Annual report
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2025 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number: 001-40379 FIVE STAR BANCORP (Exact name of registrant as specified in its charter) California (State or other jurisdiction of incorporation or organization) 3100 Zinfandel Drive, Suite 100 Rancho Cordova, California (Address of principal executive offices) 75-3100966 (I.R.S. Employer Identification No.) 95670 (Zip Code) (916) 626-5000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value per share FSBC The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Emerging growth company x If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates as of June 30, 2025 was $477.2 million. As of February 24, 2026, the number of shares outstanding of the registrant’s common stock was 21,376,153. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s Definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A for its 2026 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
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INDEX Page Cautionary Note Regarding Forward-Looking Statements 1 PART I 3 Item 1. Business 3 Item 1A. Risk Factors 18 Item 1B. Unresolved Staff Comments 39 Item 1C. Cybersecurity 40 Item 2. Properties 42 Item 3. Legal Proceedings 42 Item 4. Mine Safety Disclosures 42 PART II 43 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 43 Item 6. [Reserved] 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 73 Item 8. Financial Statements and Supplementary Data 75 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 124 Item 9A. Controls and Procedures 124 Item 9B. Other Information 125 PART III 126 Item 10. Directors, Executive Officers and Corporate Governance 126 Item 11. Executive Compensation 126 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 126 Item 13. Certain Relationships and Related Transactions, and Director Independence 127 Item 14. Principal Accountant Fees and Services 127 PART IV 128 Item 15. Exhibits and Financial Statement Schedules 128 Item 16. Form 10-K Summary 129 SIGNATURES 130 i
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Glossary of Acronyms, Abbreviations, and Terms The terms identified below are used in various sections of this Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 and the unaudited Consolidated Financial Statements and Notes to the Financial Statements in Item 1 of this Annual Report on Form 10-K. AAA Accumulated Adjustments Account FNMA Federal National Mortgage Association ACL Allowance for Credit Losses GAAP Generally Accepted Accounting Principles in theU.S. ASC Accounting Standards Codification GNMA Government National Mortgage Association ASU Accounting Standards Update GSE Government Sponsored Entity Bancorp Five Star Bancorp and its subsidiary ICS Insured Cash Sweep® Bank Five Star Bank IPO Initial Public Offering Basel III A capital framework and rules for U.S. bankingorganizations IRC Internal Revenue Code BOLI Bank-owned Life Insurance IRS Internal Revenue Service CDARS Certificate of Deposit Account RegistryService® LM Loan modification made to borrowerexperiencing financial difficulty CECL Current Expected Credit Loss Nasdaq The Nasdaq Stock Market LLC CFPB Consumer Financial Protection Bureau NI Net Income CRA Community Reinvestment Act NII Net Interest Income CME Chicago Mercantile Exchange OCI Other Comprehensive Income CRE Commercial Real Estate OFAC Office of Foreign Assets Control C&I Commercial & Industrial OREO Other Real Estate Owned DFPI Department of Financial Protection andInnovation RSA Restricted Stock Award EPS Earnings per Share ROAA Return on Average Assets, annualized EVE Economic Value of Equity ROAE Return on Average Equity, annualized FASB Financial Accounting Standards Board ROUA Right-of-Use Asset FDIC Federal Deposit Insurance Corporation SBA U.S. Small Business Administration Federal Reserve Board of Governors of the Federal ReserveSystem SEC Securities and Exchange Commission FFIEC Federal Financial Institutions ExaminationCouncil SOFR Secured Overnight Financing Rate FHLB Federal Home Loan Bank of San Francisco TreasuryDepartment U.S. Department of the Treasury FHLMC Federal Home Loan Mortgage Corporation ii
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of our beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Such forward-looking statements are based on various assumptions (some of which may be beyond our control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to: • risks related to the concentration of our business in California, and specifically within Northern California, including risks associated with any downturn in the real estate sector; • changes in market interest rates that affect the pricing of our loans and deposits, our net interest income, and our borrowers’ ability to repay loans; • changes in the U.S. economy, including an economic slowdown, recession, inflation, deflation, tariffs, housing prices, employment levels, rate of growth, and general business conditions; • uncertain market conditions and economic trends nationally, regionally, and particularly in Northern California and California; • the soundness of other financial institutions and the impacts related to or resulting from bank failures and other economic and industry volatility, including increased regulatory requirements and costs and potential impacts to macroeconomic conditions; • the impact of recent and future legislative and regulatory changes, including changes in banking, securities, and tax laws and regulations and their application by our regulators; • the effects of increased competition from a wide variety of local, regional, national, and other providers of financial and investment services; • the risks associated with our loan portfolios, and specifically with our commercial real estate loans; • our ability to maintain adequate liquidity and to maintain capital necessary to fund our growth strategy and operations and to satisfy minimum regulatory capital levels; • risks related to our strategic focus on lending to small to medium-sized businesses; • the sufficiency of the assumptions and estimates we make in establishing reserves for potential credit losses and the value of loan collateral and securities; • our level of nonperforming assets and the costs associated with resolving problem loans, if any; • our ability to comply with various governmental and regulatory requirements applicable to financial institutions, including supervisory actions by federal and state banking agencies; • governmental monetary and fiscal policies, including the policies of the Federal Reserve; • risks associated with unauthorized access, cybersecurity breaches, cyber-crime, and other threats and disruptions to data security; • our ability to implement, maintain, and improve effective risk management framework, disclosure controls and procedures, and internal controls over financial reporting; • our ability to adopt and successfully integrate new initiatives or technologies into our business in a strategic manner; 1
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• our ability to attract and retain executive officers and key employees and their customer and community relationships; • the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating; • the occurrence or impact of climate change or natural or man-made disasters or calamities, such as wildfires, droughts, mudslides, floods, and earthquakes, and particularly in California, and specifically Northern California; • changes in and impact of local, regional, and global business, economic, and political conditions and geopolitical events, such as pandemics, civil unrest, wars, and acts of terrorism; and • other factors that are discussed in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in this Annual Report on Form 10-K, including those discussed in the section entitled “Risk Factors.” Additional factors that could cause results or performance to materially differ from those expressed in our forward-looking statements are detailed in other filings we may make with the SEC, copies of which are available from us at no charge. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect us. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Annual Report on Form 10-K. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We disclaim any duty to revise or update the forward-looking statements, whether written or oral, to reflect actual results or changes in the factors affecting the forward-looking statements, except as specifically required by law. 2
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PART I Item 1. Business Our Company Headquartered in the greater Sacramento metropolitan area of California, Five Star Bancorp is a bank holding company that operates through its wholly owned subsidiary, Five Star Bank, a California state-chartered non-member bank. The Bank began operations on December 20, 1999. Bancorp was incorporated on September 16, 2002 and became the sole shareholder of the Bank on June 2, 2003. Our executive offices are located at 3100 Zinfandel Drive, Suite 100, Rancho Cordova, California 95670 and our telephone number is (916) 626-5000. Our website address is https://www.fivestarbank.com. Information on our website should not be considered a part of this Annual Report on Form 10-K. The Company provides a broad range of banking products and services to small and medium-sized businesses, professionals, and individuals primarily in Northern California through nine branch offices. The Bank opened a full-service branch in Walnut Creek in September 2025. The Bank’s deposits are insured in whole or in part by the FDIC. The Bank’s loans and deposits are primarily within Northern California, and the Bank’s primary funding source is deposits from customers. Our mission is to strive to become the top business bank in all markets we serve through exceptional service, deep connectivity, and customer empathy. We are dedicated to serving real estate, agricultural, faith-based, and small to medium-sized enterprises. We aim to consistently deliver value that meets or exceeds expectations of our shareholders, customers, employees, business partners, and community. We refer to our mission as “purpose-driven and integrity-centered banking.” At December 31, 2025, we had total assets of $4.8 billion, total loans held for investment of $4.1 billion, and total deposits of $4.2 billion. In May 2021, the Company completed its IPO, in connection with which the Company terminated its status as a Subchapter S corporation as of May 5, 2021 and became a taxable C Corporation. Unless otherwise indicated, references in this report to “we,” “our,” “us,” “the Company,” or “Bancorp” refer to Five Star Bancorp and our consolidated subsidiary. All references to “the Bank” or “Five Star” refer to Five Star Bank, our wholly owned subsidiary. Our Market The Company, through the Bank, provides financial services to customers who are predominately small and middle-market businesses, professionals, and individuals primarily in the Northern California region. Our primary loan products are commercial real estate loans, land development loans, construction loans, and operating lines of credit and our primary deposit products are checking accounts, savings accounts, money market accounts, and term certificate accounts. Our principal geographic market is the Roseville/Sacramento/Rancho Cordova/Elk Grove area (the “Greater Sacramento Area”). The Greater Sacramento Area has a profitable and productive economy driven by the governmental, education, technology, health care, agricultural, and manufacturing sectors. Since 2016, our market share of the total deposits in the Greater Sacramento Area has increased significantly, according to the FDIC Deposit Market Share Reports. We believe that our market growth confirms the quality of the purpose-driven and integrity-centered banking that we strive to deliver to our customers. During 2025, we continued our expansion into the San Francisco Bay Area, including the opening of a full service branch in Walnut Creek in September 2025. We hired three business development officers, three loan officers, and four additional staff to support these operations during 2025 as part of our expansion. Our Products and Services Lending Activities We focus primarily on commercial lending, with an emphasis on commercial real estate. We offer a variety of loans to small and medium- sized businesses, professionals, and individuals, including commercial real estate, commercial, commercial land and construction, and farmland loans. Although a substantial portion of our loan portfolio consists of commercial real estate loans within our market, our portfolio is diverse and includes SBA loans to customers nationwide. To a lesser extent, we also offer residential real estate and construction loans and consumer loans. 3
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Commercial real estate loans: As of December 31, 2025, we had $3.3 billion in total commercial real estate loans, representing 81.08% of total loans before deferred fees. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. These loans are generally collateralized by first liens on real estate and amortized over a period of years. We monitor and evaluate commercial real estate loans based on collateral, geography, and risk grade criteria. Our commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing our commercial real estate portfolio are diverse in terms of type and industry. This diversity helps reduce our exposure to adverse economic events that affect any single market or industry. Commercial land and construction loans: As of December 31, 2025, we had $98.1 million in commercial land and construction loans, representing 2.40% of total loans before deferred fees. We make loans to established builders to construct residential properties, loans to developers of commercial real estate investment properties and residential developments, and, to a lesser extent, loans to individual clients for construction of single-family homes in our market. On rare occasions, we also make loans for the acquisition of undeveloped land subject to heightened underwriting requirements. Construction loans are typically disbursed as construction progresses and carry either fixed or variable interest rates generally based on the borrowers’ ability to repay the loans from the cash flow of their businesses. The terms of our commercial land and construction loans vary depending on factors such as the type and size of the development and the financial strength of the borrower/guarantor. Loans are typically structured with an interest-only construction period and mature at the completion of construction. Residential real estate and construction loans: As of December 31, 2025, we had $46.0 million in residential real estate and construction loans, representing 1.13% of total loans before deferred fees. Residential real estate loans are underwritten based upon income, credit history, and collateral. To monitor and manage residential loan risk, policies and procedures are developed and modified, as needed. We believe that this activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage, collection remedies, the number of such loans a borrower can have at one time, and documentation requirements. Farmland loans: As of December 31, 2025, we had $59.6 million in farmland loans, representing 1.46% of total loans before deferred fees. We are a strong agricultural lender, with both lines of credit and term loans. Farmland loans are generally made to producers and processors of crops and livestock. Repayment is primarily from the sale of an agricultural product or service. Farmland loans are secured by real property and are susceptible to changes in market demand for specific commodities. This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions, and changes in business cycles, as well as adverse weather conditions. Commercial loans: As of December 31, 2025, we had $292.2 million in commercial loans, representing 7.16% of total loans before deferred fees. Commercial loans are underwritten after evaluating the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. SBA loans: As of December 31, 2025, our total commercial SBA portfolio held for investment was $34.3 million, representing 0.84% of total loans before deferred fees. In 2025, we sold 10 SBA 7(a) loans with government-guaranteed portions totaling approximately $3.3 million. We participate in the SBA 7(a) program in order to meet the needs of our small business community as well as customers nationwide. As an approved participant in the SBA Preferred Lender Program, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA presently guarantees 75% to 90% of the principal amount of qualifying loans originated under the 7(a) loan program. The guarantee is conditional and covers a portion of the risk of payment default by the borrower, but not the risk of improper closing and servicing by the lender. As such, prudent underwriting and closing processes are essential to 4
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effective utilization of the 7(a) program. We typically sell the SBA-guaranteed portion of the SBA loans we originate in the secondary market. Consumer and other loans: As of December 31, 2025, we had $275.5 million in consumer and other loans, representing 6.77% of total loans before deferred fees. These loans consist primarily of loans purchased in a loan purchase program with a non-bank lender, generally made to professionals for the purpose of large personal or household purchases. The loans are unsecured, fixed rate loans. These loans also include loans purchased or originated through financing partnerships which are no longer active. Under those financing programs, we made a variety of loans in relatively small amounts to individuals for personal purposes, primarily for home repairs and improvements. Consumer loans are underwritten based on the individual borrower’s income, current debt level, past credit history, and the value of any available collateral. The terms of consumer loans vary considerably based upon the loan type, nature of collateral, and size of the loan. The performance of consumer loans is affected by the local and regional economy as well as the rates of personal bankruptcies, job loss, divorce, and other individual-specific characteristics. We do not expect these consumer and other loans to make up a significant portion of our lending activity. Lending Philosophy In keeping with our mission of purpose-driven and integrity-centered banking, we seek credit arrangements that serve our local community and provide attractive risk-adjusted returns to us. We pursue our objectives while remaining mindful of liquidity, flexibility, and risk considerations by exercising controls on non-interest expenses and close management of our assets and liabilities. We periodically set guidelines designed to maintain stability of our loan-to-deposit ratio, minimize past-due and non-accrual loans, and achieve an optimal loan mix and concentration. We seek well-margined and collateralized loan opportunities to borrowers with extensive professional asset operating experience. Lending Policy and Procedures We have established common documentation, policies, and standards for lending based on the type of loan. A thorough credit analysis precedes commercial and real estate loan decisions, and we follow well-established and proven procedures when approving consumer loans. We have established a Management Loan Committee and a Director Loan Committee. Our Management Loan Committee is comprised of our Chief Executive Officer, our Chief Credit Officer, certain other members of management, and select senior loan officers and is primarily responsible for day-to-day implementation and oversight of our loan approval procedures. Our board of directors approves, from time to time, a delegated lending authority to members of the Management Loan Committee. The amount of authority delegated to each member of the committee varies based on years of direct lending experience, responsibility, and performance. The authority limits also vary by collateral type. Concentrations of Credit Risk Although we have a diversified loan portfolio, a substantial portion is secured by commercial and residential real estate located in Northern California. As of December 31, 2025, approximately 56.89% of our real estate loans measured by dollar amount were secured by collateral located in California, a majority of which is in Northern California. Additionally, we have a high concentration of real estate related loans, which represented approximately 86.07% of total loans before deferred fees at December 31, 2025. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, or a decline in real estate values in our primary market in particular, could have an adverse impact on the collectability of these loans. Personal and business incomes represent the primary source of repayment for the majority of these loans. Deposit Products Representing 97.49% of our total liabilities as of December 31, 2025, deposits are our primary source of funding for our business operations. As of December 31, 2025, we held total deposits of $4.2 billion, including $1.1 billion in non-interest-bearing deposits. We offer a comprehensive array of deposit products for small and medium-sized businesses, professionals, and individuals, including a variety of checking and savings accounts, time deposits, and money market accounts. We also provide a wide range of deposit services, including debit cards, remote deposit capture, online banking, mobile banking, and direct deposit services. 5
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We obtain most of our deposits from individuals, small and medium-sized businesses, and municipalities in our market. We solicit deposits through our relationship-driven team of dedicated and accessible bankers, as well as through community-focused marketing. We emphasize obtaining deposit relationships at loan origination. We provide a high level of customer service to our depositors. We have invested in personnel, business and compliance processes, and technology that enable us to acquire, as well as efficiently and effectively serve a wide array of business deposit accounts, while continuing to provide the level of customer service for which we are known. As of December 31, 2025, our 53 largest deposit relationships, each accounting for more than $10.0 million, totaled $2.0 billion, or 47.82% of our total deposits. This includes $789.6 million of our total deposits held by municipalities, of which we conduct a monthly review. Our management maintains our liquidity position and lines of credit with correspondent banks to mitigate the risk of large withdrawals by this group of large depositors. Investment Securities As of December 31, 2025, the carrying value of our investment portfolio, which represented 2.04% of total assets, totaled $96.9 million and had an average effective yield of 2.03% and an estimated modified duration of approximately 6.06 years. The primary objectives of the investment portfolio are to provide a source of liquidity and provide collateral that can be readily sold or pledged for public deposits or other business purposes. At December 31, 2025, 49.73% and 40.41% of our investment portfolio consisted of mortgage-backed securities and obligations of states and political subdivisions, respectively. The remainder of our securities portfolio is invested in U.S. government agencies, collateralized mortgage obligations, and corporate bonds. We regularly evaluate the composition of our investment portfolio as the interest rate yield curve changes and may sell or pledge investment securities from time to time to adjust our exposure to interest rates or to provide liquidity to meet loan demand. Due to loan growth, we are holding the majority of our on-balance sheet liquidity in the Federal Reserve Bank to provide readily available funds for loan growth and deposit activities in the normal course of business for our existing clients. Competition The banking business is highly competitive, and we face strong competition from many other financial institutions and financial services providers. Our principal competitors are commercial and community banks, credit unions, savings and loan associations, mortgage banking firms and online mortgage lenders, and commercial and consumer finance companies, including large national financial institutions that operate in our market. Our profitability depends in large part upon our continued ability to successfully compete with these institutions for lending opportunities, deposit funds, financial products, bankers, and potential acquisition targets. We conduct business through nine branches in our key market of Northern California. We opened a full service branch in Walnut Creek in September 2025. Many other commercial and community banks, savings institutions, credit unions, and other financial institutions maintain a physical presence in our primary market area, and some maintain only a virtual presence. Many of these competitors are larger than we are, have significantly more resources, greater brand recognition, and more extensive and established branch networks or geographic footprints than we do, and may be able to attract customers more effectively than we can. Because of their scale, many of these competitors can be more aggressive on loan and deposit pricing than we can and may better afford and make broader use of media advertising, support services, and electronic technology than we do. Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. To offset these competitive disadvantages, we concentrate marketing efforts in the local markets we service with local advertisements and personal contacts. We depend on our reputation of having greater personal service than our competitors, as well as consistency, flexibility, our ability to make credit and other business decisions quickly, and our deep knowledge of competitor strengths and weaknesses. Based on the FDIC Summary of Deposits as of June 30, 2025, the Bank ranks sixth in the Sacramento-Roseville-Folsom metropolitan statistical area (“MSA”) by deposit market share with deposits of $3.1 billion and four branches. As of June 30, 2025, total market deposits in the Sacramento-Roseville-Folsom MSA were $94.7 billion, of which $77.3 billion, or approximately 81.55%, was held by five money center banks across 174 branches. We are the 39th largest insured depository institution in California by deposits as of June 30, 2025. Information Technology Systems We have made, and continue to make, significant investments in our information technology systems and staff for our banking and lending operations and treasury management activities. We believe this investment will support our continued growth and enable us to enhance our capabilities to offer new products, improve overall customer experience, improve 6
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profitability through efficiencies, and provide scalability for future growth. We utilize nationally recognized software vendors and their cloud/hosted models, which allow us to outsource the processing of our data. Our internal network and e-mail systems are administered by a managed service provider specializing in financial institutions, and we maintain our production infrastructure in a data center facility near Reno, Nevada. This site provides for power and connectivity redundancy, and we maintain a disaster recovery program, including a cloud-based recovery environment. The majority of our other systems, including our electronic funds transfer, transaction processing, and online banking services are hosted by third-party service providers. The scalability of this infrastructure will support our growth strategy. In addition, the tested capability of these vendors to automatically switch over to standby systems should allow us to recover our systems and provide business continuity quickly in case of a disaster. Emerging Growth Company Status We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. Among other factors, as an emerging growth company: • we may discuss our results of operations for only two years in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” provided that we reference disclosure where the third year of our results of operations may be found; • we are exempt from the requirement to provide an opinion from our auditors on the design and operating effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”); • we may choose not to comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and our audited financial statements; • we are permitted to provide less extensive disclosure regarding our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies and with which emerging growth companies may comply, which means we are not required to include a compensation discussion and analysis and other disclosures regarding our executive compensation in this Annual Report on Form 10-K; and • we are not required to hold nonbinding advisory votes on executive compensation or golden parachute arrangements. We may take advantage of these provisions for up to five years unless we earlier cease to qualify as an emerging growth company. We would cease to be an emerging growth company upon the earliest of: (i) the first fiscal year following the fifth anniversary of our IPO; (ii) the first fiscal year after our annual gross revenues are $1.235 billion or more; (iii) the date on which we have, during the previous three- year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We have elected to adopt the reduced disclosure requirements described above regarding the number of periods for which we are providing audited financial statements and selected financial data, and our executive compensation arrangements. In addition, we take advantage of the reduced reporting and other requirements under the JOBS Act with respect to the periodic reports we file with the SEC and proxy statements that we use to solicit proxies from our shareholders. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you invest. The JOBS Act exempts emerging growth companies from compliance with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement declared effective under the Securities Act of 1933, as amended, or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of this extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. However, we may early adopt certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard early than the time that such standard applies to private companies to the extent early adoption is permitted. As such, our consolidated 7
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financial statements may not be comparable with those of a public company that is not an emerging growth company, or those of a public company that is an emerging growth company that has opted out of using the extended transition period, because of the potential differences in accounting standards used. Risk Management We believe that effective risk management and control processes are critical to our safety and soundness, our ability to predict and manage the challenges that we face, and, ultimately, our long-term corporate success. Risk management refers to the activities by which we identify, measure, monitor, evaluate, and manage the risks we face in the course of our banking activities. These include liquidity, interest rate, credit, operational, compliance, regulatory, strategic, financial, and reputational risk exposures. Our board of directors, both directly and through its committees, is responsible for overseeing our risk management processes, including quarterly enterprise risk management assessments and annual assessments in the following areas: (i) cyber; (ii) Bank Secrecy Act of 1970 (“Bank Secrecy Act”)/anti-money laundering; and (iii) third-party risk, with each of the committees of our board of directors assuming a different and important role in overseeing the management of the risks we face. The Audit Committee of our board of directors is responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures, and internal control over financial reporting). The Compensation Committee of our board of directors has primary responsibility for risks and exposures associated with our compensation policies, plans, and practices regarding executive compensation, board compensation, and our compensation structure generally. Our Compensation Committee, in conjunction with our President and Chief Executive Officer and other members of our management, as appropriate, reviews our incentive compensation arrangements to ensure these programs are consistent with applicable laws and regulations, including safety and soundness requirements, and do not encourage imprudent or excessive risk-taking by our employees. The Governance and Nominating Committee of our board of directors oversees risks associated with the independence of our board of directors and potential conflicts of interest. Our senior management is responsible for implementing our risk management processes by assessing and managing the risks we face, including strategic, operational, regulatory, investment, and execution risks, on a day-to-day basis, and reporting to our board of directors regarding our risk management processes. Our senior management is also responsible for creating and recommending to our board of directors for approval appropriate risk appetite metrics reflecting the aggregate levels and types of risk we are willing to accept in connection with the operation of our business and pursuit of our business objectives. The role of our board of directors in our risk oversight is consistent with our leadership structure, with our President and Chief Executive Officer and the other members of senior management having responsibility for assessing and managing our risk exposure, and our board of directors and its committees providing oversight in connection with those efforts. We believe this division of risk management responsibilities presents a consistent, systemic, and effective approach for identifying, managing, and mitigating risks throughout our operations. Human Capital To facilitate talent attraction and retention, we strive to create an inclusive, safe, and healthy workplace with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits, and health and welfare programs. Employee Profile As of December 31, 2025, we had 233 full-time employees and five part-time employees. None of our employees are covered by a collective bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements. Compensation and Benefits We provide a competitive compensation and benefits program to help meet the needs of our employees. In addition to salaries, this program includes annual bonus opportunities, a 401(k) plan with an employer matching contribution, healthcare and insurance benefits, health reimbursement accounts, paid time off and family leave, and an employee assistance program. 8
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Learning and Development We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues under the leadership of a Director of Employee Engagement. We facilitate the educational and professional development of our employees through support to attend conferences and obtain degrees, licenses, and certifications while employed by us. Commitment to Environmental, Social, and Governance We are executing an Environmental, Social, and Governance strategy designed to promote positive change that focuses on the environmental impacts of our business and the geographical service areas in which we serve, social factors in the communities we serve, and the governance of our board of directors. Environmental: Climate change impacts our customers, communities, employees, and shareholders. We are committed to developing policies and procedures that can contribute to reducing the effects of climate change, including funding customer business ventures that create a positive environmental impact through agriculture or technology. We continue to sponsor and support environmental impact initiatives by partnering with our customers that aid in the efforts of a clean and sustainable community. Additionally, we equip customers with technology tools designed to reduce their carbon footprint by reducing in-branch customer visits. We have taken steps designed to help reduce our own carbon footprint by utilizing e-signatures to conduct business to reduce paper consumption, occupying sustainable facilities when possible, and encouraging our employees to work remotely, where possible. We recognize that reducing the effects of climate change and helping to drive the transformation to a lower carbon environment are ongoing efforts, and plan to continually seek out opportunities that can positively impact the effect that climate change has on the environment. Social: We work to create positive social impacts in the communities in which our business operates, including by assisting unhoused populations, supporting affordable housing projects, and prioritizing non-profit donations. We believe it is our shared responsibility to build a strong foundation of community by fostering a culture of belonging and inclusion. We also remain focused on investing and economically developing the geographical service areas in which we serve, as well as on their sustainability. Governance: The Governance and Nominating Committee is committed to diversity on our board of directors and compliance with applicable rules, regulations, and guidance regarding the composition of our leadership. Members of our board of directors represent diverse backgrounds, including diversity of race, ethnicity, gender, and other demographics. We are committed to ethical business practices and accounting transparency, as evidenced through our involvement in the community and results of examinations by regulators. Dedication to Community Impact and Inclusion Community Impact and Inclusion is essential in our workplace. We have an Executive Vice President, Chief Operating Officer and a Vice President, Director of Community Impact and Inclusion who lead our efforts in this area. Our Human Resources department is focused on our commitment to inclusion through hiring practices and employee training. We are committed to ensuring that all employees feel a sense of belonging in the workplace and that processes and programs are impartial, fair, and provide equal opportunity for every individual. We also have a history of serving customers in the non-profit community who are dedicated to the success of under-resourced and vulnerable populations, the empowerment of women, and the continued vitality of the environment. Available Information The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, and other filings with the SEC are available free of charge at https://investors.fivestarbank.com under the heading “Financials & Filings,” as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. These reports are also available for free on the SEC’s website at https://www.sec.gov. The information contained on the Company’s website as referenced in this Annual Report on Form 10-K should not be considered a part of this report. 9
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Supervision and Regulation General Federal and state banking laws impose a comprehensive system of supervision, examination, regulation, and enforcement on the operations of insured banks and their holding companies. Supervision and regulation of banks, their holding companies, and affiliates is intended primarily for the protection of depositors and customers, the Deposit Insurance Fund (the “DIF”) of the FDIC, and the U.S. banking and financial system, rather than holders of our capital stock. As a result, our growth, earnings performance, and operations may be affected by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the DFPI, the FDIC, the Federal Reserve, and the CFPB. Furthermore, tax laws administered by the IRS and state taxing authorities, accounting rules developed by the FASB, securities laws administered by the SEC and state securities authorities, anti-money laundering laws enforced by the Treasury Department, and SBA regulations with respect to small business loans, have an impact on our business. These statutes, regulations, and policies are continually under the review of the United States Congress and state legislatures, as well as federal and state regulatory agencies, and the nature and extent of future legislative, regulatory, or other developments affecting financial institutions are impossible to predict with any certainty. Any change in the statutes, regulations or regulatory policies applicable to us, including changes in their interpretation, expectations or implementation, could have a material effect on our business and operations. The following is a summary of material elements of the regulatory and supervisory framework applicable to us and the Bank. It does not describe all of the statutes, regulations, and regulatory policies that apply, nor does it provide complete summaries of the statutes, regulations, and policies referenced therein. Supervision and Regulation of the Company We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). As a result, we are primarily subject to the supervision, examination, and reporting requirements of the BHC Act, Federal Deposit Insurance Act (the “FDI Act”), and the regulations of the Federal Reserve and FDIC. Federal law subjects bank holding companies, such as the Company, to restrictions on the types of activities in which they may engage and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. Violations of laws and regulations, or other unsafe and unsound practices, may result in regulatory agencies imposing fines, penalties, or cease and desist orders, or taking other enforcement actions. Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees, and other parties participating in the affairs of a bank or bank holding company. Federal Oversight over Mergers and Acquisitions, Investments, and Activities The BHC Act requires a bank holding company to obtain the prior approval of the Federal Reserve before: (i) it may acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, the bank holding company will directly or indirectly own or control 5% or more of the voting shares of the bank; (ii) it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or (iii) it may merge or consolidate with any other bank holding company. Before approving any such transaction, the Federal Reserve is required by the BHC Act to consider a number of factors, including the transaction’s competitive impact, the financial and managerial resources and future prospects of the bank holding companies and banks concerned, the convenience and needs of the community to be served, and the effectiveness of the parties in combating money laundering activities. Provisions of the FDI Act known as the Bank Merger Act impose similar approval standards for an insured depository institution to merge with another insured depository institution or a non-insured institution. On September 17, 2024, the United States Department of Justice (the “DOJ”) withdrew its 1995 Bank Merger Guidelines and announced that it will instead evaluate the competitive impact of bank mergers using its 2023 Merger Guidelines that the DOJ applies to mergers in all industries. Compared to the 1995 Bank Merger Guidelines, the 2023 Merger Guidelines set forth more stringent concentration limits and add several largely qualitative bases on which the DOJ may challenge a merger. While the effect of changes in the DOJ’s bank merger antitrust policy for particular transactions remains unclear, the changes may make it more difficult and/or costly for us to obtain regulatory approval for an acquisition or otherwise result in more onerous conditions to obtain approval for an acquisition. 10
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The BHC Act, as amended by the interstate banking provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”), permits us to acquire a bank located in any other state, regardless of state law to the contrary, subject to certain deposit concentration limits, aging requirements, and other restrictions. The Riegle-Neal Act also generally permits national- and state-chartered banks to branch interstate through acquisitions of banks in other states. Bank holding companies must be “well-capitalized” and “well-managed” to obtain federal bank regulatory approval of an interstate acquisition without regard to state law prohibiting the transaction. The BHC Act also generally requires Federal Reserve approval for a bank holding company’s acquisition of a company that is not an insured depository institution. Bank holding companies generally may engage, directly or indirectly, only in managing or controlling banks, and such other activities as are determined by the Federal Reserve to be closely related to banking, and certain other permissible nonbanking activities. Bank holding companies generally must notify the Federal Reserve before acquiring a company that is not an insured depository institution or engaging in a permissible nonbanking activity, and the Federal Reserve considers several factors in reviewing such a notice. The Federal Reserve may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity, or control constitutes a serious risk to the financial safety, soundness, or stability of it or any of its bank subsidiaries. The Gramm-Leach-Bliley Act (the “GLB Act”) allows a bank holding company that satisfies certain criteria to elect to become a financial holding company, which would allow such company to engage in activities that are financial in nature, incidental to such activities, or complementary to such activities. We have not elected financial holding company status. The FDIC has the authority to approve applications by state non-member banks to establish de novo branches, including, under the Riegle- Neal Act, in states other than the bank’s home state if the law of the state in which the branch is located, or is to be located, would permit establishment of the branch if the bank were a state bank chartered by that state. Certain acquisitions of our voting stock may be subject to regulatory approval or notice under federal law. Investors are responsible for ensuring that they do not, directly or indirectly, acquire shares of our stock in excess of the amount that can be acquired without regulatory approval under the Change in Bank Control Act and the BHC Act, which prohibit any person or company from acquiring control of the Company without, in most cases, the prior written approval of the Federal Reserve. Source of Strength The FDI Act and Federal Reserve regulations require a bank holding company to serve as a source of financial and managerial strength to its bank subsidiaries. As a result, a bank holding company may be expected to commit resources to support its bank subsidiary, including at times when the holding company may not be inclined or in a financial position to provide it. Capital Adequacy Bank holding companies and banks are subject to various regulatory capital requirements administered by federal and state bank regulatory agencies. Capital adequacy regulations and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices, as well as qualitative judgments by the regulators about components of capital, risk-weightings, and other factors. The Federal Reserve and the FDIC, the primary federal regulators of the Company and Bank, respectively, have substantially similar generally applicable risk-based capital ratio and leverage ratio requirements. Under the generally applicable capital requirements of the Federal Reserve and the FDIC, the Company and the Bank are required to meet a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.0% (a minimum of 4.5% plus a capital conservation buffer of 2.5%), a Tier 1 capital to risk-weighted assets ratio of at least 8.5% (a minimum of 6.0% plus a capital conservation buffer of 2.5%), a total capital to risk-weighted assets ratio of at least 10.5% (a minimum of 8.0% plus a capital conservation buffer of 2.5%), and a Tier 1 leverage ratio of at least 4.0%. In addition, insured depository institutions such as the Bank, unlike bank holding companies, are subject to further capital requirements to be deemed “well-capitalized” under the prompt corrective action provisions of the FDI Act and implementing regulations of the federal banking agencies, as described in the section entitled “—Supervision and Regulation of the Bank —Prompt Corrective Action” below. For purposes of calculating the denominator of the risk-based capital ratios, a banking institution’s assets and some of its specified off- balance sheet commitments and obligations are assigned to various risk categories. For purposes of calculating the numerator of the capital ratios, capital, at both the holding company and bank levels, is classified in one of 11
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three tiers depending on the “quality” and loss-absorbing features of the capital instrument. Common equity Tier 1 capital is predominantly comprised of common stock instruments (including related surplus) and retained earnings, net of treasury stock, and after making necessary capital deductions and adjustments. Tier 1 capital is comprised of common equity Tier 1 capital and additional Tier 1 capital, which includes non-cumulative perpetual preferred stock and similar instruments meeting specified eligibility criteria (including related surplus). Total capital is comprised of Tier 1 capital and Tier 2 capital, which includes certain subordinated notes with a minimum original maturity of five years (including related surplus) and a limited amount of allowance for credit losses. Newly issued trust preferred securities and cumulative perpetual preferred stock may not be included in Tier 1 capital, but generally may be included in Tier 2 capital, provided they do not include features that are disallowed by the capital rules, such as the acceleration of principal other than in the event of a bankruptcy, insolvency, or receivership of the issuer. Failure to meet minimum capital requirements could subject a banking organization to a variety of enforcement remedies. A banking organization’s failure to exceed the capital conservation buffer with common equity Tier 1 capital would result in limitations on the banking organization’s ability to make capital distributions and discretionary bonus payments. At December 31, 2025, common equity Tier 1 capital, Tier 1 capital, and total capital of the Company on a consolidated basis equaled 10.58%, 10.58%, and 13.33% of its total risk-weighted assets, respectively, and its Tier 1 leverage ratio on a consolidated basis was 9.70%. At December 31, 2025, the Bank exceeded its minimum capital requirements with common equity Tier 1 capital, Tier 1 capital, and total capital equal to 11.89%, 11.89%, and 12.92% of its total risk-weighted assets, respectively, and a Tier 1 leverage ratio of 10.89%. As a result, the Bank was “well-capitalized” for prompt corrective action purposes based on the ratios and guidelines described above. Payment of Dividends and Stock Repurchases The Company is limited in its ability to pay dividends or repurchase its stock by the Federal Reserve, including if doing so would be an unsafe or unsound banking practice. When a bank holding company intends to declare or pay a dividend that could raise safety and soundness concerns, it generally will be required to inform and consult with the Federal Reserve in advance. It is the policy of the Federal Reserve that a bank holding company should generally pay dividends on common stock only out of earnings, and only if prospective earnings retention is consistent with the company’s capital needs and overall current and prospective financial condition. Additionally, bank holding companies should inform and consult with the Federal Reserve in advance of declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid. According to guidance from the Federal Reserve, a bank holding company’s dividend policies will be assessed against, among other things, its ability to achieve applicable capital ratio requirements. If a bank holding company does not achieve applicable capital ratio requirements, it may not be able to pay dividends. A bank holding company is also required to give the Federal Reserve prior written notice before purchasing or redeeming its equity securities if the gross consideration for the purchase or redemption, when aggregated with the net consideration paid by the Company for all such purchases or redemptions during the preceding twelve months, is equal to 10% or more of the Company’s consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order, or any condition imposed by or written agreement with the Federal Reserve. This prior notice requirement does not apply to any bank holding company that meets certain “well-capitalized” and “well-managed” standards and is not the subject of any unresolved supervisory issues. In addition, a bank holding company is required to consult with the Federal Reserve before redeeming any equity or other capital instrument included in Tier 1 or Tier 2 capital prior to stated maturity if such redemption could have a material effect on the level or composition of the organization’s capital base. Examinations Bank holding companies and banks are subject to regular examination by their respective regulatory agencies, which results in examination reports and ratings that, while not publicly available, can impact the conduct and growth of their businesses. These examinations may consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, sensitivity to market risk, and various other factors. The regulatory agencies generally have broad authority to impose restrictions and limitations on the operations of a regulated entity when an agency determines, among other things, that such operations are unsafe or 12
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unsound, fail to comply with applicable law, or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies. Anti-Money Laundering Initiatives and Sanctions Compliance The Company and Bank are subject to extensive regulations aimed at combating money laundering and terrorist financing. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant compliance and due diligence obligations, creating new crimes and penalties, and expanding the extra-territorial jurisdiction of the United States. Treasury Department regulations implementing the Patriot Act impose obligations on financial institutions to maintain appropriate policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of their customers. In addition, the Anti-Money Laundering Act of 2020 (the “AML Act”), enacted in January 2021, includes the most substantial changes to U.S. anti-money laundering law since the Patriot Act. Among other things, the AML Act creates new beneficial ownership reporting requirements for certain entities doing business in the United States, requires the Treasury Department’s Financial Crimes Enforcement Network to establish national anti-money laundering priorities and combating the financing of terrorism priorities, increases anti-money laundering whistleblower awards and expands whistleblower protections, and enhances penalties for Bank Secrecy Act and anti-money laundering violations. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and financial consequences for the institution. The Treasury Department’s Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of persons, organizations, and countries suspected of aiding, harboring, or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. OFAC administers and enforces applicable economic and trade sanctions programs. These sanctions are usually targeted against foreign countries, terrorists, international narcotics traffickers, and those believed to be involved in the proliferation of weapons of mass destruction. These regulations generally require either the blocking of accounts or other property of specified entities or individuals, but they may also require the rejection of certain transactions involving specified entities or individuals. The Company maintains policies, procedures, and other internal controls designed to comply with anti-money laundering requirements and sanctions programs. Sarbanes-Oxley Act The Sarbanes-Oxley Act represents a comprehensive revision of laws affecting corporate governance, accounting obligations, and corporate reporting. The Sarbanes-Oxley Act is applicable to all companies with equity securities registered, or that file reports, under the Exchange Act. In particular, the act established: (i) requirements for audit committees, including independence, expertise, and responsibilities; (ii) responsibilities regarding financial statements for the chief executive officer and chief financial officer of the reporting company and new requirements for them to certify the accuracy of periodic reports; (iii) standards for auditors and regulation of audits; (iv) disclosure and reporting obligations for the reporting company and its directors and executive officers; and (v) civil and criminal penalties for violations of the federal securities laws. The legislation also established a new accounting oversight board to enforce auditing standards and restrict the scope of services that accounting firms may provide to their publicly traded company audit clients. Supervision and Regulation of the Bank The Bank is a commercial bank chartered under the laws of the state of California and is primarily subject to the supervision, examination, and reporting requirements of the FDIC and the DFPI. Almost every area of the operations and financial condition of the Bank is subject to extensive regulation and supervision and to various requirements and restrictions under federal and state law, including loans, reserves, investments, issuance of securities, establishment of branches, capital adequacy, liquidity, earnings, dividends, management practices, and the provision of services. The FDIC and the DFPI regularly examine the Bank’s operations and have the authority to approve or disapprove mergers, the establishment of branches, and similar corporate actions. Both regulatory agencies have the power to take enforcement action to prevent the development or continuance of unsafe or unsound banking practices or other violations of law. The Bank is subject to supervision, examination, enforcement, and reporting requirements under the FDI Act, the California Financial Code, regulations of the FDIC and the DFPI, and certain of the requirements imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). The Company and the Bank are also subject to a wide range of consumer protection laws and regulations. 13
