RBB Bancorp: Form 10-Q for the period ended Mar 31, 2026

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

In this Quarterly Report on Form 10-Q (this “Report” or “Form 10-Q”), the terms “Bancorp” and “RBB” refer to RBB Bancorp and the term “Bank” refers to Royal Business Bank. The terms “Company,” “we,” “us,” and “our” refer to Bancorp and its consolidated subsidiaries, including the Bank collectively. When we refer to the “parent company,” “Bancorp,” or the “holding company,” we are referring to RBB Bancorp, the parent company, on a stand-alone basis. This Report contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:

• business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the tight labor market, ineffective management of the United States (“U.S.”) federal budget or debt or turbulence or uncertainly in domestic or foreign financial markets;
• the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;
• adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments;
• federal government shutdowns and uncertainty regarding the federal government's debt limit;
• possible additional provisions for credit losses and charge-offs;
• credit risks of lending activities and deterioration in asset or credit quality;
• extensive laws and regulations and supervision that we are subject to, including potential supervisory action by bank supervisory authorities;
• compliance with the Bank Secrecy Act and other money laundering statutes and regulations;
• potential goodwill impairment;
• liquidity risk;
• fluctuations in interest rates;
• failure to comply with debt covenants;
• risks associated with acquisitions and the expansion of our business into new markets;
• inflation and deflation;
• real estate market conditions and the value of real estate collateral;
• the effects of having concentrations in our loan portfolio, including commercial real estate and the risks of geographic and industry concentrations;
• environmental liabilities;
• our ability to compete with larger competitors;
• our ability to retain key personnel;
• successful management of reputational risk;
• severe weather, natural disasters, earthquakes, fires, or other adverse external events could harm our business;
• geopolitical conditions, including acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, including the wars between Russia and Ukraine and in the Middle East, and increasing tensions between China and Taiwan, which could impact business and economic conditions in the U.S. and abroad;
• tariffs, trade policies, and related tensions, which could impact our clients, specific industry sectors, and/or broader economic conditions and financial market;
• public health crises and pandemics, and their effects on the economic and business environments in which we operate, including our credit quality and business operations, as well as the impact on general economic and financial market conditions;
• general economic or business conditions in Asia, and other regions where the Bank has operations;
• failures, interruptions, or security breaches of our information systems;
• climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs;
• cybersecurity threats and the cost of defending against them;
• our ability to adapt our systems to the expanding use of technology in banking;
• risk management processes and strategies;
• the impact of regulatory enforcement actions, if any;
• certain provisions in our charter and bylaws that may affect acquisition of the Company;
• changes in tax laws and regulations;
• the impact of governmental efforts to restructure the U.S. financial regulatory system and increased costs of compliance and other risks associated with changes in regulation, including any amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act;
• the impact of changes in the Federal Deposit Insurance Corporation (“FDIC”) insurance assessment rate and the rules and regulations related to the calculation of the FDIC insurance assessments;
• the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”) or other accounting standards setters;
• fluctuations in our stock price;
• restrictions on dividends and other distributions by laws and regulations and by our regulators and our capital structure;
• our ability to raise additional capital, if needed, and the potential resulting dilution of interests of holders of our common stock;
• the soundness of other financial institutions and our ongoing relations with our various federal and state regulators, including the SEC, FDIC, FRB, California Department of Financial Protection and Innovation and Consumer Financial Protection Bureau; and
• our success at managing the risks involved in the foregoing items.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

CRITICAL ACCOUNTING POLICIES

Management has established various accounting policies that govern the application of generally accepted accounting principles in the U.S. (“GAAP”) in the preparation of our financial statements. Certain accounting policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions. The Company’s critical accounting policies consist of the allowance for credit losses on loans held for investment, goodwill and income taxes. Please see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025 (our "2025 Annual Report") for additional discussion concerning these critical accounting policies. Also, our significant accounting policies are described in greater detail in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies to the audited consolidated financial statements included in our 2025 Annual Report and the consolidated financial statements in this Form 10-Q and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Allowance for Credit Losses (ACL)

A sensitivity analysis of our ACL was performed as of March 31, 2026. Based on this sensitivity analysis, a 25% increase in the assumed prepayment speed on loans would result in an $899,000, or 2.04%, decrease to the ACL. A 25% decrease in the assumed prepayment speed on loans would result in a $1.1 million, or 2.56%, increase to the ACL. Additionally, a one percentage point increase in the unemployment rate would result in a $1.1 million, or 2.46%, increase to the ACL and a one percentage point decrease in the unemployment rate would result in a $970,000, or 2.20%, decrease to the ACL. Management reviews the results using the comparison scenario for sensitivity analysis and considers the results when evaluating the qualitative factor adjustments.

On a quarterly basis, we stress test our nine qualitative risk factors, which are categorized by lending policy, procedures and strategies; economic conditions; changes in nature and volume of the portfolio; credit and lending staff; problem loan trends; loan review results; collateral value; concentrations; and regulatory and business environment, by creating two scenarios, a moderate stress scenario and a major stress scenario. In the Moderate Stress scenario, the status of the nine risk factors across all pooled loan types were set at “High-Moderate Risk” while in the Major Stress scenario, the status of the nine risk factors across all pooled loan types were set at “Major Risk.” Under the Moderate Stress scenario, the ACL would increase by $11.0 million, or 24.89%, as of March 31, 2026. Under the Major Stress scenario, the ACL would increase by $31.3 million, or 70.80%, as of March 31, 2026. Management compared the stress test results to our internal forecasts for earnings and capital and has concluded that the Company would remain well-capitalized under these stressed scenarios.

For additional information on the policies, methodologies and judgments used to determine the ACL, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies in our 2025 Annual Report and Note 4 — Loans and Allowance for Credit Losses in the consolidated financial statements in this Form 10-Q.

GENERAL

RBB Bancorp is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. RBB Bancorp’s principal business is to serve as the holding company for its wholly-owned subsidiaries, the Bank and RAM. RAM was formed in 2012 to hold and manage problem assets acquired in business combinations. There are no problem assets at RAM or activity in this subsidiary for the three months ended March 31, 2026, or the year ended December 31, 2025. At March 31, 2026, we had total assets of $4.2 billion, gross loans held for investment ("HFI") of $3.3 billion, total deposits of $3.3 billion, and total shareholders' equity of $531.1 million. RBB’s common stock trades on the Nasdaq Global Select Market under the symbol “RBB.”

The Bank provides business-banking products and services predominantly to Asian-centric communities through full service branches located in Los Angeles County, Orange County and Ventura County in California, in the Las Vegas (Nevada), the New York City metropolitan areas, Chicago (Illinois), Edison (New Jersey), and Honolulu (Hawaii). The products and services include commercial and investor real estate loans, business loans and lines of credit, Small Business Administration (“SBA”) 7A and 504 loans, mortgage loans, trade finance, and a full range of depository accounts, including specialized services such as remote deposit, E-banking, mobile banking, and treasury management services.

