As filed with the Securities and Exchange Commission on July 13, 2026

File No.333-

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934

 

 

PRIVATE BANCORP OF AMERICA, INC.

(Exact name of registrant as specified in its charter)

 

 

 

California		80-0769276
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
9404 Genesee Ave., Suite 100 La Jolla, California		92037
(Address of principal executive office)		(Zip Code)

Registrant’s telephone number, including area code: (858)-875-6900

 

 

Copies to:

 

Richard L. Sowers President and Chief Executive Officer Private Bancorp of America, Inc. 9404 Genesee Ave. Suite 100 La Jolla, CA 92037 (858)-875-6900		Shawn M. Turner Mary Ellen Stanley Holland & Knight LLP 800 17th Street NW, Suite 1100 Washington, D.C. 20006 (202) 469-5269

 

 

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

 

Title of each class to be so registered		Name of each exchange on which each class is to be registered
Common Stock, no par value per share		The Nasdaq Global Select Market

Securities to be registered pursuant to Section 12(g) of the Act:

None

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

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☐
				Emerging growth company		☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☒

 

TABLE OF CONTENTS

 

				Page
Explanatory Note				i
Cautionary Note Regarding Forward-Looking Statements				1
Item 1.		Business		3
Item 1A.		Risk Factors		24
Item 2.		Financial Information		53
Item 3.		Properties		101
Item 4.		Security Ownership of Certain Beneficial Owners and Management		102
Item 5.		Directors and Executive Officers		104
Item 6.		Executive Compensation		113
Item 7.		Certain Relationships and Related Transactions, and Director Independence		126
Item 8.		Legal Proceedings		128
Item 9.		Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters		129
Item 10.		Recent Sales of Unregistered Securities		131
Item 11.		Description of Registrant’s Securities to be Registered		132
Item 12.		Indemnification of Directors and Officers		135
Item 13.		Financial Statements and Supplementary Data		137
Item 14.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		138
Item 15.		Financial Statements and Exhibits		138

EXPLANATORY NOTE

Private Bancorp of America, Inc. (the “Company”) is filing this registration statement on Form 10 (this “Registration Statement”) pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), because we are seeking to list our common stock, no par value per share (the “common stock”), on the Nasdaq Global Select Market (“NASDAQ”).

Once the registration of our common stock becomes effective, we will be required to file, among other things, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy statements with the U.S. Securities and Exchange Commission (the “SEC”), and we will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(b) of the Exchange Act.

We are an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”). As such, we may elect to comply with certain reduced public company reporting requirements in future reports that we file with the SEC.

Our periodic and current reports will be available on our website, www.investors.pbam.com free of charge, as soon as reasonably practicable after such materials are filed with, or furnished to, the SEC. As used herein, “we,” “our,” “us,” “Private Bancorp of America” and the “Company” refer to the Company and our wholly owned subsidiary, CalPrivate Bank, a California state-chartered bank (the “Bank”), unless the context otherwise requires or when otherwise indicated.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Registration Statement contains, and future oral and written statements by us and our management may contain, forward-looking statements. 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:

 

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The strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

 

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Adverse developments in the banking industry and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments;

 

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The effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”);

 

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Interest rate, liquidity, economic, market, credit, operational, and inflation risks associated with our business, including the speed and predictability of changes in these risks;

 

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Our ability to attract and retain deposits and to access other sources of liquidity, particularly in a higher interest rate environment, and the quality and composition of our deposits;

 

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Business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the tight labor market, ineffective management of the U.S. federal budget or debt, or turbulence or uncertainty in domestic or foreign financial markets;

 

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The effects of concentrations in our loan portfolio, including Small Business Administration (“SBA”) loans, commercial real estate (“CRE”) and the risks of geographic and industry concentrations;

 

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Possible credit-related impairments of securities held by us;

 

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Changes in the level of our nonperforming assets and charge-offs;

 

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The timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;

 

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The ability to attract and retain essential personnel or changes in our essential personnel;

 

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The impact of changes in financial services policies, laws and regulations, including those concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies;

 

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Compliance risks, including the costs of monitoring, testing, and maintaining compliance with complex laws and regulations;

 

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The effectiveness of our risk management framework and quantitative models;

 

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The effect of changes in accounting policies and practices or accounting standards, as may be adopted from time to time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”), or other accounting standards setters;

 

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The impact of governmental efforts to restructure or modify the U.S. financial regulatory system;

 

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The impact of changes in the Federal Deposit Insurance Corporation (“FDIC”) insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount;

 

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Changes in consumer spending, borrowing, and savings habits;

 

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Changes in the financial performance and/or condition of our borrowers;

 

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Our ability to effectively compete with banks, nonbank financial institutions and financial technology (“fintech”) companies and the effects of competition in the financial services industry on our business;

 

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The effects of disruptions or instability in the financial system, including as a result of the failure of a financial institution or other participants in it, or geopolitical instability, including war, terrorist attacks, pandemics and man-made and natural disasters;

 

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Cybersecurity threats and the cost of defending against them;

 

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Uncertainty around, and disruption from, new and emerging technologies, including the adoption and utilization of artificial intelligence (“AI”) and generative AI;

 

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Climate change, including the enhanced regulatory, compliance, credit, and reputational risks and costs;

 

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Unanticipated regulatory, legal, or judicial proceedings;

 

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The one-time and incremental costs of operating as a public company;

 

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Our ability to meet our obligations as a public company, including our obligation under Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”); and

 

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Our ability to manage the risks involved in the foregoing.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Registration Statement primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section entitled “Risk Factors” in Item 1A of this Registration Statement. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Registration Statement. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Registration Statement relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Registration Statement to reflect events or circumstances after the date of this Registration Statement or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Registration Statement, and while we believe such information provides a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance.

 

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Item 1. Business

Overview

Private Bancorp of America, Inc. was incorporated in California in 2015 and is a registered bank holding company headquartered in La Jolla, California. Our wholly owned subsidiary, CalPrivate Bank, was founded in 2006 and is a California state-chartered commercial bank with deposits insured by the FDIC. At March 31, 2026, we had total assets of $2.7 billion, total deposits of $2.4 billion, and total equity of $272.7 million, and the Bank was considered “well capitalized” for regulatory capital purposes at that date.

We are a relationship-based bank that specializes in serving the unique needs of our private banking clients, the businesses they own and operate, and the advisors that serve them. We organize our business development activities and operations around three categories — private banking, business banking, and SBA lending. We leverage our deep understanding of our clients’ banking needs, coupled with innovative technology, to deliver customized banking products and services for our private and business banking clients, which include high-net-worth individuals, real estate entrepreneurs, professionals, closely-held businesses, and for-profit and nonprofit businesses. We serve our clients from our seven branches located throughout coastal Southern California, specifically Beverly Hills, Coronado, La Jolla, Montecito, Newport Beach, San Diego and El Segundo, California.

Our Strategic Focus — Being Distinctly Different^®

We are focused on growing a strong and diverse private and business banking client base through our Distinctly Different^® customized banking experience, which provides clients with a consultative approach focused on creating customized solutions to ever-evolving client needs. Throughout the dynamic operating environment over the past few years, we have leveraged our relationship-driven banking model to remain in regular contact with our clients, paying particular attention to their rapidly evolving needs and industry dynamics, while seeking opportunities to develop and expand new and existing client relationships.

Our primary strategic objective is to deliver long-term value to our shareholders and clients through disciplined, customized, and innovative organic growth; prudent and proactive capital, liquidity, and credit risk management; technology leveraged for the benefit of our clients; and opportunistically pursuing accretive strategic growth.

 

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Disciplined, Customized, and Innovative Organic Growth: We offer a broad array of customized, innovative banking products and services to a wide range of private and business clients. Our organic growth initiatives are focused primarily on new and existing high-net-worth individuals, professionals, businesses, and real estate entrepreneurs. We endeavor to deliver a high-touch, high-tech banking experience to our clients, and in doing so, leverage technology, apply our Distinctly Different® approach to business development, and provide best-in-class client service to reinforce our relationship-based business banking model, deepen our existing client relationships and develop new client relationships. We have designed our banking products, digital banking platform, and treasury management services specifically with these clients in mind.

 

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Prudent and Proactive Capital, Liquidity, and Credit Risk Management: We believe we create long-term shareholder value through prudently and proactively managing capital, liquidity, and credit risk.

 

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The Bank has been “well-capitalized” pursuant to the applicable regulatory framework for corrective action since its inception. At March 31, 2026, the Bank’s total capital to risk-weighted assets, Tier 1 capital to risk-weighted assets, CET1 capital to risk-weighted assets, and Tier 1 capital to average assets was 14.20%, 12.95%, 12.95%, and 11.29%, respectively.

 

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We rely predominantly on our core deposit franchise to fund our lending activities, with total deposits of $2.4 billion at March 31, 2026 and Federal Home Loan Bank (“FHLB”) advances of approximately $8.0 million at that date. Brokered deposits represented 2.1% of total deposits at March 31, 2026. Our weighted average spot deposit rate was 1.55% at March 31, 2026.

 

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We believe we employ disciplined underwriting guidelines and credit review and administration processes that have contributed to our minimal charge-offs. Nonperforming assets were 1.6% of total assets at March 31, 2026.

 

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Technology for the Benefit of Our Clients: We are committed to leveraging technology to expand our suite of banking products and services and to enhance growth initiatives, while remaining mindful and vigilant of the enhanced risks certain technology-enabled activities (such as deposit gathering and electronic funds transfer) may present. We have invested in and developed our Treasury One® platform, which connects and integrates cash management treasury functions to our clients through both online and mobile banking platforms. We believe this platform enables greater automation, more efficiencies, and improved workflows, all of which enhance our commercial business banking client experience. Our online and mobile banking platforms enhance our clients’ ability to efficiently and conveniently manage their accounts and cash management needs by offering features such as mobile check deposit, positive pay, wire approval, debit card management, and customized alerts. Additionally, through online and mobile banking, our clients can view both current- and prior-day balances and activities, transfer funds, review and disposition exceptions, and securely initiate international transactions.

 

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Opportunistically Pursuing Accretive Strategic Growth: Our Board of Directors (the “Board”) and senior executive management team have significant experience in identifying, pursuing, executing, and integrating accretive strategic growth opportunities. Given our capital and liquidity positions, as well as the benefit of being an SEC registrant with our common stock traded on NASDAQ, we believe we are well positioned to opportunistically pursue strategic growth opportunities that will produce long-term value for our shareholders.

Our strategy depends on many factors, including market conditions, regulations, and how well we execute our plans. See the section entitled “Risk Factors” in Item 1A of this Registration Statement for a discussion of these and other risks. Further, our strategy may change as circumstances shift, and we cannot guarantee future success. We regularly review our approach to balance growth opportunities with risk management.

Our Business Lines

We are a relationship-based bank that specializes in serving the unique needs of our private banking clients, the businesses they own and operate, and the advisors that serve them. In order to deliver our customized private and business banking products and services, we organize our operations around four primary business lines — Private Banking, Business Banking, Commercial Real Estate Banking, and Private Business Capital.

 

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Private Banking: We provide a consultative approach focused on creating customized solutions to our clients’ ever-evolving personal banking needs. Our personal banking tools provide our clients with technology for convenience without sacrificing our high-touch service experience. Through our personal banking business line, we provide our clients with access to a variety of checking and savings account solutions and innovative online banking tools. We offer secured and unsecured lines of credit and short-term loans available to private investors to facilitate investment property purchases and bridge loans for second home purchases. We also offer our existing private banking clients small balance personal unsecured loans and savings account secured loans.

 

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Business Banking: We offer a wide variety of business banking products and services. We offer our business clients secured and unsecured lines of credit, equipment and business expansion loans, and working capital lines of credit. Treasury One® is our new comprehensive online cash and treasury management suite, which provides enhanced security features, efficiency, and controls designed specifically for our business clients’ treasury management needs.

 

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Commercial Real Estate Banking: We offer customized CRE loans to help our clients and their businesses acquire, hold or improve commercial real property. Our CRE loans are term loans that are

 

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secured by income-producing real estate for investors or owners, and are generally used to finance or refinance real property. In addition, we provide construction loans which are structured as non-revolving and revolving lines of credit secured by real estate and may be used for office, industrial, retail, multifamily, and residential subdivisions.

 

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Private Business Capital: Our Private Business Capital division is dedicated to assisting small business owners with solving their unique financing needs. As an SBA preferred lender, we offer SBA 7(a) and 504 loans and provide business start-up loans, loans for business acquisition and partner buyouts, owner-occupied CRE loans, equipment, furniture and fixture, and other loans. We believe the government guaranty feature of SBA 7(a) loans and the relatively low loan-to-value ratios associated with SBA 504 loans present a compelling opportunity to generate attractive risk-adjusted returns through our Private Business Capital business division.

Lending Activities

We offer a full complement of flexible and structured loan products that we tailor to the diverse needs of our private and business banking clients, which we believe promotes our long-term growth objectives. Our primary lending business continues to focus on small- and medium-sized businesses and corporations through CRE loans, SBA loans, commercial and industrial (“C&I”) loans, and personal and other loans. During the first quarter of 2026, new loan originations increased to approximately $173 million compared to approximately $151 million and $77 million, during the three months ended December 31, 2025 and three months ended March 31, 2025, respectively. Our loans held for investment totaled $2.14 billion as of March 31, 2026.

 

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CRE Lending: We originate CRE loans that are secured by investor-owned real estate, owner-occupied real estate, multifamily real estate, and single family real estate. We also originate a limited number/amount of construction and land loans. When appropriate, we will leverage our status as an SBA preferred lender to originate CRE loans through our Private Business Capital division that are secured by owner-occupied real estate, which we refer to collectively as SBA loans secured by real estate.

