CWBC 10-K & 10-Q changes, risk factors and insider trading

Our financial flexibility would be severely constrained if we were unable to maintain our access to funding or if adequate financing were not available at acceptable interest rates. Further, if we were required to rely more heavily on more expensive funding sources to support liquidity, our revenues may not increase proportionately to cover our increased costs. In this case, our operating margins and profitability would be adversely affected. If alternative funding sources were no longer available to us, we may need to sell a portion of our investment or loan portfolio to raise funds, which, depending upon market conditions, could result in us realizing a loss on the sale of such assets. As of December 31, 2024,2025, we had a net unrealized loss of $59,221,000$39,881,000 on our available for-sale investment securities portfolio as a result of the rising interest rate environment.portfolio. Our investment securities totaled $785,058,000,$763,324,000, or 22.3%20.7% of total assets, at December 31, 2024.2025. The details of this portfolio are included in Note 3 to the consolidated financial statements.

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

At December 31, 2024,2025, our non-performing loans and leases were 0.28%0.27% of total loans and leases compared to 0.00%0.28% at December 31, 2023,2024, and 0.00% at December 31, 2022,2023. and ourOur non-performing assets (which include foreclosed real estate) were 0.18%0.19% of total assets as of December 31, 2025 compared to 0.00%0.18% at December 31, 2023.2024. The allowance for credit losses as a percentage of non-performing loans and leases was 399.37%432.37% as of December 31, 20242025 compared to 14,653.00%399.37% at December 31, 2023.2024. Non-performing assets adversely affect our net income in various ways. We generally do not record interest income on non-performing loans or other real estate owned, thereby adversely affecting our income and increasing our loan administration costs. When we take collateral in foreclosures and similar proceedings, we are required to mark the related asset to the then fair value of the collateral, which may ultimately result in a loss. An increase in the level of non-performing assets increases our risk profile and may impact the capital levels our regulators believe are appropriate in light of the ensuing risk profile, which could result in a request to reduce our level of non-performing assets. When we reduce problem assets through loan sales, workouts, restructurings and otherwise, decreases in the value of the underlying collateral, or in these borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business, results of operations and financial condition. In addition, the resolution of non-performing assets requires significant commitments of time from management, which can be detrimental to the performance of their other responsibilities. There can be no assurance that we will not experience future increases in non-performing assets or that the disposition of such non-performing assets will not have a material adverse effect on our business, financial condition and results of operations.

Our success depends, in large degree, on the skills of our management team and our ability to retain, recruit and motivate key officers and employees. Our senior management team has significant industry experience, and their knowledge and relationships would be difficult to replace. Leadership changes will occur from time to time, and we cannot predict whether significant resignations will occur or whether we will be able to recruit additional qualified personnel. Competition for senior executives and skilled personnel in the financial services and banking industry is intense, which means the cost of hiring, paying incentives and retaining skilled personnel may continue to increase. We need to continue to attract and retain key personnel and to recruit qualified individuals to succeed existing key personnel to ensure the continued growth and successful operation of our business. In addition, as a provider of relationship-based commercial banking services, we must attract and retain qualified banking personnel to continue to grow our business, and competition for such personnel can be intense. In addition, toTo attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings or have a material adverse effect on our business, financial condition and results of operations. The loss of the services of any senior executive or other key personnel, the inability to recruit and retain qualified personnel in the future, or an increase in compensation benefits could have a material adverse effect on our business, financial condition and results of operations.

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

We have a continuing need for technologicalnew change,technology, and we may not have the resources to implement new technology effectively, or we may experience operational challenges when implementing new technology or technology needed to compete effectively with larger institutions may not be available to us on a cost-effective basis.

Information security risks for financial institutions such as us have increased recently in part because of new technologies, such as artificial intelligence, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. In addition to cyber attacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against financial institutions designed to disrupt key business services such as customer-facing web sites. National and international economic and geopolitical conditions may also have a negative impact in the number of cyber security threats we may face. We are not able to anticipate or implement effective preventative measures against all security breaches of these types. Although we employ detection and response mechanisms designed to contain and mitigate security incidents, early detection may be thwarted by sophisticated attacks and malware designed to avoid detection, which continue to evolve.

We are a community bank, andand, notwithstanding a push by federal banking regulators to de-emphasize the importance of reputational risk, our reputation is one of the most valuable components of our business. Threats to our reputation can come from many sources, including: adverse sentiment about financial institutions generally; unethical practices, failures of technological systems or breaches of security measures, including, but not limited to, those resulting from computer viruses or cyber-attacks; theft, fraud or misappropriation of assets, whether arising from the intentional actions of internal personnel or external third parties; failure to deliver minimum standards of service or quality; compliance deficiencies; and questionable or fraudulent activities of our customers. Negative publicity regarding our industry, us, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation and have a material adverse effect on our business, financial condition and results of operation.

Increasing scrutinyScrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies arecan facingface increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds and influential investors aremay also increasingly focusedfocus on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG-related compliance costs for us as well as among our suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

The holders of our debt obligations if any, will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest and dividends. In any liquidation, dissolution or winding up of the Company, our common stock would rank below all claims of the holders of outstanding debt issued by the Company. As of December 31, 2025, we had $64.4 million principal amount of senior debt and subordinated notes outstanding through 2032. In addition, as of December 31, 2025, we had $5.2 million of trust preferred securities outstanding due 2036. In such event, holders of our common stock would not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution or winding up of the Company until after all of the Company’s obligations to the debt holders were satisfied and holders of the subordinated debt and trust preferred securities subordinate debentures had received any payment or distribution due to them. In addition, we are required to pay interest on the senior debt, subordinated notes, and trust preferred securities and if we are in default in the payment of interest we would not be able to pay any dividends on our common stock.

During 2024,2025, we focused on deposit and loan growth, asset quality, liquidity, and capital adequacy. We also focused on assuring that competitive products and services were made available to our clients while adjusting to the many new laws and regulations that affect the banking industry.