We operate as a minority depository institution ("MDI"), which is defined by the FDIC as a federally insured depository institution where 51% or more of the voting stock is owned by minority individuals or a majority of the board of directors is minority and the community that the institution serves is predominantly minority. A MDI is eligible to receive support from the FDIC and other federal regulatory agencies such as training, technical assistance, and review of proposed new deposit taking and lending programs, and the adoption of applicable policies and procedures governing such programs. We intend to maintain our MDI designation, as it is expected that at least 51% of our issued and outstanding shares of capital shall remain owned by minority individuals or a majority of the board of directors is minority and the community that the institution serves is predominantly minority. The MDI designation has been historically beneficial to us, and we continue to use the program for technical assistance.

We operate 24 banking offices in Arcadia, Cerritos, Diamond Bar, Irvine, Los Angeles, Monterey Park, Oxnard, Rowland Heights, San Gabriel, Silver Lake, Torrance, and Westlake Village, California; Las Vegas, Nevada; Manhattan, Brooklyn, Flushing, and Elmhurst, New York; the Chinatown and Bridgeport neighborhoods of Chicago, Illinois; Edison, New Jersey; and Honolulu, Hawaii. Our primary source of revenue is providing loans to customers, who are predominately small and middle-market businesses and individuals.

OVERVIEW

The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of RBB and its wholly owned subsidiaries. This information is intended to facilitate an understanding and assessment of significant changes and trends related to our financial condition and results of operations. This discussion and analysis should be read in conjunction with our audited consolidated financial statements included in our 2025 Annual Report, and the unaudited consolidated financial statements and accompanying notes presented elsewhere in this Report. The financial results for the three months ended March 31, 2026, are not necessarily indicative of the results expected for the year ending December 31, 2026.

We reported net income of $11.3 million, or $0.66 diluted earnings per share, for the quarter ended March 31, 2026, compared to net income of $10.2 million, or $0.59 diluted earnings per share, for the quarter ended December 31, 2025, and $2.3 million, or $0.13 diluted earnings per share, for the quarter ended March 31, 2025. Net income for the first quarter of 2026 reflected higher net interest income, lower credit costs, and higher noninterest income as compared to the prior quarter and the same quarter last year.

The provision for credit losses was a reversal of $200,000 for the first quarter of 2026 compared to a provision of $600,000 and $6.8 million for the quarters ended December 31, 2025, and March 31, 2025. The first quarter of 2026 reversal of provision for credit losses was supported by paydowns on loans with specific reserves, the impact of stabilized credit quality trends, and positive underlying economic forecast indicators, which offset the need for provisions related to new loan originations. Net charge-offs in the first quarter of 2026 represented 0.00% of average loans on an annualized basis, compared to 0.20% for the fourth quarter of 2025 and 0.35% for the first quarter of 2025.

At March 31, 2026, total assets were $4.2 billion, a decrease of $14.0 million from December 31, 2025. The decrease in total assets was primarily the result of a decrease of $15.4 million in cash and cash equivalents and a decrease of $10.5 million in income tax receivable. The decrease in cash supported an increase of $10.9 million in gross loans HFI to $3.3 billion at March 31, 2026, and an increase of $8.6 million in securities available for sale ("AFS") to $415.8 million at March 31, 2026. The decrease in income tax receivable of $10.5 million was the result of refunds of taxes previously paid that were received from taxing authorities in the first quarter of 2026. Total deposits decreased by $10.5 million to $3.3 billion as of March 31, 2026. The decrease in total deposits during the first quarter of 2026 was due to a $61.9 million decrease in wholesale deposits offset by a $51.4 million increase in retail deposits. The increase in retail deposits included a $219.4 million increase in non-maturity interest-bearing deposits and a $168.4 million decrease in time deposits as a portion of the maturing time deposits moved into a high-yield savings product. Noninterest-bearing demand deposits totaled $526.9 million, or 15.8% of total deposits, at March 31, 2026, which is similar to the balances at December 31, 2025. The gross loan to deposit ratio was 99.6% at March 31, 2026, compared to 99.0% at December 31, 2025.

Nonperforming assets decreased $4.6 million to $48.8 million, or 1.16% of total assets, at March 31, 2026, from $53.5 million, or 1.27% of total assets, at December 31, 2025. The $4.6 million decrease in nonperforming assets was primarily attributable to a $4.6 million decrease in OREO to $4.3 million at March 31, 2026, compared to $8.8 million at December 31, 2025. The decrease in OREO was due to the sale of one property and a $350,000 valuation provision on a remaining OREO property. The sale resulted in a $1.2 million gain.

Loans classified as substandard decreased by $2.7 million during the first quarter of 2026 due to payoffs and paydowns totaling $3.0 million and upgrades to pass-rated status of $1.1 million, partially offset by downgrades to substandard totaling $1.5 million. Loans classified as special mention increased $5.5 million due to downgrades of $5.8 million, partially offset by paydowns of $303,000.

As of March 31, 2026, the allowance for credit losses totaled $44.2 million, down from $44.4 million at December 31, 2025. The $222,000 decrease in the allowance for credit losses for the first quarter of 2026 was due to a $200,000 reversal of provision for credit losses and net charge-offs of $22,000. The allowance for loan losses ("ALL") as a percentage of loans HFI totaled 1.31% at March 31, 2026, compared to 1.32% at December 31, 2025. The ALL as a percentage of nonperforming loans HFI was 97.98% at March 31, 2026, and 98.33% at December 31, 2025.

Total shareholders' equity was $531.1 million, or $31.10 book value per share, at March 31, 2026, compared to $523.4 million, or $30.69 book value per share, at December 31, 2025. The increase in shareholders' equity for the first quarter of 2026 compared to the prior quarter was due mostly to net income of $11.3 million, offset by common stock cash dividends paid of $2.8 million and higher net unrealized losses on AFS securities of $962,000. Tangible book value per share increased to $26.84 at March 31, 2026, up from $26.42 at December 31, 2025. For additional information on tangible book value per share, see "Non-GAAP Financial Measures."

ANALYSIS OF RESULTS OF OPERATIONS

Financial Performance

(dollars in thousands, except per share data)

(1) Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares adjusted for the dilutive effect of outstanding stock options and restricted stock units using the treasury stock method.

(2) Return on average tangible common equity, tangible common equity to tangible assets, and tangible book value per share are non-GAAP financial measures. See "Non-GAAP Financial Measures" for a reconciliation of these measures to their most comparable GAAP measures.

(3) Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.

34

Average Balance Sheet, Interest and Yield/Rate Analysis

The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans, cash and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax equivalent (“TE”) basis by adjusting interest income utilizing the federal statutory tax rate of 21% for 2026 and 2025. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, and in the growth and maturity of earning assets. For additional information see “Capital Resources and Liquidity Management” and Part I, Item 3. "Quantitative and Qualitative Disclosures about Market Risk" included in this Report.

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the periods presented. The average balances are daily averages and, for loans, include both performing and nonperforming balances.

(dollars in thousands)

(1) Includes income and average balances for interest-earning time deposits and other miscellaneous interest-earning assets.

(2) Interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis.

(3) Average loan balances include nonaccrual loans. Interest income on loans includes the effects of discount accretion and net deferred loan origination fees and costs accounted for as yield adjustments.

