020, the shareholders approved an amendment to the 2013 Equity Incentive Plan to increase the number of shares available from 3,000,000 to 5,000,000 shares. The 2013 Plan was terminated on May 25, 2023. The shareholders approved the 2023 Equity Incentive Plan (the "2023 Plan") on May 25, 2023, which reserved for issuance 600,000 shares, plus the number of shares available for issuance under the 2013 Plan that had not been made subject to outstanding awards as of the effective date of the 2023 Plan. These plans are collectively referred to as "Equity Plans." The Equity Plans provide for the grant of incentive and nonqualified stock options, restricted stock, RSUs and PRSUs. The Equity Plans provide for the grant of incentive and nonqualified stock options, restricted stock, restricted stock units ("RSUs") and performance-based restricted stock units ("PRSUs"). The Equity Plans provide that the option price for both incentive and nonqualified stock options will be determined by the Board of Directors at no less than the fair value at the date of grant. Each RSU granted to non-executive team members generally vests ratably over three years. For the year ended December 31, 2025, the Company granted 211,696 RSUs. Options granted vest on a schedule determined by the Board of Directors at the time of grant. Generally, options vest over four years. All options expire no later than ten years from the date of grant. There were 410,508 shares available for the issuance of equity awards under the 2023 Plan as of December 31, 2025.

For 2025, the executive officers that participate in the Company's Long Term Incentive Equity Program received 50% of their award value in RSUs and 50% of their award value in PRSUs contingent on return on average tangible common equity ("ROATCE") performance compared to a peer group at the end of a three year performance period. PRSUs are subject to cliff vesting after a three year performance period commencing in the initial year of grant. The earned PRSUs, if any, shall vest on the date on which the Board of Directors certifies whether and to what extent the performance goal has been achieved following the end of the performance period. For the year ended December 31, 2025, the Company granted 115,912 shares of PRSUs.

Restricted stock is subject to time vesting. Restricted stock granted to the Board of Directors generally vests in one year. For the year ended December 31, 2025, the Company granted 88,099 shares of restricted stock.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Stock option activity under the equity plans is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Total Stock Options** | **Number<br>of Shares** | **Weighted<br>Average<br>Exercise<br>Price** | **Weighted<br>Average<br>Remaining<br>Contractual<br>Life (Years)** | **Aggregate<br>Intrinsic<br>Value** |
| Outstanding at January 1, 2025 | 2222496 | $10.73 |  |  |
| Exercised | (227892) | $7.26 |  |  |
| Forfeited or expired | (174614) | $11.27 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Outstanding at December 31, 2025 | 1819990 | $11.11 | 4.39 | $2949051 |
| Vested or expected to vest | 1710791 |  | 4.39 | $2772108 |
| Exercisable at December 31, 2025 | 1663159 |  | 4.12 | $2342799 |

---

Information related to the equity plans for each of the last three years:

---

| | | | |
|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2023** |
| Intrinsic value of options exercised | $612356 | $647984 | $805334 |
| Cash received from option exercise | $1652013 | $690679 | $1219286 |
| Tax (expense) benefit realized from option exercises | $3583 | $(14828) | $20527 |
| Weighted average fair value of options granted | N/A | N/A | 1.34 |

---

As of December 31, 2025, there was $226,000 of total unrecognized compensation cost related to nonvested stock options granted under the equity plans. That cost is expected to be recognized over a weighted-average period of approximately 1.11 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table, including the weighted average assumptions for the option grants in each year.

---

| | | | |
|:---|:---|:---|:---|
| | **December 31,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2023** |
| Expected life in months <sup>(1)</sup>  | N/A | N/A | 72 |
| Volatility <sup>(1)</sup>  | N/A | N/A | 35% |
| Weighted average risk-free interest rate <sup>(2)</sup>  | N/A | N/A | 3.52% |
| Expected dividends <sup>(3)</sup>  | N/A | N/A | 6.98% |

---

_______________________________________________________

<sup>(1)</sup> The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding based on historical experience. Volatility is based on the historical volatility of the stock price over the same period of the expected life of the option.

<sup>(2)</sup> Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the option granted.

<sup>(3)</sup> Each grant's dividend yield is calculated by annualizing the most recent quarterly cash dividend and dividing that amount by the market price of the Company's common stock as of the grant date.

_______________________________________________________

The Company estimates the impact of forfeitures based on historical experience. Should the Company's current estimate change, additional expense could be recognized or reversed in future periods. The Company issues authorized shares of common stock to satisfy stock option exercises.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Restricted stock activity under the equity plans is as follows:

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| | | |
|:---|:---|:---|
| **Total Restricted Stock Award** | **Number<br>of Shares** | **Weighted<br>Average Grant<br>Date Fair<br>Value** |
| Nonvested shares at January 1, 2025 | 88061 | $9.45 |
| Granted | 88099 | $9.71 |
| Vested | (87911) | $9.39 |
| Forfeited or expired | (10130) | $10.57 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonvested shares at December 31, 2025 | 78119 | $9.67 |

---

As of December 31, 2025, there was $390,000 of total unrecognized compensation cost related to nonvested restricted stock awards granted under the 2023 Plan. The cost is expected to be recognized over a weighted-average period of approximately 2.10 years.

RSU activity under the Equity Plans is as follows:

---

| | | |
|:---|:---|:---|
| **Total RSUs** | **Number<br>of Shares** | **Weighted<br>Average Grant<br>Date Fair<br>Value** |
| Nonvested shares at January 1, 2025 | 357666 | $8.53 |
| Granted | 211696 | $10.05 |
| Dividend Equivalent Units | 40085 | $9.12 |
| Vested | (165433) | $7.95 |
| Forfeited or expired | (50512) | $7.96 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonvested shares at December 31, 2025 | 393502 | $8.80 |

---

As of December 31, 2025, there were $2,522,000 of total unrecognized compensation cost related to unvested RSUs granted under the Equity Plans. The cost is expected to be recognized over a weighted average period of 1.84 years.

PRSU activity under the Equity Plans is as follows:

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| | | |
|:---|:---|:---|
| **Total PRSUs** | **Number<br>of Shares** | **Weighted<br>Average Grant<br>Date Fair<br>Value** |
| Nonvested shares at January 1, 2025 | 229419 | $8.06 |
| Granted | 115912 | $10.02 |
| Dividend Equivalent Units | 31503 | $8.89 |
| Forfeited or expired | (60231) | $7.61 |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonvested shares at December 31, 2025 | 316603 | $8.06 |

---

As of December 31, 2025, there were $35,000 of total unrecognized compensation cost related to unvested PRSUs granted under the Equity Plans, based on the probable level of achievement of the performance conditions. The cost is expected to be recognized over a weighted average period of 0.33 years.

Total compensation cost for the 2013 Plan and 2023 Plan charged against income was $2,082,000, $2,841,000, $2,396,000, for 2025, 2024, and 2023, respectively. The total income tax (benefit) expense was $(77,000), $280,000, and $54,000 for the years ended December 31, 2025, 2024, and 2023, respectively.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**13) Benefit Plans**

***401(k) Savings Plan***

The Company offers a 401(k) savings plan that allows team members to contribute up to a maximum percentage of their compensation, as established by the Internal Revenue Code. The Company made a discretionary matching contribution of up to $3,000 for each team member's contributions in 2025, 2024 and 2023. Contribution expense was $1,006,000, $965,000, and $949,000 in 2025, 2024 and 2023, respectively.

***Employee Stock Ownership Plan***

The Company sponsors a non-contributory employee stock ownership plan ("ESOP"). To participate in this plan, a team member must have worked at least 1,000 hours during the year and must be employed by the Company at year-end. Employer contributions to the ESOP are discretionary. Contributions to the ESOP have been suspended since 2010 and ESOP was "frozen" as of January 1, 2019. At December 31, 2025, the ESOP owned 77,663 shares of the Company's common stock.

***Deferred Compensation Plan***

The Company has a nonqualified deferred compensation plan for some of its team members. Under the deferred compensation plan, a team member may defer up to 100% of their bonus and 50% of their regular salary into a deferred account. Amounts deferred are invested in a portfolio of approved investment choices as directed by the team member. Amounts deferred by team members to the deferred compensation plan will be distributed at a future date that they have selected or upon termination of employment. There were seven team members who elected to participate in the deferred compensation plan during 2025 and 2024.

***Nonqualified Defined Benefit Pension Plan***

The Company has a supplemental retirement plan ("SERP") covering some current and some former key executives and directors. While the SERP remains active for those participants, the Company has not approved any new participation in the SERP since 2011. The SERP is a nonqualified defined benefit plan. Benefits are unsecured as there are no SERP assets. The SERP is an unfunded, nonqualified defined benefit plan. The combined number of active and retired/terminated participants in the SERP was 48 at December 31, 2025. The defined benefit represents a stated amount for key executives and directors that generally vests over nine years and is reduced for early retirement. The projected benefit obligation is included in "Accrued interest payable and other liabilities" on the consolidated balance sheets. The measurement date of the SERP is December 31.

