# EDGAR Filing Document

**Accession Number:** 0001053352
**File Stem:** 0001053352-25-000008
**Filing Date:** 2025-8
**Character Count:** 461958
**Document Hash:** 9522735dd7a54e2c64e432fc9b52210b
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001053352-25-000008.hdr.sgml**: 20250808

**ACCESSION NUMBER**: 0001053352-25-000008

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 114

**CONFORMED PERIOD OF REPORT**: 20250630

**FILED AS OF DATE**: 20250808

**DATE AS OF CHANGE**: 20250808

**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-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-23877
- **FILM NUMBER:** 251199001

**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-20250630

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 20549**

_____________________________________________________________

**FORM 10-Q**

_____________________________________________________________

**(MARK ONE)**

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

**&nbsp;&nbsp;&nbsp;&nbsp;For the quarterly period ended June 30, 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; to** 

**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 Identification No.) |
| 224 Airport Parkway**,** San Jose**,** California(Address of Principal Executive Offices) | 95110(Zip Code) |

---

(408) 947-6900

(Registrant's Telephone Number, Including Area Code)

**N/A**

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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** |

---

&nbsp;&nbsp;&nbsp;&nbsp;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 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES **☐** NO **☒**

The Registrant had 61,446,763 shares of Common Stock outstanding on July 24, 2025.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**HERITAGE COMMERCE CORP**

**QUARTERLY REPORT ON FORM 10-Q**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| | | **Page No.** |
| <u>[Cautionary Note on Forward-Looking Statements](#if171463e722442a2832fd793e396cb59_135)</u> | <u>[Cautionary Note on Forward-Looking Statements](#if171463e722442a2832fd793e396cb59_135)</u> | <u>[3](#if171463e722442a2832fd793e396cb59_135)</u> |
| Part I.  | <u>[FINANCIAL INFORMATION](#if171463e722442a2832fd793e396cb59_158)</u> | <u>[5](#if171463e722442a2832fd793e396cb59_158)</u> |
| Item 1. | <u>[Consolidated Financial Statements (unaudited)](#if171463e722442a2832fd793e396cb59_1452)</u> | <u>[5](#if171463e722442a2832fd793e396cb59_1452)</u> |
| | <u>[Consolidated Balance Sheets](#if171463e722442a2832fd793e396cb59_180)</u> | <u>[5](#if171463e722442a2832fd793e396cb59_180)</u> |
| | <u>[Consolidated Statements of Income](#if171463e722442a2832fd793e396cb59_202)</u> | <u>[6](#if171463e722442a2832fd793e396cb59_202)</u> |
| | <u>[Consolidated Statements of Comprehensive Income](#if171463e722442a2832fd793e396cb59_224)</u> | <u>[7](#if171463e722442a2832fd793e396cb59_224)</u> |
| | <u>[Consolidated Statements of Changes in Shareholders' Equity](#if171463e722442a2832fd793e396cb59_248)</u> | <u>[8](#if171463e722442a2832fd793e396cb59_248)</u> |
| | <u>[Consolidated Statements of Cash Flows](#if171463e722442a2832fd793e396cb59_271)</u> | <u>[9](#if171463e722442a2832fd793e396cb59_271)</u> |
| | <u>[Notes to Unaudited Consolidated Financial Statements](#if171463e722442a2832fd793e396cb59_10)</u> | <u>[10](#if171463e722442a2832fd793e396cb59_10)</u> |
| Item 2. | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#if171463e722442a2832fd793e396cb59_840)</u> | <u>[47](#if171463e722442a2832fd793e396cb59_840)</u> |
| Item 3. | <u>[Quantitative and Qualitative Disclosures About Market Risk](#if171463e722442a2832fd793e396cb59_864)</u> | <u>[88](#if171463e722442a2832fd793e396cb59_864)</u> |
| Item 4. | <u>[Controls and Procedures](#if171463e722442a2832fd793e396cb59_887)</u> | <u>[88](#if171463e722442a2832fd793e396cb59_887)</u> |
| PART II. | <u>[OTHER INFORMATION](#if171463e722442a2832fd793e396cb59_910)</u> | <u>[89](#if171463e722442a2832fd793e396cb59_910)</u> |
| Item 1. | <u>[Legal Proceedings](#if171463e722442a2832fd793e396cb59_933)</u> | <u>[89](#if171463e722442a2832fd793e396cb59_933)</u> |
| Item 1A. | <u>[Risk Factors](#if171463e722442a2832fd793e396cb59_956)</u> | <u>[89](#if171463e722442a2832fd793e396cb59_956)</u> |
| Item 2. | <u>[Unregistered Sales of Equity Securities and Use of Proceeds](#if171463e722442a2832fd793e396cb59_1025)</u> | <u>[89](#if171463e722442a2832fd793e396cb59_1025)</u> |
| Item 3. | <u>[Defaults Upon Senior Securities](#if171463e722442a2832fd793e396cb59_1048)</u> | <u>[89](#if171463e722442a2832fd793e396cb59_1048)</u> |
| Item 4. | <u>[Mine Safety Disclosures](#if171463e722442a2832fd793e396cb59_1071)</u> | <u>[89](#if171463e722442a2832fd793e396cb59_1071)</u> |
| Item 5. | <u>[Other Information](#if171463e722442a2832fd793e396cb59_1094)</u> | <u>[90](#if171463e722442a2832fd793e396cb59_1094)</u> |
| Item 6. | <u>[Exhibits](#if171463e722442a2832fd793e396cb59_1117)</u> | <u>[90](#if171463e722442a2832fd793e396cb59_1117)</u> |
| <u>[SIGNATURES](#if171463e722442a2832fd793e396cb59_1140)</u> | <u>[SIGNATURES](#if171463e722442a2832fd793e396cb59_1140)</u> | <u>[91](#if171463e722442a2832fd793e396cb59_1140)</u> |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**Cautionary Note Regarding Forward-Looking Statements**

This Quarterly Report on Form 10-Q (this "Report") of Heritage Commerce Corp ("we," "us," "our" or the "Company") 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, and 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, Part II, Item 1A. Risk Factors, on pages 73 – 95 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, 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 imposition of tariffs, sociopolitical events and 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;

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</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;

&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.

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.*

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**Part I—FINANCIAL INFORMATION**

**ITEM 1—CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**HERITAGE COMMERCE CORP**

**CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
| | **June 30,**<br>**2025** | **December 31,**<br>**2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Assets** |  |  |
| Cash and due from banks | $55360 | $29864 |
| Other investments and interest-bearing deposits in other financial institutions | 666432 | 938259 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total cash and cash equivalents | 721792 | 968123 |
| Securities available-for-sale, at fair value | 307035 | 256274 |
| Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $16 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;and $12, respectively (fair value of $486,476 and $497,012, respectively) | 561205 | 590016 |
| Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs | 1156 | 2375 |
| Loans held-for-investment, net of deferred fees | 3534333 | 3491937 |
| Allowance for credit losses on loans | (48633) | (48953) |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans, net | 3485700 | 3442984 |
| Federal Home Loan Bank ("FHLB"), Federal Reserve Bank ("FRB") stock and other investments, at cost | 32563 | 32556 |
| Company-owned life insurance | 82296 | 81211 |
| Premises and equipment, net | 9765 | 10140 |
| Goodwill | 167631 | 167631 |
| Other intangible assets | 5532 | 6439 |
| Accrued interest receivable and other assets | 92562 | 87257 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total assets | $5467237 | $5645006 |
| **Liabilities and Shareholders' Equity** |  |  |
| Liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Deposits: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Demand, noninterest-bearing | $1151242 | $1214192 |
| &nbsp;&nbsp;&nbsp;&nbsp; Demand, interest-bearing | 955504 | 936587 |
| &nbsp;&nbsp;&nbsp;&nbsp; Savings and money market | 1320142 | 1325923 |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits - under $250 | 35356 | 38988 |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits - $250 and over | 210818 | 206755 |
| &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 | 954272 | 1097586 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 4627334 | 4820031 |
| &nbsp;&nbsp;&nbsp;&nbsp;Subordinated debt, net of issuance costs | 39728 | 39653 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued interest payable and other liabilities | 105471 | 95595 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | 4772533 | 4955279 |
| Shareholders' equity: |  |  |
| Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;at June 30, 2025 and December 31, 2024 |  |  |
| Common stock, no par value; 100,000,000 shares authorized; |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;61,446,763, and 61,348,095 shares issued and outstanding, respectively | 509888 | 510070 |
| Retained earnings | 189794 | 187762 |
| Accumulated other comprehensive loss | (4978) | (8105) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total shareholders' equity | 694704 | 689727 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and shareholders' equity | $5467237 | $5645006 |

---

See notes to consolidated financial statements (unaudited).

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**HERITAGE COMMERCE CORP**

**CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Six Months Ended** | **Six Months Ended** |
| | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
| | **2025** | **2024** | **2025** | **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: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans, including fees | $49278 | $45470 | $95980 | $90070 |
| &nbsp;&nbsp;&nbsp;&nbsp; Securities, taxable | 6346 | 5483 | 11905 | 11666 |
| &nbsp;&nbsp;&nbsp;&nbsp; Securities, exempt from Federal tax | 215 | 225 | 432 | 451 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other investments, interest-bearing deposits |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; in other financial institutions and Federal funds sold | 7186 | 7311 | 16540 | 13263 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income | 63025 | 58489 | 124857 | 115450 |
| Interest expense: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Deposits | 17682 | 19084 | 35617 | 36004 |
| &nbsp;&nbsp;&nbsp;&nbsp; Subordinated debt | 538 | 538 | 1075 | 1076 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest expense | 18220 | 19622 | 36692 | 37080 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income before provision for credit losses on loans | 44805 | 38867 | 88165 | 78370 |
| Provision for credit losses on loans | 516 | 471 | 790 | 655 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net interest income after provision for credit losses on loans | 44289 | 38396 | 87375 | 77715 |
| Noninterest income: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Service charges and fees on deposit accounts | 929 | 891 | 1821 | 1768 |
| &nbsp;&nbsp;&nbsp;&nbsp; FHLB and FRB stock dividends | 584 | 588 | 1174 | 1178 |
| &nbsp;&nbsp;&nbsp;&nbsp; Increase in cash surrender value of life insurance | 548 | 521 | 1086 | 1039 |
| &nbsp;&nbsp;&nbsp;&nbsp; Termination fees | 227 | 100 | 314 | 113 |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on sales of SBA loans | 87 | 76 | 185 | 254 |
| &nbsp;&nbsp;&nbsp;&nbsp; Servicing income | 61 | 90 | 143 | 180 |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on proceeds from company-owned life insurance |  | 219 |  | 219 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other | 541 | 379 | 950 | 750 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income | 2977 | 2864 | 5673 | 5501 |
| Noninterest expense: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Salaries and employee benefits | 16227 | 15794 | 32802 | 31303 |
| &nbsp;&nbsp;&nbsp;&nbsp; Occupancy and equipment | 2525 | 2689 | 5059 | 5132 |
| &nbsp;&nbsp;&nbsp;&nbsp; Professional fees | 1819 | 1072 | 3399 | 2399 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other | 17764 | 8633 | 26531 | 16890 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | 38335 | 28188 | 67791 | 55724 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income before income taxes | 8931 | 13072 | 25257 | 27492 |
| Income tax expense | 2542 | 3838 | 7242 | 8092 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net income | $6389 | $9234 | $18015 | $19400 |
| Earnings per common share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Basic | $0.10 | $0.15 | 0.29 | $0.32 |
| &nbsp;&nbsp;&nbsp;&nbsp; Diluted | $0.10 | $0.15 | 0.29 | $0.32 |

---

See notes to consolidated financial statements (unaudited).

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**HERITAGE COMMERCE CORP**

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

**(Unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Six months ended** | **Six months ended** |
| | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Net income | $6389 | $9234 | $18015 | $19400 |
| 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 | 2675 | 1277 | 4582 | 1525 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income taxes | (790) | (370) | (1343) | (442) |
| &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 | 1885 | 907 | 3239 | 1083 |
| &nbsp;&nbsp;&nbsp;&nbsp; Change in net pension and other benefit plan liability adjustment | (40) | (27) | (80) | (53) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | (16) | (7) | (32) | (15) |
| &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 | (56) | (34) | (112) | (68) |
| &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 | 1829 | 873 | 3127 | 1015 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total comprehensive income | $8218 | $10107 | $21142 | $20415 |

---

See notes to consolidated financial statements (unaudited).

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**HERITAGE COMMERCE CORP**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Common Stock** | **Common Stock** | | | |
| | **Shares** | **Amount** |<br>**Retained**<br>**Earnings** | **Accumulated**<br>**Other**<br>**Comprehensive**<br>**Income (Loss)** |<br>**Total**<br>**Shareholders'**<br>**Equity** |
| | **(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)** |
| **Balance, January 1, 2024** | 61146835 | $506539 | $179092 | $(12730) | $672901 |
| Net income |  |  | 10166 |  | 10166 |
| Other comprehensive income, net of taxes |  |  |  | 142 | 142 |
| Issuance of restricted stock awards, net of forfeitures | 33908 |  |  |  |  |
| Forfeiture of restricted stock awards, net |  |  |  |  |  |
| Net amortization of restricted stock awards |  | 311 |  |  | 311 |
| Cash dividend declared $0.13 per share |  |  | (7952) |  | (7952) |
| Restricted stock units ("RSUs") and performance-based |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;restricted stock units ("PRSUs") expense, net of taxes |  | 198 |  |  | 198 |
| Stock option expense, net of forfeitures and taxes |  | 145 |  |  | 145 |
| Stock options exercised | 72882 | 385 |  |  | 385 |
| **Balance March 31, 2024** | 61253625 | 507578 | 181306 | (12588) | 676296 |
| Net income |  |  | 9234 |  | 9234 |
| Other comprehensive income, net of taxes |  |  |  | 873 | 873 |
| Issuance (forfeitures) of restricted stock awards, net | (8000) |  |  |  |  |
| Net amortization of restricted stock awards |  | 165 |  |  | 165 |
| Cash dividend declared $0.13 per share |  |  | (7969) |  | (7969) |
| RSUs and PRSUs expense, net of taxes |  | 413 |  |  | 413 |
| RSUs vested | 35837 |  |  |  |  |
| Stock option expense, net of forfeitures and taxes |  | 129 |  |  | 129 |
| Stock options exercised | 10632 | 58 |  |  | 58 |
| **Balance June 30, 2024** | 61292094 | $508343 | $182571 | $(11715) | $679199 |
| **Balance, January 1, 2025** | 61348095 | $510070 | $187762 | $(8105) | $689727 |
| Net income |  |  | 11626 |  | 11626 |
| Other comprehensive income, net of taxes |  |  |  | 1298 | 1298 |
| Issuance of restricted stock awards, net of forfeitures | 39104 |  |  |  |  |
| Forfeiture of restricted stock awards, net |  |  |  |  |  |
| Net amortization of restricted stock awards |  | 145 |  |  | 145 |
| Cash dividend declared $0.13 per share |  |  | (7987) |  | (7987) |
| RSUs and PRSUs expense, net of taxes |  | 278 |  |  | 278 |
| RSUs vested | 71700 |  |  |  |  |
| Stock option expense, net of forfeitures and taxes |  | 117 |  |  | 117 |
| Stock options exercised | 152222 | 986 |  |  | 986 |
| **Balance March 31, 2025** | 61611121 | 511596 | 191401 | (6807) | 696190 |
| Net income |  |  | 6389 |  | 6389 |
| Other comprehensive income, net of taxes |  |  |  | 1829 | 1829 |
| Issuance (forfeitures) of restricted stock awards, net | (1682) |  |  |  |  |
| Net amortization of restricted stock awards |  | 165 |  |  | 165 |
| Cash dividend declared $0.13 per share |  |  | (7996) |  | (7996) |
| RSUs and PRSUs expense, net of taxes |  | (81) |  |  | (81) |
| RSUs vested | 39643 |  |  |  |  |
| Stock option expense, net of forfeitures and taxes |  | 92 |  |  | 92 |
| Common stock repurchased | (207989) | (1912) |  |  | (1912) |
| Stock options exercised | 5670 | 28 |  |  | 28 |
| **Balance June 30, 2025** | 61446763 | $509888 | $189794 | $(4978) | $694704 |

---

See notes to consolidated financial statements (unaudited).

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**HERITAGE COMMERCE CORP**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

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| | | |
|:---|:---|:---|
| | **Six months ended** | **Six months ended** |
| | **June 30,** | **June 30,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |
| Net income | $18015 | $19400 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| Amortization of premiums and accretion of discounts on securities, net | (813) | (1660) |
| Gain on sale of SBA loans | (185) | (254) |
| Proceeds from sale of SBA loans originated for sale | 2664 | 3228 |
| SBA loans originated for sale | (1998) | (2668) |
| Provision for credit losses on loans | 790 | 655 |
| Increase in cash surrender value of life insurance | (1086) | (1039) |
| Depreciation and amortization | 662 | 629 |
| Amortization of other intangible assets | 907 | 1106 |
| Stock option expense, net | 209 | 274 |
| RSUs and PRSUs expense, net | 197 | 611 |
| Amortization of restricted stock awards, net | 310 | 476 |
| Amortization of subordinated debt issuance costs | 75 | 75 |
| Gain on proceeds from company-owned life insurance |  | (219) |
| Effect of changes in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued interest receivable and other assets | (6682) | 3927 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued interest payable and other liabilities | 9771 | (6694) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 22836 | 17847 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |
| Purchase of securities available-for-sale | (211776) |  |
| Maturities/paydowns/calls of securities available-for-sale | 166784 | 173269 |
| Maturities/paydowns/calls of securities held-to-maturity | 28464 | 28912 |
| Net change in loans | (42768) | (30074) |
| Changes in FHLB stock and other investments | (7) | (9) |
| Proceeds from redemption of company-owned life insurance |  | 594 |
| Purchase of premises and equipment | (286) | (1082) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) provided by investing activities | (59589) | 171610 |
| CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |
| Net change in deposits | (192697) | 66152 |
| Exercise of stock options | 1014 | 443 |
| Payment of cash dividends | (15983) | (15921) |
| Repurchase shares of the Company common stock | (1912) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) provided by financing activities | (209578) | 50674 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (decrease) increase in cash and cash equivalents | (246331) | 240131 |
| Cash and cash equivalents, beginning of period | 968123 | 408129 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents, end of period | $721792 | $648260 |
| Supplemental disclosures of cash flow information: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest paid | $37841 | $35591 |
| Income taxes paid, net | $10843 | $9697 |
| Supplemental schedule of non-cash activity: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Transfer of loans held-for-sale to loan portfolio | $738 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Recording of right of use assets in exchange for lease obligations | $— | $3045 |

---

See notes to consolidated financial statements (unaudited).

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**HERITAGE COMMERCE CORP**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**June 30, 2025**

**(Unaudited)**

**1) Basis of Presentation**

The unaudited consolidated financial statements of Heritage Commerce Corp (the "Company" or "HCC") and its wholly owned subsidiary, Heritage Bank of Commerce (the "Bank" or "HBC"), have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America ("GAAP") for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 ("2024 Form 10-K").

HBC is a commercial bank serving clients primarily located 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, and provides business-essential working capital factoring financing to various industries throughout the United States. No client accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for Two segments: banking and factoring. The Company's management uses segment results in its operating and strategic planning.

In management's opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated.

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. Material estimates that are particularly susceptible to significant change include the determination of the allowance for credit losses and any impairment of goodwill or intangible assets. 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.

The results for the three and six months ended June 30, 2025 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2025.

***&nbsp;&nbsp;&nbsp;&nbsp;Reclassifications***&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company's consolidated financial position, results of operations or net change in cash and cash equivalents.

***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.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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. The adoption of the provisions of ASU 2023-06 is not expected to have a material impact on HCC's consolidated financial statements.

In December 2023, FASB issued 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 will update the related disclosures upon adoption.

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.

**2) Shareholders' Equity and Earnings Per Share**

***Share Repurchase Program*** – The Company is authorized to repurchase up to $15,000,000 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 in July 2024. 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 the second quarter of 2025, under the Repurchase Program, the Company repurchased 207,989 shares of its common stock with a weighted average price of $9.19 for a total of $1,912,000. The remaining capacity under the Repurchase Program was $13,078,000 at June 30, 2025. In July 2025, the Company's Board of Directors authorized the extension of the Repurchase Program for one year, expiring on July 31, 2026.

***Earnings Per Share*** – Basic earnings per common share is computed by dividing net income by the weighted average common shares outstanding. Diluted earnings per share reflect potential dilution from outstanding stock options using the treasury stock method. Unvested restricted stock units are not considered participating securities and as a result are not considered outstanding under the two class method of computing basic earnings per common share. There were 1,436,366 and 1,402,982 weighted average stock options outstanding for the three and six months ended June 30, 2025, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were 2,205,107 and 1,892,634 weighted average stock options outstanding for the three months and six months ended June 30, 2024, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were 211,712 and 12,781 weighted average RSUs outstanding for the three months and six months ended June 30, 2025, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per shares. There were 15,528 and 153,232 weighted average RSUs outstanding for the three months and six months ended June 30, 2024, considered to be

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

antidilutive and excluded from the computation of diluted earnings per shares. A reconciliation of these factors used in computing basic and diluted earnings per common share is as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **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)** |
| Net income | $6389 | $9234 | $18015 | $19400 |
| Weighted average common shares outstanding |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;for basic earnings per common share | 61508180 | 61279914 | 61493880 | 61233269 |
| Dilutive potential common shares | 116420 | 158174 | 171062 | 213215 |
| &nbsp;&nbsp;&nbsp;&nbsp; Shares used in computing diluted earnings per common share | 61624600 | 61438088 | $61664942 | $61446484 |
| Basic earnings per share | $0.10 | $0.15 | $0.29 | $0.32 |
| Diluted earnings per share | $0.10 | $0.15 | $0.29 | $0.32 |

---

**3) Accumulated Other Comprehensive Income (Loss) ("AOCI")**

The following table reflects the changes in AOCI by component for the periods indicated:

---

| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended June 30, 2025 and 2024** | **Three Months Ended June 30, 2025 and 2024** | **Three Months Ended June 30, 2025 and 2024** |
| | **Unrealized**<br>**Gains (Losses)**<br>**on Available-**<br>**for-Sale**<br>**Securities**<br>**and I/O**<br>**Strips** |<br>**Defined**<br>**Benefit**<br>**Pension**<br>**Plan**<br>**Items**<sup>(1)</sup> |<br><br><br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning balance April 1, 2025, net of taxes | $(2239) | $(4568) | $(6807) |
| Other comprehensive income (loss) before reclassification, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;net of taxes | 1885 | (19) | 1866 |
| Amounts reclassified from other comprehensive income |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;(loss), net of taxes |  | (37) | (37) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net current period other comprehensive income (loss), |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of taxes | 1885 | (56) | 1829 |
| Ending balance June 30, 2025, net of taxes | $(354) | $(4624) | $(4978) |
| Beginning balance April 1, 2024, net of taxes | $(6853) | $(5735) | $(12588) |
| Other comprehensive income (loss) before reclassification, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;net of taxes | 907 | (16) | 891 |
| Amounts reclassified from other comprehensive income |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;(loss), net of taxes |  | (18) | (18) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net current period other comprehensive income (loss), |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; net of taxes | 907 | (34) | 873 |
| Ending balance June 30, 2024, net of taxes | $(5946) | $(5769) | $(11715) |

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__________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> This AOCI component is included in the computation of net periodic benefit cost (see Note 8 "*Benefit Plans*") &nbsp;&nbsp;&nbsp;&nbsp;and includes split-dollar life insurance benefit plan.

__________________________________________________________

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| | | | |
|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2025 and 2024** | **Six Months Ended June 30, 2025 and 2024** | **Six Months Ended June 30, 2025 and 2024** |
| | **Unrealized**<br>**Gains (Losses)**<br>**on Available-**<br>**for-Sale**<br>**Securities**<br>**and I/O**<br>**Strips** |<br>**Defined**<br>**Benefit**<br>**Pension**<br>**Plan**<br>**Items**<sup>(1)</sup> |<br><br><br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning balance January 1, 2025, net of taxes | $(3593) | $(4512) | $(8105) |
| Other comprehensive income (loss) before reclassification, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;net of taxes | 3239 | (38) | 3201 |
| Amounts reclassified from other comprehensive income |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;(loss), net of taxes |  | (74) | (74) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net current period other comprehensive income (loss), |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of taxes | 3239 | (112) | 3127 |
| Ending balance June 30, 2025, net of taxes | $(354) | $(4624) | $(4978) |
| Beginning balance January 1, 2024, net of taxes | $(7029) | $(5701) | $(12730) |
| Other comprehensive income (loss) before reclassification, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;net of taxes | 1083 | (32) | 1051 |
| Amounts reclassified from other comprehensive income |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;(loss), net of taxes |  | (36) | (36) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net current period other comprehensive income (loss), |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of taxes | 1083 | (68) | 1015 |
| Ending balance June 30, 2024, net of taxes | $(5946) | $(5769) | $(11715) |

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_________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> This AOCI component is included in the computation of net periodic benefit cost (see Note 8 "*Benefit Plans*") &nbsp;&nbsp;&nbsp;&nbsp;and includes split-dollar life insurance benefit plan.

_________________________________________________________

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| | | | |
|:---|:---|:---|:---|
| | **Amounts Reclassified from** | **Amounts Reclassified from** | |
| | **AOCI** | **AOCI** | |
| | **Three Months Ended** | **Three Months Ended** | |
| | **June 30,** | **June 30,** | |
|<br><br>**Details About AOCI Components** | **2025** | **2024** |<br><br>**Affected Line Item Where**<br>**Net Income is Presented** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** |  |
| Amortization of defined benefit pension plan items <sup>(1)</sup> |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Prior transition obligation and actuarial losses <sup>(2)</sup> | $64 | $52 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Prior service cost and actuarial losses <sup>(3)</sup> | (12) | (26) |  |
|  | 52 | 26 | Other noninterest expense |
|  | (15) | (8) | Income tax benefit |
| Total reclassification from AOCI for the period | $37 | $18 | Net of tax |

---

_______________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> This AOCI component is included in the computation of net periodic benefit cost (see Note 8 "*Benefit Plans*").

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(2)</sup> This is related to the split dollar life insurance benefit plan.

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(3)</sup> This is related to the supplemental executive retirement plan.

__________________________________________________________

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| | | | |
|:---|:---|:---|:---|
| | **Amounts Reclassified from** | **Amounts Reclassified from** | |
| | **AOCI** | **AOCI** | |
| | **Six Months Ended** | **Six Months Ended** | |
| | **June 30,** | **June 30,** | |
|<br><br>**Details About AOCI Components** | **2025** | **2024** |<br><br>**Affected Line Item Where**<br>**Net Income is Presented** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** |  |
| Amortization of defined benefit pension plan items <sup>(1)</sup> |  |  |  |
| Prior transition obligation and actuarial losses <sup>(2)</sup> | $129 | $104 |  |
| Prior service cost and actuarial losses <sup>(3)</sup> | (24) | (52) |  |
|  | 105 | 52 | Other noninterest expense |
|  | (31) | (16) | Income tax benefit |
| Total reclassification from AOCI for the period | $74 | $36 | Net of tax |

---

__________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> This AOCI component is included in the computation of net periodic benefit cost (see Note 8 "*Benefit Plans*").

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(2)</sup> This is related to the split dollar life insurance benefit plan.

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(3)</sup> This is related to the supplemental executive retirement plan.