 

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Investor-Owned Real Estate Lending: We originate loans that are secured by investor-owned CRE. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate, such as retail centers, small office locations, light industrial buildings, hotel/motel and mixed-use commercial properties located in our primary market areas. These loans are generally collateralized by first liens or second liens on real estate and amortized over a period of years. At March 31, 2026, we had $560.7 million of CRE investor-owned loans, representing 34.1% of our CRE loans held for investment at that date and 26.2% of our loans held for investment at that date.

 

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Commercial Owner-Occupied Real Estate Lending: We originate loans secured by owner-occupied CRE, such as light industrial buildings, mixed-use commercial properties, and small office locations for professional services located in primarily Southern California. These loans are underwritten and analyzed based on the businesses’ cash flows. While real estate secures these loans, real estate cash flows are typically not the primary source of repayment. At March 31, 2026, we had $238.7 million of owner-occupied CRE secured loans, representing 14.5% of our CRE loans held for investment at that date and 11.1% of our loans held for investment at that date.

 

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Multifamily Residential Lending: We originate loans secured by multifamily residential properties (five units and greater) located primarily in Southern California. Such loans may be either fixed- or adjustable-rate loans tied to the prime or Treasury Rate with maturity or repricing dates up to typically five years and amortization schedules of up to 30 years. At March 31, 2026, we had $177.2 million of multifamily real estate secured loans, representing 10.8% of our CRE loans held for investment at that date and 8.3% of our loans held for investment at that date.

 

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Single Family Residential Lending: We originate CRE loans secured by one-to-four family residential properties, which we refer to as single family residential loans, primarily located in Southern California.

 

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The financed properties may be owner-occupied or investor owned. We generally limit the loan-to-value ratios of our single family residential loans to 65% of the purchase price or appraised value, whichever is lower. At March 31, 2026, CRE loans secured by single family residential properties totaled $194.5 million, representing 11.8% of our CRE loans held for investment at that date and 9.1% of our loans held for investment at that date.

 

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Commercial Land and Construction Lending: We originate commercial land and construction loans to established builders to construct residential properties, loans to owners to construct their own occupied commercial real estate, loans to developers of CRE 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 carry either fixed or variable interest rates generally based on the borrowers’ ability to repay the loans from the cash flow of their businesses. At March 31, 2026, land and construction loans totaled $43.9 million, representing 2.7% of our CRE loans held for investment at that date and 2.1% of our loans held for investment at that date.

 

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SBA Loans Secured by CRE: Through our Private Business Capital division, we originate SBA 7(a) and 504 loans secured by owner-occupied CRE. We offer SBA 7(a) loans generally at variable rates, and we typically sell the SBA-guaranteed portion of the SBA 7(a) loans we originate in the secondary market. Under the SBA 504 program, we make loans to small businesses to provide funding for the purchase of real estate and provide up to 90% financing of the total purchase cost, represented by two loans to the borrower. The first lien loan is generally a long-term, fully amortizing, fixed-rate loan made in the amount of 50% of the total purchase cost. The second lien loan is a short-term, interest only, adjustable-rate loan made in the amount of 40% of the total purchase cost. The Bank retains the first lien loan for its term and sells the second lien loan to the SBA subordinated debenture program. At March 31, 2026, SBA loans secured by real estate totaled $431.0 million, representing 26.2% of our CRE loans held for investment at that date, and 20.1% of our total loans held for investment at that date. During the first quarter of 2026, we sold 16 SBA 7(a) loans with government-guaranteed portions totaling approximately $16.2 million.

 

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Commercial Business Lending: We originate C&I loans secured by various business assets, including inventory, receivables, machinery, and equipment. This portfolio includes loans to small- and middle-market businesses across many industries predominantly throughout Southern California. Loan types include revolving lines of credit, term loans, seasonal loans, and loans secured by liquid collateral such as cash deposits or marketable securities. C&I loans primarily are made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. Most C&I 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 addition, through our Private Business Capital division, we originate SBA 504 equipment loans, which generally are fixed rate for a term of between three and seven years and which we refer to as SBA non-real estate secured loans. At March 31, 2026, commercial business loans totaled $493.1 million, of which C&I loans represented $461.8 million, or 93.7%, and SBA non-real estate secured loans represented $31.3 million, or 6.3%. At March 31, 2026, commercial business loans represented 23.0% of our loans held for investment.

 

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Consumer and Other Lending: We originate a limited number of consumer loans (generally for existing private banking clients), which consist primarily of small balance personal unsecured loans and savings account secured loans. We do not expect these consumer and other loans to comprise a significant portion of our lending activity. At March 31, 2026, consumer and other loans totaled $2.0 million, constituting 0.1% of our loans held for investment.

 

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We have adopted credit policies that establish guidelines for originating and underwriting loans, managing our credit-related objectives, risk tolerance and portfolio concentration thresholds, and complying with applicable regulatory and statutory requirements. A thorough credit analysis precedes CRE and commercial banking lending decisions, and we follow well-established and proven procedures when approving personal consumer loans. Through these credit policies, we aim to strike a balance between our credit quality standards and our desire to maintain a prudent level of flexibility for our employees to structure loans that achieve our clients’ objectives. Our credit policies are maintained by our credit department. Our credit policies are reviewed by the Bank’s Board of Directors (the “Bank Board”) at least annually.

To facilitate and support our prudent credit origination, underwriting, and administration practices, the Bank maintains a Management Loan Committee and a Director Loan Committee. The Bank’s Management Loan Committee is comprised of the Bank’s Chief Executive Officer, Chief Credit Officer, Chief Banking Officer, and certain other members of management, and is primarily responsible for day-to-day implementation and oversight of our loan approval procedures. The Bank Board approves, from time to time, a delegated lending authority to members of senior management acting jointly with other members of senior management and/or with the approval of the Management Loan Committee or the Bank’s Director Loan Committee. The amount of authority delegated varies based on years of direct lending experience, responsibility, and performance.

We believe that our commitment to prudent credit risk management practices allows us to successfully navigate periods of economic volatility. As of March 31, 2026, nonperforming assets totaled $43.2 million, or 1.6% of total assets, special mention loans totaled $8.9 million, or 0.4% of total loans held for investment, and classified loans totaled $59.5 million, or 2.8% of total loans held for investment. During the quarter ended March 31, 2026, net charge-offs totaled $1.1 million, or 0.1% of total loans held for investment.

Deposits Products

We solicit deposits through our relationship-driven team of dedicated and accessible private and business bankers, as well as through community-focused marketing. We emphasize establishing and growing client deposit relationships, which also may come with lending needs. We believe our high level of client service to our depositors puts us in a position of strength when lending needs arise. 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 and personal deposit accounts, while continuing to provide the level of client service for which we are known.

We provide a full range of deposit products to our private and business banking clients. Our product offerings include checking, savings, money market accounts and certificates of deposit, all supported by convenient digital payment solutions such as debit cards, direct deposit, person-to-person and ACH payments, as well as extensive online and mobile banking capabilities. The Bank is a member of the IntraFi Network (“IntraFi”), which offers deposit placement services, including both the Certificate of Deposit Account Registry Service (“CDARS”) and Insured Cash Service (“ICS”) programs, and allows banking clients to access FDIC insurance protection on deposits that exceed the FDIC insurance limit while the Bank receives reciprocal deposits from other FDIC-insured banks. These reciprocal deposit structures offer protection to depositors by fully insuring deposits with other network banks, thereby helping the Bank retain the full amount of the deposits on its balance sheet. It also enhances the Company’s funding stability.

As of March 31, 2026, we had total deposits of $2.4 billion, comprised of 31.0% noninterest-bearing deposits, 12.6% interest-bearing checking accounts, 45.2% savings and money market accounts, 5.1% time deposit accounts under $250,000, and 6.1% time deposit accounts $250,000 and over. As of March 31, 2026, we had $49.5 million of brokered deposits, or approximately 2.1% of total deposits. During the quarter ended March 31, 2026, our deposits had an average cost of 1.67%.

 

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Treasury Management

Our comprehensive treasury management solutions are designed to scale from the smallest commercial banking clients to our largest commercial clients. We offer a full suite of products and services that assist clients with their cash flow and liquidity management, payment and card, reconciliation and fraud management needs. Payable solutions include ACH, wire transfer, business debit cards, bill pay, account reconciliation, check issuance, and cash vault services. Our payables solutions give our business clients options on how to best deliver their payments depending on speed, choice, and efficiency. Receivable solutions include merchant services, ACH, real time payments, wire transfers, remote deposit capture, lockbox, and coin and currency. These receivable tools help reduce days sales outstanding for our clients and allow for quicker receipt of payment. These solutions are paired with our Treasury Management platform, Treasury One^®, that provides detailed information reporting, mobile capabilities, alerting, self-service and enterprise resource planning integrations to popular accounting systems allowing for simpler account reconciliation.

Specialty Services

True to our Distinctly Different^® customized approach to banking products and services, we have leveraged the broad array of lending, deposit, and treasury management products and services described above to develop specialized banking products and services for the legal and fiduciary services providers, professional services and wealth management services providers, and nonprofit clients:

 

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Legal and Fiduciary Services Providers: Our dedicated, experienced relationship managers and private bankers provide a personalized approach tailored specifically to the needs of law firms. We offer checking, savings, and money market accounts to lawyers for use as trust accounts, to hold legal settlements, to provide escrow services, and for court-ordered conservatorships. We also offer a full suite of business loans to our legal industry clients. At March 31, 2026, legal and fiduciary services providers deposits were $761.1 million, which represented 31.2% of total deposits at that date.

 

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Professional Services and Wealth Management Services Providers: Our relationship bankers are trusted partners for registered investment advisors, wealth managers, and family offices. We cater to financial advisors by providing lending solutions to help them serve their clients’ core credit needs – personal, investment, and business financing.

 

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Nonprofit Clients: We recently began offering banking products and services customized for nonprofit organizations and the communities they serve. Our nonprofit Impact Checking Account is purpose-built for mission-driven organizations, with the tools and flexibility they need to steward funds responsibly and efficiently. We offer these organizations mobile deposit and access to additional treasury management solutions designed for nonprofit operations and governance.

Investment Securities

Our investment policy, as established by the Bank’s Asset Liability Committee (the “ALCO”), serves to provide and maintain liquidity, capital preservation, complement our lending activities, support our interest rate risk management and tax planning strategies, and generate a favorable return on investments without incurring undue interest rate and credit risks. 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. As of March 31, 2026, the carrying value of our investment portfolio, which represented 8.2% of total assets, totaled $220.9 million and had an average effective yield of 4.6% and an estimated modified duration of approximately 3.8 years. At March 31, 2026, 1.1% of our investment portfolio consisted of U.S. agency securities. The remainder of our securities portfolio is invested in municipal bonds, SBA loan pool securities, mortgage-backed securities, and corporate debt securities. 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.

 

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Our Market Area

Headquartered in La Jolla, California, we operate seven branches located in Beverly Hills, Coronado, La Jolla, Montecito, Newport Beach, San Diego and El Segundo, California, as well as through digital banking services. We also maintain two administrative locations in Brea and Mission Valley, California and two loan production offices in Temecula and Redlands, California. We define our target markets as the Southern California counties of Los Angeles, Santa Barbara, San Diego, and Orange.

Competition

The banking business is highly competitive. We compete for loans, deposits, and employees, among other things. Our most direct competition for loans comes from larger regional and national banks, diversified finance companies, and community banks that target the same clients as we do. In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and bank holding companies. Those competitors include nonbank specialty lenders, insurance companies, private investment funds, investment banks, fintech companies, and other financial and non-financial institutions.

Competition is based on a number of factors, including interest rates charged on loans and paid on deposits, underwriting standards, loan covenants, required guarantees, the scope and type of banking and financial services offered, including online and digital banking, client service, timely adoption of technological changes, and regulatory compliance. Many of our competitors are larger companies that offer a broader range of financial services and have substantial capital, technological, and marketing resources. Some of our competitors have substantial market positions and have access to a lower cost of capital or a less expensive source of funds. Because of economies of scale, our larger, nationwide competitors may offer loan pricing that is more attractive than what we are willing to offer.

Economic factors, along with legislative and technological changes, will have an ongoing impact on the competitive environment within the financial services industry. We work to anticipate and adapt to dynamic competitive conditions whether it is by developing and marketing innovative products and services, adopting or developing new technologies that differentiate our products and services, cross marketing, or providing highly personalized banking services.

We believe we differentiate ourselves in the marketplace through the quality of service we provide to clients while striving to maintain competitive interest rates, loan fees, and other loan terms. We emphasize personalized relationship banking services, strong local relationships, and the efficient decision-making of our lending business units. We believe we compete effectively based on our in-depth knowledge of our borrowers’ industries and their business needs based upon information received from our borrowers’ key decision-makers, analysis by our experienced professionals, and interaction between these two groups; our breadth of loan product offerings and our flexible and creative approach to structuring products that meet our borrowers’ business and timing needs; and our dedication to superior client service.

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, 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 (“AML”); and (iii) third-party risk, with each of the committees of our Board assuming a different and important role in overseeing the management of the risks we face.

 

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The Audit Committee 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, Governance and Nominating Committee (the “CGN Committee”) of our Board 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 CGN 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 CGN Committee of our Board oversees risks associated with the independence of our Board 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 regarding our risk management processes. Our senior management is also responsible for creating and recommending to our Board 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 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 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.

NASDAQ Listing Application

We have applied to list the shares of our common stock on NASDAQ under our current symbol “PBAM,” concurrently with the effectiveness of this Registration Statement. Our common stock is currently quoted on the OTCQX Market under the trading symbol “PBAM.”

Implications of Being an Emerging Growth Company

We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

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exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;

 

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reduced disclosure about the emerging growth company’s executive compensation arrangements; and

 

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no non-binding advisory votes on executive compensation or golden parachute arrangements.