As of December 31, 2024,2025, the Bank operated 26 full-service offices. Additionally, the Bank maintains an Agribusiness Center, and ana SBA Lending Division.

•Net loans increased $1.03 billion$202,368,000 or 81%,8.77%, and total assets increased $1.09 billion$168,546,000 or 45%4.79% at December 31, 20242025 compared to December 31, 2023.2024.

•Total cost of deposits increaseddecreased to 1.41% for the year ended December 31, 2025 compared to 1.53% for the year ended December 31, 2024 compared to 0.72% for the year ended December 31, 2023.2024.

•There were $6.46$6.96 million non-performing assets for the year ended December 31, 2024.2025. Additionally, net loan recoveries were $68,000 and loans delinquent more than 30 days were $23.21 million, compared to net loan charge-offs wereof $463,000 and loans delinquent more than 30 days wereof $9.84 million, compared to net loan charge-offs of $20,000 and loans delinquent more than 30 days of $3.74 million for the year ended December 31, 2023.2024.

Our net income for the year ended December 31, 2025 increased $30,502,000 compared to 2024 and decreased $17,870,000 compared to 2023 and decreased $1,109,000 in 20232024 compared to 2022.2023. Contributing to the decreaseincrease during 2024,2025, compared to 2023, was2024, due to a full year of earnings from the 2024 merger, and a decrease of $8,816,000 in merger related expenses of $20,491,000, including a one-time provision forfrom the expected2024 creditmerger losseswith ofCommunity theWest acquired portfolio of $10,877,000.Bancshares. During 2023,2024, net income compared to 20222023 was primarily impacted by higher non-interest expenses, including $1,191,000$9,614,000 in merger related expenses.expenses, and a provision for loan losses of $11,113,000 primarily as a result of the merger.

Non-interest income decreasedincreased $575,000,$4,043,000 or 8.19%62.73% in 20242025 compared to 20232024 primarily due to a $3,292,000decrease increaseof $4,158,000 in net realized losses on sales and calls of investment securities partially offset by ana increasedecrease of $1,629,000$362,000 in other income, ana increasedecrease in loan placement fees of $309,000$340,000 and a increasedecrease in serviceinterchange chargefee income of $295,000.$130,000. The increasedecrease in other income is primarily attributed to changes in fair value of other equity investments and increase in certain merchant fee activity.investments.

Our ROA is a ratio that measures our performance as a comparable figure with other banks and bank holding companies. Our ROA for the year ended 20242025 was 0.24%1.07% compared to 1.04%0.24% and 1.09%1.04% for the years ended December 31, 20232024 and 2022,2023, respectively. The 20242025 decreaseincrease of 8083 basis points in ROA is primarily due to the decreaseincrease in net income due to mergerhigher relatednet expenses,interest includingincome, anon-interest one-timeincome, provisionand forlower thenon-interest expected credit losses of the acquired portfolio of $10,877,000.expense.

Our net interest margin (fully tax equivalent basis) was 3.76%4.15% for the year ended December 31, 2024,2025, compared to 3.58%3.76% and 3.52%3.58% for the years ended December 31, 20232024 and 2022,2023, respectively. The increase in 20242025 net interest margin compared to 2023,2024, resulted from the increase in the yield on the Company’s loan portfolio and ana increasedecrease in theaverage balancecost of averagefunds interestof earning40 assets.basis points. The effective tax equivalent yield on total earning assets increased 10120 basis points. This increase was partially offsetaugmented by ana increasedecrease in the cost of total interest-bearing liabilities, which increaseddecreased 11740 basis points to 2.76%2.36% for the year ended December 31, 2024.2025. Our cost of total deposits in 20242025 and 20232024 was 1.53%1.41% and 0.72%,1.53%, respectively, compared to 0.06%0.72% for the same period in 2022.2023. Our net interest income before provision for credit losses increased $27,938,000$25,813,000 or 33.89%23.39% to $110,367,000$136,180,000 for the year ended 20242025 compared to $82,429,000$110,367,000 and $79,566,000$82,429,000 for the years ended 20232024 and 2022,2023, respectively.

For all banks and bank holding companies, asset quality has a significant impact on the overall financial condition and results of operations. Asset quality is measured in terms of classified and nonperforming loans, and is a key element in estimating the future earnings of a company. There were $6.96 million and $6.46 million nonperforming assets or nonperforming loans at December 31, 2024.2025 There were no non-performing loans atand December 31, 2023. The increase in nonperforming assets was primarily due to nonperforming assets acquired as of April 1, 2024 in connection with the merger. Also during 2024, there were $2.26 million in single family residential mortgages placed on non-accrual.respectively.

The Company had no other real estate owned at December 31, 2024,2025, or December 31, 2023.2024. NoThe Company had $34,000 and $0 in foreclosed assets were recorded at December 31, 20242025 orand December 31, 2023.2024, respectively. Management maintains certain loans that have been brought current by the borrower (less than 30 days delinquent) on nonaccrual status until such time as management has determined that the loans are likely to remain current in future periods.

The allowance for credit losses as a percentage of outstanding loan balance was 1.18% as of December 31, 2025 and 1.11% as of December 31, 2024 and 1.14% as of December 31, 2023.2024. The ratio of net charge-offs/ (recoveries) to average loans was 0.02%(0.003)% as of December 31, 20242025 and (0.002)% as of December 31, 2023.2024.