__________________________________________________________

**4) Securities**

The amortized cost and estimated fair value of securities were as follows at the dates indicated:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|<br>**June 30, 2025** |<br>**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 | $151711 | $696 | $(2542) | $— | $149865 |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | 80033 | 566 | (33) |  | 80566 |
| &nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations | 75739 | 895 | (30) |  | 76604 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $307483 | $2157 | $(2605) | $— | $307035 |
|  |  | **Gross** | **Gross** | **Estimated** | **Allowance** |
|  | **Amortized** | **Unrecognized** | **Unrecognized** | **Fair** | **for Credit** |
| **June 30, 2025** | **Cost** | **Gains** | **(Losses)** | **Value** | **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 | $531489 | $110 | $(73884) | $457715 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipals - exempt from Federal tax | 29732 | 1 | (972) | 28761 | (16) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $561221 | $111 | $(74856) | $486476 | $(16) |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|<br>**December 31, 2024** |<br>**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 |
|  |  | **Gross** | **Gross** | **Estimated** | **Allowance** |
|  | **Amortized** | **Unrecognized** | **Unrecognized** | **Fair** | **for Credit** |
| **December 31, 2024** | **Cost** | **Gains** | **(Losses)** | **Value** | **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) |

---

Securities with unrealized/unrecognized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized/unrecognized loss position are as follows at the dates indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Less Than 12 Months** | **Less Than 12 Months** | **12 Months or More** | **12 Months or More** | **Total** | **Total** |
|<br>**June 30, 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 | $— | $— | $46176 | $(2542) | $48126 | $(2542) |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury |  |  | 25394 | (33) | 25394 | (33) |
| &nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations | 9784 | (30) |  |  | 43919 | (30) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $9784 | $(30) | $71570 | $(2575) | $117439 | $(2605) |
| Securities held-to-maturity: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $— | $— | $447021 | $(73884) | $447021 | $(73884) |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipals — exempt from Federal tax | 2276 | (10) | 23778 | (962) | 26054 | (972) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $2276 | $(10) | $470799 | $(74846) | $473075 | $(74856) |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Less Than 12 Months** | **Less Than 12 Months** | **12 Months or More** | **12 Months or More** | **Total** | **Total** |
|<br>**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; 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; Total | $14356 | $(118) | $480639 | $(92898) | $494995 | $(93016) |

---

The Company conducts a regular assessment of its investment securities to determine whether securities are experiencing credit losses. Factors for consideration include the nature of the securities, credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows, market conditions and the Company's ability to hold the securities through the anticipated recovery period.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

At the dates and during the periods covered by these financial statements, there were zero 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 June 30, 2025, the Company held 385 securities (123 available-for-sale and 262 held-to-maturity), of which 353 had fair value below amortized cost. The unrealized/unrecognized 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.

The amortized cost and estimated fair values of securities as of June 30, 2025, are shown by contractual maturity below. The expected maturities will differ from contractual maturities if borrowers have the right to call or pre-pay obligations with or without call or pre-payment 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 three months or less | $19476 | $19454 |
| Due after three months through one year | 5951 | 5940 |
| Due after one through five years | 54606 | 55172 |
| Due after ten years | 75739 | 76604 |
| Agency mortgage-backed securities and |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;collateralized mortgage obligations | 151711 | 149865 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $307483 | $307035 |
|  | **Held-to-maturity** | **Held-to-maturity** |
|  | **Amortized** | **Estimated** |
|  | **Cost** <sup>(1)</sup> | **Fair Value** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Due after three months through one year | $2365 | $2363 |
| Due after one through five years | 10369 | 10153 |
| Due after five through ten years | 16998 | 16245 |
| Agency mortgage-backed securities | 531489 | 457715 |
| Total | $561221 | $486476 |

---

__________________________________________________________

<sup>(1)</sup> Gross of the allowance for credit losses of $16 at June 30, 2025.

__________________________________________________________

Securities with amortized cost of $586,411,000 and $753,369,000 as of June 30, 2025 and December 31, 2024, respectively, were pledged to secure the Bank's lines of credit and for other purposes as required or permitted by law or contract. The decrease in pledged securities at June 30, 2025 was due to securities maturities.

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 first and second quarters of 2025 of the allowance for credit losses on debt securities held-to-maturity at period end:

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | |
|:---|:---|
| | **Municipals** |
| | **(Dollars in thousands)** |
| Beginning balance January 1, 2025 | $12 |
| Provision for credit losses |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ending Balance at March 31, 2025 | 12 |
| Provision for credit losses | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ending Balance at June 30, 2025 | $16 |

---

The bond ratings for the Company's municipal investment securities at June 30, 2025 were consistent with the ratings at December 31, 2024.

**5) 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. Descriptions of the Company's loan portfolio segments are included in Note 1 "*Summary of Significant Accounting Policies*" of the 2024 Form 10-K.

***Loan Distribution***

Loans by portfolio segment and the allowance for credit losses on loans were as follows at the dates indicated:

---

| | | |
|:---|:---|:---|
| | **June 30, 2025** | **December 31, 2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Loans held-for-investment: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Commercial | $492231 | $531350 |
| &nbsp;&nbsp;&nbsp;&nbsp; Real estate: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; CRE - owner occupied | 627810 | 601636 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; CRE - non-owner occupied | 1390419 | 1341266 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 149460 | 127848 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Home equity | 120763 | 127963 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Multifamily | 285016 | 275490 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 454419 | 471730 |
| &nbsp;&nbsp;&nbsp;&nbsp; Consumer and other | 14661 | 14837 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans | 3534779 | 3492120 |
| Deferred loan fees, net | (446) | (183) |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans, net of deferred fees | 3534333 | 3491937 |
| Allowance for credit losses on loans | (48633) | (48953) |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans, net | $3485700 | $3442984 |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 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 | $5045 | $6184 | $26046 | $1674 | $832 | $4319 | $3863 | $299 | $48262 |
| Charge-offs | (17) |  |  |  |  |  |  | (192) | (209) |
| Recoveries | 43 | 3 |  |  | 18 |  |  |  | 64 |
| Net (charge-offs) recoveries | 26 | 3 |  |  | 18 |  |  | (192) | (145) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | 628 | 7 | (633) | 764 | (49) | 148 | (404) | 55 | 516 |
| End of period balance | $5699 | $6194 | $25413 | $2438 | $801 | $4467 | $3459 | $162 | $48633 |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 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 | $5029 | $5141 | $26409 | $1882 | $753 | $4309 | $4199 | $166 | $47888 |
| Charge-offs | (510) |  |  |  |  |  |  |  | (510) |
| Recoveries | 64 | 6 |  |  | 35 |  |  |  | 105 |
| Net (charge-offs) recoveries | (446) | 6 |  |  | 35 |  |  |  | (405) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | 427 | 197 | 438 | (359) | 26 | (40) | (239) | 21 | 471 |
| End of period balance | $5010 | $5344 | $26847 | $1523 | $814 | $4269 | $3960 | $187 | $47954 |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 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 | (1055) |  |  |  |  |  |  | (192) | (1247) |
| Recoveries | 85 | 7 |  |  | 45 |  |  |  | 137 |
| Net (charge-offs) recoveries | (970) | 7 |  |  | 45 |  |  | (192) | (1110) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | 609 | 962 | (1366) | 1038 | (42) | (268) | (159) | 16 | 790 |
| End of period balance | $5699 | $6194 | $25413 | $2438 | $801 | $4467 | $3459 | $162 | $48633 |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 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 | (868) |  |  |  |  |  |  |  | (868) |
| Recoveries | 146 | 10 |  |  | 53 |  |  |  | 209 |
| Net (charge-offs) recoveries | (722) | 10 |  |  | 53 |  |  |  | (659) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | (121) | 213 | 1524 | (829) | 117 | (784) | 535 |  | 655 |
| End of period balance | $5010 | $5344 | $26847 | $1523 | $814 | $4269 | $3960 | $187 | $47954 |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following tables present the amortized cost basis of nonaccrual loans and loans past due over 90 days and still accruing at the dates indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 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 | $72 | $419 | $123 | $614 |
| 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 | 4198 |  |  | 4198 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 728 |  |  | 728 |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 607 |  |  | 607 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $5636 | $419 | $123 | $6178 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **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 no 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; 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 Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following tables present the aging of past due loans by class at the dates indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 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 | $6977 | $2385 | $443 | $9805 | $482426 | $492231 |
| Real estate: |  |  |  |  |  |  |
| CRE - Owner Occupied |  |  | 31 | 31 | 627779 | 627810 |
| CRE - Non-Owner Occupied |  |  |  |  | 1390419 | 1390419 |
| Land and construction |  |  | 4198 | 4198 | 145262 | 149460 |
| Home equity |  |  | 728 | 728 | 120035 | 120763 |
| Multifamily |  |  |  |  | 285016 | 285016 |
| Residential mortgages |  |  | 607 | 607 | 453812 | 454419 |
| Consumer and other |  |  |  |  | 14661 | 14661 |
| Total | $6977 | $2385 | $6007 | $15369 | $3519410 | $3534779 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **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: |  |  |  |  |  |  |
| CRE - Owner Occupied | 1879 |  |  | 1879 | 599757 | 601636 |
| CRE - Non-Owner Occupied | 4479 |  |  | 4479 | 1336787 | 1341266 |
| Land and construction | 4290 | 2323 | 5874 | 12487 | 115361 | 127848 |
| Home equity | 78 | 750 |  | 828 | 127135 | 127963 |
| Multifamily |  |  |  |  | 275490 | 275490 |
| Residential mortgages | 850 |  |  | 850 | 470880 | 471730 |
| Consumer and other |  | 117 | 213 | 330 | 14507 | 14837 |
| 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:

---

| | | |
|:---|:---|:---|
| | **June 30, 2025** | **December 31, 2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Past due nonaccrual loans | $6025 | $7068 |
| Current nonaccrual loans | 30 | 110 |
| Total nonaccrual loans | $6055 | $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.

***Credit Quality Indicators***

Credit quality indicators, specifically the Company's internal risk rating systems, reflect how the Company monitors credit losses and represents factors used by the Company when measuring the allowance for credit losses.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

Descriptions of the Company's credit quality indicators by financial asset are included in Note 4 "*Loans and Allowance for Credit Losses on Loans*" of the 2024 Form 10-K.

The following tables present term loans amortized cost by vintage and loan grade classification, and revolving loans amortized cost by loan grade classification at June 30, 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 June 30, 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 premiums. The loan categories are based on the loan segmentation in the Company's CECL reserve methodology based on loan purpose and type.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Term Loans Amortized Cost Basis by Originated Period as of June 30, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of June 30, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of June 30, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of June 30, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of June 30, 2025** | **Term Loans Amortized Cost Basis by Originated Period as of June 30, 2025** | | |
| | **6/30/2025** | **2024** | **2023** | **2022** | **2021** | **Prior Periods** | **Revolving**<br>**Loans**<br>**Amortized**<br>**Cost Basis** |<br><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)** |
| Commercial: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $89156 | $27568 | $22635 | $13499 | $14366 | $30979 | $283396 | $481599 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention | 1885 | 923 |  | 107 | 154 | 371 | 2205 | 5645 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  | 32 | 43 | 284 | 4137 |  | 4496 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  | 278 |  |  | 213 |  | 491 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 91041 | 28491 | 22945 | 13649 | 14804 | 35700 | 285601 | 492231 |
| CRE - Owner Occupied: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 54864 | 53450 | 31903 | 77925 | 89191 | 296466 | 6126 | 609925 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  | 7025 | 2579 |  | 9604 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  | 5136 | 3114 |  | 8250 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  | 31 |  |  | 31 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 54864 | 53450 | 31903 | 77925 | 101383 | 302159 | 6126 | 627810 |
| CRE - Non-Owner Occupied: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 98434 | 129476 | 214833 | 220626 | 249469 | 446044 | 6002 | 1364884 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  | 5982 | 2148 | 950 |  | 9080 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  | 4393 | 11462 | 600 | 16455 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 98434 | 129476 | 214833 | 226608 | 256010 | 458456 | 6602 | 1390419 |
| Land and construction: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 29527 | 49648 | 26921 | 30553 | 8404 | 209 |  | 145262 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  | 3220 | 978 |  | 4198 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 29527 | 49648 | 26921 | 30553 | 11624 | 1187 |  | 149460 |
| Home equity: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass |  |  |  |  |  | 2044 | 115881 | 117925 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  | 2110 | 2110 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  | 728 |  | 728 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total |  |  |  |  |  | 2772 | 117991 | 120763 |
| Multifamily: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 26192 | 20051 | 45192 | 36198 | 44529 | 109915 | 907 | 282984 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  | 2032 |  | 2032 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 26192 | 20051 | 45192 | 36198 | 44529 | 111947 | 907 | 285016 |
| Residential mortgage: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 461 | 3723 | 1645 | 176365 | 239081 | 32378 |  | 453653 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  | 159 |  | 159 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  | 607 |  |  | 607 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 461 | 3723 | 1645 | 176365 | 239688 | 32537 |  | 454419 |
| Consumer and other: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 6048 | 77 | 208 | 115 | 32 | 1961 | 6220 | 14661 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 6048 | 77 | 208 | 115 | 32 | 1961 | 6220 | 14661 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total loans | $306567 | $284916 | $343647 | $561413 | $668070 | $946719 | $423447 | $3534779 |
| Risk Grades: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $304682 | $283993 | $343337 | $555281 | $645072 | $919996 | $418532 | $3470893 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention | 1885 | 923 |  | 6089 | 9327 | 5932 | 2205 | 26361 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  | 32 | 43 | 9813 | 18872 | 2710 | 31470 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  | 278 |  | 3858 | 1919 |  | 6055 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Grand Total | $306567 | $284916 | $343647 | $561413 | $668070 | $946719 | $423447 | $3534779 |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</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** | | |
| | **2024** | **2023** | **2022** | **2021** | **2020** | **Prior Periods** | **Revolving**<br>**Loans**<br>**Amortized**<br>**Cost Basis** |<br><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)** |
| Commercial: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $133643 | $27101 | $17114 | $16312 | $10444 | $28671 | $289147 | $522432 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention | 1927 |  | 327 | 86 |  | 358 | 423 | 3121 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  | 146 |  | 32 |  | 4405 | 200 | 4783 |
| &nbsp;&nbsp;&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;&nbsp;&nbsp;Pass | 57988 | 31688 | 81133 | 95939 | 65152 | 244430 | 6899 | 583229 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  | 7132 | 443 | 1342 |  | 8917 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  | 6333 | 3157 |  |  | 9490 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 57988 | 31688 | 81133 | 109404 | 68752 | 245772 | 6899 | 601636 |
| CRE - Non-Owner Occupied: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 137935 | 222142 | 229993 | 250266 | 27031 | 442105 | 5356 | 1314828 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  | 4810 | 4890 |  |  |  | 9700 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  | 4480 |  | 11658 | 600 | 16738 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 137935 | 222142 | 234803 | 259636 | 27031 | 453763 | 5956 | 1341266 |
| Land and construction: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 32691 | 45250 | 31599 | 9899 | 212 |  |  | 119651 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  | 2323 |  | 2323 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  | 3815 | 978 | 1081 |  | 5874 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 32691 | 45250 | 31599 | 13714 | 1190 | 3404 |  | 127848 |
| Home equity: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass |  |  |  |  |  | 2378 | 122207 | 124585 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  | 750 |  | 2551 | 3301 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  | 77 |  | 77 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total |  |  |  |  | 750 | 2455 | 124758 | 127963 |
| Multifamily: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 20218 | 46304 | 39609 | 53488 | 5249 | 109930 | 692 | 275490 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 20218 | 46304 | 39609 | 53488 | 5249 | 109930 | 692 | 275490 |
| Residential mortgage: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 3757 | 1659 | 180979 | 251167 | 1006 | 32384 |  | 470952 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  | 607 |  |  |  | 607 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  | 171 |  | 171 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 3757 | 1659 | 180979 | 251774 | 1006 | 32555 |  | 471730 |
| Consumer and other: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | 405 | 237 | 1338 | 43 |  | 2027 | 10574 | 14624 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  |  |  |  |  | 213 | 213 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 405 | 237 | 1338 | 43 |  | 2027 | 10787 | 14837 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total loans | $388564 | $374527 | $587493 | $704698 | $114422 | $883554 | $438862 | $3492120 |
| Risk Grades: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass | $386637 | $374381 | $581765 | $677114 | $109094 | $861925 | $434875 | $3425791 |
| &nbsp;&nbsp;&nbsp;&nbsp;Special Mention | 1927 |  | 5137 | 12715 | 443 | 4023 | 423 | 24668 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard |  | 146 |  | 10845 | 3907 | 16234 | 3351 | 34483 |
| &nbsp;&nbsp;&nbsp;&nbsp;Substandard-Nonaccrual |  |  | 591 | 4024 | 978 | 1372 | 213 | 7178 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Grand Total | $388564 | $374527 | $587493 | $704698 | $114422 | $883554 | $438862 | $3492120 |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following tables present the gross charge-offs by class of loans and year of origination for the periods indicated:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2025** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2025** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2025** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2025** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2025** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2025** | | |
| |<br>**6/30/2025** | **2024** | **2023** | **2022** | **2021** | **Prior**<br>**Periods** |<br>**Revolving**<br>**Loans** |<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)** |
| Commercial | $17 | $— | $— | $— | $— | $— | $— | $17 |
| Real estate: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Non-Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Land and construction |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Multifamily |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential mortgages |  |  |  |  |  |  |  |  |
| Consumer and other |  |  | 192 |  |  |  |  | 192 |
| Total | $17 | $— | $192 | $— | $— | $— | $— | $209 |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2024** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2024** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2024** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2024** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2024** | **Gross Charge-offs by Originated Period for the Three Months Ended June 30, 2024** | | |
| |<br>**6/30/2024** | **2023** | **2022** | **2021** | **2020** | **Prior**<br>**Periods** |<br>**Revolving**<br>**Loans** |<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)** |
| Commercial | $— | $416 | $— | $— | $— | $94 | $— | $510 |
| Real estate: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Non-Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Land and construction |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Multifamily |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential mortgages |  |  |  |  |  |  |  |  |
| Consumer and other |  |  |  |  |  |  |  |  |
| Total | $— | $416 | $— | $— | $— | $94 | $— | $510 |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | | |
| |<br>**6/30/2025** | **2024** | **2023** | **2022** | **2021** | **Prior**<br>**Periods** |<br>**Revolving**<br>**Loans** |<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)** |
| Commercial | $17 | $— | $145 | $555 | $— | $138 | $200 | $1055 |
| Real estate: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Non-Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Land and construction |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Multifamily |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential mortgages |  |  |  |  |  |  |  |  |
| Consumer and other |  |  | 192 |  |  |  |  | 192 |
| Total | $17 | $— | $337 | $555 | $— | $138 | $200 | $1247 |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | | |
| |<br>**6/30/2024** | **2023** | **2022** | **2021** | **2020** | **Prior**<br>**Periods** |<br>**Revolving**<br>**Loans** |<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)** |
| Commercial | $— | $416 | $— | $— | $— | $452 | $— | $868 |
| Real estate: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;CRE - Non-Owner Occupied |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Land and construction |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Multifamily |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential mortgages |  |  |  |  |  |  |  |  |
| Consumer and other |  |  |  |  |  |  |  |  |
| Total | $— | $416 | $— | $— | $— | $452 | $— | $868 |

---

The amortized cost basis of collateral-dependent loans at June 30, 2025 was $419,000, of which $141,000 were secured by business assets and $278,000 were unsecured. The amortized cost basis of collateral-dependent loans at December 31, 2024 was $701,000 and were secured by business assets.

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 three months ended June 30, 2025, there were no loan modifications. During the six months ended June 30, 2024 there was one commercial loan modifications with a weighted average term extension of 11 months.

The Company has not committed to lend any additional amounts to these borrowers. There were no payment defaults for loans modified for the three and six months ended June 30, 2025 and June 30, 2024.

**6) Goodwill and Other Intangible Assets**

***Goodwill***

At June 30, 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.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following table summarizes the carrying amount of goodwill by segment for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **June 30,**<br>**2025** | **December 31,**<br>**2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Banking | $154587 | $154587 |
| Factoring | 13044 | 13044 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $167631 | $167631 |

---

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, 2024 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, 2024 annual impairment test were noted that would indicate it was more likely than not a goodwill impairment exists.

***Other Intangible Assets***

The Company's intangible assets are summarized as follows for the periods indicated:

---

| | | | |
|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** |
| | **Gross**<br>**Carrying**<br>**Amount** |<br>**Accumulated**<br>**Amortization** |<br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Core deposit intangibles | $25023 | (19567) | $5456 |
| Below market leases | 110 | (34) | 76 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $25133 | $(19601) | $5532 |

---

---

| | | | |
|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Gross**<br>**Carrying**<br>**Amount** |<br>**Accumulated**<br>**Amortization** |<br>**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;&nbsp;Total | $27033 | $(20594) | $6439 |

---

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

As of June 30, 2025, the estimated amortization expense for future periods is as follows:

---

| | | | |
|:---|:---|:---|:---|
| **Year** |<br>**Core**<br>**Deposit**<br>**Intangible** | **Below/**<br>**(Above)**<br>**Market**<br>**Lease** |<br>**Total**<br>**Amortization**<br>**Expense** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| 2025 Remaining | $897 | $8 | $905 |
| 2026 | 1512 | 18 | 1530 |
| 2027 | 1438 | 18 | 1456 |
| 2028 | 999 | 18 | 1017 |
| 2029 | 610 | 14 | 624 |
|  | $5456 | $76 | $5532 |

---

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 June 30, 2025 and December 31, 2024.

**7) Income Taxes**

Some items of income and expense are recognized in one year for tax purposes, and another when applying generally accepted accounting principles, which leads to timing differences between the Company's actual current 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.

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.

The Company had net deferred tax assets of $26,179,000 and $27,817,000, at June 30, 2025 and December 31, 2024, respectively. After consideration of the matters in the preceding paragraph, the Company determined that it is more likely than not that the net deferred tax assets at June 30, 2025 and December 31, 2024 will be fully realized in future years.

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:

---

| | | |
|:---|:---|:---|
| | **June 30,**<br>**2025** | **December 31,**<br>**2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Low income housing investments | $5009 | $2201 |
| Future commitments | $475 | $475 |

---

The Company expects $4,000 of the future commitments to be paid in 2025, and $2,370,000 in 2026 through 2027.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

For tax purposes, the Company had low income housing tax credits of $78,000 and $140,000 for the three months ended June 30, 2025 and 2024, respectively, and low income housing investment expense of $96,000 and $149,000. For tax purposes, the Company had low income housing tax credit of $157,000 and $281,000 for the six months ended June 30, 2025 and 2024, respectively, and low income housing investment expense of $191,000 and $297,000, respectively. The Company recognized low income housing investment expense as a component of income tax expense.

&nbsp;&nbsp;&nbsp;&nbsp;**8) Benefit Plans**

***Supplemental Retirement Plan***

The Company has a supplemental retirement plan (the "Plan") covering some current and some former key employees and directors. While the Plan remains active for those participants, the Company has not approved any new participation in the Plan since 2011, other than the inclusion of the Chief Executive Officer as a result of the acquisition of Presidio Bank in 2019. The Plan is a nonqualified defined benefit plan. Benefits are unsecured as there are no Plan assets. The following table presents the amount of periodic cost recognized for the periods indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Components of net periodic benefit cost: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Service cost | $44 | $51 | $88 | $102 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest cost | 336 | 318 | 672 | 636 |
| &nbsp;&nbsp;&nbsp;&nbsp; Amortization of net actuarial loss | 12 | 26 | 24 | 52 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net periodic benefit cost | $392 | $395 | $784 | $790 |
| Amount recognized in other comprehensive income (loss) | $8 | $18 | $17 | $36 |

---

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.

***Split-Dollar Life Insurance Benefit Plan***

The Company maintains life insurance policies for some current and former directors and officers that are subject to split-dollar life insurance agreements. The following table sets forth the funded status of the split-dollar life insurance benefits for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **June 30, 2025** | **December 31, 2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Change in projected benefit obligation: |  |  |
| Projected benefit obligation at beginning of year | $6616 | $6951 |
| Interest cost | 182 | 344 |
| Actuarial loss |  | (679) |
| &nbsp;&nbsp;&nbsp;&nbsp;Projected benefit obligation at end of period | $6798 | $6616 |

---

---

| | | |
|:---|:---|:---|
| | **June 30,**<br>**2025** | **December 31,**<br>**2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Net actuarial loss | $1902 | $1728 |
| Prior transition obligation | 566 | 611 |
| &nbsp;&nbsp;&nbsp;&nbsp; Accumulated other comprehensive income (loss) | $2468 | $2339 |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Amortization of prior transition obligation |  |  |  |  |
| and actuarial losses | $(64) | $(52) | $(129) | $(104) |
| Interest cost | 91 | 86 | 182 | 172 |
| Net periodic benefit cost | $27 | $34 | $53 | $68 |
| Amount recognized in other comprehensive income (loss) | $(64) | $(52) | $(129) | $(104) |

---

**9) 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).

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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** |
| |<br><br><br>**Balance** |<br>**Quoted Prices in**<br>**Active Markets for**<br>**Identical Assets**<br>**(Level 1)** | **Significant**<br>**Other**<br>**Observable**<br>**Inputs**<br>**(Level 2)** |<br>**Significant**<br>**Unobservable**<br>**Inputs**<br>**(Level 3)** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Assets at June 30, 2025 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Available-for-sale securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $149865 | $— | $149865 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | 80566 | 80566 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations | 76604 |  | 76604 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; I/O strip receivables | 52 |  | 52 |  |
| Assets at December 31, 2024 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Available-for-sale securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | $186183 | $186183 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | 70091 |  | 70091 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; I/O strip receivables | 82 |  | 82 |  |

---

There were no transfers between Level 1 and Level 2 during the period for assets measured at fair value on a recurring basis.

***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. There were no material collateral dependent loans carried at fair value on a non-recurring basis at June 30, 2025 or December 31, 2024.

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 June 30, 2025 and December 31, 2024, there were no foreclosed assets on the balance sheet.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The carrying amounts and estimated fair values of the Company's financial instruments at June 30, 2025 are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | | **Significant** | | |
| |<br><br>**Carrying**<br>**Amounts** | **&nbsp;&nbsp;&nbsp;&nbsp;**<br><br> | **Quoted Prices in**<br>**Active Markets for**<br>**Identical Assets**<br>**(Level 1)** | **Other**<br>**Observable**<br>**Inputs**<br>**(Level 2)** | **Significant**<br>**Unobservable**<br>**Inputs**<br>**(Level 3)** |<br><br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Assets:** | | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | $721792 |  | $721792 | $— | $— | $721792 |
| &nbsp;&nbsp;&nbsp;&nbsp; Securities available-for-sale | 307035 |  | 80566 | 226469 |  | 307035 |
| &nbsp;&nbsp;&nbsp;&nbsp; Securities held-to-maturity | 561205 |  |  | 486476 |  | 486476 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans (including loans held-for-sale) | 3535489 | <sup>'(1)</sup> |  | 1156 | 3354339 | 3355495 |
| &nbsp;&nbsp;&nbsp;&nbsp; FHLB stock, FRB stock, and other |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; investments | 32563 |  |  |  |  | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp; Accrued interest receivable | 15032 |  | 684 | 2186 | 12162 | 15032 |
| &nbsp;&nbsp;&nbsp;&nbsp; I/O strips receivables | 52 |  |  | 52 |  | 52 |
| **Liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits | $540900 |  | $— | $542607 | $— | $542607 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other deposits | 4086435 |  |  | 4086435 |  | 4086435 |
| &nbsp;&nbsp;&nbsp;&nbsp; Subordinated debt | 39728 |  |  | 35828 |  | 35828 |
| &nbsp;&nbsp;&nbsp;&nbsp; Accrued interest payable | 5125 |  |  | 5125 |  | 5125 |

---

________________________________________________________

(1) Before allowance for credit losses on loans of $48,633.