35

The following table summarizes the extent to which changes in (1) volume and (2) interest rates of average interest-earning assets and average interest-bearing liabilities affected our net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.

(dollars in thousands)

(1) Includes income and average balances for interest-earning time deposits and other miscellaneous interest-earning assets.

(2) Interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis.

(3) Average loan balances include nonaccrual loans. Interest income on loans includes the effects of discount accretion and net deferred loan origination fees and costs accounted for as yield adjustments.

Net Interest Income/Average Balance Sheet

Three Months Ended March 31, 2026 Compared to Three Months Ended December 31, 2025

Net interest income increased $994,000 to $30.5 million for the first quarter of 2026, compared to $29.5 million for the fourth quarter of 2025. Net interest income increased despite 2 fewer days in the current quarter and was comprised of a $1.4 million decrease in interest expense, offset by a $390,000 decrease in interest income. The decrease in interest expense was due mostly to the impact of fewer days in the quarter and a decrease in the cost of interest-bearing liabilities while average balances remained relatively unchanged quarter over quarter. The decrease in interest expense was comprised of a $3.4 million decrease in interest on time deposits, offset by a $2.0 million increase in interest on non-maturity interest-bearing accounts as a portion of maturing time deposits moved to a high-yield savings product. The decrease in interest income was due mostly to fewer days in the quarter and the impact of a lower yield on cash and securities, offset by the impact of a higher loan yield and a special FHLB dividend in addition to their normal quarterly dividend. The decrease in interest income was comprised of a $509,000 decrease in loan interest income and a $315,000 decrease in interest on cash and investment securities, offset by the FHLB special dividend of $430,000.

The net interest margin (“NIM”) increased 16 basis points to 3.15% for the first quarter of 2026, from 2.99% for the fourth quarter of 2025. The NIM increase included an 8 basis point increase in the yield on average total interest-earning assets and an 8 basis point decrease in the overall cost of funds. The yield on average total interest-earning assets increased to 5.86% for the first quarter of 2026 from 5.78% for the fourth quarter of 2025 due mostly to the impact of a 7 basis point increase in the yield on average loans and a 4 basis point increase from the FHLB special dividend. Average loans represented 84% of average interest-earning assets in the first quarter of 2026, which was unchanged from the fourth quarter of 2025.

The average total cost of funds decreased to 2.96% for the first quarter of 2026 from 3.04% for the fourth quarter of 2025, due mostly to a 10 basis point decrease in the overall cost of deposits to 2.86% for the first quarter of 2026. The total cost of deposits decreased due to a 12 basis point decrease in the cost of average interest-bearing deposits to 3.39% due to the mix of deposits and the continued repricing of deposits into the current rate environment. The average overnight Federal Funds Rate was 3.64% for the first quarter of 2026 compared to 3.90% for the fourth quarter of 2025. Average noninterest-bearing deposits represented approximately 16% of average total deposits for the first quarter of 2026 and fourth quarter of 2025. The period end weighted average interest rate for total deposits was 2.79% at March 31, 2026.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Net interest income increased $4.3 million to $30.5 million for the first quarter of 2026, compared to $26.2 million for the first quarter of 2025. The increase in net interest income was due to an increase in interest income of $4.5 million, offset by a $127,000 increase in interest expense. The increase in interest income was driven by loan growth as average total interest-earning assets were $252.1 million, or 6.8%, higher for the first quarter of 2026 compared to the same quarter in 2025. The increase in interest expense was primarily due to an increase in the average balance of interest-bearing deposits, offset by lower rates paid on those deposits.

The $4.5 million increase in interest income was due mainly to a $4.3 million increase in interest income from average total loans, of which $3.3 million was attributed to higher average balances and $1.0 million was attributed to an increase in rates. Average total loans increased $216.9 million due to strong loan growth since the end of the first quarter of 2025. The yield on average total loans increased 13 basis points to 6.14% for the quarter ended March 31, 2026 compared to 6.01% for the quarter ended March 31, 2025.

The $127,000 increase in interest expense was due mainly to higher interest expense on FHLB advances of $144,000 and an increase of $16,000 in interest expense on average interest-bearing deposits. Interest expense on FHLB advances increased due mainly to a 126 basis point increase in the average rate paid on FHLB advances as $150 million of fixed rate term advances matured during the first quarter of 2025 and were replaced in the higher rate environment, offset partially by the effect of the decrease in the average balance of outstanding FHLB advances. The increase in interest expense on average total interest-bearing deposits was primarily due to an increase of $281.6 million in the average balance of interest-bearing deposits, offset almost entirely by the impact of a 38 basis point decrease in the interest rate paid on total average interest-bearing deposits as deposits repriced in the current rate environment. The Federal Reserve lowered market interest rates 75 basis points since the end of the first quarter of 2025. The average overnight Federal Funds Rate was 3.64% for the first quarter of 2026 compared to 4.33% for the first quarter of 2025.

The NIM was 3.15% for the first quarter of 2026, an increase of 27 basis points from 2.88% for the first quarter of 2025. The increase was primarily due to a 19 basis point decrease in the total cost of funds to 2.96% combined with a 10 basis point increase in the yield on average total interest-earning assets to 5.86% for the first quarter of 2026 when compared to the rates for the first quarter of 2025. The increase in the yield on average total interest-earning assets was due mainly to an increase in loan rates, as well as the impact of the FHLB special dividend in the first quarter of 2026; there was no FHLB special dividend in 2025. The decrease in funding costs was due to the lower average total cost of interest-bearing deposits, offset by the higher average total cost for FHLB advances. Average noninterest-bearing deposits totaled $526.1 million, or 16% of total average deposits, for the first quarter of 2026 compared to $520.2 million, or 17% of total average deposits, for the first quarter of 2025.

Provision for Credit Losses

Three Months Ended March 31, 2026 Compared to Three Months Ended December 31, 2025

The provision for credit losses was a $200,000 reversal for the first quarter of 2026 compared to a $600,000 provision for the fourth quarter of 2025. The first quarter of 2026 reversal of provision for credit losses was supported by paydowns on loans with specific reserves, the impact of stabilized credit quality trends, and positive underlying economic forecast indicators, which offset the need for provisions related to new loan originations. Net charge-offs on an annualized basis represented 0.00% of average loans for the first quarter of 2026 compared to 0.20% for the fourth quarter of 2025.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The provision for credit losses was a $200,000 reversal for the first quarter of 2026 compared to a $6.8 million provision for the first quarter of 2025. The provision for credit losses for the first quarter of 2025 was the result of an increase in specific reserves of $2.8 million, net charge-offs of $2.6 million and an increase in general reserves of $1.3 million due mainly to net loan growth. Net charge-offs on an annualized basis represented 0.35% for the first quarter of 2025.