We could remain an “emerging growth company” for up to five years, or until the earliest to occur of: (1) the first fiscal year after our annual gross revenues are $1.235 billion or more; (2) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (3) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. We have elected to take advantage of the reduced disclosure requirements described above regarding our executive compensation arrangements for purposes of this Registration Statement. In addition, we expect to take advantage of certain of the reduced reporting and other requirements of the JOBS Act with respect to the periodic reports we will file with the SEC and proxy statements that we use to solicit proxies from our shareholders.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or

 

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revised accounting standards, however, we have irrevocably “opted out” of this provision, and we will comply with new or revised accounting standards to the same extent that compliance is required for nonemerging growth public companies. See our discussion in the section entitled “Risk Factors” in Item 1A of this Registration Statement.

Intellectual Property

Our intellectual property is important to the success of our business. We own a variety of trademarks, service marks, trade names, logos and other intellectual property, including the trademarks “CalPrivate Bank,” “CalPrivate,” “Distinctly Different,” and “Treasury One,” which we have registered with the U.S. Patent and Trademark Office. We intend to protect the use of our trademarks and other intellectual property nationwide.

Human Capital

We strive to be an employer of choice within our industry by fostering an inclusive culture that supports teamwork and collaboration, and where all employees are treated with dignity and respect. We believe that investing in our people is essential to our long-term success and offer career development and training programs to ensure the success of our employees in their professional and personal growth. We encourage our employees to make meaningful contributions within our Company and communities in which we operate.

None of our employees is party to a collective bargaining agreement. We consider our relationship with our employees to be excellent and have not experienced interruptions of operations due to labor disagreements.

Staffing Model. Our goal is to provide our staff with careers instead of jobs. The majority of our staff are regular full-time employees. We also employ a small number of part-time employees. As of March 31, 2026, we had 251 full-time employees.

Employee Engagement. We value the voice of our employees and encourage feedback and continual improvement. We conduct our annual employee engagement survey, reaffirming our commitment to ongoing assessment and improvement.

Health & Safety. We offer a health and well-being program that provides resources supporting health, financial, community, social, emotional, purpose, and career well-being. We also strive to provide each employee with a safe and healthy work environment. Our health and well-being program consists of policies, procedures, and guidelines, and mandates all tasks be conducted in a safe and efficient manner, complying with all local, state, and federal safety and health regulations, and special safety concerns. The health and safety program encompasses all facilities and operations and addresses on-site emergencies, injuries and illnesses, evacuation procedures, cell phone usage, and general safety rules.

Benefits. We are committed to offering a competitive total compensation package. We regularly compare compensation and benefits with peer companies and market data, making adjustments as needed to ensure compensation stays competitive. We also offer a wide array of benefits for our employees and their families, including:

 

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Comprehensive medical, dental, and vision benefits, as well as life insurance and short-term disability insurance for all full-time employees

 

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Free mental health resources, coaching, and webinars

 

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Flexible healthcare and dependent care spending accounts

 

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Company paid seasonal flu vaccinations

 

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401(k) plan including a competitive company match

 

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Volunteer time off

 

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Corporate charitable opportunities

 

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Paid time off and bank holidays

 

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Internal training and online development courses

 

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Leadership roadmap and instructor-led management resources

 

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Employee appraisal program designed to ensure employees and managers are having continuous, meaningful conversations about performance and growth throughout the year

 

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Tuition reimbursement for eligible employees

 

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Public transit commuter program

 

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Dependent care assistance, caregiver support, and fertility assistance programs

 

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Employee discounts on cellular phone services, hotels, car rentals, pet insurance, and local attractions

 

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Employee referral program

Corporate Information

Our principal executive office is located at 9404 Genesee Ave., Suite 100 La Jolla, California 92037, and our telephone number is (858) 875-6900. We maintain a website at www.investors.pbam.com. This reference to our website is included for the convenience of investors only and our website and the information contained therein or limited thereto is not incorporated into this Registration Statement.

Reporting Obligations

After this Registration Statement becomes effective, we will file annual, quarterly and current reports, proxy statements and other documents with the SEC. Our SEC filings will be available to the public on the SEC’s internet site at http://www.sec.gov. You may also obtain these documents, free of charge, from the investor relations section of our website at www.investors.pbam.com. Our website will contain additional information about our business, but the contents of the website are not incorporated by reference in or otherwise a part of this Registration Statement.

Supervision and Regulation

The Company and the Bank are subject to extensive regulation under federal and state law. The following information describes certain aspects of that regulation applicable to the Company and the Bank and does not purport to be complete. The costs of compliance with the regulatory regime and supervisory framework applicable to the Company and the Bank are significant. The level of regulation and oversight over financial services activities also continues to increase, including the regulatory enforcement environment applicable to banks and bank holding companies. The laws, regulations and supervisory guidance applicable to the Company and the Bank are subject to frequent and ongoing change. A change in applicable laws, regulations or policies, or a change in the way such laws, regulations, or policies are interpreted or enforced by regulatory agencies or courts, may have a material impact on the business, operations, and earnings of the Company and the Bank. The likelihood and timing of any future changes, and the effect of such changes on the Company and the Bank, are not determinable at this time with any degree of certainty.

Private Bancorp of America, Inc.

The Company is a bank holding company organized under the laws of California within the meaning of the Bank Holding Company Act of 1956, as amended (the “BHC Act”). As a bank holding company, the Company is

 

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subject to supervision, regulation and regular examination by the Federal Reserve and is required to file periodic reports of its operations with the Federal Reserve and such additional information regarding the Company and its subsidiaries as the Federal Reserve may require.

Bank holding companies are required to maintain certain levels of capital and must serve as a source of financial and managerial strength to subsidiary banks and commit resources as necessary to support each subsidiary bank. Federal Reserve regulations and policies limit the dividends a bank holding company may pay to its shareholders and the amount of its shares that it may repurchase. Examinations are designed to inform the Federal Reserve of the financial condition and nature of the operations of the bank holding company and its subsidiaries and to monitor compliance with the BHC Act and other laws affecting the operations of bank holding companies. To determine whether potential weaknesses in the condition or operations of bank holding companies might pose a risk to the safety and soundness of their subsidiary banks, examinations focus on whether a bank holding company has adequate systems and internal controls in place to manage the risks inherent in its business, including credit risk, interest rate risk, market risk, liquidity risk, operational risk, and legal risk. Bank holding companies may be subject to potential enforcement actions by the Federal Reserve for unsafe or unsound practices in conducting their businesses or for violations of any law, regulation, or any condition imposed in writing by the Federal Reserve.

The Company is also a bank holding company within the meaning of Section 1280 of the California Financial Code. Therefore, the Company and any of its subsidiaries are subject to examination by, and may be required to file reports with, the California Department of Financial Protection and Innovation (the “DFPI”). The DFPI’s approval may also be required for certain mergers and acquisitions.

CalPrivate Bank

The Bank is a California state-chartered bank whose deposit accounts are insured by the FDIC, up to applicable limits. As such, the Bank is subject to supervision, regulation, and regular examination by the DFPI and the FDIC. While the Bank is not a member of the Federal Reserve, the Bank is also subject to certain regulations of the Federal Reserve.

Federal and state laws and regulations applicable to the Bank regulate, among other things, the level of reserves that the Bank must maintain against deposits, restrictions on the types, amount and terms and conditions of loans it may originate, and limits on the types of other activities in which the Bank may engage and the investments that it may make.

If, based on an examination of the Bank, the regulators should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of the Bank’s operations are unsatisfactory or that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators. Such remedies include the power to enjoin unsafe or unsound practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict growth, to assess civil monetary penalties, to remove officers and directors and ultimately to request the FDIC to terminate the Bank’s deposit insurance.

The Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), signed into law in July 2010, significantly restructured the financial regulatory regime in the United States and has had a broad impact on the financial services industry as a result of the significant regulatory and compliance changes required under the act.

The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (the “EGRRCPA”), which became effective May 24, 2018, amended the Dodd-Frank Act to provide regulatory relief for certain smaller and

 

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regional financial institutions, such as the Company and the Bank. The EGRRCPA, among other things, provides financial institutions with less than $10 billion in total consolidated assets with relief from certain capital requirements. The EGRRCPA also expanded the category of bank holding companies that may rely on the Federal Reserve’s Small Bank Holding Company Policy Statement (the “SBHC Policy Statement”) by raising the maximum amount of consolidated assets a qualifying bank holding company may have from $1 billion to $3 billion. In addition to meeting the asset threshold, a bank holding company must not engage in significant nonbanking activities, not conduct significant off-balance sheet activities, and not have a material amount of debt or equity securities outstanding and registered with the SEC (subject to certain exceptions). The Federal Reserve may, in its discretion, exclude any bank holding company from the application of the SBHC Policy Statement if such action is warranted for supervisory purposes.

Deposit Insurance

The Bank is an FDIC insured financial institution whereby the FDIC provides deposit insurance for a standard maximum insurance amount per depositor, per ownership category. The Deposit Insurance Fund (the “DIF”) is funded by assessments on insured depository institutions. The Bank, as is true for all FDIC insured banks, is subject to deposit insurance assessments as determined by the FDIC.

In November 2023, the FDIC finalized a rule that imposes special assessments to recover losses to the DIF arising from the protection of uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in 2023. The special assessments were collected at an annual rate of approximately 13.4 basis points per year (3.36 basis points per quarter) over eight quarters in 2024 and 2025. The first assessment period began January 1, 2024. Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment on a one-time basis. In December 2025, the FDIC approved an interim final rule reducing the special assessment rate for the eighth and final collection quarter from 3.36 basis points to 2.97 basis points to minimize amounts collected in excess of the total estimated loss. In the three months ended March 31, 2026 and March 31, 2025, the Company recorded expense of $394,000 and $368,000, respectively, for FDIC insurance premiums.

Under the Federal Deposit Insurance Act (the “FDI Act”), the FDIC may terminate the insurance of an institution’s deposits upon a finding that the institution has engaged in unsafe or 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 FDIC. We do not know of any practice, condition, or violation that might lead to termination of deposit insurance at the Bank.

Capital Adequacy Guidelines

The Federal Reserve and the FDIC have issued substantially similar capital requirements applicable to all banks and bank holding companies. In addition, those regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth.

As a bank holding company with less than $3 billion in total consolidated assets, the Company is currently treated as a “small bank holding company” under the Federal Reserve’s SBHC Policy Statement and is exempt from the Federal Reserve’s consolidated risk-based capital and leverage rules at the holding company level. Although the Company expects to continue to be treated as “small bank holding company” under the SBHC Policy Statement, the Federal Reserve has significant discretion to determine whether a publicly traded bank holding company (or any bank holding company) may continue to rely on the SBHC Policy Statement. If the Company continues to be treated as a “small bank holding company,” the Company’s capital adequacy will be evaluated at the bank level and on a parent-only basis, and it would not be subject to consolidated capital standards for regulatory purposes. If the Company in the future is advised by the Federal Reserve that it may no

 

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longer rely on the SBHC Policy Statement, the Company will become subject to the Federal Reserve’s consolidated capital standards applicable to bank holding companies. The Company believes that it would be able to satisfy the Federal Reserve’s consolidated capital rules.

The Bank is subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Act (the “Basel III Capital Rules”). Under the Basel III Capital Rules, banks must hold a capital conservation buffer above the adequately capitalized risk-based capital ratio of 2.50% for all ratios except the Tier 1 leverage ratio. The Basel III Capital Rules, effective January 1, 2015, require the Bank to comply with the following minimum capital ratios: (i) a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.50%, plus a 2.50% “capital conservation buffer” (effectively resulting in a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 7.00%); (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.00%, plus the 2.50% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.50%); (iii) a ratio of total capital to risk-weighted assets of at least 8.00%, plus the 2.50% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.50%); and (iv) a leverage ratio of 4.00%, calculated as the ratio of Tier 1 capital to average assets (the “Tier 1 Leverage ratio”). The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 capital to risk-weighted assets above the minimum but below the conservation buffer face constraints on dividends, equity repurchases, and compensation, based on the amount of the shortfall.

With respect to banks, the “prompt corrective action” regulations pursuant to Section 38 of the FDI Act require, among other things, that federal bank regulators take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For this purpose, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends, and restrictions on the acceptance of brokered deposits. To be well capitalized under these regulations, a bank must have the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of at least 6.50%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.00%; (iii) a total capital to risk-weighted assets ratio of at least 10.00%; and (iv) a Tier 1 Leverage ratio of at least 5.00%.

As of March 31, 2026, the Bank’s common equity Tier 1 capital ratio was 12.95%; its Tier 1 capital to risk-weighted asset ratio was 12.95%; its total capital to risk-weighted asset ratio was 14.2%; and its Tier 1 Leverage ratio was 11.29%. The Bank exceeded the thresholds to be considered well capitalized as of March 31, 2026.

In March 2026, the federal banking agencies published a proposal to modify risk-based capital calculations under the standardized approach for all banks that are not Category I or Category II institutions and do not opt into the Community Bank Leverage Ratio framework. The proposal would make changes to the definition of capital, reduce risk weights for certain asset classes (including residential mortgages, consumer lending and business lending) and adjust certain methodologies to calculate risk-weighted assets. The proposal would also remove any requirement to deduct servicing assets from regulatory capital, instead assigning a 250% risk weight to such assets. The standardized approach proposal represents the most significant source of potential capital requirement reductions for community banks and mid-size institutions. Comments on the standardized approach proposal are due by June 18, 2026.

Enforcement Actions and Receivership

In addition to measures taken under the “prompt corrective action” regulations, insured banks may be subject to potential enforcement actions by the federal banking agencies for unsafe or unsound practices in conducting their businesses or for violations of any law, rule, regulation, or condition imposed in writing by the agency or any written agreement with the agency. Enforcement actions may include the imposition of a conservator or receiver, the issuance of a cease-and-desist order that can be judicially enforced, the termination

 

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of insurance of deposits (in the case of a depository institution), the imposition of civil money penalties, the requirement to make restitution payments to clients who have experienced an economic loss due to bank actions, the issuance of directives to increase capital, the issuance of formal and informal agreements, the issuance of removal, and prohibition orders against institution-affiliated parties. The enforcement of such actions through injunctions or restraining orders may be based upon a judicial determination that the agency would be harmed if such equitable relief was not granted.