________________________________________________________

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The carrying amounts and estimated fair values of the Company's financial instruments at December 31, 2024 are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | | **Significant** | | |
| |<br><br>**Carrying**<br>**Amounts** | **&nbsp;&nbsp;&nbsp;&nbsp;**<br><br> | **Quoted Prices in**<br>**Active Markets for**<br>**Identical Assets**<br>**(Level 1)** | **Other**<br>**Observable**<br>**Inputs**<br>**(Level 2)** | **Significant**<br>**Unobservable**<br>**Inputs**<br>**(Level 3)** |<br><br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Assets:** | | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | $968123 |  | $968123 | $— | $— | $968123 |
| &nbsp;&nbsp;&nbsp;&nbsp; Securities available-for-sale | 256274 |  | 186183 | 70091 |  | 256274 |
| &nbsp;&nbsp;&nbsp;&nbsp; Securities held-to-maturity | 590016 |  |  | 497012 |  | 497012 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans (including loans held-for-sale) | 3494312 | <sup>'(1)</sup> |  | 2375 | 3304196 | 3306571 |
| &nbsp;&nbsp;&nbsp;&nbsp; FHLB stock, FRB stock, and other |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;investments | 32556 |  |  |  |  | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp; Accrued interest receivable | 14940 |  | 506 | 2141 | 12293 | 14940 |
| &nbsp;&nbsp;&nbsp;&nbsp; I/O strips receivables | 82 |  |  | 82 |  | 82 |
| **Liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits | $564447 |  | $— | $566695 | $— | $566695 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other deposits | 4255584 |  |  | 4255584 |  | 4255584 |
| &nbsp;&nbsp;&nbsp;&nbsp; Subordinated debt | 39653 |  |  | 34853 |  | 34853 |
| &nbsp;&nbsp;&nbsp;&nbsp; Accrued interest payable | 6350 |  |  | 6350 |  | 6350 |

---

__________________________________________________________

(1) Before allowance for credit losses on loans of $48,953.

__________________________________________________________

**10) Equity Plan**

The Company maintained an Amended and Restated 2004 Equity Plan (the "2004 Plan") for directors, officers, and key employees. The 2004 Plan was terminated on May 23, 2013. 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 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, 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 employees generally vests ratably over three years. For the six months ended June 30, 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 570,617 shares available for the issuance of equity awards under the 2023 Plan as of June 30, 2025.

The executive officers that participate in the Company's Long Term Performance Incentive Equity Program receive 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 six months ended June 30, 2025, the Company granted 115,912 shares of PRSUs.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

Restricted stock is subject to time vesting. Restricted stock granted generally vests in one to three years. For the six months ended June 30, 2025, the Company granted 46,720 shares of restricted stock.

Stock option activity under the Equity Plans is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Total Stock Options** |<br><br>**Number**<br>**of Shares** |<br>**Weighted**<br>**Average**<br>**Exercise**<br>**Price** | **Weighted**<br>**Average**<br>**Remaining**<br>**Contractual**<br>**Life (Years)** |<br>**Aggregate**<br>**Intrinsic**<br>**Value** |
| Outstanding at January 1, 2025 | 2222496 | $10.73 |  |  |
| Exercised | (157892) | $6.44 |  |  |
| Forfeited or expired | (70210) | $9.46 |  |  |
| Outstanding at June 30, 2025 | 1994394 | $11.12 | 4.72 | $1109899 |
| Vested or expected to vest | 1874730 |  | 4.72 | $1043305 |
| Exercisable at June 30, 2025 | 1750300 |  | 4.32 | $709280 |

---

The table below provides information related to stock option activity under the Equity Plans for the periods indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| Intrinsic value of options exercised | $23572 | $28158 | $499573 | $296873 |
| Cash received from option exercise | $28621 | $58333 | $1014243 | $443552 |
| Tax (expense) benefit realized from option exercises | $1727 | $4456 | $1041 | $(17996) |
| Weighted average fair value of options granted | N/A | N/A | N/A | N/A |

---

As of June 30, 2025, there was $379,000 of total unrecognized compensation cost related to unvested stock options granted under the Equity Plans. That cost is expected to be recognized over a weighted-average period of approximately 1.49 years.

Restricted stock activity under the Equity Plans is as follows:

---

| | | |
|:---|:---|:---|
|<br><br>**Total Restricted Stock Award** |<br>**Number**<br>**of Shares** | **Weighted**<br>**Average Grant**<br>**Date Fair**<br>**Value** |
| Nonvested shares at January 1, 2025 | 88061 | $9.45 |
| Granted | 46720 | $9.98 |
| Vested | (70085) | $9.16 |
| Forfeited or expired | (9298) | $10.62 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonvested shares at June 30, 2025 | 55398 | $10.07 |

---

As of June 30, 2025, there was $338,000 of total unrecognized compensation cost related to unvested restricted stock awards granted under the Equity Plans. The cost is expected to be recognized over a weighted-average period of approximately 0.70 years.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

RSU activity under the Equity Plans is as follows:

---

| | | |
|:---|:---|:---|
|<br><br>**Total RSUs** |<br>**Number**<br>**of Shares** | **Weighted**<br>**Average Grant**<br>**Date Fair**<br>**Value** |
| Nonvested shares at January 1, 2025 | 357666 | $8.53 |
| Granted | 211696 | $10.02 |
| Dividend Equivalent Units | 27846 | $9.32 |
| Vested | (111343) | $7.66 |
| Forfeited or expired | (47663) | $7.90 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonvested shares at June 30, 2025 | 438202 | $9.01 |

---

As of June 30, 2025, there were $3,435,000 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 2.28 years.

PRSU activity under the Equity Plans is as follows:

---

| | | |
|:---|:---|:---|
|<br><br>**Total PRSUs** |<br>**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 | 23501 | $9.10 |
| Forfeited or expired | (60231) | $7.61 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonvested shares at June 30, 2025 | 308601 | $8.27 |

---

As of June 30, 2025, there were $2,283,000 of total unrecognized compensation cost related to unvested PRSUs granted under the Equity Plans. The cost is expected to be recognized over a weighted average period of 2.08 years.

**11) Borrowing Arrangements**

**&nbsp;&nbsp;&nbsp;&nbsp;*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, the Company 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:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 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 | $1233605 | $811704 | $— | $811704 |
| FRB discount window collateralized line of credit | 1585172 | 1245357 |  | 1245357 |
| Federal funds purchase arrangements | N/A | 90000 |  | 90000 |
| Holding company line of credit | N/A | 25000 |  | 25000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $2818777 | $2172061 | $— | $2172061 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| | **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 its liquidity position. There were no securities sold under agreements to repurchase at June 30, 2025 and December 31, 2024.

***Subordinated Debt***

&nbsp;&nbsp;&nbsp;&nbsp;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 $272,000, totaled $39,728,000 at June 30, 2025, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Board.

**12) Capital Requirements**

The Company and HBC 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 HBC's capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at June 30, 2025. There are no conditions or events since June 30, 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 June 30, 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 at the dates indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | | **Required For** | **Required For** | |
| | | | | **Capital** | **Capital** | |
| | | | | **Adequacy** | **Adequacy** | |
| | | | | **Purposes** | **Purposes** | |
| | **Actual** | **Actual** | | **Under Basel III** | **Under Basel III** | **Under Basel III** |
| | **Amount** | **Ratio** | **Ratio** | **Amount** | **Ratio** <sup>(1)</sup> | **Ratio** <sup>(1)</sup> |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | |
| As of June 30, 2025 |  |  |  |  |  |  |
| Total Capital | $613956 | 15.5 | % | $415530 | 10.5 | % |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Tier 1 Capital | $524826 | 13.3 | % | $336382 | 8.5 | % |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Common Equity Tier 1 Capital | $524826 | 13.3 | % | $277020 | 7.0 | % |
| (to risk-weighted assets) |  |  |  |  |  |  |
| Tier 1 Capital | $524826 | 9.9 | % | $211448 | 4.0 | % |
| (to average assets) |  |  |  |  |  |  |

---

__________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

__________________________________________________________

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | | **Required For** | **Required For** | |
| | | | | **Capital** | **Capital** | |
| | | | | **Adequacy** | **Adequacy** | |
| | | | | **Purposes** | **Purposes** | |
| | **Actual** | **Actual** | **Actual** | **Under Basel III** | **Under Basel III** | **Under Basel III** |
| | **Amount** | **Ratio** | **Ratio** | **Amount** | **Ratio** <sup>(1)</sup> | **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 | $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) |  |  |  |  |  |  |

---

__________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

__________________________________________________________

The Subordinated Debt, net of unamortized issuance costs, totaled $39,728,000 at June 30, 2025 and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Board.

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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 at the dates indicated:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | | | | | **Required For** | **Required For** | |
| | | | | | | | **Capital** | **Capital** | |
| | | | | **To Be Well-Capitalized** | **To Be Well-Capitalized** | | **Adequacy** | **Adequacy** | |
| | | | | **Under PCA Regulatory** | **Under PCA Regulatory** | | **Purposes** | **Purposes** | |
| | **Actual** | **Actual** | **Actual** | **Guidelines** | **Guidelines** | | **Under Basel III** | **Under Basel III** | |
| | **Amount** | **Ratio** | **Ratio** | **Amount** | **Ratio** | **Ratio** | **Amount** | **Ratio** <sup>(1)</sup> | **Ratio** <sup>(1)</sup> |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | |
| As of June 30, 2025 |  |  |  |  |  |  |  |  |  |
| Total Capital | $596649 | 15.1 | % | $395484 | 10.0 | % | $415258 | 10.5 | % |
| (to risk-weighted assets) |  |  |  |  |  |  |  |  |  |
| Tier 1 Capital | $547248 | 13.8 | % | $316387 | 8.0 | % | $336161 | 8.5 | % |
| (to risk-weighted assets) |  |  |  |  |  |  |  |  |  |
| Common Equity Tier 1 Capital | $547248 | 13.8 | % | $257064 | 6.5 | % | $276839 | 7.0 | % |
| (to risk-weighted assets) |  |  |  |  |  |  |  |  |  |
| Tier 1 Capital | $547248 | 10.4 | % | $264182 | 5.0 | % | $211345 | 4.0 | % |
| (to average assets) |  |  |  |  |  |  |  |  |  |

---

__________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

__________________________________________________________

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | | | | | **Required For** | **Required For** | |
| | | | | | | | **Capital** | **Capital** | |
| | | | | **To Be Well-Capitalized** | **To Be Well-Capitalized** | | **Adequacy** | **Adequacy** | |
| | | | | **Under PCA Regulatory** | **Under PCA Regulatory** | | **Purposes** | **Purposes** | |
| | **Actual** | **Actual** | **Actual** | **Guidelines** | **Guidelines** | | **Under Basel III** | **Under Basel III** | |
| | **Amount** | **Ratio** | **Ratio** | **Amount** | **Ratio** | **Ratio** | **Amount** | **Ratio** <sup>(1)</sup> | **Ratio** <sup>(1)</sup> |
| | **(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)** |
| 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) |  |  |  |  |  |  |  |  |  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_______________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup> Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

________________________________________________________________

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Under the 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 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 June 30, 2025, HBC would not be required to obtain regulatory approval, and the amount available for cash dividends is $72,670,000. HBC distributed to HCC dividends of $8,000,000 during the first and second quarter of 2025 for a total of $16,000,000.

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 **13) Commitments and Loss Contingencies**

***Loss Contingencies***

&nbsp;&nbsp;&nbsp;&nbsp;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 customer 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.

&nbsp;&nbsp;&nbsp;&nbsp;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 Company contends that the claims are without merit and intends to defend them vigorously. The settlement was reached without admission of liability by the Company, includes a full release of all claims related to the matter, and is subject to court approval. The settlement amount was accrued in the Company's financial statements as of June 30, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;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.

&nbsp;&nbsp;&nbsp;&nbsp;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.

***&nbsp;&nbsp;&nbsp;&nbsp;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 $1,082,141,000 at June 30, 2025, and $1,033,982,000 at December 31, 2024. Unused commitments represented 31% and 30% of outstanding gross loans at June 30, 2025 and December 31, 2024, respectively.

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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 at the dates indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 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 | $83509 | $984354 | $1067863 | $78818 | $939992 | $1018810 |
| Standby letters of credit | 4361 | 9917 | 14278 | 5136 | 10036 | 15172 |
|  | $87870 | $994271 | $1082141 | $83954 | $950028 | $1033982 |

---

For the six months ended June 30, 2025, there was an increase of $93,000 to the allowance for credit losses on the Company's off-balance sheet credit exposures. The increase in the allowance for credit losses for off-balance sheet credit exposures in the first six months of 2025 was driven by an increase in loan commitments and loss factors. The allowance for credit losses on the Company's off-balance sheet credit exposures was $753,000 at June 30, 2025 and $660,000 at December 31, 2024.

**14) 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 ASC 606. 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 of no more than six months to attempt a direct sale of the property. We generally recognize the sale, and any

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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 ASC 606, for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Noninterest Income In-scope of Topic 606: |  |  |
| Service charges and fees on deposit accounts | $929 | $891 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income in-scope of Topic 606 | 929 | 891 |
| Noninterest Income Out-of-scope of Topic 606 | 2048 | 1973 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $2977 | $2864 |

---

---

| | | |
|:---|:---|:---|
| | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Noninterest Income In-scope of Topic 606: |  |  |
| Service charges and fees on deposit accounts | $1821 | $1768 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income in-scope of Topic 606 | 1821 | 1768 |
| Noninterest Income Out-of-scope of Topic 606 | 3852 | 3733 |
| Total noninterest income | $5673 | $5501 |

---

**15) Noninterest Expense**

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Salaries and employee benefits | $16227 | $15794 | $32802 | $31303 |
| Legal settlement and other charges <sup>(1)</sup> | 9184 |  | 9184 |  |
| Occupancy and equipment | 2525 | 2689 | 5059 | 5132 |
| Professional fees | 1819 | 1072 | 3399 | 2399 |
| Insurance expense | 1732 | 1639 | 3467 | 3273 |
| Data processing | 1038 | 995 | 1962 | 1835 |
| Client services | 959 | 906 | 1837 | 1688 |
| Software subscriptions | 716 | 713 | 1463 | 1291 |
| Other | 4135 | 4380 | 8618 | 8803 |
| Total noninterest expense | $38335 | $28188 | $67791 | $55724 |

---

__________________________________________________________

<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 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. __________________________________________________________

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**16) 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 June 30, 2025, operating lease ROU assets, included in other assets, totaled $29,440,000, and lease liabilities, included in other liabilities, totaled $29,477,000.

The following table presents the quantitative information for the Company's leases for the periods indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Operating Lease Cost (Cost resulting from lease payments) | $1715 | $1723 | $3437 | $3398 |
| Operating Lease - Operating Cash Flows (Fixed Payments) | $1626 | $1716 | $3404 | $3401 |
| Operating Lease - ROU assets | $29440 | $32468 | $29440 | $32468 |
| Operating Lease - Liabilities | $29477 | $32468 | $29477 | $32468 |
| Weighted Average Lease Term - Operating Leases | 4.99 years | 5.54 years | 4.99 years | 5.54 years |
| Weighted Average Discount Rate - Operating Leases | 5.80% | 5.51% | 5.80% | 5.51% |

---

The following maturity analysis shows the undiscounted cash flows due on the Company's operating lease liabilities as of June 30, 2025:

---

| | |
|:---|:---|
| | **(Dollars in thousands)** |
| 2025 remaining | $3458 |
| 2026 | 6958 |
| 2027 | 6899 |
| 2028 | 6313 |
| 2029 | 6053 |
| Thereafter | 4908 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total undiscounted cash flows | 34589 |
| Discount on cash flows | (5112) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total lease liability | $29477 |

---

**17) 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.

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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.

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 36 days for the six months ended June 30, 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."* of the 2024 Form 10-K.

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.

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The following tables present the Company's operating segments for the periods indicated:

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| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** |
| | **Banking** <sup>(1)</sup> | **Factoring** | **Consolidated** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Interest income | $59678 | $3347 | $63025 |
| Intersegment interest allocations | 551 | (551) |  |
| Total interest expense | 18220 |  | 18220 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 42009 | 2796 | 44805 |
| Provision for credit losses on loans | 371 | 145 | 516 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision | 41638 | 2651 | 44289 |
| Noninterest income | 2567 | 410 | 2977 |
| Salaries and employee benefits | 14800 | 1427 | 16227 |
| Other segment items <sup>(2)</sup> | 21591 | 516 | 22108 |
| Intersegment expense allocations | 154 | (154) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 7967 | 964 | 8931 |
| Income tax expense | 2257 | 285 | 2542 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $5710 | $679 | $6389 |
| Total assets | $5375612 | $91625 | $5467237 |
| Loans, net of deferred fees | $3463327 | $71006 | $3534333 |
| Goodwill | $154587 | $13044 | $167631 |

---

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| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** |
| | **Banking** <sup>(1)</sup> | **Factoring** | **Consolidated** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Interest income | $55575 | $2914 | $58489 |
| Intersegment interest allocations | 453 | (453) |  |
| Total interest expense | 19622 |  | 19622 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 36406 | 2461 | 38867 |
| Provision for credit losses on loans | 85 | 386 | 471 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision | 36321 | 2075 | 38396 |
| Noninterest income | 2677 | 187 | 2864 |
| Salaries and employee benefits | 14815 | 979 | 15794 |
| Other segment items <sup>(2)</sup> | 11726 | 668 | 12394 |
| Intersegment expense allocations | 132 | (132) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 12589 | 483 | 13072 |
| Income tax expense | 3695 | 143 | 3838 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $8894 | $340 | $9234 |
| Total assets | $5179963 | $83061 | $5263024 |
| Loans, net of deferred fees | $3323107 | $56686 | $3379793 |
| Goodwill | $154587 | $13044 | $167631 |

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<sup>(1)</sup> &nbsp;&nbsp;&nbsp;&nbsp;Includes the holding company's results of operations.

<sup>(2)</sup> &nbsp;&nbsp;&nbsp;&nbsp;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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| | | | |
|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** |
| | **Banking** <sup>(1)</sup> | **Factoring** | **Consolidated** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Interest income | $118568 | $6289 | $124857 |
| Intersegment interest allocations | 1023 | (1023) |  |
| Total interest expense | 36692 |  | 36692 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 82899 | 5266 | 88165 |
| Provision for credit losses on loans | 699 | 91 | 790 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision | 82200 | 5175 | 87375 |
| Noninterest income | 5059 | 614 | 5673 |
| Salaries and employee benefits | 30252 | 2550 | 32802 |
| Other segment items <sup>(2)</sup> | 34106 | 883 | 34989 |
| Intersegment expense allocations | 292 | (292) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 23193 | 2064 | 25257 |
| Income tax expense | 6632 | 610 | 7242 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $16561 | $1454 | $18015 |
| Total assets | $5375612 | $91625 | $5467237 |
| Loans, net of deferred fees | $3463327 | $71006 | $3534333 |
| Goodwill | $154587 | $13044 | $167631 |

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| | | | |
|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** |
| | **Banking** <sup>(1)</sup> | **Factoring** | **Consolidated** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Interest income | $109698 | $5752 | $115450 |
| Intersegment interest allocations | 876 | (876) |  |
| Total interest expense | 37080 |  | 37080 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 73494 | 4876 | 78370 |
| Provision for credit losses on loans | 370 | 285 | 655 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision | 73124 | 4591 | 77715 |
| Noninterest income | 5226 | 275 | 5501 |
| Salaries and employee benefits | 28980 | 2323 | 31303 |
| Other segment items <sup>(2)</sup> | 23650 | 771 | 24421 |
| Intersegment expense allocations | 260 | (260) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | 25980 | 1512 | 27492 |
| Income tax expense | 7645 | 447 | 8092 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income | $18335 | $1065 | $19400 |
| Total assets | $5179963 | $83061 | $5263024 |
| Loans, net of deferred fees | $3323107 | $56686 | $3379793 |
| Goodwill | $154587 | $13044 | $167631 |

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<sup>(1)</sup> &nbsp;&nbsp;&nbsp;&nbsp;Includes the holding company's results of operations.

<sup>(2)</sup> &nbsp;&nbsp;&nbsp;&nbsp;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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**18) Subsequent Events**

On July 24, 2025, the Company announced that its Board of Directors declared a $0.13 per share quarterly cash dividend to holders of common stock. The dividend will be payable on August 21, 2025 to shareholders of record at the close of the business day on August 7, 2025.

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**ITEM 2—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 Quarterly Report on Form 10-Q (this "Report"). Unless we state otherwise or the context indicates otherwise, references to the "Company," "Heritage," "we," "us," and "our," in this Report refer to Heritage Commerce Corp and its subsidiaries.

***Reclassifications***

Beginning in the first quarter of 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.

***Non-GAAP Financial Measures***

Financial results are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") 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. These measures include "adjusted" operating metrics that have been adjusted to exclude notable expenses incurred in the second quarter 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 is presented in the tables under *"Reconciliation of Non-GAAP Financial Measures."*

**CRITICAL ACCOUNTING POLICIES**

Critical accounting policies are discussed in our Form 10-K for the year ended December 31, 2024 ("2024 Form 10-K") under the heading "*Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations.*" There have been no changes in the Company's application of critical accounting policies since December 31, 2024.

**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***

We executed well in the second quarter, generating a higher level of net income and earnings per share, excluding significant charges primarily related to a legal settlement. We had positive trends in loan growth, an expansion in our net interest margin, and stable asset quality, while deposits declined due to seasonal outflows that we typically see in the second quarter. Our loan growth was well diversified across our portfolios. We continue to successfully add new clients by offering a superior banking experience and generate loan growth while maintaining our disciplined underwriting and pricing criteria. We have a strong balance sheet with a high level of capital and liquidity and healthy asset quality, which

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provides a strong foundation to weather periods of economic volatility. We are well positioned to navigate the current environment and expect to see positive trends in loan growth, the net interest margin, and expense management.

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 California Private Attorneys General Act ("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.

For the three months ended June 30, 2025, net income was $6.4 million, or $0.10 per average diluted common share, compared to $9.2 million, or $0.15 per average diluted common share, for the three months ended June 30, 2024. The Company's annualized return on average assets was 0.47% and annualized return on average equity was 3.68% for the three months ended June 30, 2025, compared to 0.71% and 5.50%, respectively, for the three months ended June 30, 2024. Adjusted net income, excluding the impact of the legal settlement and other charges, was $13.0 million, or $0.21 per average diluted common share, for the second quarter of 2025. The adjusted annualized return on average assets was 0.95% and adjusted annualized return on average tangible common equity was 9.92% for the second quarter of 2025, compared to 0.71% and 7.43%, respectively, for the second quarter of 2024. Adjusted net income, adjusted earnings per share, adjusted annualized return on average tangible assets and adjusted annualized return on average tangible common equity are non-GAAP financial measures.

For the six months ended June 30, 2025, net income was $18.0 million, or $0.29 per average diluted common share, compared to $19.4 million, or $0.32 per average diluted common share, for the six months ended June 30, 2024. The Company's annualized return on average assets was 0.66% and annualized return on average equity was 5.23% for the six months ended June 30, 2025, compared to 0.75% and 5.79%, respectively, for the six months ended June 30, 2024. Adjusted net income, excluding the impact of the legal settlement and other charges, was $24.6 million, or $0.40 per average diluted common share, for the first six months of 2025. The adjusted annualized return on average assets was 0.90% and adjusted annualized return on average tangible common equity was 9.51% for the six months ended June 30, 2025, compared to 0.75% and 7.84%, respectively, for the six months ended June 30, 2024. Adjusted net income, adjusted earnings per share, adjusted annualized return on average tangible assets and adjusted annualized return on average tangible common equity are non-GAAP financial measures.

***Second Quarter 2025 Highlights***

***Results of Operations:***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Net interest income increased $5.9 million, or 15%, to $44.8 million for the second quarter of 2025, compared to $38.9 million for the second quarter of 2024.The fully tax equivalent ("FTE") net interest margin was 3.54%, an increase over 3.23% for the second quarter of 2024 primarily due to lower rates paid on customer deposits, an increase in the average yields and average balances of loans and securities, and an increase in the average balance of deposits resulting in a higher average balance of overnight funds, partially offset by a lower average yield on overnight funds. The FTE net interest margin is a non-GAAP financial measure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ For the first six months of 2025, net interest income increased $9.8 million, or 12% to $88.2 million, compared to $78.4 million for the first six months of 2024. The FTE net interest margin increased 20 basis points to 3.47% for the first six months of 2025, from 3.27% for the first six months of 2024, primarily due to an increase in the average balances of average interest earning assets, and an increase in the average yields on loans and securities, partially offset by higher rates paid on client deposits and a lower yield on overnight funds. The FTE net interest margin is a non-GAAP financial measure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ The average yield on the total loan portfolio increased to 5.64% for the second quarter of 2025, compared to 5.49% for the second quarter of 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ The average yield on the total loan portfolio increased to 5.58% for the six months of 2025, compared to 5.46% for the first six months of 2024

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ The average cost of total deposits decreased to 1.54% for the second quarter of 2025, compared to 1.75% for the second quarter of 2024. The average cost of funds decreased to 1.57% for the first six months of 2025, compared to 1.78% for the first six months of 2024.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ The average cost of total deposits decreased to 1.54% for the first six months of 2025 compared to 1.65% for the first six months of 2024. The average cost of funds decreased to 1.57% for the first six months of 2025, compared to 1.69% for the first six months of 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ We recorded a provision for credit losses on loans of $516,000 for the second quarter of 2025, compared to $471,000 for the second quarter of 2024. There was a provision for credit losses on loans of $790,000 for the six months ended June 30, 2025, compared to $655,000 for the six months ended June 30, 2024. The increase in the provision for credit losses on loans for the second quarter and first six months of 2025 was primarily due to loan growth.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Total noninterest income was increased to $3.0 million for the second quarter of 2025, compared to $2.9 million for the second quarter of 2024, primarily due to higher termination and facility fees, partially offset by a $219,000 gain on proceeds from company-owned life insurance in the second quarter of 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Total noninterest income increased 3% to $5.7 million for the first six months of 2025, compared to $5.5 million for the first six months of 2024, primarily due to higher termination and facility fees, partially offset by a $219,000 gain on proceeds from company-owned life insurance in the first six months of 2024.

&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 $6.1 million, or 15%, to $47.8 million in the second quarter of 2025 from $41.7 million for the second quarter of 2024. Total revenue increased $9.9 million, or 12%, to $93.8 million for the first six months of 2025, compared to $83.9 million for the first six months of 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Total noninterest expense for the second quarter of 2025 increased to $38.3 million, compared to $28.2 million for the second quarter of 2024. Total noninterest expense for the first six months of 2025 increased to $67.8 million, compared to $55.7 million for the first six months of 2024. During the second quarter of 2025, the Company recorded an accrual of $9.2 million for pre-tax charges related to the settlement of certain litigation matters and the planned closure of a Bank branch. Adjusted noninterest expense, excluding the $9.2 million accrual, for the second quarter of 2025 was $29.1 million and $58.6 million for the first six months of 2025. Adjusted noninterest expense is a non-GAAP financial measure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Income tax expense decreased to $2.5 million for the second quarter of 2025, compared to $3.8 million for the second quarter of 2024, primarily due to lower pre-tax income. The effective tax rate for the second quarter of 2025 was 28.5%, compared to 29.4% for the second quarter of 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Income tax expense for the six months ended June 30, 2025 was $7.2 million, compared to $8.1 million for the six months ended June 30, 2024. The effective tax rate for six months ended June 30, 2025 was 28.7%, compared to 29.4% for the six months ended June 30, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ For the second quarter and first six months of 2025, the Company's reported pre-provision net revenue ("PPNR"), which is defined as total revenue less noninterest expense, was $9.4 million and $26.0 million, respectively. The adjusted PPNR was $18.6 million for the second quarter of 2025, compared to $16.6 million for the first quarter of 2025, and $13.5 million for the second quarter of 2024. For the six months of 2025, the adjusted PPNR, was $35.2 million, compared to $28.1 million for the six months of 2024. PPNR is a non-GAAP financial measure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ For the second quarter and first six months of 2025, the Company's reported efficiency ratio, which is defined as noninterest expense divided by total revenue, was 80.23% and 72.24%, respectively. The adjusted efficiency ratio improved to 61.01% for the second quarter of 2025, compared to 67.55% for the second quarter of 2024, primarily due to higher total revenue, partially offset by higher noninterest expense. The adjusted efficiency ratio improved to 62.45% for the first six months of 2025 from 66.45% for the first six

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months of 2024, primarily due to higher total revenue, partially offset by higher noninterest expense. The efficiency ratio is a non-GAAP financial measure.