Noninterest Income

The following table presents the major components of our noninterest income for the periods presented:

(dollars in thousands)

Three Months Ended March 31, 2026 Compared to Three Months Ended December 31, 2025

Noninterest income for the first quarter of 2026 was $4.3 million, an increase of $1.4 million from $2.8 million for the fourth quarter of 2025. The increase in noninterest income was mainly due to higher net gain on OREO of $890,000, recoveries of fully charged-off acquired loans of $484,000, and interest income on the tax refunds related to purchased federal tax credits of $360,000, offset partially by lower gain on sale of loans of $133,000. The sale of $4.9 million of mortgage loans and $4.0 million of Small Business Administration (“SBA”) loans resulted in gains of $324,000 for the first quarter of 2026 compared to the sale of mortgage loans of $22.0 million and SBA loans of $2.9 million for gains of $457,000 for the fourth quarter of 2025.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Noninterest income increased $2.0 million to $4.3 million for the first quarter of 2026 from $2.3 million for the same quarter in the prior year. The increase in noninterest income primarily relates to the gain on OREO, recoveries of fully charged-off acquired loans, and interest income on the tax refunds discussed above. In addition, gain on sale of loans for the first quarter of 2026 increased $243,000 to $324,000 from $81,000 for the same quarter in the prior year. The first quarter of 2025 included losses on sales of nonperforming loans.

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

(dollars in thousands)

(1) SFR mortgage loans sold with servicing rights retained were $3.3 million, $593,000, and $400,000 for the three months ended March 31, 2026, December 31, 2025, and March 31, 2025. The first quarter of 2025 also included a bulk sale of $10.8 million underperforming SFR mortgage loans resulting in charge-offs of $1.4 million, and no gain or loss on sale.

(2) Other loans sold in the three months ended March 31, 2025, represented nonperforming loans HFS at December 31, 2024.

The following table presents information on loan servicing income for the periods indicated:

(dollars in thousands)

As of March 31, 2026, we were servicing SFR mortgage loans for other financial institutions, the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association ("FNMA"), and SBA loans. The following table presents loans serviced for others as of the dates indicated:

(dollars in thousands)

Noninterest Expense

The following table presents major components of our noninterest expense for the periods presented:

(dollars in thousands)

39

Three Months Ended March 31, 2026 Compared to Three Months Ended December 31, 2025

Noninterest expense for the first quarter of 2026 was $19.3 million, an increase of $293,000 from $19.0 million for the fourth quarter of 2025. The increase in noninterest expense was due mainly to higher salaries and employee benefits of $528,000 attributed to higher payroll taxes, benefits, and pay increases, which are typically reflected in the first quarter of the year. The efficiency ratio was 55.41% for the first quarter of 2026, compared to 58.69% for the fourth quarter of 2025. The decrease in the efficiency ratio is attributed mostly to higher net revenues. The operating expense ratio (noninterest expense, annualized, divided by average assets) for the first quarter of 2026 was 1.86% compared to 1.80% for the fourth quarter of 2025. This increase was due to higher operating costs while average assets remained relatively unchanged.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Noninterest expense for the first quarter of 2026 was $19.3 million, an increase of $736,000 compared to $18.5 million for the first quarter of 2025. The increase was mainly due to an increase of $618,000 in salaries and employee benefits due to the impact of merit increases and higher incentives related to sustained production levels. The efficiency ratio was 55.41% for the first quarter of 2026 and 65.09% for the first quarter of 2025. The decrease in the efficiency ratio is attributed mostly to higher net revenues. The operating expense ratio for the first quarter of 2025 was 1.90% and the decrease to 1.86% for the first quarter of 2026 was due to average asset growth outpacing the relative growth in operating costs.

Income Tax Expense

We recorded an income tax provision of $4.4 million, $2.6 million, and $900,000, reflecting an effective tax rate of 28.0%, 20.2%, and 28.2%, for the three months ended March 31, 2026, December 31, 2025, and March 31, 2025. The effective tax rate for the first quarter of 2026 is lower than the federal and state statutory tax rates due primarily to state tax planning strategies. The lower effective tax rate in the fourth quarter of 2025 compared to the first quarter of 2026 resulted from benefits from purchased Federal tax credits and other state tax benefits in 2025.

ANALYSIS OF FINANCIAL CONDITION

Total Assets. At March 31, 2026, total assets were $4.2 billion, a decrease of $14.0 million from total assets at December 31, 2025. The decrease included a $15.4 million decrease in cash and cash equivalents and a $10.5 million decrease in income tax receivable. These decreases were partially offset by increases in loans HFI of $10.9 million and securities AFS of $8.6 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased $15.4 million, or 7.3%, to $196.9 million as of March 31, 2026, as compared to $212.3 million at December 31, 2025. This decrease in cash and cash equivalents was comprised of $21.3 million used in net investing activities, including purchases of AFS securities of $54.9 million and a net increase in loans of $14.8 million, offset by maturities and repayment of AFS securities of $45.1 million and proceeds from loan and OREO sales of $5.4 million. Net cash used in financing activities was $13.5 million, consisting mainly of a net decrease in deposits of $10.5 million. Net cash provided by operating activities was $19.4 million, which consisted mainly of net income of $11.3 million and proceeds from loans held for sale of $6.4 million.

Investment Securities. We manage our securities portfolio and cash to maintain adequate liquidity and to ensure the safety and preservation of invested principal, with a secondary focus on yield and returns. Specific goals of our investment portfolio include:

• providing a ready source of balance sheet liquidity to ensure adequate availability of funds to meet fluctuations in loan demand, deposit balances and other changes in balance sheet volumes and composition;
• serving as a means for diversification of our assets with respect to credit quality, maturity and other attributes; and
• serving as a tool for modifying our interest rate risk profile pursuant to our established policies.

Our investment portfolio is comprised primarily of U.S. government agency securities, corporate note securities, mortgage-backed securities backed by government-sponsored entities, and taxable and tax-exempt municipal securities.

Our investment policy is reviewed annually by our board of directors. Overall investment goals are established by our board of directors, Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and members of our Asset Liability Committee (“ALCO”) of our board of directors. Our board of directors has delegated the responsibility of monitoring our investment activities to our ALCO. Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our CEO and CFO. We actively monitor our investments on an ongoing basis to identify any material changes in the securities. We monitor our securities portfolio to ensure it has adequate credit support and consider the lowest credit rating for identification of potential credit impairment.

The following table presents the book value of each category of securities and the percentage each category represents of total of securities as of the dates indicated. The book value for debt securities classified as AFS is reflected at fair market value and the book value for securities classified as HTM is reflected at amortized cost.

(dollars in thousands)

(1) Comprised of corporate note securities and financial institution subordinated debentures.

The tables below set forth investment debt securities AFS and HTM as of the dates indicated.

(dollars in thousands)

The weighted-average life of the total investment portfolio was 4.6 years at March 31, 2026, and 4.9 years at December 31, 2025. The weighted-average life is the average number of years that each dollar of unpaid principal due remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal pay-downs.