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California Law California law governs the chartering and regulation of California commercial banks like ours, including organizational and capital requirements, fiduciary powers, investment authority, banking offices and electronic terminals, declaration of dividends, changes of control and mergers, out of state activities, interstate branching and banking, debt offerings, borrowing limits, and limits on loans to one borrower. The DFPI is charged with the Bank’s supervision and regulation. The DFPI may take possession of a bank if certain conditions exist, such as insufficient shareholders’ equity, unsafe or unauthorized operations, or violations of law. Under California law, we may engage in the general business of banking, including, but not limited to, accepting deposits, making secured and unsecured loans, purchasing and holding real property for our own use, and issuing, advising, and confirming letters of credit. The amount a bank generally may borrow may not exceed the amount of its shareholders’ equity without the consent of the DFPI. Restrictions on Lending, Insider Transactions, and Affiliate Transactions California law limits California banks in the amount they may lend to one borrower and the amount they may lend to insiders. Under California law, with limited exceptions, unsecured loans to one person may not exceed 15% of the sum of a bank’s shareholders’ equity, allowance for credit losses, capital notes, and debentures. Additionally, both secured and unsecured loans to one person (excluding certain secured lending and letters of credit) at any given time generally may not exceed 25% of the sum of a bank’s shareholders’ equity, allowance for credit losses, capital notes, and debentures. Section 22(g) of the Federal Reserve Act, as implemented by the Federal Reserve’s Regulation O, governs and restricts extensions of credit by a member bank to an executive officer, director, or principal shareholder of the bank and its affiliates. By making these provisions applicable to state non-member banks, the FDI Act and FDIC regulations impose these restrictions on the Bank’s purchases or sales of assets from or to insiders of the Bank and the Company. In general, extensions of credit to insiders: (i) may not exceed certain dollar limitations; (ii) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties; and (iii) must not involve more than the normal risk of repayment or present other unfavorable features. Additionally, California law imposes insider lending limits that are similar to the restrictions of the Federal Reserve’s Regulation O. Sections 23A and 23B of the Federal Reserve Act, which the FDI Act makes applicable to a state non-member bank like ours in the same manner and to the same extent as if it were a member bank, establish parameters for an insured bank to conduct “covered transactions” with its affiliates, generally: (i) limiting the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount not greater than 10% of the bank’s capital stock and surplus, and limiting the aggregate of all such transactions with all affiliates to an amount not greater than 20% of the bank’s capital stock and surplus; and (ii) requiring that all such transactions be on terms substantially the same, or at least as favorable, to the bank or subsidiary as those that would be provided to a non-affiliate. In addition, an insured bank’s loans to affiliates generally must be fully collateralized. The term “covered transaction” includes the making of loans to the affiliate, purchase of assets from the affiliate, issuance of a guarantee on behalf of the affiliate, and several other types of transactions. Concentrations in Lending In 2006, the federal bank regulatory agencies released guidance advising financial institutions of the risks posed by commercial real estate lending concentrations and reinforcing that financial institutions should implement sound risk management processes to identify, monitor, and control risks associated with commercial real estate concentrations. Higher allowances for credit losses and capital levels may also be required. The commercial real estate guidance provides that further supervisory analysis of an institution’s commercial real estate loan concentrations is warranted when its concentrations exceed either: (i) total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk-based capital; or (ii) total reported loans secured by multifamily and non-farm non-residential properties and loans for construction, land development, and other land of 300% or more of a bank’s total risk-based capital, where the outstanding balance of the institution’s commercial real estate portfolio has also increased by 50% or more during the prior 36 months. We have exposures to loans secured by commercial real estate due to the nature of our market and the loan needs of both our retail and commercial customers. We believe that our long-term experience in commercial real estate lending, underwriting policies, internal controls, and other policies currently in place, as well as our loan and credit monitoring and administration procedures, are generally appropriate to managing our concentrations as required under the commercial real estate guidance. 14
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Prompt Corrective Action The FDI Act identifies five capital categories for insured depository institutions: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under the banking agencies’ prompt corrective action framework, an insured depository institution is subject to differential regulation corresponding to the capital category within which the institution falls. For an insured depository institution to be “well-capitalized” under this framework, it must have a common equity Tier 1 capital ratio of at least 6.50%, a Tier 1 capital ratio of at least 8.00%, a total capital ratio of at least 10.00%, and a leverage ratio of at least 5.00%, and must not be subject to any written agreement, order or capital directive, or prompt corrective action directive issued by its primary federal or state banking regulator to meet and maintain a specific capital level for any capital measure. These limitations apply to the Bank, and not to the Company on a standalone basis. The FDI Act requires the federal banking agencies to take prompt corrective action whenever an insured depository institution does not meet minimum capital requirements. Failure to meet the capital guidelines could also subject an insured depository institution to capital raising requirements. In addition, an insured depository institution is generally prohibited from making capital distributions, including paying dividends or paying management fees to a holding company, if the institution would thereafter be undercapitalized. Finally, failure to meet statutorily mandated capital guidelines or more restrictive ratios separately established for an insured depository institution could subject the institution to a variety of enforcement remedies available to federal regulatory authorities, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting or renewing brokered deposits, limitations on the rates of interest that the institution may pay on its deposits, and other restrictions on its business. The FDI Act also requires the federal banking agencies to prescribe certain noncapital standards for safety and soundness relating generally to operations and management, asset quality, and executive compensation, and permits regulatory action against an insured depository institution that does not meet such standards. Payment of Dividends The principal source of the Company’s cash flow is dividends from the Bank. There are various legal and regulatory provisions that limit the amount of dividends the Bank can pay to the Company without regulatory approval. Under the California Financial Code, the Bank may not make any distribution to shareholders that exceeds the lesser of its retained earnings or its net income for the last three fiscal years, less the amount of any distributions made by the Bank to shareholders of the Bank during such period. However, with prior approval of the DFPI, the Bank may make a distribution to shareholders that exceeds such amounts, subject to limits set forth in the California Financial Code. Moreover, an institution’s failure to exceed the capital conservation buffer set forth in the federal banking agencies’ capital rules with common equity Tier 1 capital would result in limitations on an institution’s ability to make capital distributions and discretionary bonus payments. In addition, an insured depository institution is generally prohibited from making capital distributions, including paying dividends or paying management fees to a holding company, if the institution would thereafter be undercapitalized. Finally, the FDI Act prohibits an insured depository institution from paying dividends on its capital stock if it is in default of its payment of deposit insurance assessments to the FDIC. Reserve Requirements Federal Reserve rules require depository institutions, such as the Bank, to maintain reserves against their transaction accounts. In response to the COVID-19 pandemic, the Federal Reserve reduced reserve requirement ratios to 0.00% effective March 26, 2020. Increases to the reserve requirement would decrease the amount of the Bank’s assets that it may make available for lending and investment activities. Currently, the Federal Reserve has no plans to re-impose reserve requirements. However, the Federal Reserve may adjust reserve requirement ratios in the future if conditions warrant. Balances maintained by or on behalf of depository institutions in accounts at Federal Reserve Banks continue to receive interest when reserve requirement ratios are set to 0.00%. All balances earned the interest on excess reserves rate through July 28, 2021. Thereafter, all balances earn the Interest on Reserve Balances (the “IORB”) rate. The IORB rate is the rate of interest paid by the Federal Reserve Bank on balances maintained by or on behalf of an eligible institution in an account at a Federal Reserve Bank. The Board of Governors votes on the level of the IORB rate at each Federal Open Market Committee meeting that is consistent with the announced monetary policy stance. The amount of interest on reserve balances is calculated by multiplying the IORB rate on a day by the end of day balance maintained in an account on that day. 15
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Consumer Protection Laws While consumer lending is not currently a significant focus of our business, we are subject to numerous laws and regulations intended to protect consumers, in addition to those discussed above, when lending or offering deposit products to consumers. These laws include, among others: the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair and Accurate Credit Transactions Act, the Fair Housing Act, the Fair Credit Reporting Act, the Fair Debt Collection Act, the GLB Act, the Home Mortgage Disclosure Act, the Right to Financial Privacy Act, the Real Estate Settlement Procedures Act, laws regarding unfair and deceptive acts and practices, and usury and other fair lending laws and regulations, including state laws and regulations. Because the Bank has assets of not more than $10 billion, its primary federal regulator, the FDIC, examines and enforces the Bank’s compliance with consumer financial protection laws. However, the CFPB has rulemaking authority, including with respect to regulations prohibiting unfair, deceptive, or abusive acts or practices. Additionally, the CFPB may participate in examinations of banks with not more than $10 billion in assets on a “sampling basis” and may refer potential enforcement actions against such banks to their primary federal regulators. Many states and local jurisdictions have consumer protection laws analogous, and in addition, to those listed above. These include, for instance, the California Unfair Competition Law, which broadly prohibits any unlawful, unfair, or fraudulent business act or practice, and false, deceptive, or misleading advertising. Violations of applicable consumer protection laws can result in significant potential liability, including actual damages, restitution, and injunctive relief, from litigation brought by customers, state attorneys general, and other plaintiffs, as well as enforcement actions by banking regulators. Financial Privacy Laws The GLB Act and California Consumer Privacy Act impose requirements related to the privacy of customer financial information. Among other things, these laws require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The California Consumer Privacy Act grants California residents the rights to know about personal information collected about them, to delete certain of this personal information, to opt out of the sale of personal information, and to non-discrimination for exercising these rights. The privacy provisions of these laws may affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. On October 22, 2024, the CFPB issued a final rule to implement Section 1033 of the Dodd-Frank Act. Under the final rule, financial institutions such as the Bank that offer a consumer product or service covered by the rule would be required, upon request, to make available to a consumer or third party authorized by the consumer certain information the Bank has concerning such a product or service. Industry organizations challenged the final rule in court. On July 29, 2025, the district court granted a motion by the CFPB to stay the proceedings while the CFPB conducts a rulemaking to revise the final rule substantially. On August 22, 2025, the CFPB issued an advance notice of proposed rulemaking to solicit comments and data on several issues as part of a reconsideration of the final rule. On October 29, 2025, the district court issued a preliminary injunction preventing the CFPB from enforcing the final rule until the CFPB has completed its reconsideration of the rule. Branching Under California law, the Bank may open branch offices throughout California with the prior approval of the DFPI. In addition, with prior DFPI approval, the Bank may acquire branches of existing banks located in California. Under federal law, the Bank may establish branch offices with the prior approval of the FDIC. Federal law allows a bank to branch into a new state through the establishment of a new branch if, among other factors, the bank is “well-managed” and “well-capitalized” and, under the laws of the state in which the branch is to be located, a state bank chartered by that state would be permitted to establish the branch. FDIC Deposit Insurance Assessments The deposits of the Bank are insured by the DIF as administered by the FDIC and, accordingly, are subject to deposit insurance assessments to maintain the DIF at minimum levels required by statute. The Dodd-Frank Act increased the minimum reserve ratio requirement for the DIF to 1.35% of total estimated insured deposits or the comparable percentage of the deposit assessment base. The DIF reserve ratio fell to below the statutory minimum of 1.35% during the COVID-19 pandemic. The FDIC adopted a restoration plan in September 2020, which it amended in June 2022, to restore the DIF 16
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reserve ratio to at least 1.35% by September 30, 2028. On October 18, 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by two basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate schedules will remain in effect unless and until the reserve ratio of the DIF meets or exceeds 2.00%. As a result of the new rule, the FDIC insurance costs of insured depository institutions, including the Bank, generally increased. The FDIC uses a risk-based assessment system that imposes insurance premiums as determined by multiplying an insured bank’s assessment base by its assessment rate. A bank’s deposit insurance assessment base is generally equal to its total assets minus its average tangible equity during the assessment period. For a depository institution that has been insured for more than five years and that has total consolidated assets of less than $10.0 billion, such as the Bank, the FDIC determines the assessment rate within a range of base assessment rates based on the bank’s CAMELS composite rating, considering other factors and adjustments. The CAMELS rating system is a supervisory rating system developed to classify a bank’s overall condition by considering capital adequacy, assets, management capability, earnings, liquidity, and sensitivity to market and interest rate risk. Insurance of deposits may be terminated by the FDIC upon a finding that a bank has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the bank’s federal regulatory agency. In addition, the FDI Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of its parent bank holding company. Community Reinvestment Act (“CRA”) The CRA requires that, in connection with examinations of insured depository institutions within their respective jurisdictions, the federal banking agencies must evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate-income neighborhoods. A bank’s CRA performance is also considered in evaluating applications seeking approval for mergers, acquisitions, and new offices or facilities, and a CRA rating of less than “Satisfactory” may adversely affect the ability of a bank or its parent company to engage in such transactions. The Bank received a rating of “Satisfactory” at its most recent CRA evaluation, dated as of July 22, 2024 and covering activities from 2021 through the evaluation date. The FDIC’s evaluation of the Bank’s record of performance under the CRA is publicly available. On October 24, 2023, the federal banking agencies issued a final rule revising their framework for evaluating banks’ records of community reinvestment under the CRA. On July 16, 2025, these agencies issued a notice of proposed rulemaking to rescind the October 2023 final rule and restore the CRA framework that existed prior to the October 2023 final rule. The Bank’s most recent performance evaluation was conducted using the CRA framework that existed prior to the October 2023 final rule. FHLB Membership The Bank is a member of the FHLB, which is one of 11 regional Federal Home Loan Banks that administer the home financing credit function of banking institutions. Each Federal Home Loan Bank is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Bank system and makes advances to members in accordance with policies and procedures established by the Board of Directors of the Federal Home Loan Bank and subject to the oversight of the Federal Housing Finance Agency. All advances from a Federal Home Loan Bank are required to be fully secured by sufficient collateral as determined by the Federal Home Loan Bank. In addition, all long-term advances are required to provide funds for residential home financing. Cybersecurity Federal banking agencies pay close attention to the cybersecurity practices of banks and their holding companies and affiliates. The interagency council of the agencies, the FFIEC, has issued several policy statements and other guidance for banks as new cybersecurity threats arise. The FFIEC has recently focused on such matters as compromised customer credentials and business continuity planning. Examinations by the banking agencies now include review of an institution’s information technology and its ability to thwart cyber- attacks. 17
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Banking organizations are required to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred. In addition, the SEC enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance. Item 1A. Risk Factors Certain factors may have an adverse effect on our business, financial condition, and results of operations. You should carefully consider the following risks, together with all of the other information contained in this Annual Report on Form 10-K, including the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes thereto. Any of the following risks could have an adverse effect on our business, financial condition, and results of operations and could cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Our business, financial condition, and results of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. Risk Factor Summary The most significant risks that may have an adverse effect on our business, financial condition, and results of operations are summarized below. • Our business and operations are concentrated in Northern California, and we are sensitive to adverse changes in the local economy. • We operate in a highly competitive market and face increasing competition from traditional and new financial services providers. • We are subject to the various risks associated with our banking business and operations, including, among others, credit, market, liquidity, interest rate, and compliance risks, which may have an adverse effect on our business, financial condition, and results of operations if we are unable to manage such risks. • We may be unable to effectively manage our growth, which could have an adverse effect on our business, financial condition, and results of operations. • We operate in a highly regulated industry, and current regulatory requirements, including stringent capital requirements, consumer protection laws, and anti-money laundering laws, and failure to comply with these requirements and any future legislative and regulatory changes may have an adverse effect on our business, financial condition, and results of operations. • We are subject to laws regarding privacy, information security, and protection of personal information, and any violation of these laws or incidents involving personal, confidential, or proprietary information of individuals, including, among others, system failures or cybersecurity breaches of our network security, could damage our reputation and otherwise adversely affect our business, financial condition, and results of operations. • Our charter documents contain certain provisions, including anti-takeover and exclusive forum provisions, that limit the ability of our shareholders to take certain actions and could delay or discourage takeover attempts that shareholders may consider favorable. Risks Related to Our Business Our business and operations are concentrated in California, specifically Northern California, and we are more sensitive than our more geographically diversified competitors to adverse changes in the local economy. Unlike many of our larger competitors that maintain significant operations located outside our market, substantially all of our customers are individuals and businesses located and doing business in the state of California. As of December 31, 2025, approximately 56.89% of our real estate loans measured by dollar amount were secured by collateral located in California, a majority of which is in Northern California. Therefore, our success will depend upon the general economic conditions and real estate activity in these areas, which we cannot predict with certainty. As a result, our operations and profitability may be more adversely affected by a local economic downturn than those of larger, more geographically diverse competitors. A downturn in the local economy could make it more difficult for our borrowers to repay their loans, 18
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may lead to credit losses that are not offset by operations in other markets, and may also reduce the ability of depositors to make or maintain deposits with us. In addition, businesses operating in Northern California, and Sacramento in particular, depend on California state government employees for business, and reduced spending activity by such employees in the event of furloughing or termination of such employees could have an adverse impact on the success or failure of these businesses, some of which are current or could become future customers of the Bank. For these reasons, any regional or local economic downturn could have an adverse effect on our business, financial condition, and results of operations. The small to medium-sized businesses to which we lend may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan. We target our business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which may impair their ability as a borrower to repay a loan. In addition, the success of small and medium-sized businesses often depends on the management skills, talents, and efforts of one or two people or a small group of people, and the death, disability, or resignation of one or more of these people could have an adverse impact on the business and its ability to repay its loan. If general economic conditions negatively impact the markets in which we operate or any of our borrowers are otherwise affected by adverse business developments, our small to medium-sized borrowers may be disproportionately affected and their ability to repay outstanding loans may be negatively affected, resulting in an adverse effect on our business, financial condition, and results of operations. Our business is significantly dependent on the real estate markets in which we operate, as a significant percentage of our loan portfolio is secured by real estate. As of December 31, 2025, a substantial portion of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral, with a majority of these real estate loans concentrated in Northern California. Real property values in our market may be different from, and in some instances worse than, real property values in other markets or in the United States as a whole and may be affected by a variety of factors outside of our control and the control of our borrowers, including national and local economic conditions, generally. Declines in real estate values, including prices for homes and commercial properties, could result in a deterioration of the credit quality of our borrowers, an increase in the number of loan delinquencies, defaults, and charge-offs, and reduced demand for our products and services, generally. Our commercial real estate loans may have a greater risk of loss than residential mortgage loans, in part because these loans are generally larger or more complex to underwrite. In particular, real estate construction and land acquisition and development loans have risks not present in other types of loans, including risks associated with construction cost overruns, project completion risk, general contractor credit risk, and risks associated with the ultimate sale or use of the completed construction. In addition, declines in real property values in California could reduce the value of any collateral we realize following a default on these loans and could adversely affect our ability to continue to grow our loan portfolio consistent with our underwriting standards. We may have to foreclose on real estate assets if borrowers default on their loans, in which case we are required to record the related asset to the then-fair market value of the collateral, which may ultimately result in a loss. An increase in the level of nonperforming assets increases our risk profile and may affect the capital levels regulators believe are appropriate in light of the ensuing risk profile. Our failure to effectively mitigate these risks could have an adverse effect on our business, financial condition, and results of operations. We are subject to interest rate risk, which could adversely affect our profitability. Our profitability, like that of most financial institutions of our type, depends to a large extent on our net interest income, which is the difference between our interest income on interest-earning assets, such as loans and investment securities, and our interest expense on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates can increase or decrease our net interest income because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in interest rates can increase competitive pressures on the cost of deposit funds. These pressures have been exacerbated by the bank failures in the first half of 2023 and the resulting heightened competition for deposits, which has also affected the interest we pay on deposits. It is not possible to predict the pace and magnitude of changes in interest rates, or the impact rate changes will have on our results of operations. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could 19
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also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration of our assets and liabilities. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, or prolonged change in market interest rates could have an adverse effect on our business, financial condition, and results of operations. As of December 31, 2025, significant portions of our interest-bearing liabilities were variable rate, where our variable rate liabilities reprice at a faster rate than our variable rate assets. In addition, an increase in interest rates could also have a negative impact on our results of operations by reducing the demand for loans, decreasing the ability of borrowers to repay their current loan obligations, and increasing early withdrawals on term deposits. These circumstances could not only result in increased loan defaults, foreclosures, and charge-offs, but also reduce collateral values and necessitate further increases to the allowance for credit losses, which could have an adverse effect on our business, financial condition, and results of operations. Conversely, a decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio, and our cost of funds may not fall as quickly as yields on interest-earning assets. Our asset-liability management strategy may not be effective in mitigating exposure to the risks related to changes in market interest rates. Inflation can have an adverse impact on our business and on our customers. Inflation results in the value of assets or income from investments being worth less in the future due to a decrease in the value of money. Interest rates are likely to be higher during periods of elevated inflation and, together, these factors typically cause the value of our investment securities, particularly those with longer maturities, to decrease, although this effect is less pronounced for floating rate instruments than for fixed-rate instruments. Prolonged periods of inflation also may impact our profitability by negatively impacting our costs and expenses, including increasing funding costs and expenses related to talent acquisition and retention, and negatively impacting the demand for our products and services. Moreover, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans. Adverse changes in inflation and interest rates could negatively impact consumer and business confidence, and adversely affect the economy as well as our business, results of operations and financial condition. We operate in a highly competitive market and face increasing competition from a variety of traditional and new financial services providers. We have many competitors. Our principal competitors are commercial and community banks, credit unions, savings and loan associations, mortgage banking firms and online mortgage lenders, and commercial and consumer finance companies, including large national financial institutions that operate in our market. Many of these competitors are larger than we are, have significantly more resources, greater brand recognition, and more extensive and established branch networks or geographic footprints than we do, and may be able to attract customers more effectively than we can. Because of their scale, many of these competitors can be more aggressive on loan and deposit pricing than we can and may better afford and make broader use of media advertising, support services, and electronic technology than we do. Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. Additionally, financial technology companies and other firms have begun to offer services such as stablecoins that may serve as alternatives to traditional banking products such as deposits. We compete with these other companies both in attracting deposits and making loans. We expect competition to continue to increase as a result of legislative, regulatory, and technological changes, the continuing trend of consolidation in the financial services industry, and the emergence of alternative banking sources. Our profitability in large part depends upon our continued ability to compete successfully with traditional and new financial services providers, some of which maintain a physical presence in our market and others of which maintain only a virtual presence. Increased competition could require us to increase the rates we pay on deposits or lower the rates that we offer on loans, which could reduce our profitability. Additionally, like many of our competitors, we rely on customer deposits as our primary source of funding for our lending activities, and we continue to seek and compete for customer deposits to maintain this funding base. Our future growth will largely depend on our ability to retain and grow our deposit base. Although we have historically maintained a high deposit customer retention rate, these deposits are subject to potentially dramatic fluctuations in availability or price due to certain factors outside of our control, such as increasing competitive pressures for deposits, changes in interest rates and returns on other investment classes, customer perceptions of our financial health and general reputation, and a loss of confidence by customers in us or the banking sector generally, which could result in significant outflows of deposits within short periods of time or significant changes in pricing necessary to maintain current customer deposits or attract additional deposits. 20
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Additionally, any such loss of funds could result in lower loan originations, which could have an adverse effect on our business, financial condition, and results of operations. Our failure to compete effectively in our market could restrain our growth or cause us to lose market share, which could have an adverse effect on our business, financial condition, and results of operations. Failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability. The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements than we do. We may not be able to implement new technology-driven products and services effectively or be successful in marketing these products and services to our customers. Failure to keep pace successfully with technological change affecting the financial services industry could harm our ability to compete effectively and could have an adverse effect on our business, financial condition, and results of operations. As these technologies improve in the future, we may be required to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have an adverse effect on our business, financial condition, and results of operations. We are dependent on the use of data and modeling in both our management’s decision-making generally and in meeting regulatory expectations in particular. The use of statistical and quantitative models and other quantitatively based analyses is endemic to bank decision making and regulatory compliance processes, and the employment of such analyses is becoming increasingly widespread in our operations. Liquidity stress testing, interest rate sensitivity analysis, allowance for credit loss measurement, portfolio stress testing, and the identification of possible violations of anti-money laundering regulations are examples of areas in which we are dependent on models and the data that underlie them. We anticipate that model-derived insights will be used more widely in our decision making in the future. While these quantitative techniques and approaches improve our decision making, they also create the possibility that faulty data or flawed quantitative approaches could yield adverse outcomes or regulatory scrutiny. Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision making, which could have an adverse effect on our business, financial condition, and results of operations. We may not be able to measure and limit our credit risk adequately, which could adversely affect our profitability. Our business depends on our ability to successfully measure and manage credit risk. As a lender, we are exposed to the risk that the principal of, or interest on, a loan will not be paid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure. In addition, we are exposed to risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual loans and borrowers. The creditworthiness of a borrower is affected by many factors, including local market conditions and general economic conditions. Many of our loans are made to small to medium-sized businesses that are less able to withstand competitive, economic, and financial pressures than larger borrowers. If the overall economic climate in the United States, generally, or in our market specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs, and delinquencies could rise and require significant additional provisions for credit losses. Additional factors related to the credit quality of multifamily residential, real estate construction, and other commercial real estate loans include the quality of management of the business and tenant vacancy rates. Our risk management practices, such as monitoring the concentration of our loans within specific markets and our credit approval, review, and administrative practices, may not adequately reduce credit risk, and our credit administration personnel, policies, and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio. A failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures, and additional charge-offs, and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have an adverse effect on our business, financial condition, and results of operations. 21
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We are exposed to higher credit risk and other risks and costs by our commercial real estate, commercial land and construction, commercial construction, farmland loans and other real estate assets. Commercial real estate, commercial land and construction, commercial construction, and farmland-based lending, which form significant portions of our loan portfolio, usually involve higher credit risks than other types of mortgage loans. These types of loans also involve larger loan balances to a single borrower or groups of related borrowers. These higher credit risks are further heightened when the loans are concentrated in a small number of larger borrowers, leading to relationship exposure. Non-owner-occupied commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful development of their properties, in addition to the factors affecting residential real estate borrowers. These loans also involve greater risk because they generally are not fully amortizing over the loan period but have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner. Banking regulators closely supervise banks’ commercial real estate lending activities 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. Commercial land development loans and owner-occupied commercial real estate loans are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses. These loans may involve greater risk because the availability of funds to repay each loan depends substantially on the success of the business itself. In addition, the assets securing the loans have the following characteristics: (i) they depreciate over time; (ii) they are difficult to appraise and liquidate; and (iii) they fluctuate in value based on the success of the business. Commercial real estate loans, commercial and industrial loans, and construction loans are more susceptible to a risk of loss during a downturn in the business cycle. Our underwriting, review, and monitoring cannot eliminate all the risks related to these loans. We also make both secured and unsecured loans to our commercial clients. Secured commercial loans are generally collateralized by real estate, accounts receivable, inventory, equipment, or other assets owned by the borrower, or may include a personal guaranty of the business owner. Unsecured loans generally involve a higher degree of risk of loss than do secured loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’ businesses. Because of this lack of collateral, we are limited in our ability to collect on defaulted unsecured loans. Furthermore, the collateral that secures our secured commercial and industrial loans typically includes inventory, accounts receivable, and equipment, which, if the business is unsuccessful, usually has a value that is insufficient to satisfy the loan without a loss. We may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all. The amount that we, as a mortgagee, may realize after a foreclosure depends on factors outside of our control, including, but not limited to, general or local economic conditions, environmental cleanup liabilities, assessments, interest rates, real estate tax rates, operating expenses of the mortgaged properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, governmental and regulatory rules, and natural disasters. Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or write-downs in the value of OREO could have an adverse effect on our business, financial condition, and results of operations. In addition, if we foreclose on and take title to real property securing loans, there is a risk that hazardous or toxic substances could be found on these properties and that we could be liable for remediation costs, as well as personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to sell the affected property. The remediation costs and any other financial liabilities associated with an environmental hazard could have an adverse effect on our business, financial condition, and results of operations. 22
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Curtailment of government-guaranteed loan programs or changes in federal government funding could affect our business. One component of our business consists of originating and periodically selling U.S. government-guaranteed loans, in particular those guaranteed by the SBA under its 7(a) loan program. The SBA presently guarantees 75% to 90% of the principal amount of qualifying loans originated under the 7(a) loan program. The U.S. government may not maintain the SBA 7(a) loan program, and even if it does, the guaranteed portion may not remain at its current or anticipated level. In addition, from time to time, the SBA may reach its funding limits and cease to guarantee future loans. In addition, the SBA may change its rules for qualifying loans or Congress may adopt legislation that would have the effect of discontinuing or changing the loan guarantee programs. If these changes occur, the volume of loans to small business and industrial borrowers of the types that now qualify for government- guaranteed loans could decline. Also, the profitability of the sale of the guaranteed portion of these loans could decline as a result of market displacements due to increases in interest rates, and premiums realized on the sale of the guaranteed portions could decline from current levels. Any significant changes to the SBA 7(a) loan program, such as its funding or eligibility requirements, may have an unfavorable impact on our prospects, future performance, and results of operations. The aggregate principal balance of SBA 7(a) loans with government-guaranteed portions sold during the year ended December 31, 2025 was approximately $3.3 million, compared to approximately $18.3 million for the year ended December 31, 2024. Liquidity risk could impair our ability to fund operations and meet our obligations as they become due. Liquidity is essential to our business, and we monitor our liquidity and manage our liquidity risk at the holding company and bank levels. We require sufficient liquidity to fund asset growth, meet customer loan requests, facilitate customer deposit maturities and withdrawals, make payments on our debt obligations as they come due, and fulfill other cash commitments under both normal operating conditions and other unpredictable circumstances, including events causing industry or general financial market stress. Liquidity risk can increase due to a number of factors, which include, but are not limited to, an over-reliance on a particular source of funding, changes in the liquidity needs of our depositors, adverse regulatory actions against us, or a downturn in the markets in which our loans are concentrated. Market conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner, and without adverse consequences. Our inability to raise funds through deposits, borrowings, the sale of loans, and other sources could have an adverse effect on our business, financial condition, and results of operations, and could result in the closure of the Bank. Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities, and proceeds from issuance and sale of our equity and debt securities. Additional liquidity is provided by the ability to borrow from the FHLB and the Federal Reserve Bank of San Francisco to fund our operations. We may also borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization specifically or the financial services industry or economy in general. Our access to funding sources could also be affected by a decrease in the level of our business activity as a result of a downturn in our primary market or by one or more adverse regulatory actions against us. Any substantial, unexpected, and/or prolonged change in the level or cost of liquidity could impair our ability to fund operations and meet our obligations as they become due and could have an adverse effect on our business, financial condition, and results of operations. Although we have historically been able to replace maturing deposits and advances if desired, we may not be able to replace such funds in the future if our financial condition, the financial condition of the FHLB, or market conditions change. FHLB borrowings and other current sources of liquidity may not be available or, if available, may not be sufficient to provide adequate funding for operations and to support our continued growth. The unavailability of sufficient funding could have an adverse effect on our business, financial condition, and results of operations. We may be adversely affected by the soundness of other financial institutions. Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies may be interrelated as a result of trading, clearing, counterparty, and other relationships. The failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in 23
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2023 resulted in significant disruption in the financial services industry and negative media attention, which has also adversely impacted the volatility and market prices of the securities of financial institutions and resulted in outflows of deposits for us and many other financial institutions. These events have adversely impacted and could continue to adversely affect our business, results of operations, and financial condition, as well as the market price and volatility of our common stock. While the volatility and uncertainty with respect to the health of the United States banking system has abated somewhat since the bank failures that occurred in the spring of 2023, there remains heightened awareness around liquidity, uninsured deposits, deposit composition, unrecognized investment losses, and capital among counterparties, customers, and regulators. We are exposed to different industries and counterparties through transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, and other financial intermediaries. As a result, defaults by, declines in the financial condition of, or even rumors or questions about one or more financial services companies, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by us or other institutions. These losses could adversely affect our business, financial condition, and results of operations. Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability. The federal banking agencies have issued guidance regarding concentrations in commercial real estate lending for institutions that are deemed to have particularly high concentrations of commercial real estate loans within their lending portfolios. Under this guidance, an institution that has: (i) total reported loans for construction, land development, and other land which represent 100% or more of the institution’s total risk-based capital; or (ii) total reported loans secured by multifamily and non-farm non-residential properties and loans for construction, land development, and other land of 300% or more of the institution’s total risk-based capital, where the outstanding balance of the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months, is identified as having potential commercial real estate concentration risk. An institution that is deemed to have concentrations in commercial real estate lending is expected to employ heightened levels of risk management with respect to its commercial real estate portfolios and may be required to maintain higher levels of capital. We have a concentration in commercial real estate loans, and we have experienced significant growth in our commercial real estate portfolio in recent years. We cannot guarantee that any risk management practices we implement will be effective to prevent losses relating to our commercial real estate portfolio. Management has extensive experience in commercial real estate lending and has implemented and continues to maintain heightened portfolio monitoring and reporting, and strong underwriting criteria with respect to our commercial real estate portfolio. Nevertheless, we could be required to maintain higher levels of capital as a result of our commercial real estate concentration, which could limit our growth, require us to obtain additional capital, and have an adverse effect on our business, financial condition, and results of operations. Our recovery on commercial real estate loans could be further reduced by a lack of a liquid secondary market for such mortgage loans and mortgage-backed securities. Our current business strategy includes an emphasis on commercial real estate lending. Although we sold 10 SBA 7(a) loans with government-guaranteed portions totaling approximately $3.3 million in the year ended December 31, 2025, we may decide to sell more loans in the future. A secondary market for most types of commercial real estate loans is not readily liquid, so we have less opportunity to mitigate credit risk by selling part or all of our interest in these loans. As a result of these characteristics, if we foreclose on a commercial real estate loan, our holding period for the collateral typically is longer than for residential mortgage loans because there are fewer potential purchasers of the collateral. Accordingly, charge-offs on commercial real estate loans may be larger as a percentage of the total principal outstanding than those incurred with our residential or consumer loan portfolios. The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property and OREO may not accurately reflect the net value of the asset. In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately reflect the net value of the collateral after the loan is made. As a result, we may not be able to realize the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. In addition, we rely on appraisals and other valuation techniques to establish the value of OREO that we acquire through foreclosure proceedings and to determine loan impairments. If any of these valuations are inaccurate, our 24
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consolidated financial statements may not reflect the correct value of our OREO, if any, and our allowance for credit losses may not reflect accurate loan impairments. Inaccurate valuation of OREO or inaccurate provisioning for credit losses could have an adverse effect on our business, financial condition, and results of operations. Federal, state, and local consumer lending laws may restrict our or our partners’ ability to originate certain loans or increase our risk of liability with respect to such loans. Federal, state, and local laws have been adopted that are intended to prevent certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans, and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. It is our policy to determine borrowers’ ability to repay and not to make predatory loans. Nonetheless, the law and related rules create the potential for increased liability with respect to our lending and loan investment activities. Compliance with these laws increases our cost of doing business. Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expenses associated with the foreclosure process or prevent us from foreclosing at all. A number of states in recent years have either considered or adopted foreclosure reform laws that make it substantially more difficult and expensive for lenders to foreclose on properties in default, and we cannot be certain that the state in which we operate will not adopt similar legislation in the future. Additionally, federal regulators have prosecuted or pursued enforcement actions against a number of mortgage servicing companies for alleged consumer protection law violations. If new state or federal laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or raise outright barriers to foreclosure, such laws or regulations could have an adverse effect on our business, financial condition, and results of operations. Our largest loan relationships make up a material percentage of our total loan portfolio, and credit risks relating to these would have a disproportionate impact. As of December 31, 2025, our 30 largest borrowing relationships ranged from approximately $25.0 million to $293.3 million (including unfunded commitments) and totaled approximately $1.5 billion in total commitments (representing, in the aggregate, 35.64% of our total loans held for investment before deferred fees at that date). Each of the loans associated with these relationships has been underwritten in accordance with our underwriting policies and limits. Along with other risks inherent in these loans, such as the deterioration of the underlying businesses or property securing these loans, this concentration of borrowers presents a risk that, if one or more of these relationships were to become delinquent or suffer default, we could be exposed to material losses. The allowance for credit losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance would negatively affect our earnings and capital. Even if these loans are adequately collateralized, an increase in classified assets could harm our reputation with our regulators and inhibit our ability to execute our business plan. Our largest deposit relationships currently make up a material percentage of our deposits and the withdrawal of deposits by our largest depositors, or withdrawals of other large deposits over a short period of time, could force us to fund our business through more expensive and less stable sources. At December 31, 2025, our 53 largest deposit relationships, each accounting for more than $10.0 million, amounted to $2.0 billion, or 47.82% of our total deposits. This includes $789.6 million in deposits from municipalities, of which we conduct a monthly review. Withdrawals of deposits by any one of our largest depositors or by one of our related customer groups could force us to rely more heavily on borrowings and other sources of funding for our business and withdrawal demands, adversely affecting our net interest margin and results of operations. If a significant amount of these deposits, or other large deposits, including deposits that exceed applicable FDIC insurance limits, were withdrawn within a short period of time, it could have a negative impact on our short-term liquidity and have an adverse impact on our earnings. The ease and speed of the electronic withdrawals may increase this risk. We may also be forced, as a result of withdrawals of deposits, to rely more heavily on other, potentially more expensive and less stable, funding sources. Additionally, such circumstances could require us to raise deposit rates in an attempt to attract new deposits, which would adversely affect our results of operations, and/or to raise funding through brokered deposits. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated interest rates and financial industry instability. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Under applicable regulations, if the Bank were no longer “well-capitalized,” the Bank would not be able to accept brokered deposits without the approval of the FDIC. 25