***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, increased 12% to $1.0 billion at June 30, 2025, from $921.3 million at June 30, 2024, and decreased 16% from $1.2 billion at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $16,000, totaled $561.2 million at June 30, 2025, compared to $621.2 million at June 30, 2024, and $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 $154.5 million, or 5%, to $3.5 billion at June 30, 2025, compared to $3.4 billion at June 30, 2024, and increased $42.4 million or 1% from December 31, 2024. Loans, excluding residential mortgages, increased $184.9 million, or 6%, to $3.1 billion at June 30, 2025, compared to $2.9 billion June 30, 2024, and increased $59.7 million or 2% from $3.0 billion at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ There were 10 borrowers included in nonperforming assets ("NPAs") totaling $6.2 million, or 0.11% of total assets, at June 30, 2025, compared to 10 borrowers totaling $6.0 million, or 0.11% of total assets, at June 30, 2024, and 9 borrowers totaling $7.3 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 $37.5 million, or 0.69% of total assets, at June 30, 2025, compared to $33.6 million, or 0.64% of total assets, at June 30, 2024, and $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 $145,000 for the second quarter of 2025, compared to $405,000 for the second quarter of 2024. Net charge-offs totaled $1.1 million for the first six months of 2025, compared to $659,000 for the first six months of 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ The allowance for credit losses on loans ("ACLL") at June 30, 2025 was $48.6 million, or 1.38% of total loans, representing 787% of total nonperforming loans. The ACLL at June 30, 2024 was $48.0 million, or 1.42% of total loans, representing 795% of total 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 $182.7 million, or 4%, to $4.6 billion at June 30, 2025, compared to $4.4 billion at June 30, 2024. Total deposits decreased $192.7 million, or 4%, from $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 $3.1 billion at June 30, 2025, compared to $3.0 billion at June 30, 2024, and $3.3 billion at 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 an agreement to repurchase, subordinated debt, and short-term borrowings) to total assets was 4.58% at June 30, 2025, compared to 4.63% at June 30, 2024, and 4.37% at December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ The loan to deposit ratio was 76.38% at June 30, 2025, compared to 76.04% at June 30, 2024, and 72.45% at December 31, 2024.

***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 June 30, 2025, as reflected in the following table:

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|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | | | **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 | 15.5 | % | 15.1 | % | 10.0 | % | 10.5 | % |
| Tier 1 Capital | 13.3 | % | 13.8 | % | 8.0 | % | 8.5 | % |
| Common Equity Tier 1 Capital | 13.3 | % | 13.8 | % | 6.5 | % | 7.0 | % |
| Tier 1 Leverage | 9.9 | % | 10.4 | % | 5.0 | % | 4.0 | % |
| Tangible common equity / tangible assets <sup>(2)</sup> | 9.9 | % | 10.3 | % | N/A |  | N/A |  |

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

<sup>(2)</sup> This is a non-GAAP financial measure that represents shareholders' equity minus goodwill and other intangible &nbsp;&nbsp;&nbsp;&nbsp;assets divided by total assets minus goodwill and other intangible assets.

__________________________________________________________

**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, loan servicing fees, customer service charges and fees, the increase in cash surrender value of life insurance, and gains on the sale of securities. 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.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following Distribution, Rate and Yield table presents for the periods indicated, 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.

**Distribution, Rate and Yield**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **For the Quarter Ended** | **For the Quarter Ended** | **For the Quarter Ended** | | **For the Quarter Ended** | **For the Quarter Ended** | **For the Quarter Ended** | |
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | | **June 30, 2024** | **June 30, 2024** | **June 30, 2024** | |
| |<br>**Average**<br>**Balance** | **Interest**<br>**Income/**<br>**Expense** | **Average**<br>**Yield/**<br>**Rate** | |<br>**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)** |
| **Assets:** | | | | | | | | |
| Loans, gross <sup>(1)(2)</sup> | $3506768 | $49278 | 5.64 | % | $3329861 | $45470 | 5.49 | % |
| Securities - taxable | 902642 | 6346 | 2.82 | % | 942532 | 5483 | 2.34 | % |
| Securities - exempt from Federal tax <sup>(3)</sup> | 30259 | 272 | 3.61 | % | 31803 | 285 | 3.60 | % |
| Other investments and interest-bearing deposits |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;in other financial institutions <sup>(4)</sup> | 647421 | 7186 | 4.45 | % | 536474 | 7311 | 5.48 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total interest earning assets <sup>(3) (4)</sup> | 5087089 | 63082 | 4.97 | % | 4840670 | 58549 | 4.86 | % |
| Cash and due from banks | 31044 |  |  |  | 33419 |  |  |  |
| Premises and equipment, net | 9958 |  |  |  | 10216 |  |  |  |
| Goodwill and other intangible assets | 173448 |  |  |  | 175498 |  |  |  |
| Other assets | 156881 |  |  |  | 153368 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total assets | $5458420 |  |  |  | $5213171 |  |  |  |
| **Liabilities and shareholders' equity:** |  |  |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Demand, noninterest-bearing | $1146494 |  |  |  | $1127145 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Demand, interest-bearing | 949867 | 1484 | 0.63 | % | 932100 | 1719 | 0.74 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Savings and money market | 1313054 | 8205 | 2.51 | % | 1104589 | 7867 | 2.86 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits - under $100 | 11456 | 49 | 1.72 | % | 10980 | 46 | 1.68 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits - $100 and over | 231644 | 1995 | 3.45 | % | 228248 | 2245 | 3.96 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; ICS/CDARS <sup>(5)</sup> - interest-bearing demand, money market |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and time deposits | 965492 | 5949 | 2.47 | % | 991483 | 7207 | 2.92 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing deposits | 3471513 | 17682 | 2.04 | % | 3267400 | 19084 | 2.35 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deposits | 4618007 | 17682 | 1.54 | % | 4394545 | 19084 | 1.75 |  |
| Short-term borrowings | 19 |  | 0.00 | % | 19 |  | 0.00 | % |
| Subordinated debt, net of issuance costs | 39705 | 538 | 5.43 | % | 39553 | 538 | 5.47 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities | 3511237 | 18220 | 2.08 | % | 3306972 | 19622 | 2.39 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities and demand, |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; noninterest-bearing / cost of funds | 4657731 | 18220 | 1.57 | % | 4434117 | 19622 | 1.78 | % |
| Other liabilities | 103673 |  |  |  | 103946 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | 4761404 |  |  |  | 4538063 |  |  |  |
| Shareholders' equity | 697016 |  |  |  | 675108 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and shareholders' equity | $5458420 |  |  |  | $5213171 |  |  |  |
| Net interest income / margin <sup>(3)</sup> |  | 44862 | 3.54 | % |  | 38927 | 3.23 | % |
| Less tax equivalent adjustment <sup>(3)</sup> |  | (57) |  |  |  | (60) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net interest income |  | $44805 | 3.53 | % |  | $38867 | 3.23 | % |

---

_______________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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 $253,000 for the second quarter of 2025, compared to $117,000 for the second quarter of 2024. Prepayment fees totaled $473,000 for the second quarter of 2025, compared to $54,000 for the second quarter of 2024.

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(3)</sup> Reflects the non-GAAP FTE adjustment for Federal tax-exempt income based on a 21% tax rate.

&nbsp;&nbsp;&nbsp;&nbsp;<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").

_______________________________________________

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **For the Six Months Ended** | **For the Six Months Ended** | **For the Six Months Ended** | | **For the Six Months Ended** | **For the Six Months Ended** | **For the Six Months Ended** | |
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | | **June 30, 2024** | **June 30, 2024** | **June 30, 2024** | |
| |<br>**Average**<br>**Balance** | **Interest**<br>**Income/**<br>**Expense** | **Average**<br>**Yield/**<br>**Rate** | |<br>**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)** |
| **Assets:** | | | | | | | | |
| Loans, gross <sup>(1)(2)</sup> | $3469245 | $95980 | 5.58 | % | $3314925 | $90070 | 5.46 | % |
| Securities - taxable | 889440 | 11905 | 2.70 | % | 992508 | 11666 | 2.36 | % |
| Securities - exempt from Federal tax <sup>(3)</sup> | 30369 | 547 | 3.63 | % | 31871 | 571 | 3.60 | % |
| Other investments and interest-bearing deposits |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;in other financial institutions <sup>(4)</sup> | 748370 | 16540 | 4.46 | % | 486283 | 13263 | 5.48 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total interest earning assets <sup>(3) (4)</sup> | 5137424 | 124972 | 4.91 | % | 4825587 | 115570 | 4.82 | % |
| Cash and due from banks | 31454 |  |  |  | 33316 |  |  |  |
| Premises and equipment, net | 9982 |  |  |  | 10115 |  |  |  |
| Goodwill and other intangible assets | 173671 |  |  |  | 175769 |  |  |  |
| Other assets | 156347 |  |  |  | 151116 |  |  |  |
| Total assets | $5508878 |  |  |  | $5195903 |  |  |  |
| **Liabilities and shareholders' equity:** |  |  |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Demand, noninterest-bearing | $1156854 |  |  |  | $1152111 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Demand, interest-bearing | 947137 | 2922 | 0.62 | % | 926074 | 3273 | 0.71 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Savings and money market | 1318018 | 16278 | 2.49 | % | 1086085 | 14516 | 2.69 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits - under $100 | 11420 | 96 | 1.70 | % | 10962 | 88 | 1.61 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Time deposits - $100 and over | 233025 | 4124 | 3.57 | % | 224730 | 4309 | 3.86 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; ICS/CDARS <sup>(5)</sup> - interest-bearing demand, money |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; market and time deposits | 1001033 | 12197 | 2.46 | % | 977385 | 13818 | 2.84 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing deposits | 3510633 | 35617 | 2.05 | % | 3225236 | 36004 | 2.24 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deposits | 4667487 | 35617 | 1.54 | % | 4377347 | 36004 | 1.65 | % |
| Short-term borrowings | 19 |  | 0.00 | % | 17 |  | 0.00 | % |
| Subordinated debt, net of issuance costs | 39686 | 1075 | 5.46 | % | 39535 | 1076 | 5.47 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities | 3550338 | 36692 | 2.08 | % | 3264788 | 37080 | 2.28 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities and demand, |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;noninterest-bearing / cost of funds | 4707192 | 36692 | 1.57 | % | 4416899 | 37080 | 1.69 | % |
| Other liabilities | 106800 |  |  |  | 105304 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | 4813992 |  |  |  | 4522203 |  |  |  |
| Shareholders' equity | 694886 |  |  |  | 673700 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and shareholders' equity | $5508878 |  |  |  | $5195903 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income / margin <sup>(3)</sup> |  | 88280 | 3.47 | % |  | 78490 | 3.27 | % |
| Less tax equivalent adjustment <sup>(3)</sup> |  | (115) |  |  |  | (120) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net interest income |  | $88165 | 3.46 | % |  | $78370 | 3.27 | % |

---

______________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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 $467,000 for the first six months of 2025, compared to $277,000 for the first six months of 2024. Prepayment fees totaled $697,000 for the first six months of 2025, compared to $78,000 for the first six months of 2024.

&nbsp;&nbsp;&nbsp;&nbsp;<sup>(3)</sup> Reflects the non-GAAP FTE adjustment for Federal tax-exempt income based on a 21% tax rate.

&nbsp;&nbsp;&nbsp;&nbsp;<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 Contents**](#if171463e722442a2832fd793e396cb59_113)</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.

---

| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** |
| | **2025 vs. 2024** | **2025 vs. 2024** | **2025 vs. 2024** |
| | **Increase (Decrease)** | **Increase (Decrease)** | **Increase (Decrease)** |
| | **Due to Change in:** | **Due to Change in:** | **Due to Change in:** |
| | **Average**<br>**Volume** | **Average**<br>**Rate** | **Net**<br>**Change** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Income from the interest earning assets:** | | | |
| Loans, gross | $2456 | $1352 | $3808 |
| Securities — taxable | (281) | 1144 | 863 |
| Securities — exempt from Federal tax <sup>(1)</sup> | (14) | 1 | (13) |
| Other investments, interest-bearing deposits |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; in other financial institutions and Federal funds sold | 1234 | (1359) | (125) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income on interest-earning assets | 3395 | 1138 | 4533 |
| **Expense from the interest-bearing liabilities:** |  |  |  |
| Demand, interest-bearing | 20 | (255) | (235) |
| Savings and money market | 1293 | (955) | 338 |
| Time deposits — under $100 | 2 | 1 | 3 |
| Time deposits — $100 and over | 32 | (282) | (250) |
| ICS/CDARS — interest-bearing demand, money market |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; and time deposits | (157) | (1101) | (1258) |
| Subordinated debt, net of issuance costs | 3 | (3) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total interest expense on interest-bearing liabilities | 1193 | (2595) | (1402) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income  | $2202 | $3733 | 5935 |
| Less tax equivalent adjustment |  |  | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income |  |  | $5938 |

---

__________________________________________________________

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

__________________________________________________________

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | | | |
|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** |
| | **2025 vs. 2024** | **2025 vs. 2024** | **2025 vs. 2024** |
| | **Increase (Decrease)** | **Increase (Decrease)** | **Increase (Decrease)** |
| | **Due to Change in:** | **Due to Change in:** | **Due to Change in:** |
| | **Average**<br>**Volume** | **Average**<br>**Rate** | **Net**<br>**Change** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| **Income from the interest earning assets:** | | | |
| Loans, gross | $4254 | $1656 | $5910 |
| Securities — taxable | (1384) | 1623 | 239 |
| Securities — exempt from Federal tax <sup>(1)</sup> | (27) | 3 | (24) |
| Other investments, interest-bearing deposits |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; in other financial institutions and Federal funds sold | 5785 | (2508) | 3277 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income on interest-earning assets | 8628 | 774 | 9402 |
| **Expense from the interest-bearing liabilities:** |  |  |  |
| Demand, interest-bearing | 75 | (426) | (351) |
| Savings and money market | 2867 | (1105) | 1762 |
| Time deposits — under $100 | 4 | 4 | 8 |
| Time deposits — $100 and over | 146 | (331) | (185) |
| CDARS — interest-bearing demand, money market |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; and time deposits | 274 | (1895) | (1621) |
| Subordinated debt, net of issuance costs | 5 | (6) | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total interest expense on interest-bearing liabilities | 3371 | (3759) | (388) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income | $5257 | $4533 | 9790 |
| Less tax equivalent adjustment |  |  | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income |  |  | $9795 |

---

Net interest income increased $5.9 million, or 15%, to $44.8 million for the second quarter of 2025, compared to $39.8 million for the second quarter of 2024. The non-GAAP FTE net interest margin was 3.54% for the second quarter of 2025, an increase over 3.23% for the second quarter of 2024. The increase was primarily due to lower rates paid on customer deposits, an increase in the average yields and average balances of loans and securities, and an increase in the average balance of deposits resulting in a higher average balance of overnight funds, partially offset by a lower average yield on overnight funds.

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

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **For the Quarter Ended** | **For the Quarter Ended** | **For the Quarter Ended** | | **For the Quarter Ended** | **For the Quarter Ended** | **For the Quarter Ended** | |
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | | **June 30, 2024** | **June 30, 2024** | **June 30, 2024** | **June 30, 2024** |
| |<br>**Average**<br>**Balance** | **Interest**<br>**Income/**<br>**Expense** | **Average**<br>**Yield/**<br>**Rate** | |<br>**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)** |
| Loans, core bank | $3020534 | $41738 | 5.54 | % | $2830260 | $38496 | 5.47 | % |
| Prepayment fees |  | 473 | 0.06 | % |  | 54 | 0.01 | % |
| Bay View Funding factored receivables | 67756 | 3347 | 19.81 | % | 54777 | 2914 | 21.40 | % |
| Purchased residential mortgages | 420280 | 3548 | 3.39 | % | 447687 | 3739 | 3.36 | % |
| Loan fair value mark / accretion | (1802) | 172 | 0.02 | % | (2863) | 267 | 0.04 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total loans (includes |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; held-for-sale) | $3506768 | $49278 | 5.64 | % | $3329861 | $45470 | 5.49 | % |

---

The average yield on the total loan portfolio increased to 5.64% for the second quarter of 2025, compared to 5.49% for the second quarter of 2024, primarily due to an increase in the average yield on loans in the core bank and an increase in prepayment fees.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **For the Six Months Ended** | **For the Six Months Ended** | **For the Six Months Ended** | | **For the Six Months Ended** | **For the Six Months Ended** | **For the Six Months Ended** | |
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | | **June 30, 2024** | **June 30, 2024** | **June 30, 2024** | **June 30, 2024** |
| |<br>**Average**<br>**Balance** | **Interest**<br>**Income/**<br>**Expense** | **Average**<br>**Yield/**<br>**Rate** | |<br>**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)** |
| Loans, core bank | $2983011 | $81496 | 5.51 | % | $2812805 | $76217 | 5.45 | % |
| Prepayment fees |  | 697 | 0.05 | % |  | 78 | 0.01 | % |
| Bay View Funding factored receivables | 64024 | 6289 | 19.81 | % | 54144 | 5752 | 21.36 | % |
| Purchased residential mortgages | 424101 | 7145 | 3.40 | % | 450964 | 7527 | 3.36 | % |
| Loan fair value mark / accretion | (1891) | 353 | 0.02 | % | (2988) | 496 | 0.04 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total loans (includes |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; held-for-sale) | $3469245 | $95980 | 5.58 | % | $3314925 | $90070 | 5.46 | % |

---

The average yield on the total loan portfolio increased to 5.58% for the first six months of 2025, compared to 5.46% for 2024, primarily due to an increase in the average yield on loans in the core bank and an increase in prepayment fees.

The average cost of total deposits decreased to 1.54% for the second quarter of 2025, compared to 1.75% for the second quarter of 2024. The average cost of total deposits decreased to 1.54% for the first six months of 2025, compared to 1.65% for the first six months of 2024. The average cost of funds decreased to 1.57% for the second quarter of 2025, compared to 1.78% for the second quarter of 2024. The average cost of funds decreased to 1.57% for the first six months of 2025, compared to 1.69% for the first six months of 2024.

***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 unemployment rate projections.

There was a provision for credit losses on loans of $516,000 for the second quarter of 2025, compared to a provision for credit losses on loans of $471,000 for the second quarter of 2024. There was a provision for credit losses on loans of $790,000 for the six months ended June 30, 2025, compared to $655,000 for the six months ended June 30, 2024. The increase in the provision for credit losses on loans for the second quarter and first six months of 2025, was primarily due to loan growth. 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 the Company based on the factors discussed under *"Credit Quality and Allowance for Credit Losses on Loans."* 

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

***Noninterest Income***

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Increase** | **Increase** | |
| | **Three Months Ended** | **Three Months Ended** | **(decrease)** | **(decrease)** | |
| | **June 30,** | **June 30,** | **2025 versus 2024** | **2025 versus 2024** | |
| | **2025** | **2024** | **Amount** | **Percent** | |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| &nbsp;&nbsp;&nbsp;&nbsp; Service charges and fees on deposit accounts | $929 | $891 | $38 | 4 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; FHLB and FRB stock dividends | 584 | 588 | (4) | (1) | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Increase in cash surrender value of life insurance | 548 | 521 | 27 | 5 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Termination fees | 227 | 100 | 127 | 127 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on sales of SBA loans | 87 | 76 | 11 | 14 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Servicing income | 61 | 90 | (29) | (32) | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on proceeds from company-owned life insurance |  | 219 | (219) | (100) | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Other | 541 | 379 | 162 | 43 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $2977 | $2864 | $75 | 4 | % |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Increase** | **Increase** | |
| | **Six Months Ended** | **Six Months Ended** | **(decrease)** | **(decrease)** | |
| | **June 30,** | **June 30,** | **2025 versus 2024** | **2025 versus 2024** | **2025 versus 2024** |
| | **2025** | **2024** | **Amount** | **Percent** |  |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | |
| &nbsp;&nbsp;&nbsp;&nbsp; Service charges and fees on deposit accounts | $1821 | $1768 | $53 | $3 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; FHLB and FRB stock dividends | 1174 | 1178 | (4) | $— | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Increase in cash surrender value of life insurance | 1086 | 1039 | 47 | $5 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Termination fees | 314 | 113 | 201 | $178 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on sales of SBA loans | 185 | 254 | (69) | $(27) | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Servicing income | 143 | 180 | (37) | $(21) | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Gain on proceeds from company-owned life insurance |  | 219 | (219) | $(100) | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Other | 950 | 750 | 200 | $27 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $5673 | $5501 | $172 | $3 | % |

---

Total noninterest income increased to $3.0 million for the second quarter of 2025, compared to $2.9 million for the second quarter of 2024, primarily due to higher termination and facility fees, partially offset by a $219,000 gain on proceeds from company-owned life insurance in the second quarter of 2024. For the six months ended June 30, 2025, total noninterest income increased 3% to $5.7 million , compared to $5.5 million for the six months ended June 30, 2024, primarily due to higher termination and facility fees, partially offset by a $219,000 gain on proceeds from company-owned life insurance in the first six months of 2024.

A portion of the Company's noninterest income is associated with its Small Business Administration ("SBA") lending activity, as gain on the sales of loans sold in the secondary market and servicing income from loans sold with servicing rights retained. For the second quarter of 2025, SBA loan sales resulted in a $87,000 gain, compared to a $76,000 gain on sales of SBA loans for the second quarter of 2024. For the six months ended June 30, 2025, SBA loan sales resulted in a $185,000 gain, compared to a $254,000 gain for the six months ended June 30, 2024.

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.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

***Noninterest Expense***

***&nbsp;&nbsp;&nbsp;&nbsp;***The following table sets forth the various components of the Company's noninterest expense:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Increase** | **Increase** | |
| | **Three Months Ended** | **Three Months Ended** | **(Decrease)** | **(Decrease)** | |
| | **June 30,** | **June 30,** | **2025 versus 2024** | **2025 versus 2024** | |
| | **2025** | **2024** | **Amount** | **Percent** | |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | |
| Salaries and employee benefits | $16227 | $15794 | $433 | 3 | % |
| Legal settlement and other charges | 9184 |  | 9184 | N/A |  |
| Occupancy and equipment | 2525 | 2689 | (164) | (6) | % |
| Professional fees | 1819 | 1072 | 747 | 70 | % |
| Insurance expense | 1732 | 1639 | 93 | 6 | % |
| Data processing | 1038 | 995 | 43 | 4 | % |
| Client services | 959 | 906 | 53 | 6 | % |
| Software subscriptions | 716 | 713 | 3 |  | % |
| Other | 4135 | 4380 | (245) | (6) | % |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | $38335 | $28188 | $10147 | 36 | % |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Increase** | **Increase** | |
| | **Six Months Ended** | **Six Months Ended** | **(Decrease)** | **(Decrease)** | |
| | **June 30,** | **June 30,** | **2025 versus 2024** | **2025 versus 2024** | |
| | **2025** | **2024** | **Amount** | **Percent** |<br><br>&nbsp;&nbsp;&nbsp;&nbsp; |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Salaries and employee benefits | $32802 | $31303 | $1499 | 5 | % |
| Legal settlement and other charges | 9184 |  | 9184 | N/A |  |
| Occupancy and equipment | 5059 | 5132 | (73) | -1 | % |
| Professional fees | 3399 | 2399 | 1000 | 42 | % |
| Insurance expense | 3467 | 3273 | 194 | 6 | % |
| Data processing | 1962 | 1835 | 127 | 7 | % |
| Client services | 1837 | 1688 | 149 | 9 | % |
| Software subscriptions | 1463 | 1291 | 172 | 13 | % |
| Other | 8618 | 8803 | (185) | -2 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | $67791 | $55724 | $12067 | 22 | % |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | |
| | **2025** | **Percent**<br> **of Total** |<br>&nbsp;&nbsp;&nbsp;&nbsp; | **2024** | **Percent**<br> **of Total** | |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | |
| Salaries and employee benefits | $16227 | 42 | % | $15794 | 56 | % |
| Legal settlement and other charges | 9184 | 24 | % |  |  | % |
| Occupancy and equipment | 2525 | 7 | % | 2689 | 10 | % |
| Professional fees | 1819 | 5 | % | 1072 | 4 | % |
| Insurance expense | 1732 | 4 | % | 1639 | 6 | % |
| Data processing | 1038 | 3 | % | 995 | 3 | % |
| Client services | 959 | 2 | % | 906 | 3 | % |
| Software subscriptions | 716 | 2 | % | 713 | 2 | % |
| Other | 4135 | 11 | % | 4380 | 16 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | $38335 | 100 | % | $28188 | 100 | % |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **Percent**<br> **of Total** |  | **2024** | **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 | $32802 | 48 | % | $31303 | 56 | % |
| Legal settlement and other charges | 9184 | 14 | % |  |  | % |
| Occupancy and equipment | 5059 | 7 | % | 5132 | 9 | % |
| Professional fees | 3399 | 5 | % | 2399 | 4 | % |
| Insurance expense | 3467 | 5 | % | 3273 | 6 | % |
| Data processing | 1962 | 3 | % | 1835 | 3 | % |
| Client services | 1837 | 3 | % | 1688 | 3 | % |
| Software subscriptions | 1463 | 2 | % | 1291 | 3 | % |
| Other | 8618 | 13 | % | 8803 | 16 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | $67791 | 100 | % | $55724 | 100 | % |

---

Total noninterest expense for the second quarter of 2025 increased to $38.3 million, compared to $28.2 million for the second quarter of 2024. During the second quarter of 2025, the Company recorded an accrual of $9.2 million, primarily due to pre-tax charges related to the settlement of certain litigation matters and charges related to the planned closure of a Bank branch. Adjusted noninterest expense, excluding the $9.2 million accrual, was $29.1 million, compared to $28.2 million for the second quarter of 2024. Total noninterest expense for the first six months increased to $67.8 million compared to $55.7 million for the first six months of 2024. Adjusted noninterest expense for the first six months of 2025, excluding the $9.2 million accrual, was $58.6 million, compared to $55.7 million for the first six months of 2024.

Full time equivalent employees were 350 at June 30, 2025, compared to 353 at June 30, 2024, and 355 and at December 31, 2024.

***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.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following table shows the Company's effective income tax rates for the periods indicated:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Six Months Ended** | **For the Six Months Ended** | **For the Six Months Ended** |
| | **June 30,** | **June 30,** | **June 30,** | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
| | **2025** |  | **2024** |  | **2025** |  | **2024** |
| Effective income tax rate | 28.5 | % | 29.4 | % | 28.7 | %  | 29.4 |

---

&nbsp;&nbsp;&nbsp;&nbsp;The Company's Federal and state income tax expense for the second quarter of 2025 decreased to $2.5 million, compared to $3.8 million for the second quarter of 2024, primarily due to lower pre-tax income. The Company's Federal and state income tax expense for the first six months of 2025 was $7.2 million, compared to $8.1 million for the first six months of 2024.

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 (see Note 7 *"Income Taxes"*).

**FINANCIAL CONDITION**

At June 30, 2025, total assets increased 4% to $5.5 billion, compared to $5.3 billion at June 30, 2024, primarily due to an increase in deposits resulting in an increase in overnight funds, and an increase in loans. Total assets decreased 3% from $5.6 billion at December 31, 2024, primarily due to a decrease in deposits.

Securities available-for-sale, at fair value, were $307.0 million at June 30, 2025, an increase of 12% from $273.0 million at June 30, 2024, and increased 20% from $256.3 million at December 31, 2024. Securities held-to-maturity, at amortized cost, net of allowance for credit losses, were $561.2 million at June 30, 2025, a decrease of 10% from $621.2 million at June 30, 2024, and a decrease of 5% from $590.0 million at December 31, 2024.