If the FDIC is appointed the conservator or receiver of the Bank, the FDIC has the power: (1) to transfer any of the Bank’s assets and liabilities to a new obligor without the approval of the Bank’s creditors; (2) to enforce the terms of the Bank’s contracts pursuant to their terms; or (3) to repudiate or disaffirm any contract or lease to which the Bank is a party, the performance of which is determined by the FDIC to be burdensome and the disaffirmation or repudiation of which is determined by the FDIC to promote the orderly administration of the Bank. In addition, the claims of holders of U.S. deposit liabilities and certain claims for administrative expenses of the FDIC against the Bank would be afforded priority over other general unsecured claims against the Bank, including claims of debt holders and depositors in non-U.S. offices, in the liquidation or other resolution of the Bank. As a result, whether or not the FDIC ever sought to repudiate any debt obligations of the Bank, the debt holders and depositors in non-U.S. offices would be treated differently from, and could receive substantially less, if anything, than the depositors in the U.S. offices of the Bank.

Dividends

It is the Federal Reserve’s policy that bank holding companies, such as the Company, should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to its banking subsidiaries. The Federal Reserve also discourages dividend payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong. In addition, if the Company does not maintain an adequate capital conservation buffer under the Basel III Capital Rules, its ability to pay dividends to or repurchase shares from shareholders may be restricted.

As a California corporation, the Company is also subject to the limitations of California law, which allows a corporation to distribute cash or property to shareholders, including a dividend or repurchase or redemption of shares, if the corporation meets either a retained earnings test or a “balance sheet” test. Under the retained earnings test, the Company may make a distribution from retained earnings to the extent that its retained earnings exceed the sum of (a) the amount of the distribution plus (b) the amount, if any, of dividends in arrears on shares with preferential dividend rights. The Company may also make a distribution if, immediately after the distribution, the value of its assets equals or exceeds the sum of (a) its total liabilities plus (b) the liquidation preference of any shares which have a preference upon dissolution over the rights of shareholders receiving the distribution. Indebtedness is not considered a liability if the terms of such indebtedness provide that payment of principal and interest thereon are to be made only if, and to the extent that, a distribution to shareholders could be made under the balance sheet test. A California corporation may specify in its articles of incorporation that distributions under the retained earnings test or balance sheet test can be made without regard to the preferential rights amount. Our Articles of Incorporation (the “Articles”) do not address distributions under either the retained earnings test or the balance sheet test.

The Bank is a legal entity that is separate and distinct from the Company. The Company’s principal source of cash flow is dividends it receives from the Bank. The Bank’s ability to pay dividends to the Company is subject to restrictions set forth in the California Financial Code.

The California Financial Code provides that a bank may not make a cash distribution to its shareholders exceeding the lesser of a bank’s (1) retained earnings; or (2) net income for its last three fiscal years, less the amount of any distributions made by a bank or by any majority-owned subsidiary of a bank to the shareholders of

 

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the bank during such period. However, a bank may, with the approval of the DFPI, make a distribution to its shareholders in an amount not exceeding the greatest of (a) its retained earnings; (b) its net income for its last fiscal year; or (c) its net income for its current fiscal year. If bank regulators determine that the shareholders’ equity of a bank is inadequate or that the making of a distribution by the bank would be unsafe or unsound, the regulators may order the bank to refrain from making a proposed distribution. The payment of dividends could, depending on the financial condition of a bank, be deemed to constitute an unsafe or unsound practice.

Banking Acquisitions; Changes in Control

The BHC Act requires, among other things, the prior approval of the Federal Reserve in any case where a bank holding company proposes to (i) acquire direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank or bank holding company (unless it already owns a majority of such voting shares), (ii) acquire all or substantially all of the assets of another bank or bank holding company, or (iii) merge or consolidate with any other bank holding company. In determining whether to approve a proposed bank acquisition, the Federal Reserve will consider, among other factors, the effect of the acquisition on competition, the effect of the transaction on the convenience and needs of the community to be served, and the projected capital ratios and levels on a post-acquisition basis, as well as the acquiring institution’s performance under the Community Reinvestment Act (the “CRA”) and its compliance with fair housing and other consumer protection laws.

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-percentage, 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, 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 a number of 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 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 such state. Under California law, the Bank may open branch offices throughout California with the prior approval of the DFPI. In addition, with prior regulatory approval, the Bank may acquire branches of existing banks located in California.

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. “Control” is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company, but may arise under certain circumstances between 5% and 24.99% ownership.

 

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Source of Strength

Federal Reserve policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. The Dodd-Frank Act codified this policy as a statutory requirement. Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

The Federal Deposit Insurance Corporation Improvement Act

Under the Federal Deposit Insurance Corporation Improvement Act (the “FDICIA”) the federal bank regulatory agencies possess broad powers to take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institution is “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized,” as defined by the FDICIA.

As required by the FDICIA, the federal bank regulatory agencies also have adopted Interagency Guidelines Prescribing Safety and Soundness Standards relating to, among other things, internal controls and information systems, internal audit activities, loan documentation, credit underwriting, and interest rate exposure. In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. In addition, the agencies adopted regulations that authorize, but do not require, an institution that has been notified that it is not in compliance with safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized institution is subject under the prompt corrective action provisions described above.

Transactions with Affiliates; Restrictions on Lending

Sections 23A and 23B of the Federal Reserve Act and Regulation W establish certain quantitative limits and other requirements for loans, purchases of assets, and certain other transactions between the Bank and its “affiliates,” including the Company. Among other requirements, loans or extensions of credit to, or other covered transactions with, an affiliate, to the extent permitted, must be on terms and conditions that are substantially the same, or at least as favorable to the Bank, as those prevailing for comparable nonaffiliated transactions.

Loans to executive officers, directors, or any person who, directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a bank and their related interests, are subject to Sections 22(g) and 22(h) of the Federal Reserve Act and their corresponding regulation (Regulation O). Among other things, these loans must be made on terms (including interest rates charged and collateral required) substantially the same as those offered to unaffiliated individuals or be made as part of a benefit or compensation program and on terms widely available to employees, and must not involve a greater than normal risk of repayment. In addition, the amount of loans a bank may make to these persons is subject to both quantitative limits and procedural requirements.

California law limits California banks in the amounts 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 loan losses, capital notes and debentures, and both secured and unsecured loans to one person (excluding certain secured lending and letters of credit) at any given time and generally may not exceed 25% of the sum of a bank’s shareholders’ equity, allowance for loan losses, capital notes and debentures.

 

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Concentrations in Lending

In 2006, the federal bank regulatory agencies released guidance advising financial institutions of the risks posed by CRE lending concentrations and reinforcing that financial institutions should implement sound risk management processes to identify, monitor and control risks associated with CRE concentrations. Higher allowances for loan losses and capital levels may also be required. The CRE guidance provides that further supervisory analysis of an institution’s CRE 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 nonfarm nonresidential 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 CRE portfolio has also increased by 50% or more during the prior 36 months.

As of March 31, 2026, the Bank’s reported loans for construction, land development, and other land were approximately 55.9% of the Bank’s total risk-based capital, and the Bank’s reported loans for secured by non-owner-occupied CRE were approximately 295.1% of the Bank’s total risk-based capital. As of March 31, 2026, both percentages were below the established regulatory guidelines. We have exposures to loans secured by CRE due to the nature of our market and the loan needs of both retail and commercial customers. We believe our long-term experience in CRE 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 for managing our concentrations as required under the CRE guidance.

Consumer Financial Protection

The Company is subject to a number of federal and state consumer protection laws that extensively govern its relationship with its clients. These laws include the Equal Credit Opportunity Act (the “ECOA”), the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act (the “FHA”), the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws, and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with clients when taking deposits, making loans, collecting loans, and providing other services. For example, mortgage lenders are required to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms, either by considering underwriting factors prescribed by Regulation Z or by originating loans that meet the definition of a “qualified mortgage.” If the Company fails to comply with these laws and regulations, it may be subject to various penalties. Failure to comply with consumer protection requirements may also result in failure to obtain any required bank regulatory approval for merger or acquisition transactions or in being prohibited from engaging in such transactions even if approval is not required.

The Dodd-Frank Act centralized responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau (the “CFPB”), and giving it responsibility for implementing, examining, and enforcing compliance with federal consumer protection laws for financial institutions, as well as their affiliates, with more than $10 billion of assets and, to a lesser extent, smaller institutions. The CFPB focuses on (i) risks to consumers and compliance with the federal consumer financial laws, (ii) the markets in which firms operate and risks to consumers posed by activities in those markets, (iii) depository institutions that offer a wide variety of consumer financial products and services, and (iv) non-depository companies that offer one or more consumer financial products or services. The CFPB has broad rule-making authority for a wide range of consumer financial laws that apply to all banks, including, among other things, the authority to prohibit “unfair, deceptive or abusive” acts and practices. Abusive acts or practices are defined as those that materially interfere with a consumer’s ability to understand a term or condition of a consumer financial product or service or that take unreasonable advantage of a consumer’s (i) lack of financial savvy, (ii) inability to protect himself in the selection or use of consumer financial products or services, or (iii) reasonable reliance on a covered entity to act

 

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in the consumer’s interests. The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial laws. The CFPB may also institute a civil action against an entity in violation of federal consumer financial law in order to impose a civil penalty or injunction.

While the CFPB has the power to interpret, administer, and enforce federal consumer financial laws, the Dodd-Frank Act provides that the federal banking regulatory agencies continue to have examination and enforcement powers over the financial institutions that they supervise relating to the matters within the jurisdiction of the CFPB if such institutions have less than $10 billion in assets. The Dodd-Frank Act also gives state attorneys general the ability to enforce federal consumer protection laws. Because the Company and the Bank have less than $10 billion in assets, most consumer protection aspects of the Dodd-Frank Act will continue to be applied to the Company and the Bank by their primary bank regulators.

Community Reinvestment Act

The CRA requires the appropriate federal banking agency, in connection with its examination of a bank, to assess the bank’s record in meeting the credit needs of the communities served by the bank, including low- and moderate-income neighborhoods. Furthermore, such assessment is also required of banks that have applied, among other things, to merge or consolidate with or acquire the assets or assume the liabilities of an insured depository institution, or to open or relocate a branch. In the case of a bank holding company applying for approval to acquire a bank or bank holding company, the record of each subsidiary bank of the applicant bank holding company is subject to assessment in considering the application. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” The Bank was rated “Satisfactory” in its most recent CRA evaluation received on March 18, 2024.

On October 24, 2023, the federal bank regulatory agencies issued a final rule to modernize their respective CRA regulations. However, on July 16, 2025, due to litigation, such agencies issued a joint notice of proposed rulemaking to rescind the 2023 rule and reinstate the CRA framework that existed prior to the 2023 final rule.

AML Legislation

The Company is subject to several federal laws that are designed to combat money laundering, terrorist financing, and transactions with persons, companies or foreign governments designated by U.S. authorities (the “AML laws”). This category of laws includes the Bank Secrecy Act, the Money Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020.

The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report potential money laundering and terrorist financing. The AML laws and their regulations also provide for information sharing, subject to conditions, between federal law enforcement agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes. Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the AML activities of the applicants.

Office of Foreign Assets Control

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) is responsible for administering and enforcing economic and trade sanctions against specified foreign parties, including countries and regimes, foreign individuals, and other foreign organizations and entities. OFAC publishes lists of prohibited parties that are regularly consulted by the Company in the conduct of its business in order to ensure its compliance. The Company is responsible for, among other things, blocking the accounts of, and transactions with, prohibited parties identified by OFAC, avoiding unlicensed trade and financial transactions with such

 

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parties, and reporting blocked transactions after their occurrence. Failure to comply with OFAC requirements could have serious legal, financial, and reputational consequences for the Company.

Privacy Regulations

The Gramm-Leach-Bliley Act (the “GLB Act”) and the California Consumer Privacy Act of 2018 (the “CCPA”), as amended by the California Privacy Rights Act of 2020, impose requirements related to the privacy of customer financial information. Generally, privacy laws impose obligations with regard to the collection, use and disclosure of personal information and require public disclosure of privacy practices. Some privacy laws offer individuals certain rights about how their personal information is processed, provide for significant penalties for non-compliance, and, under certain circumstances, impose requirements for transfers of personal data across national borders. Under federal law and state laws, a financial institution must provide to its customers, at the inception of the customer relationship and annually thereafter, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. These provisions also provide that, except for certain limited exceptions, a financial institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure.

Incentive Compensation

Federal bank regulatory agencies issued guidance intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the institution’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the financial institution’s board of directors.

The Federal Reserve reviews, as part of the regular risk-focused examination process, the incentive compensation arrangements of financial institutions, such as the Company, that are not “large complex banking organizations.” These reviews are tailored to each financial institution based on the scope and complexity of the institution’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives are included in reports of examination. Deficiencies are incorporated into the institution’s supervisory ratings, which can affect the institution’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a financial institution if its incentive compensation arrangements, or related risk management control or governance processes, pose a risk to the institution’s safety and soundness and the financial institution is not taking prompt and effective measures to correct the deficiencies.

In accordance with SEC rules, securities exchanges have adopted rules mandating, in the case of a restatement, the recovery or “clawback” of excess incentive-based compensation paid to current or former executive officers and requiring listed issuers to disclose any recovery analysis where recovery is triggered by a restatement.

The scope and content of the U.S. banking regulators’ policies on executive compensation may continue to evolve in the near future. It cannot be determined at this time whether compliance with such policies will adversely affect the Company’s ability to hire, retain, and motivate its key employees.

Cybersecurity

In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing the internet-based services

 

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of the financial institution. The other statement indicates that a financial institution’s management is expected to maintain sufficient business-continuity-planning processes to ensure the rapid recovery, resumption, and maintenance of the institution’s operations after a cyberattack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and to address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyberattack. If the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

Effective April 1, 2022, federal bank regulatory agencies issued a joint rule imposing upon banking organizations and their service providers notification requirements for significant cybersecurity incidents. Specifically, the rule requires banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a “computer-security incident” that rises to the level of a “notification incident” as those terms are defined in the rule. Banks’ service providers are required under that rule to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible” after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.