The following table sets forth the SERP's status at December 31:

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| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Change in projected benefit obligation: |  |  |
| &nbsp;&nbsp;&nbsp;Projected benefit obligation at beginning of year | $25311 | $26452 |
| &nbsp;&nbsp;&nbsp;Service cost | 174 | 205 |
| &nbsp;&nbsp;&nbsp;Actuarial loss (gain) | 862 | (917) |
| &nbsp;&nbsp;&nbsp;Interest cost | 1347 | 1272 |
| &nbsp;&nbsp;&nbsp;Benefits paid | (1903) | (1701) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Projected benefit obligation at end of year | $25791 | $25311 |
| Amounts recognized in accumulated other comprehensive loss: |  |  |
| &nbsp;&nbsp;&nbsp;Net actuarial loss | $2746 | $2173 |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Weighted-average assumptions used to determine the benefit obligation at year-end:

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| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Discount rate | 5.16% | 5.50% |
| Rate of compensation increase | N/A | N/A |

---

Estimated benefit payments over the next ten years, which reflect anticipated future events, service and other assumptions, are as follows:

---

| | |
|:---|:---|
| **Year** | **Estimated<br>Benefit<br>Payments** |
| | **(Dollars in thousands)** |
| 2026 | $2020 |
| 2027 | 2318 |
| 2028 | 2371 |
| 2029 | 2415 |
| 2030 | 2459 |
| 2031 to 2035 | 12661 |

---

The following table presents the amount of periodic cost recognized for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Components of net periodic benefit cost: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Service cost | $174 | $205 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest cost | 1347 | 1272 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of net actuarial loss | 48 | 104 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net periodic benefit cost | $1569 | $1581 |
| Amount recognized in other comprehensive (loss) income | $(573) | $719 |

---

The components of net periodic benefit cost other than the service cost component are included in the line item "other noninterest expense" in the Consolidated Statements of Income. The estimated net actuarial loss and prior service cost for the SERP that will be amortized from Accumulated Other Comprehensive Loss into net periodic benefit cost over the next fiscal year are $107,000 as of December 31, 2025.

Net periodic benefit cost for the years ended December 31, 2025 and 2024 were determined using the following assumption:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Discount rate | 5.50% | 4.95% |
| Rate of compensation increase | N/A | N/A |

---

***Split-Dollar Life Insurance Benefit Plan***

The Company maintains life insurance policies for some current and some former directors and officers that are subject to split-dollar life insurance agreements, some of which continues after the participant's employment and retirement. The policies acquired from Focus and Presidio do not include a post-retirement benefit. All participants are fully vested in their split-dollar life insurance benefits. The accrued benefit liability for the split-dollar insurance

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

agreements represents either the present value of the future death benefits payable to the participants' beneficiaries or the present value of the estimated cost to maintain term life insurance, depending on the contractual terms of the participant's underlying agreement.

The split-dollar life insurance projected benefit obligation is included in "Accrued interest payable and other liabilities" on the consolidated balance sheets. The measurement date of the split-dollar life insurance benefit plan is December 31.

The following table sets forth the funded status of the split-dollar life insurance benefits for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **December 31,<br>2025** | **December 31,<br>2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Change in projected benefit obligation: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Projected benefit obligation at beginning of year | $6616 | $6951 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest cost | 364 | 344 |
| &nbsp;&nbsp;&nbsp;&nbsp;Actuarial loss | (300) | (679) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Projected benefit obligation at end of period | $6680 | $6616 |

---

Amounts recognized in accumulated other comprehensive loss at periods indicated consist of:

---

| | | |
|:---|:---|:---|
| | **December 31,<br>2025** | **December 31,<br>2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Net actuarial loss | $1775 | $1728 |
| Prior transition obligation | 521 | 611 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | $2296 | $2339 |

---

Weighted-average assumption used to determine the benefit obligation at year-end follow:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Discount rate | 5.16% | 5.50% |

---

Components of net periodic benefit cost during the periods indicated are:

---

| | | |
|:---|:---|:---|
| | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Amortization of prior transition obligation |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; and actuarial losses | $(258) | $(209) |
| Interest cost | 364 | 344 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net periodic benefit cost | $106 | $135 |
| Amount recognized in other comprehensive income | $43 | $470 |

---

The estimated net actuarial loss and prior transition obligation for the split-dollar life insurance benefit plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are ($278,000) and ($258,000) as of December 31, 2025 and 2024, respectively.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

Weighted-average assumption used to determine the net periodic benefit cost:

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| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Discount rate | 5.50% | 4.95% |

---

**14) Fair Value**

Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

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

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data (for example, interest rates and yield curves observable at commonly quoted intervals, prepayment speeds, credit risks, and default rates).

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

***Financial Assets and Liabilities Measured on a Recurring Basis***

The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs). The Company uses matrix pricing (Level 2 inputs) to establish the fair value of its securities available-for-sale.

The fair value of interest-only ("I/O") strip receivable assets is based on a valuation model used by a third party. The Company is able to compare the valuation model inputs and results to widely available published industry data for reasonableness (Level 2 inputs).

---

| | | | | |
|:---|:---|:---|:---|:---|
| | | **Fair Value Measurements Using** | **Fair Value Measurements Using** | **Fair Value Measurements Using** |
| | **Balance** | **Quoted Prices in<br>Active Markets for<br>Identical Assets<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Assets at December 31, 2025 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Available-for-sale securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | $280919 | $— | $280919 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Collateralized mortgage obligations | 256730 |  | 256730 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury | 55309 | 55309 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;I/O strip receivables | 33 |  | 33 |  |
| Assets at December 31, 2024 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Available-for-sale securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury | $186183 | $186183 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agency mortgage-backed securities | 70091 |  | 70091 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;I/O strip receivables | 82 |  | 82 |  |

---

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

***Assets and Liabilities Measured on a Non-Recurring Basis***

The fair value of collateral dependent loans individually evaluated with specific allocations of the allowance for credit losses on loans is generally based on recent real estate appraisals. The appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Collateral dependent loans carried at fair value on a non-recurring basis are immaterial.

Foreclosed assets are valued at the time the loan is foreclosed upon and the asset is transferred to foreclosed assets. The fair value is based primarily on third party appraisals, less costs to sell. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. At December 31, 2025 and December 31, 2024, there were no foreclosed assets on the balance sheet.

***Fair Value of Financial Instruments***

The carrying amounts and estimated fair values of financial instruments at December 31, 2025 are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | **Estimated Fair Value** | **Estimated Fair Value** | **Estimated Fair Value** | **Estimated Fair Value** |
| | **Carrying<br>Amounts** | | **Quoted Prices in<br>Active Markets for<br>Identical Assets<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Assets:** | | | | | | |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $647028 |  | $647028 | $— | $— | $647028 |
| &nbsp;&nbsp;&nbsp;Securities available-for-sale | 592958 |  | 55309 | 537649 |  | 592958 |
| &nbsp;&nbsp;&nbsp;Securities held-to-maturity | 529711 |  |  | 465767 |  | 465767 |
| &nbsp;&nbsp;&nbsp;Loans (including loans held-for-sale) | 3654382 | <sup>(1)</sup> |  | 1322 | 3501954 | 3503276 |
| &nbsp;&nbsp;&nbsp;FHLB stock, FRB stock, and other |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; investments | 32568 |  |  |  |  | N/A |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable | 16379 |  | 510 | 3124 | 12745 | 16379 |
| &nbsp;&nbsp;&nbsp;I/O strips receivables | 33 |  |  | 33 |  | 33 |
| **Liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Time deposits | $528240 |  | $— | $528990 | $— | $528990 |
| &nbsp;&nbsp;&nbsp;Other deposits | 4374846 |  |  | 4374846 |  | 4374846 |
| &nbsp;&nbsp;&nbsp;Subordinated debt | 39805 |  |  | 37605 |  | 37605 |
| &nbsp;&nbsp;&nbsp;Accrued interest payable | 5746 |  |  | 5746 |  | 5746 |

---

_______________________________________________________

<sup>(1)</sup> Before allowance for credit losses on loans of $49,999,000.

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

The carrying amounts and estimated fair values of financial instruments at December 31, 2024 are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | **Estimated Fair Value** | **Estimated Fair Value** | **Estimated Fair Value** | **Estimated Fair Value** |
| | **Carrying<br>Amounts** | | **Quoted Prices in<br>Active Markets for<br>Identical Assets<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** | **Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Assets:** | | | | | | |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $968123 |  | $968123 | $— | $— | $968123 |
| &nbsp;&nbsp;&nbsp;Securities available-for-sale | 256274 |  | 186183 | 70091 |  | 256274 |
| &nbsp;&nbsp;&nbsp;Securities held-to-maturity | 590016 |  |  | 497012 |  | 497012 |
| &nbsp;&nbsp;&nbsp;Loans (including loans held-for-sale) | 3494312 | <sup>(1)</sup> |  | 2375 | 3304196 | 3306571 |
| &nbsp;&nbsp;&nbsp;FHLB stock, FRB stock, and other |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; investments | 32556 |  |  |  |  | N/A |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable | 14940 |  | 506 | 2141 | 12293 | 14940 |
| &nbsp;&nbsp;&nbsp;I/O strips receivables | 82 |  |  | 82 |  | 82 |
| **Liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Time deposits | $564447 |  | $— | $566695 | $— | $566695 |
| &nbsp;&nbsp;&nbsp;Other deposits | 4255584 |  |  | 4255584 |  | 4255584 |
| &nbsp;&nbsp;&nbsp;Subordinated debt | 39653 |  |  | 34853 |  | 34853 |
| &nbsp;&nbsp;&nbsp;Accrued interest payable | 6350 |  |  | 6350 |  | 6350 |

---

_______________________________________________________

<sup>(1)</sup> Before allowance for credit losses on loans of $48,953,000.

_______________________________________________________

**15) Commitments and Contingencies**

***Loss Contingencies***

Within the ordinary course of our business, we are from time to time subject to private lawsuits, government audits and examinations, administrative proceedings and other claims. Under certain circumstances, we also may be subjected to increased risk associated with the acts or omissions of our clients (such as clients who, unbeknownst to the Bank or the Company, may engage in or become associated with fraudulent or unlawful transactions, Ponzi schemes, money laundering, and similar unlawful acts), or we may be subject to subpoenas or similar demands for client information. A number of these claims and processes may exist at any given time, and some of the claims may be pled as class actions. We could be affected by adverse publicity and litigation costs resulting from such allegations, regardless of whether they are valid or whether we are ultimately determined to be liable.