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Our allowance for credit losses may be inadequate to absorb losses inherent in the loan portfolio. Experience in the banking industry indicates that a portion of our loans will become delinquent, and that some may only be partially repaid or may never be repaid at all. We may experience losses for reasons beyond our control, such as the impact of general economic conditions on customers and their businesses. Accordingly, we maintain an allowance for credit losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio. In determining the size of our allowance for credit losses, we rely on an analysis of our loan portfolio that considers historical loss experience, volume and types of loans, trends in classification, volume and trends in delinquencies and non-accruals, economic conditions, and other pertinent information. The determination of the appropriate level of the allowance for credit losses is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risk and future trends, all of which may change materially. Although we endeavor to maintain our allowance for credit losses at a level adequate to absorb any inherent losses in the loan portfolio, these estimates of credit losses are necessarily subjective, and their accuracy depends on the outcome of future events. At December 31, 2025, the allowance for credit losses was $44.4 million. Deterioration of economic conditions affecting borrowers, new information regarding existing loans, inaccurate management assumptions, identification of additional problem loans, temporary modifications, loan forgiveness, automatic forbearance, and other factors, both within and outside of our control, may result in our experiencing higher levels of nonperforming assets and charge-offs, and incurring credit losses in excess of our current allowance for credit losses, requiring us to make material additions to our allowance for credit losses, which could have an adverse effect on our business, financial condition, and results of operations. Additionally, federal and state banking regulators, as an integral part of their supervisory function, periodically review the allowance for credit losses. These regulatory agencies may require us to increase our allowance for credit losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours. If we need to make significant and unanticipated increases in the loss allowance in the future, or to take additional charge-offs for which we have not established adequate reserves, our business, financial condition, and results of operations could be adversely affected at that time. On January 1, 2023, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all subsequent amendments that modified ASU 2016-13 (collectively, “ASC 326,”), which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model applies to estimated credit losses on loans receivable, held-to-maturity debt securities, unfunded loan commitments, and certain other financial assets measured at amortized cost. Under ASC 326, available-for-sale debt securities are evaluated for impairment if fair value is less than amortized cost, with any estimated credit losses recorded through a credit loss expense and an allowance, rather than a write-down of the investment. Changes in fair value that are not credit-related will continue to be recorded in other comprehensive income. Under the CECL model, the calculated allowance for credit losses was $5.3 million higher on January 1, 2023 than the allowance under the incurred loss model. For further information, please see Note 2, Recently Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K. We could recognize losses on investment securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate. As of December 31, 2025, the carrying value of our investment securities portfolio was approximately $96.9 million. As of the same date, 7.60% of our investments were U.S. government agency securities. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions with respect to the securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and instability in the capital markets. Any of these factors, among others, could require the Company to record an allowance for credit losses, which could have an adverse effect on our business, financial condition, and results of operations. The process for determining whether an allowance for credit losses is required involves complex, subjective judgments about the future financial performance and liquidity of the issuer, any collateral underlying the security, and our intent and ability to hold the security for a sufficient period of time to allow for any anticipated recovery in fair value, in order to assess the probability of receiving all contractual principal and interest payments on the security. Our failure to correctly and timely assess any impairments or losses with respect to our securities could have an adverse effect on our business, financial condition, and results of operations. 26
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We depend on the accuracy and completeness of information provided by customers and counterparties. In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished by or on behalf of customers and counterparties, including financial information. We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information. In deciding whether to extend credit, we may rely upon customers’ representations that their financial statements conform to GAAP and present fairly the financial condition, results of operations, and cash flows of the customer. We also may rely on customer representations and certifications, or other audit or accountants’ reports, with respect to the business and financial condition of our customers. Our business, financial condition, and results of operations could be adversely affected if we rely on misleading, false, inaccurate, or fraudulent information. Risks Related to Our Industry and Regulation Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have an adverse effect on our operations. The banking industry is highly regulated and supervised under both federal and state laws and regulations that are intended primarily for the protection of depositors, customers, the public, the banking system as a whole, and/or the FDIC DIF, not for the protection of our shareholders and creditors. We are subject to regulation and supervision by the Federal Reserve, and our Bank is subject to regulation and supervision by the FDIC and the DFPI. Compliance with these laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance costs. The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts, and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept and the rates we may pay on such deposits, maintenance of adequate capital and liquidity, changes in control of us and our Bank, transactions between us and our Bank, handling of nonpublic information, restrictions on dividends, and establishment of new offices. We must obtain approval from our regulators before engaging in certain activities, and there is risk that such approvals may not be granted, either in a timely manner or at all. These requirements may constrain our operations, and the adoption of new laws and changes to or repeal of existing laws may have an adverse effect on our business, financial condition, and results of operations. Also, the burden imposed by those federal and state regulations may place banks in general, including our Bank in particular, at a competitive disadvantage compared to their non-bank competitors. Compliance with current and potential regulation, as well as supervisory scrutiny by our regulators, may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital, and limit our ability to pursue business opportunities in an efficient manner by requiring us to expend significant time, effort, and resources to ensure compliance and respond to any regulatory inquiries or investigations. Our failure to comply with any applicable laws or regulations, interpretations of such laws and regulations, or regulatory policies could result in sanctions by regulatory agencies, civil money penalties, and/or damage to our reputation, all of which could have an adverse effect on our business, financial condition, and results of operations. Applicable laws, regulations, interpretations, enforcement policies, and accounting principles have been subject to significant changes in recent years and may be subject to significant future changes. Additionally, federal and state regulatory agencies may change the manner in which existing regulations are applied. We cannot predict the substance or effect of pending or future legislation or regulation or changes to the application of laws and regulations to us. Future changes may have an adverse effect on our business, financial condition, and results of operations. In addition, given the current economic and financial environment, regulators may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine the adequacy of liquidity, risk management, or other operational practices for financial service companies. This could impact our ability to implement our strategy, could affect us in substantial and unpredictable ways, and could have an adverse effect on our business, financial condition, and results of operations. Furthermore, the regulatory agencies have broad discretion in their interpretation of laws and regulations and their assessment of the quality of our loan portfolio, securities portfolio, and other assets. Based on our regulators’ assessment of the quality of our assets, operations, lending practices, investment practices, capital structure, or other aspects of our business, we may be required to take additional charges or undertake, or refrain from taking, actions that could have an adverse effect on our business, financial condition, and results of operations. 27
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Monetary policies and regulations of the Federal Reserve could have an adverse effect on our business, financial condition, and results of operations. Our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate, and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments, and deposits. Their use also affects interest rates charged on loans or paid on deposits. The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition, and results of operations cannot be predicted with certainty. Federal and state regulators periodically examine our business and may require us to remediate adverse examination findings or may take enforcement action against us. The Federal Reserve periodically examines our business, and the FDIC and the DFPI periodically examine the business of the Bank, including compliance with laws and regulations. If, as a result of an examination, the Federal Reserve, the FDIC, or the DFPI were to determine that our or the Bank’s financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our or the Bank’s operations had become unsatisfactory, or that we or the Bank were in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate. These actions may include requiring us or the Bank to remediate any such adverse examination findings. In addition, these agencies have the power to take enforcement action against us and/or the Bank to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation of law or regulation or unsafe or unsound practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to direct the sale of subsidiaries or other assets, to limit dividends and distributions, to restrict our growth, to assess civil money penalties against us or our officers or directors, to remove officers and directors, and, if it is concluded that such conditions cannot be corrected or there is imminent risk of loss to depositors, to terminate the Bank’s deposit insurance and place the Bank into receivership or conservatorship. Any regulatory enforcement action against us or the Bank could have an adverse effect on our business, financial condition, and results of operations. We are subject to stringent capital requirements, which could have an adverse effect on our operations. Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define different forms of capital for calculating these ratios. The capital rules generally require bank holding companies and banks to maintain a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.0% (a minimum of 4.5% plus a capital conservation buffer of 2.5%), a Tier 1 capital to risk-weighted assets ratio of at least 8.5% (a minimum of 6.0% plus a capital conservation buffer of 2.5%), a total capital to risk-weighted assets ratio of at least 10.5% (a minimum of 8.0% plus a capital conservation buffer of 2.5%), and a Tier 1 leverage ratio of at least 4.0%. An institution’s failure to exceed the capital conservation buffer with common equity Tier 1 capital would result in limitations on an institution’s ability to make capital distributions and discretionary bonus payments. In addition, for an insured depository institution to be “well-capitalized” under the banking agencies’ prompt corrective action framework, it must have a common equity Tier 1 capital ratio of at least 6.5%, a Tier 1 capital ratio of at least 8.0%, a total capital ratio of at least 10.0%, and a Tier 1 leverage ratio of at least 5.0%, and must not be subject to any written agreement, order or capital directive, or prompt corrective action directive issued by its primary federal or state banking regulator to meet and maintain a specific capital level for any capital measure. Any new or revised standards adopted in the future may require us to maintain materially more capital, with common equity as a more predominant component, or manage the configuration of our assets and liabilities to comply with formulaic capital requirements. We may not be able to raise additional capital at all, or on terms acceptable to us. Failure to maintain capital to meet current or future regulatory requirements could have an adverse effect on our business, financial condition, and results of operations. 28
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We are subject to numerous “fair and responsible banking” laws and other laws and regulations designed to protect consumers, and failure to comply with these laws could lead to a wide variety of sanctions. We are subject to extensive and evolving federal and state fair lending laws and regulations. For example, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and regulations, including state laws and regulations, prohibit discriminatory lending practices by financial institutions. The Federal Trade Commission Act prohibits unfair or deceptive acts or practices, and the Dodd-Frank Act prohibits unfair, deceptive, or abusive acts or practices by financial institutions. The FDIC, the U.S. Department of Justice, and/or other federal and state agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s compliance with fair lending or consumer protection laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private litigation, including through class action litigation. In addition, an institution’s receipt of a less-than-Satisfactory CRA rating, which could result from a violation of fair lending or consumer protection laws or from an unsatisfactory record of meeting the credit needs of low- and moderate-income communities, could similarly result in an inability of the institution to engage in mergers or other expansionary activity. Such actions and limitations could have a material adverse effect on our business, financial condition, and results of operations. We are a bank holding company and are dependent upon the Bank for cash flow, and the Bank’s ability to make cash distributions is restricted. Additionally, the Federal Reserve may require us to commit capital resources to support the Bank. We are a bank holding company with no material activities other than activities incidental to holding the common stock of the Bank. Our principal source of funds to pay distributions on our common stock and service any of our obligations, other than further issuances of securities, is dividends received from the Bank. The holding company, Five Star Bancorp, is a legal entity separate and distinct from the Bank. Furthermore, the Bank is not obligated to pay dividends to us, and any dividends paid to us would depend on the earnings or financial condition of the Bank, various business considerations, and applicable law and regulation. As is generally the case for banking institutions, the profitability of the Bank is subject to the fluctuating cost and availability of money, changes in interest rates, and economic conditions in general. In addition, various federal and state statutes and regulations limit the amount of dividends that the Bank may pay to the Company without regulatory approval. In addition, the Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to support its subsidiary banks. Under this “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a subsidiary bank, including at times when the bank holding company may not be inclined to do so, and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. Accordingly, we could be required to provide financial assistance to the Bank if it experiences financial distress. A capital injection may be required at a time when our resources are limited, and we may be required to borrow the funds or raise capital to make the required capital injection. Any loan by a bank holding company to its subsidiary bank is subordinate in right of payment to deposits and certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of any note obligations. Thus, any borrowing by a bank holding company for the purpose of making a capital injection to a subsidiary bank may become more difficult and expensive relative to other corporate borrowings. We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations. The Bank Secrecy Act, the Patriot Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and to file reports such as suspicious activity reports and currency transaction reports. We are required to comply with these and other anti-money laundering requirements. Our federal and state banking regulators, the Treasury Department’s Financial Crimes Enforcement Network, and other government agencies are authorized to impose significant civil money penalties for violations of anti-money laundering 29
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requirements. We are also subject to increased scrutiny of compliance with the regulations issued and enforced by the Treasury Department’s OFAC, which is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. If our program is deemed deficient, we could be subject to liability, including fines, civil money penalties, and other regulatory actions, which may include restrictions on our business operations and our ability to pay dividends, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have significant reputational consequences for us. Any of these circumstances could have an adverse effect on our business, financial condition, and results of operations. Risks Related to Ownership of Our Common Stock The market price of our common stock may be volatile, and we may not be able to meet investor or analyst expectations. You may not be able to resell your shares at or above the price you paid and may lose part or all of your investment as a result. Our stock price has fluctuated from a low of $18.21 to a high of $38.14 between our initial public offering and December 31, 2025. Volatility in the market price of our common stock may negatively impact the price at which our common stock may be sold and may also negatively impact the timing of any sale. The market price of our common stock may continue to fluctuate widely in response to a variety of factors including the risk factors described herein and, among other things: • actual or anticipated variations in quarterly or annual operating results, financial conditions, or credit quality; • changes in business or economic conditions; • changes in accounting standards, policies, guidance, interpretations, or principles; • changes in recommendations or research reports about us or the financial services industry in general published by securities analysts; • changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial institutions; • news reports relating to trends, concerns, and other issues in the financial services industry; • perceptions in the marketplace regarding us and or our competitors; • sudden increases in the demand for our common stock, including as a result of any “short squeezes”; • significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors; • additional investments from third parties; • additions or departures of key personnel; • future sales or issuance of additional shares of our common stock; • changes or proposed changes in laws or regulations, or differing interpretations thereof, affecting our business, or enforcement of these laws or regulations; or • geopolitical conditions or natural or man made disasters. In particular, the realization of any of the risks described in this section could have an adverse effect on the market price of our common stock and cause the value of your investment to decline. In addition, the stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our common stock over the short, medium, or long term, regardless of our actual performance. In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class action litigation. If we were to be involved in a class action lawsuit, it could divert the attention of our senior management and could adversely affect our business, financial condition, and results of operations. 30
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We are an “emerging growth company,” as defined in the JOBS Act and are able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors and adversely affect the market price of our common stock. We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various requirements generally applicable to public companies. These exemptions allow us, among other things, to discuss our results of operations for only two years in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; not to provide an auditor attestation of our internal control over financial reporting; to take advantage of an extended transition period to comply with the new or revised accounting standards applicable to public companies; and not to seek a non-binding advisory vote on executive compensation or golden parachute arrangements. We may take advantage of these exemptions until we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest of: (i) the first fiscal year following the fifth anniversary of our IPO; (ii) the first fiscal year after our annual gross revenues are $1.235 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We cannot predict whether investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile or decline. Our significant shareholders have the ability to control significant corporate activities, and our significant shareholders’ interests may not coincide with yours. Upon the closing of our IPO, our directors, executive officers, and principal shareholders beneficially owned an aggregate of 5,881,682 shares, or approximately 34.47% of our issued and outstanding shares of common stock at the time. As of December 31, 2025, our directors, executive officers, and principal shareholders beneficially owned an aggregate of 9,955,654, or approximately 46.59% of our issued and outstanding shares of common stock. Consequently, our directors, executive officers, and principal shareholders are able to significantly affect our affairs and policies, including the outcome of the election of directors and the potential outcome of other matters submitted to a vote of our shareholders, such as mergers, the sale of substantially all of our assets, and other extraordinary corporate matters. This influence may also have the effect of delaying or preventing changes of control or changes in management or limiting the ability of our other shareholders to approve transactions that they may deem to be in the best interests of our Company. The interests of these significant shareholders could conflict with the interests of our other shareholders, including you. We may not pay dividends on our common stock in the future, and our ability to pay dividends is subject to certain restrictions. Holders of our common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments. Our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. In addition, we are a bank holding company, and our ability to declare and pay dividends is dependent on federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends. It is the policy of the Federal Reserve that bank holding companies should generally pay dividends on common stock only out of earnings, and only if prospective earnings retention is consistent with the organization’s expected future needs, asset quality, and financial condition, and that bank holding companies should inform and consult with the Federal Reserve in advance of declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid. California law and the provisions of our amended and restated articles of incorporation and amended and restated bylaws may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies. California corporate law and provisions of our amended and restated articles of incorporation (“articles of incorporation”) and our second amended and restated bylaws (“bylaws”) could make it more difficult for a third party to acquire us, even if doing so would be perceived to be beneficial by our shareholders. Furthermore, prior approval of the Federal Reserve and the DFPI is generally required for any person to acquire control of the Company. Under federal and state laws, a person may be presumed to acquire control of the Company if the person 31
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acquires 10% or more of the Company’s outstanding common stock. In addition, Federal Reserve approval is also generally required for a bank holding company to acquire more than 5% or more of the Company’s outstanding common stock. Accordingly, prospective investors must comply with these requirements, if applicable, in connection with any purchase of shares of our common stock. Collectively, provisions of our articles of incorporation and bylaws and other statutory and regulatory provisions may delay, prevent, or deter a merger, acquisition, tender offer, proxy contest, or other transaction that might otherwise result in our shareholders receiving a premium over the market price for their common stock. Moreover, the combination of these provisions effectively inhibits certain business combinations, which, in turn, could adversely affect the market price of our common stock. Our bylaws have an exclusive forum provision, which could limit a shareholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or other employees. Our bylaws have an exclusive forum provision providing that, unless we consent in writing to the selection of an alternative forum, the United States District Court for the Northern District of California (or, in the event that the United States District Court for the Northern District of California does not have jurisdiction, any federal or state court of California) shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of any duty owed by any director, officer, or other employee to us or to our shareholders; (iii) any action asserting a claim against us or any of our directors, officers, or other employees arising pursuant to any provision of the General Corporation Law of California or the articles of incorporation or the bylaws; or (iv) any action asserting a claim against us or any of our directors, officers, or other employees that is governed by the internal affairs doctrine. Our bylaws will further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by applicable law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws, including the applicable rules and regulations promulgated thereunder. Any person purchasing or otherwise acquiring any interest in any shares of our capital stock will be deemed to have notice of and to have consented to this provision of our bylaws. The exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits. Alternatively, if a court were to find the exclusive forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have an adverse effect on our business, financial condition, results of operations, and growth prospects. If we fail to design, implement, and maintain effective internal control over financial reporting or remediate any future material weakness in our internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Effective internal control over financial reporting is necessary for us to provide reliable reports and prevent fraud. We may not be able to identify all significant deficiencies and/or material weaknesses in our internal control over financial reporting in the future, and our failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have an adverse effect on our business, financial condition, and results of operations. In the normal course of our operations, we may identify deficiencies that would have to be remediated to satisfy the SEC rules for certification of our internal control over financial reporting. A material weakness is defined by the standards issued by the PCAOB as a deficiency, or combination of deficiencies, in internal control over financial reporting that results in a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a consequence, we would have to disclose in periodic reports we file with the SEC any material weakness in our internal control over financial reporting. The existence of a material weakness would preclude management from concluding that our internal control over financial reporting is effective and, when we cease to be an emerging growth company under the JOBS Act, preclude our independent registered public accounting firm from rendering their report addressing an assessment of the effectiveness of our internal control over financial reporting. In addition, disclosures of deficiencies of this type in our SEC reports could cause investors to lose confidence in our financial reporting, may negatively affect the market price of our common stock, and could result in the delisting of our securities from the securities exchanges on which they trade. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud. If we have deficiencies in our disclosure controls and procedures or internal control over financial reporting, such deficiencies may adversely affect us. 32
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General Risk Factors Our success is largely dependent upon our management team and key employees and ability to successfully execute our business strategy. Our success depends, in large part, on the retention of our management team and key employees. Our management team and other key employees, including those who conduct our loan origination and other business development activities, have significant industry experience. We cannot ensure that we will be able to retain the services of any members of our management team or other key employees. Though we have employment agreements in place with certain members of our management team, they may still elect to leave at any time. The loss of any of our management team or our key employees could adversely affect our ability to execute our business strategy, and we may not be able to find adequate replacements on a timely basis, or at all. Our future success also depends on our continuing ability to attract, develop, motivate, and retain key employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. Because the market for qualified individuals is highly competitive, we may not be able to attract and retain qualified officers or candidates. Failure to attract and retain a qualified management team and qualified key employees could have an adverse effect on our business, financial condition, and results of operations. There can be no assurance that we will be able to continue to grow and to remain profitable in future periods, or, if profitable, that our overall earnings will remain consistent with our prior results of operations or increase in the future. A downturn in economic conditions in our market, particularly in the real estate market, heightened competition from other financial services providers, an inability to retain or grow our core deposit base, regulatory and legislative considerations, and failure to attract and retain high-performing talent, among other factors, could limit our ability to grow assets or increase profitability as rapidly as we have in the past. Sustainable growth requires that we manage our risks by following prudent loan underwriting standards, balancing loan and deposit growth without materially increasing interest rate risk or compressing our net interest margin, maintaining more than adequate capital at all times, managing a growing number of customer relationships, scaling technology platforms, hiring and retaining qualified employees, and successfully implementing our strategic initiatives. We must also successfully implement improvements to, or integrate, our management information and control systems, procedures, and processes in an efficient and timely manner and identify deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate an increase in loan volume in various markets and the infrastructure that comes with expanding operations, including new branches. Our growth strategy may require us to incur additional expenditures to expand our administrative and operational infrastructure. If we are unable to effectively manage and grow our banking franchise, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth. We may not have, or may not be able to develop, the knowledge or relationships necessary to be successful in new markets. Our failure to sustain our historical rate of growth, adequately manage the factors that have contributed to our growth, or successfully enter new markets could have an adverse effect on our earnings and profitability and, therefore, on our business, financial condition, and results of operations. If we implement new lines of business, products, or services, we may invest significant time and resources in doing so, and such new lines of business, products, or services may not be successful. From time to time, we may implement new lines of business or offer new products and product enhancements as well as new services within our existing lines of business. There are substantial risks and uncertainties associated with these efforts. In developing, implementing, or marketing new lines of business, products, product enhancements, or services, we may invest significant time and resources. We may underestimate the appropriate level of resources or expertise necessary to make new lines of business or products successful or to realize their expected benefits. We may not achieve the milestones set in initial timetables for the development and introduction of new lines of business, products, product enhancements, or services, and price and profitability targets may not prove feasible. External factors, such as new or changing regulations, competitive alternatives, and shifting market preferences, may also impact the ultimate implementation of a new line of business or offerings of new products, product enhancements, or services. Any new line of business, product, product enhancement, or service could have a significant impact on the effectiveness of our system of internal controls. We may also decide to discontinue businesses or products due to lack of customer acceptance or unprofitability. Failure to successfully manage these risks in the development and implementation of new lines of business 33
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or offerings of new products, product enhancements, or services could have an adverse effect on our business, financial condition, and results of operations. We may pursue strategic acquisitions in the future, and we may not be able to overcome risks associated with such transactions. Although we plan to continue to grow our business organically, we may explore opportunities to invest in, or to acquire, other financial institutions and businesses that we believe would complement our existing business. Our investment or acquisition activities could be material to our business and involve a number of risks including the following: • investing time and incurring expense associated with identifying and evaluating potential investments or acquisitions and negotiating potential transactions, resulting in our attention being diverted from the operation of our existing business; • the lack of history among our management team in working together on acquisitions and related integration activities; • the time, expense, and difficulty of integrating the operations and personnel of the combined businesses; • unexpected asset quality problems with acquired companies; • inaccurate estimates and judgments used to evaluate credit, operations, management, and market risks with respect to the target institution or assets; • risks of impairment to goodwill or allowance for credit losses of investment securities; • potential exposure to unknown or contingent liabilities of banks and businesses we acquire; • an inability to realize expected synergies or returns on investment; • potential disruption of our ongoing banking business; and • loss of key employees or key customers following our investment or acquisition. We may not be successful in overcoming these risks or other problems encountered in connection with potential investments or acquisitions. Our inability to overcome these risks could have an adverse effect on our ability to implement our business strategy and enhance shareholder value, which, in turn, could have an adverse effect on our business, financial condition, and results of operations. Additionally, if we record goodwill in connection with any acquisition, our business, financial condition, and results of operations may be adversely affected if that goodwill is determined to be impaired, which would require us to take an impairment charge. Our reputation is critical to our business, and damage to it could have an adverse effect on us. A key differentiating factor for our business is the strong reputation we are building in our market. Maintaining a positive reputation is critical to attracting and retaining customers and employees. Adverse perceptions of us could make it more difficult for us to execute on our strategy. Harm to our reputation can arise from many sources, including actual or perceived employee misconduct, errors or misconduct by our third-party vendors or other counterparties, litigation or regulatory actions, our failure to meet our high customer service and quality standards, system failures, cybersecurity breaches, and compliance failures. In particular, it is not always possible to prevent employee error or misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon processing systems to record and process transactions and our large transaction volume may further increase the risk that employee errors, tampering, or manipulation of those systems will result in losses that are difficult to detect. Employee error or misconduct could also subject us to financial claims. If our internal control systems fail to prevent or detect an occurrence, or if any resulting loss is not insured, exceeds applicable insurance limits, or if insurance coverage is denied or not available, it could have an adverse effect on our business, financial condition, and results of operations. 34
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Additionally, as a financial institution, we are inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, customers, and other third parties targeting us and our customers or data. Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts. Although we devote substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the increasing sophistication of possible perpetrators, we may experience financial losses or reputational harm as a result of fraud. Negative publicity about us, whether accurate or not, may also damage our reputation, which could have an adverse effect on our business, financial condition, and results of operations. Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services, or fail to comply with banking regulations. We outsource some of our operational activities and, accordingly, depend on relationships with third-party providers for services such as core systems support, informational website hosting, internet services, online account opening, and other processing services. Our business depends on the successful and uninterrupted functioning of our information technology and telecommunications systems, many of which also depend on third-party providers. The failure of these systems, a cybersecurity breach involving any of our third-party service providers, or the termination or change in terms of a third-party software license or service agreement on which any of these systems is based could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity, or such third-party systems fail or experience interruptions. Replacing vendors or addressing other issues with our third-party service providers could entail significant delay, expense, and disruption of service. As a result, if these third-party service providers experience difficulties, are subject to cybersecurity breaches, or terminate their services, and we are unable to replace them with other service providers, particularly on a timely basis, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition, and results of operations could be adversely affected. Even if we are able to replace third-party service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition, and results of operations. Furthermore, third-party service providers, and banking organizations’ relationships with those providers, are subject to demanding regulatory requirements and attention by bank regulators. These regulatory expectations may change, and potentially become more rigorous in certain ways. Our regulators may hold us responsible for any deficiencies in our oversight or control of our third-party service providers and in the performance of the parties with which we have these relationships. As a result, if our regulators assess that we have not exercised adequate oversight and control over our third-party service providers or that such providers have not performed adequately, we could be subject to administrative penalties, fines, or other forms of regulatory enforcement action as well as requirements for consumer remediation, any of which could have an adverse effect on our business, financial condition, and results of operations. We are subject to laws regarding the privacy, information security, and protection of personal information, and any violation of these laws or other incidents involving personal, confidential, or proprietary information of individuals could damage our reputation and otherwise adversely affect our business. Our business requires the collection and retention of large volumes of customer data, including personally identifiable information (“PII”), in various information systems that we maintain and in those maintained by third-party service providers. We also maintain important internal company data such as PII about our employees and information relating to our operations. We are subject to complex and evolving laws and regulations governing the privacy and protection of PII of individuals (including customers, employees, and other third parties). For example, our business is subject to the GLB Act, which, among other things: (i) imposes certain limitations on our ability to share nonpublic PII about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing, and security practices and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement, and maintain a written comprehensive information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Various federal and state banking regulators and states have also enacted data breach notification requirements with varying levels of individual, consumer, regulatory, or law enforcement notification in the event of a security breach. The California Consumer Privacy Act grants California residents the rights to know about personal 35
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information collected about them, to delete certain of this personal information, to opt out of the sale of personal information, and to non- discrimination for exercising these rights. Ensuring that our collection, use, transfer, and storage of PII complies with all applicable laws and regulations can increase our costs. Furthermore, we may not be able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with respect to personal, confidential, or proprietary information of customers or others, or if that data were otherwise to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Concerns regarding the effectiveness of our measures to safeguard PII, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers and thereby reduce our revenues. Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations, and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines, penalties, regulatory enforcement actions, and/or criminal prosecution and could damage our reputation and otherwise adversely affect our business, financial condition, and results of operations. Depending on the circumstances giving rise to the breach, this liability may not be subject to a contractual limit or an exclusion of consequential or indirect damages. System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation, damage to our reputation, and other potential losses. Failures in, or breaches of, our computer systems and network infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber-attacks, cybersecurity breaches, and other disruptions, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, result in supervisory liability or regulatory enforcement action, damage our reputation, result in a loss of customers and business, result in a loss of confidence in the security of our systems, products, and services, increase our costs, and cause losses. Our operations are dependent upon our ability to protect our computer equipment against damage from fire, power loss, telecommunications failure, or a similar catastrophic event. Any damage or failure that causes an interruption in our operations could have an adverse effect on our business, financial condition, and results of operations. In addition, our operations are dependent upon our ability to protect our computer systems and network infrastructure, including our internet banking activities, against damage from physical break-ins, cybersecurity breaches, and other disruptive problems caused by the internet or other users. Cybersecurity breaches and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in business disruptions, significant liability to us, and damage to our reputation and may discourage current and potential customers from using our internet banking services. Our security measures, including firewalls and penetration testing, as well as oversight by our board of directors and the Audit Committee as well as management’s assessment, identification, and management of cybersecurity risks, may not prevent or detect future potential losses from system failures or cybersecurity breaches, attacks, or other disruptions. While we seek to continuously monitor for and react to any and all such malicious cyber activity and develop our systems to protect our technology infrastructure and data, such monitoring and systems development may not be effective in preventing misuse, misappropriation, or corruption. In the ordinary course of business, our board of directors receives quarterly cybersecurity risk management updates and members of the Audit Committee of our board of directors also attend the meetings of our information technology steering committee on a quarterly basis. Cybersecurity risk management is incorporated into our overall enterprise risk management model, which is updated on a quarterly basis and subject to oversight by our board of directors. In the normal course of business, we collect, process, and retain sensitive and confidential information regarding our customers. Although we devote significant resources, oversight by our board of directors, and management focus to ensuring the integrity of our systems through information security and business continuity programs, our facilities and systems, and those of our third-party service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses, malware, misplaced or lost data, programming or human errors, or other similar events. We and our third-party service providers have experienced these types of events in the past and expect to continue to experience them in the future. These events could interrupt our business or operations or result in significant legal and financial exposure (including costs associated with remediating any security breaches), supervisory liability, regulatory enforcement action, damage to our reputation, loss of customers and business, or a loss of confidence in the security of our systems, products, and services. Although the impact to date from these events has not had an adverse effect on us, we cannot be sure this will be the case in the future. Any of these occurrences could have an adverse effect on our business, financial condition, and results of operations. We are not able to anticipate or implement effective preventive measures 36
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against all security breaches of these types, especially because attacks are increasingly sophisticated, change frequently, often are not recognized until launched, and can originate from a wide variety of sources. Our early detection and response mechanisms could fail to detect, mitigate, or remediate these risks in a timely manner. Despite our implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software, and networks may be vulnerable to human error, equipment failure, natural disasters, power loss, unauthorized access, supply chain attacks, distributed denial of service attacks, computer viruses and other malicious code, and other events that could result in significant liability and damage to our reputation, and have an ongoing impact on the security and stability of our operations. In addition, although we maintain insurance coverage that may, subject to terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover all losses, such as litigation costs or financial losses that exceed our policy limits or are not covered under any of our current insurance policies. Information security risks for financial institutions like us have increased recently in part because of new technologies, such as artificial intelligence, the use of the internet, cloud, 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. We also face increased cybersecurity risk as we deploy additional technologies and digital solutions, including our website and digital banking platform with complementary treasury management solutions. Moreover, any cyber-attack or other security breach may persist for an extended period of time without detection. We endeavor to design and implement policies and procedures to identify such cyber-attacks or breaches as quickly as possible; however, we expect that any investigation of a cyber-attack or breach would take substantial amounts of time, and that there may be extensive delays before we obtain full and reliable information. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all of which would further increase the costs and consequences of such an attack or breach. Notwithstanding the strength of defensive measures, cybersecurity threats and the tactics, techniques, and procedures used in cyberattacks change, develop, and evolve rapidly and continuously, including from emerging technologies, such as artificial intelligence, which may be used to enhance the tactics, techniques, and procedures described above and facilitate new cyber threats. In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers recently have engaged in attacks against large financial institutions that are designed to disrupt key business services, such as consumer-facing web sites. We are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. Our early detection and response mechanisms may be thwarted by sophisticated attacks and malware designed to avoid detection. Banking organizations are required to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred. Failure to comply with this requirement in the event of such an incident could result in sanctions by regulatory agencies, civil money penalties, and/or damage to our reputation, all of which could have an adverse effect on our business, financial condition, and results of operations. The adoption of artificial intelligence tools by us and our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment, or fraudulent behavior by our employees, clients, or counterparties, or other third parties. Our adoption of artificial intelligence, including generative artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyze, or generate data or other materials or content (collectively, “AI”), for limited internal use has increased our efficiency, and we expect to continue to adopt such tools as appropriate. In addition, we expect our third-party vendors and service providers to increasingly develop and incorporate AI into their product offerings faster than we are able to do so independently. There are significant risks involved in utilizing AI and no assurance can be provided that our or our third-party vendors’ or service providers’ use of AI will enhance our or our third-party vendors’ or service providers’ products or services or produce the intended results. The adoption and incorporation of such tools can lead to concerns around safety and soundness, fair access to financial services, fair treatment of consumers, and compliance with applicable laws and regulations. Such risk can result from models being poorly designed or faulty data being used, inadequate model testing or validation, narrow or limited human oversight, inadequate planning or due diligence, inappropriate or controversial data practices by developers or end-users, and other factors adversely affecting public opinion of AI and the acceptance of AI solutions. Furthermore, given the pace of rapid adoption of such tools by vendors and service providers, we may not be aware of the addition of AI solutions prior to such tools being introduced into our environment. Failure to adequately manage AI risks can result in erroneous results and decisions made by misinformation, unwanted forms of bias, unauthorized access to sensitive, confidential, proprietary or personal information, and violations 37
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of applicable laws and regulations, leading to operational inefficiencies, competitive harm, reputational harm, ethical challenges, legal liability, losses, fines, and other adverse impacts on our business and financial results. If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, or to use the output of such AI tools, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacy, or other rights or contracts to which we are a party. In addition, regulation of AI is rapidly evolving as federal and state legislators and regulators are increasingly focused on these powerful emerging technologies. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including, but not limited to, intellectual property, data privacy and cybersecurity, consumer protection, competition, equal opportunity and fair lending laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations. AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states are applying, or are considering applying, existing laws and regulations to AI or are considering general legal frameworks for AI. We may not be able to anticipate how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions. Moreover, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to the use of AI. Our ability to conduct our business could be disrupted by natural or man-made disasters or the effects of climate change. All of our offices, a significant portion of the real estate securing loans we make, and many of our borrowers’ business operations in general, are located in California. California has had and will continue to have major earthquakes in areas where a significant portion of the collateral and assets of our borrowers are concentrated. California is also prone to wildfires, droughts, mudslides, floods, and other natural disasters. Additionally, acts of terrorism, war, civil unrest, violence, other man-made disasters, or the effects of climate change could also cause disruptions to our business or to the economy as a whole. The occurrence of natural or man-made disasters or the effects of climate change could destroy, or cause a decline in the value of, mortgaged properties or other assets that serve as our collateral and increase the risk of delinquencies, defaults, foreclosures, and losses on our loans, damage our banking facilities and offices, negatively impact regional economic conditions, result in a decline in loan demand and loan originations, result in drawdowns of deposits by customers impacted by disasters, and negatively impact the implementation of our growth strategy. Natural or man-made disasters or the effects of climate change could also disrupt our business operations more generally. We have implemented a business continuity program that allows us to move critical functions to a backup data center in the event of a catastrophe. Although this program has been tested, we cannot guarantee its effectiveness in any disaster scenarios. Regardless of the effectiveness of our disaster recovery and business continuity plan, the occurrence of any natural or man-made disaster or the effects of climate change could have an adverse effect on our business, financial condition, and results of operations. Climate change also could present financial risks to us as a result of transition risks, such as societal and/or technological responses to climate change, which could include changes in climate policy or in the regulation of financial institutions with respect to risks posed by climate change. Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments, or other requirements resulting in increased expenses or restrictions on our business activities. From time to time, in the normal course of business, we have in the past been and may in the future be named as a defendant in various legal actions, arising in connection with our current and/or prior business activities. Legal actions could include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. Further, in the future our regulators may impose consent orders, civil money penalties, matters requiring attention, or similar types of supervisory criticism. We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations, and proceedings (both formal and informal) by governmental agencies regarding our current and/or prior business activities. Any such legal or regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices, or other requirements resulting in increased expenses, diminished income, and damage to our reputation. Our involvement in any such matters, whether tangential or otherwise and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any settlement, consent order, or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations, or proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could have an adverse effect on our business, financial condition, and results of operations. 38