As revenues from both net interest income and non-interest income are a function of asset size, the continued growth in assets has a direct impact in increasing net income and therefore ROE and ROA. The majority of our assets are loans and investment securities, and the majority of our liabilities are deposits, and therefore the ability to generate deposits as a funding source for loans and investments is fundamental to our asset growth. Due to the merger that closed on April 1, 2024, totalTotal assets increased 45%4.79% during 20242025 to $3,690,317,000 as of December 31, 2025 from $3,521,771,000 as of December 31, 2024 from $2,433,426,000 as of December 31, 2023.2024. Total loans, net of discount and the allowance for credit losses increased 80.84%8.77% to $2,334,221,000$2,510,786,000 as of December 31, 2024,2025, compared to $1,290,797,000$2,308,418,000 at December 31, 2023.2024. Total investment securities decreased $121,229,000$21,734,000 to $763,324,000 as of December 31, 2025 compared to $785,058,000 as of December 31, 20242024. comparedTotal deposits increased 6.34% to $906,287,000$3,095,274,000 as of December 31, 2023.2025 Total deposits increased 43%compared to $2,910,777,000 as of December 31, 2024 compared to $2,041,612,000 as of December 31, 2023.2024.

At December 31, 2025, we had a total capital to risk-weighted assets ratio of 13.97%, a Tier 1 risk-based capital ratio of 11.73%, common equity Tier 1 ratio of 11.56%, and a leverage ratio of 9.80%. At December 31, 2024, we had a total capital to risk-weighted assets ratio of 13.58%, a Tier 1 risk-based capital ratio of 11.33%, common equity Tier 1 ratio of 11.15%, and a leverage ratio of 9.17%. At December 31, 2023, we had a total capital to risk-weighted assets ratio of 16.08%, a Tier 1 risk-based capital ratio of 13.07%, common equity Tier 1 ratio of 12.78%, and a leverage ratio of 9.18%. At December 31, 2024,2025, on a stand-alone basis, the Bank had a total risk-based capital ratio of 14.54%,14.77%, a Tier 1 risk based capital ratio of 13.70%, common equity Tier 1 ratio of 13.70%, and a leverage ratio of 11.44%. At December 31, 2024, the Bank had a total risk-based capital ratio of 14.54%, Tier 1 risk-based capital of 13.54%, common equity Tier 1 ratio of 13.54%, and a leverage ratio of 11.04%. At December 31, 2023, the Bank had a total risk-based capital ratio of 17.74%, Tier 1 risk-based capital of 16.76% and a leverage ratio of 11.75%. Note 13 of the audited Consolidated Financial Statements provides more detailed information concerning the Company’s capital amounts and ratios.

Operating efficiency is the measure of how efficiently earnings before taxes are generated as a percentage of revenue. A lower ratio represents greater efficiency. The Company’s efficiency ratio (operating expenses divided by net interest income plus non-interest income) was 61.63% for 2025 compared to 81.07% for 2024 compared toand 61.82% for 2023 and 57.30% for 2022.2023. The declinedecrease in the efficiency ratio in 20242025 was due to the increase in net interest income and non-interest income combined with the reduction in merger related expenses. The combination of the Company’s net interest income before provision for credit losses, plus non-interest income, increased 30.59%$29,856,000 to $146,668,000 in 2025 compared to $116,812,000 in 2024 compared toand $89,449,000 in 2023 and $84,620,000 in 2022,2023, while operating expenses increaseddecreased 71.25%to $90,386,000 in 2025, compared to $94,701,000 in 2024, 14.06%and $55,300,000 in 2023, and 1.06% in 2022.2023.

Net income for 2025 was $7,666,000 in 2024$38,168,000 compared to $25,536,000$7,666,000 and $26,645,000$25,536,000 infor 2023the years ended December 31, 2024 and 2022,2023, respectively. Basic earnings per shareEPS was $0.45,$2.01 $2.17,for 2025 compared to $0.45 and $2.27$2.17 for 2024, 2023,2024 and 2022,2023, respectively. Diluted earnings per shareEPS was $0.45,$2.00 $2.17,for 2025 compared to $0.45 and $2.27$2.17 for 2024, 2023,2024 and 2022,2023, respectively. ROE was 9.92% for 2025 compared to 2.42% for 2024 compared toand 13.81% for 2023 and 14.25% for 2022.2023. ROA for 20242025 was 0.24%1.07% compared to 0.24% for 2024 and 1.04% for 2023 and 1.09% for 2022.2023.

Net income for the year ended December 31, 2025 increased $30,502,000 compared to 2024 and decreased $17,870,000 compared to 2023 and decreased $1,109,000 in 20232024 compared to 2022.2023. ContributingNet toincome the decreaseincreased during 2024,2025, compared to 2023,2024 weredue mergerto relatedhigher expenses,net includinginterest aincome, one-timenon-interest provisionincome, forand thelower expectednon-interest credit losses of the acquired portfolio of $10,877,000.expense. During 2023,2024, net income compared to 20222023 was primarily impacted by higher non-interest expenses, including $1,191,000$20,491,000 of merger related expenses.

(1)Interest income is calculatedCalculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $1,373, $1,457, $1,489, and $1,775$1,489 in 2025, 2024, and 2023, and 2022, respectively.

(3) Average loans do not include nonaccrualnon-accrual loans but do include interest income recovered from previously charged off loans.

(4) Net interest margin is computed by dividing net interest income by total average interest-earning assets.

Interest and fee income from loans increased $60,363,000$29,723,000 or 86.48%22.83% in 20242025 compared to 2023.2024. Interest and fee income from loans increasedwas $13,896,000 or 24.86%$159,889,000 in 20232025 compared to 2022.$130,166,000 in 2024. The increase in 20242025 is attributable to rate increases and an increase of $717,581,000$416,501,000 in average total loans outstanding.

Average total loans, including nonaccrual loans, for 20242025 increased $717,581,000$416,501,000 to $1,980,807,000$2,394,887,000 compared to $1,978,386,000 for 2024 and $1,263,226,000 for 2023 and $1,133,919,000 for 2022.2023. The yield on loans for 20242025 was 6.58%6.68% compared to 5.53%6.58% and 4.93%5.53% for 20232024 and 2022,2023, respectively. The impact to interest income from the accretion of the loan marks on acquired loans was an increase toof $9,849,000$11,481,000 from $325,000$9,849,000 for the years ended December 31, 20242025 and 2023,2024, respectively.