The table below summarizes the fair value of the securities portfolio and their weighted average yields by expected maturity as of March 31, 2026. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

(dollars in thousands)

42

The table below shows our investment securities’ gross unrealized losses and estimated fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2026 and December 31, 2025. The unrealized losses on these securities were primarily attributed to changes in interest rates. There was no ACL on the AFS or HTM securities portfolios as of March 31, 2026 or December 31, 2025. We monitor our securities portfolio to ensure that all our investments have adequate credit support and we consider the lowest credit rating for identification of potential impairment. The issuers of these securities have not, to our knowledge, evidenced any cause for default on these securities. As of March 31, 2026, all of our investment securities in an unrealized loss position received an investment grade credit rating. These securities have fluctuated in value since their purchase dates as market rates have also fluctuated. However, we have the ability and the intention to hold these securities until their fair values recover to cost or until their respective maturity dates. As such, management does not deem these securities to be impaired under the current expected credit loss model. A summary of our analysis of these securities and the unrealized losses is described more fully in "Note 3 — Investment Securities" of our audited consolidated financial statements included in our 2025 Annual Report. Economic trends may adversely affect the value of the portfolio of investment securities that we hold.

(dollars in thousands)

(dollars in thousands)

Loans

The loan portfolio is the largest category of our earning assets. Loans HFI increased $10.9 million, or 1.3% on an annualized basis, to $3.3 billion at March 31, 2026, since December 31, 2025. The increase was primarily due to increases in SFR mortgage loans of $27.4 million, commercial and industrial ("C&I") loans of $12.9 million, and construction and land development ("C&D") loans of $3.8 million, partially offset by decreases in CRE loans of $28.9 million and SBA loans of $3.7 million. SFR mortgage loans represented 50.6% of our total HFI loans as of March 31, 2026, and 50.0% at December 31, 2025. There were no loans HFS at March 31, 2026, compared to $2.1 million loans HFS at December 31, 2025. The decrease in loans HFS was due to sales totaling $8.9 million, offset by loans originated or transferred into HFS of $6.8 million.

The following table presents the balance and associated percentage of each major category in our loan portfolio as of the dates indicated:

(dollars in thousands)

(1) Net of discounts and deferred fees and costs.

(2) Includes non-farm and non-residential real estate loans, multifamily residential loans, and non-owner occupied single-family residential loans.

The following table presents the geographic locations of loans in our loan portfolio, by loan class, as of the date indicated:

(dollars in thousands)

The majority of our loan portfolio is based on collateral or businesses located in California and New York, which represented 88.2% of our loan portfolio. Loans secured by collateral in other states represented approximately 11.8% of our portfolio and the majority of these loans are secured by real estate with a weighted average LTV of 55.1% at March 31, 2026.

SFR loans. SFR loans totaled $1.7 billion, or 50.6% of our loans HFI portfolio, as of March 31, 2026. SFR loans increased $27.4 million, or 6.7% annualized, during the first quarter of 2026 due to higher originations relative to payoffs, paydowns, and sales. As of March 31, 2026, the weighted-average LTV of the portfolio was 54%, the weighted average FICO score was 764, and the average age was 3.5 years.

We originate qualified SFR mortgage loans and non-qualified, alternative documentation SFR mortgage loans through wholesale channels and retail channels, including our branch network, to accommodate the needs of the Asian-centric market. The qualified SFR mortgage loans are 15-year and 30-year conforming mortgages and may be sold directly to FNMA and FHLMC. We originate non-qualified SFR mortgage loans both to sell and hold for investment.

For SFR mortgage loans sold to FNMA, FHLMC, and to other third parties such as investment funds or other banks, we provide limited representations and warranties and with a repurchase and premium refund for loans that become delinquent in the first 90-days or a premium refund if paid-off in the first 90-days with respect to all loans sold. In certain loan sales to other banks, loans are sold with no representations or warranties and provide a replacement feature for the first six months if any loans pay off early. As a condition of the sale for all loans, the buyer must have the loans audited for underwriting and compliance standards. There were no SFR loans HFS at March 31, 2026, and $2.1 million of SFR loans HFS at December 31, 2025.

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

(dollars in thousands)

44

Commercial real estate loans. CRE loans decreased $28.9 million, or 9.0% annualized, to $1.3 billion at March 31, 2026, compared to $1.3 billion at December 31, 2025. The decrease in the first quarter of 2026 was driven by above-average payoff activity more than offsetting new loan production.

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

The largest subset of CRE loans was the multi-family residential loan portfolio, which totaled $740.6 million as of March 31, 2026, and $745.3 million as of December 31, 2025.

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

(dollars in thousands)

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

(dollars in thousands)

45

Construction and land development loans. C&D loans totaled $159.3 million, or 4.8% of the loan portfolio, at March 31, 2026. Our C&D loans are comprised of commercial construction, residential construction, and land acquisition and development loans. C&D loans increased $3.8 million, or 10.0% annualized, during the first three months of 2026 due to increases in commercial construction and land development loans, partially offset by a decrease in residential construction loans. Interest reserves are generally established on real estate construction loans. These loans are typically Prime rate based and have maturities of less than 18 months.

The following table shows the categories of our C&D portfolio as of the dates indicated:

(dollars in thousands)

Commercial and industrial loans. C&I loans totaled $152.9 million, or 4.6% of the loan portfolio, as of March 31, 2026. C&I loans increased $12.9 million, or 37.2% annualized, during the first three months of 2026 due in part to an increase of $15.2 million in commercial term loans and lines of credit, partially offset by a decrease of $2.3 million in mortgage warehouse lines of credit. Our SFR mortgage lending unit originates mortgage warehouse lines of credit to certain correspondent banks.

The interest rates on C&I loans are generally based on the Wall Street Journal Prime rate. We originate both variable rate and fixed rate C&I loans. The loans are typically made to small- and medium-sized manufacturing, wholesale, retail and service businesses for working capital needs, business expansions and for international trade financing. C&I loans include lines of credit with a maturity of one year or less, term loans with maturities of five years or less, shared national credits with maturities of five years or less, mortgage warehouse lines with a maturity of one year or less, bank subordinated debentures with a maturity of 10 years and international trade discounts with a maturity of three months or less. Substantially all of our C&I loans are collateralized by business assets or by real estate.

SBA loans. SBA loans decreased $3.7 million, or 6.6%, to $52.3 million at March 31, 2026, compared to $56.0 million at December 31, 2025. We originated SBA loans of $1.3 million and advanced an additional $292,000 on such loans during the first three months of 2026. Offsetting these loan originations and advances were loan sales of $4.0 million, refinances into non-SBA guaranteed loan types of $789,000, and net loan payoffs and paydowns of $513,000 during the first three months of 2026.

We are designated a Preferred Lender under the SBA Preferred Lender Program. We offer SBA guaranteed loans and mainly originate the SBA 7(a) product, which are variable rate loans, through our loan offices and independent brokers. We generally sell the 75% guaranteed portion of the SBA loans that we originate. Our SBA loans are typically made to small-sized manufacturing, wholesale, retail, hotel/motel and service businesses for working capital needs or business expansions. SBA loans secured by real estate can have any maturity up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable, equipment, and includes personal guarantees.

Loan Quality

We use what we believe is a comprehensive methodology to monitor credit quality and prudently manage credit concentration within our loan portfolio. Our underwriting policies and practices govern the risk profile and credit and geographic concentration for our loan portfolio. Our comprehensive methodology to monitor these credit quality standards includes a risk classification system that identifies potential problem loans based on risk characteristics by loan class as well as the early identification of deterioration at the individual loan level.