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We are subject to an extensive body of accounting rules and best practices. Periodic changes to such rules may change the treatment and recognition of critical financial line items. In addition, the accuracy of our consolidated financial statements and related disclosures could be affected if the judgments, assumptions, or estimates used in our critical accounting policies are inaccurate. The nature of our business makes us sensitive to the large body of accounting rules in the United States. From time to time, the governing bodies that oversee changes to accounting rules and reporting requirements may release new guidance for the preparation of our consolidated financial statements. These changes can materially impact how we record and report our financial condition and results of operations. In some instances, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. Changes which have been approved for future implementation, or which are currently proposed or expected to be proposed or adopted include requirements that we: (i) calculate the allowance for credit losses on the basis of the current expected credit losses over the lifetime of our loans, which was applicable to us beginning in 2023, and may result in increases in our allowance for credit losses and future provisions for credit losses; and (ii) record the value of and liabilities relating to operating leases on our balance sheet, which became applicable to us beginning in 2022. These changes could adversely affect our capital, regulatory capital ratios, ability to make larger loans, earnings, and performance metrics. Any such changes could have an adverse effect on our business, financial condition, and results of operations. The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies, which are included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions, and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events or regulatory views concerning such analysis differ significantly from the judgments, assumptions, and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our possible need to revise or, if in error, restate prior period financial statements, cause damage to our reputation and the price of our common stock, and adversely affect our business, financial condition, and results of operations. We could be subject to changes in tax laws, regulations and interpretations or challenges to our income tax provision. We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. Any change in enacted tax laws, rules, or regulatory or judicial interpretations, or any change in the pronouncements relating to accounting for income taxes, could adversely affect our effective tax rate, tax payments, and results of operations. For example, on July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Act also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025. The Company evaluated the impact on future periods and the legislation is not expected to have a significant impact on the Company’s consolidated financial statements. Additionally, the taxing authorities in the jurisdictions in which we operate may challenge our tax positions, which could increase our effective tax rate and harm our financial position and results of operations. We are subject to audit and review by U.S. federal and state tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. In addition, changes in enacted tax laws, such as adoption of a lower income tax rate in any of the jurisdictions in which we operate, could impact our ability to obtain the future tax benefits represented by our deferred tax assets. Also, the determination of our provision for income taxes and other liabilities requires significant judgment by management. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and could have a material adverse effect on our financial results in the period or periods for which such determination is made. Item 1B. Unresolved Staff Comments None. 39
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Item 1C. Cybersecurity We recognize the crucial importance of identifying, assessing, and managing material risks from cybersecurity threats. We are committed to implementing and maintaining a comprehensive information security program to manage such risks and safeguard our systems and data, including the data of our customers. Information Security Policies and Procedures We manage our cybersecurity risk in accordance with our Information Security Program (the “Information Security Program”), which is applicable to all users of our information technology assets, information assets, and facilities, including our employees, contractors, vendors, volunteers, and agents. The Information Security Program includes an Information Security Incident Response Policy (the “Incident Response Policy”), which sets forth the rules and requirements for identifying, investigating, validating, prioritizing, and responding to information security incidents, and addresses the response portion of security monitoring. The Information Security Program also includes: (i) an Information Security Incident Response Procedure (the “Incident Response Procedure”), which delineates the processes for reporting, classifying, investigating, planning, containing, eradicating, recovering, documenting, and communicating information security incidents, as well as post-incident activities; and (ii) a Security Monitoring Policy, which establishes the rules and requirements for enabling, logging, alerting, and monitoring real time security alerts and security logs (automated or manual), as well as various condition monitoring tests and reviews, and documentation requirements in connection with security incident identification. Potential information security incidents are identified in a number of ways, including, but not limited to: users reporting security violations, system weaknesses, violations of our Information Security Acceptable Use Policy, which addresses the boundaries of acceptable use of our information technology assets, automated system alerts, and monitoring of both system generated and manually generated logs. Our Information Security Program mandates that any potential information security incident response begin at the initial internal communication and investigation stage, during which such events undergo initial investigation for validation, including related to the scope and depth of such incident and to ensure that it has not resulted from a false positive. Internal communications regarding the potential incident occur with the relevant security coordinator according to our Incident Response Procedures. Following this initial stage, we gather and update impact information and related documentation for such incident. We use an incident classification matrix to determine the initial classification of a potential information security incident, which considers users, customers, and systems affected, the sensitivity of data at risk, and the potential business impacts to the Company, including financial, legal, regulatory, operational, and reputation. The resulting classification of “Red,” “Yellow,” or “Green” identifies next steps for escalation and communication following initial investigation of the potential incident. Upon escalation of an incident, a member of management who is identified as an Incident Response Contact per our Information Security Program reviews and validates the initial determination of the priority of the incident prior to entering into the subsequent stage, during which a response to the incident is determined and notifications or communications are made to either additional personnel or any external entities. Depending on the specific details of any such incident, we may notify additional members of our management team, our board of directors, the Audit Committee, state and federal regulators, technology service providers, and/or the SEC. The timing of such communications varies based on the details of a particular incident and applicable regulations governing such disclosure. Following this classification and communication stage, we enter the recovery stage to determine containment and a response to the incident, assign technical staff to address such incident, implement containment, eradicate the incident source, and recover from such incident. Following any such incident, we engage in follow-up to communicate with law enforcement and notify impacted third parties and customers, as appropriate, in addition to further investigating the cause of the incident, documenting takeaways, and engaging in remediation. Our Director of Information Security (“DIS”) coordinates with other members of our executive management team identified in our Information Security Program to document, validate, respond to, and manage actual or potential security incidents according to their threat classifications as described above, and report to our board of directors and/or the Audit Committee on an ad hoc basis. The DIS also provides quarterly reports on the status of our Information Security Program and its compliance with regulatory requirements to our board of directors in connection with our board’s general risk management oversight role, as described in further detail below. The DIS and the Chief Information Officer (“CIO”) have shared responsibility for overseeing day-to-day operations of the Information Security Program; coordinating or contributing to reviews, audits, risk assessments, and other risk management material; development of departmental policies and procedures for board approval; and periodic updates to our information technology steering committee and/or the full board of directors. The CIO reports to the President and Chief Executive Officer, while the DIS reports to the Chief Regulatory Officer and reports regularly to the Audit Committee. 40
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The CIO has over 20 years of industry experience including management of technology, security, data analytics, and vendor relationships. The DIS has over 10 years of industry experience and over 25 years of information security experience focusing on management of security and vendor relationships. The DIS also possesses several industry certifications, including certification as a Certified in Risk and Information Systems Control and Certified Information Security Manager from the Information System Audit and Control Association. With the approval of the Audit Committee, we also engage third-party assessors, consultants, and auditors in connection with the Company’s Information Security Program and in accordance with our Audit Program, including to conduct external and internal penetration testing, independent audits, and risk assessments. We may also utilize third-party service providers in the ordinary course of business, including to assist us in performing information security assessments for third-party service providers that store or process our confidential data. These information security assessments, whether performed by a third party or internally, include a review of any systems and organization control reports, and proof of the vendor’s independent testing of their data protection controls, as well as a review of any exceptions noted and assessment of management responses, results of vulnerability and penetration testing, incident response processes, and third-party data protection controls (which can include, but are not limited to: access reviews and controls, backups, monitoring, encryption standards, and disaster recovery). The review of these areas is taken into account in order to provide an overall information security conclusion and risk rating for the vendor. In addition, we use a combination of technology, policies, procedures, training, and monitoring to promote security awareness and prevent security incidents. Cybersecurity Risk Oversight Our executive management team is responsible for the development of our policies and procedures and for managing any exception to the same. In particular, our DIS oversees information security compliance, as described above. The board of directors of the Company has ultimate oversight of cybersecurity-related risk and activities, including the review and approval of our policies and procedures related to cybersecurity. The Information Security Program is approved on an annual basis. Cybersecurity risk management is also incorporated into our overall enterprise risk management model, which is updated on a quarterly basis and subject to oversight by our board of directors. In the ordinary course of business, our board of directors receives quarterly updates from the DIS regarding the Information Security Program and compliance with relevant regulations, as described above. Members of the Audit Committee of our board of directors receive presentations as well as minutes of the meetings of our information technology steering committee on a quarterly basis. Our information technology steering committee consists of members of management who have relevant experience as well as industry training. If an incident occurs, depending on its priority as identified through the procedures described above, management may inform our board of directors and/or the Audit Committee sooner than its next quarterly update. See the section entitled “Part I, Item 1. Business—Risk Management” for additional information on the role of our board of directors and its committees in overseeing risk management. Relevant Regulations As a regulated financial institution, the Bank is also subject to financial privacy laws, and our cybersecurity practices are subject to oversight by the federal banking agencies. In addition, the Bank is subject to SEC rules requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance. For additional information, see the section entitled “Part I, Item 1. Business—Supervision and Regulation—Supervision and Regulation of the Bank—Cybersecurity.” Prior Incidents Although we have not, as of the date of this Annual Report on Form 10-K, experienced a cybersecurity threat or incident that materially affected our business strategy, results of operations, or financial condition, there can be no guarantee that we will not experience such an incident in the future. For additional information regarding the risk we face from cybersecurity threats, see the risk factor entitled “System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation, damage to our reputation, and other potential losses.” included in Part I, Item 1A. Risk Factors in this Annual Report on Form 10-K. 41
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Item 2. Properties Our corporate headquarters is located at 3100 Zinfandel Drive, Suite 100, Rancho Cordova, CA 95670. As of December 31, 2025, in addition to our corporate headquarters, which includes our Rancho Cordova branch, we operated eight other branch offices in Roseville, Natomas, Redding, Elk Grove, Chico, Yuba City, San Francisco, and Walnut Creek and two administrative offices in Sacramento and Newport Beach. We lease our corporate headquarters and all of our other offices. The lease on our corporate headquarters expires in 2032, and the leases on our branch offices and administrative offices expire in 2026 through 2036. We believe that these facilities and additional or alternative space available to us are adequate to meet our needs for the foreseeable future. Item 3. Legal Proceedings From time to time, we are a party to various litigation matters incidental to the conduct of our business. We do not believe that any currently pending legal proceedings will have a material adverse effect on our business, financial condition, or results of operations. Item 4. Mine Safety Disclosures Not applicable. 42
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PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information, Holders of Common Stock, and Dividends The Company’s common stock, no par value per share, is traded on the Nasdaq Global Select Market under the symbol “FSBC.” On February 24, 2026, there were 123 holders of record of the Company’s common stock. The actual number of stockholders is greater than this, as it would include stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. The Company has paid cash dividends on its common stock in every quarter since January 2002, with the exception of the third and fourth quarters of 2009 and all quarters of 2010. It is currently the intention of the board of directors of the Company to continue payment of cash dividends on a quarterly basis. There is no assurance, however, that any dividends will be paid since they are dependent on a number of factors, including general and economic conditions, industry standards, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, our ability to service debt obligations senior to our common stock, banking regulations, contractual, legal, tax, and regulatory restrictions, and limitations on the payment of dividends by us to our shareholders or by the Bank to us, and such other factors as our board of directors may deem relevant. Further, while we expect to continue our current practice of paying quarterly cash dividends with respect to our common stock, this practice is subject to our board of directors’ discretion to modify or terminate it at any time and for any reason without prior notice. As of December 31, 2025, there was $103.8 million available for payment of dividends by the Bank to the Company, under applicable laws and regulations. For a discussion of dividend restrictions on our common stock, or of restrictions on dividends from the Company’s subsidiaries to the Company, see the sections entitled “Part I, Item 1. Business—Supervision and Regulation—Supervision and Regulation of the Company—Payment of Dividends and Stock Repurchases” and “Part I, Item 1. Business—Supervision and Regulation—Supervision and Regulation of the Bank—Payment of Dividends.” Securities Authorized for Issuance Under Equity Compensation Plans See “Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.” Unregistered Sales of Equity Securities and Use of Proceeds Unregistered Sales of Equity Securities Not applicable. Use of Proceeds Not applicable. Issuer Purchases of Equity Securities None. 43
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Stock Performance The following graph presents the cumulative total yearly shareholder return from investing $100 on May 5, 2021, the Company’s IPO date, in each of our common stock, the S&P 500 Index, and the KBW Nasdaq Regional Banking Index. Total return assumes the reinvestment of all dividends. Period Ending Index May 5, 2021 December 31,2021 December 31,2022 December 31,2023 December 31,2024 December 31,2025 Five Star Bancorp 100.00 125.24 116.25 115.55 137.10 167.35 S&P 500 Index 100.00 115.45 94.54 119.40 149.27 175.96 KBW Nasdaq RegionalBanking Index 100.00 99.86 92.94 92.57 104.79 111.61 The stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities Act of 1933, as amended or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. Item 6. [Reserved] Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis presents management’s perspective on our financial condition and results of operations on a consolidated basis. However, because we conduct all of our material business operations through our bank subsidiary, Five Star Bank, the discussion and analysis relate to activities primarily conducted by the Bank. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and the accompanying notes presented elsewhere in this Annual Report on Form 10-K. Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to containing historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Part I, Item 1A. Risk Factors.” We assume no obligation to update any of these forward-looking statements, except to the extent required by law. 44
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Set forth below is a comparison of the results of operations and changes in financial condition for the fiscal years ended December 31, 2025 and December 31, 2024. For a discussion of our financial results for the fiscal year ended December 31, 2023, see the section entitled “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, 2024. Company Overview Headquartered in the greater Sacramento metropolitan area of California, Five Star Bancorp (“Bancorp” or the “Company”) is a bank holding company that operates through its wholly owned subsidiary, Five Star Bank, a California state-chartered non-member bank. We provide a broad range of banking products and services to small and medium-sized businesses, professionals, and individuals primarily in Northern California through nine branch offices. Our mission is to strive to become the top business bank in all markets we serve through exceptional service, deep connectivity, and customer empathy. We are dedicated to serving real estate, agricultural, faith-based, and small to medium-sized enterprises. We aim to consistently deliver value that meets or exceeds the expectations of our shareholders, customers, employees, business partners, and community. We refer to our mission as “purpose-driven and integrity-centered banking.” At December 31, 2025, we had total assets of $4.8 billion, total loans held for investment of $4.1 billion, and total deposits of $4.2 billion. Key Factors Affecting our Business Interest Rates Net interest income is the most significant contributor to our net income and is the difference between the interest and fees earned on interest-earning assets and the interest expense incurred in connection with interest-bearing liabilities. Net interest income is primarily a function of the average balances and yields of these interest-earning assets and interest-bearing liabilities. These factors are influenced by internal considerations such as product mix and risk appetite as well as external influences such as economic conditions, competition for loans and deposits, and market interest rates. The cost of our deposits and short-term borrowings is primarily based on short-term interest rates, which are largely driven by the Federal Reserve’s actions and market competition. The yields generated by our loans and securities are typically affected by short-term and long- term interest rates, which are driven by market competition and market rates often impacted by the Federal Reserve’s actions. The level of net interest income is influenced by movements in such interest rates and the pace at which such movements occur. Interest rates have risen significantly following the historically low levels during the COVID-19 pandemic. Due to elevated levels of inflation and corresponding pressure to raise interest rates, the Federal Reserve announced in January 2022 that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time. The Federal Open Market Committee (“FOMC”) then increased the target range eleven times throughout 2022 and 2023. During 2024 and 2025, the Federal Reserve decreased the federal funds rate three times each year. As of December 31, 2025, the target range for the federal funds rate had been decreased to 3.50% to 3.75%, and the FOMC projects one additional decrease in 2026, as part of a strategy to return inflation to normalized levels while keeping unemployment low. We anticipate that interest rates may be lowered over the next few years. Based on our sensitivity analysis, a steepened yield curve could have a slight negative impact on our net interest income over the next year. Additionally, a continued flat yield curve would be expected to maintain our net interest income over the next year. Factors Affecting Comparability of Financial Results Allowance for Credit Losses (“ACL”) On January 1, 2023, the Company adopted ASC 326, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model applies to estimated credit losses on loans receivable, held-to- maturity debt securities, unfunded loan commitments, and certain other financial assets measured at amortized cost. Under ASC 326, available-for-sale debt securities are evaluated for impairment if fair value is less than amortized cost, with any estimated credit losses recorded through a credit loss expense and an allowance, rather than a write-down of the investment. Changes in fair value that are not credit-related continue to be recorded in other comprehensive income. Under the CECL model, the calculated allowance for credit losses was $5.3 million higher on January 1, 2023 than the allowance under the incurred loss model. For further information, please see Note 2, Recently 45
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Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue, and expenses. We have identified certain policies and estimates as critical to our business operations and the understanding of our past or present consolidated financial condition and results of operations. These policies and estimates are considered critical because they have a material impact, or they have the potential to have a material impact, on our consolidated financial statements and because they require us to make significant judgments, assumptions, or estimates. We believe that the judgments, estimates, and assumptions used in the preparation of our financial statements are reasonable and appropriate, based on the information available at the time they were made. However, actual results may differ from those estimates, and these differences may be material. Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), as an emerging growth company, we can elect to opt out of the extended transition period for adopting any new or revised accounting standards. We have elected not to opt out of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public and private companies, we may adopt the standard on the application date for private companies. However, we may early adopt certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies to the extent early adoption is permitted. We have elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as we qualify as an emerging growth company. ACL The ACL represents the estimated probable credit losses in our loan and investment portfolios and is estimated as of December 31, 2025 using CECL. The ACL is established through a provision for credit losses charged to operations. Loans and investments are charged against the ACL when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged-off amounts, if any, are credited to the ACL. The ACL is evaluated on a regular basis by management in consideration of optimistic, moderate, and pessimistic current conditions, and is based on management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions specifically impacting each loan type by purpose and by geography, and concentrations within the loan portfolio. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. A significant amount of the ACL is measured on a collective (pool) basis by loan and investment security type when similar risk characteristics exist. Pools are determined based primarily on regulatory reporting codes as the loans and investment securities within each pool share similar risk characteristics and there is sufficient historical peer loss data from the FFIEC to provide statistically meaningful support in the models developed. Reserves for credit losses identified on a pooled basis are then adjusted for qualitative factors to reflect current conditions. The most significant components of qualitative factors used to estimate the allowance for credit losses are adjustments relating to prevailing economic conditions, concentrations within the loan portfolio, and external factors. These qualitative factors are subject to significant judgment and carry a higher degree of uncertainty. The prevailing economic conditions factor is estimated based on a range of potential economic conditions and is applied at both the portfolio and individual concentration level based on various factors. This estimate is subject to significant judgment and could potentially add $3.2 million based on existing loan balances to the allowance for credit losses while using severely adverse economic conditions in the estimate. The concentrations within the loan portfolio factor is estimated based on concentrations at the loan pool level. This estimate is subject to significant judgment and could potentially add $12.0 million based on existing loan balances to the allowance for credit losses while using a severely adverse market outlook for the specifically identified concentrations. The external factor is estimated based on current external factors, such as environmental factors, which could impact the loan portfolio. This estimate is subject to significant judgment and could potentially add $9.5 million based on existing loan balances to the allowance for credit losses while using severely adverse external factors in the estimate. Other qualitative factors within 46
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the ACL relate to items which carry a lower degree of judgment using internally generated data. These factors include, but are not limited to, policy exception rates, volume of loan growth, and results of internal and external audits. Executive Summary Our strategic focus is to continue to grow organically by leveraging our existing core competencies and positioning our business for success in the evolving banking landscape. In leveraging our core competencies, we intend to: • continue our organic growth in our market through our “purpose-driven and integrity-centered” approach to banking; • continue to focus on and expand our operations in our unique lines of business throughout our geographic service areas; • build upon the strength of our brand to deepen and broaden client relationships and grow our deposit base; • attract additional banking professionals with track records of driving revenue growth; • maintain our disciplined credit underwriting and robust risk management; • enhance our disciplined cost management culture; • leverage our technology platforms to improve our efficiency; and • further engage in the economic development of our communities and market areas. Highlights of the financial results are presented in the following tables: Table 1: Highlights of Financial Results (dollars in thousands) December 31, 2025 December 31, 2024 Selected financial condition data: Total assets $ 4,754,861 $ 4,053,278 Total loans held for investment 4,074,929 3,532,686 Total deposits 4,201,084 3,557,994 Total subordinated notes, net 74,041 73,895 Total shareholders’ equity 445,832 396,624 Asset quality ratios: Allowance for credit losses to total loans held for investment 1.09 % 1.07 % Allowance for credit losses to nonperforming loans 14.34x 21.02x Nonperforming loans to total loans held for investment 0.08 % 0.05 % Capital ratios: Total capital (to risk-weighted assets) 13.33 % 13.99 % Tier 1 capital (to risk-weighted assets) 10.58 % 11.02 % Common equity Tier 1 capital (to risk-weighted assets) 10.58 % 11.02 % Tier 1 leverage 9.70 % 10.05 % Total shareholders’ equity to total assets 9.38 % 9.79 % Tangible shareholders’ equity to tangible assets 9.38 % 9.79 %1 47
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Table 2: Highlights of Financial Results (continued) (dollars in thousands, except share and per share data) For the year ended December 31, 2025 December 31, 2024 Selected operating data: Net interest income $ 151,905 $ 119,711 Provision for credit losses 9,700 6,950 Non-interest income 6,535 6,453 Non-interest expense 65,008 54,493 Net income 61,606 45,671 Per common share data: Earnings per common share: Basic $ 2.90 $ 2.26 Diluted $ 2.90 $ 2.26 Book value per share $ 20.87 $ 18.60 Tangible book value per share $ 20.87 $ 18.60 Shares outstanding data: Weighted average basic common shares outstanding 21,224,788 20,154,385 Weighted average diluted common shares outstanding 21,273,552 20,205,440 Shares outstanding at end of period 21,367,387 21,319,083 Performance and other financial ratios: ROAA 1.41 % 1.23 % ROAE 14.74 % 12.72 % Net interest margin 3.55 % 3.32 % Cost of funds 2.47 % 2.64 % Efficiency ratio 41.03 % 43.19 % Average equity to average assets 9.55 % 9.71 % Cash dividend payout ratio on common stock 27.59 % 35.45 % Tangible shareholders’ equity to tangible assets is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measure. Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets at the end of each of the periods indicated. Tangible book value per share is considered a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measure. Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated. Cash dividend payout ratio on common stock is calculated as dividends on common shares divided by basic earnings per common share. 2 3 1 2 3 48
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RESULTS OF OPERATIONS The following discussion of our results of operations compares the year ended December 31, 2025 to the year ended December 31, 2024. Net Interest Income Net interest income is the most significant contributor to our net income. Net interest income represents interest income from interest- earning assets, such as loans and investments, less interest expense on interest-bearing liabilities, such as deposits, subordinated notes, and other borrowings, which are used to fund those assets. In evaluating our net interest income, we measure and monitor yields/rates on our interest-earning assets and interest-bearing liabilities as well as trends in our net interest margin. Net interest margin is a ratio calculated as net interest income divided by total interest-earning assets for the same period. We manage our earning assets and funding sources in order to maximize this margin while limiting credit risk and interest rate sensitivity to our established risk appetite levels. Changes in market interest rates and competition in our market typically have the largest impact on periodic changes in our net interest margin. Net interest income increased by $32.2 million, or 26.89%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, while our net interest margin increased 23 basis points during the same period. The increase in net interest income was primarily due to an increase in interest income driven by higher average balances and yields on loans, partially offset by an increase in interest expense due to higher average balances of deposits. Additional detail relating to net interest margin in each period is provided below. Average balance sheet, interest, and yield/rate analysis. Table 3 presents average balance sheet information, interest income, interest expense, and the corresponding average yield earned or rate paid for each period reported. The average balances are daily averages and include both performing and nonperforming loans. Table 3: Average Balances, Interest, and Yield/Rate (dollars in thousands) For the year endedDecember 31, 2025 For the year ended December 31, 2024 AverageBalance InterestIncome/Expense AverageYield/Rate AverageBalance InterestIncome/Expense AverageYield/Rate Assets Interest-earning deposits in banks $ 407,884 $ 17,421 4.27 % $ 218,156 $ 11,080 5.08 % Investment securities 98,242 2,298 2.34 % 106,289 2,530 2.38 % Loans held for investment and sale 3,767,199 229,214 6.08 % 3,283,874 193,341 5.89 % Total interest-earning assets 4,273,325 248,933 5.83 % 3,608,319 206,951 5.74 % Interest receivable and other assets, net 105,775 90,061 Total assets $ 4,379,100 $ 3,698,380 Liabilities and shareholders’ equity Interest-bearing transaction accounts $ 306,983 $ 4,529 1.48 % $ 298,137 $ 4,716 1.58 % Savings accounts 130,079 3,363 2.59 % 124,208 3,584 2.89 % Money market accounts 1,767,137 56,323 3.19 % 1,533,405 53,750 3.51 % Time accounts 661,321 28,167 4.26 % 412,007 20,348 4.94 % Subordinated notes and other borrowings 73,974 4,646 6.28 % 77,335 4,842 6.26 % Total interest-bearing liabilities 2,939,494 97,028 3.30 % 2,445,092 87,240 3.57 % Demand accounts 988,447 858,789 Interest payable and other liabilities 33,090 35,331 Shareholders’ equity 418,069 359,168 Total liabilities and shareholders’ equity $ 4,379,100 $ 3,698,380 Net interest spread 2.53 % 2.17 % Net interest income/margin $ 151,905 3.55 % $ 119,711 3.32 % 1 1,2 1, 3 1 4 1 1 1 1 1 5 6 49
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Interest income/expense is divided by the actual number of days in the period multiplied by the actual number of days in the year to correspond to stated interest rate terms, where applicable. Yields on available-for-sale securities are calculated based on fair value. Investment security interest is earned on a 30/360 day basis monthly. Yields are not calculated on a tax-equivalent basis. Non-accrual loans are included in total loan balances. No adjustment has been made for these loans in the yield calculations. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs. Allowance for credit losses is not included in total loan balances. Allowance for credit losses is included in interest receivable and other assets, net. Net interest spread represents the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities. Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets, then annualized based on the number of days in the given period. Analysis of changes in interest income and expenses. Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average yields/rates. Table 4 shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the current period’s average yield/rate. The effect of rate changes is calculated by multiplying the change in average yield/rate by the previous period’s volume. Changes not solely attributable to volume or yields/rates have been allocated in proportion to the respective volume and yield/rate components. Table 4: Interest Income and Expense Change Analysis (dollars in thousands) For the year ended December 31, 2025 compared to the year ended December 31, 2024 Variance due to Volume Yield/Rate Total Interest-earning deposits with banks $ 8,103 $ (1,762) $ 6,341 Investment securities (188) (44) (232) Loans held for investment and sale 29,408 6,465 35,873 Total interest-earning assets 37,323 4,659 41,982 Interest-bearing transaction accounts 131 (318) (187) Savings accounts 152 (373) (221) Money market accounts 7,451 (4,878) 2,573 Time accounts 10,619 (2,800) 7,819 Subordinated notes and other borrowings (212) 16 (196) Total interest-bearing liabilities 18,141 (8,353) 9,788 Changes in net interest income/margin $ 19,182 $ 13,012 $ 32,194 Net interest income during the year ended December 31, 2025 increased $32.2 million, or 26.89%, to $151.9 million, as compared to $119.7 million during the year ended December 31, 2024. Net interest margin totaled 3.55% for the year ended December 31, 2025, an increase of 23 basis points compared to the prior year. The increase in net interest income is primarily attributable to an additional $35.9 million in loan interest income due to a $483.3 million, or 14.72% increase in the average balance of loans and a 19 basis point improvement in the average yield on loans as compared to the prior year. The increase in interest income was partially offset by an additional $10.0 million in deposit interest expense due to a $627.4 million, or 19.45% increase in the average balance of deposits during the year. The average cost of deposits was 2.40% for the year ended December 31, 2025, a decrease of 16 basis points compared to the prior year which helped to moderate the increase in interest expense related to deposits. 1 2 3 4 5 6 50
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Provision for Credit Losses The provision for credit losses is based on management’s assessment of the adequacy of our allowance for credit losses. Factors impacting the provision include inherent risk characteristics in our loan portfolio, the level of nonperforming loans and net charge-offs, both current and historic, local economic and credit conditions, the direction of the change in collateral values, and the funding probability on unfunded lending commitments. The provision for credit losses is charged against earnings in order to maintain our allowance for credit losses, which reflects management’s best estimate of forecasted life of credit losses inherent in our loan portfolio at the balance sheet date. Beginning January 1, 2023, we adopted ASC 326, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model calculates reserves over the life of a financial instrument and is largely driven by portfolio characteristics, economic outlook, and other key methodology assumptions. Under the CECL model, the calculated allowance for credit losses was $5.3 million higher on January 1, 2023 than the allowance under the incurred loss model. We recorded a $9.7 million provision for credit losses in the year ended December 31, 2025 compared to a $7.0 million provision for credit losses for the year ended December 31, 2024. The provision for credit losses increased $2.8 million, or 39.57%, primarily due to increases in loan growth and an overall increase in loss rates related to the annual CECL model refresh during the three months ended December 31, 2025, as compared to the prior year. Non-interest Income Non-interest income is a secondary contributor to our net income, following interest income. Non-interest income consists of service charges on deposit accounts, gain on sale of loans, loan-related fees, FHLB stock dividends, earnings on BOLI, and other income. Table 5 details the components of non-interest income for the periods indicated. Table 5: Non-interest Income (dollars in thousands) For the year ended $ Change % ChangeDecember 31,2025 December 31,2024 Service charges on deposit accounts $ 755 $ 721 $ 34 4.72 % Gain on sale of loans 244 1,274 (1,030) (80.85)% Loan-related fees 2,156 1,605 551 34.33 % FHLB stock dividends 1,317 1,320 (3) (0.23)% Earnings on BOLI 824 644 180 27.95 % Other income 1,239 889 350 39.37 % Total non-interest income $ 6,535 $ 6,453 $ 82 1.27 % Gain on sale of loans. The decrease related primarily to an overall decline in the volume of loans sold due to a strategic, intentional reduction in originations of loans held for sale during the second half of the year ended December 31, 2025. During the year ended December 31, 2025, approximately $3.3 million of loans were sold with an effective yield of 7.41%, as compared to approximately $18.3 million of loans sold with an effective yield of 6.96% during the year ended December 31, 2024. Loan-related fees. The increase was primarily a result of a $0.5 million increase in fees from swap referrals and a $0.2 million increase in income from credit card activity, partially offset by a $0.1 million decrease in fees from SBA 7(a) loans. Earnings on BOLI. The increase was primarily due to additional policies purchased between December 31, 2024 and December 31, 2025. Other income. The increase related primarily to an overall improvement in earnings related to equity investments in venture-backed funds during the year ended December 31, 2025 compared to the year ended December 31, 2024. 51
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Non-interest Expense Non-interest expense includes salaries and employee benefits, occupancy and equipment, data processing and software, FDIC insurance, professional services, advertising and promotional, loan-related expenses, and other operating expenses. In evaluating our level of non- interest expense, we closely monitor the Company’s efficiency ratio, which is calculated as non-interest expense divided by the sum of net interest income and non-interest income. We constantly seek to identify ways to streamline our business and operate more efficiently in order to reduce our non-interest expense over time as a percentage of our revenue, while continuing to achieve growth in total loans and assets. Over the past several years, we have continued to invest significant resources in personnel, technology, and infrastructure. As we execute initiatives based on growth, we expect non-interest expense to continue to grow. Non-interest expense has increased throughout the periods presented below; however, we expect our efficiency ratio will improve going forward due, in part, to our past investment in infrastructure. Table 6 details the components of non-interest expense for the periods indicated. Table 6: Non-interest Expense (dollars in thousands) For the year ended $ Change % ChangeDecember 31,2025 December 31,2024 Salaries and employee benefits $ 37,885 $ 31,709 $ 6,176 19.48 % Occupancy and equipment 2,782 2,547 235 9.23 % Data processing and software 6,121 5,088 1,033 20.30 % FDIC insurance 1,950 1,635 315 19.27 % Professional services 3,723 3,078 645 20.96 % Advertising and promotional 3,178 2,411 767 31.81 % Loan-related expenses 1,423 1,207 216 17.90 % Other operating expenses 7,946 6,818 1,128 16.54 % Total non-interest expense $ 65,008 $ 54,493 $ 10,515 19.30 % Salaries and employee benefits. The increase was the result of: (i) a $6.5 million increase in salaries, benefits, and bonus expense, related to the 13.66% increase in employee headcount between December 31, 2024 and December 31, 2025; and (ii) a $1.2 million increase in commissions expense due to higher loan production. The increase was partially offset by a $1.5 million increase in deferred loan origination costs due to higher loan production period-over-period. Occupancy and equipment. The increase was primarily due to higher rent and property management expenses for the Walnut Creek and San Francisco branch offices period-over-period. Data processing and software. The increase related to: (i) increased usage of our digital banking platform; (ii) higher transaction volumes related to the increased number of loan and deposit accounts; and (iii) an increased number of licenses required for new users on our loan origination and documentation system. FDIC Insurance. The increase was primarily due to a $571.8 million increase in the assessment base period-over-period. Professional services. The increase was due to: (i) $0.1 million in fees paid for compensation consulting services that did not occur during 2024; (ii) a $0.2 million increase in expenses related to business development consulting services; (iii) a $0.1 million increase in legal expenses; and (iv) a $0.1 million increase in recruiter fees related to the 13.66% increase in employee headcount between December 31, 2024 and December 31, 2025. Advertising and promotional. The increase was primarily due to an additional $0.2 million in donations and $0.2 million related to sponsored events and partnerships, combined with $0.4 million of additional expenses incurred to support the expansion of the Bank’s business development teams, specifically related to client and prospective client development expenses. Loan-related expenses. The increase was due to an increase of $0.1 million in inspection fees and an increase of $0.1 million in loan- related legal expenses, both due to loan growth between December 31, 2024 and December 31, 2025. 52
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Other operating expenses. The increase was due to: (i) a $0.4 million increase in employee-related expenses, such as travel, conferences, training, and professional association memberships; (ii) a $0.2 million increase in armored car and courier expenses; (iii) a $0.2 million increase in administrative charges, including subscription services and bank charges; (iv) a $0.1 million increase in IntraFi Network fees resulting from an overall increase in balances carried in the network; (v) a $0.1 million increase in office expenses, such as check printing and supplies; and (vi) a $0.1 million increase in regulatory assessment fees. Provision for Income Taxes On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Act also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025. These changes were not reflected in the income tax provision for the period ended December 31, 2025. The Company evaluated the impact on future periods and the legislation is not expected to have a significant impact on the Company’s consolidated financial statements. Provision for income taxes increased by $3.1 million, or 16.15%, to $22.1 million for the year ended December 31, 2025, as compared to $19.1 million for the year ended December 31, 2024. This increase is primarily due to a 29.37% increase in pre-tax income recognized during the year ended December 31, 2025. This was partially offset by: (i) a $0.9 million benefit recorded during the quarter ended December 31, 2025 related to the purchase of transferable federal tax credits; and (ii) a net $0.2 million reduction to the provision recorded during the quarter ended June 30, 2025. This adjustment related to a tax law change for the state of California effective as of June 30, 2025, which requires a transition from a three-factor apportionment formula to a single-sales-factor formula for determining state income tax. As such, the Company recorded a net benefit of approximately $0.9 million relating to the current year provision, which was partially offset by a $0.7 million expense relating to the remeasuring of the deferred tax assets and liabilities as of June 30, 2025. The effective tax rate was 26.42% and 29.43% for the years ended December 31, 2025 and December 31, 2024, respectively. FINANCIAL CONDITION SUMMARY The following discussion compares our financial condition as of December 31, 2025 to our financial condition as of December 31, 2024. Table 7 summarizes selected components of our consolidated balance sheet as of December 31, 2025 and December 31, 2024. Table 7: Selected Components of Consolidated Balance Sheets (dollars in thousands) December 31,2025 December 31,2024 Total assets $ 4,754,861 $ 4,053,278 Cash and cash equivalents 506,851 352,343 Total investments 96,889 100,914 Loans held for investment 4,074,929 3,532,686 Total deposits 4,201,084 3,557,994 Subordinated notes, net 74,041 73,895 Total shareholders’ equity 445,832 396,624 Total Assets At December 31, 2025, total assets were $4.8 billion, an increase of $701.6 million from $4.1 billion at December 31, 2024, primarily due to a $542.2 million increase in total loans held for investment and a $154.5 million increase in cash and cash equivalents. Cash and Cash Equivalents Total cash and cash equivalents were $506.9 million at December 31, 2025, an increase of $154.5 million from $352.3 million at December 31, 2024. The increase in cash and cash equivalents was primarily due to the net increase in 53
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cash inflows from growth in total deposits of $643.1 million and cash outflows from growth in total loans held for investment of $542.2 million. Investment Portfolio Our investment portfolio is primarily comprised of U.S. government agency securities, mortgage-backed securities, and obligations of states and political subdivisions, which are high-quality liquid investments. We manage our investment portfolio according to written investment policies approved by our board of directors. Our investment strategy is designed to maximize earnings while maintaining liquidity in securities with minimal credit risk and interest rate risk that is reflective of the yields obtained on those securities. Most of our securities are classified as available-for-sale, although we have one long-term, fixed rate municipal security classified as held-to-maturity. Our total securities available-for-sale and held-to-maturity amounted to $96.9 million at December 31, 2025 and $100.9 million at December 31, 2024, a decrease of $4.0 million year-over-year. The decrease was primarily due to maturities, prepayments, and calls of $9.3 million, partially offset by a purchase of a $1.0 million security and an unrealized gain on securities of $5.1 million, with the remainder of the change due to amortization of premiums. For the year ended December 31, 2025, other comprehensive gain was $3.2 million, primarily due to rate changes and other market conditions on securities during the period. 54
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Table 8 presents the carrying value of our securities by their stated maturities, as well as the weighted average yields for each maturity range, as of the dates shown. Table 8: Stated Maturities and Weighted Average Yields - Investment Securities Due in one year orless Due after one yearthrough five years Due after five yearsthrough ten years Due after ten years Total (dollars in thousands) CarryingValue WeightedAverageYield CarryingValue WeightedAverageYield CarryingValue WeightedAverageYield CarryingValue WeightedAverageYield CarryingValue WeightedAverageYield December 31, 2025 Available-for-sale: U.S. governmentagencysecurities $ 198 2.00 % $ 619 5.27 % $ 298 2.01 % $ 6,246 5.58 % $ 7,361 5.31 % Mortgage-backedsecurities — — % — — % 4,677 1.33 % 43,509 1.79 % 48,186 1.75 % Obligations ofstates andpoliticalsubdivisions — — % 1,196 1.26 % 12,385 1.64 % 23,383 1.70 % 36,964 1.67 % Collateralizedmortgageobligations — — % — — % 231 1.76 % — — % 231 1.76 % Corporate bonds 1,957 1.25 % — — % — — % — — % 1,957 1.25 % Total available-for-sale 2,155 1.32 % 1,815 2.63 % 17,591 1.57 % 73,138 2.09 % 94,699 1.98 % Held-to-maturity: Obligations ofstates andpoliticalsubdivisions 170 6.00 % 865 6.00 % 1,155 6.00 % — — % 2,190 6.00 % Total $ 2,325 1.66 % $ 2,680 3.72 % $ 18,746 1.84 % $ 73,138 2.09 % $ 96,889 2.07 % December 31, 2024 Available-for-sale: U.S. governmentagencysecurities $ — — % $ 1,583 5.00 % $ 338 2.01 % $ 6,424 5.65 % $ 8,345 5.38 % Mortgage-backedsecurities — — % — — % 508 2.74 % 50,062 1.74 % 50,570 1.75 % Obligations ofstates andpoliticalsubdivisions — — % 737 1.17 % 8,108 1.62 % 28,292 1.79 % 37,137 1.74 % Collateralizedmortgageobligations — — % — — % 279 1.76 % — — % 279 1.76 % Corporate bonds — — % 1,863 1.25 % — — % — — % 1,863 1.25 % Total available-for-sale — — % 4,183 2.65 % 9,233 1.70 % 84,778 2.05 % 98,194 2.04 % Held-to-maturity: Obligations ofstates andpoliticalsubdivisions 210 6.00 % 945 6.00 % 1,380 6.00 % 185 6.00 % 2,720 6.00 % Total $ 210 6.00 % $ 5,128 3.27 % $ 10,613 2.26 % $ 84,963 2.06 % $100,914 2.15 % Weighted average yield for securities available-for-sale is the projected yield to maturity given current cash flow projections for U.S. government agency securities, mortgage-backed securities, and collateralized mortgage obligations. For callable municipal securities and corporate bonds, weighted average yield is a yield to worst. Weighted average yield for securities held-to-maturity is the stated coupon of the bond. Yields on tax-exempt securities are not presented on a tax-equivalent basis.
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Loan Portfolio Our loan portfolio is our largest class of interest-earning assets and typically provides higher yields than other types of interest-earning assets. Associated with the higher yields is an inherent amount of credit risk, which we attempt to mitigate with strong underwriting standards. As of December 31, 2025 and 2024, our total loans amounted to $4.1 billion and $3.5 billion, respectively. Table 9 presents the balance and associated percentage of each major product type within our portfolio as of the dates indicated. Table 9: Loans Outstanding As of (dollars in thousands) December 31, 2025 December 31, 2024 Amount % of Loans Amount % of Loans Loans held for investment: Real estate: Commercial $ 3,305,713 81.08 % $ 2,857,173 80.75 % Commercial land and development 1,352 0.03 % 3,849 0.11 % Commercial construction 96,760 2.37 % 111,318 3.15 % Residential construction 8,389 0.21 % 4,561 0.13 % Residential 37,566 0.92 % 32,774 0.93 % Farmland 59,606 1.46 % 47,241 1.34 % Commercial: Secured 251,736 6.17 % 170,548 4.82 % Unsecured 40,422 0.99 % 27,558 0.78 % Consumer and other 275,475 6.77 % 279,584 7.90 % Loans held for investment, gross 4,077,019 100.00 % 3,534,606 99.91 % Loans held for sale: Commercial — — % 3,247 0.09 % Total loans, gross 4,077,019 100.00 % 3,537,853 100.00 % Net deferred loan fees (2,090) (1,920) Total loans $ 4,074,929 $ 3,535,933 Commercial real estate loans consist of term loans secured by a mortgage lien on the real property, such as office and industrial buildings, manufactured home communities, self-storage facilities, hospitality properties, faith-based properties, retail shopping centers, and apartment buildings, as well as commercial real estate construction loans that are offered to builders and developers. Commercial land and development and commercial construction loans consist of loans made to fund commercial land acquisition and development and commercial construction, respectively. The real estate purchased with these loans is generally located in or near our market. Residential real estate and construction real estate loans consist of loans secured by single-family and multifamily residential properties, which are both owner-occupied and investor-owned. Farmland loans consist of loans used to purchase, refinance, or improve farmland secured by farming properties themselves. The farmland is generally located in or near our market. Commercial loans consist of financing for commercial purposes in various lines of business, including manufacturing, service industry, and professional service areas. Commercial loans can be secured or unsecured but are generally secured with the assets of the company and/or the personal guaranty of the business owner(s). Consumer and other loans consist primarily of loans purchased in a loan purchase program with a non-bank lender, generally made to professionals for the purpose of large personal or household purchases. The loans are unsecured, fixed 56