Following an agreement on preliminary settlement terms in May 2025, the Company entered into a settlement agreement to resolve a lawsuit pending in Alameda County Superior Court that alleges that the Company and the Bank violated certain wage-and-hour and related laws and regulations during certain prior payroll periods. The claim seeks recovery on behalf of representative plaintiffs and other employees and seeks unspecified damages, penalties and attorney fees under the California Labor Code, the California Business and Professions Code, and the California Private Attorneys General Act ("PAGA"). The settlement was reached without admission of liability by the Company and includes a full release of all claims related to the matter. The settlement amount was accrued in the Company's financial statements during 2025.

On October 21, 2025, the Alameda County Superior Court issued the Order granting preliminary approval of the settlement. No adjustment to the previously recorded accrual was required as a result of the preliminary approval.

Following the announcement of the proposed merger with CVBF, three civil actions were filed, challenging, among other things, the adequacy of the disclosures contained in the definitive proxy statement filed by us with the SEC in connection with the proposed merger. Two of the lawsuits were filed by our purported shareholders against us and our

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Board and assert claims under New York State common law. The third was filed by a purported stockholder against us, our Board, and CVBF, and it asserts claims under California common law. The plaintiffs in these actions seek, among other things, an injunction preventing the closing of the merger, or damages in the event it is consummated, and the award of attorneys' fees and expenses. We believe the claims asserted in these actions are without merit.

The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The outcomes of legal proceedings and other contingencies are, however, inherently unpredictable and subject to significant uncertainties. As a result, the Company cannot always reasonably estimate the amount or range of possible losses, particularly including but not limited to losses that could arise as a result of application of non-monetary remedies, with respect to the contingencies it faces, and the Company's estimates, once made, may prove inaccurate.

At this time, we believe that the amount of reasonably possible losses resulting from final disposition of pending or threatened lawsuits, audits, proceedings and claims will not have a material adverse effect individually or in the aggregate on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, proceedings or claims, including claims that have not yet been asserted, and that, associated with the defense of such claims, we may incur elevated levels of attorney fees and other litigation costs. Likewise, factors that affect the insurance coverage for these matters may affect our estimates of the relevant contingent liabilities, and we generally adjust our estimates based on known factors that affect that coverage as those factors come to light. Legal costs related to such claims generally are expensed as incurred.

***Off-Balance Sheet Arrangements***

In the normal course of business the Company makes commitments to extend credit to its clients as long as there are no violations of any conditions established in the contractual arrangements. These commitments are obligations that represent a potential credit risk to the Company, but are not reflected on the Company's consolidated balance sheets. Total unused commitments to extend credit were $1,161,262,000 at December 31, 2025, compared to $1,033,982,000 at December 31, 2024. Unused commitments represented 32% outstanding gross loans at December 31, 2025 and 30% at December 31, 2024.

The effect on the Company's revenues, expenses, cash flows and liquidity from the unused portion of the commitments to provide credit cannot be reasonably predicted because there is no certainty that lines of credit and letters of credit will ever be fully utilized. The following table presents the Company's commitments to extend credit for the periods indicated:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Fixed**<br>**Rate** | **Variable**<br>**Rate** |<br>**Total** | **Fixed**<br>**Rate** | **Variable**<br>**Rate** |<br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Unused lines of credit and commitments to make loans | $121141 | $1024512 | $1145653 | $78818 | $939992 | $1018810 |
| Standby letters of credit | 5619 | 9990 | 15609 | 5136 | 10036 | 15172 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | $126760 | $1034502 | $1161262 | $83954 | $950028 | $1033982 |

---

For the year ended December 31, 2025, there was an increase of $63,000 to the allowance for credit losses on loans for the Company's off-balance sheet credit exposures, compared to the year ended December 31, 2024. The increase in the allowance for credit losses for off-balance sheet credit exposures for the year ended December 31, 2025 was driven by an increase in loan commitments. The allowance for losses for the Company's off-balance sheet credit exposures was $723,000 and $660,000 at December 31, 2025 and December 31, 2024 respectively.

**16) Shareholders' Equity and Earnings Per Share**

***Share Repurchase Program*** – At December 31, 2025, the Company was authorized to repurchase up to $30,000,000 of the Company's shares of its issued and outstanding common stock under a share repurchase program (the "Repurchase Program") adopted by the Board of Directors (the "Board") in July 2024, as amended on October 23, 2025. The repurchase program is in effect through October 31, 2026. Under the Repurchase Program, the Company is authorized

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to purchase its common stock from time-to-time in open market transactions, made pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The actual timing, price, value and amount of any repurchases under the Repurchase Program will depend on various factors, including the market price of the Company's common stock, trading volume, general market conditions and other corporate and economic considerations, including the best interests of our shareholders. For the year ended December 31, 2025, the Company repurchased 439,187 shares of its common stock with a weighted average price of $9.22 per share for a total of $4,049,000. At December 31, 2025, the remaining capacity under the Repurchase Program was $25,951,000.

***Earnings Per Share*** – Basic earnings per common share is computed by dividing net income, less dividends and discount accretion on preferred stock, by the weighted average common shares outstanding. Diluted earnings per share reflect potential dilution from outstanding stock options using the treasury stock method. There were 1,363,444 weighted average stock options for the year ended December 31, 2025, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were no weighted average RSUs outstanding for the year ended December 31, 2025 considered to be antidilutive and excluded from the computation of diluted earnings per shares. There were 1,571,756 weighted average stock options for the year ended December 31, 2024, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were 5,823 weighted average RSUs outstanding for the year ended December 31, 2024, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were 1,655,654 weighted average stock options for the year ended December 31, 2023, considered to be antidilutive and excluded from the computation of diluted earnings per share. A reconciliation of these factors used in computing basic and diluted earnings per common share is as follows:

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** | **(Dollars in thousands, except per share amounts)** |
| Net income | $47830 | $40528 | $64443 |
| Weighted average common shares outstanding |  |  |  |
| &nbsp;&nbsp;&nbsp;for basic earnings per common share | 61407520 | 61270730 | 61038857 |
| Dilutive potential common shares | 294575 | 256642 | 272461 |
| &nbsp;&nbsp;&nbsp;Shares used in computing diluted earnings per common share | 61702095 | 61527372 | 61311318 |
| Basic earnings per share | $0.78 | $0.66 | $1.06 |
| Diluted earnings per share | $0.78 | $0.66 | $1.05 |

---

**17) Capital Requirements**

The Company and its subsidiary bank are subject to various regulatory capital requirements administered by the banking agencies. 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 financial statements and operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and HBC must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Company's consolidated capital ratios and the HBC's capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at December 31, 2025. There are no conditions or events since December 31, 2025, that management believes have changed the categorization of the Company or HBC as "well-capitalized."

Quantitative measures established by regulation to help ensure capital adequacy require the Company and HBC to maintain minimum amounts and ratios (set forth in the tables below) of total, Tier 1 capital, and common equity Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes that, as of December 31, 2025 and December 31, 2024, the Company and HBC met all capital adequacy guidelines to which they were subject.

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The Company's consolidated capital amounts and ratios are presented in the following table, together with capital adequacy requirements, under the Basel III regulatory requirements as of December 31, 2025, and December 31, 2024.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Actual** | **Actual** | **Required For<br>Capital<br>Adequacy<br>Purposes<br>Under Basel III** | **Required For<br>Capital<br>Adequacy<br>Purposes<br>Under Basel III** |
| | **Amount** | **Ratio** | **Amount** | **Ratio** <sup>(1)</sup>  |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| As of December 31, 2025 |  |  |  |  |
| Total Capital | $629952 | 15.1% | $437685 | 10.5% |
| (to risk-weighted assets) |  |  |  |  |
| Tier 1 Capital | $539415 | 12.9% | $354316 | 8.5% |
| (to risk-weighted assets) |  |  |  |  |
| Common Equity Tier 1 Capital | $539415 | 12.9% | $291790 | 7.0% |
| (to risk-weighted assets) |  |  |  |  |
| Tier 1 Capital | $539415 | 9.6% | $223613 | 4.0% |
| (to average assets) |  |  |  |  |

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_______________________________________________________

<sup>(1)</sup> Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

_______________________________________________________

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Actual** | **Actual** | **Required For<br>Capital<br>Adequacy<br>Purposes<br>Under Basel III** | **Required For<br>Capital<br>Adequacy<br>Purposes<br>Under Basel III** |
| | **Amount** | **Ratio** | **Amount** | **Ratio** <sup>(1)</sup>  |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| As of December 31, 2024 |  |  |  |  |
| Total Capital | $610643 | 15.6% | $411383 | 10.5% |
| (to risk-weighted assets) |  |  |  |  |
| Tier 1 Capital | $524204 | 13.4% | $333024 | 8.5% |
| (to risk-weighted assets) |  |  |  |  |
| Common Equity Tier 1 Capital | $524204 | 13.4% | $274255 | 7.0% |
| (to risk-weighted assets) |  |  |  |  |
| Tier 1 Capital | $524204 | 9.6% | $217451 | 4.0% |
| (to average assets) |  |  |  |  |

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_______________________________________________________