Additionally, effective December 9, 2022, amendments to the GLB Act Safeguards Rule went into effect. That rule requires financial institutions to: (i) appoint a qualified individual to oversee and implement their information security programs; (ii) implement additional criteria for information security risk assessments; (iii) implement safeguards identified by assessments, including access controls, data inventory, data disposal, change management, and monitoring, among other things; (iv) implement information system monitoring in the form of either “continuous monitoring” or “periodic penetration testing;” and (v) implement additional controls, including training for security personnel, periodic assessment of service providers, written incident response plans, and periodic reports from the qualified individual to the board of directors. Additionally, state regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs with detailed requirements, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. For example, on January 1, 2026, additional CCPA requirements related to cybersecurity audits, privacy risk assessments, and automated decision-making technology became effective, with phased compliance dates beginning in 2027. The new CCPA regulations fundamentally shift California’s privacy law from reactive compliance to a governance and accountability regime where companies will be required to prove the security effectiveness of their cybersecurity programs, provide customers with notice, transparency and opt-out rights with respect to the use of automated decision making technology, and conduct risk assessments for data processing activities that function like consumer privacy impact assessments that will be reported to the California Privacy Protection Agency.

On July 26, 2023, the SEC also adopted rules that require reporting in Current Reports on Form 8-K of material cybersecurity incidents. These rules also require disclosures in Annual Reports on Form 10-K describing (i) the processes for assessing, identifying, and managing material risks from cybersecurity threats, (ii) the material effects or reasonably likely material effects of risks from cybersecurity threats and previous cybersecurity incidents, and (iii) the board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in assessing and managing material risks from cybersecurity threats.

Future Legislation and Regulation

Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although the enactment of proposed legislation could impact the regulatory structure under which the

 

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Company and the Bank operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business opportunities in an efficient manner. A change in statutes, regulations or regulatory policies applicable to the Company or the Bank could have a material adverse effect on the business, financial condition, and results of operations of the Company and the Bank.

 

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ITEM 1A. Risk Factors

Investing in our common stock involves a significant degree of risk. The material risks and uncertainties that management believes affect us are described below. Before investing in our common stock, you should carefully consider the risks and uncertainties described below, in addition to the other information contained in this Registration Statement. Any of the following risks, as well as risks that we do not know or that we currently deem immaterial, could have a material adverse effect on our business, financial condition and results of operations. As a result, the trading price of our common stock could decline, and you could lose some or all of your investment. Further, to the extent that any of the information in this Registration Statement constitutes forward-looking statements, the risk factors below are cautionary statements identifying important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Risk Factor Summary

General Economic and Market Conditions Risks

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The economic environment could pose significant challenges for the Company and could adversely affect our financial condition and results of operations.

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Adverse economic conditions in California, specifically Southern California, may cause us to suffer higher default rates on our loans and reduce the value of the assets we hold as collateral.

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Risks related to disintermediation and uninsured deposits may have a material effect on the Company’s operations and/or stock price.

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Significant changes in interest rates may adversely affect our earnings and financial condition.

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Changes in the fair value of our investment securities may reduce our shareholders’ equity, results of operations and liquidity.

Credit Risks

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We may suffer losses in our loan portfolio, and those losses may exceed our allowance for credit losses.

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The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as an SBA preferred lender, our ability to comply with applicable SBA lending requirements, and our ability to successfully manage related risks.

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We are exposed to risks specific to our shorter-term loans that are secured by or otherwise relate to commercial real estate.

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We are exposed to credit risks specific to our unsecured loans.

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The non-guaranteed portion of SBA 7(a) loans that we retain on our balance sheet as well as the guaranteed portion of SBA 7(a) loans that we sell could expose us to various credit and default risks.

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Concentrations within our loan portfolio could result in increased credit risk in a challenging economy.

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Our CRE and commercial land and construction loans involve credit risks that could adversely affect our financial condition and results of operations.

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We rely upon independent appraisals to determine the value of the real estate that secures a significant portion of our loans, and the values indicated by such appraisals may not be realizable if we are compelled to foreclose upon such loans.

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We depend on the accuracy and completeness of information about clients and counterparties.

Risks Related to Business Strategy

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We are, and intend to continue, developing new products and services, and our failure to accurately predict their demand or growth could have an adverse effect on our business.

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New lines of business, products, product enhancements or services may subject us to additional risk.

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Our success is largely dependent upon our ability to successfully execute our business strategy.

Liquidity and Capital Risks

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We are subject to liquidity risk, which could adversely affect our financial condition and results of operations.

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Loss of deposits could increase our funding costs or require us to sell assets or borrow.

 

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•

The proportion of our deposit account balances that exceed FDIC insurance limits may expose us to enhanced liquidity risk in times of financial distress.

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Our high concentration of large depositors and depositors in certain industries may increase our liquidity risk.

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We may need to raise additional capital in the future and such capital may not be available when needed or at all.

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We are subject to capital adequacy standards and liquidity rules, and failure to meet these standards could adversely affect our financial condition.

Risks Related to Risk Management

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We are exposed to risks related to cybersecurity, data privacy, fraud, and critical technology and software systems.

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We rely on other companies to provide key components of our business infrastructure.

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The development and use of AI presents risks and challenges that may adversely impact our business.

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A natural or man-made disaster or recurring energy shortage, especially in California, could harm our business.

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Climate change could have a material negative impact on the Company and our clients.

Legal and Regulatory Compliance Risks

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Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a materially adverse effect on our operations.

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Federal and state regulators periodically examine our business and may require us to remediate adverse examination findings or may take enforcement action against us.

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Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments, restrictions on our business activities or reputational harm.

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The Bank is subject to extensive and evolving requirements under AML and sanctions laws.

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The Bank is subject to numerous “fair and responsible banking” laws and regulations designed to protect consumers, which increase our compliance costs and subject us to potential legal liability or reputational damage.

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We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to potential costs, risks and consumer protection laws.

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Increases in FDIC insurance premiums could adversely affect our earnings and results of operations.

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The Federal Reserve may require the Company to commit capital resources to support the Bank at a time when our resources are limited, which may require us to borrow funds or raise capital on unfavorable terms.

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Fulfilling our public company financial reporting and other regulatory obligations and transitioning to a public company will be expensive and time consuming and may strain our resources.

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Regulations relating to privacy, information security, and data protection could increase our costs, affect or limit how we collect and use personal information, and adversely affect our business opportunities.

Risks Related to Competition

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Our ability to attract and retain qualified employees is critical to our success.

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We face strong competition from financial services companies and other companies that offer banking services, which could materially and adversely affect our business.

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The financial services industry, including the banking sector, is undergoing rapid technological change due to changes in customer behavior, competition, and the legal and regulatory framework, and we may not be able to compete effectively due to these changes.

Risks from Accounting and Other Estimates

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The Company’s consolidated financial statements are based in part on assumptions and estimates which, if incorrect, could cause unexpected losses in the future.

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There are risks resulting from the extensive use of models in our business, and we rely on third parties for the provision of economic forecasts and other key inputs used in our models.

Risks Related to Investments in Our Securities

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An active, liquid trading market for our common stock may not develop, which may limit the ability of shareholders to sell their shares.

 

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The market price of shares of our common stock may be volatile or may decline regardless of our operating performance, which could cause the value of your investment to decline.

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We may issue shares of preferred stock in the future, which could adversely affect holders of our common stock and depress the price of our common stock.

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We currently do not pay dividends on our common stock, and any future declaration and payment of dividends may be subject to restrictions.

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

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If the Bank fails or is put into receivership or conservatorship by the FDIC, investors will likely lose their entire investment in the Company.

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We qualify as an “emerging growth company” and the reduced public company reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.

Risk Factors

General Economic and Market Conditions Risks

The economic environment could pose significant challenges for the Company and could adversely affect our financial condition and results of operations.

Our financial condition and results of operations are dependent on the U.S. economy, generally, and markets we serve, specifically. We primarily serve markets in Southern California, and specifically Los Angeles, Santa Barbara, San Diego and Orange counties, though certain of our products and services are offered nationwide and internationally. Financial stress on our customers as a result of an uncertain future economic environment could have an adverse effect on the Company’s customers and their ability to maintain their deposits and/or repay their loans, which could adversely affect the Company’s business, financial condition, and results of operations. A weakening of these conditions in the markets in which we operate would likely have an adverse effect on us and others in the financial institutions industry. For example, a deterioration in economic conditions in our markets could drive losses beyond that which is provided for in our allowance for credit losses. We may also face the following risks in connection with these events:

 

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economic conditions that negatively affect real estate values, the profitability of business operations, and the job market may result in the deterioration of the credit quality of our loan portfolio, and such deterioration in credit quality could have a negative impact on our business;

 

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a decrease in the demand for loans and other products and services offered by us, particularly in light of the higher interest rate environment;

 

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a decrease in deposit balances, including low-cost and noninterest-bearing deposits, and changes in our interest rate mix toward higher-cost deposits;

 

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a decrease in net interest income derived from our lending and deposit gathering activities;

 

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a decrease in the value of our loans or other assets secured by collateral such as commercial or residential real estate;

 

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a decrease in consumer confidence levels and adverse changes in payment patterns, causing increases in delinquencies and default rates on loans and other credit facilities;

 

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the processes we use to estimate our allowance for credit losses under the current expected credit loss (“CECL”) methodology requires the use of complex judgments, including forecasts of economic conditions, which are difficult to estimate, and adverse economic conditions or expected economic conditions may require us to provide for a significantly greater allowance for credit losses; and

 

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our ability to assess the creditworthiness of our customers may become less effective in controlling charge-offs.

Although inflation levels moved closer to the Federal Open Market Committee’s target rate of 2% in 2025, as of March 31, 2026, inflation rates remained elevated above the target rate. To the extent inflation persists, it

 

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poses risk to the economy overall, and could pose direct or indirect challenges to our clients and to our business. Elevated inflation can impact our business customers through loss of purchasing power for their customers, leading to lower sales. Elevated inflation can also increase input and inventory costs for our customers, forcing them to raise their prices or lower their profitability. Supply chain disruption, also leading to inflation, can delay our customers’ shipping ability, or timing on receiving inputs for their production or inventory. Inflation can lead to higher wages for our business customers, increasing costs. All of these inflationary risks for our business customer base can be financially detrimental, leading to increased likelihood that the customer may become delinquent or otherwise default on a loan. To the extent such conditions exist or worsen, we could experience adverse effects on our business, financial condition, and results of operations.

Global economic conditions also affect our operating results because global economic conditions directly influence the U.S. economic conditions. Sources of global economic and market instability include, but are not limited to, the effects of a pandemic or other health crises, the current or anticipated impact of military conflict, other geopolitical risk, trade tensions, and prolonged government shutdowns. Military conflicts include military actions or potential military actions between Russia and Ukraine, war and conflicts in the Middle East, and terrorism. In addition, trade tensions between the United States and any of its significant trading partners, including China, Canada, and Mexico, may increase economic uncertainty.

Adverse economic conditions in California, specifically Southern California, may cause us to suffer higher default rates on our loans and reduce the value of the assets we hold as collateral.

Although we do provide products and services nationwide, our business activities and credit exposure are concentrated in Southern California. Difficult economic conditions in Southern California or adverse changes in laws or regulations in California, may cause us to incur losses associated with higher default rates, decreased collateral values in our loan portfolio, or the businesses of our customers and the ability to expand our business. In addition, demand for our products and services may decline. Declines in the real estate market could hurt our business because if real estate values were to decline, the collateral for our loans would provide less security. As a result, our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on defaulted loans. The majority of our loans, approximately 71.2% of the aggregate outstanding balance as of March 31, 2026, are secured, at least in part, by real estate located within Southern California.

Risks related to disintermediation and uninsured deposits may have a material effect on the Company’s operations and/or stock price.

The high-profile bank failures in the first half of 2023 generated significant market volatility among publicly-traded bank holding companies and, in particular, regional banks like the Bank. The industry has stabilized since these failures and the customer confidence in the safety and soundness of smaller regional banks has improved. Nevertheless, risks remain that customers may choose to invest in higher yielding and higher-rated short-term fixed income securities or maintain deposits with larger more systematically important financial institutions, or shift their deposits into higher-cost products that we offer, all of which could materially and adversely impact our liquidity, loan funding capacity, net interest margin, capital, and results of operations. In addition, we may need to increase our interest rates to avoid deposit attrition, and funding costs may also increase if deposits lost are replaced with wholesale funding. The bank failures in the first half of 2023 highlighted the speed at which deposits can be moved in the digital economy. The banking operating environments and public trading prices of banking institutions can be highly correlated, in particular during times of stress, which could adversely impact the trading prices of our common stock and potentially, our results of operations.

Significant changes in interest rates may adversely affect our earnings and financial condition.

Significant changes in interest rates may adversely affect our earnings and financial condition in ways that cannot be predicted with certainty. Interest rates are highly sensitive to numerous factors beyond our control,

 

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including inflation, unemployment, changes in the money supply, international events, events in world financial markets, competition, general economic conditions, tariffs, and monetary and fiscal policies of various governmental and regulatory authorities, including the Federal Reserve.

Our operating income and net income depend to a great extent on net interest margin (i.e., the difference between the interest yields earned on cash, loans, securities, and other interest-bearing assets and the interest rates paid on interest-bearing deposits, borrowings, and other liabilities). Net interest margin is affected by changes in market interest rates because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. For example, when interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period, an increase in market rates of interest could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could reduce net interest income. Additionally, because a significant amount of our funding consists of non-interest-bearing deposits, a significant decrease in short-term interest rates would be expected to immediately reduce our interest income without a corresponding reduction in our interest expense, which would reduce our net interest income. While we benefited from elevated short-term rates prior to September 2024, the Federal Reserve began reducing its target federal funds rate in September 2024, and any significant declines in the Interest on Reserve Balances rate would be expected to adversely affect our net interest income unless offset by other factors. These conditions would be expected to adversely affect our business, results of operations, and financial condition.