Loans HFI, net of deferred costs and fees, increased $154.5 million, or 5%, to $3.5 billion at June 30, 2025, compared to $3.4 billion at June 30, 2024, and remained relatively flat from December 31, 2024. Loans HFI, excluding residential mortgages, increased $184.9 million, or 6%, to $3.1 billion at June 30, 2025, compared to $2.9 billion at June 30, 2024, and increased $59.7 million, or 2% from $3.0 billion at December 31, 2024.

Total deposits increased $182.7 million, or 4%, to $4.6 billion at June 30, 2025, compared to $4.4 billion at June 30, 2024, and decreased $192.7 million, or 4%, from $4.8 billion at December 31, 2024.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

***Securities Portfolio***

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

---

| | | | |
|:---|:---|:---|:---|
| | **June 30,** | **June 30,** | **December 31,** |
| | **2025** | **2024** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale (at fair value): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $149865 | $54361 | $70091 |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | 80566 | 218682 | 186183 |
| &nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations | 76604 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $307035 | $273043 | $256274 |
| Securities held-to-maturity (at amortized cost): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $531489 | $589386 | $559548 |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipals — exempt from Federal tax <sup>(1)</sup> | 29732 | 31804 | 30480 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total <sup>(1)</sup> | $561221 | $621190 | $590028 |

---

__________________________________________________________

<sup>(1)</sup> Gross of the allowance for credit losses of $16 at June 30, 2025 and $12 December 31, 2024, and June 30, 2024.

__________________________________________________________

*&nbsp;&nbsp;&nbsp;&nbsp;*During the first six months of 2025, the Company purchased $87.2 million of agency mortgage-backed securities, $79.8 million of collateralized mortgage obligations, and $44.8 million of U.S. Treasury securities, for total purchases of $211.8 million in the available-for-sale portfolio. Securities purchased had a book yield of 4.82% and an average life of 4.55 years.

&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the weighted average life and weighted average yields of securities at June 30, 2025:

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **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 | $193 | 2.15 | % | $57019 | 3.32 | % | $92653 | 4.78 | % | $— |  | % | $149865 | 4.22 |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | 25394 | 3.48 | % | 55172 | 4.31 | % |  |  | % |  |  | % | 80566 | 4.05 |
| &nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations |  |  | % | 32369 | 5.12 | % | 44235 | 5.49 | % |  |  | % | 76604 | 5.33 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $25587 | 3.44 | % | $144560 | 4.10 | % | $136888 | 5.01 | % | $— |  | % | $307035 | 4.45 |
| Securities held-to-maturity (at amortized cost): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $1218 | 2.02 | % | $91775 | 2.02 | % | $362364 | 1.84 | % | $76132 | 2.60 | % | $531489 | 1.98 |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipals — exempt from Federal tax <sup>(1) (2)</sup> | 4325 | 4.16 | % | 8689 | 3.33 | % | 16718 | 3.57 | % |  | $— | % | 29732 | 3.59 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total (2) | $5543 | 3.69 | % | $100464 | 2.13 | % | $379082 | 1.92 | % | $76132 | 2.60 | % | $561221 | 2.07 |

---

__________________________________________________________

<sup>(1)</sup> Reflects non-GAAP tax equivalent adjustment for Federal tax exempt income based on a 21% tax rate.

<sup>(2)</sup> Gross of the allowance for credit losses of $16 at June 30, 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

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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.

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:

---

| | | | |
|:---|:---|:---|:---|
| | **June 30,** | **June 30,** | **December 31,** |
| | **2025** | **2024** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Securities available-for-sale pre-tax unrealized gain (loss): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $(1846) | $(4815) | $(4148) |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Treasury | 533 | (3578) | (912) |
| &nbsp;&nbsp;&nbsp;&nbsp; Collateralized mortgage obligations | 865 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $(448) | $(8393) | $(5060) |
| Securities held-to-maturity pre-tax unrecognized (loss): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Agency mortgage-backed securities | $(73774) | $(92058) | $(91585) |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipals — exempt from Federal tax | (971) | (1694) | (1431) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $(74745) | $(93752) | $(93016) |
| Allowance for credit losses on municipal securities | $(16) | $(12) | $(12) |

---

The net pre-tax unrealized loss on the securities available-for-sale was $448,000, or $396,000 net of taxes, which equaled less than 1% of total shareholders' equity at June 30, 2025. The pre-tax unrecognized loss on securities held-to-maturity was $74.7 million, or $52.7 million net of taxes, which equaled 7.6% of total shareholders' equity at June 30, 2025. The unrealized and unrecognized losses in both the available-for-sale and held-to-maturity portfolios were due to higher interest rates at June 30, 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 value is expected to recover as the securities approach their maturity date and/or interest rates decline.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following are the projected cash flows from paydowns and maturities in the investment securities portfolio for the periods indicated based on the current interest rate environment:

---

| | | | |
|:---|:---|:---|:---|
| |<br>**U.S.**<br>**Treasury**<br>**(Par Value)** | **Agency**<br>**Mortgage-**<br>**backed and**<br>**Municipal**<br>**Securities** |<br><br>**Total** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Third quarter of 2025 | $25500 | $29136 | $54636 |
| Fourth quarter of 2025 |  | 25445 | 25445 |
| First quarter of 2026 |  | 24334 | 24334 |
| Second quarter of 2026 |  | 23850 | 23850 |
| Third quarter of 2026 |  | 24318 | 24318 |
| Fourth quarter of 2026 | 15000 | 22948 | 37948 |
| First quarter of 2027 | 15000 | 21926 | 36926 |
| Second quarter of 2027 |  | 21618 | 21618 |
| Total | $55500 | $193575 | $249075 |

---

***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. Loans HFI, net of deferred costs and fees, represented 65% of total assets at June 30, 2025, compared to 64% at June 30, 2024, and 62% at December 31, 2024. The loan to deposit ratio was 76.38% at June 30, 2025, compared to 76.04 at June 30, 2024, and 72.45% at December 31, 2024.

***Loan Distribution***

The Loan Distribution table that follows sets forth the Company's gross loans, excluding loans held-for-sale, outstanding and the percentage distribution in each category at the dates indicated:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | | **June 30, 2024** | **June 30, 2024** | | **December 31, 2024** | **December 31, 2024** | |
| | **Balance** | **% to Total** |  | **Balance** | **% to Total** |  | **Balance** | **% to 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)** |
| Commercial | $492231 | 14 | % | $477929 | 14 | % | $531350 | 15 | % |
| Real estate: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - owner occupied | 627810 | 18 | % | 594504 | 18 | % | 601636 | 17 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - non-owner occupied | 1390419 | 39 | % | 1283323 | 38 | % | 1341266 | 38 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 149460 | 4 | % | 125374 | 4 | % | 127848 | 4 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 120763 | 4 | % | 126562 | 4 | % | 127963 | 4 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Multifamily | 285016 | 8 | % | 268968 | 8 | % | 275490 | 8 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 454419 | 13 | % | 484809 | 14 | % | 471730 | 14 | % |
| Consumer and other | 14661 | < 1 | % | 18758 | < 1 | % | 14837 | <1 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Loans | 3534779 | 100 | % | 3380227 | 100 | % | 3492120 | 100 | % |
| Deferred loan fees, net | (446) |  |  | (434) |  |  | (183) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans, net of deferred fees | 3534333 | 100 | % | 3379793 | 100 | % | 3491937 | 100 | % |
| Allowance for credit losses on loans | (48633) |  |  | (47954) |  |  | (48953) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans, net | $3485700 |  |  | $3331839 |  |  | $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 concentrations by industry or group of industries in its loan portfolio, however, 85% of its gross loans were secured by real property at both June 30, 2025, and December 31, 2024, compared to 86% at June 30, 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.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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 the three months ended June 30, 2025 and 2024, loans were sold resulting in a gain on sales of SBA loans of $87,000 and $76,000, respectively. During the six months ended June 30, 2025 and 2024, loans were sold resulting in a gain on sales of SBA loans of $185,000 and $254,000, respectively.

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 36 days for the first six months of 2025, compared to 35 days for the first six months of 2024.

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:

---

| | | |
|:---|:---|:---|
| | **June 30,**<br>**2025** | **June 30,**<br>**2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Total factored receivables at period-end | $71005 | $56686 |
| Average factored receivables: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;For the three months ended | 67756 | 54778 |
| &nbsp;&nbsp;&nbsp;&nbsp;For the six months ended | $64024 | $54144 |
| Total full time equivalent employees at period-end | 31 | 29 |

---

The commercial loan portfolio increased $14.3 million, or 3%, to $492.2 million at June 30, 2025, from $477.9 million at June 30, 2024, and decreased $39.1 million, or 7%, from $531.4 at December 31, 2024. Commercial and industrial line usage was 32% at June 30, 2025, compared to 31% at June 30, 2024 and 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 $33.3 million, or 6%, to $627.8 million at June 30, 2025, from $594.5 million at June 30, 2024, and increased $26.2 million, or 4%, from $601.6 million at December 31, 2024. CRE non-

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

owner occupied loans increased $107.1 million, or 8%, to $1.4 billion at June 30, 2025, compared to $1.3 billion at June 30, 2024, and increased $49.2 million, or 4%, from $1.3 billion at December 31, 2024. At both June 30, 2025 and June 30, 2024, 32% of the CRE loan portfolio was secured by owner-occupied real estate, compared to 31% at December 31, 2024.

During the second quarter of 2025, there were 54 new owner occupied and non-owner occupied CRE loans originated totaling $90 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 1.80 times. The average loan size for all CRE loans at June 30, 2025 was $1.7 million, and the average loan size for office CRE loans was also $1.7 million. The Company has personal guarantees on 92% 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 $432 million, including 33 loans totaling approximately $73 million, in San Jose, 18 loans totaling approximately $26 million in San Francisco, and eight loans totaling approximately $15 million, in Oakland, at June 30, 2025. Non-owner occupied CRE with office exposure totaled $333 million at June 30, 2025. At June 30, 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 17 loans totaling $19 million, with a weighted average LTV and DSCR ratio of 42% and 2.57 times, respectively, at June 30, 2025.

The following table presents the weighted average LTV and DSCR by collateral type for CRE loans at June 30, 2025:

---

| | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Owner Occupied** | **CRE - Owner Occupied** | **CRE - Owner Occupied** | **CRE - Owner Occupied** | **Total CRE** | **Total CRE** | **Total CRE** | **Total CRE** |
|<br>**Collateral Type** | **Outstanding** | **Outstanding** | **LTV** | **LTV** | **DSCR** | **Outstanding** | **Outstanding** | **LTV** | **LTV** | **Outstanding** | **Outstanding** | **LTV** | **LTV** |
| Retail | 26 | % | 37.5 | % | 2.04 | 15 | % | 46.0 | % | 23 | % | 38.8 | % |
| Industrial | 18 | % | 39.1 | % | 2.57 | 35 | % | 41.7 | % | 23 | % | 40.1 | % |
| Mixed-Use, Special |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purpose and Other | 19 | % | 42.2 | % | 1.92 | 33 | % | 40.9 | % | 23 | % | 41.7 | % |
| Office | 20 | % | 41.6 | % | 2.10 | 17 | % | 44.0 | % | 19 | % | 42.2 | % |
| Multifamily | 17 | % | 42.6 | % | 1.89 | 0 | % | 00.0 | % | 12 | % | 42.6 | % |
| Hotel/Motel | < 1 | % | 16.0 | % | 0.64 | 0 | % | 00.0 | % | < 1 | % | 16.0 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Total | 100 | % | 40.2 | % | 2.09 | 100 | % | 42.4 | % | 100 | % | 40.8 | % |

---

The following table presents the weighted average LTV and DSCR by county for CRE loans at June 30, 2025:

---

| | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Non-owner Occupied** | **CRE - Owner Occupied** | **CRE - Owner Occupied** | **CRE - Owner Occupied** | **CRE - Owner Occupied** | **Total CRE** | **Total CRE** | **Total CRE** | **Total CRE** |
| **County** | **Outstanding** | **Outstanding** | **LTV** | **LTV** | **DSCR** | **Outstanding** | **Outstanding** | **LTV** | **LTV** | **Outstanding** | **Outstanding** | **LTV** | **LTV** |
| Alameda | 25 | % | 44.0 | % | 1.78 | 18 | % | 43.5 | % | 23 | % | 43.6 | % |
| Contra Costa | 7 | % | 40.2 | % | 1.83 | 8 | % | 45.4 | % | 7 | % | 41.9 | % |
| Marin | 6 | % | 45.6 | % | 1.99 | 3 | % | 48.9 | % | 5 | % | 46.1 | % |
| Monterey | 2 | % | 38.4 | % | 2.06 | 2 | % | 37.9 | % | 2 | % | 38.3 | % |
| Napa | <1 | % | 28.7 | % | 2.68 | 1 | % | 50.8 | % | 1 | % | 36.4 | % |
| Out of Area | 8 | % | 43.0 | % | 1.82 | 8 | % | 48.2 | % | 8 | % | 44.4 | % |
| San Benito | 1 | % | 37.8 | % | 2.07 | 3 | % | 39.3 | % | 2 | % | 38.4 | % |
| San Francisco | 9 | % | 37.2 | % | 2.23 | 4 | % | 38.7 | % | 8 | % | 37.4 | % |
| San Mateo | 12 | % | 40.1 | % | 2.31 | 14 | % | 40.0 | % | 12 | % | 40.0 | % |
| Santa Clara | 25 | % | 37.7 | % | 2.35 | 35 | % | 41.3 | % | 27 | % | 39.0 | % |
| Santa Cruz | 2 | % | 32.6 | % | 1.87 | 1 | % | 48.9 | % | 2 | % | 35.4 | % |
| Solano | 1 | % | 34.3 | % | 2.69 | 1 | % | 36.4 | % | 1 | % | 34.8 | % |
| Sonoma | 2 | % | 38.2 | % | 2.52 | 2 | % | 42.2 | % | 2 | % | 39.0 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 100 | % | 40.2 | % | 2.09 | 100 | % | 42.4 | % | 100 | % | 40.8 | % |

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The Company's land and construction loans are primarily to finance the development and 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 $24.1 million, or 19%, to $149.5 million at June 30, 2025, compared to $125.4 million at June 30, 2024, and increased $21.6 million, or 17%, 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 $5.8 million, or 5%, to $120.8 million at June 30, 2025, compared to $126.6 million at June 30, 2024, and decreased $7.2 million, or 6%, from $128.0 million at December 31, 2024.

Multifamily loans increased $16.0 million, or 6%, to $285.0 million at June 30, 2025, compared to $269.0 million at June 30, 2024, and increased $9.5 million, or 3%, from $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 mortgage loans decreased $30.4 million, or 6%, to $454.4 million at June 30, 2025, compared to $484.8 million at June 30, 2024, and decreased $17.3 million, or 4% from $471.7 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 decreased $4.1 million, or 22%, to $14.7 million at June 30, 2025, compared to $18.8 million at June 30, 2024 and remained relatively from $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 $114.9 million and $191.4 million at June 30, 2025, respectively.

***Loan Maturities***

The following table presents the maturity distribution of the Company's loans (excluding loans held-for-sale) as of June 30, 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. As of June 30, 2025, approximately 24% of the Company's loan portfolio consisted of floating interest rate loans.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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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 | $338264 | $112088 | $41879 | $492231 |
| Real estate: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - owner occupied | 42811 | 240821 | 344178 | 627810 |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - non-owner occupied | 76143 | 556495 | 757781 | 1390419 |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 129203 | 17820 | 2437 | 149460 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 5000 | 22132 | 93631 | 120763 |
| &nbsp;&nbsp;&nbsp;&nbsp; Multifamily | 20380 | 146023 | 118613 | 285016 |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 6918 | 17374 | 430127 | 454419 |
| Consumer and other | 5752 | 8045 | 864 | 14661 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans | $624471 | $1120798 | $1789510 | $3534779 |
| Loans with variable interest rates | $442586 | 194063 | 224380 | $861029 |
| Loans with fixed interest rates | 181885 | 926735 | 1565130 | 2673750 |
| &nbsp;&nbsp;&nbsp;&nbsp; Loans | $624471 | $1120798 | $1789510 | $3534779 |

---

***Loan Servicing***

As of June 30, 2025 and 2024, SBA loans that the Company serviced for others totaled $55.5 million and $49.6 million, respectively. Activity for loan servicing rights was as follows for the periods indicated:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $315 | $392 | $344 | $415 |
| Additions | 22 | 20 | 39 | 61 |
| Amortization | (46) | (49) | (92) | (113) |
| &nbsp;&nbsp;&nbsp;&nbsp; End of period balance | $291 | $363 | $291 | $363 |

---

Loan servicing rights are included in accrued interest receivable and other assets on the unaudited consolidated balance sheets and reported net of amortization. There was no valuation allowance as of June 30, 2025 and 2024, as the fair value of the assets was greater than the carrying value.

Activity for the I/O strip receivable was as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Beginning of period balance | $62 | $110 | $82 | $117 |
| Unrealized holding loss | (10) | (9) | (30) | (16) |
| &nbsp;&nbsp;&nbsp;&nbsp; End of period balance | $52 | $101 | $52 | $101 |

---

***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

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 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 | $6977 | $2385 | $443 | $9805 | $482426 | $492231 |
| Real estate: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - Owner Occupied |  |  | 31 | 31 | 627779 | 627810 |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - Non-Owner Occupied |  |  |  |  | 1390419 | 1390419 |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction |  |  | 4198 | 4198 | 145262 | 149460 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity |  |  | 728 | 728 | 120035 | 120763 |
| &nbsp;&nbsp;&nbsp;&nbsp; Multifamily |  |  |  |  | 285016 | 285016 |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages |  |  | 607 | 607 | 453812 | 454419 |
| Consumer and other |  |  |  |  | 14661 | 14661 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $6977 | $2385 | $6007 | $15369 | $3519410 | $3534779 |

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</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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| | | |
|:---|:---|:---|
| | **June 30,**<br>**2025** | **December 31,**<br>**2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Past due nonaccrual loans | $6025 | $7068 |
| Current nonaccrual loans | 30 | 110 |
| Total nonaccrual loans | $6055 | $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 June 30, 2025, June 30, 2024, or December 31, 2024. There were no Shared National Credits or material purchased participations included in NPAs or total loans at June 30, 2025, June 30, 2024, or December 31, 2024.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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

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| | | | | |
|:---|:---|:---|:---|:---|
| | **June 30,** | **June 30,** | **December 31,** | **December 31,** |
| | **2025** | **2024** | **2024** | **2024** |
| Nonaccrual loans — held-for-investment | $6055 | $5782 | $7178 |  |
| Loans 90 days past due and still accruing | 123 | 248 | 489 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total nonperforming loans | 6178 | 6030 | 7667 |  |
| Foreclosed assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total nonperforming assets | $6178 | $6030 | $7667 |  |
| Nonperforming assets as a percentage of loans |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; plus foreclosed assets | 0.17 | 0.18 | 0.22 | % |
| Nonperforming assets as a percentage of total assets | 0.11 | 0.11 | 0.14 | % |

---

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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| | | | | |
|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** |
| |<br>**Nonaccrual**<br>**with no Special**<br>**Allowance for**<br>**Credit**<br>**Losses** |<br>**Nonaccrual**<br>**with Special**<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 | $72 | $419 | $123 | $614 |
| 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 | 4198 |  |  | 4198 |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 728 |  |  | 728 |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 607 |  |  | 607 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $5636 | $419 | $123 | $6178 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Nonaccrual**<br>**with no Special**<br>**Allowance for**<br>**Credit**<br>**Losses** | **Nonaccrual**<br>**with Special**<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; 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 |

---

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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.

The amortized cost basis of collateral-dependent loans at June 30, 2025 was $419,000, of which $278,000 were secured by real estate and $141,000 were secured by business assets. The amortized cost basis of collateral-dependent loans at December 31, 2024 was $701,000 and were secured by business assets.

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 were $37.5 million, or 0.69% of total assets, at June 30, 2025, compared to $33.6 million, or 0.64% of total assets, at June 30, 2024, and $41.7 million, or 0.74% of total assets at December 31, 2024.

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.

&nbsp;&nbsp;&nbsp;&nbsp;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*" of the 2024 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

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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.

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

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 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 | $5045 | $6184 | $26046 | $1674 | $832 | $4319 | $3863 | $299 | $48262 |
| Charge-offs | (17) |  |  |  |  |  |  | (192) | (209) |
| Recoveries | 43 | 3 |  |  | 18 |  |  |  | 64 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net (charge-offs) recoveries | 26 | 3 |  |  | 18 |  |  | (192) | (145) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | 628 | 7 | (633) | 764 | (49) | 148 | (404) | 55 | 516 |
| End of period balance | $5699 | $6194 | $25413 | $2438 | $801 | $4467 | $3459 | $162 | $48633 |
| Percent of ACLL to Total ACLL |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;at end of period | 12% | 13% | 52% | 5% | 2% | 9% | 7% | < 1% | 100% |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 2024** | **Three Months Ended June 30, 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 | $5029 | $5141 | $26409 | $1882 | $753 | $4309 | $4199 | $166 | $47888 |
| Charge-offs | (510) |  |  |  |  |  |  |  | (510) |
| Recoveries | 64 | 6 |  |  | 35 |  |  |  | 105 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net (charge-offs) recoveries | (446) | 6 |  |  | 35 |  |  |  | (405) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | 427 | 197 | 438 | (359) | 26 | (40) | (239) | 21 | 471 |
| End of period balance | $5010 | $5344 | $26847 | $1523 | $814 | $4269 | $3960 | $187 | $47954 |
| Percent of ACLL to Total ACLL |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;at end of period | 10% | 11% | 56% | 3% | 2% | 9% | 8% | < 1% | 100% |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 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 | (1055) |  |  |  |  |  |  | (192) | (1247) |
| Recoveries | 85 | 7 |  |  | 45 |  |  |  | 137 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net (charge-offs) recoveries | (970) | 7 |  |  | 45 |  |  | (192) | (1110) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | 609 | 962 | (1366) | 1038 | (42) | (268) | (159) | 16 | 790 |
| End of period balance | $5699 | $6194 | $25413 | $2438 | $801 | $4467 | $3459 | $162 | $48633 |
| Percent of ACLL to Total ACLL |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;at end of period | 12% | 13% | 52% | 5% | 2% | 9% | 7% | < 1% | 100% |

---

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 2024** | **Six Months Ended June 30, 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 | (868) |  |  |  |  |  |  |  | (868) |
| Recoveries | 146 | 10 |  |  | 53 |  |  |  | 209 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net (charge-offs) recoveries | (722) | 10 |  |  | 53 |  |  |  | (659) |
| Provision for (recapture of) |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;credit losses on loans | (121) | 213 | 1524 | (829) | 117 | (784) | 535 |  | 655 |
| End of period balance | $5010 | $5344 | $26847 | $1523 | $814 | $4269 | $3960 | $187 | $47954 |
| Percent of ACLL to Total ACLL |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;at end of period | 10% | 11% | 56% | 3% | 2% | 9% | 8% | < 1% | 100% |

---

The decrease in the allowance for credit losses on loans of $320,000 for the six months ended June 30, 2025, compared to December 31, 2024, was primarily attributed to a increase of $297,000 in the reserve for pooled loans, and a decrease of $617,000 in specific reserves for individually evaluated loans.

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.

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **June 30,** | **June 30,** | **June 30,** | **June 30,** | **June 30,** | | | | |
| | **2025** | **2025** | | **2024** | **2024** | | **December 31, 2024** | **December 31, 2024** | |
| |<br><br><br>**Allowance** | **Percent**<br>**of Loans**<br>**in each**<br>**category**<br>**to total**<br>**loans** | |<br><br><br>**Allowance** | **Percent**<br>**of Loans**<br>**in each**<br>**category**<br>**to total**<br>**loans** | |<br><br><br>**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)** | |
| Commercial | $5699 | 14 | % | $5010 | 14 | % | $6060 | 15 | % |
| Real estate: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - owner occupied | 6195 | 18 | % | 5344 | 18 | % | 5225 | 17 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; CRE - non-owner occupied | 25413 | 39 | % | 26847 | 38 | % | 26779 | 38 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Land and construction | 2438 | 4 | % | 1523 | 4 | % | 1400 | 4 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Home equity | 801 | 4 | % | 814 | 4 | % | 798 | 4 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Multifamily | 4467 | 8 | % | 4269 | 8 | % | 4735 | 8 | % |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential mortgages | 3459 | 13 | % | 3960 | 14 | % | 3618 | 14 | % |
| Consumer and other | 161 | < 1 | % | 187 | < 1 | % | 338 | <1 | % |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $48633 | 100 | % | $47954 | 100 | % | $48953 | 100 | % |

---

The ACLL totaled $48.6 million, or 1.38% of total loans at June 30, 2025, compared to $48.0 million, or 1.42% of total loans at June 30, 2024, and $49.0 million, or 1.40% of total loans at December 31, 2024. The ACLL was 787% of nonperforming loans at June 30, 2025, compared to 795% of nonperforming loans at June 30, 2024, and 638% of nonperforming loans at December 31, 2024. The Company had net charge-offs of $145,000, or 0.02% of average loans, for the second quarter of 2025, compared to net charge-offs of $405,000, or 0.05% of average loans, for the second quarter of 2024. Net charge-offs totaled $1.1 million, or 0.07% of average loans, for the first six months of 2025, compared to $659,000, or 0.04% of average loans, for the first six months of 2024.

The following table shows the drivers of change in ACLL for the first and second quarters of 2025:

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | |
|:---|:---|
| | **(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 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; quarter of 2025 including changes in economic forecasts | (392) |
| &nbsp;&nbsp;&nbsp;&nbsp;&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 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; quarter of 2025 including changes in economic forecasts | (345) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ACLL at June 30, 2025 | $48633 |

---

***Leases***

***&nbsp;&nbsp;&nbsp;&nbsp;***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 included $29.4 and total liabilities included $29.5 million at June 30, 2025 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. At December 31, 2024, $30.6 million was included in both other assets and other liabilities as a result of recognizing right-of-use assets and lease liabilities, related to non-cancelable operating lease agreements for office space. See Note 16 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.

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

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | | **June 30, 2024** | **June 30, 2024** | | **December 31, 2024** | **December 31, 2024** |
| | **Balance** | **% to Total** | | **Balance** | **% to Total** | | **Balance** | **% to 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)** |
| Demand, noninterest-bearing | $1151242 | 25 | % | $1187320 | 27 | % | $1214192 | 25 |
| Demand, interest-bearing | 955504 | 21 | % | 928246 | 21 | % | 936587 | 19 |
| Savings and money market | 1320142 | 28 | % | 1126520 | 25 | % | 1325923 | 28 |
| Time deposits — under $250 | 35356 | 1 | % | 39046 | 1 | % | 38988 | 1 |
| Time deposits — $250 and over | 210818 | 4 | % | 203886 | 4 | % | 206755 | 4 |
| ICS/CDARS — interest-bearing demand, |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;money market and time deposits | 954272 | 21 | % | 959592 | 22 | % | 1097586 | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deposits | $4627334 | 100 | % | $4444610 | $100 | % | $4820031 | 100 |

---

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 June 30, 2025, June 30, 2024, and December 31, 2024.

Total deposits increased $182.7 million, or 4%, to $4.6 billion at June 30, 2025, from $4.4 billion at June 30, 2024. Total deposits decreased $192.7 million, or 4%, from $4.8 billion at December 31, 2024.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The Company had 25,447 deposits accounts at June 30, 2025, with an average balance of $182,000, compared to 25,033 deposit accounts at June 30, 2024, with an average balance of $178,000. At December 31, 2024, the Company had 25,427 deposit accounts, with an average balance of $190,000.