<sup>(1)</sup> Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

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HBC's actual capital amounts and ratios are presented in the following table, together with capital adequacy requirements, under the Basel III regulatory requirements as of December 31, 2025, and December 31, 2024.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Actual** | **Actual** | **To Be Well-Capitalized<br>Under Basel III PCA Regulatory<br>Requirements** | **To Be Well-Capitalized<br>Under Basel III PCA Regulatory<br>Requirements** | **Required For<br>Capital<br>Adequacy<br>Purposes<br>Under Basel III** | **Required For<br>Capital<br>Adequacy<br>Purposes<br>Under Basel III** |
| | **Amount** | **Ratio** | **Amount** | **Ratio** | **Amount** | **Ratio** <sup>(1)</sup>  |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| As of December 31, 2025 |  |  |  |  |  |  |
| Total Capital | $615222 | 14.8% | $416492 | 10.0% | $437316 | 10.5% |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Tier 1 Capital | $564489 | 13.6% | $333193 | 8.0% | $354018 | 8.5% |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Common Equity Tier 1 Capital | $564489 | 13.6% | $270720 | 6.5% | $291544 | 7.0% |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Tier 1 Capital | $564489 | 10.1% | $279338 | 5.0% | $223471 | 4.0% |
| (to average assets) |  |  |  |  |  |  |

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_______________________________________________________

<sup>(1)</sup> Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

_______________________________________________________

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Actual** | **Actual** | **To Be Well-Capitalized<br>Under Basel III PCA Regulatory<br>Requirements** | **To Be Well-Capitalized<br>Under Basel III PCA Regulatory<br>Requirements** | **Required For<br>Capital<br>Adequacy<br>Purposes<br>Under Basel III** | **Required For<br>Capital<br>Adequacy<br>Purposes<br>Under Basel III** |
| | **Amount** | **Ratio** | **Amount** | **Ratio** | **Amount** | **Ratio** <sup>(1)</sup>  |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| As of December 31, 2024 |  |  |  |  |  |  |
| Total Capital | $590658 | 15.1% | $391459 | 10.0% | $411038 | 10.5% |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Tier 1 Capital | $543872 | 13.9% | $313167 | 8.0% | $332745 | 8.5% |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Common Equity Tier 1 Capital | $543872 | 13.9% | $254448 | 6.5% | $274025 | 7.0% |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Tier 1 Capital | $543872 | 10.0% | $271640 | 5.0% | $217312 | 4.0% |
| (to average assets) |  |  |  |  |  |  |

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<sup>(1)</sup> Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets.

_______________________________________________________

The Subordinated Debt, net of unamortized issuance costs, totaled $39,805,000 at December 31, 2025, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank.

Under California General Corporation Law, the holders of common stock are entitled to receive dividends when and as declared by the Board of Directors, out of funds legally available. The California Financial Code provides that a state licensed bank may not make a cash distribution to its shareholders in excess of the lesser of the following: (i) the bank's retained earnings; or (ii) the bank's net income for its last three fiscal years, less the amount of any distributions made by the bank to its shareholders during such period. However, a bank, with the prior approval of the Commissioner of

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the California Department of Financial Protection and Innovation ("DFPI") may make a distribution to its shareholders of an amount not to exceed the greater of (i) a bank's retained earnings; (ii) its net income for its last fiscal year; or (iii) its net income for the current fiscal year. Also with the prior approval of the Commissioner of the DFPI and the shareholders of the bank, the bank may make a distribution to its shareholders, as a reduction in capital of the bank. In the event that the Commissioner determines that the shareholders' equity of a bank is inadequate or that the making of a distribution by a bank would be unsafe or unsound, the Commissioner may order a bank to refrain from making such a proposed distribution. As of December 31, 2025, HBC would not be required to obtain regulatory approval, and the amount available for cash dividends is $56,670,000. Similar restrictions applied to the amount and sum of loan advances and other transfers of funds from HBC to the parent company. HBC distributed to HCC dividends of $32,000,000 for both years ended December 31, 2025 and 2024.

**18) Revenue Recognition**

The majority of our revenue-generating transactions are not subject to ASC 606 "Revenue from Contracts with Customers", including revenue generated from financial instruments, including revenue from loans and securities, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, gain on sale of securities, bank-owned life insurance, gain on sales of SBA loans, and certain credit card fees, as these activities are subject to other GAAP discussed elsewhere within our disclosures. Substantially all of the Company's revenue is generated from contracts with clients. Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of noninterest income are as follows:

Service charges and fees on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. We sometimes charge clients fees that are not specifically related to the client accessing its funds, such as account maintenance or dormancy fees. The amount of deposit fees assessed varies based on a number of factors, such as the type of client and account, the quantity of transactions, and the size of the deposit balance. We charge, and in some circumstances do not charge, fees to earn additional revenue and influence certain client behavior. An example would be where we do not charge a monthly service fee, or do not charge for certain transactions, for clients that have a high deposit balance. Deposit fees are considered either transactional in nature (such as wire transfers, nonsufficient fund fees, and stop payment orders) or non-transactional (such as account maintenance and dormancy fees). These fees are recognized as earned or as transactions occur and services are provided. Check orders and other deposit account related fees are largely transactional based and, therefore, the Company's performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to clients' accounts.

The Company currently accounts for sales of foreclosed assets in accordance with Topic 360-20. In most cases the Company will seek to engage a real estate agent for the sale of foreclosed assets immediately upon foreclosure. However, in some cases, where there is clear demand for the property in question, the Company may elect to allow for a marketing period on no more than six months to attempt a direct sale of the property. We generally recognize the sale, and any associated gain or loss, of a real estate property when control of the property transfers. Any gains or losses from the sale are recorded to noninterest income/expense.

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

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Noninterest Income In-scope of Topic 606: |  |  |  |
| &nbsp;&nbsp;&nbsp;Service charges and fees on deposit accounts | $3688 | $3561 | $4341 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income in-scope of Topic 606 | 3688 | 3561 | 4341 |
| Noninterest Income Out-of-scope of Topic 606 | 8401 | 7542 | 6806 |
| &nbsp;&nbsp;&nbsp;Total noninterest income | $12089 | $11103 | $11147 |

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**19) Noninterest Expense**

The following table indicates the various components of the Company's noninterest expense in each category for the periods indicated:

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** | **Year Ended <br>December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Salaries and employee benefits | $66537 | $63952 | $56862 |
| Occupancy and equipment | 9944 | 10226 | 9490 |
| Legal settlement and other charges <sup>(1)</sup> | 9184 |  |  |
| Professional fees | 6233 | 5416 | 4350 |
| Data processing | 4374 | 3183 | 3429 |
| Insurance expense | 4267 | 6724 | 6264 |
| Client services | 4143 | 3920 | 2512 |
| Software subscriptions | 3150 | 3046 | 2599 |
| Merger-related costs <sup>(2)</sup> | 2067 |  |  |
| Other | 17960 | 17116 | 15548 |
| &nbsp;&nbsp;&nbsp;Total noninterest expense | $127859 | $113583 | $101054 |

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__________________________________________________________

<sup>(1)</sup> During the second quarter of 2025, the Company recorded expenses of $9,184,000, primarily due to pre-tax charges related to the settlement of certain litigation matters, including the anticipated settlement of a previously disclosed class action and PAGA lawsuit that alleged the violation of certain California wage-and-hour and related laws and regulations, and charges related to the planned closure of a Bank branch.

<sup>(2)</sup> During fourth quarter of 2025, the Company recorded expenses of $2,067,000, due to pre-tax charges related to the announced pending merger with CVBF.

_________________________________________________________

**20) Business Segment Information**

The Company's reportable segments are determined by the Chief Executive Officer, who is the designated chief operating decision maker, based upon information provided about the Company's products and services offered, primarily distinguished between Banking and Factoring. They are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products and services, and clients are similar. The chief operating decision maker analyzes the financial performance of the Company's segments, allocates resources and assesses compensation of certain employees by evaluating revenue streams, significant expenses and budget to actual results. The performance of the Banking segment is assessed by monitoring the margin between interest income and interest expense related to loans, investments, deposits and other borrowings. Pretax profit and loss is used to assess the performance of the Factoring segment. Interest expense, provisions for credit losses and Salaries and employee benefits provide significant expenses in the Banking segment, while Salaries and employee benefits provide the significant expenses in the Factoring segment.

The Banking segment provides a diversified mix of business loans encompassing the following loan products: commercial and industrial loans; commercial real estate loans; construction loans; and SBA loans. From time to time the Banking segment has purchased single family residential mortgage loans. The Banking segment also offers home equity lines of credit, to accommodate the needs of business owners and individual clients, as well as consumer loans (both secured and unsecured). The Banking segment focuses deposit generation on relationship accounts, encompassing non-interest bearing demand, interest bearing demand, and money market accounts. In order to facilitate the generation of non-interest bearing demand deposits, the Banking segment requires, depending on the circumstances and the type of relationship, its borrowers to maintain deposit balances with it as a typical condition of granting loans. The Banking segment also offers certificates of deposit and savings accounts.

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The Factoring segment consists of the factored receivables portfolio originated by Bay View Funding. Factored receivables are receivables that have been acquired from the originating company and typically have not been subject to previous collection efforts. These receivables are acquired from a variety of companies, including but not limited to service providers, transportation companies, manufacturers, distributors, wholesalers, apparel companies, advertisers, and temporary staffing companies. The average life of the factored receivables was 34 days for the year ended December 31, 2025.

Reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. The accounting policies of the segments are substantially the same as those described in "*Note 1 – Summary of Significant Accounting Policies.*"

Transactions between segments consist primarily of borrowed funds. Intersegment interest expense is allocated to the Factoring segment based on the Banking segment's prime rate and funding costs. The provision for credit losses on loans is allocated based on the segment's allowance for credit losses on loans determination which considers the effects of charge-offs. Noninterest income and expense directly attributable to a segment are assigned to it. Taxes are paid on a consolidated basis and allocated for segment purposes.