Interest income from total investment securities decreased $3,204,000$4,224,000 in the twelve months ended December 31, 20242025 to $27,324,000$21,643,000 compared to $30,528,000$25,867,000 for 20222024 and $28,465,000$29,039,000 for 2022.2023. The yield on average total investment securities decreased one20 basis pointpoints to 2.99%2.79% for the twelve months ended December 31, 20242025 compared to 2.99% for 2024 and 3.00% for 2023 and 2.51% for 2022.2023. Average total amortized cost of investment securities for the twelve months ended December 31, 20242025 decreased $103,522,000$88,117,000 or 10.19%9.65% to $824,697,000 compared to $912,814,000 comparedfor to2024 and $1,016,336,000 for 2023 and $1,132,093,000 for 2022.2023.

A significant portion of the investment portfolio is mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs). At December 31, 2024,2025, we held $302,857,000$293,366,000 or 38.90%38.78% of the total AFS market value of the investment portfolio in MBS and CMOs with an average book yield of 2.94%.2.48%. We invested in CMOs and MBS as part of our overall strategy to increase our net interest margin. CMOs and MBS by their nature are affected by prepayments which are impacted by changes in interest rates. In a normal declining rate environment, prepayments from MBS and CMOs would be expected to increase and the expected life of the investment would be expected to shorten. However, as interest rates have increased,increased since purchase, prepayments have declined and the average life of the MBS and CMOs have extended. Premium amortization and discount accretion of these investments affects our net interest income. Management monitors the prepayment trends of these investments and adjusts premium amortization and discount accretion based on several factors. These factors include the type of investment, the investment structure, interest rates, interest rates on new mortgage loans, expectation of interest rate changes, current economic conditions, the level of principal remaining on the bond, the bond coupon rate, the bond origination date, and volume of available bonds in market. The calculation of premium amortization and discount accretion is by its nature inexact, and represents management’s best estimate of principal pay downs inherent in the total investment portfolio.

Total interest income in 20242025 increased $57,970,000$25,322,000 to $185,710,000 compared to $160,388,000 comparedin to2024 and $102,418,000 in 2023 and $82,988,000 in 2022,2023, respectively. The increase in 20242025 was the result of a full year of operations after the 2024 merger, yield changes and asset mix changes. The tax-equivalent yield on interest earning assets increased to 5.64% for the year ended December 31, 2025 from 5.44% for the year ended December 31, 20242024. fromAverage 4.43%interest earning assets increased to $3,316,150,000 for the year ended December 31, 2023.2025 Average interest earning assets increasedcompared to $2,974,451,000 for the year ended December 31, 2024 compared to $2,347,311,000 for the year ended December 31, 2023.2024. Average interest-earning deposits in other banks increased $15,502,000$13,315,000 in 20242025 compared to 2023.2024. Average yield on these deposits was 5.23%4.33% compared to 5.28%5.23% on December 31, 20242025 and December 31, 20232024 respectively. Average investments and interest-earning deposits decreased $88,020,000$88,117,000 and the tax equivalent yield on those assets increaseddecreased three20 basis points. Average total loans increased $717,581,000$416,501,000 while the yield on average loans increased 10510 basis points.

Average other borrowings were $135,966,000 with an effective rate of 5.07% for 2025 compared to $178,627,000 with an effective rate of 5.24% for 2024 compared to $86,250,000 with an effective rate of 5.17% for 2023.2024. Included in other borrowingsborrowed funds are the junior subordinated debentures acquired from Service 1st Bancorp (“Service 1st”), subordinated debt, senior debt, advances on lines of credit, advances from the Federal Home Loan Bank (FHLB), and overnight borrowings. The junior subordinated debentures carry a floating rate based on the three month SOFR plus a margin of 1.60%. The rate was 6.52%5.77% for 20242025 and 7.26% for 2023.2024. The subordinated debt, issued in 2021, bears a fixed interest rate of 3.130% per year. The senior debt has an interest rate of prime less a margin of 0.50%, with cap of 6.75%6.75%. whichDue wasto reachedthe decreases in 2022.the Theprime FHLBrate long-termduring advances were recorded at fair value as of April 1, 2024 and included a discount of $4.4 million that is being amortized over2025, the remaininginterest life of the advances, which mature in April and June 2025. Additionally, there was one short-term FHLB advance outstandingrate as of December 31, 20242025 was 6.25%. As of December 31, 2025, the Company had an overnight borrowing advance for $73,000,000 outstanding with an interest rate of 4.52%.4.02%. At December 31, 2024, the Company had an overnight borrowing advance with the FHLB for $35,000,000 with an interest rate of 5.70%.

Net interest income before provision for credit losses for 20242025 increased $27,938,000$25,813,000 or 33.89%23.39% to $136,180,000 compared to $110,367,000 compared to $82,429,000 for 2023.2024. The increase in 20242025 was a result of yield changes, asset mix changes, and an increase in average earningassets assets,and offsetfrom byyield anchanges increaseand inasset averagemix interest bearing liabilities.changes. The increase in average earnings assets and liabilities was due to a full year in 2025 from the 2024 merger with Community West Bank.Bancshares. The net interest margin (NIM) increased eighteen39 basis points. Yield on interest earning assets increased 10120 basis points. The increase in net interest margin in the period-to-period comparison resulted primarily from the increase in yield and volume of loans partially offset by increasea decrease in the yield and volume of interest-bearing liabilities.

Net interest income before provision for credit losses increased $7,012,000$27,938,000 in 20232024 compared to 2022,2023, primarily due yield changes andchanges, asset mix changes.changes, and an increase in average earnings assets, offset by an increase in average interest bearing liabilities. Average interest-earning assets were $2,974,451,000$3,316,150,000 for the year ended December 31, 20242025 with a NIM of 4.15% compared to $2,974,451,000 with a NIM of 3.76% comparedin to2024, and $2,347,311,000 with a NIM of 3.58% in 2023, and $2,313,766,000 with a NIM of 3.52% in 2022.2023. For a discussion of the repricing of our assets and liabilities, refer to Quantitative and Qualitative Disclosure about Market Risk.