Analysis of the Allowance for Loan Losses

The following table presents the ALL, its corresponding percentage of the loan class balance, and the percentage of loan balance to total loans HFI as of the dates indicated:

(dollars in thousands)

(1) Includes non-farm and non-residential real estate loans, multi-family residential loans and non-owner occupied SFR loans.

Allowance for Credit Losses - Loans

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

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

Management estimates the allowance balance required using past loan loss experience from peers with similar asset sizes and geographic locations to the Company. The nature and volume of the portfolio, information about specific borrower situations, changes in credit quality and estimated collateral values, economic conditions, and other factors are also considered. Our CECL methodology utilizes a four-quarter reasonable and supportable forecast period, and a four-quarter reversion period. We use the Federal Open Market Committee forecasts for the national unemployment rate, while reverting to historical loss information.

Individual loans considered to be uncollectible are charged off against the ACL. Factors used in determining the amount and timing of charge-offs on loans include consideration of the loan type, length of delinquency, sufficiency of collateral value, lien priority and the overall financial condition of the borrower. Loans deemed to be collateral-dependent are reviewed individually based on the estimated fair value of the collateral less estimated selling costs. Collateral value is determined using appraisals and/or other market comparable information. Charge-offs are generally taken on loans when the loan balance is determined to be uncollectible. Recoveries on loans previously charged off are added to the ACL. Net charge-offs on an annualized basis represented 0.00% of average loans for the three months ended March 31, 2026, and 0.35% of average loans for the three months ended March 31, 2025.

As of March 31, 2026, the ACL totaled $44.2 million and was comprised of an ALL of $43.7 million and a RUC of $484,000. This compares to the ACL of $44.4 million comprised of an ALL of $43.9 million and a RUC of $484,000 at December 31, 2025. The $222,000 decrease in the ACL for the first three months of 2026 was due to a $200,000 reversal of provision for credit losses and net charge-offs of $22,000. The ALL as a percentage of loans HFI was 1.31% at March 31, 2026, compared to 1.32% at December 31, 2025, due mainly to the reversal of provision for credit losses and growth in the loan portfolio. The ALL as a percentage of nonperforming loans HFI was 97.98% at March 31, 2026, a decrease from 98.33% at December 31, 2025.

The following table provides an analysis of the ACL, provision for credit losses and net charge-offs for the periods indicated:

(dollars in thousands)

Problem Loans. Loans are considered delinquent when principal or interest payments are past due 30 days or more; delinquent loans may remain on accrual status between 30 days and 89 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a modified loan. These concessions may include a reduction of the interest rate, principal or accrued interest, extension of the maturity date or other actions intended to minimize potential losses. Loans modified at a rate equal to or greater than that of a new loan with comparable risk at the time the loan is modified may be excluded from modified loan disclosures in years subsequent to the modification if the loans are in compliance with their modified terms.

Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at fair value at the date of foreclosure, establishing a new cost basis (carrying value) by a charge to the allowance for credit losses, if necessary, or a gain recognized through noninterest income, as appropriate. Once classified as an OREO, it is subsequently carried at the lower of our carrying value of the property or its fair value. Fair value is based on current appraisals less estimated selling costs. Any subsequent write-downs are charged against operating expenses and recognized as a valuation allowance. Operating expenses and related income of such properties are included in other operating income and expenses. Gains on transfer of loans to OREO, and gains or losses on their disposition are included in gain on OREO.

Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest (of which there were none during the periods presented). The balances of nonperforming loans included in the table below are the net investment in these assets and do not include specific reserves that are included in the ALL. The following table presents the net investment in nonperforming assets by loan class and certain nonperforming asset ratios as of the dates indicated.

(dollars in thousands)

Nonperforming assets totaled $48.8 million, or 1.16% of total assets, at March 31, 2026, down from $53.5 million, or 1.27% of total assets, at December 31, 2025. The $4.6 million decrease in nonperforming assets included a decrease of $4.6 million in OREO to $4.3 million at March 31, 2026, compared to $8.8 million at December 31, 2025. The decrease in OREO was primarily due to the sale of one property and a $350,000 valuation provision on a remaining OREO property. The sale resulted in a $1.2 million gain.

Our 30-89 day delinquent loans, excluding nonperforming loans, totaled $7.9 million, or 0.24% of total loans, at March 31, 2026, down from $8.8 million, or 0.27% of total loans, at December 31, 2025. The $0.9 million decrease was mainly due to $3.4 million in loans returning to current status and $1.3 million in payoffs and paydowns, offset by $3.7 million in new delinquent loans.

We did not recognize any interest income on nonaccrual loans during the three months ended March 31, 2026 and 2025, while the loans were in nonaccrual status.

We utilize an asset risk classification system in compliance with guidelines established by the FDIC as part of our efforts to improve asset quality. In connection with examinations of insured institutions, examiners have the authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard,” “doubtful,” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable based on facts, conditions and values that currently exist. An asset classified as loss is not considered collectable and is of such little value that continuance as an asset is not warranted.

We use a risk grading system to categorize and determine the credit risk of our loans. Potential problem loans include loans with a risk grade of 6, which are “special mention,” loans with a risk grade of 7, which are “substandard” loans that are generally not considered to be impaired and loans with a risk grade of 8, which are “doubtful” loans generally considered to be impaired. These loans generally require more frequent loan officer contact and receipt of financial data to closely monitor borrower performance. Potential problem loans are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive officers and other members of senior management.

The following table presents the risk categories for loans HFI, by segment and class, as of the dates indicated:

(dollars in thousands)

(dollars in thousands)

Special mention loans totaled $24.8 million, or 0.75% of total loans, at March 31, 2026, up from $19.2 million, or 0.58% of total loans, at December 31, 2025. The $5.5 million increase for the first quarter of 2026 was primarily due to downgrades to special mention of $5.8 million, partially offset by paydowns of $303,000. As of March 31, 2026, all special mention loans were paying current.

Substandard loans totaled $72.5 million at March 31, 2026, a decrease of $2.7 million from $75.2 million at December 31, 2025. The decrease in substandard loans during the first quarter of 2026 was primarily due to payoffs and paydowns totaling $3.0 million and upgrades to pass-rated loans of $1.1 million, partially offset by downgrades to substandard totaling $1.5 million. Of the total substandard loans outstanding at March 31, 2026, there were $27.9 million, or 39% of such loans, on accrual status.

Liabilities. Total liabilities decreased by $21.6 million to $3.7 billion at March 31, 2026, compared to December 31, 2025, primarily due to a $10.5 million decrease in deposits and a $10.8 million decrease in accrued interest and other liabilities.

Deposits. Total deposits were $3.3 billion as of March 31, 2026, a decrease of $10.5 million, or 1.3% annualized, compared to $3.4 billion as of December 31, 2025. The decrease in total deposits during the first quarter of 2026 was due to a $61.9 million decrease in wholesale deposits, offset by a $51.4 million increase in retail deposits. The increase in retail deposits included a $219.4 million increase in non-maturity interest-bearing deposits and a $168.4 million decrease in time deposits as a portion of maturing time deposits moved into a high-yield savings product. Noninterest-bearing deposits totaled $526.9 million, or 15.8% of total deposits, at March 31, 2026, which is similar to the balances and percentage of total deposits at December 31, 2025.