A portion of our assets is invested in interest-bearing reserves at the Federal Reserve. If the Federal Reserve decreases the interest it pays on these reserves, or ceases to pay interest on these reserves entirely, our net interest income could be adversely affected. This risk may potentially be exacerbated if the Federal Reserve requires banks to maintain minimum levels of reserves. Further, a reduction in the interest rate paid on these reserves or in the accessibility of these reserves could compel us to seek alternative, potentially higher-risk investments to generate interest income, which might adversely affect our business, results of operations, or financial condition if such investments underperform or increase our risk exposure.

Increases in interest rates will likely also adversely affect the market value of our investment and loan portfolios. If we are required to sell securities at a discount prior to their maturity, our unrealized losses would then turn into realized losses. Decreases in the market value of our loan portfolio could potentially become realized losses if we were to sell loans or if our bank were to be acquired.

We attempt to manage risk from changes in market interest rates by adjusting the rates, maturities, repricing schedules, and balances of various types of interest-earning assets and interest-bearing liabilities. However, interest rate risk management techniques are imprecise and may not effectively mitigate these risks. Moreover, we currently do not employ interest rate derivatives to hedge this risk, relying exclusively on portfolio adjustments, which may prove insufficient against rapid or significant rate fluctuations. As a result, a rapid increase or decrease in interest rates could potentially have an adverse effect on our net interest margin and results of operations. Market interest rates for types of products and services in our market may also fluctuate significantly over time due to competition and local or regional economic conditions. Our interest rate risk management process relies on numerous assumptions, including projections of interest rate trends and asset-liability repricing behaviors, which may be inaccurate due to unforeseen market shifts or external factors beyond our control. Furthermore, should we employ derivatives in the future, their implementation costs or ineffective hedging could potentially further complicate risk management. Consequently, there can be no assurance that we will successfully manage our interest rate risk exposure, and actual outcomes may differ materially from our expectations due to factors within or beyond our control.

Changes in the fair value of our investment securities may reduce our shareholders’ equity, results of operations and liquidity.

At March 31, 2026, $220.9 million of our securities were classified as available for sale with an aggregate net unrealized loss of $7.9 million. We increase or decrease shareholders’ equity by the amount of change from

 

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the unrealized gain or loss (the difference between the estimated fair value and the amortized cost) of our available for sale securities portfolio, net of the related tax, under the category of accumulated other comprehensive income (loss). Therefore, a decline in the estimated fair value of this portfolio will result in a decline in reported shareholders’ equity, book value per common share, and tangible book value per common share. This decrease will occur even though the securities are not sold. In the case of debt securities, if these securities are never sold and there are no credit impairments, the decrease will be recovered over the life of the securities. In the case of equity securities, which have no stated maturity, the declines in fair value may or may not be recovered over time.

At March 31, 2026, we had stock holdings of $10.7 million in the FHLB and $5.6 million in other stock. The stock held by us is evaluated for impairment under applicable accounting standards. In 2025, we did not recognize an impairment charge related to our stock holdings. There can be no assurance that future negative changes to the financial condition of the issuers may require us to recognize an impairment charge with respect to such stock holdings.

Credit Risks

We may suffer losses in our loan portfolio, and those losses may exceed our allowance for credit losses.

Our total nonperforming assets amounted to $43.2 million, or 1.6% of our total assets, at March 31, 2026. We had $1.1 million of net loan charge-offs for the three months ended March 31, 2026. If increases in our nonperforming assets occur in the future, our net loan charge-offs may also increase, which may have an adverse effect upon our financial condition and results of operations.

We seek to mitigate the risks inherent in our loan portfolio by adhering to specific underwriting practices. These practices generally include assessing business and guarantor capacity, obtaining full and/or partial personal guarantees from borrowers, analyzing a borrower’s history and future prospects as well as available cash flow and cash flow projections (when appropriate), obtaining a valuation of collateral based on reports of independent appraisers, and other metrics. Although we believe that our underwriting criteria are appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria but subsequently deteriorate, and these losses may exceed the amounts set aside as reserves in our allowance for credit losses under the CECL methodology.

We estimate credit losses using the CECL methodology, which incorporates the use of and is reliant upon reasonable and supportable forecasts of economic conditions and variables. As of March 31, 2026, economic variables that have significant influence in the model for determining allowance for credit losses include, without limitation: changes in the U.S. unemployment rate, U.S. real GDP growth, CRE prices, and interest rates. Changes in one or more of these economic variables could have an impact on our allowance for credit losses determination. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in Item 2 of this Registration Statement. Because the CECL methodology is more dependent on future economic forecasts, assumptions, and models than methods of reserving for loan losses under the previous accounting standards, it may result in increases and add volatility to our allowance for credit losses and future provisions for loan losses. The forecasts, assumptions, and models required by CECL are based upon third-party forecasts, subject to management’s review and adjustment in light of information currently available. Although we maintain an allowance for credit losses at a level that we believe is adequate to absorb future expected credit losses under the CECL methodology, our allowance for credit losses may not be adequate to absorb actual credit losses. Changes in economic, operating, and other conditions, including a sharp decline in real estate values as well as lower or higher interest rates (or a persistently higher-for-longer interest rate environment), which are beyond our control, may cause our actual loan losses to exceed our current allowance estimates, which could adversely affect our financial condition and results of operations.

In addition, the FDIC and the DFPI, as part of their supervisory function, periodically review our credit loss reserves. Either agency may require us to increase our provision for loan losses or to recognize further loan

 

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losses, based on its judgment, which may be different from that of our management and could adversely affect our financial condition and results of operations.

The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as an SBA preferred lender, our ability to comply with applicable SBA lending requirements, and our ability to successfully manage related risks.

A significant portion of our business consists of originating and periodically selling U.S. government guaranteed loans, in particular those guaranteed by the SBA. As of March 31, 2026, our total commercial SBA portfolio held for investment was $462.2 million, representing 21.6% of total loans held for investment. In 2025, we sold 16 SBA 7(a) loans with government guaranteed portions totaling $16.2 million. Presently, pursuant to the Consolidated Appropriations Act of 2021, the SBA guarantees 75% to 90% of the principal amount of qualifying loans originated under the 7(a) loan program (excluding the SBA’s Paycheck Protection Program loans). The U.S. government may not maintain the SBA 7(a) and 504 loan programs, and even if it does, such guaranteed portion may not remain at its current or anticipated level. In addition, from time to time, the government agencies that guarantee these loans reach their internal limits and cease to guarantee future loans. These agencies may change their rules for qualifying loans or Congress may adopt legislation that would have the effect of discontinuing or changing the loan guarantee programs. If such changes occur, the volume of loans to small businesses and industrial borrowers of the types that now qualify for government guaranteed loans could decline. Non-governmental programs could replace government programs for some borrowers, but the terms might not be equally acceptable.

In addition, our SBA loan portfolio is subject to the risk that the U.S. government’s partial guaranty on SBA loans is withdrawn due to noncompliance with regulations. As an SBA preferred lender, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA preferred lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender’s SBA preferred lender status. If we lose our status as an SBA preferred lender, we may lose some or all of our customers to lenders who are SBA preferred lenders, which could have a material adverse effect on our financial results. Also, in the event of a loss resulting from default and a determination by the SBA that there is a deficiency in the manner in which a loan was originated, funded, or serviced by us, the SBA may require us to repurchase the previously sold portion of the loan, deny its liability under the guaranty, reduce the amount of the guaranty or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from us.

Additionally, for a borrower to be eligible to receive an SBA loan, the lender must establish that the borrower would not be able to secure a bank loan without the credit enhancements provided by a guaranty under the SBA program. Accordingly, the SBA loans in our portfolio generally have weaker credit characteristics than the rest of our portfolio and may be at greater risk of default in the event of deterioration in economic conditions or the borrower’s financial condition. For instance, in the case of SBA 7(a) loans, if businesses to which we lend generate inadequate cash flow to repay principal and interest, and borrowers are otherwise unable to repay the loan, losses may result if related collateral is sold for less than the unguaranteed balance of the loan. Because these loans are generally at variable rates, higher rate environments will increase required payments from borrowers, with increased payment default risk. As a result of a wide variety of collateral with very specific uses, markets for resale of the collateral may be limited, which could adversely affect amounts realized upon sale and therefore our financial results.

In addition, over the last several years, there have been prolonged government shutdowns, which have impeded our ability to both originate SBA loans and sell such SBA loans in the secondary market. 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

 

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current levels. As the funding of SBA 7(a) and 504 loans and sale of the guaranteed portion of SBA 7(a) loans is a major portion of our business and a significant portion of our noninterest income, any significant changes to the SBA 7(a) or 504 loan program, such as its funding or eligibility requirements, or the loss of our SBA preferred lender status, may have an unfavorable impact on our prospects, future performance and results of operations.

We are exposed to risks specific to our shorter-term loans that are secured by or otherwise relate to commercial real estate.

We originate shorter-term loans that mature 36 months or sooner after origination that we sometimes refer to as bridge loans. These shorter-term loans are secured by or otherwise relate to commercial real estate and predominantly are reported as CRE loans or C&I loans, depending on the nature of the collateral securing the loan. These shorter-term loans are made to borrowers seeking shorter term capital to be used to invest in, acquire, improve, rehabilitate, or refinance existing properties pending the approval of a permanent loan, the proceeds of which are typically used to repay the shorter-term loan. At March 31, 2026, these shorter-term loans totaled $159.1 million, or 7.4%, of our total loans held for investment.

There are unique risks related to this loan population. Given the relatively shorter duration of these loans, we need to generate a high volume of new shorter-term loans to offset the repayment of existing shorter-term loans. Several factors, including an economic slowdown or rapidly rising interest rate environment, may negatively affect our ability to generate a high volume of these loans, which in turn may decrease our net interest income and result in a material adverse effect on our results of operations. In addition, the larger size of loan balances, a borrower’s inability to refinance these loans, declining market value of the collateral properties, or decreases in cash flows produced by the underlying properties may materially and adversely affect our results of operations and financial condition.

We are exposed to credit risks specific to our unsecured loans.

We originate unsecured loans to our private banking clients that are used primarily for investments in real estate and other asset classes. At March 31, 2026, our unsecured loans totaled $207.0 million, or 9.7% of our total loans held for investment. Unsecured loans generally involve a higher degree of risk of loss than secured loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’ business and the borrowers’ solvency, which can deteriorate and are more likely to be adversely affected by adverse economic conditions. Because of this lack of collateral, we are limited in our ability to collect on defaulted unsecured loans. Also, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on an unsecured loan in default. Unsecured loans and their higher credit risk could lead to increased losses on these loans and an increase in our nonperforming assets, which could have a material adverse effect on our financial condition, results of operations of cash flows.

The non-guaranteed portion of SBA 7(a) loans that we retain on our balance sheet as well as the guaranteed portion of SBA 7(a) loans that we sell could expose us to various credit and default risks.

As of March 31, 2026 we held $69.0 million of SBA 7(a) loans on our balance sheet. $54.0 million, or 78.3%, consisted of the non-guaranteed portion of SBA 7(a) loans and $15.0 million, or 21.7%, consisted of the guaranteed portion of SBA loans. The non-guaranteed portion of SBA 7(a) loans have a higher degree of risk of loss as compared to the guaranteed portion of such loans. Further, we generally retain the non-guaranteed portions of the SBA 7(a) loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations could be adversely impacted.

In 2025, we sold 16 SBA 7(a) loans with government guaranteed portions totaling $16.2 million. When we sell the guaranteed portion of SBA 7(a) loans in the ordinary course of business, we are required to make certain representations and warranties to the purchaser about the SBA 7(a) loan and the manner in which they were

 

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originated. Under these agreements, we may be required to repurchase the guaranteed portion of the SBA 7(a) loan if we have breached any of these representations or warranties, in which case we may record a loss. In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolios, our liquidity, results of operations, and financial condition could be adversely affected.

Concentrations within our loan portfolio could result in increased credit risk in a challenging economy.

While our loan portfolio is diversified across business sectors, it is concentrated in CRE and commercial business loans. To the extent loans are concentrated by loan type, collateral, or location of borrower or property, we may have higher credit risk or experience higher credit losses. As of March 31, 2026, our commercial investor-owned real estate loans totaled $560.7 million, or 26.2% of our loans held for investment, and our C&I loans totaled $461.8 million, or 21.6% of our loans held for investment. At such date, our largest outstanding commercial investor-owned real estate loan balance was $31.5 million, and our largest outstanding C&I loan balance was $14.9 million. CRE and C&I loans are in some respects considered riskier than single-family residential loans because they have larger balances to a single borrower or group of related borrowers. CRE and C&I loans involve risks because the borrowers’ abilities to repay the loans typically depend primarily on the successful operation of the businesses or the properties securing the loans.

Most of the Company’s commercial business loans are made to small- or middle-market business customers who may have a heightened vulnerability to economic conditions. CRE valuations can be significantly affected over relatively short periods of time by changes in business climate, economic conditions, interest rates, and in many cases, the results of operations of businesses and other occupants of the real property. Related to this, elevated interest rates may make it more difficult for borrowers to refinance maturing loans. Deterioration of our borrowers’ businesses may hinder their ability to repay their loans with us, which may increase our nonperforming assets, net loan charge-offs, and/or our provision for credit losses. Rent control regulations and increases in vacancy rates in commercial properties can impact the value of CRE. In addition, as part of our proactive approach to credit risk management, we may determine to sell deteriorating loans at a discount. Increases in our nonperforming assets, net loan charge-offs, provision for credit losses, and/or the sale of deteriorating loans, in each case in our commercial business and/or CRE loan portfolios, may adversely affect our financial condition and results of operations.