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rate loans. Consumer and other loans also include loans purchased or originated through financing partnerships which are no longer active. Table 10 presents the commercial real estate loan balance, associated percentage of commercial real estate concentrations, estimated real estate collateral values, and related loan-to-value (“LTV”) ranges by collateral type as of the dates indicated. Revolving lines of credit with zero balance and 0.00% LTV are excluded from this table. Collateral values are determined at origination using third-party real estate appraisals or evaluations. Updated appraisals, which are included in the table below, may be obtained for loans that are downgraded to watch or substandard. Loans over $2.0 million are reviewed annually, at which time an internal assessment of collateral values is completed. Table 10: Commercial Real Estate Loans (dollars in thousands) Loan Balance % of CommercialReal Estate CollateralValue Minimum LTV Maximum LTV December 31, 2025 Manufactured home community $ 1,025,386 31.02 % $ 1,820,597 16.16 % 73.59 % RV Park 412,955 12.49 % 742,097 17.56 % 74.70 % Retail 317,536 9.61 % 668,216 6.23 % 74.23 % Multifamily 286,064 8.65 % 618,588 7.56 % 79.21 % Industrial 247,368 7.48 % 563,631 0.99 % 91.33 % Faith-based 193,362 5.85 % 513,107 8.66 % 75.00 % Mini storage 190,252 5.76 % 381,810 14.63 % 70.00 % Office 175,767 5.32 % 404,727 4.62 % 74.95 % All other types 457,023 13.82 % 966,325 0.79 % 134.52 % Total $ 3,305,713 100.00 % $ 6,679,098 December 31, 2024 Manufactured home community $ 891,935 31.22 % $ 1,586,109 14.24 % 74.52 % RV Park 371,733 13.01 % 648,272 17.94 % 75.00 % Retail 283,394 9.92 % 569,677 6.49 % 72.80 % Industrial 224,860 7.87 % 500,307 4.56 % 73.91 % Faith-based 184,151 6.45 % 492,030 9.35 % 74.67 % Mini storage 177,854 6.22 % 361,437 16.23 % 69.19 % Multifamily 172,592 6.04 % 371,634 14.35 % 75.00 % Office 145,986 5.11 % 338,474 5.03 % 73.64 % All other types 404,668 14.16 % 855,084 4.00 % 112.07 % Total $ 2,857,173 100.00 % $ 5,723,024 Types of collateral in the “all other types” category are those that individually make up less than 5.00% of the commercial real estate concentration. Minimum LTV and maximum LTV not shown for aggregated totals, as such values are meaningful only when presented by specific category. Over the past several years, we have experienced significant growth in our loan portfolio, although the relative composition of the portfolio has not changed materially. Our primary focus remains commercial real estate lending (including commercial, commercial land and development, and commercial construction), which constitutes 83.49% of loans held for investment at December 31, 2025. Commercial secured lending represents 6.17% of loans held for investment at December 31, 2025. We sell the guaranteed portion of all SBA 7(a) loans in the secondary market and will continue to do so as long as market conditions continue to be favorable. We recognize that our commercial real estate loan concentration is significant within our balance sheet. Commercial real estate loan balances as a percentage of risk-based capital were 594.17% and 571.91% as of December 31, 2025 and 1 2 1 2 1 2 57
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December 31, 2024, respectively. We have established internal concentration limits in the loan portfolio for commercial real estate loans by sector (e.g., manufactured home communities, self-storage, hospitality, etc.). All loan sectors were within our established limits as of December 31, 2025. Additionally, our loans are geographically concentrated with borrowers and collateralized properties primarily in California. We believe that our past success is attributable to focusing on products and markets where we have significant expertise. Given our concentrations, we have established strong risk management practices, including risk-based lending standards, self-established product and geographical limits, annual evaluations of income property loans, and semi-annual top-down and bottom-up stress testing. We expect to continue growing our loan portfolio. We do not expect our product or geographic concentrations to materially change. Table 11 sets forth the contractual maturities and sensitivity to interest rate changes of our loan portfolio as of the dates shown. 58
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Table 11: Contractual Maturities and Sensitivity to Interest Rate Changes - Gross Loans (dollars in thousands) Due in 1 yearor less Due after 1year through 5years Due after 5years through15 years Due after 15years Total December 31, 2025 Loans with fixed interest rates: Real estate: Commercial $ 31,238 $ 275,099 $ 366,518 $ 3,571 $ 676,426 Commercial land and development — 176 — — 176 Commercial construction — — — — — Residential construction — — — — — Residential 24 5,741 1,313 412 7,490 Farmland — — 4,612 — 4,612 Commercial: Secured 3,187 36,461 16,118 — 55,766 Unsecured 58 5,781 23,417 — 29,256 Consumer and other 72 17,779 257,472 — 275,323 Total loans with fixed interest rates 34,579 341,037 669,450 3,983 1,049,049 Loans with floating or adjustable interest rates: Real estate: Commercial 29,907 274,098 2,257,847 67,435 2,629,287 Commercial land and development 602 500 74 — 1,176 Commercial construction 1,429 49,478 32,749 13,104 96,760 Residential construction 4,790 3,267 332 — 8,389 Residential 4,344 4,931 20,485 316 30,076 Farmland 1,775 12,829 40,390 — 54,994 Commercial: Secured 57,918 67,862 59,623 10,567 195,970 Unsecured 4,524 6,642 — — 11,166 Consumer and other — 152 — — 152 Total loans with floating or adjustableinterest rates 105,289 419,759 2,411,500 91,422 3,027,970 Total: Real estate: Commercial 61,145 549,197 2,624,365 71,006 3,305,713 Commercial land and development 602 676 74 — 1,352 Commercial construction 1,429 49,478 32,749 13,104 96,760 Residential construction 4,790 3,267 332 — 8,389 Residential 4,368 10,672 21,798 728 37,566 Farmland 1,775 12,829 45,002 — 59,606 Commercial: Secured 61,105 104,323 75,741 10,567 251,736 Unsecured 4,582 12,423 23,417 — 40,422 Consumer and other 72 17,931 257,472 — 275,475 Total loans $ 139,868 $ 760,796 $ 3,080,950 $ 95,405 $ 4,077,019 59
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Table 11: Contractual Maturities and Sensitivity to Interest Rate Changes - Gross Loans (continued) (dollars in thousands) Due in 1 yearor less Due after 1year through 5years Due after 5years through15 years Due after 15years Total December 31, 2024 Loans with fixed interest rates: Real estate: Commercial $ 17,022 $ 184,493 $ 386,310 $ — $ 587,825 Commercial land and development 645 — 771 — 1,416 Commercial construction — — — — — Residential construction — — — — — Residential — 3,737 325 433 4,495 Farmland — — 4,873 — 4,873 Commercial: Secured 2,238 30,458 15,891 — 48,587 Unsecured — 5,482 14,506 — 19,988 Consumer and other 161 13,838 265,459 — 279,458 Total loans with fixed interest rates 20,066 238,008 688,135 433 946,642 Loans with floating or adjustable interest rates: Real estate: Commercial 18,660 177,584 1,997,345 75,759 2,269,348 Commercial land and development 1,788 438 207 — 2,433 Commercial construction 9,378 64,407 37,533 — 111,318 Residential construction 3,310 1,251 — — 4,561 Residential 324 5,749 21,720 486 28,279 Farmland — 6,632 35,736 — 42,368 Commercial: Secured 54,392 16,264 54,144 408 125,208 Unsecured 2,500 5,070 — — 7,570 Consumer and other — 126 — — 126 Total loans with floating or adjustableinterest rates 90,352 277,521 2,146,685 76,653 2,591,211 Total: Real estate: Commercial 35,682 362,077 2,383,655 75,759 2,857,173 Commercial land and development 2,433 438 978 — 3,849 Commercial construction 9,378 64,407 37,533 — 111,318 Residential construction 3,310 1,251 — — 4,561 Residential 324 9,486 22,045 919 32,774 Farmland — 6,632 40,609 — 47,241 Commercial: Secured 56,630 46,722 70,035 408 173,795 Unsecured 2,500 10,552 14,506 — 27,558 Consumer and other 161 13,964 265,459 — 279,584 Total loans $ 110,418 $ 515,529 $ 2,834,820 $ 77,086 $ 3,537,853 60
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Asset Quality We manage the quality of our loans based upon trends at the overall loan portfolio level, as well as within each product type. We measure and monitor key factors that include the level and trend of classified, delinquent, non-accrual, and nonperforming assets, collateral coverage, credit scores, and debt service coverage, where applicable. These metrics directly impact our evaluation of the adequacy of our allowance for credit losses. Our primary objective is to maintain a high level of asset quality in our loan portfolio. We believe our underwriting policies and practices, executed by experienced professionals, appropriately govern the risk profile for our loan portfolio. These policies are continually evaluated and updated as necessary. All loans are assessed and assigned a risk classification at origination based on underlying characteristics of the transaction, such as collateral cash flow, collateral coverage, and borrower strength. We believe that we have a comprehensive methodology to proactively monitor our credit quality after the origination process. Particular emphasis is placed on our commercial portfolio, where risk assessments are reevaluated as a result of reviewing commercial property operating statements and borrower financials. On an ongoing basis, we also monitor payment performance, delinquencies, and tax and property insurance compliance. We design our practices to facilitate the early detection and remediation of problems within our loan portfolio. Assigned risk classifications are an integral part of management’s assessment of the adequacy of our ACL. We periodically employ the use of an independent consulting firm to evaluate our underwriting and risk assessment process. Like other financial institutions, we are subject to the risk that our loan portfolio will be exposed to increasing pressures from deteriorating borrower credit due to general economic conditions and rising interest rates. Nonperforming Assets Our nonperforming assets consist of nonperforming loans and foreclosed real estate, if any. Nonperforming loans consist of non-accrual loans and loans contractually past due by 90 days or more and still accruing. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full and timely collection of interest or principal or when a loan becomes contractually past due by 90 days or more with respect to interest or principal. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current period interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest. SBA Loans During 2025, the Company sold 10 SBA 7(a) loans with government-guaranteed portions totaling approximately $3.3 million. The decrease in sales from prior years is due to a strategic, intentional reduction in originations of loans held for sale. The Company received gross proceeds of $3.5 million on the loans sold in 2025, resulting in a net gain on sale of $0.2 million. During 2024, the Company sold 56 SBA 7(a) loans with government-guaranteed portions totaling approximately $18.3 million. The Company received gross proceeds of $19.6 million on the loans sold in 2024, resulting in a net gain on sale of $1.3 million. 61
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Non-accrual Loans Table 12 provides details of our nonperforming and restructured assets and certain other related information as of the dates presented: Table 12: Nonperforming and Restructured Assets (dollars in thousands) December 31,2025 December 31,2024 Non-accrual loans: Real estate: Commercial $ 2,666 $ 1,750 Commercial: Secured 430 48 Total non-accrual loans 3,096 1,798 Loans past due 90 days or more and still accruing: Total loans past due and still accruing — — Total nonperforming loans 3,096 1,798 Real estate owned — 87 Total nonperforming assets $ 3,096 $ 1,885 Performing LMs (not included above) $ — $ — Allowance for credit losses to period end nonperforming loans 1,434.40 % 2,101.78 % Nonperforming loans to loans held for investment 0.08 % 0.05 % Nonperforming assets to total assets 0.07 % 0.05 % Nonperforming loans plus performing LMs to loans held for investment 0.08 % 0.05 % The ratio of nonperforming loans to loans held for investment was 0.08% at December 31, 2025, increasing from 0.05% as of December 31, 2024. The ratio of non-accrual loans to loans held for investment was also 0.08% at December 31, 2025, increasing from 0.05% as of December 31, 2024. The ratio of the allowance for credit losses to period end nonperforming loans decreased from 2,101.78% as of December 31, 2024 to 1,434.40% as of December 31, 2025. This decrease was due to a 72.19% increase in nonperforming loans year-over-year, partially offset by a 17.51% increase in the allowance for credit losses year-over-year. The increase in nonperforming loans resulted mainly from the occurrence of two separate faith-based real estate loans entering nonperforming status. Potential Problem Loans We utilize a risk grading system for our loans to aid us in evaluating the overall credit quality of our real estate loan portfolio and assessing the adequacy of our allowance for credit losses. All loans are grouped into a risk category at the time of origination. Commercial real estate loans over $2.0 million are reevaluated at least annually for proper classification in conjunction with our review of property and borrower financial information. All loans are reevaluated for proper risk grading as new information such as payment patterns, collateral condition, and other relevant information comes to our attention. 62
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Loans designated as “watch” are internal bank designations and are not considered adversely classified. However, loans designated as “substandard” or “doubtful” are considered adversely classified. Table 13 shows loans by credit quality risk rating as of the periods indicated. Table 13: Gross Loans Held for Investment by Credit Quality Risk Rating (dollars in thousands) Pass Watch Substandard Doubtful Total December 31, 2025 Real estate: Commercial $ 3,208,223 $ 76,118 $ 21,372 $ — $ 3,305,713 Commercial land and development 1,352 — — — 1,352 Commercial construction 81,840 14,920 — — 96,760 Residential construction 8,389 — — — 8,389 Residential 37,566 — — — 37,566 Farmland 59,021 585 — — 59,606 Commercial: Secured 240,511 10,272 953 — 251,736 Unsecured 40,422 — — — 40,422 Consumer and other 275,469 — 6 — 275,475 Total $ 3,952,793 $ 101,895 $ 22,331 $ — $ 4,077,019 December 31, 2024 Real estate: Commercial $ 2,746,594 $ 107,992 $ 2,587 $ — $ 2,857,173 Commercial land and development 3,849 — — — 3,849 Commercial construction 111,318 — — — 111,318 Residential construction 4,561 — — — 4,561 Residential 32,774 — — — 32,774 Farmland 45,948 1,293 — — 47,241 Commercial: Secured 156,381 14,119 48 — 170,548 Unsecured 27,558 — — — 27,558 Consumer and other 279,575 — 9 — 279,584 Total $ 3,408,558 $ 123,404 $ 2,644 $ — $ 3,534,606 Loans designated as watch decreased from $123.4 million to $101.9 million between December 31, 2024 and December 31, 2025. Consequently, loans designated as substandard increased from $2.6 million to $22.3 million between December 31, 2024 and December 31, 2025, primarily attributable to the downgrade of one borrower experiencing financial difficulty with a special purpose commercial real estate loan and a commercial line of credit. There were no loans with doubtful risk grades at December 31, 2025 or December 31, 2024. Allowance for Credit Losses The allowance for credit losses is established through a provision for credit losses charged to operations. Provisions are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged-off amounts, if any, are credited to the allowance for credit losses. The allowance for credit losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. Historical loss rates within the commercial secured pool are also evaluated by 63
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management on a regular basis to estimate the allowance for credit losses. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. At December 31, 2025, the Company’s allowance for credit losses was $44.4 million compared to $37.8 million at December 31, 2024. The $6.6 million increase in the allowance is due to a $9.8 million provision for credit losses, partially offset by net charge-offs of $3.1 million during the year ended December 31, 2025, mainly attributable to commercial and industrial loans, during the same period. While the entire allowance for credit losses is available to absorb losses from any and all loans, Table 14 represents management’s allocation of our allowance for credit losses by loan category, the allocation of our allowance for credit losses as a percent of the total allowance for credit losses, and the balance of loans in each category as a percentage of total loans, for the periods indicated. Table 14: Allocation of the Allowance for Credit Losses (dollars in thousands) Allowance for Credit Losses % of Allowance for Credit Losses % of Loans to Total Loans December 31, 2025 Real estate: Commercial $ 25,219 56.77 % 81.08 % Commercial land and development 56 0.13 % 0.03 % Commercial construction 4,050 9.12 % 2.37 % Residential construction 213 0.48 % 0.21 % Residential 362 0.82 % 0.92 % Farmland 467 1.05 % 1.46 % Commercial: Secured 11,204 25.23 % 6.17 % Unsecured 482 1.09 % 0.99 % Consumer and other 2,356 5.31 % 6.77 % Total $ 44,409 100.00 % 100.00 % December 31, 2024 Real estate: Commercial $ 25,864 68.44 % 80.75 % Commercial land and development 78 0.21 % 0.11 % Commercial construction 2,268 6.00 % 3.15 % Residential construction 64 0.17 % 0.13 % Residential 270 0.71 % 0.93 % Farmland 607 1.61 % 1.34 % Commercial: Secured 5,866 15.52 % 4.91 % Unsecured 278 0.74 % 0.78 % Consumer and other 2,496 6.60 % 7.90 % Total $ 37,791 100.00 % 100.00 % The ratio of allowance for credit losses to total loans held for investment was 1.09% at December 31, 2025, as compared to 1.07% at December 31, 2024. 64
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Table 15 provides information on the activity within the allowance for credit losses as of and for the periods indicated. Table 15: Activity Within the Allowance for Credit Losses As of and for the year ended December 31, 2025 December 31, 2024 (dollars in thousands) Activity % of AverageLoans Held forInvestment Activity % of AverageLoans Held forInvestment Average loans held for investment $ 3,766,410 $ 3,276,841 Allowance for credit losses $ 37,791 $ 34,431 Net (charge-offs) recoveries: Real estate: Commercial (280) (0.01)% — — % Commercial: Secured (2,738) (0.07)% (4,042) (0.12)% Unsecured (50) — % (41) — % Consumer and other (64) — % (7) — % Net charge-offs (3,132) (0.08)% (4,090) (0.12)% Provision for credit losses 9,750 7,450 Allowance for credit losses $ 44,409 $ 37,791 Loans held for investment $ 4,074,929 $ 3,532,686 Allowance for credit losses to loans held for investment 1.09 % 1.07 % The allowance for credit losses to loans held for investment increased from 1.07% as of December 31, 2024 to 1.09% as of December 31, 2025. Net charge-offs as a percent of average loans held for investment decreased from 0.12% to 0.08% for the years ended December 31, 2024 and December 31, 2025, respectively. Liabilities During 2025, total liabilities increased by $652.4 million from $3.7 billion at December 31, 2024 to $4.3 billion at December 31, 2025. This increase was primarily attributable to an increase in deposits of $643.1 million. The $643.1 million increase in deposits was largely due to increases in money market, non-interest-bearing demand, interest-bearing transaction, and savings deposits of $553.3 million, $161.9 million, $29.0 million, and $14.5 million, respectively. These increases were partially offset by decreases in time deposits of $115.5 million, largely driven by a $95.0 million decrease in wholesale deposits. Deposits Representing 97.49% of our total liabilities as of December 31, 2025, deposits are our primary source of funding for our business operations. Total deposits increased by $643.1 million, or 18.07%, to $4.2 billion at December 31, 2025 from $3.6 billion as of December 31, 2024. Deposit increases were primarily attributable to an increase in the number of new relationships, as well as normal fluctuations in our existing accounts. Non-interest-bearing deposits increased by $161.9 million in 2025 to $1.1 billion, and represented 25.82% of total deposits at December 31, 2025, compared to 25.93% of total deposits at December 31, 2024. Our loan to deposit ratio was 97.00% at December 31, 2025, compared to 99.38% at December 31, 65
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2024. We closely monitor the loan to deposit ratio for purposes of both operational objectives and regulatory capital compliance. We intend to continue to operate our business with close monitoring of the loan to deposit ratio. Table 16 summarizes our deposit composition by average deposits and average rates paid for the periods indicated. Table 16: Deposit Composition by Average Balances and Average Rates Paid For the year ended December 31, 2025 December 31, 2024 (dollars in thousands) Average Amount Average RatePaid % of TotalDeposits AverageAmount Average RatePaid % of TotalDeposits Interest-bearing transaction accounts $ 306,983 1.48 % 7.97 % $ 298,137 1.58 % 9.24 % Money market and savings accounts 1,897,216 3.15 % 49.22 % 1,657,613 3.46 % 51.37 % Time accounts 661,321 4.26 % 17.16 % 412,007 4.94 % 12.77 % Demand accounts 988,447 — % 25.65 % 858,789 — % 26.62 % Total deposits $ 3,853,967 2.40 % 100.00 % $ 3,226,546 2.56 % 100.00 % Uninsured and uncollateralized deposits totaled $1.4 billion and $1.2 billion at December 31, 2025 and 2024, respectively. As of December 31, 2025, our 53 largest deposit relationships, each accounting for more than $10.0 million, totaled $2.0 billion, or 47.82% of our total deposits. The average age on deposit relationships of more than $5.0 million was approximately 7.67 years. As of December 31, 2024, our 49 largest deposit relationships, each accounting for more than $10.0 million, totaled $1.8 billion, or 50.35% of our total deposits. Overall, our large deposit relationships have been relatively consistent over time and have helped to continue to grow our deposit base. Table 17 shows the entity types making up our large deposit relationships at the dates indicated. Table 17: Composition of Large Deposit Relationships (dollars in thousands) December 31, 2025 December 31, 2024 Municipalities $ 789,643 $ 674,094 Non-profits 283,666 211,480 Businesses 760,516 605,894 Brokered deposits 174,981 299,961 Total $ 2,008,806 $ 1,791,429 Our largest single deposit relationship at December 31, 2025 related to a government agency. The balance for this customer was $290.0 million, or approximately 6.90% of total deposits as of December 31, 2025. At December 31, 2024, our largest single deposit relationship related to brokered deposits and had a balance of $300.0 million, or 8.43% of total deposits as of December 31, 2024. As our demand deposits fluctuate, we have purchased brokered deposits as needed to supplement liquidity. We do not consider brokered deposits as core deposits, but as another deposit funding source for our loan growth. Table 18 sets forth the maturity of time deposits as of December 31, 2025. Table 18: Scheduled Maturities of Time Deposits (dollars in thousands) $250,000 or Greater Less than $250,000 Total Uninsured Portion Remaining maturity: Three months or less $ 332,954 $ 182,057 $ 515,011 $ 324,494 Over three through six months 8,245 15,208 23,453 4,745 Over six through twelve months 7,482 6,924 14,406 3,982 Over twelve months 1,351 390 1,741 601 Total $ 350,032 $ 204,579 $ 554,611 $ 333,822 66
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FHLB Advances and Other Borrowings From time to time, we utilize short-term collateralized FHLB borrowings to maintain adequate liquidity. There were no borrowings outstanding as of December 31, 2025 and December 31, 2024, respectively. In 2022, we issued subordinated notes of $75.0 million. This debt was issued to investors in private placement transactions. See Note 9, Long Term Debt and Other Borrowings, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding these subordinated notes. The proceeds of the notes qualify as Tier 2 capital for the Company under the regulatory capital rules of the federal banking agencies. Table 19 is a summary of our outstanding subordinated notes as of December 31, 2025. Table 19: Subordinated Notes Outstanding (dollars in thousands) Issuance Date Amount of Notes Prepayment Right Maturity Date Subordinated notes August 2022 $ 75,000 August 17, 2027 September 1, 2032 Fixed at 6.00% through September 1, 2027, then three-month Term SOFR plus 329.0 basis points (6.94% as of December 31, 2025) through maturity Shareholders’ Equity Shareholders’ equity totaled $445.8 million at December 31, 2025 and $396.6 million at December 31, 2024. The increase in shareholders’ equity was primarily net income recognized of $61.6 million, partially offset by $17.1 million in cash dividends paid during the period. Liquidity and Capital Resources Liquidity Management We manage liquidity based upon factors that include the level of diversification of our funding sources, the composition of our deposit types, the availability of unused funding sources, our off-balance sheet obligations, the amount of cash and liquid securities we hold, and the availability of assets to be readily converted into cash without undue loss. As the primary federal regulator of the Bank, the FDIC evaluates our liquidity on a stand-alone basis pursuant to applicable guidance and policies. Liquidity refers to our capacity to meet our cash obligations at a reasonable cost. Our cash obligations require us to have cash flow that is adequate to fund loan growth and maintain on-balance sheet liquidity while meeting present and future obligations of deposit withdrawals, borrowing maturities, and other contractual cash obligations. In managing our cash flows, management regularly confronts situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints in accessing sources of funds, and the ability to convert assets into cash. Changes in economic conditions or exposure to borrower credit quality, capital markets, and operational, legal, or reputational risks could also affect the Bank’s liquidity risk profile and are considered in the assessment of liquidity management. The Company is a corporation separate and apart from the Bank and, therefore, must provide for its own liquidity, including liquidity required to meet its debt service requirements on its subordinated notes. The Company’s main source of cash flow is dividends declared and paid to it by the Bank. There are statutory and regulatory limitations that affect the ability of the Bank to pay dividends to the Company, including various legal and regulatory provisions that limit the amount of dividends the Bank can pay to the Company without regulatory approval. Under the California Financial Code, payment of a dividend from the Bank to the Company without advance regulatory approval is restricted to the lesser of the Bank’s retained earnings or the amount of the Bank’s net income from the previous three fiscal years less the amount of dividends paid during that period. We believe that these limitations will not impact our ability to meet our ongoing short-term cash obligations. For contingency purposes, the Company maintains a minimum level of cash to fund one year’s projected operating cash flow needs plus two years’ subordinated notes debt service. We continually monitor our liquidity position in order to meet all reasonably foreseeable short-term, long-term, and strategic liquidity demands. Management has established a comprehensive process for identifying, measuring, monitoring, and controlling liquidity risk. Because of its critical importance to the viability of the Bank, liquidity risk management is fully integrated into our risk management processes. Critical elements of our liquidity risk management include effective corporate governance, consisting of oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures, and 67
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limits used to manage and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems, including stress tests, that are commensurate with the complexity of our business activities; active management of intraday liquidity and collateral; an appropriately diverse mix of existing and potential future funding sources; adequate levels of highly liquid marketable securities free of legal, regulatory, or operational impediments that can be used to meet liquidity needs in stress situations; comprehensive contingency funding plans that sufficiently address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes sufficient to determine the adequacy of the Bank’s liquidity risk management process. Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our liquidity requirements are met primarily through our deposits, Federal Reserve Discount Window advances, FHLB advances, and the principal and interest payments we receive on loans and investment securities. Cash on hand, cash at third-party banks, investments available-for-sale, and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are routinely available to us include funds from retail and wholesale deposits, advances from the FHLB and the Federal Reserve Discount Window, and proceeds from the sale of loans. Less commonly used sources of funding include borrowings from established federal funds lines from unaffiliated commercial banks, and the issuance of debt or equity securities. We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary. In addition, as of December 31, 2025, we had a shelf registration statement on file with the SEC registering the offer and sale by us of up to $250.0 million of any combination of equity or debt securities, depository shares, warrants, purchase contracts, purchase units, subscription rights, and units in one or more offerings. In April 2024, we sold an aggregate of 3,967,500 shares of our common stock at a price of $21.75 per share in a public offering (the “2024 Public Offering”), for net proceeds to us, after deducting underwriting discounts and commissions and offering expenses payable by us, of approximately $80.9 million, to be used for general corporate purposes and to support continued growth, including through investments in the Bank to pursue growth opportunities, and for working capital. The 2024 Public Offering used approximately $86.3 million of our shelf registration statement on file with the SEC, leaving approximately $163.7 million available for future offerings as of December 31, 2025. In February 2026, our new shelf registration statement became effective, registering the offer and sale by us of up to $300.0 million of any combination of equity or debt securities, depository shares, warrants, purchase contracts, purchase units, subscription rights, and units in one or more offerings, and replacing our prior shelf registration statement. Specific information on the terms of any securities being offered, including the expected use of proceeds from the sale of such securities, are provided at the time of the offering. Sources and Uses of Cash Our executive officers and board of directors review our sources and potential uses of cash in connection with our annual budgeting process. Generally speaking, our principal funding source is cash from deposits, and our principal uses of cash include funding of loans, operating expenses, income taxes, and dividend payments, as described below. As of December 31, 2025, management believes the above- mentioned sources will provide adequate liquidity during the next twelve months for the Bank to meet its operating needs. Based on our current capital allocation objectives, during 2026, we project spending $0.5 million related to continued build-out of our IT systems and processes and allocating $21.4 million of cash for dividends on our common stock. For the 12-month period ending December 31, 2026, we project that our fixed commitments could potentially include: (i) approximately $503.3 million to fund off-balance sheet commitments outstanding at December 31, 2025; (ii) $9.4 million for IT services, IT support, and compliance expenditures; and (iii) $2.0 million for operating leases. In future years, we expect that our main sources and uses of cash will relate primarily to regular operating activities. Loans Loans are a significant use of cash in daily operations, and a source of cash as customers make payments on their loans or as loans are sold to other financial institutions. Cash flows from loans are affected by the timing and amount of customer payments and prepayments, changes in interest rates, the general economic environment, competition, and the political environment. During the year ended December 31, 2025, we had cash outflows of $544.2 million in loan originations and advances, net of principal collected, and $1.4 million in loans originated for sale. Additionally, in the ordinary course of business, we enter into commitments to extend credit, such as commitments to fund new loans and undisbursed construction funds. While these commitments represent contractual cash requirements, a 68
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portion of these commitments to extend credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. At December 31, 2025, off-balance sheet commitments totaled $503.3 million. We expect to fund these commitments to the extent utilized primarily through the repayment of existing loans, deposit growth, and liquid assets. Deposits Deposits are our primary source of funding for our business operations, and the cost of deposits has a significant impact on our net interest income and net interest margin. Our deposits are primarily made up of money market, interest-bearing transaction, time, and non-interest-bearing demand deposits. Aside from commercial and business clients, a significant portion of our deposits are from municipalities and non-profit organizations. Cash flows from deposits are impacted by the timing and amount of customer deposits, changes in market rates, and collateral availability. During the year ended December 31, 2025, we had cash inflows related to an increase in deposits of $643.1 million. During the twelve months following December 31, 2025, approximately $552.9 million of time deposits are expected to mature, which includes $175.0 million of brokered deposits. In addition, we expect $1.7 million of time deposits to mature through 2030. These deposits may or may not renew due to general competition. We expect the outflow will not be significant and can be replenished through our organic growth in deposits. We believe our emphasis on local deposits and our San Francisco Bay Area expansion provide a stable funding base. At December 31, 2025, cash and cash equivalents represented 12.06% of total deposits. Investment Securities Our investment securities totaled $96.9 million at December 31, 2025. Mortgage-backed securities and obligations of states and political subdivisions comprised 49.73% and 40.41% of our investment portfolio, respectively. Cash proceeds from mortgage-backed securities result from payments of principal and interest by borrowers. Cash proceeds from obligations of states and political subdivisions occur when these securities are called or mature. Assuming the current prepayment speed and interest rate environment, we expect to receive approximately $9.5 million from our securities over the next twelve months. In future periods, we expect to maintain approximately the same level of cash flows from our securities. Depending on market yield and our liquidity, we may purchase securities as a use of cash in our interest-earning asset portfolio. During the year ended December 31, 2025, we had cash proceeds from sales, maturities, calls and prepayments of securities of $9.3 million and cash outflows from the purchase of a security for $1.0 million. Additionally, at December 31, 2025, securities available-for- sale totaled $94.7 million, of which $89.7 million has been pledged as collateral for borrowings and other commitments. Future Contractual Obligations Our estimated future obligations as of December 31, 2025 include both current and long-term obligations. Under our operating leases as discussed in Note 15, Commitments and Contingencies, of the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K, we have a current obligation of $2.0 million and a long-term obligation of $12.5 million. We also have a current obligation of $552.9 million and a long-term obligation of $1.7 million related to time deposits, as discussed in Note 8, Interest- Bearing Deposits, of the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K. We have net subordinated notes of $74.0 million, all of which are long-term obligations. Finally, we have two significant contracts, one for core processing services and the other for a digital and mobile banking platform. The actual obligations under both contracts are unknown and dependent on certain factors, including volume and activity. Based on our average monthly expenses for 2025, and extrapolating those figures over the remaining term of the core processing services contract, we estimate our current obligation to be approximately $2.1 million, with a long-term obligation of $9.3 million. For the digital and mobile banking platform contract, using the same methodology, our current obligation under this contract is estimated at $1.1 million. We do not have any long-term obligation under this contract until it is renewed. 69
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Total Liquidity Total liquidity (consisting of cash and cash equivalents and unused and immediately available borrowing capacity as set forth in Table 20) was approximately $2.3 billion as of December 31, 2025. Table 20: Total Liquidity December 31, 2025 (dollars in thousands) Line of Credit Letters of Credit Issued Borrowings Available FHLB advances $ 1,518,680 $ 887,500 $ — $ 631,180 Federal Reserve Discount Window 957,362 — — 957,362 Correspondent bank lines of credit 185,000 — — 185,000 Cash and cash equivalents — — — 506,851 Total $ 2,661,042 $ 887,500 $ — $ 2,280,393 FHLB Financing The Bank is a shareholder of the FHLB, which enables the Bank to have access to lower-cost FHLB financing when necessary. At December 31, 2025, the Bank had no outstanding FHLB financing borrowings and a total financing availability of $631.2 million, net of letters of credit issued of $887.5 million. Federal Reserve Discount Window The Company has the ability to borrow from the Federal Reserve Discount Window when necessary. At December 31, 2025, the Bank had no outstanding Federal Reserve Discount Window borrowings and total financing availability of $957.4 million. Correspondent Bank Lines of Credit At December 31, 2025, the unused and available amount for borrowing from correspondent bank lines of credit was $185.0 million. Dividends A use of liquidity for the Company is shareholder dividends. The Company paid dividends to its shareholders totaling $17.1 million during the year ended December 31, 2025. We expect to continue our current practice of paying quarterly cash dividends with respect to our common stock, subject to our board of directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. We believe our quarterly dividend rate per share, as approved by our board of directors, enables us to balance our multiple objectives of managing our business and returning a portion of our earnings to our shareholders. Assuming continued payment during 2026 at a rate of $0.25 per share, our average total dividend paid each quarter would be approximately $5.3 million based on the number of currently outstanding shares if there are no increases or decreases in the number of shares, and given that unvested RSAs share equally in dividends with outstanding common stock. Impact of Inflation Our consolidated financial statements and related notes have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of operations. Unlike industrial companies, nearly all of our assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods or services. 70
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Historical Information Table 21 summarizes our consolidated cash flow activities. Table 21: Consolidated Cash Flow Activities (dollars in thousands) For the year ended December 31, $ Change2025 2024 Net cash provided by operating activities $ 72,612 $ 51,786 $ 20,826 Net cash used in investing activities (544,109) (446,744) 97,365 Net cash provided by financing activities 626,005 425,725 200,280 Operating Activities Net cash provided by operating activities increased by $20.8 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to lower loans originated for sale, higher net income, higher net change in interest payable and other liabilities, and a higher provision for credit losses. These sources of cash were partially offset by lower gross proceeds from sale of loans, lower net change in interest receivable and other assets, and lower purchase of transferable tax credits. Cash provided by operating activities is subject to variability period-over-period as a result of timing differences, including with respect to the collection of receivables and payments of interest expense, accounts payable, and bonuses. For additional information about our operating results, see “Results of Operations” above. Investing Activities Net cash used in investing activities increased by $97.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to higher originations of loans held for investment, net of repayments. Financing Activities Net cash provided by financing activities increased by $200.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to an increase in deposits and lower borrowings, partially offset by proceeds from the 2024 Public Offering. Capital Adequacy We manage our capital by tracking our level and quality of capital with consideration given to our overall financial condition, our asset quality, our level of allowance for credit losses, our geographic and industry concentrations, and other risk factors on our balance sheet, including interest rate sensitivity. Bancorp and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements as set forth in Tables 22 and 23 can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on our consolidated financial statements. Under federal regulations implementing the Basel III framework, the Bank is subject to minimum risk-based and leverage capital requirements. The Bank is also subject to regulatory thresholds that must be met for an insured depository institution to be classified as “well-capitalized” under the prompt corrective action framework. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. Capital amounts for Bancorp and the Bank, and the Bank’s prompt corrective action classification, are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors. As of December 31, 2025, both Bancorp and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank qualified as “well-capitalized” under the prompt corrective action framework. Management reviews capital ratios on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet our anticipated future needs. For all periods presented, the Bank’s ratios exceed the regulatory 71
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definition of “well-capitalized” under the regulatory framework for prompt corrective action, and Bancorp’s ratios exceed the minimum ratios required for it to be considered a well-capitalized bank holding company. The capital adequacy ratios as of December 31, 2025 and 2024 for Bancorp and the Bank are presented in Tables 22 and 23. As of December 31, 2025 and 2024, Bancorp’s Tier 2 capital included subordinated notes, which were not included at the Bank level. Eligible amounts of subordinated notes included in Tier 2 capital will be phased out by 20% per year beginning five years before the maturity date of the notes. Table 22: Capital Ratios for Bancorp (dollars in thousands) Actual Ratio Required for CapitalAdequacy Purposes Ratio to be Well-Capitalized under PromptCorrective ActionProvisions Amount Ratio Amount Ratio Amount Ratio December 31, 2025 Total capital (to risk-weighted assets) $ 572,874 13.33 % $ 343,779 8.00 % N/A N/A Tier 1 capital (to risk-weighted assets) $ 454,830 10.58 % $ 257,834 6.00 % N/A N/A Common equity tier 1 capital (to risk- weighted assets) $ 454,830 10.58 % $ 193,376 4.50 % N/A N/A Tier 1 leverage $ 454,830 9.70 % $ 187,499 4.00 % N/A N/A December 31, 2024 Total capital (to risk-weighted assets) $ 519,722 13.99 % $ 332,622 8.00 % N/A N/A Tier 1 capital (to risk-weighted assets) $ 409,514 11.02 % $ 222,940 6.00 % N/A N/A Common equity tier 1 capital (to risk- weighted assets) $ 409,514 11.02 % $ 167,205 4.50 % N/A N/A Tier 1 leverage $ 409,514 10.05 % $ 162,960 4.00 % N/A N/A Table 23: Capital Ratios for the Bank (dollars in thousands) Actual Ratio Required for CapitalAdequacy Purposes Ratio to be Well-Capitalizedunder Prompt CorrectiveAction Provisions Amount Ratio Amount Ratio Amount Ratio December 31, 2025 Total capital (to risk-weighted assets) $ 554,071 12.92 % $ 342,984 8.00 % $ 428,729 10.00 % Tier 1 capital (to risk-weighted assets) $ 510,067 11.89 % $ 257,238 6.00 % $ 342,984 8.00 % Common equity tier 1 capital (to risk- weighted assets) $ 510,067 11.89 % $ 192,928 4.50 % $ 278,674 6.50 % Tier 1 leverage $ 510,067 10.89 % $ 187,409 4.00 % $ 234,261 5.00 % December 31, 2024 Total capital (to risk-weighted assets) $ 504,896 13.59 % $ 297,216 8.00 % $ 371,520 10.00 % Tier 1 capital (to risk-weighted assets) $ 468,584 12.61 % $ 222,912 6.00 % $ 297,216 8.00 % Common equity tier 1 capital (to risk- weighted assets) $ 468,584 12.61 % $ 167,184 4.50 % $ 241,488 6.50 % Tier 1 leverage $ 468,584 11.50 % $ 162,942 4.00 % $ 203,677 5.00 % The listed capital adequacy ratios exclude capital conservation buffers. Recent Accounting Pronouncements For a discussion of the expected impact of accounting pronouncements recently adopted and accounting pronouncements recently issued but not yet adopted by us as of December 31, 2025, see Note 2, Recently Issued Accounting Standards, in the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K. 1 1 1 72
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Non-GAAP Financial Measures Some of the financial measures discussed herein are non-GAAP financial measures. In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP in our consolidated statements of income, balance sheets, statements of shareholders’ equity, or statements of cash flows. Tangible shareholders’ equity to tangible assets is defined as total equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholders’ equity to total assets. Management believes that tangible shareholders’ equity to tangible assets is a useful financial measure because it enables management, investors, and others to assess the Company’s financial health based on tangible capital. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible shareholders’ equity to tangible assets is the same as total shareholders’ equity to total assets at the end of each of the periods indicated. Tangible book value per share is defined as total shareholders’ equity less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of the period. The most directly comparable GAAP financial measure is book value per share. Management believes that tangible book value per share is a useful financial measure because it enables management, investors, and others to assess the Company’s value and use of equity. We had no goodwill or other intangible assets at the end of any period indicated. As a result, tangible book value per share is the same as book value per share at the end of each of the periods indicated. We believe that these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations, and cash flows computed in accordance with GAAP. However, we acknowledge that our non- GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those we use for the non-GAAP financial measures we disclose, but may calculate them differently. You should understand how we and other companies each calculate non-GAAP financial measures when making comparisons. Item 7A. Quantitative and Qualitative Disclosure About Market Risk Market risk is the risk of loss from adverse changes in market prices and rates. As a financial institution, the Company experiences market risk arising primarily from interest rate risk inherent in lending and deposit-taking activities. Because the interest rates on the Company’s assets and liabilities do not necessarily change at the same speed or rate as market interest rates, sudden and/or substantial changes in interest rates may adversely impact our earnings. In particular, the Company’s financial results are sensitive to significant changes in the treasury yield curve, the federal funds rate, and the Wall Street Prime Index. The Company’s total interest income was $66.4 million for the three months ended December 31, 2025 and $248.9 million for the year ended December 31, 2025. Our total interest expense was $24.4 million for the three months ended December 31, 2025 and $97.0 million for the year ended December 31, 2025. Overall, our net interest income was $42.1 million for the three months ended December 31, 2025 and $151.9 million for the year ended December 31, 2025. Economic value of equity (“EVE”) measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time for a given set of market rate assumptions. An increase in EVE due to a specified rate change indicates an improvement in the long-term earnings capacity of the balance sheet, assuming that the rate change remains in effect over the life of the current balance sheet. As of December 31, 2025, the Company carried a slightly higher balance of assets than liabilities that will reprice within the next twelve months in the event that interest rates fall. Our policies and procedures provide management with guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. This is overseen and adjusted as needed by our Management Asset Liability Committee on a monthly basis and our Director Asset Liability Committee on a quarterly basis. We have historically managed our sensitivity position within our established guidelines. With the intent of stabilizing or increasing net interest income, management typically deploys the Company’s excess liquidity and seeks to migrate certain earning assets into higher-yielding categories (from investment securities into loans, for example). However, in situations where deposit balances contract, management relies upon various borrowing facilities and/or the use of brokered 73
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deposits. The Company monitors the impact of interest rate risk on EVE by reviewing and managing assets and liabilities with varying interest rate risks, such as cash and time deposits. Assets and liabilities are subject to fluctuations at each measurement date based on the composition of the balance sheet at each measurement date. EVE results are compared to previous periods and established policies on a quarterly basis. As of December 31, 2025, the overnight federal funds rate (the rate used in the interest rate shock scenarios listed below) was 3.64%, a decrease from 4.33% at December 31, 2024. The scenarios presented assume that interest rates change instantaneously (“shock”) and that there are no significant changes in the structure of the Company’s balance sheet over the twelve months being measured. Table 24 summarizes the estimated effect on net interest income and EVE from changing interest rates as measured against a flat rate (no interest rate change) instantaneous parallel shock scenario over a twelve-month period utilizing an interest sensitivity (GAP) analysis based on the Company’s specific mix of interest-earning assets and interest-bearing liabilities as of December 31, 2025 and 2024. Table 24: Estimated Effect on Net Interest Income and EVE from Changing Interest Rates December 31, 2025 December 31, 2024 Change in Interest Rates Estimated Change inNII(as % of NII) Estimated Change inEVE(as % of EVE) Estimated Change inNII(as % of NII) Estimated Change inEVE(as % of EVE)(in basis points) +300 (shock) (1.72)% (9.70)% (6.32)% (12.51)% +200 (shock) (1.19)% (6.77)% (4.09)% (8.70)% +100 (shock) (0.47)% (3.55)% (2.15)% (4.29)% + 0 (flat) — % — % — % — % -100 (shock) 0.86 % 2.45 % 2.14 % 3.93 % -200 (shock) 2.82 % 4.07 % 4.80 % 6.40 % -300 (shock) 9.44 % 8.79 % 7.95 % 10.12 % The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions, which are based upon our experience and published industry experience including, but not limited to, assumptions relating to expected maturities, hypothetical changes in interest rates, decay rates, and deposit betas. Such assumptions may not necessarily reflect the manner or timing in which our interest-earning assets and interest-bearing liabilities respond to changes in market rates. Because these assumptions are inherently uncertain, actual results will differ from simulated results. 74
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Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (Baker Tilly US LLP; PCAOB ID# 23) 76 Consolidated Balance Sheets as of December 31, 2025 and 2024 77 Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023 78 Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024, and 2023 79 Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2025, 2024, and 2023 80 Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024, and 2023 81 Notes to Consolidated Financial Statements 83 75
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Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Five Star Bancorp and Subsidiary Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Five Star Bancorp (and subsidiary) (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Baker Tilly US, LLP Everett, Washington February 27, 2026 We have served as the Company’s auditor since 2010. 76
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FIVE STAR BANCORP AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31, 2025 and 2024 (in thousands, except share amounts) 2025 2024 ASSETS Cash and due from financial institutions $ 33,978 $ 33,882 Interest-bearing deposits in banks 472,873 318,461 Cash and cash equivalents 506,851 352,343 Time deposits in banks 100 4,121 Securities available-for-sale, at fair value, net of allowance for credit losses of $0 at December 31, 2025 and 2024 (amortized cost of $107,197 and $115,757 at December 31, 2025 and 2024, respectively) 94,699 98,194 Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $20 at December 31, 2025 and 2024 (fair value of $1,995 and $2,353 at December 31, 2025 and 2024, respectively) 2,190 2,720 Loans held for sale — 3,247 Loans held for investment 4,074,929 3,532,686 Allowance for credit losses (44,409) (37,791) Loans held for investment, net of allowance for credit losses 4,030,520 3,494,895 FHLB stock 15,000 15,000 Operating leases, right-of-use asset, net 10,802 6,245 Premises and equipment, net 2,109 1,584 Bank-owned life insurance, net 23,910 19,375 Interest receivable and other assets 68,680 55,554 Total assets $ 4,754,861 $ 4,053,278 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits: Non-interest-bearing $ 1,084,537 $ 922,629 Interest-bearing 3,116,547 2,635,365 Total deposits 4,201,084 3,557,994 Borrowings: Subordinated notes, net 74,041 73,895 Other borrowings — — Operating lease liability 11,872 6,857 Interest payable and other liabilities 22,032 17,908 Total liabilities 4,309,029 3,656,654 Commitments and contingencies (Note 15) Shareholders’ equity: Preferred stock, no par value; 10,000,000 shares authorized; zero issued and outstanding at December 31, 2025 and 2024 — — Common stock, no par value; 100,000,000 shares authorized; 21,367,387 shares issued and outstanding at December 31, 2025; 21,319,083 shares issued and outstanding at December 31, 2024 303,990 302,531 Retained earnings 150,985 106,464 Accumulated other comprehensive loss, net of taxes (9,143) (12,371) Total shareholders’ equity 445,832 396,624 Total liabilities and shareholders’ equity $ 4,754,861 $ 4,053,278 See accompanying notes to consolidated financial statements. 77
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FIVE STAR BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, 2025, 2024, and 2023 (in thousands, except per share amounts) 2025 2024 2023 Interest and fee income: Loans, including fees $ 229,214 $ 193,341 $ 162,713 Taxable securities 1,626 1,830 1,876 Nontaxable securities 672 700 724 Interest-bearing deposits in banks 17,421 11,080 9,069 Total interest and fee income 248,933 206,951 174,382 Interest expense: Deposits 92,382 82,398 57,861 Subordinated notes 4,646 4,646 4,646 Other borrowings — 196 995 Total interest expense 97,028 87,240 63,502 Net interest income 151,905 119,711 110,880 Provision for credit losses 9,700 6,950 4,000 Net interest income after provision for credit losses 142,205 112,761 106,880 Non-interest income: Service charges on deposit accounts 755 721 575 Net gain (loss) on sale of securities — — (167) Gain on sale of loans 244 1,274 1,952 Loan-related fees 2,156 1,605 1,719 FHLB stock dividends 1,317 1,320 970 Earnings on BOLI 824 644 510 Other 1,239 889 1,952 Total non-interest income 6,535 6,453 7,511 Non-interest expense: Salaries and employee benefits 37,885 31,709 27,097 Occupancy and equipment 2,782 2,547 2,218 Data processing and software 6,121 5,088 4,015 FDIC insurance 1,950 1,635 1,557 Professional services 3,723 3,078 2,575 Advertising and promotional 3,178 2,411 2,403 Loan-related expenses 1,423 1,207 1,192 Other operating expenses 7,946 6,818 6,718 Total non-interest expense 65,008 54,493 47,775 Income before provision for income taxes 83,732 64,721 66,616 Provision for income taxes 22,126 19,050 18,882 Net income $ 61,606 $ 45,671 $ 47,734 Basic earnings per common share $ 2.90 $ 2.26 $ 2.78 Diluted earnings per common share $ 2.90 $ 2.26 $ 2.78 See accompanying notes to consolidated financial statements.