Non-interest income is comprised of customer service charges, gains (losses) on sales and calls of investment securities, income from appreciation in cash surrender value of bank owned life insurance, loan placement fees, Federal Home Loan Bank dividends, and other income. Non-interest income was $10,488,000 in 2025 compared to $6,445,000 and $7,020,000 in 2024 compared to $7,020,000 and $5,054,000 in 2023 and 2022,2023, respectively. The $575,000$4,043,000 or 8.19%62.73% decreaseincrease in non-interest income in 20242025 was driven by ana increasedecrease of $4,158,000 in net realized losses on sales and calls of investment securities, partially offset by ana increasedecrease in other income,income increaseof $362,000, $340,000 in loan placement fees and ana increase$130,000 decrease in service charge income. The $1,966,000 or 39% improvement in non-interest income in 2023 was driven by a decrease in net realized losses on sales and calls of investment securities, an increase in other income, gain on sale of assets, partially offset by a decrease in loan placement fees and service charges.

CustomerIncome from customer service charges increased $295,000$230,000 to $2,028,000 in 2025 compared to $1,798,000 in 2024 compared to $1,503,000 in 2023.2024. The increase in service charge fees in 20242025 was due to the merger and increased customer base. Service charges were $2,014,000$1,503,000 in 2022. The decrease in our 2023 fees compared to 2022 was the result of lower NSF and analysis service charges.2023.

The Company earns loan placement fees from the brokerage of single-family residential mortgage loans provided for the convenience of our customers. Loan placement fees increaseddecreased $309,000$340,000 in 2025 to $844,000 compared to $1,184,000 in 2024 to $893,000 compared toand $584,000 in 2023 and $899,000 in 2022.2023.

Other income increaseddecreased to $3,747,000$3,094,000 in 2025 compared to $3,456,000 and $2,125,000 in 2024 compared to $2,125,000 and $657,000 in 2023 and 2022,2023, respectively. The increasedecrease in other income is primarily attributed to changes in fair value of other equity investments and increase in certain merchant fee activity.investments.

Salaries and employee benefits, occupancy and equipment, regulatory assessments, acquisition and integration-related expenses, data processing expenses, ATM/Debit card expenses, license and maintenance contract expenses, information technology, and professional services (consisting of audit, accounting, consulting and legal fees) are the major categories of non-interest expenses. Non-interest expenses increaseddecreased $39,401,000$4,315,000 or 71.25%4.56% to $90,386,000 in 2025 compared to $94,701,000 in 20242024, and $55,300,000 in 2023. The decreases in various non-interest expense categories consisted of a decrease of $8,816,000 in merger expenses, $588,000 in data processing expense, $435,000 in professional services, and $161,000 in ATM/Debit card expenses in 2025 compared to $55,300,000 in 2023, and $48,484,000 in 2022.2024.

Our efficiency ratio, measured as the percentage of non-interest expenses (exclusive of amortization of core deposit intangibles, other real estate owned, and repossessed asset expenses) to net interest income before provision for credit losses plus non-interest income (exclusive of realized gains or losses on sale and calls of investments) was 61.63% for 2025 compared to 81.07% for 2024 compared toand 61.82% for 2023 and 57.30% for 2022.2023. The increasedecrease in the efficiency ratio in 20242025 compared to 20232024 was due to the increasedecrease in non-interest expense, primarily due to merger related expenses.expense.

Salaries and employee benefits increased $17,103,000$1,371,000 or 54.53%2.83% to $49,841,000 in 2025 compared to $48,470,000 in 2024 compared toand $31,367,000 in 2023 and $28,917,000 in 2022.2023. Full time equivalents were 346338 for the year ended December 31, 20242025 compared to 246356 for the year ended December 31, 2023.2024. The increase in salaries and employee benefits in 20242025 compared to 20232024 was from the increased headcount from the merger as well as increases in salary to reflect current market conditions.

For the years ended December 31, 2025, 2024, 2023, and 2022,2023, the compensation cost recognized for equity-based compensation was $879,000,$1,158,000, $858,000$879,000 and $776,000,$858,000, respectively. As of December 31, 2024,2025, there was $1,097,000$1,354,000 of total unrecognized compensation cost related to non-vested equity-based compensation arrangements granted under all plans. The cost is expected to be recognized over a weighted average period of 2.152.13 years. See Notes 1 and 14 to the audited Consolidated Financial Statements for more detail. The Company issued 390,462 options to purchase common stock to previous option holders of Community West Bancshares as part of the merger.merger during 2024. No options to purchase shares of the Company’s common stock were issued during the years ending December 31, 20232025 and 2022.2023. Restricted common stock awards of 79,033, 72,360, 69,692, and 56,08969,692 shares were awarded in 2025, 2024, and 2023, and 2022, respectively.

Occupancy and equipment expense increased $3,753,000$1,951,000 or 65.54%20.58% to $11,430,000 in 2025 compared to $9,479,000 in 2024 compared toand $5,726,000 in 2023 and $5,131,000 in 2022.2023. The Company made no changes in its depreciation expense methodology. The Company operated 26 full-service offices at December 31, 20242025 and 19 full-service offices at December 31, 2023. During 2024, the Company acquired seven banking centers through the merger and opened one new banking center.2024.

Information technology expense increased $2,324,000$1,197,000 to $5,940,000$7,137,000 for the year ended December 31, 20242025 compared to $3,616,000$5,940,000 and $3,344,000$3,616,000 in 20232024 and 2022,2023, respectively. Data processing expenses were $3,160,000 in 2025 compared to $3,748,000 in 2024 compared toand $2,621,000 in 2023 and $2,245,000 in 2022.2023. Professional services increaseddecreased $591,000$435,000 in 20242025 to $2,390,000 compared to 2023$2,825,000 duein to higher audit fees, legal expenses and consulting fees.2024.