The following table presents the composition of our deposit portfolio by account type as of the dates indicated:

(dollars in thousands)

The following table presents our average deposit balances and weighted average rates for the three months ended March 31, 2026:

(dollars in thousands)

The following table presents the maturity schedule of time deposits as of March 31, 2026:

(dollars in thousands)

(1) Includes wholesale deposits of $123.3 million.

(2) Includes wholesale deposits of $40.5 million.

Of the $773.6 million in time deposits over $250,000, the estimated aggregate amount of time deposits in excess of the FDIC insurance limit is $531.9 million at March 31, 2026. The following table presents the maturity distribution of uninsured time deposits in amounts of more than $250,000 as of the date indicated.

(dollars in thousands)

Deposits exceeding the FDIC insurance limits were estimated to be $1.6 billion as of March 31, 2026, and $1.5 billion as of December 31, 2025.

Time deposits include certain wholesale deposits, such as brokered deposits, collateralized deposits from the State of California, and deposits acquired through internet listing services. We mitigate the risk of using wholesale time deposits by managing the aggregate level of such funding, obtaining wholesale deposits through multiple sources, and leveraging collateralized deposits. Wholesale time deposits totaled $163.8 million at March 31, 2026, and were comprised of brokered deposits of $90.9 million, collateralized deposits from the State of California of $40.0 million, and deposits acquired through internet listing services of $32.9 million at March 31, 2026. This compares to wholesale time deposits of $225.7 million at December 31, 2025, comprised of brokered deposits of $145.5 million, collateralized deposits from the State of California of $40.0 million, and deposits acquired through internet listing services of $40.2 million.

In addition, we offer deposit products through the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweeps (“ICS”) programs where customers are able to achieve FDIC insurance for balances on deposit in excess of the $250,000 FDIC limit. Time deposits held through the CDARS program were $139.8 million at March 31, 2026 and $128.3 million at December 31, 2025 and ICS deposits totaled $149.1 million at March 31, 2026 and $156.3 million at December 31, 2025.

FHLB Borrowings. In addition to deposits, we have used long- and short-term borrowings, such as federal funds purchased and FHLB long-and short-term advances, as a source of funds to meet the daily liquidity needs of our customers and fund growth in earning assets. FHLB advances totaled $130.0 million at March 31, 2026 and at December 31, 2025. FHLB borrowings at March 31, 2026, included $130.0 million in putable term advances.

The terms of all putable advances outstanding at March 31, 2026 are presented in Next Call Date order in the table below:

(dollars in thousands)

(1) Call option after initial one year lock out.

The following table presents information on our total FHLB advances at and for the periods presented:

(dollars in thousands)

Long-term Debt. Long-term debt consists of subordinated notes. As of March 31, 2026, the amount of subordinated notes outstanding was $120.0 million as compared to $119.9 million at December 31, 2025.

In March 2021, we issued $120.0 million of fixed to floating rate subordinated notes due April 1, 2031 (the “2031 Subordinated Notes”). The interest rate was fixed at 4.00% through March 31, 2026, and now resets quarterly to a rate of three month Secured Overnight Financing Rate (“SOFR”) plus 329 basis points starting April 1, 2026. The rate was set at 6.97% as of April 1, 2026. The 2031 Subordinated Notes are considered Tier 2 capital at the Company and are redeemable beginning April 1, 2026.

Subordinated Debentures. Subordinated debentures consist of subordinated debentures issued in connection with three separate trust preferred securities and totaled $15.4 million as of March 31, 2026, and $15.4 million as of December 31, 2025. Under the terms of our subordinated debentures issued in connection with the issuance of trust preferred securities, we are not permitted to declare or pay any dividends on our capital stock if an event of default occurs under the terms of the long-term debt. In addition, we have the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. These subordinated debentures consist of the following at March 31, 2026, and are described in detail after the table below:

(dollars in thousands)

At March 31, 2026, we were in compliance with all covenants under our long-term debt agreements and subordinated debt.

The Company maintains the TFC Statutory Trust ("TFC Trust"), which has issued a total of $5.2 million securities ($5.0 million in capital securities and $155,000 in common securities). The TFC Trust subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 1.65%, which was 5.59% as of March 31, 2026, and 5.63% at December 31, 2025.

The Company maintains the First American International Statutory Trust I ("FAIC Trust"), which has issued a total of $7.2 million securities ($7.0 million in capital securities and $217,000 in common securities). The FAIC Trust subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.25%, which was 6.19% as of March 31, 2026, and 6.23% at December 31, 2025.

The Company maintains the Pacific Global Bank Trust I ("PGBH Trust"), a Delaware statutory trust formed in December 2004. PGBH Trust issued 5,000 units of fixed-to-floating rate capital securities with an aggregate liquidation amount of $5.0 million and 155 common securities with an aggregate liquidation amount of $155,000. The PGBH subordinated debentures have a variable rate of interest equal to three-month CME Term SOFR plus applicable tenor spread adjustment of 0.26% plus 2.10%, which was 6.04% as of March 31, 2026, and 6.08% at December 31, 2025.

Capital Resources and Liquidity Management

Capital Resources. Shareholders’ equity is influenced primarily by earnings, dividends, sales and redemptions of common stock and preferred stock and changes in accumulated other comprehensive income, net of taxes, from AFS investment securities.

Shareholders’ equity increased $7.6 million, or 1.5%, to $531.1 million as of March 31, 2026, from $523.4 million at December 31, 2025. The increase in shareholders' equity for the three months of 2026 was due to net income of $11.3 million and lower unrealized losses on AFS securities in accumulated other comprehensive loss, net of tax, of $962,000, offset by common stock cash dividends paid of $2.8 million. As a result, book value per share increased to $31.10 from $30.69 at December 31, 2025, and tangible book value per share increased to $26.84 from $26.42 at December 31, 2025. For additional information, see "Non-GAAP Financial Measures."

Liquidity Management. Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements, both known and unknown. We manage our liquidity position to meet the daily cash flow needs of customers, while also maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash, interest-earning deposits in banks, federal funds sold, available for sale securities, term federal funds, purchased receivables and maturing or prepaying balances in our securities and loan portfolios. Liquid liabilities include retail deposits, federal funds purchased, securities sold under repurchase agreements and other borrowings. Other sources of liquidity include the sale of loans, the ability to acquire additional wholesale funding, the issuance of additional collateralized borrowings through FHLB advances or the Federal Reserve’s discount window, and the ability to access the capital markets through the issuance of debt securities, preferred securities or common securities. Our short-term and long-term liquidity requirements are primarily to fund known and unknown on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers, capital expenditures and shareholder dividends. These liquidity requirements are met primarily through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, debt financing and increases in customer deposits. For additional information regarding our operating, investing and financing cash flows, see the consolidated statements of cash flows provided in our consolidated financial statements.

Integral to our liquidity management is the administration of short-term borrowings. To the extent we are unable to obtain sufficient liquidity through core deposits, we seek to meet our liquidity needs through wholesale funding or other borrowings on either a short- or long-term basis. Our wholesale funding ratio was 8.6% at March 31, 2026, compared to 10.3% at December 31, 2025.