The following tables present the Company's operating segments for the periods indicated:

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** | **Year Ended December 31, 2025** |
| | **Banking** <sup>(1)</sup> | **Factoring** | **Consolidated** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Interest income | $242746 | $14253 | $256999 |
| Intersegment interest allocations | 2647 | (2647) |  |
| Total interest expense | 71624 |  | 71624 |
| &nbsp;&nbsp;&nbsp;Net interest income | 173769 | 11606 | 185375 |
| Provision for credit losses on loans | 1382 | 434 | 1816 |
| &nbsp;&nbsp;&nbsp;Net interest income after provision | 172387 | 11172 | 183559 |
| Noninterest income | 10578 | 1511 | 12089 |
| Salaries and employee benefits | 60814 | 5723 | 66537 |
| Other segment items <sup>(2)</sup> | 59425 | 1897 | 61322 |
| Intersegment expense allocations | 632 | (632) |  |
| &nbsp;&nbsp;&nbsp;Income before income taxes | 63358 | 4431 | 67789 |
| Income tax expense | 18649 | 1310 | 19959 |
| &nbsp;&nbsp;&nbsp;Net income | $44709 | $3121 | $47830 |
| Total assets | $5628227 | $136470 | $5764697 |
| Loans, net of deferred fees | $3534557 | $118503 | $3653060 |
| Goodwill | $154587 | $13044 | $167631 |

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_______________________________________________________

<sup>(1)</sup> Includes the holding company's results of operations.

<sup>(2)</sup> Other segment items for the Banking segment includes expenses for occupancy and equipment, professional fees, insurance, information technology, client services, marketing and other miscellaneous expenses. Other segment items for the Factoring segment includes expenses for occupancy and equipment, professional fees, information technology, marketing, credit reports, broker fees, and other miscellaneous expenses.

_______________________________________________________

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| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** | **Year Ended December 31, 2024** |
| | **Banking** <sup>(1)</sup> | **Factoring** | **Consolidated** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Interest income | $229364 | $10980 | $240344 |
| Intersegment interest allocations | 1827 | (1827) |  |
| Total interest expense | 79051 |  | 79051 |
| &nbsp;&nbsp;&nbsp;Net interest income | 152140 | 9153 | 161293 |
| Provision for credit losses on loans | 1679 | 460 | 2139 |
| &nbsp;&nbsp;&nbsp;Net interest income after provision | 150461 | 8693 | 159154 |
| Noninterest income | 10381 | 722 | 11103 |
| Salaries and employee benefits | 58922 | 5030 | 63952 |
| Other segment items <sup>(2)</sup> | 48055 | 1576 | 49631 |
| Intersegment expense allocations | 520 | (520) |  |
| &nbsp;&nbsp;&nbsp;Income before income taxes | 54385 | 2289 | 56674 |
| Income tax expense | 15469 | 677 | 16146 |
| &nbsp;&nbsp;&nbsp;Net income | $38916 | $1612 | $40528 |
| Total assets | $5558556 | $86450 | $5645006 |
| Loans, net of deferred fees | $3423040 | $68897 | $3491937 |
| Goodwill | $154587 | $13044 | $167631 |

---

_______________________________________________________

<sup>(1)</sup> Includes the holding company's results of operations.

<sup>(2)</sup> Other segment items for the Banking segment includes expenses for occupancy and equipment, professional fees, insurance, information technology, client services, marketing and other miscellaneous expenses. Other segment items for the Factoring segment includes expenses for occupancy and equipment, professional fees, information technology, marketing, credit reports, broker fees, and other miscellaneous expenses.

_______________________________________________________

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<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** | **Year Ended December 31, 2023** |
| | **Banking** <sup>(1)</sup> | **Factoring** | **Consolidated** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Interest income | $218722 | $13427 | $232149 |
| Intersegment interest allocations | 2038 | (2038) |  |
| Total interest expense | 51074 |  | 51074 |
| &nbsp;&nbsp;&nbsp;Net interest income | 169686 | 11389 | 181075 |
| Provision for (recapture of) credit losses on loans | 1005 | (256) | 749 |
| &nbsp;&nbsp;&nbsp;Net interest income after provision | 168681 | 11645 | 180326 |
| Noninterest income | 10731 | 416 | 11147 |
| Salaries and employee benefits | 52236 | 4626 | 56862 |
| Other segment items <sup>(2)</sup> | 42215 | 1977 | 44192 |
| Intersegment expense allocations | 547 | (547) |  |
| &nbsp;&nbsp;&nbsp;Income before income taxes | 85508 | 4911 | 90419 |
| Income tax expense | 24524 | 1452 | 25976 |
| &nbsp;&nbsp;&nbsp;Net income | $60984 | $3459 | $64443 |
| Total assets | $5111367 | $82728 | $5194095 |
| Loans, net of deferred fees | $3292920 | $57458 | $3350378 |
| Goodwill | $154587 | $13044 | $167631 |

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_______________________________________________________

<sup>(1)</sup> Includes the holding company's results of operations.

<sup>(2)</sup> Other segment items for the Banking segment includes expenses for occupancy and equipment, professional fees, insurance, information technology, client services, marketing and other miscellaneous expenses. Other segment items for the Factoring segment includes expenses for occupancy and equipment, professional fees, information technology, marketing, credit reports, broker fees, and other miscellaneous expenses.

_______________________________________________________

**21) Parent Company only Condensed Financial Information** 

The condensed financial statements of Heritage Commerce Corp (parent company only) are as follows:

**Condensed Balance Sheets**

---

| | | |
|:---|:---|:---|
| | **December 31,** | **December 31,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Assets** |  |  |
| Cash and cash equivalents | $11481 | $16903 |
| Investment in subsidiary bank | 733625 | 709379 |
| Other assets | 3526 | 3360 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total assets | $748632 | $729642 |
| **Liabilities and Shareholders' Equity** |  |  |
| Subordinated debt, net of issuance costs | $39805 | $39653 |
| Other liabilities | 261 | 262 |
| Shareholders' equity | 708566 | 689727 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $748632 | $729642 |

---

------

<u>[Table of Content](#i24baf52b287841329ec8f7b68eab379b_7)[s](#i24baf52b287841329ec8f7b68eab379b_7)</u>

**Condensed Statements of Income**

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Dividend from subsidiary bank | $32000 | $32000 | $32000 |
| Interest expense | (2151) | (2152) | (2152) |
| Other expenses | (4456) | (4608) | (3771) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes and equity in net income of subsidiary bank | 25393 | 25240 | 26077 |
| Equity in undistributed net income of subsidiary bank | 20514 | 13320 | 36648 |
| Income tax benefit | 1923 | 1968 | 1718 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $47830 | $40528 | $64443 |

---

**Condensed Statements of Cash Flows**

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2024** | **2023** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Cash flows from operating activities: |  |  |  |
| Net Income | $47830 | $40528 | $64443 |
| Adjustments to reconcile net income to net cash provided by operations: |  |  |  |
| &nbsp;&nbsp;Amortization of restricted stock awards, net | 621 | 916 | 1404 |
| &nbsp;&nbsp;Equity in undistributed net income of subsidiary bank | (20514) | (13320) | (36648) |
| &nbsp;&nbsp;Net change in other assets and liabilities | 234 | 1468 | (1174) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 28171 | 29592 | 28025 |
| Cash flows from financing activities: |  |  |  |
| &nbsp;&nbsp;Payment of cash dividends | (31917) | (31858) | (31740) |
| &nbsp;&nbsp;Proceeds from exercise of stock options | 2373 | 690 | 1220 |
| &nbsp;&nbsp;Payment to repurchase common stock | (4049) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities: | (33593) | (31168) | (30520) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net decrease in cash and cash equivalents | (5422) | (1576) | (2495) |
| Cash and cash equivalents, beginning of year | 16903 | 18479 | 20974 |
| &nbsp;&nbsp;Cash and cash equivalents, end of year | $11481 | $16903 | $18479 |

---

**22) Subsequent Events**

On January 22, 2026, the Company announced that the Board of Directors declared a $0.13 per share quarterly cash dividend to holders of common stock. The dividend was payable on February 19, 2026 to shareholders of record on February 5, 2026.

## Exhibit 19.1

**Exhibit 19.1**

**HERITAGE COMMERCE CORP INSIDER TRADING POLICY**

**Purpose** 

Heritage Commerce Corp's Board of Directors has adopted this Insider Trading Policy ("**Policy**") for our directors, officers, employees and consultants with respect to the trading of Company's securities, as well as the securities of publicly traded companies with whom we have a business relationship.

Federal and state securities laws prohibit the purchase or sale of a company's securities by persons who are aware of material information about that company that is not generally known or available to the public. These laws also prohibit persons who are aware of such material nonpublic information from disclosing this information to others who may trade. Companies and their controlling persons are also subject to liability if they fail to take reasonable steps to prevent insider trading by company personnel.

It is important that you understand the breadth of activities that constitute illegal insider trading and the consequences, which can be severe. Both the U.S. Securities and Exchange Commission ("**SEC**") and the Financial Industry Regulatory Authority ("**FINRA**") investigate and are very effective at detecting insider trading. The SEC, together with the U.S. Attorneys, pursue insider trading violations vigorously. Cases have been successfully prosecuted against trading by employees through foreign accounts, trading by family members and friends, and trading involving only a small number of shares.

This Policy is designed to prevent insider trading or allegations of insider trading, and to protect the Company's reputation for integrity and ethical conduct. It is your obligation to understand and comply with this Policy.