Deposits from the Bank's top 100 client relationships, representing 23% of total number of accounts, totaled $2.1 billion, representing 46% of total deposits, with an average account size of $368,000 at June 30, 2025. At June 30, 2024, deposits from the Bank's top 100 client relationships, representing 21% of the total number of accounts, totaled $2.1 billion, representing 47% of total deposits, with an average account size of $388,000. 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 at December 31, 2024.

The Bank's uninsured deposits were approximately $2.1 billion, or 46% of the Company's total deposits, at June 30, 2025, compared to $2.0 billion, or 45% of the Company's total deposits, at June 30, 2024, and $2.2 billion, or 45% of total deposits at December 31, 2024.

At June 30, 2025, the $954.3 million of ICS/CDARS deposits were comprised of $405.0 million of interest-bearing demand deposits, $254.6 million of money market accounts and $294.7 million of time deposits. At June 30, 2024, the $959.6 million ICS/CDARS deposits comprised $435.7 million of interest-bearing demand deposits, $228.8 million of money market accounts and $249.3 million of time deposits. At December 31, 2024, the $1.00 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 as of June 30, 2025:

---

| | | | |
|:---|:---|:---|:---|
| | **Balance** | **% of Total** | |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | |
| Three months or less | $27878 | 18 | % |
| Over three months through six months | 40923 | 26 | % |
| Over six months through twelve months | 56047 | 36 | % |
| Over twelve months | 30504 | 20 | % |
| Total | $155352 | 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 help ensure its ability to fund deposit withdrawals.

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

***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:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** |
| | **June 30,** | **June 30,** | **June 30,** | | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
| | **2025** |  | **2024** |  | **2025** |  | **2024** | |
| Return on average assets | 0.47 | % | 0.71 | % | 0.66 | % | 0.75 | % |
| Return on average tangible assets<sup>(1)</sup> | 0.48 | % | 0.74 | % | 0.68 | % | 0.78 | % |
| Return on average equity | 3.68 | % | 5.50 | % | 5.23 | % | 5.79 | % |
| Return on average tangible common equity<sup>(1)</sup> | 4.89 | % | 7.43 | % | 6.97 | % | 7.84 | % |
| Average equity to average assets ratio | 12.77 | % | 12.95 | % | 12.61 | % | 12.97 | % |
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |  | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** |
|  | **June 30,** | **June 30,** | **June 30,** |  | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
| Adjusted: | **2025** |  | **2024** |  | **2025** |  | **2024** |  |
| Return on average assets<sup>(1)</sup> | 0.95 | % | 0.71 | % | 0.90 | % | 0.75 | % |
| Return on average tangible common equity<sup>(1)</sup> | 9.92 | % | 7.43 | % | 9.51 | % | 7.84 | % |

---

____________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup>This is a non-GAAP financial measure.

______________________________

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

***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, on a 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 76.38% at June 30, 2025, compared to 76.04% at June 30, 2024, and 72.45% at December 31, 2024.

The Company's total liquidity and borrowing capacity at June 30, 2025 was $3.1 billion, all of which remained available. The available liquidity and borrowing capacity included $2.2 billion in Federal funds purchase arrangements and lines of credit, $662.5 million of excess funds at the FRB, and $281.6 million of unpledged investment securities, at fair value, at June 30, 2025. The available liquidity and borrowing capacity was 67% of the Company's total deposits and approximately 147% of the Bank's estimated uninsured deposits, at June 30, 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. In additions, The Company has a line of credit with a correspondent bank. 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:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 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 | $1233605 | $811704 | $— | $811704 |
| FRB discount window collateralized line of credit | 1585172 | 1245357 |  | 1245357 |
| Federal funds purchase arrangements |  | 90000 |  | 90000 |
| Holding company line of credit |  | 25000 |  | 25000 |
|  | $2818777 | $2172061 | $— | $2172061 |

---

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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| | | | | |
|:---|:---|:---|:---|:---|
| | **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 June 30, 2025 and December 31, 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.

The Company is authorized to repurchase up to $15 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 in July 2024. 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 the second quarter of 2025, the Company repurchased 207,989 shares of its common stock with a weighted average price of $9.19 for a total of $1.9 million. The remaining capacity under this share repurchase program was $13.1 million at June 30, 2025. In July 2025, the Company's Board of Directors extended the program for one year, expiring on July 31, 2026.

&nbsp;&nbsp;&nbsp;&nbsp;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 $272,000, totaled $39.7 million at June 30, 2025, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank.

&nbsp;&nbsp;&nbsp;&nbsp;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:

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **June 30,**<br>**2025** |<br>**&nbsp;&nbsp;&nbsp;&nbsp;** | **June 30,**<br>**2024** | | **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 | $524826 |  | $516127 |  | $524204 |
| Additional Tier 1 capital |  |  |  |  |  |
| Tier 1 Capital | 524826 |  | 516127 |  | 524204 |
| Tier 2 Capital | 89130 |  | 85388 |  | 86439 |
| Total Capital | $613956 |  | $601515 |  | $610643 |
| Risk-weighted assets | $3957432 |  | $3849234 |  | $3917931 |
| Average assets for capital purposes | $5286196 |  | $5045412 |  | $5436274 |
| **Capital ratios:** |  |  |  |  |  |
| Total Capital | 15.5 | % | 15.6 | % | 15.6 |
| Tier 1 Capital | 13.3 | % | 13.4 | % | 13.4 |
| Common equity Tier 1 Capital | 13.3 | % | 13.4 | % | 13.4 |
| Tier 1 Leverage<sup>(1)</sup> | 9.9 | % | 10.2 | % | 9.6 |

---

__________________________________________________________

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

__________________________________________________________

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:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **June 30,**<br>**2025** |<br>**&nbsp;&nbsp;&nbsp;&nbsp;** | **June 30,**<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 | $547248 |  | $534916 |  | $543872 |
| Additional Tier 1 capital |  |  |  |  |  |
| Tier 1 Capital | 547248 |  | 534916 |  | 543872 |
| Tier 2 Capital | 49401 |  | 45811 |  | 46786 |
| Total Capital | $596649 |  | $580727 |  | $590658 |
| Risk-weighted assets | $3954837 |  | $3846732 |  | $3914648 |
| Average assets for capital purposes | $5283630 |  | $5042909 |  | $5432806 |
| **Capital ratios:** |  |  |  |  |  |
| Total Capital | 15.1 | % | 15.1 | % | 15.1 |
| Tier 1 Capital | 13.8 | % | 13.9 | % | 13.9 |
| Common Equity Tier 1 Capital | 13.8 | % | 13.9 | % | 13.9 |
| Tier 1 Leverage<sup>(1)</sup> | 10.4 | % | 10.6 | % | 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 Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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 PCA:

---

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

---

__________________________________________________________

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

&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;___________________________________________________________

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 June 30, 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 June 30, 2025, June 30, 2024, and December 31, 2024, the Company and HBC met all capital adequacy guidelines to which they were subject. There are no conditions or events since June 30, 2025, that management believes have changed the categorization of the Company or HBC as well-capitalized.

At June 30, 2025, the Company had total shareholders' equity of $694.7 million, compared to $679.2 million at June 30, 2024, and $689.7 million at December 31, 2024. At June 30, 2025, total shareholders' equity included $509.9 million in common stock, $189.8 million in retained earnings, and $(5.0) million of accumulated other comprehensive loss. The book value per share was $11.31 at June 30, 2025, compared to $11.08 at June 30, 2024, and $11.24 at December 31, 2024. The tangible book value per share was $8.49 at June 30, 2025, compared to $8.22 at June 30, 2024, and $8.41 at December 31, 2024. Adjusted tangible book value per share was $8.59 at June 30, 2025. Tangible book value per share is a non-GAAP financial measure.

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

---

| | | | |
|:---|:---|:---|:---|
| | **June 30,** | **June 30,** | **December 31,** |
|<br>**Accumulated Other Comprehensive Loss** | **2025** | **2024** | **2024** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Actuarial losses associated with: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Split dollar insurance contracts | $(2468) | $(2913) | $(2339) |
| &nbsp;&nbsp;&nbsp;&nbsp;Supplemental executive retirement plan | (2156) | (2856) | (2173) |
| Unrealized loss on securities available-for-sale | (396) | (6022) | (3656) |
| Unrealized gain on interest-only strip from SBA loans | 42 | 76 | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total accumulated other comprehensive loss | $(4978) | $(11715) | $(8105) |

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

***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 rate 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 uses two methodologies to manage interest rate risk: (i) a standard GAP analysis; and (ii) an interest rate shock simulation model.

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 are not reflected in the interest sensitivity analysis table. Because of these factors, an interest sensitivity GAP report may not provide a complete assessment of the exposure to changes in interest rates.

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 June 30, 2025:

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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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 | $15967 | 8.2 | % |
| +300 | $11951 | 6.1 | % |
| +200 | $7963 | 4.1 | % |
| +100 | $3980 | 2.0 | % |
| 0 |  |  |  |
| -100 | $(6331) | (3.3) | % |
| -200 | $(15553) | (8.0) | % |
| -300 | $(27131) | (13.9) | % |
| -400 | $(42502) | (21.8) | % |

---

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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 | $41477 | 3.0 | % |
| +300 | $38041 | 2.8 | % |
| +200 | $30716 | 2.2 | % |
| +100 | $18624 | 1.3 | % |
| 0 |  |  |  |
| -100 | $(44872) | (3.2) | % |
| -200 | $(119458) | (8.7) | % |
| -300 | $(213815) | (15.5) | % |
| -400 | $(333310) | (24.1) | % |

---

_______________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup>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

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

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.

**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. These measures include "adjusted" operating metrics that have been adjusted to exclude notable expenses incurred in the second quarter of 2025 as well as other performance measures and ratios adjusted for notable items. 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 net income and earnings per share adjusted to exclude the $9.2 million of charges primarily related to a legal settlement and charges related to the planned closure of a Bank branch in the second quarter and first six months of 2025 as a useful measurement of the Company's profitability compared to prior periods.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **For the Three Months Ended** | **For the Three Months Ended** | **For the Six Months Ended** | **For the Six Months Ended** |
| | **June 30,**<br>**2025** | **June 30,**<br>**2024** | **June 30,**<br>**2025** | **June 30,**<br>**2024** |
| | **(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) | $6389 | $9234 | $18015 | $19400 |
| Add: pre-tax legal settlement and other charges | 9184 |  | 9184 |  |
| Less: related income taxes | (2618) |  | (2618) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted net income (non-GAAP) | $12955 | $9234 | $24581 | $19400 |
| Weighted average shares outstanding - diluted | 61624600 | 61438088 | 61664942 | 61446484 |
| Reported diluted earnings per share | $0.10 | $0.15 | $0.29 | 0.32 |
| Adjusted diluted earnings per share | $0.21 | $0.15 | $0.40 | 0.32 |

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</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:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** |
| | **June 30,** | **June 30,** | **June 30,** | | **June 30,** | **June 30,** | **June 30,** |
| | **2025** | | **2024** | | **2025** | | **2024** |
| | **(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 provision for |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; credit losses on loans (GAAP) | $44805 |  | $38867 |  | $88165 |  | $78370 |
| Tax-equivalent adjustment on securities - exempt from Federal tax | 57 |  | 60 |  | 115 |  | 120 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net interest income, FTE (non-GAAP) | $44862 |  | $38927 |  | $88280 |  | $78490 |
| Average balance of total interest earning assets | $5087089 |  | $4840670 |  | $5137424 |  | $4825587 |
| Net interest margin (annualized net interest income divided by the |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;average balance of total interest earnings assets) (GAAP) | 3.53 | % | 3.23 | % | 3.46 | % | 3.27 |
| Net interest margin, FTE (annualized net interest income, FTE, divided |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;by average balance of total interest earnings assets) (non-GAAP) | 3.54 | % | 3.23 | % | 6.91 | % | 3.27 |

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<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

Management views its non-GAAP 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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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Six Months Ended** | **Six Months Ended** |
| | **June 30,** | **June 30,** | **June 30,** | **June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Net interest income before credit losses on loans | $44805 | $38867 | $88165 | $78370 |
| Noninterest income | 2977 | 2864 | 5673 | 5501 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 47782 | 41731 | 93838 | 83871 |
| Less: Noninterest expense | (38335) | (28188) | (67791) | (55724) |
| &nbsp;&nbsp;&nbsp;&nbsp;Reported pre-provision net revenue (non-GAAP) | 9447 | 13543 | 26047 | 28147 |
| Add: pre-tax legal settlement and other charges | 9184 |  | 9184 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjusted pre-provision net revenue (non-GAAP) | $18631 | $13543 | $35231 | $28147 |

---

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 noninterest expense and the efficiency ratio of the Company for the periods indicated:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** |
| | **June 30,** | **June 30,** | **June 30,** | | **June 30,** | **June 30,** | **June 30,** |
| | **2025** | **2025** | **2024** | | **2025** | | **2024** |
| | **(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) | $38335 |  | $28188 |  | $67791 |  | $55724 |
| Less: pre-tax legal settlement and other charges | (9184) |  |  |  | (9184) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted noninterest expense (non-GAAP) | 29151 |  | 28188 |  | 58607 |  | 55724 |
| Net interest income before provision for credit losses on loans | $44805 |  | $38868 |  | $88165 |  | $78370 |
| Noninterest income | 2977 |  | 2864 |  | 5673 |  | 5501 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total revenue | $47782 |  | $41732 |  | $93838 |  | $83871 |
| Reported efficiency ratio (noninterest expense divided by |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; total revenue) (non-GAAP) | 80.23 | % | 67.55 | % | 72.24 | % | 66.44 |
| Adjusted efficiency ratio (noninterest expense divided by |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; total revenue) (non-GAAP) | 61.01 | % | 67.55 | % | 62.46 | % | 66.44 |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</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 assets, annualized return on average equity, and the annualized return on average tangible common equity for the periods indicated:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** |
| | **June 30,** | **June 30,** | **June 30,** | | **June 30,** | **June 30,** | **June 30,** |
| | **2025** | | **2024** | | **2025** | | **2024** |
| | **(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) | $6389 |  | $9234 |  | $18015 |  | $19400 |
| Add: pre-tax legal settlement and other charges | 9184 |  |  |  | 9184 |  |  |
| Less: related income taxes | (2618) |  |  |  | (2618) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted net income (non-GAAP) | $12955 |  | $9234 |  | $24581 |  | $19400 |
| Average Assets (GAAP) | $5458420 |  | $5213171 |  | $5508878 |  | $5195903 |
| Reported annualized return on average tangible assets (GAAP) | 0.47 | % | 0.71 | % | 0.66 | % | 0.75 |
| Adjusted annualized return on average tangible assets (GAAP) | 0.95 | % | 0.71 | % | 0.90 | % | 0.75 |
| Average tangible common equity components: |  |  |  |  |  |  |  |
| Average Equity (GAAP) | $697016 |  | $675108 |  | $694886 |  | $673700 |
| Less: Goodwill | (167631) |  | (167631) |  | (167631) |  | (167631) |
| Less: Other Intangible Assets | (5817) |  | (7867) |  | (6040) |  | (8138) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Average Tangible Common Equity (non-GAAP) | $523568 |  | $499610 |  | $521215 |  | $497931 |
| Annualized return on average equity (GAAP) | 3.68 | % | 5.50 | % | 5.23 | % | 5.79 |
| Reported annualized return on average tangible |  |  |  |  |  |  |  |
| common equity (non-GAAP) | 4.89 | % | 7.43 | % | 0.07 | % | 7.84 |
| Adjusted annualized return on average tangible |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; common equity (non-GAAP) | 9.92 | % | 7.43 | % | 9.51 | % | 7.84 |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following table summarizes components of the tangible common equity to tangible assets ratio of the Company at the dates indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **June 30,**<br>**2025** |<br>**&nbsp;&nbsp;&nbsp;&nbsp;** | **June 30,**<br>**2024** | | **December 31,**<br>**2024** |<br>**&nbsp;&nbsp;&nbsp;&nbsp;** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Capital components: |  |  |  |  |  |  |
| Total Equity (GAAP) | $694704 |  | $679199 |  | $689727 |  |
| Less: Preferred Stock |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Common Equity | 694704 |  | 679199 |  | 689727 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Goodwill | (167631) |  | (167631) |  | (167631) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Other Intangible Assets | (5532) |  | (7521) |  | (6439) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Tangible Common Equity (non-GAAP) | $521541 |  | $504047 |  | $515657 |  |
| Asset components: |  |  |  |  |  |  |
| Total Assets (GAAP) | $5467237 |  | $5263024 |  | $5645006 |  |
| Less: Goodwill | (167631) |  | (167631) |  | (167631) |  |
| Less: Other Intangible Assets | (5532) |  | (7521) |  | (6439) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Tangible Assets (non-GAAP) | $5294074 |  | $5087872 |  | $5470936 |  |
| Tangible common equity / tangible assets (non-GAAP) | 9.85 | % | 9.91 | % | 9.43 | % |

---

The following table summarizes components of the tangible common equity to tangible assets ratio of HBC at the dates indicated:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **June 30,**<br>**2025** | | **June 30,**<br>**2024** | | **December 31,**<br>**2024** |<br>**&nbsp;&nbsp;&nbsp;&nbsp;** |
| | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Capital components: |  |  |  |  |  |  |
| Total Equity (GAAP) | $717103 |  | $697964 |  | $709379 |  |
| Less: Preferred Stock |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Common Equity | 717103 |  | 697964 |  | 709379 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Goodwill | (167631) |  | (167631) |  | (167631) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Other Intangible Assets | (5532) |  | (7521) |  | (6439) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Tangible Common Equity (non-GAAP) | $543940 |  | $522812 |  | $535309 |  |
| Asset components: |  |  |  |  |  |  |
| Total Assets (GAAP) | $5464618 |  | $5260500 |  | $5641646 |  |
| Less: Goodwill | (167631) |  | (167631) |  | (167631) |  |
| Less: Other Intangible Assets | (5532) |  | (7521) |  | (6439) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Tangible Assets (non-GAAP) | $5291455 |  | $5085348 |  | $5467576 |  |
| Tangible common equity / tangible assets (non-GAAP) | 10.28 | % | 10.28 | % | 9.79 | % |

---

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

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

The following table summarizes components of the tangible book value per share of the Company at the dates indicated:

---

| | | | |
|:---|:---|:---|:---|
| | **June 30,**<br>**2025** | **June 30,**<br>**2024** | **December 31,**<br>**2024** |
| | **(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) | $694704 | $679199 | $689727 |
| Less: Preferred Stock |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Common Equity | 694704 | 679199 | 689727 |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Goodwill | (167631) | (167631) | (167631) |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Other Intangible Assets | (5532) | (7521) | (6439) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Tangible Common Equity (non-GAAP) | 521541 | 504047 | 515657 |
| Add: pre-tax legal settlement and other charges | 9184 |  | 0 |
| Less: related income taxes | (2618) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Adjusted tangible common equity (non-GAAP) | $528107 | $504047 | $515657 |
| Common shares outstanding at period-end | 61446763 | 61292094 | 61348095 |
| Reported tangible book value per share (non-GAAP) | $8.49 | $8.22 | $8.41 |
| Adjusted tangible book value per share (non-GAAP) | $8.59 | $8.22 | $8.41 |

---

**ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

The information concerning quantitative and qualitative disclosures about market risk called for by Item 305 of Regulation S-K is included under "*Part I, Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Market Risk*" and "*—Interest Rate Management*" of this Report.

**ITEM 4—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 as of June 30, 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 the Company's disclosure controls were effective at June 30, 2025, the period covered by this Report.

&nbsp;&nbsp;&nbsp;&nbsp;In designing and evaluating disclosure controls and procedures, the Company's management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurances of achieving the desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

During the three months and six months ended June 30, 2025, there were no changes in our internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**Part II—OTHER INFORMATION**

**ITEM 1—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. As of June 30, 2025, we were party to no litigation that we believe to be material to our business, financial condition, results of operations, or cash flows.

For more information regarding legal proceedings, see Note 13 "*Commitments and Loss Contingencies*" to the consolidated financial statements.

**ITEM 1A—RISK FACTORS** 

A discussion of risk factors affecting us as is set forth in Part II, Item 1A. Risk Factors, on pages 73 – 95 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025. The discussion of risk factors provides a description of some of the important risk factors that could affect our actual results and could cause our results to vary materially from those expressed in public statements or documents. However, other factors besides those included in the discussion of risk factors, or discussed elsewhere in any of our reports filed with or furnished to the SEC could affect our business or results. The readers should not consider any description of such factors to be a complete set of all potential risks that we may face.

**ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

The Company is authorized to repurchase up to $15.0 million of the Company's shares of its issued and outstanding common stock under its share repurchase program authorized by the Board of Directors in July 2024. In July 2025, the Company's Board of Directors extended the program for one year, expiring on July 31, 2026. The following table shows the share repurchase activity during the second quarter and first six months of 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
|<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 |  |
| First Six Months of 2025 | 207989 | $9.19 | 207989 | $13078 |

---

**ITEM 3—DEFAULTS UPON SENIOR SECURITIES**

None.

**ITEM 4—MINE SAFETY DISCLOSURES**

Not applicable.

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**ITEM 5—OTHER INFORMATION**

None.

**ITEM 6—EXHIBITS**

---

| | |
|:---|:---|
| **Exhibit** | **Description** |
| 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 Registrant's Registration Statement on Form S-1 filed July 23, 2010).](https://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 on November 7, 2019)](https://www.sec.gov/Archives/edgar/data/1053352/000155837019010431/htbk-20190930ex33ac7355e.htm)[.](https://www.sec.gov/Archives/edgar/data/1053352/000155837019010431/htbk-20190930ex33ac7355e.htm)</u> |
| 3.4 | <u>[Heritage Commerce Corp Bylaws, as amended](htbkex-34.htm)[,](htbkex-34.htm)[dated](htbkex-34.htm)[May 22, 2025, filed herewith](htbkex-34.htm)[.](htbkex-34.htm)</u> |
| 10.1\* | <u>[Employment Agreement with Seth Fonti, dated July 24, 2025 (incorporated 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> |
| 31.1 | <u>[Certification of Registrant's Chief](htbkex-311.htm)[Executive](htbkex-311.htm)[Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002.](htbkex-311.htm)</u> |
| 31.2 | <u>[Certification of Registrant's Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002](htbkex-312.htm)[.](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)[.](htbkex-321.htm)</u> |
| 32.2\*\* | <u>[Certification of Registrant's Chief Financial Officer Pursuant To 18 U.S.C. Section 1350](htbkex-322.htm)[.](htbkex-322.htm)</u> |
| 101.INS | Inline XBRL Instance Document Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase. |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase. |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase. |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase. |
| 104. | The cover page from Heritage Commerce Corp's Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, formatted in Inline XBRL.<br>\* Management contract or compensatory plan or arrangement.<br>\*\*Furnished and not filed. |

---

------

<u>[**Table of Contents**](#if171463e722442a2832fd793e396cb59_113)</u>

**SIGNATURES**

**&nbsp;&nbsp;&nbsp;&nbsp;**Pursuant to the requirements 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 (Registrant) |
| Date: August 8, 2025 | /s/ ROBERTSON CLAY JONES |
|  | Robertson Clay Jones |
|  | *Chief Executive Officer* (Duly Authorized Officer) |
| Date: August 8, 2025 | /s/ SETH FONTI |
|  | Seth Fonti |
|  | *Chief Financial Officer* (Principal Financial Officer) |

---

## Exhibit 3.4

**Exhibit 3.4**

THIRD AMENDED AND RESTATED BYLAWS

OF

HERITAGE COMMERCE CORP

(as of May 22, 2025)

------

**HERITAGE COMMERCE CORP**

**THIRD AMENDED AND RESTATED BYLAWS**

**ARTICLE I**

**CORPORATE OFFICES**

Section 1.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Principal Office</u>. The Board of Directors shall fix the location of the principal executive office of Heritage Commerce Corp. (the "<u>Corporation</u>") at any place within or outside the State of California. The Board of Directors is hereby granted full power and authority to change said principal executive office from one location to another.

Section 1.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Other Offices</u>. The Board of Directors may at any time establish branch or subordinate offices at any place or places.

**ARTICLE II**

**DIRECTORS**

Section 2.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Powers</u>. Subject to the provisions of the California General Corporation Law (the "<u>Code</u>"), any limitations in the Restated Articles of Incorporation of the Corporation (the "<u>Articles of Incorporation</u>"), and these Second Amended and Restated Bylaws (these "<u>Bylaws</u>") relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.

Section 2.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Number; Qualifications</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;The number of directors of the Corporation shall be not less than eight (8) nor more than fifteen (15). The exact number of directors shall be set, from time to time, within the limits specified above from time to time by resolution of the Board of Directors. The maximum number or minimum number of directors may be changed, or a definite number fixed without provision for a maximum or minimum number, by a duly adopted amendment to the Articles of Incorporation or by amendment to these Bylaws duly adopted by the vote of holders of a majority of the outstanding shares entitled to vote; provided, however, that an amendment reducing the fixed number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting of the shareholders, or the shares not consenting in the case of action by written consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote. No amendment may change the stated maximum number of authorized directors to a number greater than two times the stated minimum number minus one.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;No person shall be qualified to become a member of the Board of Directors who is a director, executive officer, branch manager or trustee for any unaffiliated commercial bank, savings bank, trust company, savings and loan association, building and loan association, industrial bank or credit union that is engaged in business in (i) any city, town or village in which the corporation or any affiliate or subsidiary thereof has offices, or (ii) any city, town or village adjacent to a city, town or village in which the Corporation or any banking affiliate or subsidiary thereof has offices, unless approved by the Board of Directors (or committee thereof).

Section 2.3&nbsp;&nbsp;&nbsp;&nbsp;<u>Compensation</u>. Directors and members of committees may receive such compensation, if any, for their services, and may be reimbursed for expenses, as fixed or determined

------

by resolution of the Board of Directors. This <u>Section 2.3</u> shall not be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation for those services.

Section&nbsp;&nbsp;&nbsp;&nbsp; 2.4&nbsp;&nbsp;&nbsp;&nbsp;<u>Election and Term of Office</u>. The directors shall be elected at each annual meeting of shareholders, but, if any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose. Each director, including a director elected to fill a vacancy, shall hold office until the next annual meeting of shareholders or at the next special meeting of shareholders convened for the election of directors, and until a successor has been elected and qualified, subject, however, to such director's prior death, resignation, retirement, disqualification or removal from office.

Section 2.5&nbsp;&nbsp;&nbsp;&nbsp;<u>Vacancies and Resignations</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;A vacancy or vacancies on the Board of Directors shall be deemed to exist (i) in the event of the death, resignation or removal of any director, (ii) if the authorized number of directors is increased, (iii) if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be elected at that meeting, or (iv) if the Board of Directors declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;The shareholders may elect a director at any time to fill a vacancy or vacancies not filled by the directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;Any director may resign effective upon giving written notice to the Chair of the Board, President, and Secretary of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective. A reduction of the authorized number of directors shall not remove any director prior to the expiration of such director's term of office.

Section 2.6&nbsp;&nbsp;&nbsp;&nbsp;Chair of the Board. The Corporation may have at the discretion of the Board of Directors, a Chair of the Board of Directors and/or one or more Vice-Chairs of the Board. The Chair of the Board of Directors, or a Vice Chair of the Board, if there be one, shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and shall be subject to such other duties as the Board of Directors may from time to time prescribe or as may be prescribed by these Bylaws. If there is more than one Vice-Chair of the Board, the Board of Directors may prescribe different responsibilities to each Vice-Chair of the Board of Directors.

Section 2.7&nbsp;&nbsp;&nbsp;&nbsp;Removal. The entire Board of Directors or any individual director may be removed without cause from office by an affirmative vote of a majority of the outstanding shares entitled to vote; provided, however, that, unless the entire Board of Directors is removed, no director shall be removed when the votes cast against removal, would be sufficient to elect such director if voted cumulatively at an election at which the same total number of votes were cast, and the entire number of directors authorized at the time of the directors most recent election were then being elected. If any or all directors are so removed, new directors may be elected at the same meeting or at a

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subsequent meeting. If at any time a class or series of shares is entitled to elect one or more directors under authority granted by the Articles of Incorporation, the provisions of this <u>Section 2.7</u> shall apply to the vote of that class or series and not to the vote of the outstanding shares as a whole.