Our effective income tax rate was 27.3% for 2025 compared to 30.3% for 2024 compared toand 24.5% for 2023 and 24.2% for 2022. The increase in the effective tax rate during 2024 was due to non-deductible merger expenses, non-deductible salary expenses, increased meals and entertainment expenses, and tax return true-ups.2023. The Company reported an income tax provision of $14,360,000, $3,332,000, $8,304,000, and $8,496,000$8,304,000 for the years ended December 31, 2025, 2024, and 2023, and 2022, respectively.

The total investment portfolio decreased 13.38%$21,734,000 orto $121,229,000$763,324,000 at December 31, 2025 compared to $785,058,000 at December 31, 2024,2024. fromThe $906,287,000fair value of the available-for-sale investment portfolio reflected a net unrealized loss of $39,673,000 at December 31, 2023.2025, Thecompared marketto value of the portfolio reflected annet unrealized losslosses of $59,221,000 at December 31, 2024,2024 comparedand to an unrealized loss of $72,450,000$49,999,000 at December 31, 2023.2024.

The amortized cost, maturities and weighted average yield of investment securities at December 31, 20242025 are summarized in the following table.table:

Total loans, net of discount anddiscounts, deferred costs, and allowance for credit losses increased $1,043,424,000$202,368,000 or 80.8%8.77% to $2,334,221,000$2,510,786,000 as of December 31, 2024,2025, compared to $1,290,797,000$2,308,418,000 as of December 31, 2023.2024.

In order to mitigate these risks, the Board reviews and approves concentration limits proposed by management. Exceptions to limitations of concentrations are reported to the Board of Directors at least quarterly. Additionally, the Company maintains policy guidelines for maximum loan to value ratios to mitigate the risk of general declines in real estate values. The Company performs regular risk assessments, portfolio monitoring of loans, and stress tests as part of its risk management policies to identify any negative trends within the portfolio. Withinportfolio.Within the commercial real estate portfolio, there is diversification of collateral type and geography throughout our footprint. The Company did not engage in any sub-prime mortgage lending activities during the years ended December 31, 20242025 and 2023.2024.

The following table presents the commercial real estate owner and non-owner occupied loan balances, associated percentage of commercial real estate concentrations of those sub-categories by collateral type as of the dates indicated.indicated:

At December 31, 2024,2025, there were $6.46$6.96 million nonperforming assets.assets Therecompared wereto no$6.46 non-performing assetsmillion as of December 31, 2023.2024. Total nonperforming assets at December 31, 2024,2025, included $6.46$6.96 million nonaccrual loans, no OREO, and no$34,000 in repossessed assets. See Note 4 of the Company’s audited Consolidated Financial Statements in Item 8 of this Annual Report concerning our recorded investment in loans for which impairment has been recognized.

A summary of nonaccrual, restructured, and loans past due loansby more than 90 days at December 31, 2025, 2024, 2023, 2022, 2021, and 20202021 is set forth below. The Company had no loans past due more than 90 days and still accruing interest at December 31, 20242025 and 2023.2024. Management is not aware of any potential problem loans, which were current and accruing at December 31, 2024,2025, where serious doubt existed as to the ability of the borrower to comply with the present repayment terms. Management can give no assurance that nonaccrual and other nonperforming loans will not increase in the future.

Composition of Nonaccrual, Past Due 90 Days or More, and Restructured Loans

OREO represents real property taken either through foreclosure or through a deed in lieu thereof from the borrower. OREO is carried at the lesser of cost or fair market value less selling costs. As of December 31, 20242025 and 2023,2024, the Bank had no OREO properties. The Company held no$34,000 and $0 in repossessed assets at December 31, 20242025 and 2023,2024, which would be included in other assets on the consolidated balance sheets.

As of December 31, 2024,2025, the allowance for credit losses (ACL) was $25,803,000,$30,071,000, compared to $14,653,000$25,803,000 at December 31, 2023,2024, a net increase of $11,150,000. The net increase of $11,150,000 in the ACL was primarily attributed to the one-time provision for credit losses on acquired loans related to the merger with Community West Bancshares. This provision resulted in an increase to the ACL effective April 1, 2024 of $10,877,000.$4,268,000. Net charge-offsrecoveries totaled $463,000$68,000 for the twelve months ended December 31, 2024.2025.

On AprilJuly 22, 2026, the Board of Directors declared a $0.12 per share cash dividend payable on MayAugust 22,21, 2026 to shareholders of record as of MayAugust 8,6, 2026.

Goodwill and intangible assets acquired in a business combination and that are determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Core deposit intangible assets arising from business combinations are amortized on an accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. The estimated life of the core deposit intangible is approximately 108-10 years.

The significant highlights for the Company as of or for the period ended MarchJune 31,30, 2026 included the following:

•On April 1, 2026, the Company completed its previously announced merger (“Merger”) with United Security Bancshares (“USB”) pursuant to which USB merged with and into the Company, with the Company continuing as the surviving entity. Following the Merger, United Security Bank, a wholly owned subsidiary of USB, merged with and into Community West Bank (the “Bank”),Bank, a wholly owned subsidiary of the Company, with the Bank continuing as the surviving bank. The financial condition and results of operation of the combined companies will begin to be reported in the 2026 second quarter results.entity.

•The Company recorded a provision for credit losses of $90,000$5,635,000 during the quarter ended MarchJune 31,30, 2026, as compared to a provision for credit losses of $515,000$90,000 during the trailing quarter. The current quarter provision is attributed to a provision for loan losses totaling $122,000 and$5,259,000, a provision for unfunded commitments of $1,000,$430,000, partially offset by a credit to the reserve for held-to-maturity securities of $33,000.$54,000. The provision for loan losses during the quarter ended June 30, 2026 was primarily due to an update of the Company’s peer group based on its larger asset size following the completion of the Merger and also from organic loan growth during the quarter. Charge-offs during the quarter were associated with loans previously fully reserved or absorbed within the Day 1 allowance recorded at the time of the Merger.