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FIVE STAR BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years ended December 31, 2025, 2024, and 2023 (in thousands) 2025 2024 2023 Net income $ 61,606 $ 45,671 $ 47,734 Unrealized gain (loss) on securities: Net unrealized holding gain (loss) on securities available-for-sale during the period 5,067 (858) 2,228 Reclassification for net loss on sale of securities included in net income — — 167 Less: Income tax expense (benefit) related to items of other comprehensive income (loss) 1,839 (254) 708 Other comprehensive income (loss) 3,228 (604) 1,687 Total comprehensive income $ 64,834 $ 45,067 $ 49,421 See accompanying notes to consolidated financial statements. 79
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FIVE STAR BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Years ended December 31, 2025, 2024, and 2023 (in thousands, except share and per share amounts) Common Stock RetainedEarnings AccumulatedOtherComprehensiveIncome (Loss) TotalShareholders’EquityShares Amount Balance at December 31, 2022 17,241,926 $ 219,543 $ 46,736 $ (13,454) $ 252,825 Cumulative effect of adoption of ASC 326 on retained earnings — — (4,491) — (4,491) Net income — — 47,734 — 47,734 Other comprehensive income — — — 1,687 1,687 Stock issued under stock award plans 16,978 — — — — Stock compensation expense — 962 — — 962 Stock forfeitures (1,915) — — — — Cash dividends paid ($0.75 per share) — — (12,943) — (12,943) Balance at December 31, 2023 17,256,989 $ 220,505 $ 77,036 $ (11,767) $ 285,774 Net income — — 45,671 — 45,671 Other comprehensive loss — — — (604) (604) Stock issued under stock award plans 96,380 — — — — Stock compensation expense — 1,156 — — 1,156 Stock forfeitures (1,786) — — — — Common stock issued 3,967,500 80,870 — — 80,870 Cash dividends paid ($0.80 per share) — — (16,243) — (16,243) Balance at December 31, 2024 21,319,083 $ 302,531 $ 106,464 $ (12,371) $ 396,624 Net income — — 61,606 — 61,606 Other comprehensive income — — — 3,228 3,228 Stock issued under stock award plans 49,303 — — — — Stock compensation expense — 1,459 — — 1,459 Stock forfeitures (999) — — — — Cash dividends paid ($0.80 per share) — — (17,085) — (17,085) Balance at December 31, 2025 21,367,387 $ 303,990 $ 150,985 $ (9,143) $ 445,832 See accompanying notes to consolidated financial statements. 80
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FIVE STAR BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2025, 2024, and 2023 (in thousands) 2025 2024 2023 Cash flows from operating activities: Net income $ 61,606 $ 45,671 $ 47,734 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 9,700 6,950 4,000 Depreciation and amortization 2,247 1,877 1,612 Amortization of deferred loan fees and costs 170 (337) 117 Amortization of premiums and discounts on securities 800 943 1,152 Amortization of subordinated note issuance costs 146 146 144 Amortization of low income housing tax credits 1,769 1,050 291 Stock compensation expense 1,459 1,156 962 Earnings on BOLI (824) (644) (510) Deferred tax provision (578) (243) (897) Purchase of transferable tax credits (6,572) — — Loans originated for sale (1,384) (21,654) (47,922) Gain on sale of loans (244) (1,274) (1,952) Gross proceeds from sale of loans 3,531 19,682 38,410 Net loss (gain) on sale of securities available-for-sale — — 167 Earnings on equity investments (821) (545) (1,683) Net changes in: Interest receivable and other assets (3,378) 2,535 (3,708) Interest payable and other liabilities 6,102 (2,611) 1,897 Operating lease liability (1,117) (916) (900) Net cash provided by operating activities 72,612 51,786 38,914 Cash flows from investing activities: Proceeds from sale of securities available-for-sale — — 737 Maturities, prepayments, and calls of securities available-for-sale 9,321 8,445 10,056 Purchases of securities available-for-sale (1,030) — (1,151) Capital call for equity investments (2,138) (2,908) (1,407) Proceeds received from equity investments 283 1,056 1,915 Capital call for low income housing tax credits (5,593) (10,052) (2,341) Net change in time deposits in banks 4,021 1,737 3,991 Loan originations, net of repayments (544,152) (442,843) (284,314) Purchase of premises and equipment, net (1,197) (628) (653) Purchase of FHLB stock — — (4,110) Purchase of BOLI (3,711) (1,551) (2,001) Other real estate sale proceeds 87 — — Net cash used in investing activities (544,109) (446,744) (279,278) Cash flows from financing activities: Net change in deposits 643,090 531,098 244,892 Proceeds from issuance of stock, net of issuance costs — 80,870 — (Payments) advances on other borrowings — (170,000) 70,000 Cash dividends paid (17,085) (16,243) (12,943) Net cash provided by financing activities 626,005 425,725 301,949 Net change in cash and cash equivalents 154,508 30,767 61,585 Cash and cash equivalents at beginning of period 352,343 321,576 259,991 Cash and cash equivalents at end of period $ 506,851 $ 352,343 $ 321,576
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(in thousands) 2025 2024 2023 Supplemental disclosure of cash flow information: Interest paid $ 97,581 $ 87,113 $ 61,854 Income taxes paid: US Federal 11,647 US Federal - IRC 45X Tax Credits 6,572 US State and Local California 5,451 Other states 1,289 Total 24,959 16,884 19,969 Supplemental disclosure of noncash items: Transfer from loans held for sale to loans held for investment 1,344 11,464 9,416 Unrealized gain (loss) on securities 5,067 (858) 2,228 Operating lease liabilities exchanged for ROUA 6,132 2,170 2,260 ROUA acquired (6,132) (2,170) (2,243) Increase (decrease) in commitment for low income housing tax credits 10,188 (531) 13,612 Cumulative effect of adoption of ASC 326 on retained earnings, net of tax — — (4,491) See accompanying notes to consolidated financial statements. Income taxes are presented by significant jurisdictions beginning in 2025 as required by ASU 2023-09. This standard has been applied on a prospective basis. 1 1 82
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Basis of Presentation Nature of Operations and Principles of Consolidation Five Star Bank was chartered on October 26, 1999 and began operations on December 20, 1999. Five Star Bancorp was incorporated on September 16, 2002 and subsequently obtained approval from the Federal Reserve to become a bank holding company in connection with its acquisition of the Bank. The Company became the sole shareholder of the Bank on June 2, 2003 in a statutory merger, pursuant to which each outstanding share of the Bank’s common stock was exchanged for one share of common stock of the Company. The Company publicly filed a Registration Statement on Form S-1 with the SEC in connection with its IPO, which was declared effective by the SEC on May 4, 2021 and closed on May 7, 2021. In connection with the Company’s IPO, its status as a Subchapter S corporation was terminated and the Company became a taxable C Corporation as of May 5, 2021. The Company, through the Bank, provides a broad range of banking products and services to customers who are predominately small and medium-sized businesses, professionals, and individuals primarily in the Northern California region. The Company’s primary loan products are commercial real estate loans, land development loans, construction loans, and operating lines of credit, and its primary deposit products are checking accounts, savings accounts, money market accounts, and term certificate accounts. The Bank currently has nine branch offices in Roseville, Natomas, Rancho Cordova, Redding, Elk Grove, Chico, Yuba City, San Francisco, and Walnut Creek. Basis of Financial Statement Presentation and Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the FASB’s ASC, including ASU, and the rules and regulations of the SEC, including the instructions to Regulation S-X. The consolidated financial statements include Bancorp and its wholly owned subsidiary, the Bank. All significant intercompany transactions and balances are eliminated in consolidation. The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry. The Company qualifies as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and, as such, may take advantage of specified reduced reporting requirements and deferred accounting standards adoption dates, and is relieved of other significant requirements that are otherwise generally applicable to other public companies. Segments The Company has one reportable operating segment: banking. The banking segment derives its revenues through the Bank, which provides a broad range of banking products and services to customers who are predominantly small to medium-sized businesses, professionals, and individuals primarily in Northern California. The Company manages the business activities on a consolidated basis. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM assesses performance for the operating segment and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. In accordance with ASC 280, as amended by ASU 2023-07, the Company discloses the following significant expense categories and other items on a consolidated basis which are regularly provided to the CODM and included in the measure of consolidated profit or loss: • Interest expense - includes interest paid on deposits, borrowings, and subordinated notes; • Provision for credit losses - represents the amount charged to earnings to maintain the allowance for credit losses at an appropriate level; • Salaries and employee benefits - includes wages, incentive compensation, payroll taxes, and employee benefits; 83
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• Occupancy and equipment expense - includes rent, depreciation, utilities, and maintenance of premises and equipment; • Data processing and software expense - includes costs related to core processing, digital banking platforms, and other technology- related services; • Professional services - includes legal, audit, consulting, and other professional fees; • FDIC insurance - represents deposit insurance premiums paid to the FDIC; • Advertising and promotional expense - includes marketing, advertising, and business development costs; • Loan-related expenses - includes costs associated with loan origination, servicing, and collection; and • Other operating expenses - includes all other expenses not separately disclosed above, such as office supplies, travel, and regulatory assessments. Other items regularly provided to the CODM and included in the measure of consolidated profit or loss include: • Non-interest income - such as service charges on deposit accounts, gain on sale of loans, loan-related fees, FHLB stock dividends, and earnings on BOLI; and • Income tax expense - represents the provision for federal and state income taxes. Segment profit or loss is measured as consolidated net income, which is calculated as total revenues (net interest income and non-interest income) less total expenses (interest expense, provision for credit losses, and non-interest expenses) and income tax expense. These financial metrics are used by the CODM to make key operating decisions, such as determination of the rate at which the Company seeks to grow, loan and deposit pricing, and the allocation of budget for non-interest expenses. Net income is used to monitor budget versus actual results. The Company does not have any other reportable segments, and discrete financial information is not available other than on a consolidated basis. All significant operating decisions are made on a consolidated basis. Use of Estimates Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual results could differ. The ACL is the most significant accounting estimate reflected in the Company’s consolidated financial statements. Other estimates include fair value measurements and deferred tax asset valuation. Cash and Cash Equivalents The Company defines cash and cash equivalents as cash, due from financial institutions, interest-bearing deposits in banks with short-term original maturities, and federal funds sold. Generally, federal funds are sold for one-day periods, if at all. At times throughout the year, balances can exceed FDIC insurance limits. The Company has not experienced any historical losses associated with balances maintained with financial institutions in excess of FDIC insurance limits, and management continues to monitor the financial condition of the major financial institutions where these funds are held. Securities Available-for-Sale Available-for-sale securities consist of bonds, notes, and debentures not classified as trading securities or held-to-maturity securities. Securities are classified as available-for-sale if the Company intends and has the ability to hold those securities for a period of time, but not necessarily to maturity. Any decision to sell a security classified as available-for-sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Securities available-for-sale are carried at fair value. Unrealized holding gains or losses are included in other comprehensive income as a separate component of shareholders’ equity, net of tax. Realized gains or losses, determined based on the cost of specific securities sold, are included in earnings. Premiums are amortized over the life of the security or, if a callable bond, over the earliest call date, and discounts are accreted over the life of the related investment security as an adjustment to interest income using the effective interest method. Interest income is recognized when earned. Unrealized credit losses are recognized through an allowance for credit losses instead of an adjustment to amortized cost basis, eliminating the other-than-temporary impairment concept. For available-for-sale debt securities in an unrealized loss 84
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position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of amortized cost basis. If either criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings. For available-for-sale debt securities that do not meet the above conditions, the Company evaluates at the individual security level whether the decrease in fair value has resulted from credit factors or non-credit factors. If assessment determines that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, then a credit loss would be recognized, limited to the amount by which the fair value is less than the amortized cost basis. All other changes in fair value of an available-for-sale debt security are recognized in other comprehensive income, net of applicable taxes. Changes in the allowance for credit losses, if any, are recognized as a provision for (or reversal of) credit losses. Accrued interest receivable is not subject to an estimate for credit loss, as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. Securities Held-to-Maturity Securities are classified as held-to-maturity if the Company has both the intent and ability to hold those securities to maturity regardless of changes in market conditions, liquidity needs, or changes in general economic conditions. These securities are carried at cost adjusted for amortization of premium to the earliest callable call date and accretion of discount, computed by the effective interest method over the life of the related investment. Estimated credit losses are recorded through a credit loss expense and an allowance. Accrued interest receivable is not subject to an estimate for credit loss, as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. Loans Loans are reported at the principal amount outstanding, net of deferred loan fees and costs and the allowance for credit losses. Interest on loans is accrued daily based on the principal outstanding. Loan fees, net of certain direct costs of origination, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. During the years ended December 31, 2025, 2024, and 2023, salaries and employee benefits totaling $5,218,000, $3,719,000, and $3,461,000, respectively, were deferred as loan origination costs. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full and timely collection of interest or principal or when a loan becomes contractually past due by 90 days or more with respect to interest or principal. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current period interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest. Allowance for Credit Losses The ACL is a valuation account that offsets the amortized cost basis of loans receivable and certain other financial assets, including unfunded loan commitments and held-to-maturity debt securities. Under ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all subsequent amendments that modified ASU 2016-13 (collectively, “ASC 326”), amortized cost basis is the basis on which the ACL is determined. Amortized cost basis on loans receivable is principal outstanding, net of any purchase premiums and discounts, and net of any deferred loan fees and costs. Credit losses are charged off when management believes that the collectability of at least some portion of outstanding principal is unlikely. These charge-offs are recorded as a reversal to, thereby reducing, the allowance for credit losses. Subsequent recoveries of previously charged-off amounts, if any, are recorded as a provision to, thereby increasing, the allowance for credit losses. The allowance for credit losses is maintained at a level to absorb expected credit losses over the contractual life, including consideration of prepayments. Determining the adequacy of the allowance is complex and requires judgments that are inherently subjective, as it requires estimates that are susceptible to revision as additional information becomes available. While the Company has determined an allowance for credit losses it considers appropriate, there can be no assurance that the allowance will be sufficient to absorb future losses. 85
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The Company’s process for determining expected lifetime credit losses entails a loan-level, model-based approach and considers a broad range of information, including historical loss experience, current conditions, and reasonable and supportable forecasts. Credit loss is estimated for all loans. Accordingly, the Company has stratified the full loan population into segments sharing similar characteristics to perform the evaluation of the credit loss collectively. The Company can also further stratify loans of similar types, risk attributes, and methods for credit risk monitoring. The Company has determined loan pools based primarily on regulatory reporting codes, as the loans within each pool share similar risk characteristics and there is sufficient historical peer loss data from the FFIEC to provide statistically meaningful support in the models developed. The Company further stratified the following portfolios as the loans in these pools have different repayment structures and credit risk characteristics: Multifamily portfolio into traditional Multifamily loans and Manufactured Home Community (“MHC”) loans, CRE Non-Owner Occupied portfolio into traditional CRE Non-Owner Occupied loans and RV Park loans, and C&I portfolio into traditional C&I loans and SBA loans. The Company also stratified C&I loans and consumer loans that do not require reserves, as the Company has third-party agreements in place to cover credit losses. The Company has identified the following pools subject to estimate of credit loss: (1) 1-4 Family Construction; (2) Other Construction; (3) Farmland; (4) Revolving Secured by 1-4 Family; (5) Residential Secured by First Liens; (6) Residential Secured by Junior Liens; (7) Multifamily; (8) Multifamily MHC; (9) CRE Owner Occupied; (10) CRE Non-Owner Occupied; (11) CRE Non-Owner Occupied RV Park; (12) Agriculture; (13) C&I; (14) C&I SBA; (15) Consumer; and (16) Municipal. The Company has determined, given its limited loss experience, that peer data and other external data to support loss history provides the best basis for its assessment of expected credit losses. The Company believes that the use of peer loss data from March 31, 2004 through December 31, 2019 and January 31, 2022 through March 31, 2025 presents loss histories that appropriately reflect a full economic cycle, reflects asset-specific risk characteristics at each pool level identified, and includes a historical look-back period that is objective and reflective of future expected credit losses. Loss data from 2020 and 2021 was excluded from the data set to exclude pandemic-related data from the model. The method for determining the estimate of lifetime credit losses includes, among other things, the following main components: (i) the use of probability of default and loss given default assumptions under a discounted cash flow model; (ii) a multi-scenario macroeconomic forecast; (iii) an initial and reasonable and supportable forecast period of one year for all loan segments; and (iv) a reversion period of one year using a linear transition method to historical loss rates. Given the inherent limitations of a quantitative-only model, qualitative adjustments are included to factor in data points not captured from a quantitative analysis alone. Qualitative criteria that can be considered includes, among other things, the following: • Concentrations – the existence and effect of any concentrations of credit, and changes in the level of such concentrations; • Volume – changes in the nature and volume of the portfolio and in the terms of the loans; • Economic – changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments; • Policy – changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; • Quality – changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans; • Loan review - changes in the quality of internal loan review processes, measured by third party audit and regulatory results; and • External – the effect of other external factors, such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company’s loan portfolio. Management reviews current information on a quarterly basis to assess the forecasted future economic impact for purposes of evaluating the adequacy of the ACL. The forecasted direction and magnitude of change with respect to future economic conditions is then assessed against the estimate in the model. Any changes resulting from the quarterly assessment are recorded in “Provision for credit losses” in the unaudited consolidated statements of income. The Audit Committee of the board of directors reviews the adequacy of the allowance at least quarterly. 86
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Accrued interest receivable is excluded from amortized cost of all financial instrument types and included in “Interest receivable and other assets” in the consolidated balance sheets. Accrued interest receivable is not subject to an estimate for credit loss, as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. When a loan is placed on non-accrual status, which occurs within 90 days of a borrower becoming delinquent, interest previously accrued but not collected is reversed against current period income. If an individual loan’s characteristics have deteriorated to below a range of the overall pool, the loan would be individually evaluated. Individually evaluated loans are measured for credit loss based on one of the following methods: (i) present value of future expected cash flows, discounted at the loan’s effective interest rate; (ii) amount by which carrying value of the loan exceeds the loan’s observable market price; or (iii) the fair value of the collateral, less estimated selling costs, if the loan is collateral dependent. The Company applies the practical expedient and defines collateral dependent loans as those where the borrower is experiencing financial difficulty and on which payment is expected to be provided substantially through the operation or sale of the collateral. Troubled Debt Restructurings (“TDRs”) and Other Loan Modifications The Company evaluates all loan modifications to determine whether they are made to borrowers experiencing financial difficulty, in accordance with ASC 326, as amended by ASU 2022-02. A loan modification is considered to be to a borrower experiencing financial difficulty if the borrower is unable to meet its current contractual obligations and the Company grants a concession, such as principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension. For such modifications, the Company assesses whether the modification should be accounted for as a new loan or as a continuation of the existing loan, based on the specific facts and circumstances. The Company provides enhanced disclosures regarding the nature and extent of modifications made to borrowers experiencing financial difficulty, including the type of modification, the financial effect of the modification, and subsequent performance. The Company continues to monitor the performance of these modified loans and provides the required disclosures in the notes to the consolidated financial statements. Federal Home Loan Bank Stock Federal Home Loan Bank stock represents the Company’s investment in the stock of the FHLB and is carried at par value. While technically these are considered equity securities, there is no market for FHLB stock. Therefore, the shares are considered as other investment securities. Management periodically evaluates FHLB stock for impairment. Management’s determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as: (i) the significance of any decline in net assets of the FHLB, as compared to the capital stock amount for the FHLB and the length of time this situation has persisted; (ii) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; (iii) the impact of legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB; and (iv) the liquidity position of the FHLB. Both cash and stock dividends are reported as non-interest income. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using a straight-line basis. Table 1.1 presents the normal estimated lives used in determining depreciation and amortization. Table 1.1: Normal Estimated Lives - Premises and Equipment Equipment 3 - 12 years Furniture and fixtures 5 - 10 years Leasehold improvements 5 - 15 years Automobiles 3 - 5 years Leasehold improvements are amortized over the lesser of the useful life of the asset or the remaining term of the lease. The straight-line method of depreciation is followed for all assets for financial reporting purposes, but accelerated methods are used for tax purposes. 87
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When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to expense as incurred. Other Real Estate Real estate properties acquired through, or in lieu of, loan foreclosure, are classified as OREO, are to be sold, and are initially recorded at fair value of the property at the date of foreclosure less estimated selling costs. Any write-downs in value are recorded against the allowance for credit losses. Subsequent to foreclosure, valuations are periodically performed, and any revisions in the estimate of fair value are reported as adjustments to the carrying value of the real estate, provided the adjusted carrying amount does not exceed the original amount at foreclosure. Subsequent valuation adjustments are recognized as OREO write-downs. Revenues and expenses incurred from OREO property management are recorded in non-interest income and non-interest expense, respectively. During 2025, the Bank did not foreclose on any loans. During 2024, the Bank foreclosed on one loan, and its associated OREO was sold during 2025. During 2023, the Bank did not foreclose on any loans. BOLI BOLI is recorded at the amount that can be realized under the insurance contract at the consolidated balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Increases in contract value are recorded as non-interest income, and insurance proceeds received are recorded as a reduction of the contract value. Long-Term Assets Premises, equipment, and other long-term assets are reviewed for impairment when events indicate that their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are adjusted to reflect their fair value. Leases The Company records a ROUA in the consolidated balance sheets for those leases that convey rights to control use of identified assets for a period of time in exchange for consideration. The Company records a lease liability in the consolidated balance sheets for the present value of future payment commitments. All of the Company’s leases are comprised of operating leases in which the Company is the lessee of real estate property for branches and operations. The Company elected not to include short-term leases (i.e., leases with initial terms of 12 months or less) within the ROUA and lease liability. Known or determinable adjustments to the required minimum future lease payments are included in the calculation of the Company’s ROUA and lease liability. Adjustments to the required minimum future lease payments that are variable and will not be determinable until a future period, if any, are included as variable lease costs. Additionally, when expected variable payments for common area maintenance, taxes, and insurance are unknown and not determinable at lease commencement, they are not included in the determination of the Company’s ROUA and lease liability. The value of the ROUA and lease liability is impacted by the amount of the periodic payment required, length of the lease term, and the discount rate used to calculate the present value of the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROUA and lease liability. ASC 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. The lease liability is reduced based on the discounted present value of remaining payments as of each reporting period. The ROUA value is measured using the lease liability as adjusted for prepaid or accrued lease payments and remaining lease incentives, unamortized direct costs, and impairment, if any. Equity Investments The Company records equity investments within “Interest receivable and other assets” in the consolidated balance sheets. Equity investments are recorded under the following methods: • Low income housing tax credit investments are accounted for under the proportional amortization method. Under this method, the initial book value (gross commitment amount) of the investment is amortized over time in proportion to the projected tax benefits to be received. This amortization is a component of income tax expense. 88
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• For equity investments where the Company has significant influence, the Company applies the equity method of accounting, which adjusts the carrying value of the investment to recognize a proportionate share of the financial results of the investment entity, regardless of whether any distribution is made. Any adjustments to the fair value of these investments are recorded in “Other non-interest income” in the consolidated statements of income. • For certain nonmarketable equity investments where the equity method of accounting is not applicable, the Company applies the fair value method. Any adjustments to the fair value of these investments are recorded in “Other non-interest income” in the consolidated statements of income. Fair value is determined by reference to readily determinable market values, if applicable. As these investments do not have readily determinable fair values, they are generally accounted for at cost minus impairment, if any, plus or minus changes resulting from observable transactions involving the same or similar investments from the same issuer. This practice is referred to as the measurement alternative. Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Transfers of Financial Assets Transfers of an entire financial asset, a group of financial assets, or a participating interest in an entire financial asset are accounted for as sales when control has been relinquished. Control is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of more than trivial conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Included in the loan portfolio are loans guaranteed by the SBA, the Farm Service Agency, the Federal Agriculture Mortgage Corporation, and the United States Department of Agriculture, of which the guaranteed portion is expected to be sold in the secondary market in exchange for a one-time premium. At the time the guaranteed portion of the loan is sold, the unguaranteed portion and related right to service the entire loan is retained with the Company, to earn future servicing income. The loans held for sale are accounted for at the lower of cost or fair value, using the aggregate method. There were no government-guaranteed loans held for sale at December 31, 2025. Government-guaranteed loans held for sale at December 31, 2024 totaled $3,247,000. Servicing rights acquired through the origination of loans, which are subsequently sold with servicing rights retained, are recognized as separate assets or liabilities. Servicing assets and liabilities are initially recorded at fair value and are subsequently amortized in proportion to, and over the period of, the related net servicing income or expense. Servicing assets represent the assets related to servicing loans for others, including collecting payments, maintaining escrow accounts, disbursing payments to investors, and conducting foreclosure proceedings. The amortized assets are assessed for impairment or increased obligations at the loan level, based on the fair value on a periodic basis. The Company serviced loans with unpaid principal balances of $121,515,000 and $159,078,000 as of December 31, 2025 and 2024, respectively, on behalf of others. Loan Commitments and Related Financial Instruments Financial instruments include off-balance sheet credit instruments, such as commitments to make loans, and financial standby letters of credit issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Loan commitments not unconditionally cancellable are subject to an estimate of credit loss under the CECL model. The Company’s process for determining the estimate of credit loss on loan commitments is the same as it is on loans. Reserves for unfunded commitments are included as a component of “Interest payable and other liabilities” in the consolidated balance sheets. Stock-Based Compensation The Company issues equity grants in the form of stock options, RSAs, and PSUs under the Five Star Bancorp 2021 Equity Incentive Plan. These grants are issued to executives, directors, and employees. Compensation cost is recognized based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the grant date fair value of 89
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stock options, while the fair value of the Company’s common stock at the date of grant is used for RSAs and PSUs. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company recognizes forfeitures as they occur and does not estimate forfeitures at grant. Supplemental Executive Retirement Plan The Bank has entered into a non-qualified retirement plan for the Chief Executive Officer based on a continuation of employment. The present value of annual post-retirement payments is allocated to expense over the years of required service. Income Taxes The Company files its income taxes on a consolidated basis with its subsidiary. The allocation of income tax expense represents each entity’s proportionate share of the consolidated provision for income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance is evaluated at least annually and, as needed, reduces deferred tax assets to the amount expected to be realized. The Company accounts for uncertain tax positions in accordance with FASB ASC Topic No. 740, Accounting for Uncertainty in Income Taxes. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a likelihood greater than 50% of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Derivatives All derivative instruments are recorded at fair value. If derivative instruments are designated as hedges of fair values, both the change in the fair value of the hedge and the hedged item are included in current earnings. Fair value adjustments related to cash flow hedges, if any, are recorded in other comprehensive income or loss and reclassified to earnings when the hedged transaction is reflected in earnings. Comprehensive Income or Loss Comprehensive income or loss consists of net income and other comprehensive income or loss. Other comprehensive income or loss includes unrealized gains and losses on securities available-for-sale, net of tax, which are also recognized as separate components of shareholders’ equity. EPS Basic EPS is net income divided by the weighted average number of common shares outstanding during the period less average unvested RSAs. Diluted EPS includes the dilutive effect of additional potential common shares related to unvested RSAs using the treasury stock method. During the years ended December 31, 2025 and 2024, there were no outstanding stock options. The Company has two forms of outstanding common stock: common stock and unvested RSAs. Holders of unvested RSAs receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in 90
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undistributed earnings, and therefore the RSAs are considered participating securities. However, under the two-class method, the difference in EPS is not significant for these participating securities. Table 1.2: EPS (in thousands, except share and per share data) 2025 2024 2023 Net income $ 61,606 $ 45,671 $ 47,734 Basic weighted average common shares outstanding 21,224,788 20,154,385 17,166,592 Add: Dilutive effects of assumed vesting of restricted stock 48,764 51,055 21,377 Total dilutive weighted average common shares outstanding 21,273,552 20,205,440 17,187,969 Earnings per common share: Basic EPS $ 2.90 $ 2.26 $ 2.78 Diluted EPS $ 2.90 $ 2.26 $ 2.78 The Company did not have any anti-dilutive shares at December 31, 2025 or December 31, 2024. Subordinated Notes The subordinated notes are recorded at par with related debt issuance costs reported as a direct reduction from the carrying amount. Issuance costs are amortized over the remaining maturity of the notes and reflected in interest expense. Fair Value of Financial Instruments The consolidated financial statements include various estimated fair value information as of December 31, 2025 and 2024. Such information, which pertains to the Company’s financial instruments, does not purport to represent the aggregate net fair value of the Company. Further, the fair value estimates are based on various assumptions, methodologies, and subjective considerations, which vary widely among different financial institutions, and are subject to change. Fair Value Measurements The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company bases the fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Securities available-for-sale and derivatives, if any, are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record certain assets at fair value on a non-recurring basis, such as loans held for sale and certain collateral dependent impaired loans held for investment. These non-recurring fair value adjustments typically involve write-downs of individual assets due to application of lower of cost or fair value accounting. Accounting standards require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The fair values of securities are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). 91
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As a result, if other assumptions had been used, the Company’s recorded earnings or disclosures could have been materially different from those reflected in these consolidated financial statements. Subsequent Events The Company has evaluated events and transactions subsequent to December 31, 2025 for recognition or disclosure. Additional detail can be found in Note 19, Subsequent Events. Note 2: Recently Issued Accounting Standards The following information reflects recent accounting standards that have been adopted or are pending adoption by the Company. As discussed in Note 1, Basis of Presentation, the Company qualifies as an emerging growth company and as such, has elected not to opt out of the extended transition period for complying with new or revised accounting standards and is not subject to the new or revised accounting standards applicable to public companies during the extended transition period. However, we may early adopt certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies to the extent early adoption is permitted. Our early adoption of ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures (“ASU 2023-09”) was voluntary and does not represent an irrevocable election to opt out of the extended transition period for all standards. Apart from ASU 2023-09, the accounting standards discussed below indicate effective dates for the Company as an emerging growth company using the extended transition period. Accounting Standards Adopted On January 1, 2023, the Company adopted ASC 326, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. The CECL model applies to estimated credit losses on loans receivable, held-to- maturity debt securities, unfunded loan commitments, and certain other financial assets measured at amortized cost. Under ASC 326, available-for-sale debt securities are evaluated for impairment if fair value is less than amortized cost, with any estimated credit losses recorded through a credit loss expense and an allowance, rather than a write-down of the investment. Changes in fair value that are not credit-related will continue to be recorded in other comprehensive income. The Company adopted this standard using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance was effective for financial assets measured at amortized cost. For certain new disclosures required under ASC 326, such as credit quality indicators by year of origination, the Company has not restated comparative financial information before January 1, 2023 to conform under ASC 326. This adoption method is considered a change in accounting principle requiring additional disclosure of the nature and reason for the change, which is solely due to adoption of ASC 326. On January 1, 2023, the Company also adopted ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which had no material impact. 92
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Table 2.1 reflects the cumulative-effect adjustments the Company recorded on January 1, 2023 for the adoption of ASC 326. Table 2.1: Impact of Adoption of ASC 326 January 1, 2023 (in thousands) Pre-ASC 326 Adoption Impact of ASC 326Adoption Post-ASC 326 Adoption Assets: Allowance for Credit Losses - Loans $ (28,389) $ (5,262) $ (33,651) Allowance for Credit Losses - HTM Securities — (20) (20) Deferred Tax Asset (Interest receivable and otherassets) 12,273 1,883 14,156 Liabilities: Reserve for Unfunded Commitments (Interestpayable and other liabilities) (125) (1,092) (1,217) Shareholders’ Equity: Retained Earnings (46,736) 4,491 (42,245) In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”). Under current GAAP, an entity can only elect to apply the proportional amortization method to investments in low income housing tax credit (“LIHTC”) structures. The amendments in ASU 2023-02 allow entities to elect to account for equity investments made primarily for the purpose of receiving income tax credits using the proportional amortization method, regardless of the tax credit program through which the investment earns income tax credits, if certain conditions are met. ASU 2023-02 provides amendments to paragraph ASC 323-740-25-1, which sets forth the conditions needed to apply the proportional amortization method. The amendments make certain limited changes to those conditions to clarify their application to a broader group of tax credit investment programs. However, the conditions in substance remain consistent with current GAAP. The amendments in ASU 2023-02 also eliminate certain LIHTC-specific guidance to align the accounting more closely with the accounting for other equity investments in tax credit structures and require that the delayed equity contribution guidance in paragraph ASC 323-740-25-3 apply only to tax equity investments accounted for using the proportional amortization method. The Company adopted ASU 2023-02 on January 1, 2024, which did not have a significant impact on the Company’s consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures (“ASU 2023-07”), amending disclosure requirements related to segment reporting primarily through enhanced disclosure about significant segment expenses and by requiring disclosure of segment information on an annual and interim basis. ASU 2023-07 is effective January 1, 2024 and for interim periods beginning after December 15, 2024. The key amendments: (i) require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (the “CODM”) and included within each reported measure of segment profit or loss; (ii) require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition; (iii) require that a public entity provide all annual disclosures about a reportable segment’s profit or loss currently required by GAAP in interim periods as well; (iv) clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, an entity may report one or more of those additional measures of segment profit; (v) require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources; and (vi) require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures. The Company has one reportable segment. The Company adopted ASU 2023-07 on January 1, 2024, which did not have a significant impact on the Company’s consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, which enhances the transparency and decision usefulness of income tax disclosures. ASU 2023-09 will require disaggregated information about a reporting entity’s effective tax rate 93
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reconciliation as well as information on income taxes paid. Entities will also be required to disclose income/(loss) from continuing operations before income tax expense/(benefit) disaggregated between domestic and foreign operations, as well as income tax expense/(benefit) from continuing operations disaggregated by federal, state, and foreign operations. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, for emerging growth companies that have elected not to opt out of the extended transition period. The Company elected to early adopt ASU 2023-09 for the fiscal year ended December 31, 2025, which did not have a significant impact on the Company’s consolidated financial statements. The Company’s early adoption of ASU 2023-09 was voluntary and does not represent an irrevocable election to opt out of the extended transition period for all standards. The Company has updated its income tax disclosures in accordance with ASU 2023-09, which primarily enhances transparency regarding income tax expense and related items. Accounting Standards Issued But Not Yet Adopted In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”), amending disclosure or presentation requirements related to various subtopics in the FASB’s ASC. ASU 2023-06 was issued in response to the SEC’s initiative to update and simplify disclosure requirements. The SEC identified 27 disclosure requirements that were incremental to those in the ASC and referred them to the FASB for potential incorporation into GAAP. To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations as the FASB incorporated them into the relevant ASC subtopics. ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the ASC. ASU 2023-06 is to be applied prospectively, and early adoption is prohibited. For reporting entities subject to the SEC’s existing disclosure requirements, the effective dates of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the ASC and will not become effective for any entities. ASU 2023-06 is not expected to have a significant impact on the Company’s consolidated financial statements. In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements (“ASU 2024-02”). ASU 2024-02 contains amendments to the ASC that remove references to various Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior Statements to provide guidance in certain topical areas. FASB Concepts Statements are nonauthoritative. Removing all references to Concepts Statements in the guidance is intended to simplify the ASC and draw a distinction between authoritative and nonauthoritative literature. ASU 2024-02 is effective January 1, 2026 for emerging growth companies electing not to opt out of the extended transition period and is not expected to have a significant impact on the Company’s consolidated financial statements. On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (“Subtopic 220-40”): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025 the FASB issued ASU 2025-01, Clarifying the Effective Date. This standard responds to investor input by requiring public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. This standard is effective for all entities that are subject to Subtopic 220-40, for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, but early adoption is permitted. ASU 2024-03 is not expected to have a significant impact on the Company’s consolidated financial statements. Note 3: Investment Securities The Company’s investment securities portfolio includes obligations of states and political subdivisions, securities issued by U.S. federal government agencies, such as the SBA, and securities issued by U.S. GSEs, such as the FNMA, the FHLMC, and the FHLB. The Company also invests in residential and commercial mortgage-backed securities, collateralized mortgage obligations issued or guaranteed by GSEs, and corporate bonds, as reflected in the following tables. 94
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A summary of the amortized cost and fair value related to securities held-to-maturity as of December 31, 2025 and 2024 is presented in Table 3.1. Securities held-to-maturity had a $20,000 allowance for credit losses as of December 31, 2025 and 2024. Table 3.1: Securities Held-to-Maturity (in thousands) Amortized Cost Gross Unrealized Fair ValueGains (Losses) 2025 Obligations of states and political subdivisions $ 2,190 $ — $ (195) $ 1,995 Total held-to-maturity $ 2,190 $ — $ (195) $ 1,995 2024 Obligations of states and political subdivisions $ 2,720 $ — $ (367) $ 2,353 Total held-to-maturity $ 2,720 $ — $ (367) $ 2,353 For securities issued by states and political subdivisions, for purposes of evaluating whether to recognize credit loss expense, management considers: (i) issuer and/or guarantor credit ratings; (ii) historical probability of default and loss given default rates for given bond ratings and remaining maturity; (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities; (iv) internal credit review of the financial information; and (v) whether or not such securities have credit enhancements such as guarantees, contain a defeasance clause, or are pre-refunded by the issuers. The Company adopted ASC 326 on January 1, 2023, which affects accounting of credit loss expense on held-to-maturity and available-for- sale securities. As of December 31, 2025 and 2024, the allowance for credit losses on held-to-maturity securities was $20,000. The Company did not record an allowance for credit losses on available-for-sale securities as of December 31, 2025 and 2024. Refer to Note 1, Basis of Presentation, for further detail. A summary of the amortized cost and fair value related to securities available-for-sale as of December 31, 2025 and 2024 is presented in Table 3.2. Table 3.2: Securities Available-for-Sale (in thousands) Amortized Cost Gross Unrealized Fair ValueGains (Losses) 2025 U.S. government agency securities $ 7,276 $ 138 $ (53) $ 7,361 Mortgage-backed securities 56,941 31 (8,786) 48,186 Obligations of states and political subdivisions 40,734 — (3,770) 36,964 Collateralized mortgage obligations 246 — (15) 231 Corporate bonds 2,000 — (43) 1,957 Total available-for-sale $ 107,197 $ 169 $ (12,667) $ 94,699 2024 U.S. government agency securities $ 8,293 $ 152 $ (100) $ 8,345 Mortgage-backed securities 62,397 6 (11,833) 50,570 Obligations of states and political subdivisions 42,762 1 (5,626) 37,137 Collateralized mortgage obligations 305 — (26) 279 Corporate bonds 2,000 — (137) 1,863 Total available-for-sale $ 115,757 $ 159 $ (17,722) $ 98,194 95
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The amortized cost and fair value of investment securities by contractual maturity at December 31, 2025 and 2024 are shown in Table 3.3. Expected maturities may differ from contractual maturities if the issuers of the securities have the right to call or prepay obligations with or without call or prepayment penalties. Table 3.3: Contractual Maturities - Investment Securities (in thousands) 2025 2024 Held-to-Maturity Available-for-Sale Held-to-Maturity Available-for-Sale Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Within one year $ 170 $ 155 $ — $ — $ 210 $ 182 $ — $ — After one but within five years 865 788 1,256 1,196 945 818 798 737 After five years through ten years 1,155 1,052 13,471 12,385 1,380 1,193 9,221 8,108 After ten years — — 26,007 23,383 185 160 32,743 28,292 Investment securities not due at a singlematurity date: U.S. government agency securities — — 7,276 7,361 — — 8,293 8,345 Mortgage-backed securities — — 56,941 48,186 — — 62,397 50,570 Collateralized mortgage obligations — — 246 231 — — 305 279 Corporate bonds — — 2,000 1,957 — — 2,000 1,863 Total $ 2,190 $ 1,995 $107,197 $ 94,699 $ 2,720 $ 2,353 $115,757 $ 98,194 96
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Sales of investment securities and gross gains and losses are shown in Table 3.4. Table 3.4: Income Statement Impacts for Securities Available-for-Sale (in thousands) 2025 2024 2023 Available-for-sale: Sales proceeds $ — $ — $ 737 Gross realized (losses) gains — — (167) Pledged investment securities are shown in Table 3.5. Table 3.5: Pledged Investment Securities (in thousands) 2025 2024 Pledged to: The State of California, securing deposits of public funds and borrowings $ 47,091 $ 49,477 The Federal Reserve Discount Window, increasing borrowing capacity 42,578 45,576 Total pledged investment securities $ 89,669 $ 95,053 Table 3.6 details the gross unrealized losses and fair values aggregated by investment category and length of time that individual available- for-sale securities have been in a continuous unrealized loss position at December 31, 2025 and 2024. Table 3.6: Securities Available-for-Sale in Continuous Unrealized Loss Positions (in thousands) Less than 12 months 12 months or more Total securities in a loss position Fair Value Unrealized(Loss) Fair Value Unrealized(Loss) Fair Value Unrealized(Loss) 2025 U.S. government agencysecurities $ 1,683 $ (6) $ 2,393 $ (47) $ 4,076 $ (53) Mortgage-backed securities — — 47,090 (8,786) 47,090 (8,786) Obligations of states andpolitical subdivisions 360 (20) 36,603 (3,750) 36,963 (3,770) Collateralized mortgageobligations — — 231 (15) 231 (15) Corporate bonds — — 1,957 (43) 1,957 (43) Total temporarily impairedsecurities $ 2,043 $ (26) $ 88,274 $ (12,641) $ 90,317 $ (12,667) 2024 U.S. government agencysecurities $ 2,316 $ (11) $ 4,082 $ (89) $ 6,398 $ (100) Mortgage-backed securities — — 49,476 (11,833) 49,476 (11,833) Obligations of states andpolitical subdivisions — — 35,630 (5,626) 35,630 (5,626) Collateralized mortgageobligations — — 279 (26) 279 (26) Corporate bonds — — 1,863 (137) 1,863 (137) Total temporarily impairedsecurities $ 2,316 $ (11) $ 91,330 $ (17,711) $ 93,646 $ (17,722) There were 147 available-for-sale securities in unrealized loss positions at December 31, 2025 and 2024. As of December 31, 2025, the investment portfolio included 142 investment securities that had been in a continuous loss position for twelve months or more and five investment securities that had been in a loss position for less than twelve months. 97