In addition, banking regulators are examining CRE lending activity with increasingly heightened scrutiny and may require banks with higher levels of CRE loans to implement more stringent underwriting, internal controls, risk management policies, and portfolio stress testing. Because a significant portion of our loan portfolio is comprised of CRE loans, the banking regulators may require us to maintain higher levels of capital than we would otherwise be expected to maintain, which could impact our business strategy, financial condition, and results of operations.

Our CRE and commercial land and construction loans involve credit risks that could adversely affect our financial condition and results of operations.

CRE and commercial land and construction lending usually involve higher credit risks than other types of mortgage loans. As of March 31, 2026, the following loan types accounted for the stated percentages of our loan portfolio: CRE (both owner-occupied and non-owner occupied) — 37.3%; and commercial land and construction — 2.0%. 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 CRE loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because CRE 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

 

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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’ CRE lending activities, and may require banks with higher levels of CRE to implement improved underwriting, internal controls, risk management policies, and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of CRE lending growth and exposures.

Commercial land and construction loans and owner-occupied CRE 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.

CRE loans and commercial land 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 of the risks related to these loans. We also make secured 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. Furthermore, if a business is unsuccessful, the collateral that includes inventory, accounts receivable, and equipment usually has a value that is insufficient to satisfy the loan without a loss.

We rely upon independent appraisals to determine the value of the real estate that secures a significant portion of our loans, and the values indicated by such appraisals may not be realizable if we are compelled to foreclose upon such loans.

A significant portion of our loan portfolio is secured by CRE. To determine the value of the real estate that secures these loans, we rely on independent appraisals. These appraisals are estimates of value at a specific point in time, and while they are an important tool in our lending process, they are not guarantees of future market value. The independent appraisers we use may make errors in judgment or overlook factors that could affect the reliability of the appraisals, despite our efforts to mitigate such risks.

While we utilize appraisal management companies to order appraisals and employ a third-party appraisal review process to evaluate the accuracy and reliability of the appraisals before they are used in our lending decisions, there can be no assurances that these practices will prevent losses if we are compelled to foreclose on loans secured by CRE and residential real estate. Even with these measures in place, the value of real estate can change due to market conditions or events that occur after the appraisal, which are beyond our control. If we are compelled to foreclose on a property, there is a risk that the real estate may be worth less than the appraised value, which could result in us not recovering the full amount of the loan. In such cases, we could incur losses that may adversely affect our financial condition.

We depend on the accuracy and completeness of information about clients and counterparties.

In deciding whether to extend credit or enter into other transactions, and in evaluating and monitoring our loan and lease portfolio on an ongoing basis, we typically rely on information furnished by or on behalf of clients and counterparties, including financial statements, credit reports, and other financial information. We may also rely on representations of those clients or counterparties, or of other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate, incomplete, unaudited, fraudulent, or misleading financial statements, credit reports, or other financial or business information, or the failure to receive information furnished by or on behalf of clients and counterparties on a timely basis, could result in loan and lease losses, reputational damage or other effects that could have a material adverse effect on our business, financial condition, and results of operations.

 

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Risks Related to Business Strategy

We are, and intend to continue, developing new products and services, and our failure to accurately predict their demand or growth could have an adverse effect on our business.

We are, and intend in the future to continue, investing significant resources in developing new tools, features, services, products, and other offerings. New initiatives are inherently risky, as each involves unproven business strategies and new products and services with which we have limited or no prior development or operating experience. Risks from our innovative initiatives include those associated with potential defects in the design and development of the technologies used to automate processes, misapplication of technologies, the reliance on data that may prove inadequate, and failure to meet client expectations, among others. As a result of these risks, we could experience increased claims, reputational damage, or other adverse effects, which could be material. Additionally, we can provide no assurance that we will be able to develop, commercially market and achieve acceptance of our new products and services. In addition, our investment of resources to develop new products and services may either be insufficient or result in expenses that are excessive in light of revenue actually originated from these new products and services.

The profile of potential clients using our new products and services may not be as attractive as the profile of the clients that we currently serve, which may lead to higher levels of delinquencies or defaults than we have historically experienced. Failure to accurately predict demand or growth with respect to our new products and services could have an adverse impact on our business, and there is always risk that these new products and services will be unprofitable, will increase our costs, or will decrease our operating margins or take longer than anticipated to achieve target margins. Further, our development efforts with respect to these initiatives could distract management from current operations and could divert capital and other resources from our existing business. If we do not realize the expected benefits of our investments, our business may be harmed.

New lines of business, products, product enhancements or services may subject us to additional risk.

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 compliance with 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 or offerings of new products, product enhancements, or services could have an adverse effect on our business, financial condition, and results of operations.

Our success is largely dependent upon our ability to successfully execute our business strategy.

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, an inability to continue to generate a high loan volume, 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. Further, a significant portion of our loan portfolio is

 

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short-term in duration, with terms of less than twenty-four months. In order for us to maintain our level of income earning assets, we need to originate a large volume of loans at competitive prices on a regular basis. 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 platform, 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.

Liquidity and Capital Risks

We are subject to liquidity risk, which could adversely affect our financial condition and results of operations.

Effective liquidity management is essential for the operation of our business. Although we have implemented strategies to maintain sufficient and diverse sources of funding to accommodate planned, as well as unanticipated, changes in assets, liabilities, and off-balance sheet commitments under various economic conditions, an inability to raise funds through deposits, borrowings, the sales of investment securities, and other sources, or the inability to effectively manage concentrations of funding sources, could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a market disruption, a decrease in the borrowing capacity assigned to our pledged assets by our secured creditors, or adverse regulatory action against us. Deterioration in economic conditions and the loss of confidence in financial institutions may increase our cost of funding and limit our access to some of our customary sources of liquidity, including, but not limited to, inter-bank borrowings and borrowings from the Federal Reserve and FHLB. Our ability to acquire deposits or borrow, and the possibility of deposit outflows, could also be impaired by various stress environments and other factors that are not specific to us, including a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry generally as a result of conditions faced by banking organizations in the domestic and international credit markets. Other factors, for example a cybersecurity breach that is specific to us, could also impair our ability to acquire or retain deposits.

Loss of deposits could increase our funding costs or require us to sell assets or borrow.

Like many banking companies, we rely on client deposits to provide a considerable portion of our funding, and we continue to seek client deposits to maintain this funding base. We accept deposits directly from commercial and consumer clients and, as of March 31, 2026, we had $2.4 billion in total deposits. If we are unable to sufficiently maintain or grow our deposits to meet liquidity objectives, we may be subject to paying higher funding costs or unable to satisfy our funding needs.

Our deposits may be subject to dramatic fluctuations in availability or price due to certain factors outside our control, such as a loss of confidence by clients in us or the banking sector generally, client perceptions of our

 

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financial health and general reputation, increasing competitive pressures from other financial services firms for consumer or commercial client deposits, changes in interest rates and returns on other investment classes, which could result in significant outflows of deposits within short periods of time or significant changes in pricing necessary to maintain current client deposits or attract additional deposits. Further, as of March 31, 2026, we estimate that approximately 56.7% of our total deposits were not insured by the FDIC, and these uninsured deposits may be more likely to be withdrawn if we experience, or are perceived to experience, financial distress or during periods of real or perceived stress or instability in financial markets more generally. In addition, if our competitors raise the rates they pay on deposits, our funding costs may increase, either because we raise our rates to avoid losing deposits or because we lose deposits and must rely on more expensive sources of funding. Also, clients typically move money from bank deposits to alternative investments during high or rising interest rate environments. Checking and savings account balances and other forms of client deposits may decrease when clients perceive alternative investments as providing a better risk/return trade-off. Our clients could take their money out of the Bank and put it in alternative investments, causing us to lose a lower-cost source of funding. Clients may also move non-interest-bearing deposits to interest-bearing accounts, increasing the cost of those deposits. Obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates, such as the present, and our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Higher funding costs could reduce our net interest margin and net interest income and could have a material adverse effect on our business, financial condition, and results of operations.

The proportion of our deposit account balances that exceed FDIC insurance limits may expose us to enhanced liquidity risk in times of financial distress.

Uninsured deposits historically have been viewed by the FDIC as less stable than insured deposits. According to statements made by the FDIC staff and the leadership of the federal banking agencies, customers with larger uninsured deposit account balances often are small- and mid-sized businesses that rely upon deposit funds for payment of operational expenses and, as a result, are more likely to closely monitor the financial condition and performance of their depository institutions. As a result, in the event of financial distress, uninsured depositors historically have been more likely to withdraw their deposits.

As of March 31, 2026, we estimate that approximately 56.7% of our total deposits were not insured by the FDIC, and these uninsured deposits may be more likely to be withdrawn if we experience, or are perceived to experience, financial distress or during periods of real or perceived stress or instability in financial markets more generally. If a sizable portion of these uninsured deposits were to be withdrawn within an abbreviated period of time such that additional sources of funding would be required to meet withdrawal demands, we may be unable to obtain funding at favorable terms or obtain funding at all, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits. If we had to rely more on higher-cost wholesale borrowings to fund a loss of deposits, it could materially, negatively impact our results of operations.

Our high concentration of large depositors and depositors in certain industries may increase our liquidity risk.

We have developed relationships with certain individuals and businesses that have resulted in a concentration of large deposits from a small number of clients and industries. As of March 31, 2026, our ten largest depositor relationships accounted for approximately 23.0% of our total deposits. This high concentration of depositors presents a risk to our liquidity if one or more of them decides to change their relationship with us and to withdraw all or a significant portion of their deposits, for example, as a result of deposits above the FDIC insurance limit. As of March 31, 2026, deposits associated with our legal and fiduciary services providers’ banking specialty services, which includes certain depositors also included in our ten largest depositor relationships, accounted for 31.2% of total deposits. The concentration of depositors in the legal and fiduciary

 

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services industry presents a risk to our liquidity if there are adverse developments within that particular industry. If such an event occurs, we may need to seek out alternative sources of funding that may not be on the same terms as the deposits being replaced, which could negatively impact our net interest margin if the alternative source of funding is at a higher rate and have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

We may need to raise additional capital in the future and such capital may not be available when needed or at all.

We may need to raise additional capital, in the form of additional debt or equity, in the future to have sufficient capital resources and liquidity to meet our commitments and fund our business needs and future growth. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial condition. Economic conditions and a loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary sources of capital, including inter-bank borrowings, repurchase agreements, and borrowings from the discount window of the Federal Reserve. We may not be able to obtain capital on acceptable terms, or at all. Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of debt purchasers, depositors of the Bank or counterparties participating in the capital markets, or other disruption in capital markets, may adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. Further, if we need to raise additional capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. An inability to raise additional capital on acceptable terms when needed could have a material adverse effect on our business, financial condition, and results of operations.

In addition, an inability to raise capital when needed may subject us to increased regulatory supervision and the imposition of restrictions on our growth and business. These restrictions could negatively affect our ability to operate or further expand our operations through loan growth, acquisitions, or otherwise. These restrictions may also result in increases in operating expenses and reductions in revenues that could have a material adverse effect on our business, financial condition, and results of operations.

If we raise additional capital by incurring debt at the holding company level, including to fund capital contributions to the Bank, it could reduce the returns on our common stock or put our ownership of the Bank at risk. We could also elect to incur additional debt at the holding company in order to provide additional capital to the Bank, or other secured lending, which could be secured by a pledge of all, or a majority, of the stock of the Bank through the issuance of notes or debentures, or similar securities or instruments. While the use of leverage at the holding company level may limit the dilution of our earnings and book value, the interest we accrue and pay on our current or future debt could adversely affect our earnings, equity, shareholder returns, and the value of the common stock. In addition, if the debt is secured by the Bank’s stock then the failure to make regular payments on the debt on interest payment dates or at maturity, or the failure to comply with financial covenants or other conditions of the borrowing, could result in the sale of the Bank in order to pay the debt, and such sale may not be in a manner which would maximize shareholder value.

We are subject to capital adequacy standards and liquidity rules, and failure to meet these standards could adversely affect our financial condition.

The Company and the Bank are each subject to capital adequacy and liquidity rules and other regulatory requirements specifying minimum amounts and types of capital that must be maintained. From time to time, the regulators implement changes to these regulatory capital adequacy and liquidity rules. If we fail to meet these minimum capital and liquidity rules and other regulatory requirements, we may be restricted in the types of activities we may conduct and may be prohibited from taking certain capital actions, such as paying dividends, making payments on other capital instruments, paying executive bonuses, and repurchasing or redeeming the Company’s common stock.

 

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Risks Related to Risk Management

We are exposed to risks related to cybersecurity, data privacy, fraud, and critical technology and software systems.

We collect, process, and store the sensitive, nonpublic, and/or confidential data or information of our customers, employees, and third-party service providers, including our own proprietary information in the ordinary course of business. As such, we recognize the importance of managing data privacy risks on an enterprise-wide basis to protect and maintain the security and confidentiality of the sensitive information entrusted to us. In order to effectively monitor data privacy and information security risks, we must be able to identify, measure, and control the risks associated with the entire lifecycle of our information assets; from collection, to storage, to disclosure, to destruction. Under our information security program, we have established a training program that is mandatory for all employees and a robust set of preventive, detective, and administrative safeguards and security controls. These controls are intended to prevent unauthorized access to or use of our sensitive information, cyber-attacks by hackers, or breaches due to employee error or misconduct, or other disruptions such as computer viruses, malicious software, ransomware, phishing schemes, fraud activities, and hardware or software failures.

The legal, regulatory, and threat landscape surrounding information security, cybersecurity, and data privacy is dynamic, increasingly demanding, and challenging. Increases in data security breaches have led to an expansion of federal and state laws regulating privacy and the collection, use, processing, disclosure, and security of sensitive information. The growth in interstate data flow, together with new privacy and data security-related statutes and regulations, heightens the risk of privacy violations and creates compliance challenges. In order to mitigate and control these risks and challenges, we monitor the progress of pending federal and state legislation that, if passed, would materially alter federal and state privacy or data protection practices and requirements applicable to us.