**Persons Subject to the Policy**

This Policy applies to all officers of the Company and its subsidiaries, all members of the Company's Board of Directors and all employees of the Company and its subsidiaries. The Company may also determine that other persons should be subject to this Policy, such as contractors or consultants who have access to material nonpublic information. This Policy also applies to a person's family members, other members of a person's household and entities controlled by a person covered by this Policy, as described below.

**Transactions Subject to the Policy** 

This Policy applies to transactions in Company's securities (collectively referred to in this Policy as "**Company Securities**"), including the Company's common stock, options to purchase common stock, restricted stock or any other type of securities that the Company may issue, including (but not limited to) preferred stock, convertible debentures and warrants, as well

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as derivative securities that are not issued by the Company, such as exchange-traded put or call options or swaps relating to Company Securities.

**Individual Responsibility**

Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information about the Company and its subsidiaries and to not engage in transactions in Company Securities while in possession of material nonpublic information. Each individual is responsible for making sure that he or she complies with this Policy, and that any family member, household member or entity whose transactions are subject to this Policy, as discussed below, also complies with this Policy. In all cases, the responsibility for determining whether an individual is in possession of material nonpublic information rests with that individual, and any action on the part of the Company, the Compliance Officer or any other employee or director pursuant to this Policy (or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws. You could be subject to severe legal penalties and disciplinary action by the Company for any conduct prohibited by this Policy or applicable securities laws, as described below in more detail under the heading "Consequences of Violations."

**Administration of the Policy**

The Company's Corporate Secretary shall serve as the Compliance Officer for the purposes of this Policy, and in his or her absence, another officer employee designated by the Compliance Officer shall be responsible for administration of this Policy. The Compliance Officer shall consult with the Company's legal counsel on an as needed basis. All determinations and interpretations by the Compliance Officer shall be final and not subject to further review, except upon a resolution adopted by the Board of Directors.

**Statement of Policy** 

Nonpublic information (as defined below) relating to the Company, its subsidiaries, or their respective businesses is the property of the Company. The Company prohibits the unauthorized disclosure of any such nonpublic information acquired in the work-place or otherwise as a result of an individual's employment or other relationship with the Company or any of its subsidiaries, as well as the misuse of any material nonpublic information about the Company or any of its subsidiaries or their respective businesses in securities trading.

**General Policies**

*Do not trade while in possession of material nonpublic information*. From time to time, you may come into possession of material nonpublic information as a result of your relationship with the Company or its subsidiaries. You may not buy, sell or trade in any Company Securities at <u>any</u> <u>time</u> while the you possesses material nonpublic information concerning the Company or its subsidiaries. You must wait to trade until any such material nonpublic information is released and has been public for at least two full trading days (a trading day is a day on which the stock market is open).

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*Pre-clear trades involving Company securities*. If you are unsure about whether information you possess would qualify as material nonpublic information and whether you therefore should refrain from trading in Company Securities, you should pre-clear any transactions involving Company Securities that you intend to engage in with the Compliance Officer.

*Do not give nonpublic information to others*. You may not give nonpublic information concerning the Company or any of its subsidiaries (commonly referred to as "<u>tipping</u>") to any other person, including family members, and may not make recommendations or express opinions about trading in Company's Securities under any circumstances. You should even avoid discussing material nonpublic information with persons within the Company whose jobs do not require them to have that information.

*Do not discuss Company information with the press, analysts or other persons outside of the Company*. Announcements of Company information is regulated by Company policy and may only be made by persons specifically authorized by the Company to make such announcements. Laws and regulations govern the nature and timing of such announcements to outsiders or the public and unauthorized disclosure could result in substantial liability for you, the Company and its management. If you receive inquiries from any third party about Company nonpublic information, you should notify the Compliance Officer or the Company's Chief Executive Officer immediately.

*Do not participate in Internet "chat rooms" (i.e., "blogging") in which the Company is discussed*. In accordance with the Company's Social Media Policy & Program, directors, officers and employees of the Company and its subsidiaries may not participate in on-line dialogues (or similar activities) involving the Company, its subsidiaries or their respective businesses.

*Do not use nonpublic information to trade in other companies' securities*. In the course of your work with the Company, you may learn material nonpublic information about the Company's or its subsidiaries' customers, vendors, suppliers or other business partners (collectively, "**Company Business Partners**"). You may not trade in the securities of Company Business Partners when the you have material nonpublic information concerning the Company or such other persons that you obtained in the course of their relationship with the Company and its subsidiaries and that would give you an advantage in trading. You should treat material nonpublic information about Company Business Partners obtained in the course of their relationship with the Company and its subsidiaries with the same care required with respect to information related directly to the Company and its subsidiaries.

There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure), or small transactions, remain subject to this Policy. The securities laws do not recognize any mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company's and its subsidiaries' reputation for adhering to the highest standards of conduct.

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**Definition of Material Nonpublic Information** 

*Material Information*. Information is considered "material" if a reasonable investor would consider that information important in making a decision to buy, hold or sell securities. Any information that could be expected to affect the Company's stock price, whether it is positive or negative, should be considered material. There is no bright-line standard for assessing materiality; rather, materiality is based on an assessment of all of the facts and circumstances, and is often evaluated by enforcement authorities with the benefit of hindsight. While it is not possible to define all categories of material information, some examples of information that ordinarily would be regarded as material are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Projections of future earnings or losses, or other earnings guidance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Prospective earnings results that are inconsistent with the consensus expectations of the investment community;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes to previously announced earnings guidance, or the decision to suspend earnings guidance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A pending or proposed merger, acquisition or tender offer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A new debt or equity offering;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A pending or proposed acquisition or disposition of a significant asset;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A pending or proposed joint venture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A Company restructuring;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Significant related party transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A change in dividend policy, the declaration of a stock split, or an offering of additional securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Borrowings or other financing transactions out of the ordinary course;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The establishment of a repurchase program for Company Securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Major marketing changes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A change in management;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The addition or closure of Company branches or facilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Regulatory issues, actions or investigations that may have a material impact on the Company or its subsidiaries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A change in auditors or notification that the auditor's reports may no longer be relied upon;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Restatement of financial statements or potential impairments to Company assets;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Development of a significant new product, process, or service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Pending or threatened significant litigation, or the resolution of such litigation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Severe liquidity problems;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The gain or loss of a significant customer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A significant cybersecurity incident, such as a data breach, or any other significant disruption in the Company's operations, or the loss, potential loss, breach or unauthorized access of the Company's property and assets, whether at its facilities or through information technology infrastructure; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The imposition of a ban on trading in Company Securities or the securities of another company.

*When Information is Considered Public*. Information that has not been disclosed to the public is generally considered to be nonpublic information. In order to establish that the information has been disclosed to the public, it may be necessary to demonstrate that the information has been widely disseminated. Information generally would be considered widely disseminated if it has been disclosed through the Dow Jones "broad tape," newswire services, a broadcast on widely-available radio or television programs, publication in a widely-available newspaper, magazine or news website, or public disclosure documents filed with the SEC, like a Form 8-K, that are available on the SEC's website. By contrast, information would likely not be considered widely disseminated if it is available only to the Company's or its subsidiaries employees, or if it is only available to a select group of analysts, brokers and institutional investors. In some circumstances, even something publicly available, like through a regulatory filing or through a website with limited traffic, may not be considered publicly disseminated for purposes of insider trading.

Once information is widely disseminated, it is still necessary to afford the investing public with sufficient time to absorb the information. As a general rule, information should not be considered fully absorbed by the marketplace until after the second trading day after the day on which the information is released. If, for example, the Company were to make an announcement on a Monday, you should not trade in Company Securities until Thursday. Depending on the particular circumstances, the Company may determine that a longer or shorter period should apply to the release of specific material nonpublic information.

**Transactions by Family Members and Others** 

This Policy applies to your family members who reside with you (including a spouse, a child, a child away at college, stepchildren, grandchildren, parents, stepparents, grandparents, siblings and in-laws), anyone else who lives in your household, and any family members who do not live in your household but whose transactions in Company Securities are directed by you or are subject to your influence or control, such as parents or children who consult with you before they trade in Company Securities (collectively referred to as "**Family Members**"). You are responsible for the transactions of these other persons and therefore should make them aware of the need to confer with you before they trade in Company Securities, and you should treat all

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such transactions for the purposes of this Policy and applicable securities laws as if the transactions were for your own account. This Policy does not, however, apply to personal securities transactions of Family Members where the purchase or sale decision is made by a third party not controlled by, influenced by or related to you or your Family Members.

**Transactions by Entities that You Influence or Control** 

This Policy applies to any entities that you influence or control, including any corporations, partnerships or trusts (collectively referred to as "**Controlled Entities**"), and transactions by these Controlled Entities should be treated for the purposes of this Policy and applicable securities laws as if they were for your own account.

**Transactions under Company Plans** 

This Policy does not apply in the case of the following transactions, except as specifically noted:

*Stock Option Exercises*. This Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company's plans, or to the exercise of a tax withholding right pursuant to which a person has elected to have the Company withhold shares subject to an option to satisfy tax withholding requirements. This Policy does apply, however, to any sale of stock as part of a broker-assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option.

*Restricted Stock Awards*. This Policy does not apply to the vesting of restricted stock, or the exercise of a tax withholding right pursuant to which you elect to have the Company withhold shares of stock to satisfy tax withholding requirements upon the vesting of any restricted stock. The Policy does apply, however, to any market sale of restricted stock.