We have sufficient capital and do not anticipate any need for additional liquidity sources as of March 31, 2026. As of March 31, 2026, and December 31, 2025, we had $97.0 million of unsecured federal funds lines with other financial institutions and no amounts advanced against these lines. In addition, secured lines of credit from the Federal Reserve Discount Window were $70.0 million at March 31, 2026, and $66.5 million at December 31, 2025. Federal Reserve Discount Window lines were collateralized by a pool of CRE loans totaling $89.6 million as of March 31, 2026, and $88.9 million as of December 31, 2025. We did not have any borrowings outstanding with the Federal Reserve at March 31, 2026, and December 31, 2025.

At March 31, 2026, and December 31, 2025, we had $130.0 million in FHLB advances. Based on the values of loans pledged as collateral, we had $1.4 billion of remaining secured borrowing capacity with the FHLB as of March 31, 2026, and December 31, 2025.

Bancorp is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity. Bancorp’s main source of funding is dividends declared and paid to Bancorp by the Bank. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to Bancorp. Management believes that these limitations will not impact our ability to meet our ongoing short-term cash obligations. The Bank paid no cash dividends to Bancorp during the three months ended March 31, 2026, and $45.0 million during the twelve months ended December 31, 2025. Dividends on common stock during the three months ended March 31, 2026, and the year ended December 31, 2025, totaled $2.8 million and $11.3 million. At March 31, 2026, Bancorp had $43.2 million in cash, of which $42.9 million was on deposit at the Bank.

Contractual Obligations

The following table contains supplemental information regarding our total contractual obligations at March 31, 2026:

(dollars in thousands)

(1) See "FHLB Borrowings" for the structure of FHLB advances that are callable by FHLB within one year, however final stated maturities range from 2.1 to 3.1 years as of March 31, 2026.

Off-Balance Sheet Arrangements

Refer to Note 12 in our consolidated financial statements for information related to our off-balance sheet arrangements.

Non-GAAP Financial Measures

Some of the financial measures included herein are not measures of financial performance recognized by GAAP. These non-GAAP financial measures include the “tangible common equity to tangible assets ratio,” “tangible book value per share,” and “return on average tangible common equity.” Our management uses these non-GAAP financial measures in our analysis of our performance.

Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share. The tangible common equity to tangible assets ratio and tangible book value per share are non-GAAP measures generally used by financial analysts and investment bankers to evaluate capital adequacy. We calculate: (i) tangible common equity as total shareholders’ equity less goodwill and other intangible assets (excluding mortgage servicing assets); (ii) tangible assets as total assets less goodwill and other intangible assets (excluding mortgage servicing assets); and (iii) tangible book value per share as tangible common equity divided by period end shares of common stock outstanding.

Our management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, which typically stem from the use of the purchase method of accounting for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share and related measures should not be considered in isolation or as a substitute for total shareholders’ equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible common equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names. The following table reconciles shareholders’ equity (on a GAAP basis) to tangible common equity and total assets (on a GAAP basis) to tangible assets, and calculates our tangible book value per share:

(dollars in thousands)

Return on Average Tangible Common Equity. Management measures return on average tangible common equity (“ROATCE”) to assess our capital strength and business performance. Tangible equity excludes goodwill and other intangible assets (excluding mortgage servicing assets) and is reviewed by banking and financial institution regulators when assessing a financial institution’s capital adequacy. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles ROATCE to its most comparable GAAP measure:

(dollars in thousands)

Pre-tax Pre-Provision Income. Management believes that pre-tax pre-provision (“PTPP”) income is a useful measure for investors to evaluate core operating performance, excluding the volatility of credit provision expenses. PTPP income is calculated by subtracting noninterest expense from the sum of net interest income and noninterest income, as shown in the following table:

(dollars in thousands)

55

Market Risk

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified three primary sources of market risk: interest rate risk, price risk and basis risk.

Interest Rate Risk. Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricing and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and SOFR (basis risk).

Price Risk. Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and subject to fair value accounting. We have price risk from the available for sale SFR mortgage loans and fixed-rate available for sale securities.

Basis Risk. Basis risk represents the risk of loss arising from asset and liability pricing movements not changing in the same direction. We have basis risk primarily in the SFR mortgage loan portfolio, the multi-family loan portfolio and our securities portfolio.

Our ALCO establishes broad policy limits with respect to interest rate risk. The ALCO establishes specific operating guidelines within the parameters of the board of directors’ policies. In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. The ALCO monitors the level of interest rate risk sensitivity to ensure compliance with the board of directors’ approved risk limits and to oversee management's balance sheet risk management strategies.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

An asset sensitive position refers to a balance sheet position in which a short-term decrease in interest rates is expected to generate lower net interest income, as rates earned on interest-earning assets would reprice downward more quickly than rates paid on interest-bearing liabilities, thus compressing the net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which a short-term decrease in interest rates is expected to generate higher net interest income, as rates paid on interest-bearing liabilities would reprice downward more quickly than rates earned on interest-earning assets, thus expanding the net interest margin.

Income Simulation and Economic Value Analysis. Interest rate risk measurement is calculated and reported to the board and the ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

We use two approaches to model interest rate risk: Net Interest Income at Risk ("NII at Risk"), and Economic Value of Equity (“EVE”). Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and derivatives over a 12 month time horizon assuming a flat balance sheet and an instantaneous and parallel shift in market interest rates in 100 basis point increments. We report NII at Risk to isolate the change in income related solely to interest-earning assets and interest-bearing liabilities. The model results do not take into consideration any steps management might take to respond to the changes in interest rates or changes in competitor or customer behavior. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.

56

At March 31, 2026, our NII at Risk profile is liability sensitive. This is directionally consistent with our profile at December 31, 2025. Actual results could vary materially from those calculated by our model, due to a variety of factors or assumptions such as the uncertainty of the magnitude, timing and direction of future interest rate movement or the shape of the yield curve. The NII at Risk results are within board policy limits.

At March 31, 2026, the EVE position is projected to decrease in the up rate scenarios and down 300 and 200 rate scenarios. When interest rates rise, fixed rate assets generally lose economic value as these instruments are discounted at a higher rate demonstrating the relative longer asset duration as compared to the overall liability duration. When interest rates decrease, the value of noninterest-bearing deposits also decreases. In addition, as the down rate shocks become more severe the pace of the increase in the value of loans also slows due to an increase in loan prepayments and the impact of discount rates reaching their floors; this results in a change of EVE volatility from positive to negative between the down 100 and 200 scenarios. Actual results could vary materially from those calculated by our model, due to a variety of factors or assumptions such as the uncertainty of the magnitude, timing and direction of future interest rate movement or the shape of the yield curve. The EVE results are within board policy limits.

Evaluation of Disclosure Controls and Procedures.

The Company’s management, including our principal executive officer and principal financial officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of March 31, 2026, our disclosure controls and procedures were effective.

Changes in Internal Controls Over Financial Reporting.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this Form 10-Q relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A. "Risk Factors" of our 2025 Annual Report. The materiality of any risks and uncertainties identified in our Forward-Looking Statements contained in this Report or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See Part I, Item 2 for “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report.