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There was one held-to-maturity security in a continuous unrealized loss position at December 31, 2025 and 2024, which had been in a continuous loss position for more than twelve months. Obligations issued or guaranteed by government agencies such as the GNMA and the SBA or GSEs under conservatorship such as the FNMA and the FHLMC, are guaranteed or sponsored by agencies of the U.S. government and have strong credit profiles. The Company therefore expects to receive all contractual interest payments on time and believes the risk of credit losses on these securities is remote. The Company’s investment in obligations of states and political subdivisions is deemed credit worthy after management’s comprehensive analysis of the issuers’ latest financial information, credit ratings by major credit agencies, and/or credit enhancements. Non-Marketable Securities Included in Other Assets FHLB capital stock: As a member of the FHLB, the Company is required to maintain a minimum investment in FHLB capital stock determined by the board of directors of the FHLB. The minimum investment requirements can increase in the event the Company increases its total asset size or borrowings with the FHLB. Shares cannot be purchased or sold except between the FHLB and its members at the $100 per share par value. The Company held $15,000,000 of FHLB stock at December 31, 2025 and 2024. The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and do not have a readily determinable market value. Based on management’s analysis of the FHLB’s financial condition and certain qualitative factors, management determined that the FHLB stock was not impaired at December 31, 2025 and 2024. For the years ended December 31, 2025, 2024, and 2023, cash dividends received on FHLB capital stock in the amount of $1,317,000, $1,320,000, and $970,000, respectively, were recorded as non-interest income in the consolidated statements of income. Equity investments: The Company is a limited partner in certain venture-backed capital funds and accounts for these investments under the equity method of accounting, as its ownership is greater than 3% of each fund. The Company held $12,111,000 and $9,328,000 of equity investments at December 31, 2025 and 2024, respectively, included in “Interest receivable and other assets” in the consolidated balance sheets. The Company’s share of earnings from these investments was $821,000, $545,000, and $1,683,000 for the years ended December 31, 2025, 2024, and 2023, respectively, and is included in “Other non-interest income” in the consolidated statements of income. No individual investee is material to the Company’s consolidated financial statements. Based on management’s analysis of each fund’s financial condition and certain qualitative factors, management determined that the equity investments were not impaired at December 31, 2025 and 2024. Note 4: Loans and Allowance for Credit Losses The Company’s loan portfolio is its largest class of earning assets and typically provides higher yields than other types of earning assets. Associated with the higher yields is an inherent amount of credit risk which the Company attempts to 98
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mitigate through strong underwriting practices. Table 4.1 presents the balance of each major product type within the Company’s portfolio as of the dates indicated. Table 4.1: Loans Outstanding (in thousands) December 31, 2025 December 31, 2024 Real estate: Commercial $ 3,305,713 $ 2,857,173 Commercial land and development 1,352 3,849 Commercial construction 96,760 111,318 Residential construction 8,389 4,561 Residential 37,566 32,774 Farmland 59,606 47,241 Commercial: Secured 251,736 170,548 Unsecured 40,422 27,558 Consumer and other 275,475 279,584 Subtotal 4,077,019 3,534,606 Net deferred loan fees (2,090) (1,920) Loans held for investment 4,074,929 3,532,686 Allowance for credit losses (44,409) (37,791) Loans held for investment, net of allowance for credit losses $ 4,030,520 $ 3,494,895 Underwriting Real estate loans: Real estate loans are subject to underwriting standards and processes similar to those for commercial loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected than other loans by conditions in the real estate market or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. Construction loans: With respect to construction loans that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction loans may be underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the ultimate success of the project. Sources of repayment for these types of loans may be pre- committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored using on-site inspections and are generally considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing. Residential real estate loans: Residential real estate loans are underwritten based upon the borrower’s income, credit history, and collateral. To monitor and manage residential loan risk, policies and procedures are developed and modified, as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage, collection remedies, the number of such loans a borrower can have at one time, and documentation requirements. 99
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Farmland loans: Farmland loans are generally made to producers and processors of crops and livestock. Repayment is primarily from the sale of an agricultural product or service. Farmland loans are secured by real property and are susceptible to changes in market demand for specific commodities. This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions, changes in business cycles, and adverse weather conditions. Commercial loans: Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, the Company’s management examines current and projected cash flows to determine the ability of the borrower to repay its obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. Consumer loans: The Company purchased consumer loans underwritten utilizing credit scoring analysis to supplement the underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage, collection remedies, the number of such loans a borrower can have at one time, and documentation requirements. Concentrations The Company’s customers are primarily located in the Greater Sacramento, North Valley, and San Francisco Bay Area regions of California. As of December 31, 2025, approximately 86% of the Company’s loans were real estate related, 7% were commercial, and 7% were consumer. Credit Quality Indicators The Company has established a loan risk rating system to measure and monitor the quality of the loan portfolio. All loans are assigned a risk rating from the inception of the loan until the loan is paid off. The primary loan grades are as follows: Loans rated pass: These are loans to borrowers with satisfactory financial support, repayment capacity, and credit strength. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history, and management expertise. Loans in this category must have an identifiable and stable source of repayment and meet the Company’s policy regarding debt service coverage ratios. These borrowers are capable of sustaining normal economic, market, or operational setbacks without significant financial impacts and their financial ratios and trends are acceptable. Negative external industry factors are generally not present. The loan may be secured, unsecured, or supported by non-real estate collateral for which the value is more difficult to determine and/or marketability is more uncertain. Loans rated watch: These are loans which have deficient loan quality and potentially significant issues, but losses do not appear to be imminent, and the issues may be temporary in nature. The significant issues are typically: (i) a history of losses or events that threaten the borrower’s viability; (ii) a property with significant depreciation and/or marketability concerns; or (iii) poor or deteriorating credit, occasional late payments, and/or limited reserves but the loan is generally kept current. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Loans rated substandard: These are loans which are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged (if any). Loans so classified exhibit a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected. Loans rated doubtful: These are loans for which the collection or liquidation of the entire debt is highly questionable or improbable. Typically, the possibility of loss is extremely high. The losses on these loans are deferred until all pending factors have been addressed. 100
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Table 4.2 presents the amortized cost basis of the Company’s loans by origination year, where origination is defined as the later of origination or renewal date, and credit quality indicator as of the periods indicated. Table 4.2: Loans by Risk Category and Vintage Amortized Cost Basis by Origination Year as of December 31, 2025 (in thousands) 2025 2024 2023 2022 2021 Prior RevolvingLoans RevolvingConverted toTerm Total Real estate: Commercial Pass $ 670,067 $ 414,556 $ 282,656 $ 838,288 $ 579,921 $ 406,273 $ 13,549 $ — $ 3,205,310 Watch 200 — 2,974 31,209 16,949 23,407 1,391 — 76,130 Substandard 1,044 — 2,122 — 3,700 14,040 415 — 21,321 Total 671,311 414,556 287,752 869,497 600,570 443,720 15,355 — 3,302,761 Commercial land and development Pass 414 75 — — — 369 496 — 1,354 Total 414 75 — — — 369 496 — 1,354 Commercial construction Pass 19,160 11,692 50,158 522 — — — — 81,532 Watch — 14,891 — — — — — — 14,891 Total 19,160 26,583 50,158 522 — — — — 96,423 Residential construction Pass 8,341 — — — — — — — 8,341 Total 8,341 — — — — — — — 8,341 Residential Pass 6,285 5,923 4,718 2,784 8,883 7,548 1,459 — 37,600 Total 6,285 5,923 4,718 2,784 8,883 7,548 1,459 — 37,600 Farmland Pass 19,761 1,580 1,994 6,126 8,215 21,323 — — 58,999 Watch — — — — — 585 — — 585 Total 19,761 1,580 1,994 6,126 8,215 21,908 — — 59,584 Commercial: Secured Pass 53,290 25,960 15,508 16,270 6,881 15,762 107,900 — 241,571 Watch — 95 528 6,867 1,665 1,122 — — 10,277 Substandard 167 — 166 34 74 17 499 — 957 Total 53,457 26,055 16,202 23,171 8,620 16,901 108,399 — 252,805 Unsecured Pass 12,597 8,163 2,514 1,282 1,828 2,874 11,195 — 40,453 Total 12,597 8,163 2,514 1,282 1,828 2,874 11,195 — 40,453 Consumer and other Pass 72,893 172,130 21,159 4,976 4,172 120 152 — 275,602 Substandard — — — 6 — — — — 6 Total 72,893 172,130 21,159 4,982 4,172 120 152 — 275,608 Total Pass 862,808 640,079 378,707 870,248 609,900 454,269 134,751 — 3,950,762 Watch 200 14,986 3,502 38,076 18,614 25,114 1,391 — 101,883 Substandard 1,211 — 2,288 40 3,774 14,057 914 — 22,284 Total $ 864,219 $ 655,065 $ 384,497 $ 908,364 $ 632,288 $ 493,440 $ 137,056 $ — $ 4,074,929 101
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Table 4.2: Loans by Risk Category and Vintage (continued) Amortized Cost Basis by Origination Year as of December 31, 2024 (in thousands) 2024 2023 2022 2021 2020 Prior RevolvingLoans RevolvingConverted toTerm Total Real estate: Commercial Pass $ 427,209 $ 298,408 $ 881,675 $ 618,052 $ 202,356 $ 312,622 $ 3,688 $ — $ 2,744,010 Watch 641 8,193 42,531 31,895 16,969 6,316 1,391 — 107,936 Substandard — — — — — 2,585 — — 2,585 Total 427,850 306,601 924,206 649,947 219,325 321,523 5,079 — 2,854,531 Commercial land and development Pass 1,781 — 1,237 — 180 656 — — 3,854 Total 1,781 — 1,237 — 180 656 — — 3,854 Commercial construction Pass 13,757 72,933 13,112 — 11,231 — — — 111,033 Total 13,757 72,933 13,112 — 11,231 — — — 111,033 Residential construction Pass 4,560 — — — — — — — 4,560 Total 4,560 — — — — — — — 4,560 Residential Pass 6,080 4,783 2,869 9,483 2,201 6,246 1,134 — 32,796 Total 6,080 4,783 2,869 9,483 2,201 6,246 1,134 — 32,796 Farmland Pass 1,054 2,042 7,032 11,467 6,960 17,373 — — 45,928 Watch 501 — 791 — — — — — 1,292 Total 1,555 2,042 7,823 11,467 6,960 17,373 — — 47,220 Commercial: Secured Pass 26,536 20,427 21,142 9,607 9,144 14,400 55,914 — 157,170 Watch — 301 9,840 2,581 107 1,289 — — 14,118 Substandard — — — — — 48 — — 48 Total 26,536 20,728 30,982 12,188 9,251 15,737 55,914 — 171,336 Unsecured Pass 8,071 4,499 2,815 3,494 4,817 1,364 2,515 — 27,575 Total 8,071 4,499 2,815 3,494 4,817 1,364 2,515 — 27,575 Consumer and other Pass 232,420 33,453 7,874 5,812 6 207 — — 279,772 Substandard — — 9 — — — — — 9 Total 232,420 33,453 7,883 5,812 6 207 — — 279,781 Total Pass 721,468 436,545 937,756 657,915 236,895 352,868 63,251 — 3,406,698 Watch 1,142 8,494 53,162 34,476 17,076 7,605 1,391 — 123,346 Substandard — — 9 — — 2,633 — — 2,642 Total $ 722,610 $ 445,039 $ 990,927 $ 692,391 $ 253,971 $ 363,106 $ 64,642 $ — $ 3,532,686 Management regularly reviews the Company’s loans for accuracy of risk grades whenever new information is received. Borrowers are generally required to submit financial information at regular intervals. Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals generally ranging from monthly to annually depending on credit size, risk, and complexity. All commercial borrowers with loans exceeding a certain dollar threshold are usually required to submit financials annually for review; this includes business financial statements, rent rolls, property income statements, and tax returns. Management monitors construction loans monthly and reviews consumer loans based on delinquency. Management also reviews loans graded “watch” or worse, regardless of loan type, no less than quarterly. 102
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Table 4.3 presents the Company’s gross charge-offs by origination year and class, where origination is defined as the later of origination or renewal date, as of the periods indicated. Table 4.3: Gross Charge-Offs by Vintage Amortized Cost Basis by Origination Year as of December 31, 2025 (in thousands) 2025 2024 2023 2022 2021 Prior RevolvingLoans RevolvingConverted toTerm Total Real estate: Commercial $ — $ — $ — $ 112 $ 168 $ — $ — $ — $ 280 Commercial: Secured — 405 510 453 343 1,502 — — 3,213 Unsecured — — — — 50 — — — 50 Consumer and other — — 35 179 87 — — — 301 Total $ — $ 405 $ 545 $ 744 $ 648 $ 1,502 $ — $ — $ 3,844 Amortized Cost Basis by Origination Year as of December 31, 2024 (in thousands) 2024 2023 2022 2021 2020 Prior RevolvingLoans RevolvingConverted toTerm Total Commercial: Secured 116 1,433 1,218 323 712 935 — — 4,737 Unsecured — 36 — 5 — — — — 41 Consumer and other — 46 211 116 — — — — 373 Total $ 116 $ 1,515 $ 1,429 $ 444 $ 712 $ 935 $ — $ — $ 5,151 103
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Table 4.4 presents the age analysis of the Company’s past due loans by class as of the periods indicated. Table 4.4: Age Analysis of Past Due Loans by Class (in thousands) Past Due 30-59 Days 60-89 Days Greater Than90 Days Total PastDue Current Total LoansReceivable December 31, 2025 Real estate: Commercial $ 859 $ — $ — $ 859 $ 3,301,902 $ 3,302,761 Commercial land and development — — — — 1,354 1,354 Commercial construction — — — — 96,423 96,423 Residential construction — — — — 8,341 8,341 Residential — — — — 37,600 37,600 Farmland — — — — 59,584 59,584 Commercial: Secured 691 8 183 882 251,923 252,805 Unsecured — — — — 40,453 40,453 Consumer and other 46 — — 46 275,562 275,608 Total $ 1,596 $ 8 $ 183 $ 1,787 $ 4,073,142 $ 4,074,929 December 31, 2024 Real estate: Commercial $ — $ — $ — $ — $ 2,854,531 $ 2,854,531 Commercial land and development — — — — 3,854 3,854 Commercial construction — — — — 111,033 111,033 Residential construction — — — — 4,560 4,560 Residential — — — — 32,796 32,796 Farmland — — — — 47,220 47,220 Commercial: Secured 1,107 — — 1,107 170,229 171,336 Unsecured — — — — 27,575 27,575 Consumer and other 67 — — 67 279,714 279,781 Total $ 1,174 $ — $ — $ 1,174 $ 3,531,512 $ 3,532,686 There were no loans greater than 90 days past due and still accruing interest income as of December 31, 2025 or 2024. Table 4.5 presents the amortized cost basis of the Company’s collateral dependent loans by class as of the periods indicated. These loans were individually evaluated for credit loss in accordance with the Company’s allowance for credit losses methodology. Table 4.5: Collateral Dependent Loans by Class (in thousands) 2025 2024 Real estate: Commercial $ 2,667 $ 1,749 Commercial: Secured 17 48 Total $ 2,684 $ 1,797 104
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There were no residential real estate loans in the process of foreclosure as of December 31, 2025 and 2024. Modifications to loans for borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Table 4.6 presents the amortized cost basis of loans by class that were modified due to financial distress during the periods indicated. Table 4.6: Amortized Cost Basis of Loans Modified due to Financial Distress (in thousands) For the twelve months ended December 31, 2025 For the twelve months ended December 31, 2024 Payment Change/Deferment Total % of Loans Outstanding Payment Change Total % of Loans Outstanding Real estate: Commercial $ 1,583 0.04 % $ 1,749 0.05 % Total $ 1,583 0.04 % $ 1,749 0.05 % Table 4.7 presents the financial effect of loans by class that were modified due to financial distress during the periods indicated. Table 4.7: Financial Effect of Loans Modified due to Financial Distress For the twelve months ended December 31, Modification Type Loan Type Financial Effect 2025 Payment Change/Deferment Real estate: Commercial Reduced the loan payment owed by the borrower for five months and deferred the full loan payment for one month 2024 Payment Change Real estate: Commercial Reduced the loan payment owed by the borrower for twelve months Table 4.8 presents the Company’s non-accrual loans by class as of the periods indicated. Table 4.8: Non-accrual Loans (in thousands) 2025 2024 Real estate: Commercial $ 2,666 $ 1,750 Commercial: Secured 430 48 Total non-accrual loans $ 3,096 $ 1,798 No interest income was recognized on non-accrual loans in the years ended December 31, 2025, 2024, and 2023. Non-accrual real estate loans did not have an allowance for credit losses as of December 31, 2025 and 2024. Non-accrual commercial loans carried an immaterial allowance for credit losses as of December 31, 2025 and 2024. Interest income can be recognized on non-accrual loans in cases where resolution occurs through a sale or full payment is received on the non-accrual loan. The amount of foregone interest income related to non-accrual loans was $194,000, $167,000, and $95,000 for the years ended December 31, 2025, 2024, and 2023, respectively. Allowance for Credit Losses Table 4.9 discloses activity in the allowance for credit losses for the periods indicated. 105
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Table 4.9: Allowance for Credit Losses (in thousands) BeginningBalance Effect ofAdoption ofASC 326 Charge-offs Recoveries Provision(Benefit) EndingBalance Year ended December 31, 2025 Real estate: Commercial $ 25,864 $ — $ (280) $ — $ (365) $ 25,219 Commercial land and development 78 — — — (22) 56 Commercial construction 2,268 — — — 1,782 4,050 Residential construction 64 — — — 149 213 Residential 270 — — — 92 362 Farmland 607 — — — (140) 467 Commercial: Secured 5,866 — (3,213) 475 8,076 11,204 Unsecured 278 — (50) — 254 482 Consumer and other 2,496 — (301) 237 (76) 2,356 Total $ 37,791 $ — $ (3,844) $ 712 $ 9,750 $ 44,409 Year ended December 31, 2024 Real estate: Commercial $ 29,015 $ — $ — $ — $ (3,151) $ 25,864 Commercial land and development 178 — — — (100) 78 Commercial construction 718 — — — 1,550 2,268 Residential construction 89 — — — (25) 64 Residential 151 — — — 119 270 Farmland 399 — — — 208 607 Commercial: Secured 3,314 — (4,737) 695 6,594 5,866 Unsecured 189 — (41) — 130 278 Consumer and other 378 — (373) 366 2,125 2,496 Total $ 34,431 $ — $ (5,151) $ 1,061 $ 7,450 $ 37,791 Year ended December 31, 2023 Real estate: Commercial $ 19,216 $ 7,606 $ — $ — $ 2,193 $ 29,015 Commercial land and development 54 74 — — 50 178 Commercial construction 645 882 — — (809) 718 Residential construction 49 81 — — (41) 89 Residential 175 3 — — (27) 151 Farmland 644 (396) — — 151 399 Commercial: Secured 7,098 (3,060) (3,496) 423 2,349 3,314 Unsecured 116 37 (6) — 42 189 Consumer and other 347 80 (1,106) 995 62 378 Unallocated 45 (45) — — — — Total $ 28,389 $ 5,262 $ (4,608) $ 1,418 $ 3,970 $ 34,431 106
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Unfunded Loan Commitment Reserves Unfunded loan commitment reserves are included in “Interest payable and other liabilities” in the consolidated balance sheets. Provisions for unfunded loan commitments are included in “Provision for credit losses” in the consolidated statements of income. Table 4.10: Unfunded Loan Commitment Reserves (in thousands) 2025 2024 2023 Balance at January 1 $ 747 $ 1,247 $ 125 Effect of adoption of ASC 326 — — 1,092 (Benefit) provision (50) (500) 30 Balance at December 31 $ 697 $ 747 $ 1,247 Pledged Loans The Company’s FHLB line of credit is secured under terms of a collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $2,209,121,000 and $1,850,910,000 at December 31, 2025 and 2024, respectively. In addition, the Company pledges eligible tenants in common loans, which totaled $1,324,605,000 and $1,201,864,000 at December 31, 2025 and 2024, respectively, to secure its borrowing capacity with the Federal Reserve Discount Window. See Note 9, Long Term Debt and Other Borrowings, for further discussion of these borrowings. Note 5: Premises and Equipment, Net Table 5.1 shows the composition of premises and equipment, net, as of December 31, 2025 and 2024. Table 5.1: Premises and Equipment, Net (in thousands) 2025 2024 Furniture, fixtures, and equipment $ 5,336 $ 4,587 Tenant improvements 2,658 2,210 Bank automobiles 125 125 8,119 6,922 Accumulated depreciation and amortization (6,010) (5,338) Premises and equipment, net $ 2,109 $ 1,584 Depreciation and amortization expense for occupancy, furniture, fixtures, and equipment was $671,000, $667,000, and $673,000 for the years ended December 31, 2025, 2024, and 2023, respectively. Note 6: Bank-owned Life Insurance The Company owns life insurance policies on the lives of certain current and former officers designated by the board of directors to fund its employee benefit programs. Death benefits provided under the specific terms of these insurance policies are estimated to be $49,586,000 at December 31, 2025. The benefits to employees’ beneficiaries are limited to each employee’s active service period. The investment in BOLI policies is reported at their cash surrender value, net of surrender charges, of $23,910,000 and $19,375,000 at December 31, 2025 and 2024, respectively. The cash surrender value includes both the original premiums paid for the life insurance policies and the accumulated accretion of policy income since inception of the policies, net of mortality costs and other fees. Income of $824,000, $644,000, and $510,000 was recognized on these life insurance policies for the years ended December 31, 2025, 2024, and 2023, respectively. 107
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Note 7: Interest Receivable and Other Assets The composition of interest receivable and other assets as of December 31, 2025 and 2024 is shown in Table 7.1. Table 7.1: Interest Receivable and Other Assets (in thousands) 2025 2024 Interest receivable $ 11,904 $ 10,293 Equity investments 12,111 9,328 Low income housing tax credits 22,476 14,081 Other assets 22,189 21,852 Interest receivable and other assets $ 68,680 $ 55,554 Note 8: Interest-Bearing Deposits Table 8.1 shows the composition of interest-bearing deposits as of December 31, 2025 and 2024. Table 8.1: Interest-Bearing Deposits (in thousands) 2025 2024 Interest-bearing transaction accounts $ 344,200 $ 315,217 Savings accounts 139,169 124,702 Money market accounts 2,078,567 1,525,292 Time accounts, $250 or more 350,032 344,129 Other time accounts 204,579 326,025 Total interest-bearing deposits $ 3,116,547 $ 2,635,365 Time deposits totaled $554,611,000 and $670,154,000 as of December 31, 2025 and 2024, respectively. There were $174,981,000 of brokered time deposits as of December 31, 2025 and $299,961,000 of brokered time deposits as of December 31, 2024. Scheduled maturities of time deposits as of December 31, 2025 for the next five years are shown in Table 8.2. Table 8.2: Scheduled Maturities of Time Deposits (in thousands) 2026 $ 552,870 2027 1,680 2028 61 2029 — 2030 — Total time deposits $ 554,611 Total deposits include deposits offered through the IntraFi Network that are comprised of Certificate of Deposit Account Registry Service® (“CDARS”) balances included in time deposits and Insured Cash Sweep® (“ICS”) balances included in money market and interest-bearing transaction deposits. Through this network, the Company offers customers access to FDIC-insured deposit products in aggregate amounts exceeding current insurance limits. When funds are deposited through CDARS and ICS on behalf of a customer, the Company has the option of receiving matching deposits through the network’s reciprocal deposit program or placing deposits “one-way,” for which the Company receives no matching deposits. The Company considers the reciprocal deposits to be in-market deposits, as distinguished from traditional out-of- 108
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market brokered deposits. There were no one-way deposits at December 31, 2025 and 2024. The composition of network deposits as of December 31, 2025 and 2024 is shown in Table 8.3. Table 8.3: Network Deposits (in thousands) 2025 2024 CDARS $ 21,488 $ 19,292 ICS 957,156 674,453 Total network deposits $ 978,644 $ 693,745 Table 8.4 presents interest expense recognized on interest-bearing deposits for the years ended December 31, 2025, 2024, and 2023. Table 8.4: Interest Expense Recognized on Interest-Bearing Deposits (in thousands) 2025 2024 2023 Interest-bearing transaction accounts $ 4,529 $ 4,716 $ 3,321 Savings accounts 3,363 3,584 3,073 Money market accounts 56,323 53,750 33,932 Time accounts, $250 or more 15,378 12,329 12,686 Other time accounts 12,789 8,019 4,849 Total interest expense on interest-bearing deposits $ 92,382 $ 82,398 $ 57,861 Note 9: Long Term Debt and Other Borrowings Subordinated notes: On August 17, 2022, the Company completed a private placement of $75,000,000 of fixed-to-floating rate subordinated notes to certain qualified investors, of which $19,250,000 was purchased by existing or former members of the board of directors and their affiliates. The notes will be used for capital management and general corporate purposes, including, without limitation, the redemption of existing subordinated notes. The subordinated notes have a maturity date of September 1, 2032 and bear interest, payable semi-annually, at the rate of 6.00% per annum until September 1, 2027. On that date, the interest rate will be adjusted to float at a rate equal to the three-month Term SOFR plus 329.0 basis points (6.94% as of December 31, 2025) until maturity. The notes include a right of prepayment, on or after August 17, 2027 or, in certain limited circumstances, before that date. The indebtedness evidenced by the subordinated notes, including principal and interest, is unsecured and subordinate and junior in right to payment to general and secured creditors and depositors of the Company. The subordinated notes have been structured to qualify as Tier 2 capital for the Company for regulatory capital purposes. Eligible amounts will be phased out by 20% per year beginning five years before the maturity date of the notes. Debt issuance costs incurred in conjunction with the notes were $1,454,000, of which $496,000 has been amortized through December 31, 2025. The Company reflects debt issuance costs as a direct deduction from the face of the note. The debt issuance costs are amortized into interest expense through the maturity period. At December 31, 2025 and 2024, the carrying value of the Company’s subordinated notes was $74,041,000 and $73,895,000, respectively. Other borrowings: The Company entered into an agreement with the FHLB which granted the FHLB a blanket lien on certain loans receivable as collateral for a borrowing line. The Company’s total financing availability is based on the dollar volume of qualifying loan collateral. The Company’s total financing availability with the FHLB is decreased by outstanding borrowings and letters of credit (“LCs”) issued on behalf of the company, as shown in Table 9.1. 109
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Table 9.1: Financing Availability with the FHLB (in thousands) 2025 2024 Total financing ability from the FHLB $ 1,518,680 $ 1,212,209 Less: outstanding borrowings — — Less: LCs pledged to secure State of California deposits 312,500 281,500 Less: LCs pledged to secure local agency deposits 575,000 420,000 Total LCs issued 887,500 701,500 Available borrowing capacity with the FHLB $ 631,180 $ 510,709 At December 31, 2025 and 2024, the Company had the ability to borrow from the Federal Reserve Discount Window. The borrowings were available at an interest rate of 3.75% as of December 31, 2025. At December 31, 2025 and 2024, the borrowing capacity under this arrangement was $957,362,000 and $862,136,000, respectively. There were no amounts outstanding at December 31, 2025 and 2024. The borrowing line is secured by certain liens on the Company’s loans and certain available-for-sale securities. At December 31, 2025, the Company had five unsecured federal funds lines of credit totaling $185,000,000 with five of its correspondent banks. At December 31, 2024, the Company had five unsecured federal funds lines of credit totaling $175,000,000 with five of its correspondent banks. The borrowings were available at interest rates ranging from 3.75% to 4.95% as of December 31, 2025 and interest rates ranging from 4.55% to 5.70% as of December 31, 2024. There were no amounts outstanding at December 31, 2025 and 2024. Note 10: 401(k) Benefit Plan A 401(k) benefit plan covers substantially all employees and allows voluntary employee contributions up to the lesser of 100% of eligible compensation or the annually adjusted IRS dollar limit. These voluntary contributions are matched equal to 100% of the first 3% of the employee’s compensation contributed and 50% of contributions exceeding 3% of eligible compensation, not to exceed 5% of the total eligible compensation. The employees’ voluntary contributions and the Company’s matching contributions are 100% vested immediately. The expense related to matching employees’ contributions for 2025, 2024, and 2023 was $1,039,000, $835,000, and $787,000, respectively. Note 11: Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes. The provision for income taxes consists of federal and state income taxes. The Company does not have any foreign operations or foreign income tax exposure. 110
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Income Tax Rate Reconciliation Table 11.1 presents a calculation of the Company’s income tax expense for the year ended December 31, 2025. Table 11.1: Calculation of Income Tax Expense 2025 (in thousands) Amount Percent Income before provision for income taxes $ 83,732 Income tax expense at U.S. federal statutory rate 17,584 21.00 % State and local income tax, net of federal income tax effect 5,837 6.97 % Tax Credits IRC 45X Tax Credits (900) (1.07)% Other tax credits (139) (0.17)% Nontaxable and nondeductible items Other nontaxable and nondeductible items (54) (0.06)% Other adjustments (202) (0.25)% Total $ 22,126 26.42 % State taxes in California made up the majority of the effect of the state and local tax category. Table 11.2 presents a reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2024 and 2023. Table 11.2: Difference Between Effective Income Tax Rate and Statutory Federal Rate (in thousands) 2024 2023 Statutory U.S. federal income tax $ 13,591 $ 13,989 Increase (decrease) resulting from: State taxes, net of federal impact 5,219 5,048 Other 240 (155) Income tax expense $ 19,050 $ 18,882 Effective tax rate 29.43 % 28.34 % The impact of transferable tax credits purchased and utilized during the year is included in the “IRC 45X Tax Credits” line item in the Company’s reconciliation of the U.S. federal statutory income tax rate to the effective income tax rate, as required by ASU 2023-09. For the year ended December 31, 2025, the transferable tax credits reduced the Company’s effective tax rate by 1.07%. 1 1 111
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Table 11.3 shows the components of the consolidated provision for income taxes for the years indicated. Table 11.3: Components of Consolidated Provision for Income Taxes (in thousands) 2025 2024 2023 Current tax expense: Federal $ 15,819 $ 12,382 $ 13,234 State 6,885 6,911 6,439 Total current tax expense 22,704 19,293 19,673 Deferred tax expense (benefit): Federal (919) (66) (741) State 341 (177) (50) Total deferred tax benefit (578) (243) (791) Provision for income taxes $ 22,126 $ 19,050 $ 18,882 Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities. Table 11.4 shows significant components of deferred tax assets and liabilities as of December 31, 2025, 2024, and 2023. Table 11.4: Components of Deferred Tax Assets and Liabilities (in thousands) 2025 2024 2023 Deferred tax assets: Allowance for credit losses $ 12,143 $ 11,241 $ 10,820 Supplemental employee retirement plan 279 343 409 Gain on available-for-sale assets 677 943 303 Net unrealized loss on securities available-for-sale 3,353 5,192 4,938 State tax 1,188 1,268 751 Operating lease liability 3,195 1,999 1,759 Other 392 334 1,891 Total deferred tax assets 21,227 21,320 20,871 Deferred tax liabilities: Deferred loan fees (3,436) (3,723) (4,063) Depreciation (332) (145) (411) ROUA (2,907) (1,821) (1,648) Other (983) (801) (416) Total deferred tax liabilities (7,658) (6,490) (6,538) Net deferred tax asset $ 13,569 $ 14,830 $ 14,333 The Company evaluates the need for a valuation allowance against deferred tax assets based on the likelihood of realization. No deferred tax asset valuation allowance was established during 2025, 2024, or 2023, as management believes it is more likely than not the Company will realize the benefits of these deductible differences as of December 31, 2025, 2024, and 2023. 112
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Tax Impacts of Investments in Qualified Affordable Housing Projects Table 11.5 details items the Company recognized as components of tax expense, taxable losses and amortization expense relating to investments in Qualified Affordable Housing Projects for the periods indicated. Table 11.5: Tax Impacts of Investments in Qualified Affordable Housing Projects (in thousands) 2025 2024 2023 Taxable loss - decrease in tax expense $ (2,689) $ (963) $ (1,626) Amortization - increase in tax expense 1,769 1,050 291 Qualified Affordable Housing Tax Credits - decrease in tax expense (1,553) (1,046) — The total capital contributed, net of amortization, for the Low Income Housing Tax Credit Funds was $14,312,000 as of December 31, 2025. As of December 31, 2025, the Company has committed to make additional capital contributions to the Low Income Housing Tax Credit Funds in the amount of $8,119,000, of which $3,853,000 is expected to be made in 2026. Transferable Tax Credits During the year ended December 31, 2025, the Company purchased IRC 45X transferable federal tax credits from a third party under the provisions of the Inflation Reduction Act of 2022, as modified by H.R. 1, the “One Big Beautiful Bill Act” in 2025, resulting in a $0.9 million benefit to the provision for income taxes. These credits were acquired to offset the Company’s current year income tax liability and were fully utilized during the year. The credits were applied in accordance with relevant tax regulations, resulting in a reduction of the Company’s income tax payable for the year ended December 31, 2025. The benefit from the utilization of the purchased tax credits is reflected in the Company’s income tax expense for the period. No gain or loss was recognized, as the credits were used at their carrying value. As of December 31, 2025, there were no remaining purchased tax credits recorded on the balance sheet, as all credits acquired during the year were utilized. The Company’s ability to utilize purchased tax credits is subject to compliance with applicable tax laws and regulations. Management has reviewed the eligibility and documentation requirements and determined that all credits purchased and utilized during the year met the necessary criteria. Unrecognized Tax Benefits No unrecognized tax benefits were outstanding as of December 31, 2025, 2024, or 2023. The Company does not anticipate significant changes in unrecognized tax benefits within the next twelve months. Other Disclosures The Company files tax returns in the U.S. federal and state jurisdictions where the Company has material nexus. The Company is no longer subject to examinations for federal and state tax purposes for the years before 2021 and 2020, respectively. There were no material interest or penalties in 2025, 2024, and 2023. It is the Company’s policy to record such accruals in its income tax accounts. Note 12: Related Party Transactions During the normal course of business, the Company may enter into transactions with related parties, including directors, executive officers, principal shareholders, and their businesses or affiliates. In accordance with applicable regulations and Bank policies, these loans are granted on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with persons not related to the Company. Likewise, these 113
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transactions do not involve more than the normal risk of collectability or present other unfavorable features. Table 12.1 is a summary of loans to related parties in 2025, 2024, and 2023. Table 12.1: Related Party Loans (in thousands) 2025 2024 2023 Beginning balance $ 14,497 $ 5,455 $ 6,250 New loans or advances — 9,400 1,275 Repayments (634) (358) (2,070) Ending balance $ 13,863 $ 14,497 $ 5,455 At December 31, 2025, 2024, and 2023, deposits from related parties (directors, executive officers, and principal shareholders) totaled $39,242,000, $53,607,000, and $37,201,000, respectively. The Company leases an administrative office from a partnership comprised of certain shareholders and members of the board of directors, which is further described in Note 15, Commitments and Contingencies. Property management fees totaling $1,000 in 2025, 2024, and 2023 were paid to the entity that owns this property. The Company leased a temporary administrative office from an entity affiliated with a member of our board of directors, which is further described in Note 15, Commitments and Contingencies. No property management fees were paid to the entity that owns this property. Note 13: Equity Incentive Plan In April 2021, the Company’s board of directors and shareholders approved the Five Star Bancorp 2021 Equity Incentive Plan (the “Equity Incentive Plan”). The Equity Incentive Plan provides for the grant of stock options, stock appreciation rights, performance awards, restricted stock, restricted stock units, and other stock-based awards that the Compensation Committee determines are consistent with the purpose of the Equity Incentive Plan and the interests of the Company. Awards may be granted to the Company’s executives and other key employees, directors, and other service providers and are designed to align the interests of the Equity Incentive Plan’s participants with the interests of the Company’s shareholders. The stock options granted under the Equity Incentive Plan may be either non-statutory stock options or incentive stock options. There were no stock options outstanding at December 31, 2025 or 2024. The total number of shares of the Company’s common stock reserved and available for grant and issuance pursuant to the Equity Incentive Plan will not exceed 1,700,000 shares, less RSAs granted, plus any RSAs that become available upon forfeiture. Each of these shares may be issued as an incentive stock option. At December 31, 2025, 1,361,860 shares remained available for issuance pursuant to grant awards under the Plan. The Equity Incentive Plan does not contain an “evergreen” provision pursuant to which shares authorized for issuance may be automatically replenished. Stock-Based Compensation The Company’s stock-based compensation consists of RSAs granted under its historical stock-based incentive arrangement (the “Historical Incentive Plan”) and RSAs and performance stock awards (“PSUs”) issued under the Equity Incentive Plan. The Historical Incentive Plan consisted of RSAs for certain executive officers of the Company. The arrangement provided that these executive officers would receive shares of restricted common stock of the Company that vested over three years, with the number of shares granted based upon achieving certain performance objectives. These objectives included, but were not limited to, net income adjusted for the provision for credit losses, deposit growth, efficiency ratio, net interest margin, and asset quality. Compensation expense for RSAs granted under the Historical Incentive Plan is recognized over the service period, which is equal to the vesting period of the shares based on the fair value of the shares at issue date. In connection with its IPO in May 2021, the Company granted RSAs under the Equity Incentive Plan to certain employees, officers, executives, and non-employee directors. Shares granted to non-employee directors vested immediately upon grant, while shares granted to certain employees, officers, and executives vest ratably over three, five, or seven years (as defined in the respective agreements). Since the completion of the IPO, the Company has granted RSAs under the Equity Incentive Plan to certain executives, which vest ratably over three or five years (as defined in the respective agreements), and to directors, which vest over one year. All RSAs were granted at the fair value of common stock at the time of the award. The 114
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RSAs are considered fixed awards, as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the service period. Beginning in 2025, the Company granted PSUs under the Equity Incentive Plan to certain executives. Performance is measured over a three-year period and such PSUs cliff vest. Based on the achievement of certain pre-established goals, actual payouts can range from 0% to 150% of the target award. All PSUs were granted at the fair value of common stock at the time of the award. As such, the PSUs are considered variable awards, as the number of shares and fair value are not known at the date of grant. An estimate is made of the number of shares expected to vest based on the probability that the performance criteria will be achieved to determine the amount of compensation expense to be recognized. This estimate is re-evaluated quarterly, and total compensation expense is adjusted for any change in the current period. The estimate of the number of shares expected to vest is also used to accrue for dividends to be paid at the end of the vesting period. Non-cash stock compensation expense recognized for the years ended December 31, 2025, 2024, and 2023 was $1,459,000, $1,156,000, and $962,000, respectively. The total fair value of restricted shares vested during the years ended December 31, 2025, 2024, and 2023 was $1,370,000, $1,101,000, and $953,000, respectively. Tax benefits for vested restricted shares are recorded as tax benefits in the consolidated statements of income with a corresponding decrease to current taxes payable and were immaterial for the years ended December 31, 2025, 2024, and 2023. In 2025, the Company granted as compensation to members of the board of directors a total of 11,097 shares that were scheduled to cliff vest as of December 31, 2025 contingent on continued service. In 2024, the Company granted as compensation to members of the board of directors a total of 16,380 shares that were scheduled to cliff vest as of December 31, 2024 contingent on continued service. In 2023, the Company granted as compensation to members of the board of directors a total of 13,882 shares that were scheduled to cliff vest as of December 31, 2023 contingent on continued service. As of December 31, 2025, there was approximately $2,216,000 of unrecognized compensation expense related to the 124,747 unvested restricted shares. The holders of unvested RSAs are entitled to dividends at the same per-share ratio as holders of common stock. Tax benefits for dividends paid on unvested RSAs are recorded as tax benefits in the consolidated statements of income with a corresponding decrease to current taxes payable. Such tax benefits are expected to be recognized over the weighted average term remaining on the unvested restricted shares of 2.83 years as of December 31, 2025. The impact of tax benefits for dividends paid on unvested restricted stock on the Company’s consolidated statements of income for the years ended December 31, 2025, 2024, and 2023 was immaterial. Table 13.1 summarizes information about unvested restricted shares. Table 13.1: Unvested Restricted Share Activity 2025 2024 2023 Shares WeightedAverage GrantDate FairValue Shares WeightedAverage GrantDate FairValue Shares WeightedAverage GrantDate FairValue Beginning of the period balance 120,577 $ 21.36 69,338 $ 20.53 96,826 $ 20.34 Shares granted 49,303 28.26 96,380 21.97 16,978 28.52 Shares vested (44,134) 23.69 (43,358) 21.38 (42,553) 23.07 Shares forfeited (999) 21.97 (1,783) 21.66 (1,913) 25.62 End of the period balance 124,747 $ 23.25 120,577 $ 21.36 69,338 $ 20.53 115
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Table 13.2 summarizes information about unvested PSUs. The weighted average grant date fair value is based on the fair value at the time of grant. The vesting of PSUs is subject to achievement of specified performance targets and continued employment. Table 13.2: Unvested Performance Share Activity 2025 Shares WeightedAverage GrantDate FairValue Beginning of the period balance — $ — Shares granted 23,110 31.15 End of the period balance 23,110 $ 31.15 Table 13.2 shows the target number of PSUs awarded. Vesting of the PSUs is based on achievement of the Company’s three-year average return on average assets for the performance period ended December 31, 2027 relative to a peer group of publicly traded banks and bank holding companies utilizing the S&P Global Broad Market Index - Western Region. If the Company’s performance is at the 60th percentile, 70th percentile, and 80th percentile or higher, the recipients are entitled to receive 50%, 100%, and 150% of their target award grant, respectively. Based on current performance estimates, the Company estimates that the number of shares vested could be 150% of the target award, or 34,665 shares, with approximately $814,000 of related unrecognized compensation expense. The weighted average term remaining on unvested PSUs is 2.00 years. Note 14: Shareholders’ Equity Dividends During the year ended December 31, 2025, the Company declared cash dividends on its common shares totaling $17,085,000. During the year ended December 31, 2024, the Company declared cash dividends on its common shares totaling $16,243,000. During the year ended December 31, 2023, the Company declared cash dividends on its common shares totaling $12,943,000. Note 15: Commitments and Contingencies Financial Instruments with Off-Balance Sheet Risk Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Substantially all of these commitments are at variable interest rates, based on an index, and have fixed expiration dates. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The Company uses the same credit policies in making commitments to originate loans and lines of credit as it does for on-balance sheet instruments, including obtaining collateral at exercise of the commitment. The contractual 116
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amounts of unfunded loan commitments and standby letters of credit not reflected in the consolidated balance sheets are shown in Table 15.1. Table 15.1: Unfunded Loan Commitments and Standby Letters of Credit (in thousands) 2025 2024 Commercial lines of credit $ 287,988 $ 230,063 Undisbursed commercial real estate loans 94,559 98,508 Undisbursed construction loans 82,420 74,671 Agricultural lines of credit 26,236 21,155 Undisbursed residential real estate loans 5,965 7,225 Undisbursed agricultural real estate loans 4,470 — Other 1,627 1,973 Total commitments and standby letters of credit $ 503,265 $ 433,595 The Company records an allowance for credit losses on unfunded loan commitments at the consolidated balance sheet date based on estimates of the probability that these commitments will be drawn upon according to historical utilization experience of the different types of commitments and historical loss rates determined for pooled funded loans. The allowance for credit losses on unfunded commitments totaled $697,000 and $747,000 as of December 31, 2025 and 2024, respectively, which is recorded in “Interest payable and other liabilities” in the consolidated balance sheets. Concentrations of credit risk: The Company grants real estate mortgage, real estate construction, commercial, and consumer loans to customers primarily in Northern California. Although the Company has a diversified loan portfolio, a substantial portion is secured by commercial and residential real estate. In management’s judgment, a concentration of loans exists in real estate related loans, which represented approximately 86.07% of the Company’s loan portfolio at December 31, 2025 and 86.41% of the Company’s loan portfolio at December 31, 2024. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, or a decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on the collectability of these loans. Personal and business incomes represent the primary source of repayment for the majority of these loans. Deposit concentrations: At December 31, 2025, the Company had 129 deposit relationships that exceeded $5,000,000 each, totaling $2,558,312,000, or approximately 60.90% of total deposits. The Company’s largest single deposit relationship at December 31, 2025 totaled $290,000,000, or approximately 6.90% of total deposits. At December 31, 2024, the Company had 104 deposit relationships that exceeded $5,000,000 each, totaling $2,166,080,000, or approximately 60.88% of total deposits. The Company’s largest single deposit relationship at December 31, 2024 totaled $300,000,000, or approximately 8.43% of total deposits. Management maintains the Company’s liquidity position and lines of credit with correspondent banks to mitigate the risk of large withdrawals by this group of large depositors. Correspondent banking agreements: The Company maintains funds on deposit with other FDIC-insured financial institutions under correspondent banking agreements. Uninsured deposits through these agreements totaled $27,356,000 and $29,154,000 at December 31, 2025 and 2024, respectively. Equity investments: The Company has committed to and is invested in a limited number of venture funds. As of December 31, 2025 and 2024, the balance of these investments totaled approximately $12,111,000 and $9,328,000, respectively. As of December 31, 2025 and 2024, the estimated remaining commitment for these funds totaled $13,695,000 and $10,833,000, respectively. Leases The Company leases office space for its banking operations under non-cancelable operating leases of various terms. The leases expire at dates through 2036 and provide for renewal options from one to five years. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties. All leases include predefined rental increases over the term of the lease. The Company has a sublease agreement for space adjacent to the Redding location. The sublease has renewal terms extended to December 31, 2026. 117
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The Company leases its Sacramento administrative office from a partnership comprised of certain shareholders and members of the Company’s board of directors. The Sacramento administrative office lease extends through May 2026. Rent expense paid to the partnership was $33,000, $32,000, and $28,000 for the years ended December 31, 2025, 2024, and 2023, respectively, under this lease. Until the opening of a full service branch in San Francisco in September 2024, the Company leased a temporary administrative office in San Francisco from an entity affiliated with a member of our board of directors. No rent expense was paid to this entity for the year ended December 31, 2025. Rent expense paid to this entity was $40,000 and $19,000 for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2025, the Company’s ROUA and lease liability were $10,802,000 and $11,872,000, respectively. Table 15.2 presents the components of lease expense for the years shown. Table 15.2: Components of Lease Expense (in thousands) 2025 2024 2023 Operating lease expense $ 1,727 $ 1,609 $ 1,261 Sublease income (26) (26) (22) Total lease expense $ 1,701 $ 1,583 $ 1,239 Table 15.3 presents the weighted average operating lease term, discount rate, and operating cash flows at the dates indicated. Table 15.3: Other Lease Information (in thousands, except for average remaining lease term and discount rate) December 31,2025 December 31,2024 December 31,2023 Weighted average remaining lease term 7.68 years 6.33 years 5.28 years Weighted average discount rate 4.99 % 4.99 % 4.11 % Operating cash flows for operating leases $ 1,117 $ 916 $ 900 ROUA obtained in exchange for operating lease liabilities 6,132 2,170 2,281 Table 15.4 shows the future minimum lease payments under the Company’s operating lease arrangements as of December 31, 2025. Table 15.4: Future Minimum Lease Payments (in thousands) December 31, 2025 2026 $ 1,996 2027 2,112 2028 2,052 2029 1,668 2030 1,454 Thereafter 5,231 Total expected operating lease payments 14,513 Discount for present value of expected cash flows (2,641) Operating lease liability at December 31, 2025 $ 11,872 Litigation Matters The Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to such actions will not materially affect the consolidated financial position or results of operations of the Company. 118
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Note 16: Capital Requirements and Restrictions on Retained Earnings The Company and the Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements as set forth in Tables 16.1 and 16.2 can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and the Bank’s prompt corrective action classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are generally not applicable to bank holding companies. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in Tables 16.1 and 16.2) of total capital, Tier 1 capital, and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets and of Tier 1 capital to average assets. The Company and Bank are required to meet a common equity Tier 1 capital to risk-weighted assets ratio of at least 7.0% (a minimum of 4.5% plus a capital conservation buffer of 2.5%), a Tier 1 capital to risk-weighted assets ratio of at least 8.5% (a minimum of 6.0% plus a capital conservation buffer of 2.5%), a total capital to risk-weighted assets ratio of at least 10.5% (a minimum of 8.0% plus a capital conservation buffer of 2.5%), and a Tier 1 leverage ratio of at least 4.0%. Management believes that, as of December 31, 2025, the Company and the Bank met all capital adequacy requirements to which they are subject. As of December 31, 2025, the Bank was categorized as “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized,” an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in Table 16.2. There are no conditions or events since that categorization that management believes have changed the Bank’s category. The principal source of cash for the Company is dividends from the Bank. Dividends from the Bank to the Company are restricted under California law to the lesser of: (i) the Bank’s retained earnings; or (ii) the Bank’s net income for the latest three fiscal years, less dividends previously declared during that period. As of December 31, 2025 and 2024, the maximum amount available for dividend distribution under this restriction was approximately $103,758,000 and $94,595,000, respectively. If a proposed dividend exceeds the limit, the Bank may still pay a dividend to the Holding Company if it obtains approval from the DFPI and the dividend does not exceed the greater of: (i) the retained earnings of the Bank; (ii) the net income of the Bank for its last fiscal year; or (iii) the net income of the Bank for its current fiscal year. The Company’s and the Bank’s actual capital amounts and ratios as of December 31, 2025 and 2024 are presented in Tables 16.1 and 16.2. As of December 31, 2025 and 2024, Bancorp’s Tier 2 capital included subordinated notes, which were not included at the bank level. Eligible amounts of subordinated notes included in Tier 2 capital will be phased out by 20% per year beginning five years before the maturity date of the notes. 119