**Transactions Not Involving a Purchase or Sale** 

Bona fide gifts are not transactions subject to this Policy, unless the person making the gift has reason to believe that the recipient intends to sell Company Securities while the officer, employee or director is aware of material nonpublic information, or the person making the gift is subject to the trading restrictions specified below under the heading "Additional Procedures" and the sales by the recipient of Company Securities occur during a blackout period.

Transactions in mutual funds, ETFs, index funds or hedge funds that are invested in Company Securities are not transactions subject to this Policy.

**Post-Termination Transactions** 

This Policy continues to apply to transactions in Company Securities even after termination of service to the Company or a subsidiary. If an individual is in possession of material nonpublic information when his or her service terminates, that individual may not trade in Company Securities until that information has become public or is no longer material. The pre-clearance procedures specified under the heading "Additional Procedures" above, however,

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will cease to apply to transactions in Company Securities upon the expiration of any Blackout Period or other Company-imposed trading restrictions applicable at the time of the termination of service. Special rules also apply to persons subject to Section 16 of the Exchange Act and who leave the Company or a subsidiary.

**Special and Prohibited Transactions** 

The Company has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if the persons subject to this Policy engage in certain types of transactions. It therefore is the Company's policy that any persons covered by this Policy may not engage in any of the following transactions, or should otherwise consider the Company's preferences as described below:

*Speculative transactions*. The Company's directors, officers and employees may not engage in any transactions that suggest they are speculating in Company's Securities (that is, that they are trying to profit in short-term movements, either increases or decreases, in the stock price). The Company's directors, officers and employees may not engage in any short sale, or any equivalent transaction involving Company Securities. A short sale involves selling shares that a party does not own at a specified price with the expectation that the price will go down so that the party can buy the shares at a lower price before the party has to deliver them.

*Publicly-Traded Options*. Given the relatively short term of publicly-traded options, transactions in options may create the appearance that a director, officer or employee is trading based on material nonpublic information and focus a director's, officer's or other employee's attention on short-term performance at the expense of the Company's long-term objectives. Accordingly, transactions in put options, call options or other derivative securities, on an exchange or in any other organized market, are prohibited by this Policy. (Option positions arising from certain types of hedging transactions are governed by the next paragraph below captioned "Hedging Transactions").

*Hedging Transactions*. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging transactions may permit a director, officer or employee to continue to own Company Securities obtained through employee benefit plans or otherwise, but without the full risks and rewards of ownership. When that occurs, the director, officer or employee may no longer have the same objectives as the Company's other shareholders. Therefore, the Company prohibits transactions by its directors, officers and other employees.

*Margin Accounts and Pledged Securities*. Securities held in a margin account as collateral for a margin loan may be sold by the broker without your consent if you fail to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledger is aware of material nonpublic information or otherwise is not permitted to trade in Company Securities, directors, officers and other employees are prohibited from holding Company Securities in a margin account or otherwise pledging Company

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Securities as collateral for a loan. (Pledges of Company Securities arising from certain types of hedging transactions are governed by the paragraph above captioned "Hedging Transactions").

*Standing and Limit Orders*. Standing and limit orders (except standing and limit orders under approved Rule 10b5-1 Plans, as described below) create heightened risks for insider trading violations similar to the use of margin accounts. There is no control over the timing of purchases or sales that result from standing instructions to a broker, and as a result the broker could execute a transaction when a director, officer or other employee is in possession of material nonpublic information. The Company therefore discourages placing standing or limit orders on Company Securities. If a person subject to this Policy determines that they must use a standing order or limit order, the order should be limited to short duration and should otherwise comply with the restrictions and procedures outlined below under the heading "Additional Procedures."

**Section 16 Procedures for Directors and Executive Officers**

Directors and executive officers of the Company must report to the SEC all their holdings of and transactions in the Company's equity securities and must disgorge to the Company any profits realized from buying and selling (or selling and buying) such securities within any six-month period. When a person first becomes an insider (i.e., a director or executive officer), a report of beneficial ownership of the Company's equity securities must be filed on a Form 3 and thereafter whenever a trade in the Company's common stock is consummated a Form 4 or Form 5 must be filed with the SEC (except in the case of certain exempt transactions). These reports must be filed on a timely basis–two business days for trading transaction and the filing of a Form 4. All delinquent filings must be disclosed in the Company's annual meeting proxy statement (with the delinquent individuals identified by name), and they can trigger monetary fines. An insider is generally deemed to be the owner of securities that are owned by a spouse or child living with the insider, and may also be deemed to be the owner of securities held in a trust of which the insider is a trustee, settlor, or beneficiary or of securities owned by a corporation or other entity controlled by the insider. Furthermore, an insider is responsible for trading transactions in the Company's common stock made from a discretionary account even through the insider does not make the investment decisions with regard to the account.

Profit disgorgement is required if an insider purchases and sells Company Securities within a six-month period and vice versa (i.e., sells within six months before buying). Any "profit"–measured as the difference between the prices of any two "matchable" transactions during the six-month period (i.e., the highest priced sale and the lowest priced purchase)–must be paid to the Company. The requirement is intentionally arbitrary and, subject to tightly defined regulatory exemptions, applies to all transactions within any six-month period regardless of whether the insider had inside information or, in fact, made a profit on an overall basis. This provision is aggressively enforced by a plaintiffs' bar that monitors SEC filings.

Some transactions, such as the grant and exercise of stock options and the acquisition of securities under employee benefit plans, may be exempt from the purchase and sale triggers of the short-swing profit rules if procedural requirements established by SEC rules have been satisfied. Absent an exemption, the receipt of an option, the acquisition of securities through a

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benefit plan, or the acquisition of a derivative security related to the value of the Company's common stock normally will be considered to be a purchase of the underlying security and could be matched against a sale. The Company's stock option plans and equity plans are designed and administered in a manner to take advantage of these exemptions.

A retiring director or executive officer may be subject to profit recovery based on transactions occurring during the six months after the director or officer departs. If a director or officer purchases shares of the Company, resigns, and sells shares within six months after the purchase, liability may be imposed for any short-swing profit even though the individual is no longer a director or officer at the time of the sale.

*Dividend Reinvestments*. The reinvestment of Company cash dividends is a "purchase" for purposes of Section 16 and also presents possible issues for Section 16(b) liability.

**Additional Procedures** 

The Company has established additional procedures in order to assist the Company in the administration of this Policy, to facilitate compliance with laws prohibiting insider trading while in possession of material nonpublic information, and to avoid the appearance of any impropriety. ***These additional procedures are applicable only to those individuals described below.***

*Pre-Clearance Procedures*. All directors and executive officers, as well as the Family Members and Controlled Entities of such persons and such other persons that may be identified by the Company Officer from time to time, may not engage in any transaction in Company Securities, even voluntary transactions not otherwise subject to this Policy, without first obtaining pre-clearance of the transaction from the Compliance Officer. A request for pre-clearance should be submitted to the Compliance Officer at least two business days in advance of the proposed transaction. The Compliance Officer is under no obligation to approve a transaction submitted for pre-clearance, and may determine not to permit the transaction. If a person seeks pre-clearance and permission to engage in the transaction is denied, then he or she should refrain from initiating any transaction in Company Securities, and should not inform any other person of the restriction. The Compliance Officer himself or herself may not trade in Company securities unless the Chief Operating Officer has approved the trade(s) in accordance with the procedures set forth in this policy. Pre-cleared trades must be effected within five business days of receipt of pre-clearance unless an exception is granted.

When a request for pre-clearance is made, the requestor should carefully consider whether he or she may be aware of any material nonpublic information about the Company, and should describe fully those circumstances to the Compliance Officer. The requestor should also indicate whether he or she has effected any non-exempt "opposite-way" transactions within the past six months. The Compliance Officer will cause a Form 4 to be prepared and filed on your behalf with the SEC pursuant to Section 16 of the Securities and Exchange Act of 1934. The Form 4 is required to be filed on the second business day after your transaction date. It is your responsibility to notify the Compliance Officer of your transaction date.

&nbsp;&nbsp;&nbsp;&nbsp;9&nbsp;&nbsp;&nbsp;&nbsp;

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*Quarterly Trading Restrictions*. All directors, executive officers and the covered persons listed on Schedule A (referred to in this Policy as "**Covered Persons**") subject to this restriction, as well as their Family Members or Controlled Entities, may not conduct any transactions involving Company's Securities (other than as specified by this Policy), during a "Blackout Period" beginning fifteen days prior to the end of each fiscal quarter and ending on the second trading day following the date of the public release of the Company's earnings results for that quarter. In other words, these persons may only conduct transactions in Company Securities during the "Window Period" beginning on the second trading day following the public release of the Company's quarterly (or year-end) earnings and ending fifteen days prior to the close of the next fiscal quarter.

Under certain very limited circumstances, a person subject to this restriction may be permitted to trade during a Blackout Period, but only if the Compliance Officer concludes that the person does not in fact possess material nonpublic information. Persons wishing to trade during a Blackout Period must contact the Compliance Officer for approval at least two business days in advance of any proposed transaction involving Company Securities.

*Event-Specific Trading Restriction Periods*. The Company may on occasion issue interim earnings guidance or other potentially material information by means of a press release, SEC filing on Form 8-K or other means designed to achieve widespread dissemination of the information. You should anticipate that trading will be blacked out while the Company is in the process of assembling the information to be released and until the information has been released and fully absorbed by the market.