•ThereGross wereloans $23.0increased by $992.7 million ofor non-performing assets as of March 31, 2026. Net loan recoveries were $37,00038.91% for the quarter ended June 30, 2026 compared to the quarter ended March 31, 2026 and loansincreased delinquent$1.0 30 daysbillion or more39.47% wereyear-to-date. $27.5The fair value of loans acquired from USB was $878.5 million as of MarchApril 31,1, 2026.

•Capital positions remain strong at MarchJune 31,30, 2026 with a 9.94%9.79% Tier 1 Leverage Ratio; a 11.84%11.41% Common Equity Tier 1 Ratio; a 12.01%11.53% Tier 1 Risk-Based Capital Ratio; and a 14.24%13.63% Total Risk-Based Capital Ratio.

•The Company declared a $0.12 per common share cash dividend, payable on MayAugust 22,21, 2026 to shareholders of record as of MayAugust 8,6, 2026.

During the three months ended MarchJune 31,30, 2026, the Company reported net income of $11,489,000.$2,695,000. Basic and diluted earnings per share for the three months ended MarchJune 31,30, 2026 were $0.60$0.10 compared to $0.44$0.41 for the three months ended MarchJune 31,30, 2025. During the three months ended MarchJune 31,30, 2026, the Company recorded a $90,000$5,635,000 provision for credit losses compared to a $41,000$2,613,000 creditprovision for credit losses during the three months ended MarchJune 31,30, 2025. During the quarter ended June 30, 2026, the Company realized a net loss on sales and calls of securities of $5,899,000 compared to a net loss of $15,000 during the prior year quarter ended June 30, 2025 as part of a strategic repositioning of the investment portfolio. The increase in both quarter-to-date and year-to-date non-interest expense categories was driven primarily by increases in merger expenses, salary and employee benefits, and amortization of core deposit intangibles as a result of the Merger.

(1) Calculated on a fully tax equivalent basis, which includes Federal tax benefits relating to income earned on municipal bonds totaling $336 and $348$347 at MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.

(2) Loan interest income includes loan fees (costs) fees of $589$(280) and $99$217 at MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively. Loan interest income includes an accretion on loan marks of $2,253$5,163 and $3,339$2,987 at MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.

Comparison of the quarter ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025

The Company’s net interest margin (fully tax equivalent basis), expressed as a percentage of average earning assets, increased 2646 basis points to 4.30%4.56% for the firstsecond quarter of 2026, from 4.04%4.10% for the firstsecond quarter of 2025. Average interest earning assets were $3,423,934,000$4,507,223,000 for the three months ended MarchJune 31,30, 2026 compared to $3,263,483,000$3,290,580,000 for the three months ended MarchJune 31,30, 2025. The $160,451,000$1,216,643,000 increase in average earning assets was attributed to the $202,980,000$1,115,945,000 or 8.72%47.20% increase in average loans, partially offset by a $2,497,000$25,230,000 decreaseincrease in interest-earning deposits and $40,032,000$75,468,000 decreaseincrease in investment securities. For the three months ended MarchJune 31,30, 2026, the effective yield on investment securities including Federal funds sold and interest-earning deposits in other banks decreasedincreased 1910 basis points. The effective yield on loans increased 35 basis points. Average interest bearing liabilities increased 3.53%36.84% to $2,190,436,000$2,885,938,000 for the three months ended MarchJune 31,30, 2026, compared to $2,115,718,000$2,108,955,000 for the same period in 2025.

Interest and fee income from loans increased $3,480,000$19,093,000 or 9.06%48.29% for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The yield on average loans, excluding nonaccrual loans, was 6.72%6.76% for the three months ended MarchJune 31,30, 2026 compared to 6.69%6.71% for the same period in 2025. The accretion from fair value marks on loans contributed 3860 basis points to the loan yield for the three months ended MarchJune 31,30, 2026 compared to 5831 basis points for the same period in 2025.

Interest income from interest-earning deposits in other banks decreasedincreased $206,000$45,000 in the three months ended MarchJune 31,30, 2026 to $850,000$1,099,000 compared to $1,056,000$1,054,000 for the same period in 2025. The yield on average interest-earning deposits decreased 7877 basis points to 3.75%3.62% for the three month period ended MarchJune 31,30, 2026 compared to 4.53%4.39% for the same period in 2025. Average interest-earning deposits for the three month period ended MarchJune 31,30, 2026 decreasedincreased $2,497,000$25,230,000 or 2.68%26.24% to $90,720,000$121,366,000 compared to $93,217,000$96,136,000 for the same period in 2025.

Interest income from total investment securities decreasedincreased $532,000$946,000 in the three months ended MarchJune 31,30, 2026 to $5,473,000$6,727,000 compared to $6,005,000$5,781,000 for the same period in 2025. The yield on average total investment securities decreasedincreased twelve18 basis points to 2.73%2.97% for the three month period ended MarchJune 31,30, 2026 compared to 2.85%2.79% for the same period in 2025. Average total investment securities for the three month period ended MarchJune 31,30, 2026 decreasedincreased $40,032,000$75,468,000 or 4.75%9.09% to $802,402,000$905,456,000 compared to $842,434,000$829,988,000 for the same period in 2025.

Total interest income for the three months ended MarchJune 31,30, 2026 increased $2,754,000$20,094,000 or 6.10%43.66% to $47,892,000$66,119,000 compared to $45,138,000$46,025,000 for the three months ended MarchJune 31,30, 2025. The yield on interest earning assets increased 626 basis points to 5.71%5.91% on a fully tax equivalent basis for the three months ended MarchJune 31,30, 2026 from 5.65% for the period ended MarchJune 31,30, 2025. The increase was the result of yield changes, increases in interest rates, and asset mix changes.changes, and the Merger.