**ARTICLE III**

**OFFICERS**

Section 3.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Officers</u>. The officers of the Corporation shall be a Chief Executive Officer or a President or both, a Secretary and a Chief Financial Officer. The Corporation may also have, at the discretion of the Board of Directors, a Chair of the Board of Directors, one or more Vice-Chairman of the Board of Directors, one or more Vice Presidents, a Treasurer, one or more Assistant Secretaries and one or more Assistant Treasurers and such officers as may be appointed in accordance with the provisions of <u>Section 3.3</u>. Any number of offices may be held by the same person.

Section 3.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Appointment of Officers</u>. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of <u>Section 3.3</u>, shall be chosen by the Board of Directors and serve at the pleasure of the Board of Directors, subject to the rights, if any, of an officer under any contract of employment.

Section 3.3&nbsp;&nbsp;&nbsp;&nbsp;<u>Subordinate Officers</u>. The Board of Directors may appoint, or may empower the Chief Executive Officer or the President to appoint such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine.

Section 3.4&nbsp;&nbsp;&nbsp;&nbsp;<u>Term of Office and Compensation</u>. The term of office and salary of each of said officers and the manner and time of the payment of such salaries shall be fixed and determined by the Board of Directors and may be altered by the Board of Directors from time to time at its pleasure, subject to the rights, if any, of an officer under any contract of employment.

Section 3.5&nbsp;&nbsp;&nbsp;&nbsp;<u>Removal or Resignation</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;Subject to the rights, if any, of an officer under any contract of employment, all officers serve at the pleasure of the Board of Directors and any officer may be removed, either with or without cause, by the Board of Directors at any regular or special meeting of the Board of Directors, or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;Any officer may resign at any time upon written notice to the Corporation, without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice, and, unless otherwise necessary to make it effective, the acceptance of the resignation shall not be necessary to make it effective.

Section 3.6&nbsp;&nbsp;&nbsp;&nbsp;<u>Vacancies</u>. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed by these Bylaws for regular appointments to that office.

Section 3.7&nbsp;&nbsp;&nbsp;&nbsp;<u>Chief Executive Officer</u>. The powers and duties of the Chief Executive Officer are:

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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;(a)&nbsp;&nbsp;&nbsp;&nbsp;To act as the general manager and chief executive officer of the Corporation and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;To preside at all meetings of the shareholders and, in the absence of the Chair of the Board of Directors and a Vice-Chair of the Board of Directors or if there be no Chair of the Board of Directors or Vice-Chair of the Board of Directors, at all meetings of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;To call meetings of the shareholders and meetings of the Board of Directors to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;To affix the signature of the Corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.

Section 3.8&nbsp;&nbsp;&nbsp;&nbsp;<u>President</u>. The powers and duties of the President 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;(a)&nbsp;&nbsp;&nbsp;&nbsp;To act as the general manager of the Corporation and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;To preside at all meetings of the shareholders and, in the absence of the Chair of the Board of Directors, and a Vice Chair of the Board of Directors and the Chief Executive Officer or if there be no Chair of the Board of Directors, Vice-Chair of the Board of Directors or Chief Executive Officer, at all meetings of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;To affix the signature of the Corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the President, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.

Section 3.9&nbsp;&nbsp;&nbsp;&nbsp;<u>Chief Financial Officer</u>. The powers and duties of the Chief Financial Officer 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;(a)&nbsp;&nbsp;&nbsp;&nbsp;To supervise and control the keeping and maintaining of adequate and correct accounts of the Corporation's properties and business transactions, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares. The books of account shall at all reasonable times be open to inspection by any director.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;To have the custody of all funds, securities, evidences of indebtedness and other valuable documents of the Corporation and, at his or her discretion, to cause any or all thereof to be deposited for the account of the Corporation with such depository as may be designated from time to time by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;To receive or cause to be received, and to give or cause to be given, receipts and acquittances for moneys paid in for the account of the Corporation.

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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;(d)&nbsp;&nbsp;&nbsp;&nbsp;To disburse, or cause to be disbursed, all funds of the Corporation as may be directed by the Chief Executive Officer, the President or the Board of Directors, taking proper vouchers for such disbursements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;To render to the Chief Executive Officer, the President or to the Board of Directors, whenever either may require, accounts of all transactions as Chief Financial Officer and of the financial condition of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Generally to do and perform all such duties as pertain to such office and as may be required by the Board of Directors or these Bylaws.

Unless the Board of Directors has elected a separate treasurer, the Chief Financial Officer shall be deemed to be the Corporation's treasurer for purposes of giving any reports or executing any certificates or documents.

Section 3.10&nbsp;&nbsp;&nbsp;&nbsp;<u>President Pro Tem</u>. If none of the Chair of the Board of Directors, any Vice-Chair of the Board of Directors, the Chief Executive Officer, the President, nor any Vice President is present at any meeting of the Board of Directors, a president pro tem may be chosen to preside and act at such meeting. If none of the Chair of the Board of Directors, Chief Executive Officer, the President nor any Vice President is present at any meeting of the shareholders, a President pro tem may be chosen to preside at such meeting.

Section 3.11&nbsp;&nbsp;&nbsp;&nbsp;<u>Vice President</u>. The titles, powers and duties of any Vice President or Vice Presidents shall be prescribed by the Board of Directors. In case of the absence, disability or death of the Chief Executive Officer or the President, subject to the direction and authorization of the Board of Directors and the Corporation's succession policy, if any, one of the Vice Presidents shall exercise all his or her powers and perform all his or her duties.

Section 3.12&nbsp;&nbsp;&nbsp;&nbsp;<u>Secretary</u>. The powers and duties of the Secretary 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;(a)&nbsp;&nbsp;&nbsp;&nbsp;To keep a book of minutes at the principal executive office of the Corporation, or such other place as the Board of Directors may order, of all meetings of its directors and shareholders with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at shareholders' meetings and the proceedings thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;To keep the seal of the Corporation and to affix the same to all instruments which may require it.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;To keep or cause to be kept at the principal executive office of the Corporation, or at the office of the transfer agent or agents, a record of the shareholders of the Corporation, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder, the number and date of any certificates issued for shares, appropriate records with respect to uncertificated shares issued, the number and date of cancellation of every certificate surrendered for cancellation and the number and date of every replacement certificate or the appropriate records for uncertificated shares issued for lost, stolen or destroyed certificates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;To keep a supply of certificates for shares of the Corporation, to fill and sign in all certificates issued or prepare the initial transaction statement or written statements for uncertificated shares, and to make a proper record of each such issuance; provided, however, that so long as the Corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the Corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents.

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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;(e)&nbsp;&nbsp;&nbsp;&nbsp;To transfer upon the share books of the Corporation or in accordance with a direct registration program as provided in <u>Section 7.4(b)</u> of these Bylaws any and all shares of the Corporation; provided, however, that so long as the Corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the Corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents, and the method of transfer of each share shall be subject to the reasonable regulations of the transfer agent to which the shares are presented for transfer and, also, if the Corporation then has one or more duly appointed and acting registrars, subject to the reasonable regulations of the registrar to which a new certificate or a new issuance of shares is presented for registration; and provided, further, that no shares shall be issued, recorded or delivered or, if issued, recorded or delivered, shall have any validity whatsoever until and unless the certificate has been signed or authenticated, as applicable, in the manner provided in <u>Section 7.4</u> of these Bylaws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;To make service and publication of all notices that may be necessary or proper and without command or direction from anyone. In case of the absence, disability, refusal or neglect of the Secretary to make service or publication of any notices, then such notices may be served and/or published by the Chief Executive Officer, the President, an Assistant Secretary or a Vice President, or by any person thereunto authorized by either of them or by the Board of Directors or by the holders of a majority of the outstanding shares of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;Generally to do and perform all such duties as pertain to such office and as may be required by the Board of Directors or these Bylaws.

**ARTICLE IV**

**COMMITTEES**

Section 4.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Committees of the Board of Directors</u>. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of a minimum of three (3) or more directors, to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any such committee shall have authority to act in a manner and to the extent provided in the resolution of the Board of Directors and may have all the authority of the Board of Directors, except with respect to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;the approval of any action which, under the Code, also requires shareholders' approval or approval of the outstanding shares;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;the filling of vacancies on the Board of Directors or in any committee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;the fixing of compensation of the director for serving on the Board of Directors or on any committee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;the amendment or repeal of these Bylaws or the adoption of new bylaws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;the amendment or repeal of any resolution of the Board of Directors which by its express terms is not so amendable or repealable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;a distribution to the shareholders of the Corporation, except at a rate, in a periodic amount or within a price range set forth in the Articles of Incorporation or determined by the Board of Directors; and

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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;(g)&nbsp;&nbsp;&nbsp;&nbsp;the appointment or designation of any other committee of the Board of Directors or the members thereof.

In the event that the Board of Directors appoints an Executive Committee, such Executive Committee, in all cases in which specific direction to the contrary shall not have been given by the Board of Directors, shall have and may exercise, during the intervals between the meetings of the Board of Directors, all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation (except as provided above in this <u>Section 4.1</u>)) in such manner as the Executive Committee may deem in the best interests of the Corporation.

Section 4.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Meetings and Authorized Committees</u>. Meetings and action of committees are governed by, and are held and taken in accordance with, the provisions of <u>Article VI</u>, <u>Section 6.1</u> (place of meetings), <u>Section 6.5</u> (quorum), <u>Section 6.6</u> (adjournment), <u>Section 6.7</u> (waiver of notice) and <u>Section 6.8</u> (action without meeting), with such changes in the context of these Bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws or applicable law.

**ARTICLE V**

**MEETINGS OF SHAREHOLDERS**

Section 5.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Place of Meetings</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;Meetings (whether regular, special, adjourned, or postponed) of the shareholders of the Corporation may be held at the principal executive office for the transaction of business of the Corporation, or at any place within or without the State, in each case as designated by resolution of the Board of Directors or a duly authorized committee thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;At the sole discretion of the Board of Directors, and subject to applicable provisions under the Code, the Securities Exchange Act of 1934, as amended, and Regulation 14A thereunder ("Exchange Act"), the regulations of the national securities market listing the Corporation's equity securities, and any guidelines and procedures that the Board of Directors may adopt, a meeting of the shareholders may be conducted in whole or in part by electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication, provided, however, that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a shareholder or proxy holder, (ii) the Corporation shall implement reasonable measures to provide such shareholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any shareholder or proxy holder votes or takes other action at the meeting by means of remote communication, the Corporation shall maintain a record of such vote.

Section 5.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Annual Meetings</u>. An annual meeting of shareholders shall be held each year on a date and at a time designated by the Board of Directors or a duly authorized committee thereof. The annual meeting shall be held for the purpose of electing directors and for making reports of the affairs of the Corporation. Any other business properly brought before the meeting may be transacted at the annual meeting of shareholders. The Board of Directors may adjourn, postpone, recess, reschedule, or cancel any previously scheduled annual meeting of shareholders for any reason.

Section 5.3&nbsp;&nbsp;&nbsp;&nbsp;<u>Special Meetings</u>.

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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;(a)&nbsp;&nbsp;&nbsp;&nbsp;Special meetings of the shareholders for any purpose or purposes whatsoever may be called at any time by (i) the Chair of the Board, President or by the Board of Directors or (ii) by one or more holders of shares entitled to cast not less than ten percent (10%) of the votes ("<u>Requisite Percent</u>") on the record date established pursuant to <u>Section 5.9</u> of these Bylaws. A request for a special meeting (a "<u>special meeting request</u>") other than by the Board of Directors must be in writing directed to the attention of the Chair of the Board, the President or the Secretary of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;In order for a special meeting requested by the shareholder to be called one or more special meeting requests signed and dated by shareholders (or their duly authorized agents) who own or who are acting on behalf of persons who own, as of the date of the notice, at least the Requisite Percent of the voting power of the then-outstanding capital stock of the Corporation entitled to vote on the matter or matters to be brought before the proposed special meeting (or their duly authorized agents), must be delivered to the Secretary at the principle executive offices of the Corporation in writing, and be accompanied by:

&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;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;in the case of any special meeting requested by shareholders at which director nominations are proposed to be presented, the information required by <u>Section 5.14(a)(iii)(A)</u> and <u>Section(a)(iv)</u>, including as to the person(s) seeking to propose such nominations at such meeting, the information required by <u>Section 5.14(a)(iii)(C)</u>, 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;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;in the case of any special meeting requested by shareholders at which any business other than nominations of persons for election to the Board of Directors is proposed to be presented, the information required by <u>Section 5.14(a)(iii)(B)</u> (which shall be in addition to the information required by <u>Section 5.3(b)(i)</u> if director nominations also are proposed to be considered), including as to the person(s) seeking to propose such business at such meeting the information required by <u>Section 5.14(a)(iii)(C)</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;(c)&nbsp;&nbsp;&nbsp;&nbsp;The information required by <u>Section 5.3(b)(i)</u> and <u>(ii)</u> must be updated and supplemented by the shareholder or shareholders requesting the meeting so that the information provided or required to be provided in such notice shall be true and correct, by delivery to the Secretary (1) no later than ten (10) days after the record date for determining the shareholders entitled to vote at the special meeting of shareholders, of such information as of such record date and (2) no later than five (5) days before the special meeting of shareholders, of such information as of the date that is ten (10) days before the special meeting of shareholders. For the avoidance of doubt, the requirement to update, supplement and correct such information shall not permit any shareholder or other person to change any proposal or add any proposed nominee or be deemed to cure any defects or limit the remedies (including without limitation under these Bylaws) available to the Corporation relating to any defect or deficiency.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors may request that the shareholder or shareholders requesting the meeting furnish such additional information as may be reasonably required by the Board of Directors. Such shareholder or shareholders shall provide such additional information within five (5) business days after it has been requested by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;If the Board of Directors determines (i) that any special meeting request (A) relates to an item of business proposed to be transacted at the special meeting that is not a proper subject for shareholder action under applicable law, (B) includes an item of business proposed to be transacted at such meeting that did not appear on the written special meeting request or (C) was made in a manner that does not comply with applicable law, or (ii) that any shareholder making a special meeting request otherwise has not complied with this <u>Section 5.3</u>, then the Board of Directors shall not accept, and shall consider ineffective, any such request and Chair of the Board of Directors, President or Secretary, as applicable, shall not be required to cause notice to be given to shareholders entitled to vote that a special meeting has been requested by the person or persons calling the meeting,

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respectively. The Board of Directors shall determine in good faith whether the requirements set forth in this <u>Section 5.3</u> have been satisfied.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Subject to <u>Section 5.3(e)</u>, upon request in writing that a special meeting of shareholders be called for any proper purpose, directed to the Chair of the Board, President or Secretary, the officer forthwith shall cause notice to be given to the shareholders entitled to vote, in accordance with the provisions of <u>Section 5.4</u> and <u>Section 5.5</u> of these Bylaws, that a meeting will be held at the date and time established by the Board of Directors, which date shall be specified in a written notice delivered by the Corporation to all shareholders in accordance with the Code and with Regulation 14A of the Exchange Act of 1934, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;Business transacted at a shareholder-requested special meeting shall be limited to (i) the business stated in the valid special meeting request received from the Requisite Percent, and (ii) any additional business that the Board of Directors determines to include in the Corporation's notice of meeting. If none of the shareholders who submitted the special meeting request appears at the special meeting to present the matter or matters to be brought before the special meeting that were specified in the special meeting request, the Corporation need not present the matter or matters for a vote at the meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation. In such an event the Chair or the officer acting in such capacity may adjourn, postpone, recess, reschedule or cancel any special meeting of shareholders previously scheduled pursuant to this <u>Section 5.3</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;(h)&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything in these Bylaws to the contrary, the Board of Directors may submit its own proposal or proposals for consideration at a special meeting called pursuant to clause (ii) of <u>Section 5.3(a)</u>. Nothing contained in this <u>Section 5.3</u> shall be construed as limiting, fixing, or affecting the time when a meeting of shareholders called by action of the Board of Directors may be held.

Section 5.4&nbsp;&nbsp;&nbsp;&nbsp;<u>Notice of Meetings</u>. Notice of any meeting of shareholders shall be given in writing not less than ten (10) nor more than sixty (60) days before the date of the meeting to each shareholder entitled to vote thereat by the Secretary or an Assistant Secretary, or other person charged with that duty, or if there is no such officer or person, or in case of such officer's or person's neglect or refusal, by any director or shareholder. The notice shall state the place, if any, date, and hour of the meeting and (a) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (b) in the case of the annual meeting, those matters which the Board of Directors, at the time of the mailing of the notice, intends to present for action by the shareholders, but any proper matter may be presented at the meeting for such action except as otherwise provided by Section 601(f) of the Code. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by the Board of Directors for election. If the meeting is to be held in whole or in part by electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication, the notice shall state the means of electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication, if any, by which shareholders may participate in the meeting.

Section 5.5&nbsp;&nbsp;&nbsp;&nbsp;<u>Manner of Giving Notice</u>; Affidavit of Notice. Written notice shall be given by the Corporation to any shareholder, either personally or by mail or other means of written communication (including electronic transmission by the Corporation), charges prepaid, addressed to such shareholder at such shareholder's physical or electronic address appearing on the books of the Corporation or given by such shareholder to the Corporation for the purpose of notice. If a shareholder gives no address or no such address appears on the books of the Corporation, notice shall be deemed to have been given if sent by mail or other means of written communication addressed to the place where the principal executive office of the Corporation is located, or if published at least once in a newspaper

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of general circulation in the county in which such office is located. The notice shall be deemed to have been given at the time when delivered personally or deposited in the United States mail, postage prepaid, or sent by other means of written communication and addressed as hereinbefore provided. An affidavit of delivery or mailing, or other authorized means of transmitting, of any notice in accordance with the provisions of this <u>Section 5.5</u>, executed by the Secretary, any Assistant Secretary, or any transfer agent, shall be prima facie evidence of the giving of the notice. If any notice addressed to the shareholder at the address of such shareholder appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at such address, all future notices shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon written demand of the shareholder at the principal executive office of the Corporation for a period of one (1) year from the date of the giving of the notice to all other shareholders. Any notice by electronic transmission by the Corporation shall be given subject to applicable provisions under the Code.

Section 5.6&nbsp;&nbsp;&nbsp;&nbsp;<u>Validation of Defectively Called or Noticed Meeting</u>. The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by law to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the Articles of Incorporation, except as provided in Section 601(f) of the Code.

Section 5.7&nbsp;&nbsp;&nbsp;&nbsp;<u>Quorum</u>. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. Shares shall not be counted to make up a quorum for a meeting if voting of such shares at the meeting has been enjoined or for any reason they cannot be lawfully voted at the meeting. The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum or, if required by the Code, the vote of a greater number or voting by classes.

Section 5.8&nbsp;&nbsp;&nbsp;&nbsp;<u>Adjourned Meetings</u>. Any shareholders' meeting, whether or not a quorum is present, may be adjourned from time to time, either by the chair of the meeting or by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy thereat, but, except as provided in <u>Section 5.7</u> of these Bylaws, in the absence of a quorum, no other business may be transacted at such meeting. When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if its time and place (or the means of electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication, if any, by which the shareholders may participate) are announced at the meeting at which the adjournment is taken. When a meeting is adjourned for more than forty-five (45) days or if after adjournment a new record date is fixed for the adjourned meeting, a notice of the time and place adjourned meeting shall be given to each shareholder of record entitled to vote at a meeting. At any adjourned meeting the shareholders may transact any business which might have been transacted at the original meeting.

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Section 5.9&nbsp;&nbsp;&nbsp;&nbsp;<u>Record Date for Shareholder Notice and Voting</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;In order that the Corporation may determine the shareholders entitled to notice of any meeting or to vote, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of such meeting. Only shareholders of record at the close of business on the record date are entitled to notice of and to vote at a meeting of shareholders, notwithstanding any transfer of any shares on the books or the Corporation after the record date, except as otherwise provided by in the Articles of Incorporation or the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;A determination of the shareholders of record entitled to notice of and to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board of Directors shall fix a new record date if the meeting is adjourned for more than forty-five (45) days from the date set for the original meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;If the Board of Directors does not fix a record date the record date for determining shareholder entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

Section 5.10&nbsp;&nbsp;&nbsp;&nbsp;<u>Voting Rights</u>. Except as otherwise provided in the Articles of Incorporation or Section 708 of the Code each outstanding share regardless of class shall be entitled to one vote on each matter submitted to a vote of shareholders. Any holder of shares entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, other than elections to office, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares such shareholder is entitled to vote.

At a shareholders' meeting involving the election of directors, no shareholder is entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the shareholder's shares) unless the candidate or candidates' names have been placed in nomination prior to the voting and a shareholder has given notice prior to the voting of the shareholder's intention to cumulate votes. If any shareholder has given such notice, then every shareholder entitled to vote may cumulate such shareholder's votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such shareholder's shares are entitled, or distribute the shareholder's votes on the same principle among any or all of the candidates, as the shareholder shall indicate unambiguously in writing.

Section 5.11&nbsp;&nbsp;&nbsp;&nbsp;<u>Election of Directors</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;In any election of directors, the candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares are elected; votes against the directors and votes withheld with respect to the election of the directors shall have no legal effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;Elections of directors need not be by ballot except upon demand made by a shareholder at the meeting and before the voting begins.

Section 5.12&nbsp;&nbsp;&nbsp;&nbsp;<u>Proxies</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;Every person entitled to vote or execute consents shall have the right to do so either in person or by one or more agents authorized by a written proxy executed by such person or such person's duly authorized agent and filed with the Secretary. No proxy shall be valid (i) after

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revocation thereof, unless the proxy is specifically made irrevocable and otherwise conforms to this <u>Section 5.12</u> and applicable law, or (ii) after the expiration of eleven (11) months from the date thereof, unless the person executing it specifies therein the length of time for which such proxy is to continue in force. Revocation may be effected by a writing delivered to the Secretary stating that the proxy is revoked or by a subsequent proxy executed by, or by attendance at the meeting and voting in person by, the person executing the proxy. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, a written notice of such death or incapacity is received by the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;A proxy which states that it is irrevocable is irrevocable for the period specified therein when it is held by any of the following or a nominee of any of the following: (i) a pledgee, (ii) a person who has purchased or agreed to purchase or holds an option to purchase the shares or a person who has sold a portion of such person's shares in the Corporation to the maker of the proxy, (iii) a creditor or creditors of the Corporation or the shareholder who extended or continued credit to the Corporation or the shareholder in consideration of the proxy if the proxy states that it was given in consideration of such extension or continuation of credit and the name of the person extending or continuing the credit, (iv) a person who has contracted to perform services as an employee of the Corporation, if a proxy is required by the contract of employment and if the proxy states that it was given in consideration of such contract of employment, the name of the employee and the period of employment contracted for, (v) a person designated by or under a close corporation shareholder agreement or a voting trust agreement, or (vi) a beneficiary of a trust with respect to shares held by the trust. In addition, a proxy may be made irrevocable if it is given to secure the performance of a duty or to protect a title, either legal or equitable, until the happening of events which, by its terms, discharge the obligation secured by it.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;Every form of proxy which provides an opportunity to specify approval or disapproval with respect to any proposal, shall also contain an appropriate space marked "abstain," whereby a shareholder may indicate a desire to abstain from voting their shares on the proposal. A proxy marked "abstain" by the shareholder with respect to a particular proposal shall not be voted either for or against such proposal. In any election of directors, any form of proxy in which the directors to be voted upon are named therein as candidates and which is marked by a shareholder "withhold" or otherwise marked in a manner indicating that the authority to vote for the election of directors is withheld shall not be voted either for or against the election of a director.