From time to time, an event may occur that is material to the Company and is known by only a few directors, officers and/or employees. So long as the event remains material and nonpublic, the persons designated by the Compliance Officer may not trade Company Securities. In addition, the Company's financial results may be sufficiently material in a particular fiscal quarter that, in the judgment of the Compliance Officer, designated persons should refrain from trading in Company Securities even sooner than the typical Blackout Period described above. In that situation, the Compliance Officer may notify these persons that they should not trade in Company's Securities, without disclosing the reason for the restriction. The existence of an event-specific trading restriction period or extension of a Blackout Period will not be announced to the Company as a whole, and should not be communicated to any other person. Even if the Compliance Officer has not designated you as a person who should not trade due to an event-specific restriction, you should not trade while aware of material nonpublic information. Exceptions will not be granted during an event-specific trading restriction period.

*Exceptions*. The quarterly trading restrictions and event-driven trading restrictions do not apply to those transactions to which this Policy does not apply, as described above under the headings "Transactions under Company Plans" and "Transactions Not Involving a Purchase or Sale." Further, the requirement for pre-clearance, the quarterly trading restrictions and event-driven trading restrictions do not apply to transactions conducted pursuant to approved Rule 10b5-1 plans, described under the heading "Rule 10b5-1 Plans."

&nbsp;&nbsp;&nbsp;&nbsp;10&nbsp;&nbsp;&nbsp;&nbsp;

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*Preparation of Form 3s and Form 4s.* The Company will prepare and file with the SEC Form 4s on behalf of the Company's directors and executive officers. Sufficient notice of reportable transactions must be provided to the Company so that the Form 4 is properly and timely filed with the SEC (i.e., 2 days after the purchase or sale). While the Company provides this service as an accommodation to the directors and executive officers, it remains such reporting person's obligation to assure the filings are properly and timely made.

**Rule 10b5-1 Plans** 

Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability under Rule 10b-5. In order to be eligible to rely on this defense, a person subject to this Policy must enter into a Rule 10b5-1 plan for transactions in Company Securities that meets certain conditions specified in the Rule (a "**Rule 10b5-1 Plan**"). If the plan meets the requirements of Rule 10b5-1, Company Securities may be purchased or sold without regard to certain insider trading restrictions. To comply with the Policy, a Rule 10b5-1 Plan must meet the requirements of Rule 10b5-1 and the Company's "Guidelines for Rule 10b5-1 Plans," set forth on Schedule B. In general, a Rule 10b5-1 Plan must be entered into at a time when the person entering into the plan is not aware of material nonpublic information. Once the plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify (including by formula) the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party.

The Company requires that all Rule 10b5-1 Plans be approved in writing in advance by the Compliance Officer and the Company's legal counsel.

**Consequences of Violations**

The purchase or sale of securities while aware of material nonpublic information, or the disclosure of material nonpublic information to others who then trade in Company Securities, is prohibited by the federal and state laws. Insider trading violations are pursued vigorously by the SEC, U.S. Attorneys and state enforcement authorities as well as the laws of foreign jurisdictions. Punishment for insider trading violations is severe, and could include significant fines and imprisonment. Pursuant to applicable law, the penalties for "insider trading" include civil fines of up to three times the profit gained or loss avoided, and criminal fines of up to $5,000,000 and up to twenty years in jail for each violation. You also can be liable for improper transactions by any person to whom you have disclosed nonpublic information or made recommendations on the basis of such information as to trading in Company's Securities ("<u>tippee liability</u>"). Large penalties have been imposed by federal securities regulators even when the disclosing person did not profit from the trading. Federal securities regulators, the stock exchanges and the Financial Industry Regulatory Authority (FINRA) use sophisticated electronic surveillance techniques to uncover insider trading.

In addition, your failure to comply with this Policy may subject you to Company-imposed sanctions, including dismissal for cause, whether or not your failure to comply results in

&nbsp;&nbsp;&nbsp;&nbsp;11&nbsp;&nbsp;&nbsp;&nbsp;

------

a violation of law. Needless to say, a violation of law, or even an SEC investigation that does not result in prosecution, can tarnish a person's reputation and irreparably damage a career.

**Company Assistance** 

Your compliance with this Policy is of the utmost importance both for you and for the Company. If you have any questions about this Policy or its application to any proposed transaction, you may obtain additional guidance from the Compliance Officer, who will if required also consult with the Company's outside legal counsel. Do not try to resolve uncertainties on your own, as the rules relating to insider trading are often complex, not always intuitive and carry severe consequences.

**Certification**

All persons subject to this Policy must certify their understanding of, and intent to comply with, this Policy.

&nbsp;&nbsp;&nbsp;&nbsp;12&nbsp;&nbsp;&nbsp;&nbsp;

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**HERITAGE COMMERCE CORP<br>INSIDER TRADING POLICY<br>CERTIFICATION**

I certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have read and understand the Company's Insider Trading Policy (the "Policy"). I understand that the Compliance Officer is available to answer any questions I have regarding the Policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.I will continue to comply with the Policy for as long as I am subject to the Policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.I understand that my failure to comply in all respects with the Policy is a basis for termination for cause of my employment or other service relationship with the Company or any of its subsidiaries.

<br>Print name: <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>Signature: <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>Date:&nbsp;&nbsp;&nbsp;&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>

------

**SCHEDULE A<br><u>COVERED PERSONS</u>**

---

| |
|:---|
| **Covered Persons/Positions** |
| Members of the Board of Directors |
| Executive Officers\* |
| Executive Vice Presidents |
| Senior Vice Presidents |
| Employees of the accounting and finance department |
| \* As such term is defined by Section 16 of the Securities Exchange Act of 1934. |

---

&nbsp;&nbsp;&nbsp;&nbsp;A-1

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**SCHEDULE B<br>Rule 10b5-1 Plan**

**Guidelines for Rule 10b5-1 Plans**

Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability under Rule 10b-5. In order to be eligible to rely on this defense, a person subject to this Policy must enter into a Rule 10b5-1 plan for transactions in Company Securities (as defined in the Insider Trading Policy) that meets certain conditions specified in the Rule (a "**Rule 10b5-1 Plan**"). If the plan meets the requirements of Rule 10b5-1, Company Securities may be purchased or sold without regard to certain insider trading restrictions. In general, a Rule 10b5-1 Plan must be entered into at a time when the person entering into the plan is not aware of material nonpublic information. Once the plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party.

As specified in the Company's Insider Trading Policy, a Rule 10b5-1 Plan must be approved by the Compliance Officer and meet the requirements of Rule 10b5-1 and these guidelines. Any Rule 10b5-1 Plan must be submitted for approval five days prior to the entry into the Rule 10b5-1 Plan. No further pre-approval of transactions conducted pursuant to the Rule 10b5-1 Plan will be required.

The following guidelines apply to all Rule 10b5-1 Plans:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You may not enter into, modify or terminate a trading program during a blackout period or while in possession of material nonpublic information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All Rule 10b5-1 Plans must have a duration of at least 6 months and no more than 2 years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• If a Rule 10b5-1 Plan is terminated, you must wait at least 30 days before trading outside of the Rule 10b5-1 Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• If a trading program is terminated, you must wait until the commencement of the next Window Period (as defined in the Insider Trading Policy) before a new Rule 10b5-1 plan may be adopted.

• You may not commence sales under a trading program until at least 30 days following the date of establishment of a trading program. Any modification of a trading program must not take effect for at least 30 days from the date of modification.

&nbsp;&nbsp;&nbsp;&nbsp;B-1

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Each director and executive officer understands that the approval or adoption of a pre-planned selling program in no way reduces or eliminates such person's obligations under Section 16 of the Exchange Act, including such person's disclosure and short-swing trading liabilities thereunder. If any questions arise, such person should consult with their own counsel in implementing a Rule 10b5-1 Plan.

&nbsp;&nbsp;&nbsp;&nbsp;B-2

## Exhibit 23.1

 **Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in Registration Statements No. 333-272233, 333-234216, and 333-248420 on Form S-8 of Heritage Commerce Corp of our report dated March 9, 2026 relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;Crowe LLP

Oakbrook Terrace, Illinois

March 9, 2026

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

**REGARDING THE ANNUAL REPORT ON FORM 10-K**

**FOR THE YEAR ENDED DECEMBER 31, 2025**

I, Robertson Clay Jones, certify that:

1. I have reviewed this Annual Report on Form 10-K for the Year Ended December 31, 2025 of Heritage Commerce Corp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 9, 2026

---

| |
|:---|
| /s/ ROBERTSON CLAY JONES |
| Robertson Clay Jones |
| *Chief Executive Officer* (Principal Executive Officer) |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

**REGARDING THE ANNUAL REPORT ON FORM 10-K**

**FOR THE YEAR ENDED DECEMBER 31, 2025**

I, Seth Fonti, certify that:

1. I have reviewed this Annual Report on Form 10-K for the Year Ended December 31, 2025 of Heritage Commerce Corp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 9, 2026

---

| |
|:---|
| /s/ SETH FONTI |
| Seth Fonti |
| *Chief Financial Officer* (Principal Financial Officer) |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

**REGARDING THE ANNUAL REPORT ON FORM 10-K**

**FOR THE YEAR ENDED DECEMBER 31, 2025**

In connection with the Annual Report of Heritage Commerce Corp (the "Company") on Form 10-K for the year ended December 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robertson Clay Jones, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 9, 2026

---

| |
|:---|
| /s/ ROBERTSON CLAY JONES |
| Robertson Clay Jones |
| *Chief Executive Officer* (Principal Executive Officer) |

---

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

**REGARDING THE ANNUAL REPORT ON FORM 10-K**

**FOR THE YEAR ENDED DECEMBER 31, 2025**

In connection with the Annual Report of Heritage Commerce Corp (the "Company") on Form 10-K for the year ended December 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Seth Fonti, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 9, 2026

---

| |
|:---|
| /s/ SETH FONTI |
| Seth Fonti |
| *Chief Financial Officer* (Principal Financial Officer) |

---

<br>