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Table 16.1: Capital Ratios for Bancorp (dollars in thousands) Actual Ratio Required for CapitalAdequacy Purposes Ratio to be Well-Capitalizedunder Prompt CorrectiveAction Provisions Amount Ratio Amount Ratio Amount Ratio December 31, 2025 Total capital (to risk-weighted assets) $ 572,874 13.33 % $ 343,779 8.00 % N/A N/A Tier 1 capital (to risk-weighted assets) $ 454,830 10.58 % $ 257,834 6.00 % N/A N/A Common equity tier 1 capital (to risk- weighted assets) $ 454,830 10.58 % $ 193,376 4.50 % N/A N/A Tier 1 leverage $ 454,830 9.70 % $ 187,499 4.00 % N/A N/A December 31, 2024 Total capital (to risk-weighted assets) $ 519,722 13.99 % $ 332,622 8.00 % N/A N/A Tier 1 capital (to risk-weighted assets) $ 409,514 11.02 % $ 222,940 6.00 % N/A N/A Common equity tier 1 capital (to risk- weighted assets) $ 409,514 11.02 % $ 167,205 4.50 % N/A N/A Tier 1 leverage $ 409,514 10.05 % $ 162,960 4.00 % N/A N/A Table 16.2: Capital Ratios for the Bank (dollars in thousands) Actual Ratio Required for CapitalAdequacy Purposes Ratio to be Well-Capitalizedunder Prompt CorrectiveAction Provisions Amount Ratio Amount Ratio Amount Ratio December 31, 2025 Total capital (to risk-weighted assets) $ 554,071 12.92 % $ 342,984 8.00 % $ 428,729 10.00 % Tier 1 capital (to risk-weighted assets) $ 510,067 11.89 % $ 257,238 6.00 % $ 342,984 8.00 % Common equity tier 1 capital (to risk- weighted assets) $ 510,067 11.89 % $ 192,928 4.50 % $ 278,674 6.50 % Tier 1 leverage $ 510,067 10.89 % $ 187,409 4.00 % $ 234,261 5.00 % December 31, 2024 Total capital (to risk-weighted assets) $ 504,896 13.59 % $ 297,216 8.00 % $ 371,520 10.00 % Tier 1 capital (to risk-weighted assets) $ 468,584 12.61 % $ 222,912 6.00 % $ 297,216 8.00 % Common equity tier 1 capital (to risk- weighted assets) $ 468,584 12.61 % $ 167,184 4.50 % $ 241,488 6.50 % Tier 1 leverage $ 468,584 11.50 % $ 162,942 4.00 % $ 203,677 5.00 % The listed capital adequacy ratios exclude capital conservation buffers. 1 1 1 120
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Note 17: Fair Value of Assets and Liabilities Table 17.1 summarizes the Company’s assets and liabilities that were required to be recorded at fair value on a recurring basis. Table 17.1: Fair Value on a Recurring Basis (in thousands) CarryingValue Quoted Prices inActive Marketsfor IdenticalAssets (Level 1) SignificantOtherObservableInputs (Level 2) SignificantUnobservableInputs (Level 3) MeasurementCategories:Changes in FairValue RecordedIn 2025 Assets: Securities available-for-sale: U.S. government agency securities, mortgage-backed securities, obligations of states andpolitical subdivisions, collateralized mortgageobligations, and corporate bonds $ 94,699 $ — $ 94,699 $ — OCI 2024 Assets: Securities available-for-sale: U.S. government agency securities, mortgage-backed securities, obligations of states andpolitical subdivisions, collateralized mortgageobligations, and corporate bonds $ 98,194 $ — $ 98,194 $ — OCI Available-for-sale securities are recorded at fair value on a recurring basis. When available, quoted market prices (Level 1 inputs) are used to determine the fair value of available-for-sale securities. If quoted market prices are not available, management obtains pricing information from a reputable third-party service provider, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity, and credit spreads (Level 2 inputs). Level 2 securities include U.S. agencies’ or government-sponsored agencies’ debt securities, mortgage-backed securities, government agency-issued bonds, privately issued collateralized mortgage obligations, and corporate bonds. Level 3 securities are based on unobservable inputs that are supported by little or no market activity. In addition, values use discounted cash flow models and may include significant management judgment and estimation. As of December 31, 2025 and 2024, there were no Level 1 available-for-sale securities and no transfers between Level 1 and Level 2 classifications for assets or liabilities measured at fair value on a recurring basis. The Company’s investment portfolio service bureau has developed a model for pricing available-for-sale debt securities. Information such as historical and current performance of the underlying collateral, deferral/default rates, collateral coverage ratios, break-even yield calculations, cash flow projections, liquidity, and credit premiums required by a market participant, as well as financial trend analysis with respect to the individual issuing financial institutions and insurance companies, are utilized in determining individual security valuations. Due to current market conditions, as well as the limited trading activity of the securities, the market value of the securities is highly sensitive to assumption changes and market volatility. The fair value of collateral dependent impaired loans and other real estate is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management also incorporates assumptions regarding market trends or other relevant factors and selling and commission costs ranging from 5.00% to 7.00%. Such adjustments and assumptions are typically significant and result in a Level 3 classification of the inputs for determining fair value. 121
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Certain financial assets may be measured at fair value on a non-recurring basis. These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as collateral dependent loans and OREO. As of December 31, 2025 and 2024, the carrying amount of assets measured at fair value on a non-recurring basis was immaterial to the Company. Disclosures about Fair Value of Financial Instruments Table 17.2 is a summary of fair value estimates for financial instruments as of December 31, 2025 and 2024. These estimates are made at a specific point in time based on relevant market data and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering the Company’s entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the fair values presented. The carrying amounts in Table 17.2 are recorded in the consolidated balance sheets under the indicated captions. Further, management has not disclosed the fair value of financial instruments specifically excluded from disclosure requirements, such as BOLI. Table 17.2: Fair Value Estimates for Financial Instruments (in thousands) December 31, 2025 December 31, 2024 CarryingAmounts Fair Value Fair ValueHierarchy CarryingAmounts Fair Value Fair ValueHierarchy Financial assets: Cash and cash equivalents $ 506,851 $ 506,851 Level 1 $ 352,343 $ 352,343 Level 1 Time deposits in banks 100 100 Level 1 4,121 4,121 Level 1 Securities available-for-sale 94,699 94,699 Level 2 98,194 98,194 Level 2 Securities held-to-maturity 2,190 1,995 Level 3 2,720 2,353 Level 3 Loans held for sale — — Level 2 3,247 3,597 Level 2 Loans held for investment, net of allowancefor credit losses 4,030,520 3,971,563 Level 3 3,494,895 3,412,032 Level 3 Financial liabilities: Time deposits 554,611 553,987 Level 2 670,154 669,078 Level 2 Subordinated notes 74,041 73,723 Level 3 73,895 73,371 Level 3 The Company used the following methods and assumptions to estimate the fair value of its financial instruments at December 31, 2025 and 2024: Cash and cash equivalents and time deposits in banks: The carrying amount is estimated to be fair value due to the liquid nature of the assets and their short-term maturities. Investment securities: See discussion above for the methods and assumptions used by the Company to estimate the fair value of available- for-sale investment securities. The fair value of held-to-maturity securities is estimated by calculating the net present value of future cash flows based on observable market data, such as interest rates and yield curves (observable at commonly quoted intervals) as provided by an independent third party. Loans held for sale: The fair value is based on what secondary markets are currently offering for portfolios with similar characteristics. Loans held for investment, net of allowance for credit losses: For variable rate loans that reprice frequently with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, which use interest rates being offered at each reporting date for loans with similar terms to borrowers of comparable creditworthiness without considering widening credit spreads due to market illiquidity, which 122
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approximates the exit price notion. The allowance for credit losses is considered to be a reasonable estimate of loan discount for credit quality concerns. Commitments to extend credit: These are primarily for adjustable rate loans, and there are no differences between the committed amounts and their fair values. Commitments to fund fixed rate loans are at rates which approximate fair value at each reporting date. Time deposits: The fair value is estimated using a discounted cash flow analysis that uses interest rates offered at each reporting date by the Company for certificates with similar remaining maturities, resulting in a Level 2 classification. Subordinated notes: The fair value is estimated by discounting the future cash flow using the current three-month CME Term SOFR. The Company’s subordinated notes are not registered securities and were issued through private placements, resulting in a Level 3 classification. Other borrowings: The carrying amount is estimated to be fair value. Note 18: Parent Company Only Condensed Financial Information CONDENSED BALANCE SHEETS December 31, 2025 and 2024 Table 18.1: Condensed Balance Sheets (in thousands) 2025 2024 ASSETS Cash and cash equivalents $ 8,605 $ 8,794 Investment in banking subsidiary 501,068 455,693 Other assets 12,004 7,826 Total assets $ 521,677 $ 472,313 LIABILITIES AND SHAREHOLDERS’ EQUITY Subordinated notes and other liabilities $ 75,846 $ 75,690 Shareholders’ equity 445,831 396,623 Total liabilities and shareholders’ equity $ 521,677 $ 472,313 CONDENSED STATEMENTS OF INCOME Years ended December 31, 2025, 2024, and 2023 Table 18.2: Condensed Statements of Income (in thousands) 2025 2024 2023 Dividends from banking subsidiary $ 25,185 $ 22,223 $ 19,643 Other income 40 — — Interest expense 4,646 4,646 4,646 Other expense 3,257 2,636 2,500 Income before income tax and undistributed banking subsidiary income 17,322 14,941 12,497 Income tax benefit 2,137 2,112 2,244 Equity in undistributed banking subsidiary income 42,147 28,618 32,993 Net income $ 61,606 $ 45,671 $ 47,734 123
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CONDENSED STATEMENTS OF CASH FLOWS Years ended December 31, 2025, 2024, and 2023 Table 18.3: Condensed Statements of Cash Flows (in thousands) 2025 2024 2023 Cash flows from operating activities: Net income $ 61,606 $ 45,671 $ 47,734 Adjustments to reconcile net income to net cash provided by operating activities: Stock compensation expense 1,459 1,156 962 Equity in undistributed banking subsidiary income (42,147) (28,618) (32,993) Amortization of subordinated note issuance costs 146 146 144 Change in other assets (4,178) (2,418) (2,319) Change in accrued expenses and other liabilities 10 (41) (132) Net cash provided by operating activities 16,896 15,896 13,396 Cash flows from investing activities: Investment in subsidiary — (80,870) — Net cash used in investing activities — (80,870) — Cash flows from financing activities: Proceeds from issuance of stock, net of issuance costs — 80,870 — Cash dividends paid (17,085) (16,243) (12,943) Net cash provided by financing activities (17,085) 64,627 (12,943) Net change in cash and cash equivalents (189) (347) 453 Cash and cash equivalents at beginning of period 8,794 9,141 8,688 Cash and cash equivalents at end of period $ 8,605 $ 8,794 $ 9,141 Note 19: Subsequent Events On January 15, 2026, the board of directors declared a $0.25 per common share dividend for shareholders of record as of February 2, 2026, which was paid on February 9, 2026 in the amount of $5,344,000. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of December 31, 2025. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating and implementing its controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). As of December 31, 2025, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “2013 Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations of 124
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the Treadway Commission. Based on that assessment, management determined that we maintained effective internal control over financial reporting as of December 31, 2025. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, such controls. Attestation Report of the Independent Registered Public Accounting Firm Not applicable for an emerging growth company. Item 9B. Other Information During the three months ended December 31, 2025, none of our directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement”. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 125
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PART III Item 10. Directors, Executive Officers and Corporate Governance Board of Directors For information relating to the Company’s board of directors, the section entitled “Items to be Voted on by Shareholders —Item 1 — Election of Directors” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference. Executive Officers For information relating to officers of the Company, the section entitled “Information About Our Executive Officers” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference. Delinquent Section 16(a) Reports For information regarding compliance with Delinquent Section 16(a) Reports, the section entitled “Stock Information —Delinquent Section 16(a) Reports” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference. Disclosure of Code of Conduct For information concerning the Company’s Code of Conduct, the information contained under the section entitled “Corporate Governance — Code of Conduct” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated by reference. A copy of the Code of Conduct is available to shareholders on the Company’s investor relations website at https://investors.fivestarbank.com/corporate-governance/governance-overview. Nominating, Compensation, and Audit Committees For information regarding the Company’s Nominating, Compensation, and Audit Committees, their composition, and the Audit Committee financial experts, the section entitled “Corporate Governance — Board Committees” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference. Insider Trading Policies and Procedures We have insider trading policies and procedures that govern the purchase, sale, and/or other disposition of the Company’s securities by our directors, officers and employees, and the Company itself, that we believe are reasonably designed to promote compliance by the Company and our directors, officers, and employees with insider trading laws, rules and regulations and the listing standards of Nasdaq. A copy of our Insider Trading Policy is filed with this Annual Report on Form 10-K as Exhibit 19.1. Item 11. Executive Compensation For information regarding executive compensation, the sections entitled “Executive Compensation” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Security Ownership of Certain Beneficial Owners Information required by this item is incorporated herein by reference to the section entitled “Stock Information — Security Ownership of Certain Beneficial Owners and Management” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders. Security Ownership of Management Information required by this item is incorporated herein by reference to the section entitled “Stock Information — Security Ownership of Certain Beneficial Owners and Management” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders. 126
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Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information about the Company common stock that may be issued upon the exercise of stock options, warrants, and rights under all the Company’s equity compensation plans as of December 31, 2025. Table 25: Securities Authorized for Issuance Under Equity Compensation Plans (a) Number of securitiesto be issued uponexercise ofoutstanding options,warrants, and rights (b) Weighted-averageexercise price ofoutstandingoptions, warrants,and rights (c)Number of securitiesremaining available forissuance under equitycompensation plans(excluding securitiesreflected in column (a)) Equity compensation plan approved by shareholders — $ — 1,361,860 Equity compensation not approved by shareholders — — — Total — $ — 1,361,860 Plan approved by shareholders is the Five Star Bancorp 2021 Equity Incentive Plan. Item 13. Certain Relationships and Related Transactions, and Director Independence Certain Relationships and Related Transactions For information regarding certain relationships and related transactions, the section entitled “Other Information —Transactions with Related Parties” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference. Director Independence For information regarding director independence, the section entitled “Corporate Governance — Director Independence” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference. Item 14. Principal Accountant Fees and Services For information regarding the principal accountant fees and expenses, the section entitled “Item 2 — Ratification of Selection of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2026 Annual Meeting of Shareholders is incorporated herein by reference. 1 1 127
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PART IV Item 15. Exhibits and Financial Statement Schedules (1) The financial statements required in response to this item are incorporated herein by reference from Part II, Item 8 of this Annual Report on Form 10-K. (2) All financial statement schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto. (3) Exhibits ExhibitNumber Exhibit Description Incorporated by Reference Form File No. Exhibit Filing Date Herewith 3.1 Amended and Restated Articles of Incorporation of Five Star Bancorp 10-Q 001-40379 3.1 June 17, 2021 3.2 Second Amended and RestatedBylaws of Five Star Bancorp 10-Q 001-40379 3.1 May 8, 2025 4.1 Form of Common Stock Certificate of Five Star Bancorp S-1 333-255143 4.1 April 26, 2021 4.2 Form of 6.0% Fixed-to-FloatingRate Subordinated Note Due 2032 8-K 001-40379 Exhibit A of 10.1 August 17, 2022 4.3 Description of Securities 10-K 001-40379 4.4 February 25, 2022 10.1† Form of S Corporation Termination and Tax Sharing Agreement S-1 333-255143 10.1 April 9, 2021 10.2* Five Star Bancorp 2021 Equity Incentive Plan S-1 333-255143 10.4 April 26, 2021 10.3* Form of Restricted Stock Vesting Agreement pursuant to Historical Incentive Plan S-1 333-255143 10.5 April 9, 2021 10.4 Form of Restricted Stock VestingAgreement for Executives pursuantto the Five Star Bancorp 2021Equity Incentive Plan 10-K 001-40379 10.4 February 25, 2022 10.5 Form of Restricted Stock VestingAgreement for Directors pursuantto the Five Star Bancorp 2021Equity Incentive Plan 10-K 001-40379 10.5 February 25, 2022 10.6* Five Star Bank SalaryContinuation Agreement, datedSeptember 1, 2007, as amended,between Five Star Bank and JamesBeckwith 10-Q 001-40379 Exhibit A of 10.1 May 12, 2022 10.7 Form of Subordinated NotePurchase Agreement for 6.0%Fixed-to-Floating RateSubordinated Notes Due 2032 8-K 001-40379 10.1 August 17, 2022 10.8* Executive EmploymentAgreement, effective May 5, 2025,between Five Star Bank and JamesBeckwith 10-Q 001-40379 10.1 August 7, 2025 128
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10.9* Form of Performance Share AwardVesting Agreement for Executivespursuant to the Five Star Bancorp2021 Equity Incentive Plan 10-Q 001-40379 10.2 August 7, 2025 10.10* Form of Change in ControlAgreement 8-K 001-40379 10.1 November 5, 2025 16.1 Letter dated June 3, 2025 fromMoss Adams LLP to the Securitiesand Exchange Commissionconfirming the disclosurescontained in Item 4.01 of the reporton form 8-K 8-K 001-40379 16.1 June 9, 2025 19.1 Five Star Bancorp Insider TradingPolicy Filed 21.1 Subsidiaries of the Registrant Filed 23.1 Consent of Baker Tilly US LLP Filed 31.1 Certification of Chief ExecutiveOfficer pursuant to Rule 13a-14(a)/15d-14(a), as adoptedpursuant to Section 302 of theSarbanes-Oxley Act of 2002 Filed 31.2 Certification of Chief FinancialOfficer pursuant to Rule 13a-14(a)/15d-14(a), as adoptedpursuant to Section 302 of theSarbanes-Oxley Act of 2002 Filed 32.1 Certification of Chief ExecutiveOfficer pursuant to 18 U.S.C.Section 1350, as adopted pursuantto Section 906 of the Sarbanes-Oxley Act of 2002 Filed 32.2 Certification of Chief FinancialOfficer pursuant to 18 U.S.C.Section 1350, as adopted bySection 906 of the Sarbanes-OxleyAct of 2002 Filed 97.1 Five Star Bancorp ClawbackPolicy 10-K 001-40379 97.1 February 23, 2024 101 Inline XBRL Interactive Data Filed 104 Cover Page Interactive Data File (embedded within the Inline XBRL document in Exhibit 101) Filed † Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. * Management contract or compensatory plan, contract, or arrangement. Item 16. Form 10-K Summary None. 129
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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIVE STAR BANCORP Dated: February 27, 2026 /s/ James E. Beckwith James E. Beckwith President and Chief Executive Officer 130
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/ James E. Beckwith President and Chief Executive Officer and Director February 27, 2026 James E. Beckwith (Principal Executive Officer) /s/ Heather C. Luck Executive Vice President and Chief Financial Officer February 27, 2026 Heather C. Luck (Principal Financial and Accounting Officer) /s/ Robert T. Perry-Smith Chair of the Board and Director February 27, 2026 Robert T. Perry-Smith /s/ Randall E. Reynoso Vice Chair of the Board and Director February 27, 2026 Randall E. Reynoso /s/ Larry E. Allbaugh Director February 27, 2026 Larry E. Allbaugh /s/ Shannon Deary-Bell Director February 27, 2026 Shannon Deary-Bell /s/ Warren P. Kashiwagi Director February 27, 2026 Warren P. Kashiwagi /s/ Donna L. Lucas Director February 27, 2026 Donna L. Lucas /s/ David F. Nickum Director February 27, 2026 David F. Nickum /s/ Kevin F. Ramos Director February 27, 2026 Kevin F. Ramos /s/ Judson T. Riggs Director February 27, 2026 Judson T. Riggs 131
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1 INSIDER TRADING POLICY
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Internal Use Only – Insider Trading Policy Page | 2 of 10 Purpose This Insider Trading Policy (the “Policy”) provides guidelines with respect to transactions in the securities of Five Star Bancorp (the “Company,” “we,” or “us”) and the handling of confidential information about the Company and the companies with which the Company does business. It is our policy to comply with federal securities laws, which prohibit any director, officer, or employee of a publicly ‐ held company (such as the Company) from trading, either personally or on behalf of others, on the basis of “material, non ‐ public information” as defined in this Policy. These laws also generally prohibit the communication of material, non ‐ public information to others, except to individuals with a need to know the information for a proper business purpose. The Company prohibits trading while in possession of material non ‐ public information about the Company or any other publicly ‐ held company about which a director, officer or employee learns through his or her position with the Company. This Policy applies to any and all transactions in the securities of the Company (collectively referred to in this Policy as “Company Securities”). Person Subject to the Policy This Policy applies to all executive officers, all members of the Boards of Directors and all employees of the Company and its subsidiaries. In addition, this Policy applies to “temporary insiders” who enter into a confidential relationship in the conduct of the Company’s affairs and thereby gains access to material non ‐ public information. Examples of temporary insiders include the Company’s outside legal counsel, accountants, securities analysts, consultants, and employees of those organizations. As an employee, consultant, contractor, executive officer or director of the Company, this Policy applies to you. This Policy also applies to your immediate family members, anyone else who lives in your household, and any family memberwho do not live in your household but whose transactions in Company Securities are directed by you or are subject to your influence or control, such as parents or children who consult with you before they trade in Company Securities (collectively referred to as “Family Members”). You are responsible for the transactions of these other persons and therefore should make them aware of the need to confer with you before they trade in Company Securities, and you should treat all such transactions for the purposes of this Policy and applicable securities laws as if the transactions were for your own account. This Policy does not, however, apply to personal securities transactions of Family Members where the purchase or sale decision is made by a third party not controlled by, influenced by or related to you or your Family Members. Further, this Policy applies to any entities that you influence or control, including any corporations, partnerships or trusts (collectively referred to as “Controlled Entities”), and transactions by these Controlled Entities should be treated for the purposes of this Policy and applicable securities laws as if they were for your own account. Transactions Subject to the Policy This Policy applies to transactions in the Company Securities, including the Company’s common stock, restricted stock, restricted stock units, options to purchase common stock, or any other type of securities that the Company may issue, including (but not limited to) preferred stock, convertible debentures and warrants, as well as derivative securities that are not issued by the Company, such as exchange-traded put or call options or swaps relating to the Company’s Securities.
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Internal Use Only – Insider Trading Policy Page | 3 of 10 Individual Responsibility Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information about the Company and to not engage in transactions in Company Securities while in possession of material nonpublic information. Persons subject to this policy must not engage in illegal trading and must avoid the appearance of improper trading. Each individual is responsible for making sure that he or she complies with this Policy, and that any Family Member, household member or Controlled Entity, as discussed above, also comply with this Policy. In all cases, the responsibility for determining whether an individual is in possession of material nonpublic information rests with that individual, and any action on the part of the Company, the Compliance Officer (as defined below) or any other employee or director pursuant to this Policy (or otherwise) does not in any way constitute legal advice or insulate an individual from liability under applicable securities laws. You could be subject to severe legal penalties and disciplinary action by the Company for any conduct prohibited by this Policy or applicable securities laws, as described below in more detail under the heading “Consequences of Violations.” Administration of the Policy The Chief Financial Officer (“CFO”) shall serve as the Compliance Officer (the “Compliance Officer”) for the purposes of this Policy, and in their absence, Chief Executive Officer (“CEO”) or another employee designated by the Compliance Officer shall be responsible for administration of this Policy. All determinations and interpretations by the Compliance Officer shall be final and not subject to further review. Statement of Policy It is the policy of the Company that no director, executive officer or other employee of the Company (or any other person designated by this Policy or by the Compliance Officer as subject to this Policy) whis aware of material nonpublic information relating to the Company may, directly, or indirectly through family members or other persons or entities: • Buy or sell, or otherwise engage in transactions in, Company Securities, except as otherwise specified in this Policy under the headings “Transactions Under Company Plans,” “Transactions Not Involving a Purchase or Sale” and “Rule 10b5-1 Plans;” • Recommend the purchase or sale of any Company Securities; • Disclose material nonpublic information to persons within the Company whose jobs do not require them to have that information, or outside of the Company to other persons, including, but not limited to, family, friends, business associates, investors and expert consulting firms, unless any such disclosure is made in accordance with the Company’s policies regarding the protection or authorized external disclosure of information regarding the Company; or • Assist anyone engaged in the above activities. In addition, it is the policy of the Company that no director, executive officer or other employee of the Company (or any other person designated as subject to this Policy) who, in the course of working for the Company, learns of material nonpublic information about a company with which the Company does business, including a customer or supplier of the Company, may trade in that company’s securities until the information becomes public or is no longer material.
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Internal Use Only – Insider Trading Policy Page | 4 of 10 There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure), or small transactions, are not exceptions to this Policy. The securities laws do not recognize any mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company’s reputation for adhering to the highest standards of conduct. Any person subject to this Policy who is uncertain whether these or other prohibitions or restrictions apply should consult with the Compliance Officer before engaging in any transaction in the Company’s securities or the securities of another company. Definition of Material Nonpublic Information Material Information. Information is considered “material” if a reasonable investor would consider that information important in making a decision to buy, hold or sell securities, or if it is likely to significantly alter the total mix of publicly available information about the Company. Any information that, if made public, could reasonably be expected to affect the market price of a security is likely to be considered material. ’There is no bright-line standard for assessing materiality; rather, materiality is based on an assessment of all of the facts and circumstances, and is often evaluated by enforcement authorities with the benefit of hindsight. While it is not possible to define all categories of material information, some examples of information that ordinarily would be regarded as material are: • Projections of future earnings or losses, or other earnings guidance; • Changes to previously announced earnings guidance, or the decision to suspend earnings guidance; • A pending or proposed merger, acquisition or tender offer; • A pending or proposed acquisition or disposition of a significant asset; • A pending orproposed joint venture; • A Company restructuring; • Significant related party transactions; • A change in dividend policy, the declaration of a stock split, or an offering of additional securities; • Bank borrowings or other financing transactions out of the ordinary course; • The establishment of a repurchase program for Company Securities; • A change in the Company’s pricing or cost structure; • Major marketing changes; • A change in management; • A change in auditors or notification that the auditor’s reports may no longer be relied upon; • Development of a significant new product, process, or service; • Pending or threatened significant litigation, or the resolution of such litigation; • Impending bankruptcy or the existence of severe liquidity problems; • The gain or loss of a significant customer; • Significant changes in the Company’s loan or deposit portfolio; • A significant cybersecurity incident, such as a data breach, or any other significant disruption in the company’s operations or loss, potential loss, breach or unauthorized access of its property or assets, whether at its facilities or through its information technology infrastructure; • Changes in law and any analysis of the impact of such matters on the Company’s business or business model; or • The imposition of an event-specific restriction on trading in Company Securities or the securities
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Internal Use Only – Insider Trading Policy Page | 5 of 10 of another company or the extension or termination of such restriction. The above list is not exhaustive and many other types of information may be considered material, depending on the circumstances. The probability of whether an event will or will not occur affects the determination of whether it is material. For example, information concerning an event that would have a large effect on the Company’s stock price, such as a merger, may be material even if the possibility that the event will occur is relatively small. When Information is Considered Nonpublic. Information that has not been disclosed to the public is generally considered to be nonpublic information. In order to establish that the information has been disclosed to the public, it may be necessary to demonstrate that the information has been widely disseminated. Information generally would be considered widely disseminated if it has been disclosed through the Dow Jones “broad tape,” newswire services, a broadcast on widely-available radio or television programs, publication in a widely-available newspaper, magazine or news website, or public disclosure documents filed with the Securities and Exchange Commission (the “SEC”) that are available on the SEC’s website. By contrast, information would likely not be considered widely disseminated if it is available only to the Company’s employees, or if it is only available to a select group of analysts, brokers and institutional investors. Once information is widely disseminated, it is still necessary to provide the investing public with sufficient time to absorb the information. As a general rule, information should not be considered fully absorbed by the marketplace until after the second business day after the day on which the information is released. If, for example, the Company were to make an announcement on a Monday, you should not trade in Company Securities until Thursday.Depending on the particular circumstances, the Company may determine that a longer or shorter period should apply to the release of specific material nonpublic information. Transactions Under Company Plans This Policy does not apply in the case of the following transactions, except as specifically noted: Stock Option Exercises. This Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company’s plans, or to the exercise of a tax withholding right pursuant to which a person has elected to have the Company withhold shares subject to an option to satisfy tax withholding requirements. This Policy does apply, however, to any sale of stock as part of a broker- assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option. Restricted Stock Units/Restricted Stock Awards/Performance Based Units/Performance Based Awards (“Restricted Stock Grants and Performance Based Stock Grants”). This Policy does not apply to the vesting of restricted stock grants or performance based stock grants, or the exercise of a tax withholding right pursuant to which you elect to have the Company withhold shares of stock to satisfy tax withholding requirements upon the vesting of any restricted stock grants or performance based stock grants. The Policy does apply, however, to any market sale of restricted stock or to the sale of common stock received by you as a result of the vesting. 401(k) Plan. This Policy does not apply to purchases of Company Securities in the Company’s 401(k) plan resulting from your periodic contribution of money to the plan pursuant to your payroll
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Internal Use Only – Insider Trading Policy Page | 6 of 10 deduction election. This Policy does apply, however, to certain elections you may make under the 401(k) plan, including: (a) an election to increase or decrease the percentage of your periodic contributions that will be allocated to the Company stock fund; (b) an election to make an intra-plan transfer of an existing account balance into or out of the Company stock fund; (c) an election to borrow money against your 401(k) plan account if the loan will result in a liquidation of some or all of your Company stock fund balance; and (d) an election to pre ‑ pay a plan loan if the pre-payment will result in allocation of loan proceeds to the Company stock fund. It should be noted that sales of Company Securities from a 401(k) account are also subject to Rule 144, and therefore affiliates should ensure that a Form 144 is filed when required. Transactions Not Involving a Purchase or Sale Bona fide gifts are not transactions subject to this Policy, unless the person making the gift has reason to believe that the recipient intends to sell the Company Securities while the executive officer, employee or director is aware of material nonpublic information, or the person making the gift is subject to the trading restrictions specified below under the heading “Additional Procedures” and the sales by the recipient of the Company Securities occur during a blackout period. Further, transactions in mutual funds that are invested in Company Securities are not transactions subject to this Policy. Special and Prohibited Transactions The Company has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if the persons subject to this Policy engage in certain types of transactions. It therefore is the Company’s policy that any persons covered by this Policy may not engage in any of the following transactions, or should otherwise consider the Company’s preferences as described belowShort-Term Trading. Short-term trading of Company Securities may be distracting to the person and may unduly focus the person on the Company’s short-term stock market performance instead of the Company’s long-term business objectives. For these reasons, any director, executive officer or other employee of the Company who purchases Company Securities in the open market may not sell any Company Securities of the same class during the six months following the purchase (or vice versa). Short Sales. Short sales of Company Securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of the seller that the securities will decline in value, and therefore have the potential to signal to the market that the seller lacks confidence in the Company’s prospects. In addition, short sales may reduce a seller’s incentive to seek to improve the Company’s performance. For these reasons, short sales of Company Securities are prohibited. In addition, Section 16(c) of the Exchange Act prohibits executive officers and directors from engaging in short sales. (Short sales arising from certain types of hedging transactions are governed by the paragraph below captioned “Hedging Transactions.”) Publicly-Traded Options. Given the relatively short term of publicly-traded options, transactions in options may create the appearance that a director, executive officer or employee is trading based on material nonpublic information and focus a director’s, executive officer’s or other employee’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in put options, call options or other derivative securities, on an exchange or in any other organized market, are prohibited by this Policy. (Option positions arising from certain types of hedging transactions are governed by the next paragraph below.)
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Internal Use Only – Insider Trading Policy Page | 7 of 10 Hedging Transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such transactions may permit a director, executive officer or employee to continue to own Company Securities obtained through employee benefit plans or otherwise, but without the full risks and rewards of ownership. When that occurs, the director, executive officer or employee may no longer have the same objectives as the Company’s other shareholders. Therefore, directors, executive officers and employees are prohibited from engaging in any such transactions related to Company Securities. Margin Accounts and Pledged Securities. Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company Securities, directors, executive officers and other employees are prohibited from holding Company Securities in a margin account or otherwise pledging Company Securities as collateral for a loan. (Pledges of Company Securities arising from certain types of hedging transactions are governed by the paragraph above captioned “Hedging Transactions.”) Standing and Limit Orders. Standing and limit orders (except standing and limit orders under approved Rule 10b5-1 Plans, as described below) create heightened risks for insider trading violations similar to the use of margin accounts. There is no control over the timing of purchases or sales that resufrom standing instructions to a broker, and as a result the broker could execute a transaction when a director, executive officer or other employee is in possession of material nonpublic information. The Company therefore discourages placing standing or limit orders on Company Securities. If a person subject to this Policy determines that they must use a standing order or limit order, the order should be limited to short duration and should otherwise comply with the restrictions and procedures outlined below under the heading “Additional Procedures.” Solicitation of non-insiders. Solicitation of non-insiders to purchase or sell Company Securities is prohibited at any time, unless pre-cleared in accordance with the procedures outlined below under the heading “Additional Procedures” and in compliance with applicable securities laws. Insiders owe a fiduciary duty to the Company and are privy to information not available to non-insiders. These factors could give the solicitation of non-insiders by insiders the appearance of inappropriate or improper conduct as well as expose the Company and insider to potential liability. Accordingly, insiders are prohibited from engaging in a solicitation of a non-insider regarding Company Securities without pre-clearance as described below. Additional Procedures The Company has established additional procedures in order to assist the Company in the administration of this Policy, to facilitate compliance with laws prohibiting insider trading while in possession of material nonpublic information, and to avoid the appearance of any impropriety. These additional procedures are applicable to insiders and their related persons and controlled entities in addition to the prohibitions described in this Policy. Insiders include members of the Boards of Directors, as well as certain executive officers, employees, consultants and contractors who are likely to be in possession of material non-public information due to the nature of their workSpecifically, all executive officers as well as all members of the Accounting, Finance, Internal Audit and Investor Relations departments, and any person who is
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Internal Use Only – Insider Trading Policy Page | 8 of 10 involved in the calculation of the Company’ allowance for credit losses or related provisions, as well as their related persons and controlled entities, are insiders for the purposes of this Policy. Under special circumstances, employees who are not listed above may gain access to material non-public information and the Company may determine that such employees may also be subject to the below listed restrictions. Such employees will be notified of such status and will be subject to the below listed restrictions for such period of time as the Company deems appropriate. Pre-Clearance Procedures. The persons designated by the Compliance Officer as being subject to these procedures, as well as the Family Members and Controlled Entities of such persons, may not engage in any transaction in Company Securities without first obtaining pre-clearance of the transaction from the Compliance Officer. A request for pre-clearance should be submitted to the Compliance Officer at least two trading days in advance of the proposed transaction. The Compliance Officer is under no obligation to approve a transaction submitted for pre-clearance, and may determine not to permit the transaction. If a person seeks pre-clearance and permission to engage in the transaction is denied, then he or she should refrain from initiating any transaction in Company Securities, and should not inform any other person of the restriction. Pre-clearance of a trade does not relieve the requestor of his or her legal obligation to refrain from trading while in possession of material non-public information or from engaging in the prohibited transactions described above. When a request for pre-clearance is made, the requestor should carefully consider whether he or she may be aware of any material nonpublic information about the Company, and should describe fully those circumstances to the Compliance Officer. The requestor should alsoindicate whether he or she has effected any non-exempt “opposite-way” transactions within the past six months, and should be prepared to report the proposed transaction on an appropriate Form 4 or Form 5. The requestor should also be prepared to comply with SEC Rule 144 and file Form 144, if necessary, at the time of any sale. Quarterly Trading Restrictions. The persons designated by the Compliance Officer as subject to this restriction, as well as their Family Members or Controlled Entities, may not conduct any transactions involving the Company’s Securities (other than as specified by this Policy), during a “Blackout Period” beginning on the 15th day of the last month of each fiscal quarter and ending on the second trading day following the date of the public release of the Company’s earnings results for that quarter. In other words, these persons may only conduct transactions in Company Securities during the “Window Period” beginning on the second trading day following the public release of the Company’s quarterly earnings and ending on the 15th day of the last month of the next fiscal quarter. Even during the Window Period, any person possessing material non-public information should not engage in any transactions in Company Securities until the second trading day following the date of public disclosure of such information, whether or not the Company has imposed any trading restrictions applicable to such person. Under certain very limited circumstances, a person subject to this restriction may be permitted to trade during a Blackout Period, but only if the Compliance Officer concludes that the person does not in fact possess material nonpublic information. Persons wishing to trade during a Blackout Period must contact the Compliance Officer for approval in accordance with the pre-clearance procedures described above. Event-Specific Trading Restriction Periods. From time to time, an event may occur that is material to the Companyand is known by only a few directors, executive officers and/or employees. So long as
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Internal Use Only – Insider Trading Policy Page | 9 of 10 the event remains material and nonpublic, the persons designated by the Compliance Officer may not trade Company Securities and such designated persons shall be deemed to be an "insider" for purposes of the policy described under the heading “Additional Procedures” above. In addition, the Company’s financial results may be sufficiently material in a particular fiscal quarter that, in the judgment of the Compliance Officer, designated persons should refrain from trading in Company Securities even sooner than the typical Blackout Period described above. In that situation, the Compliance Officer may notify these persons that they should not trade in the Company’s Securities, without disclosing the reason for the restriction. The existence of an event-specific trading restriction period or extension of a Blackout Period will not be announced to the Company as a whole, and should not be communicated to any other person. Even if the Compliance Officer has not designated you as a person who should not trade due to an event-specific restriction, you should not trade while aware of material nonpublic information. Exceptions will not be granted during an event-specific trading restriction period. Exceptions. The quarterly trading restrictions and event-specific trading restrictions do not apply to those transactions to which this Policy does not apply, as described above under the headings “Transactions Under Company Plans” and “Transactions Not Involving a Purchase or Sale.” Further, the requirement for pre-clearance, the quarterly trading restrictions and event-specific trading restrictions do not apply to transactions conducted pursuant to approved Rule 10b5-1 plans, described under the heading “Rule 10b5-1 Plans.” Rule 10b5-1 Plans Rule 10b5-1 under the Exchange Act of 1934, as amended, provides a defense from insider trading liability under Rule 10b5. In order to be eligible to rely on thisdefense, a person subject to this Policy must enter into a Rule 10b5-1 plan for transactions in Company Securities that meets certain conditions specified in the Rule (a “Rule 10b5-1 Plan”). If the plan meets the requirements of Rule 10b5-1, Company Securities may be purchased or sold without regard to certain insider trading restrictions. To comply with the Policy, a Rule 10b5-1 Plan must be approved by the Compliance Officer and meet the requirements of Rule 10b5- 1. In general, a Rule 10b5-1 Plan must be entered into at a time when the person entering into the plan is not aware of material nonpublic information. Once the plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party. A standing or limit order does not, by itself, qualify as a Rule 10b5-1 plan. Any Rule 10b5-1 Plan must be submitted for approval by the Compliance Officer in advance and enter into the Rule 10b5-1 Plan within five days of receipt of approval. No further pre-approval of transactions conducted pursuant to the Rule 10b5-1 Plan will be required. Post-Termination Transactions This Policy continues to apply to transactions in Company Securities even after termination of service to the Company. If an individual is in possession of material nonpublic information when his or her service terminates, that individual may not trade in Company Securities until that information has become public or is no longer material. The pre-clearance procedures specified under the heading “Additional Procedures” above, however, will cease to apply to transactions in Company Securities upon the expiration of any Blackout Period or other Company-imposed trading restrictions applicable at the time
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Internal Use Only – Insider Trading Policy Page | 10 of 10 of the termination of service. Consequences of Violations The purchase or sale of securities while aware of material nonpublic information, or the disclosure of material nonpublic information to others who then trade in the Company’s Securities, is prohibited by the federal and state laws. Insider trading violations are pursued vigorously by the SEC, U.S. Attorneys and state enforcement authorities as well as the laws of foreign jurisdictions. Punishment for insider trading violations is severe, and could include significant fines and imprisonment. While the regulatory authorities concentrate their efforts on the individuals who trade, or who tip inside information to others who trade, the federal securities laws also impose potential liability on companies and other “controlling persons” if they fail to take reasonable steps to prevent insider trading by company personnel. In addition, an individual’s failure to comply with this Policy may subject the individual to Company- imposed sanctions, including dismissal for cause, whether or not the employee’s failure to comply results in a violation of law. Needless to say, a violation of law, or even an SEC investigation that does not result in prosecution, can tarnish a person’s reputation and irreparably damage a career. Company Assistance Any person who has a question about this Policy or its application to any proposed transaction may obtain additional guidance from the Compliance Officer, who can be reached by telephone at (916) 626-5008 or by e-mail at hluck@fivestarbank.com. Certification All persons subject to this Policy must certify their understanding of, and intent to comply with, this Policy. Change Control Log Version Date Summary/Comments June 2025 Addition of performance based stock units and performance based stock awards June 2024 Minor word change June 2023 No Change June 2022 No Change March 2021 New Policy
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EXHIBIT 21.1 Subsidiaries of the Registrant The following is a list of subsidiaries of Five Star Bancorp, the names under which subsidiaries do business, and the jurisdiction in which each was organized. All subsidiaries are wholly-owned unless otherwise noted. Subsidiaries of Five Star Bancorp Name Jurisdiction of Organization Five Star Bank California
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EXHIBIT 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-293089) and Form S-8 (No. 333- 256345) of Five Star Bancorp (the “Company”) of our report dated February 27, 2026, relating to the consolidated financial statements of the Company, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2025. /s/ Baker Tilly US, LLP Everett, Washington February 27, 2026
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EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James E. Beckwith, certify that: 1. I have reviewed this Annual Report on Form 10-K of Five Star Bancorp (the “Registrant”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and 5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. Date: February 27, 2026 /s/ James E. Beckwith James E. Beckwith President & Chief Executive Officer
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EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Heather C. Luck, certify that: 1. I have reviewed this Annual Report on Form 10-K of Five Star Bancorp (the “Registrant”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and 5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. Date: February 27, 2026 /s/ Heather C. Luck Heather C. Luck Executive Vice President & Chief Financial Officer
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EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Five Star Bancorp (the “Registrant”) for the year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James E. Beckwith, President & Chief Executive Officer of the Registrant, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: February 27, 2026 /s/ James E. Beckwith James E. Beckwith President & Chief Executive Officer
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EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Five Star Bancorp (the “Registrant”) for the year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Heather C. Luck, Executive Vice President & Chief Financial Officer of the Registrant, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: February 27, 2026 /s/ Heather C. Luck Heather C. Luck Executive Vice President & Chief Financial Officer