Section 5.13&nbsp;&nbsp;&nbsp;&nbsp;<u>Inspectors of Elections</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;In advance of any meeting of shareholders the Board of Directors may appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the chair of any meeting of shareholders may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse) at the meeting. The number of inspectors shall be either one (1) or three (3). If appointed at a meeting on the request of one or more shareholders or proxies the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election,

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the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

Section 5.14&nbsp;&nbsp;&nbsp;&nbsp;<u>Advance Notice of Shareholder Business and Nominations</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;<u>Annual Meetings of Shareholders</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;Nominations of persons for election to the Board of Directors or the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders only (A) pursuant to the Corporation's notice of meeting (or any supplement thereto), (B) by or at the direction of the Board of Directors or any duly authorized committee thereof, or (C) by any shareholder of the Corporation who was a shareholder of record of the Corporation at the time the notice required by this <u>Section 5.14</u> and the record date for the determination of shareholders entitled to vote at the annual meeting entitled to vote at the meeting.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;For nominations of persons for election to the Board of Directors or the proposal of business to be properly brought before an annual meeting of shareholders by a shareholder pursuant to <u>Section 5.14(a)(i)(C)</u>, the shareholder must have given timely notice thereof in proper written form to the Secretary and any such proposed business must constitute a proper matter for shareholder action under the Code. No person may be appointed, nominated or elected a director of the Corporation unless such person, as of the time of the notice of nomination provided for pursuant to this <u>Section 5.14</u> and as of the time of appointment or election, would then be able to serve as a director without conflicting in any manner with any state, federal or foreign law or regulation, as determined in good faith by the Board of Directors.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;To be timely, a shareholder's notice shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day before the one-year anniversary of the date on which the preceding year's annual meeting was held (provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date of the annual meeting, then notice by the shareholder must be so received not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement (as defined in <u>Section 5.14(c)(v))</u> of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting of shareholders commence a new time period (or extend any time period) for the giving of a shareholder's notice as described above. To be in proper written form, a shareholder's notice to the Secretary (whether pursuant to this <u>Section 5.14(a)(iii)</u> or <u>Section 5.14(b))</u> must set forth:

&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;&nbsp;&nbsp;&nbsp;as to each person, if any, whom the shareholder proposes to nominate for election as a director (1) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Exchange Act, (including such person's written consent to being named in the proxy statement as a nominee, such person's written attestation to the accuracy and completeness of the information provided with respect to such person and his or her nomination, and such person's willingness to serving as a director if elected); (2) the name, age, business address and residence address of the nominee, (3) the principal occupation or employment of the nominee, (4) the class or series and number of shares of capital stock of the Corporation that are, directly or indirectly, owned or are beneficially owned (as defined in <u>Section 5.4(c)(iii))</u> by the nominee and any derivative positions held or beneficially held by the nominee, (5) the number of shares of capital stock of any bank, bank holding company, savings and loan association or other depository institution owned beneficially by such person and the identities

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and locations of any such institutions, (6) whether such person has ever been convicted of or pleaded nolo contender to any criminal offensive involving dishonestly or breach of trust, filed a petition in bankruptcy or been adjudged bankrupt, (7) a written statement executed by the such person acknowledging that as a director of the Corporation, such person will owe a fiduciary duty under the Code exclusively to the Corporation and its shareholders, (8) a representation whether such person satisfies the requirements of <u>Section 2.2(b)</u> of these Bylaws, (9) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such person with respect to any securities of the Corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (10) a description of all arrangements or understandings, financial or otherwise, between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the shareholder, (11) a reasonably detailed description of the business and personal relationship, if any, between the nominee and the person or entity nominating such individual (including any affiliates of such person or entity whom the nominee has any business or personal relationship), and (12) a completed signed director questionnaire signed by the nominee (a form of which shall be provided by the Secretary with ten (10) days following a request therefor);

&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;&nbsp;&nbsp;&nbsp;if the notice relates to any business (other than the nomination of persons for election as directors) that the shareholder proposes to bring properly before a meeting of shareholders pursuant to <u>Section 5.14(a)(i)(C)</u>, to be in proper form, the shareholder's notice to the Secretary must set forth as to each matter of business to be brought before the annual meeting, (1) a brief description of the business desired to be brought before the meeting, (2) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these Bylaws, the language of the proposed amendment), (3) the reasons for conducting such business at the meeting, (4) any material interest in such business of such shareholder or a Shareholder Associated Person (as defined in <u>Section 5.4(c)(vi))</u>, (5) a representation whether the shareholder or the beneficial owner, if any, intends or is part of a group that intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve or adopt the proposal or otherwise to solicit proxies from shareholders in support of such proposal (and a copy of such documents); (6) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act, and (7) such other information relating to any proposed item of business as the Corporation may reasonably require to determine whether such proposed item of business is a proper matter for shareholder action;

&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;&nbsp;&nbsp;&nbsp;as to the shareholder giving the notice pursuant to this <u>Section 5.14</u> and the beneficial owner, if any, on whose behalf the nomination for election or proposal of any other business is made (1) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and any other shareholders and beneficial owners known by such shareholder to be supporting such proposed business to be brought before the meeting or nominees for election, (2) the class or series and number of shares of capital stock of the Corporation that are, directly or indirectly, owned or beneficially owned by the shareholder or any Shareholder Associated Person, (3) any derivative positions with respect to shares of capital stock of the Corporation held or beneficially held by or on behalf of the shareholder or Shareholder Associated Person, (4) whether and to the extent to which any hedging or other transaction or series of with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such shareholder or any Shareholder Associated Person with respect to any securities of the Corporation, (5) all information relating to the shareholder or any

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Shareholder Associated Person or related person that would be required to be set forth in a Schedule 13D filed by the shareholder or any Shareholder Associated Person or related person pursuant to Rule 13d-1(a) of the Exchange Act or an amendment pursuant to Rule 13d-2(a) of the Exchange Act if such a statement were required to be filed under the Exchange Act, and (6) a representation that the shareholder is a holder of record of capital stock of the Corporation entitled to vote at such meeting and intends to appear in person or by personal representative (as defined in <u>Section 15.14(e)(iv))</u> at the meeting to propose such business or nomination;

&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)&nbsp;&nbsp;&nbsp;&nbsp;The information required by <u>Section 5.14(a)(iii)(A)(B)</u> and <u>(C)</u> must be updated and supplemented so that the information provided or required to be provided shall be true and correct, by delivery to the Secretary (1) no later than ten (10) days after the record date for determining the shareholders entitled to vote at the annual meeting of shareholders, of such information as of such record date and (2) no later than five (5) days before the annual meeting of shareholders, of such information as of the date that is ten (10) days before the annual meeting of shareholders. For the avoidance of doubt, the requirement to update, supplement and correct such information shall not permit any shareholder or other person to change or add any proposed nominee or proposal or be deemed to cure any defects or limit the remedies (including without limitation under these Bylaws) available to the Corporation relating to any defect.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;For the avoidance of doubt, the information required in <u>Section 5.14(a)(iii)(A)(1)</u> through <u>5.14(a)(iii)(A)(11)</u> shall be provided with the notice of nomination, and the information required pursuant to <u>Section 5.14(a)(iii)(A)(12)</u> shall be provided to the Secretary within ten (10) calendar days after the delivery of a questionnaire to the nominee or to the person submitting the nomination. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine (A) the eligibility of such proposed nominee to serve as a director of the Corporation (including the information required to be set forth in the shareholder's notice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person's nomination was given) and (B) whether such nominee qualifies as an "independent director" or "audit committee financial expert" under applicable law, securities exchange rule or regulation, or any publicly-disclosed corporate governance guideline or committee charter of the Corporation.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;A nominee shall not be eligible for election if a shareholder or Shareholder Associated Person, as applicable, takes action contrary to the information provided to the Company applicable to such nominee or if the information provided contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;<u>Special Meetings of Shareholders</u>. For special meeting of shareholders at which directors are to be elected pursuant to <u>Section 5.3</u>, nominations of persons for election to the Board of Directors shall be made only (i) by or at the direction of the Board of Directors, (ii) by any shareholder of the Corporation who (A) is a stockholder of record at the time of the giving of the notice required by this <u>Section 5.14(b)</u> and on the record date for the determination of shareholder entitled to vote at the special meeting and (B) delivers a timely written notice of the nomination to the Secretary that includes the information set forth in <u>Section 5.14(a)(iii)(A)</u> and Section <u>5.14(a)(iii)(C)</u>, or (iii) in the

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case of a stockholder-requested special meeting, by any shareholder of the Corporation pursuant to <u>Section 5.3</u>. To be timely, such notice must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall an adjournment of a special meeting of shareholders, or postponement of any previously scheduled special meeting of shareholders for which notice has been given (or with respect to which there has been a public announcement of the date of the meeting), commence a new time period (or extend any time period) for the giving of a shareholder's notice as described in this <u>Section 5.14(b)</u>. A person shall not be eligible for election as a director at a special meeting unless the person is nominated (i) by or at the direction of the Board of Directors, (ii) by a shareholder in accordance with the notice procedures set forth in this <u>Section 5.14(b)</u>, or (iii) in the case of a stockholder-requested special meeting, by any shareholder of the Corporation pursuant to <u>Section 5.3</u>. In addition, a nominee shall not be eligible for election if a shareholder or Shareholder Associated Person, as applicable, takes action contrary to the representations made in the information applicable to such nominee provided to the Corporation or if the information provided to the Corporation applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chair of the special meeting shall, if the facts warrant, determine and declare at the special meeting that a nomination was not made in accordance with the provisions of this <u>Section 5.14(b)</u>, and if he or she should so determine, he or she shall so declare at the special meeting, and the defective nomination shall be disregarded. Notwithstanding any other provision of these Bylaws, in the case of a stockholder-requested special meeting, no shareholder may nominate a person for election to the Board of Directors or propose any other business to be considered at the meeting, except pursuant to the written request(s) delivered for such special meeting pursuant to <u>Section 5.3</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;(c)&nbsp;&nbsp;&nbsp;&nbsp;<u>General</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;A shareholder who has delivered a notice of nomination pursuant to this <u>Section 5.14</u> shall promptly certify to the Corporation in writing that it has complied with the requirements of Rule 14a-19 promulgated under the Exchange Act ("<u>Rule 14a-9</u>") and deliver no later than five (5) business days prior to the annual meeting or special meeting, as applicable, reasonable evidence that it has complied with such requirements. Notwithstanding anything to the contrary in these Bylaws, unless otherwise required by law, if any shareholder (A) provides notice pursuant to Rule 14a-19 and (B) subsequently (aa) notifies the Corporation that such shareholder no longer intends to solicit proxies in support of director nominees other than the Corporation's director nominees in accordance with Rule 14a-19 or (bb) fails to comply with the requirements of Rule 14a-19, such shareholder's nomination(s) shall be deemed null and void and the Corporation shall disregard any proxies or votes solicited for any nominee proposed by such shareholder.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;Only such persons who are nominated in accordance with the procedures set forth in this <u>Section 5.14</u> shall be eligible to be elected at an annual or special meeting of shareholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this <u>Section 5.14</u>. Except as otherwise provided by law, the chair of the meeting shall have the power and duty (A) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this <u>Section 5.14</u> and (B) if any proposed nomination or business was not made or proposed in compliance with this <u>Section 5.14</u>, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this <u>Section 5.14</u>, unless otherwise required by law, if the shareholder (or a qualified representative of the shareholder) does not appear at the annual or special meeting of shareholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed

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business shall not be considered, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the this <u>Section 5.14</u>, "beneficially owned" means as defined within the meaning of Rule 13-3 under the Exchange Act, except that a person shall be deemed to beneficially own any shares of any class or series of the Corporation as to which such person has a right to acquire beneficial ownership at any time in the future.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this <u>Section 5.14</u>, to be considered a <u>qualified representative</u> of the shareholder, a person must be authorized by a writing executed by such shareholder or an electronic transmission delivered by such shareholder to act for such shareholder as proxy at the meeting of shareholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of shareholders.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this <u>Section 5.14</u>, "<u>public announcement</u>" shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press, or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;&nbsp;&nbsp;For purpose of this <u>Section 5.14</u>, "<u>Shareholder Associated Person</u>" shall mean (A) any person controlling, directly or indirectly, or acting in concert with, such shareholder, (B) any beneficial owner of shares of capital stock of the Corporation owned of record or beneficially by such shareholder and on whose behalf the business proposal or nomination, as the case may be, is being made or (C) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (A) and (B).

&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;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;&nbsp;&nbsp;&nbsp;Nothing in this <u>Section 5.14</u> shall be deemed to affect any rights (A) of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 (or any successor thereto) promulgated under the Exchange Act (and any proposal included in the Corporation's proxy statement pursuant to such Rule shall not be subject to any of the advance notice requirements in this <u>Section 5.14</u>) or (B) of the holders of any class or series of stock of the Corporation having a preference over the common stock as to dividends or upon liquidation to nominate and elect directors pursuant to and to the extent provided in any applicable provisions of the Articles of Incorporation. Nothing in this <u>Section 5.14</u> shall be deemed to affect any right of the Corporation to omit a proposal from the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(viii)&nbsp;&nbsp;&nbsp;&nbsp;In addition to the foregoing provisions of this <u>Section 5.14</u>, a shareholder must also comply with all applicable requirements of law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this <u>Section 5.14</u>.

Section 5.15&nbsp;&nbsp;&nbsp;&nbsp;<u>Conduct of Meetings</u>. The Board of Directors may adopt by resolution such rules, regulations, and procedures for the conduct of any meeting of shareholders as it shall deem appropriate. Except to the extent inconsistent with rules, regulations, and procedures adopted by the Board of Directors, the chair of the meeting shall have the right to prescribe such rules, regulations, and procedures and to do all such acts, as, in the judgment of such chair, are necessary, appropriate, or convenient for the proper conduct of the meeting. Such rules, regulations, or procedures, whether adopted by the Board of Directors or the chair of the meeting, may include, without limitation, the following: (a) the establishment of an agenda for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present at the meeting; (c) limitations on attendance at or participation in the meeting to shareholders of record of the Corporation, their duly authorized and constituted proxies, or such other persons as the chair of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) the determination of the

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circumstances in which any person may make a statement or ask questions and limitations on the time allotted to questions or comments; (f) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (g) the exclusion or removal of any shareholders or any other individual who refuses to comply with meeting rules, regulations, or procedures; (h) restrictions on the use of audio and video recording devices, cell phones, and other electronic devices; (i) rules, regulations, and procedures for compliance with any federal, state, or local laws or regulations (including those concerning safety, health, or security); (j) procedures (if any) requiring attendees to provide the Corporation advance notice of their intent to attend the meeting; and (k) rules, regulations, or procedures regarding the participation by means of remote communication of shareholders and proxy holders not physically present at a meeting, whether such meeting is to be held at a designated place or solely by means of remote communication. Unless and to the extent determined by the Board of Directors or the chair of the meeting, the chair of the meeting shall not be obligated to follow any technical, formal, or parliamentary rules or principles of procedure. Should any person in attendance become unruly or obstruct the meeting proceedings, the chair of the meeting shall have the power to have such person removed from the meeting

**ARTICLE VI**

**MEETINGS OF DIRECTORS** 

Section 6.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Place of Meetings</u>. Meetings (whether regular, special or adjourned) of the Board of Directors shall be held at the principal office of the Corporation for the transaction of business, as specified in accordance with <u>Section 1.1</u> of these Bylaws, or at any other place within or without the State which has been designated from time to time by resolution of the Board or which is designated in the notice of the meeting.

Section 6.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Regular Annual Meeting; Regular Meetings</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;After the adjournment of each annual meeting of the shareholders, the Board of Directors shall hold it annual regular meeting for the purpose of transaction of other business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;Regular meetings of the Board of Directors may be held without notice if the time and place of such meetings are fixed from time to time by the Board of Directors. Such regular meetings may be held without notice, provided the notice of any change in the time of any such meetings is given to all of the directors. Notice of a change in the determination of the time or place of a regular meeting shall be given to each director in the same manner as notice for special meetings of the Board of Directors.

Section 6.3&nbsp;&nbsp;&nbsp;&nbsp;<u>Special Meetings</u>. Special meetings of the Board of Directors may be called for any purposes or purposes at any time by the Chair of the Board, the Chief Executive Officer or the President, the Secretary, or by any two or more directors.

Section 6.4&nbsp;&nbsp;&nbsp;&nbsp;<u>Notice of Special Meetings</u>. Notice of the time and place of special meetings shall be delivered personally or by telephone, including voice messaging system or by electronic transmission by the Corporation, to each director or sent by first-class mail addressed to each Director at his or her address as it is shown upon the records of the Corporation. In case such notice is mailed, it must be deposited in the United States mail, postage prepaid, at least four (4) days prior to the time of the holding of the meeting. In case such notice is delivered personally, or by telephone (including by voice messaging system or by electronic transmission by the corporation), it shall be delivered personally or by telephone at least forty-eight (48) hours prior to the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated to either the director or to a person at the office of the director who the person giving the notice has reason to believe will

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promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the Corporation.

Section 6.5&nbsp;&nbsp;&nbsp;&nbsp;<u>Action at a Meeting; Quorum and Required Vote</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;Presence of a majority of the authorized number of directors at a meeting of the Board of Directors constitutes a quorum for the transaction of business, except as hereinafter provided.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;Members of the Board of Directors may participate in a meeting through use of conference telephone, electronic video screen communication or electronic transmission by and to the Corporation. Participation in a meeting through use of conference telephone or electronic video screen communication pursuant to this <u>subsection (b)</u> constitutes presence in person at such meeting as long as all members participating in the meeting are able to hear one another. Participation in a meeting through electronic transmission by and to the Corporation, other than conference telephone or electronic video screen communication (to which the restrictions in this sentence do not apply), pursuant to this <u>subsection (b)</u> constitutes presence in person at such meeting, if both of the following apply: (i) each member participating in the meeting can communicate with all of the other members concurrently, and (ii) each member is provided the means of participating in all matters before the Board of Directors, including, without limitation, the capacity to propose, or to interpose an objection to a specific action to be taken by the corporation.

&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;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the Board of Directors, unless a greater number, or the same number after disqualifying one or more directors from voting, is required by law, by the Articles of Incorporation or by these Bylaws. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

Section 6.6&nbsp;&nbsp;&nbsp;&nbsp;<u>Adjournment</u>. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for over twenty-four (24) hours, notice of any adjournment to another time and place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of adjournment.

Section 6.7&nbsp;&nbsp;&nbsp;&nbsp;<u>Waiver of Notice</u>. Notice of a meeting need not be given to a director who provides a waiver of notice or a consent to holding the meeting, or who attends the meeting without protesting the lack of notice to such director, prior thereto or at its commencement. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 6.8&nbsp;&nbsp;&nbsp;&nbsp;<u>Action without a Meeting</u>. Any action required or permitted by law to be taken by the Board of Directors may be taken without a meeting, if all members of the Board of Directors shall individually or collectively consent in writing to such action. Written consent or consents shall be filed with the minutes of the proceedings of the Board of Directors. Action by written consent shall have the same force and effect as the unanimous vote of such directors.

**ARTICLE VII**

**GENERAL MATTERS**

Section 7.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Record Date for Purposes Other than Notice and Voting</u>. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action (other than with respect to notice or voting at a shareholders' meeting, the Board of Directors may fix, in

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advance, a record date, which shall not be more than sixty (60) days prior to any such action. Only shareholders of record at the close of business on the record date are entitled to receive the dividend, distribution or allotment or rights, or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date, except as otherwise provided for in the Articles of Incorporation, by agreement or the Code.

Section 7.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Instruments in Writing</u>. All checks, drafts, other orders for payments of money, notes or other evidences of indebtedness of the Corporation, and all written contracts of the Corporation, shall be signed by such officer or officers, agent or agents, as the Board of Directors may from time to time designate. No officer, agent, or employee of the Corporation shall have the power to bind the Corporation by contract or otherwise unless authorized to do so by these Bylaws or by the Board of Directors.

Section 7.3&nbsp;&nbsp;&nbsp;&nbsp;<u>Shares Held by the Corporation</u>. Shares in other corporations standing in the name of the Corporation may be voted or represented and all rights incident thereto may be exercised on behalf of the Corporation by the Chief Executive Officer, the President or any officer of the Corporation authorized so to do by resolution of the Board of Directors. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or by power of attorney duly executed by such person having the authority.

Section 7.4&nbsp;&nbsp;&nbsp;&nbsp;<u>Certificated and Uncertificated Shares</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;Certificates for the shares of stock of the Corporation shall be issued only to the extent as may be required by applicable law or as otherwise authorized by the Secretary or any Assistant Secretary, and if so issued shall be in such form as is consistent with the Articles of Incorporation and applicable law. Any such certificates shall be signed by, or in the name of the Corporation by, the Chief Executive Officer or the President and by the Secretary or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. Any such certificate shall also contain such legend or other statement as may be required by Section 418 of the Code, any agreement between the Corporation and the issue thereof, and may contain such legend or other statement as may be required by any other applicable law or regulation or agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;Upon resolution of the Board of Directors, shares of the Corporation may also be issued, recorded and transferred exclusively in uncertificated book-entry form in accordance with a direct registration program operated by a clearing agency registered under Section 17A of the Exchange Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars on behalf of the Corporation. If a transfer agent is appointed, transfers of shares of stock of the Corporation shall be made by the transfer agent and registrar on the books of the Corporation after receipt of a request with proper evidence of succession, assignment, or authority to transfer by the record holder of such stock, or by an attorney lawfully constituted in writing, and in the case of stock represented by a certificate, upon surrender of the certificate. Subject to the foregoing, the Board of Directors shall have power and authority to make such rules and regulations as it shall deem necessary or appropriate concerning the issue, transfer, and registration of shares of stock of the corporation, and to appoint and remove transfer agents and registrars of transfers.

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Section 7.5&nbsp;&nbsp;&nbsp;&nbsp;<u>Lost Certificates</u>. When the owner of any certificate for shares of the Corporation claims that the certificate has been lost, stolen or destroyed, the Corporation shall issue new certificates (or uncertificated shares) in place of the original certificate if the owner (a) so requests before the Corporation has notice that the original certificate has been acquired by a bona fide purchaser, (b) files with the Corporation an indemnity bond in such form and in such amount sufficient to protect the Corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement shares, and (c) satisfies any other reasonable requirements imposed by the Corporation. The Board of Directors may adopt such other provisions and restrictions with reference to lost certificates, not inconsistent with applicable law, as it shall in its discretion deem appropriate.

Section 7.6&nbsp;&nbsp;&nbsp;&nbsp;<u>Maintenance and Inspection of Bylaws; Other Corporate Records; Share Register</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;(a)&nbsp;&nbsp;&nbsp;&nbsp;The Corporation shall keep at its principal executive or business office the original or a copy of these Bylaws as amended or otherwise altered to date, which shall be open to inspection by the shareholders at all reasonable times during office hours.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;The accounting books and records and minutes of proceedings of the shareholders and the Board of Directors and any committee or committees of the Board of Directors shall be kept at such place or places designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;The Corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the Board of Directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder.

Section 7.7&nbsp;&nbsp;&nbsp;&nbsp;Fiscal Year. The fiscal year of this Corporation shall commence on January 1st and end on December 31st of each year.

Section 7.8&nbsp;&nbsp;&nbsp;&nbsp;<u>Notices</u>. Any reference in these By-Laws to the time a notice is given or sent means, unless otherwise expressly provided, the time a written notice by mail is deposited in the United States mails, postage prepaid; or the time any other written notice is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient; or the time any oral notice is communicated, in person or by telephone or wireless, to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient.

Section 7.9&nbsp;&nbsp;&nbsp;&nbsp;<u>Reports to Shareholders</u>. The Board of Directors of the corporation shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year, and at least fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days) prior to the annual meeting of shareholders to be held during the next fiscal year. If approved by the Board of Directors, the report and any accompanying material may be sent by electronic transmission by the Corporation. This report shall contain a balance sheet as of the end of that fiscal year and an income statement and statement of changes in financial position for that fiscal year, accompanied by any report thereon of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation. This requirement will be satisfied if the Corporation has a class of securities registered under Section 12 of the Exchange Act and complies with Rule 14a-16 of the Exchange Act. The report required by this <u>Section 7.9</u> shall also contain such other matters as required by Section 1501(b) of the General Corporation Law, unless the Corporation is subject to the reporting requirements of Section 13 of the Exchange Act , and is not exempted therefrom under Section 12(g)(2) thereof. As long as the corporation has less than 100 holders of record of its shares (determined as provided in Section 605 of the General Corporation Law), the foregoing requirement of an annual report is hereby waived.

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Section 7.10&nbsp;&nbsp;&nbsp;&nbsp;<u>Definitions</u>. Unless the context requires otherwise or as otherwise defined in these Bylaws, the general provisions, rules of construction, and definitions in the Code and Sections 1-21 of the Code govern the construction of these Bylaws. Without limiting the generality of the provision, the singular number includes the plural, the plural number includes the singular, the word "<u>including</u>" is not a term of limitation, the terms "<u>approval of the outstanding shares</u>" and "<u>approved by (or approval of) the shareholders</u>" have the meanings set forth in Sections 152 and 153 of the Code, respectively, and the terms "<u>electronic transmission by the corporation</u>" and "<u>electronic transmission to corporation</u>" have the meanings set forth in Sections 20 and 21 of the Code, respectively. The term "<u>person</u>" means, as applicable, any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, association, trust or other entity or organization.

**ARTICLE VIII**

**CONSTRUCTION OF BYLAWS WITH REFERENCE TO PROVISIONS OF LAW** 

Section 8.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Bylaw Provisions Additional and Supplemental to Provisions of Law</u>. All restrictions, limitations, requirements and other provisions of these Bylaws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal. Reference in these Bylaws to the Code or any other law, statute or regulation means as amended, modified, replaced, or reenacted, and in effect from time to time, including rules and regulations promulgated thereunder. All references to "Section" numbers refers to Sections of these Bylaws.

Section 8.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Bylaw Provisions Contrary to or Inconsistent with Provisions of Law</u>. Any article, section, subsection, subdivision, sentence, clause or phrase of these Bylaws which, upon being construed in the manner provided in <u>Section 8.1</u> of these Bylaws, shall be contrary to or inconsistent with any applicable provision of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these Bylaws, it being hereby declared that these Bylaws, and each article, section, subsection, subdivision, sentence, clause, or phrase thereof, would have been adopted irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.

**ARTICLE IX**

**ADOPTION, AMENDMENT OR REPEAL OF BYLAWS** 

Section 9.1&nbsp;&nbsp;&nbsp;&nbsp;<u>By Shareholders</u>. These Bylaws may be adopted, amended or repealed by the vote of holders of a majority of the outstanding shares entitled to vote. Any Bylaws specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa may only be adopted by the shareholders; provided, however, that a bylaw or amendment of the Articles of Incorporation reducing the number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting are equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote.

Section 9.2&nbsp;&nbsp;&nbsp;&nbsp;<u>By the Board of Directors</u>. Subject to the right of shareholders to adopt, amend or repeal these Bylaws, other than a bylaw or amendment thereof specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa, these Bylaws may be adopted, amended or repealed by the Board of Directors. A bylaw

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adopted by the shareholders may restrict or eliminate the power of the Board of Directors to adopt, amend or repeal these Bylaws.

**ARTICLE X**

**INDEMNIFICATION**

Section 10.1&nbsp;&nbsp;&nbsp;&nbsp;<u>Indemnification of Directors, Officers and Employees</u>. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any proceeding, by reason of the fact that such person is or was an agent of the Corporation, to the fullest extent permitted by Section 317 of the Code. The term "agent" in the foregoing sentence means any person who is or was a director, officer, or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, or employee of another corporation, partnership, limited liability company, joint venture, trust or other enterprise. The term "proceeding" in the foregoing sentence shall have the meaning given to the term in Section 317 of the Code.

Section 10.2&nbsp;&nbsp;&nbsp;&nbsp;<u>Indemnification Not Exclusive</u>. The indemnification provided by this Article X for acts, omissions or transactions while acting in the capacity of, or while serving as, a director, officer or employee of the Corporation shall not be deemed exclusive of any other rights to those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, to the extent the additional rights to indemnification are authorized in the Articles of Incorporation. The Corporation is specifically authorized to enter into individual contracts with any or all if its directors, officers, employees or agents respecting indemnification and expense advances to the fullest extent permitted by the Code or other applicable law. Nothing in this section shall restrict the power of the corporation to indemnify its agents under any provision of the Code, or under any other provision of law from time to time applicable to the Corporation, nor shall anything in this section authorize the Corporation to indemnify its agents in situations prohibited by the Code or other applicable law.

Section 10.3&nbsp;&nbsp;&nbsp;&nbsp;<u>Insurance Indemnification</u>. The Corporation shall have the power to purchase and maintain insurance on behalf of any agent of the Corporation against any liability asserted against or incurred by the agent in that capacity or arising out of that agent's status as such whether or not the Corporation would have the power to indemnify the agent against that liability under the provisions of this <u>Article X</u>.

Section 10.4&nbsp;&nbsp;&nbsp;&nbsp;<u>Survival of Rights</u>. The rights conferred on any person by this <u>Article X</u> shall continue as to a person who has ceased to be a director, officer, employee or other agent of the Corporation and shall inure to the benefit of the heirs, executors and administrators of such person.

Section 10.5&nbsp;&nbsp;&nbsp;&nbsp;<u>Amendments</u>. Any repeal or modification of this <u>Article X</u> shall only be prospective and shall not adversely affect the rights under this <u>Article X</u> in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the Corporation.

Section 10.6&nbsp;&nbsp;&nbsp;&nbsp;<u>Fiduciaries</u>. This <u>Article X</u> does not apply to any proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in such person's capacity as such, even though such person may also be an agent as defined in <u>Section 10.1</u> of these By-Laws. The Corporation shall, and it hereby agrees to, indemnify such trustee, investment manager or other fiduciary to the extent permitted by subdivision (f) of Section 207 of the Code.

CERTIFICATE OF ADOPTION OF

SECOND AMENDED AND RESTATED BYLAWS

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OF

HERITAGE COMMERCE CORP

The undersigned hereby certifies that she is the duly elected, qualified and acting Secretary of Heritage Commerce Corp, a California corporation (the "Corporation"), and that the foregoing amended and restated bylaws were adopted as the Corporation's Bylaws as of May 22, 2025 by the Corporation's Board of Directors.

The undersigned has executed this Certificate as of May 22, 2025.

<u>/s/ Debbie Reuter&nbsp;&nbsp;&nbsp;&nbsp;</u>

Debbie Reuter

Corporate Secretary

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

**REGARDING THE QUARTERLY REPORT ON FORM 10-Q**

**FOR THE QUARTER ENDED JUNE 30, 2025**

I, Robertson Clay Jones, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the Quarter Ended June 30, 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: August 8, 2025

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| |
|:---|
| /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 QUARTERLY REPORT ON FORM 10-Q**

**FOR THE QUARTER ENDED JUNE 30, 2025**

I, Seth Fonti, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the Quarter Ended June 30, 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: August 8, 2025

---

| |
|:---|
| /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 QUARTERLY REPORT ON FORM 10-Q**

**FOR THE QUARTER ENDED JUNE 30, 2025**

In connection with the Quarterly Report of Heritage Commerce Corp (the "Company") on Form 10-Q for the period ended June 30, 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: August 8, 2025

---

| |
|:---|
| /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 QUARTERLY REPORT ON FORM 10-Q**

**FOR THE QUARTER ENDED JUNE 30, 2025**

In connection with the Quarterly Report of Heritage Commerce Corp (the "Company") on Form 10-Q for the period ended June 30, 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: August 8, 2025

---

| |
|:---|
| /s/ SETH FONTI |
| Seth Fonti |
| *Chief Financial Officer* (Principal Financial Officer) |

---

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