Interest expense on deposits for the three months ended MarchJune 31,30, 2026 and 2025 was $10,835,000$13,732,000 and $10,388,000,$10,538,000, respectively. The average interest rate on interest bearing deposits decreased to 2.09%2.00% for the three months ended MarchJune 31,30, 2026 compared to 2.21%2.18% for the period ended MarchJune 31,30, 2025. Average interest-bearing deposits increased 9.93%41.96% or $189,563,000$814,674,000 to $2,099,119,000$2,755,993,000 for the three months ended MarchJune 31,30, 2026 compared to $1,909,556,000$1,941,319,000 for the period ended MarchJune 31,30, 2025.

Average other borrowed funds were $91,317,000$129,945,000 with an effective rate of 4.62%4.54% for the three months ended MarchJune 31,30, 2026 compared to $206,162,000$167,636,000 with an effective rate of 4.98%5.15% for the three months ended MarchJune 31,30, 2025. Total interest expense on other borrowed funds was $1,054,000$1,475,000 for the three months ended MarchJune 31,30, 2026 and $2,568,000$2,183,000 for the three months ended MarchJune 31,30, 2025.

The cost of interest-bearing liabilities decreased 2831 basis points to 2.20%2.11% for the three month period ended MarchJune 31,30, 2026 compared to 2.48%2.42% for the same period in 2025. The cost of total deposits decreased to 1.40%1.31% compared to 1.45%1.43% for the three month periods ended MarchJune 31,30, 2026 and 2025, respectively. The decrease in cost of deposits was due to reduction of rates paid for money market and time deposit accounts over the two time periods. Average non-interest bearing demand deposits increased 5.23%39.84% to $1,049,045,000$1,428,442,000 for the three month period ended MarchJune 31,30, 2026 compared to $996,921,000$1,021,513,000 for the same period in 2025. The ratio of average non-interest bearing demand deposits to average total deposits decreased to 33.32%34.14% in the three month period ended MarchJune 31,30, 2026 compared to 34.30%34.48% for the same period in 2025.

Net interest income before the provision for credit losses for the three months ended MarchJune 31,30, 2026 increased by $3,821,000$17,608,000 or 11.87%52.87% to $36,003,000$50,912,000 compared to $32,182,000$33,304,000 for the same period in 2025. The increase was a result of increased interest income on average earnings assets and aan decreaseincrease in interest expense on average interest bearing liabilities.

The Bank currently holds $10,978,000$17,250,000 in stock from the Federal Home Loan Bank (“FHLB”) of San Francisco in conjunction with our borrowing capacity and generally earns quarterly dividends. We received dividends totaling $557,000$773,000 for the three months ended MarchJune 31,30, 2026, which included a special dividend,2026 compared to $241,000$478,000 for the three months ended MarchJune 31,30, 2025.

Non-interest expenses decreasedincreased $483,000$16,847,000 or 2.06%75.56% to $22,987,000$39,143,000 for the three months ended MarchJune 31,30, 2026, compared to $23,470,000$22,296,000 for the three months ended MarchJune 31,30, 2025. The net decreaseincrease for the three months ended MarchJune 31,30, 2026 was primarily the result of decreasesincreases in professional services of $242,000, salaries and employee benefits of $195,000,$4,058,000, information technology of $189,000,$867,000, advertisingprofessional services of $60,000$201,000, data processing expenses of $363,000, and ATM/Debit card expenses of $46,000,$280,000, partially offset by a decrease in personnel other of $72,000 and data processingadvertising expenses of $40,000.$56,000. The year over year decreaseincrease in professionalexpenses servicesfor the quarter-to-date period was primarily driven by athe decrease in audit and consulting fees.Merger.

Salaries and employee benefits decreasedincreased $195,000$3,862,000 or 1.50%15.31% to $12,764,000$29,081,000 for the first threesix months of 2026 compared to $22,090,000 for the three months ended MarchJune 31,30, 2025. The decreaseCompany inadded salaries and benefits was a reflection of a decrease in100 full-time equivalent employees,employees partiallyas offseta byresult annualof meritthe increasesMerger, including temporary employees to assist with systems integrations. The year-to-date average full time equivalent employees were 327418 for the three months ended MarchJune 31,30, 2026, compared to 344342 for the three months ended MarchJune 31,30, 2025.

The Company reported an income tax provision of $4,225,000$1,469,000 and $3,071,000$2,927,000 for the three month periods ended MarchJune 31,30, 2026 and 2025, respectively. The Company reported an income tax provision of $5,694,000 and $5,998,000 for the six month periods ended June 30, 2026 and 2025, respectively.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense in the consolidated statements of income. If deemed necessary, the Company maintains a reserve for uncertain income taxes where the merits of the position taken or the amount of the position that would be ultimately sustained upon examination do not meet a more-likely-than-not criteria. As of MarchJune 31,30, 2026 and December 31, 2025, there was no reserve for uncertain tax positions.

On June 27, 2025, California Senate Bill 132 (“SB 132”) was passed and signed into law by Governor Newsom. Effective for taxable years beginning on or after January 1, 2025, SB 132 amends California Rev. & Tax. Code to require financial institutions to apportion income using the single sales factor formula for California. Prior to this change, financial institutions were required to use the three-factor apportionment formula contemplating a payroll factor, property factor, and sales factor. This change in tax law did not have a material impact on the company's tax expense as of MarchJune 31,30, 2026 and for the year ended 2025.

On July 4, 2025, the President of the United States signed and enacted the One Big Beautiful Bill Act (“OBBBA”) into law. Except for certain provisions, the OBBBA is effective for tax years beginning on or after January 1, 2025. The tax and spending legislation permanently extends key business tax breaks originally enacted under the 2017 Tax Cuts and Jobs Act. The law did not materially impact the Company’s tax provision as of MarchJune 31,30, 2026.