Cybersecurity and the continued development and enhancement of controls, processes, and practices designed to protect systems, computers, software, data, customer information, and networks against the threat of security breaches, fraud, cyber-attacks, ransomware, social engineering, and computer malware attacks, damage, or unauthorized access remain a priority for us. As risks associated with cybersecurity threats constantly evolve, including as a result of AI, and become more sophisticated the costs to enhance, modify, and refine our protective measures against these evolving threats and to respond to such threats may increase.

Our risk and exposure of cyber threats to our information systems, as well as those of our third-party vendors, remain heightened because of, among other things, the evolving nature of these threats, the continuation of remote and/or hybrid work environments for our employees and service providers, and our plans to continue to implement and expand digital banking services, expand operations, and use third-party information systems that include cloud-based infrastructure, platforms, and software. In addition, as geopolitical tensions rise, the threat of state-sponsored cyber-attacks on the United States and its financial services sector has increased. The measures we implement to reduce and mitigate these risks may not always be effective, and there can be no assurance that our efforts will prevent breakdowns, intrusions, incidents, or breaches of our or our third-party vendors’ information systems. Security breaches, cybersecurity incidents, or loss of information may result in business interruptions, exposure of proprietary or confidential information, data corruption, fines and penalties, potential liabilities from regulatory or third-party investigations, litigation costs, remediation costs, diversion of management attention, and the negative impact on our reputation and loss of clients’ confidence.

In addition, our customers and third-party service providers rely on technology and systems unmanaged by us, such as networking devices, server infrastructure, personal computers, smartphones, tablets, and other mobile devices, to contact and conduct business with us. If the devices of our customers and/or third-party service providers become the target of a cyber-attack, or security breach, it may result in business interruptions or unauthorized access to, misuse, or loss of the sensitive information of, employees, or third-party service providers. Threat actors using improperly obtained personal or financial information of consumers can attempt to

 

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obtain loans, lines of credit, or other financial products or services, or attempt to fraudulently persuade our employees, customers, or other users of our systems to disclose sensitive information to gain access to our information assets and/or information systems.

We also face additional costs when our customers become the victims of cyber-attacks, which may include phishing scams, providing cybercriminals access to their accounts, or credit or debit card information. In these situations, we incur costs to replace compromised cards and address fraudulent transactions affecting our customers. The occurrence of any of the foregoing risks could result in a reduced ability to operate our business, additional costs, potential liability, and reputational harm, any of which could adversely affect our business, financial condition, and results of operations.

We rely on other companies to provide key components of our business infrastructure.

We rely on certain third parties to provide products and services necessary to maintain day-to-day operations, such as data processing and storage, recording and monitoring transactions, online and mobile banking interfaces and services, internet connections, telecommunications, and network access. We have a vendor risk management program, which includes policies and procedures that help us carefully select and monitor the performance of third parties in a number of key areas, including financial review, core systems, insurance coverage, information technology, data and cyber security, and privacy. Notwithstanding our vendor risk management program, we do not control the actions of our third-party vendors. Further, we do not control the actions of indirect vendors, meaning vendors who provide services to our vendors, and opportunities to perform due diligence or exert influence on such indirect vendors are inherently limited since we have no direct contractual relationship with them. The failure of a third party to perform in accordance with the contracted arrangements for any reason could disrupt our operations, which could have a material adverse effect on our business, financial condition, and results of operations. Replacing these third parties could also create significant delays and expenses. Accordingly, using such third parties introduces additional risks to our business operations.

The development and use of AI presents risks and challenges that may adversely impact our business.

We or our third-party vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products. We may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models. AI models, particularly generative AI models, may produce output or take action that is incorrect, include unauthorized material in the training data for their models, result in the release of private, confidential, or proprietary information, reflect biases included in the data on which they are trained, infringe on the intellectual property rights of others, or are otherwise harmful. Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures. In addition to our use of AI technologies, we are exposed to risks arising from the use of AI technologies by bad actors to commit fraud and misappropriate funds and to facilitate cyberattacks.

The legal and regulatory environment relating to AI is uncertain and rapidly evolving and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI. These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance.

A natural or man-made disaster or recurring energy shortage, especially in California, could harm our business.

We are based in La Jolla, California and, as of March 31, 2026, approximately 94.3% of the aggregate outstanding balance of our loans was tied to businesses or secured at least in part by real estate located in

 

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California. In addition, the computer systems that operate our internal computer network, our internet websites, and some of their back-up systems are in Data Centers located in Irvine, California and Las Vegas, Nevada. Historically, California has been vulnerable to natural disasters, such as earthquakes, wildfires, floods, mudslides, and droughts. For example, the California wildfires in Los Angeles County in January 2025 destroyed considerable commercial and residential properties, impacting the businesses and lives of clients, employees and other stakeholders. Direct and indirect costs and impacts from wildfires may include potential adverse changes to the level of our nonperforming assets and charge-offs.

Natural or man-made disasters and recurring energy shortages may cause operational disruptions and damage to both our properties and the properties securing our loans. Such disasters could harm our operations directly through interference with communications, including the interruption or loss of our information technology structure and websites, which could prevent us from gathering deposits, originating loans, and processing and controlling our flow of business, as well as through the destruction of facilities and our operational, financial, and management information systems. The measures we have implemented to mitigate the risk of business interruption may not protect us fully from the effects of a disaster. A natural or man-made disaster or recurring energy shortages may also impair the value of our largest class of assets, our loan portfolio. Uninsured or underinsured disasters may reduce borrowers’ ability to repay mortgage loans. Disasters or recurring energy shortages may diminish the profitability of our business customers and reduce their ability to repay business loans. Disasters may also reduce the value of the real estate securing our loans, impairing our ability to recover on defaulted loans through foreclosure and making it more likely that we would suffer losses on defaulted loans. California has also experienced water shortages, which, if they recur, could impair the value of the real estate or hinder the operations of businesses, including agricultural businesses, in those areas affected. The occurrence of natural and man-made disasters or energy shortages could have a material adverse effect on our business prospects, financial condition, and results of operations.

Climate change could have a material negative impact on the Company and our clients.

The Company’s business, as well as the operations and activities of our clients, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to the Company and its clients, and these risks may increase over time. Climate change presents multi-faceted risks, including: operational risk from the physical effects of climate events on the Company and its clients’ facilities and other assets; credit risk from borrowers with significant exposure to climate risk; transition risks associated with the transition to a less carbon-dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, the Company’s carbon footprint, and the Company’s business relationships with clients and vendors who operate in carbon-intensive industries.

In addition, California remains at the forefront of climate-related disclosure regulations, including the Climate-Related Financial Risk Act (SB 261), as amended by California Senate Bill 219. While these laws are currently subject to legal challenge and the extent to which these laws may be pre-empted by federal law is uncertain, in the absence of federal preemption the Climate-Related Financial Act would apply to us. Related compliance costs represent hard costs beyond current regulatory costs and would also involve the cost of management and personnel resources. In addition, we have multiple stakeholders, among them shareholders, customers, federal and state regulatory authorities, and political entities, who often have differing, and sometimes conflicting, priorities and expectations regarding environmental, social and governance issues. For instance, we operate extensively in California, which is at the forefront of requiring climate-related disclosures, but we also operate in states throughout the country, and there is an increasing number of state-level anti-ESG initiatives.

New or increased regulations could result in increased compliance costs or capital requirements. Additionally, our reputation and customer relationships may be damaged due to our practices related to climate change, including our involvement, or our customers’ involvement, in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change. Ongoing legislative or regulatory

 

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developments and changing climate risk management and related practices may result in higher regulatory, compliance and credit risks and costs.

Nonetheless, the risks and expectations associated with climate change are rapidly evolving, and some of the risks are difficult to assess due to limited data and other uncertainties. We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, financial condition, and results of operations.

Legal and Regulatory Compliance Risks

Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a materially adverse effect on our operations.

The banking industry is heavily regulated. Banking regulations are primarily intended to protect the DIF, depositors, and consumers, but not shareholders. We are subject to regulation and supervision by the Federal Reserve, and the Bank is subject to regulation and supervision by the FDIC and the DFPI. The burden imposed by federal regulations puts banks at a competitive disadvantage compared to less regulated competitors such as nonbank finance companies, mortgage-banking companies, digital fintech lenders, and leasing companies. Changes in the laws, regulations, and regulatory practices affecting the banking industry may increase the costs of doing business or otherwise adversely affect the Bank and create competitive advantages for others. Regulations affecting banks and financial services companies undergo continuous change, and we cannot predict the ultimate effect of these changes, which could have a material adverse effect on profitability or financial condition. In addition, changes to other laws or regulations, such as tax laws, could also have a disproportionate impact on us, based on the way those laws or regulations are applied to financial services and financial firms or due to our corporate structure or where or how we provide these services.

Changes in federal and state legislation and regulation may affect our operations. New and modified regulations, such as the regulations promulgated pursuant to the Dodd-Frank Act, and revisions to the capital and liquidity rules adopted by the federal banking agencies, including revisions to the Basel III Capital Rules, may have unforeseen or unintended consequences on the banking industry. The Dodd-Frank Act implemented significant changes to the U.S. financial system, including new regulatory agencies (such as the Financial Stability Oversight Committee to oversee systemic risk and the CFPB, to develop and enforce rules for consumer financial products), changes in retail banking regulations, and changes to deposit insurance assessments.

The Basel III Capital Rules introduced new risk-based and leverage capital requirements and also limit capital distributions and certain discretionary bonuses if a banking organization does not satisfy its “capital conservation buffer” requirement in full. See the section entitled “Supervision and Regulation — Capital Adequacy Guidelines” in Item 1 of this Registration Statement for more information about our regulatory capital requirements. While the Company, as a bank holding company with less than $3 billion in total consolidated assets, is currently treated as a “small bank holding company” under Federal Reserve policy and is not subject to the Federal Reserve’s consolidated risk-based capital and leverage rules at the holding company level, the Bank is subject to the Basel III Capital Rules’ risk-based and leverage capital requirements. This additional regulation increases the Bank’s compliance costs and may otherwise adversely affect operations, including by limiting our growth or requiring the Company to raise additional capital in the future so that the Company could contribute capital to the Bank. For example, during periods of growth in deposits, our assets could reach a level that would require the Bank to control the level of these deposits in order to maintain a satisfactory Tier 1 leverage ratio. If we are required to raise additional capital, our ability to do so will depend on our performance, financial condition, and prospects as well as conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control. Accordingly, there can be no assurances we will be able to raise additional capital if needed on terms acceptable to us or at all. If we cannot raise additional capital when needed,

 

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or cannot raise additional capital on acceptable terms, it could have a material adverse effect on our financial condition, results of operations, and prospects. Further, if the Company becomes subject to the Federal Reserve’s consolidated capital rules applicable to bank holding companies in the future, it could increase our compliance costs or otherwise adversely affect our operations.

The potential also exists for additional federal or state laws or regulations, or changes in policy or interpretations, to affect operations, including capital levels, lending and funding practices, insurance assessments, and liquidity standards. The effect of any such changes and their interpretation and application by regulatory authorities cannot be predicted, may increase the Company’s cost of doing business and otherwise affect operations, may significantly affect the markets in which the Company does business, including the Company’s international markets, and could have a material adverse effect on the Company.

In addition, in response to the high-profile bank failures in 2023, and loss of public confidence in the banking sector, the government has increased its scrutiny of financial institutions. State and federal lawmakers and regulators have proposed new measures and regulations regarding capital levels, deposit concentrations, liquidity, risk management, and deposit insurance. Such legal and regulatory changes could materially and adversely affect our business, results of operations, or financial condition. The government’s response to the condition of the global financial markets and the banking industry has also increased costs and may further increase costs for items such as federal deposit insurance. The FDIC insures deposits at FDIC-insured institutions, such as the Bank, up to applicable limits. The FDIC charges the insured financial institutions premiums to maintain the DIF at a minimum of 2% of total estimated insured deposits. Increases in deposit insurance premiums to increase the coverage ratio to required levels, to meet revised rules to measure risk or to pay depositors of additional failed institutions could adversely affect the Company’s financial condition and results of operations.

The failure to fully comply with applicable laws and regulations, particularly those related to consumer compliance and lending, could result in additional regulatory scrutiny being placed on the Bank, the Company or the Bank being subjected to informal or formal enforcement actions, or the imposition of civil money penalties against the Company, the Bank, and/or their respective officers or directors. Even if the Company or the Bank avoided such enforcement actions following a compliance lapse, expenses required to come into compliance and maintain such compliance, and to avoid any threatened enforcement action, could have an adverse effect on earnings, divert management attention from other opportunities, and otherwise adversely affect shareholder returns.

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, the FDIC, and the DFPI periodically examine our business, including our 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 financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or that we 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 to remediate any such adverse examination findings.

In addition, these agencies have the power to take enforcement action against us 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 our deposit insurance and place the Bank into receivership or conservatorship. Any regulatory enforcement action against us could have an adverse effect on our business, financial condition, and results of operations.

 

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Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments, restrictions on our business activities, or reputational harm.

In the normal course of business, from time to time, we have in the past 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 and results of operations.

The Bank is subject to extensive and evolving requirements under AML and sanctions laws.

The Bank is subject to stringent regulations under the Bank Secrecy Act, the USA PATRIOT Act of 2001, the Anti-Money Laundering Act of 2020, and regulations administered OFAC. These laws require us to maintain a comprehensive AML and sanctions compliance program, which includes client due diligence, enhanced due diligence for high-risk clients, ongoing monitoring of transactions, and the timely filing of Suspicious Activity Reports and Currency Transaction Reports.

The Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration, and the Internal Revenue Service. There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by OFAC. Further, OFAC may impose civil penalties for sanctions violations based on strict liability, meaning we could be held liable for sanctions violations even if we did not know or have reason to know we were engaging in a violation.

AML and sanctions laws and regulations are complex, and regulatory expectations are constantly evolving. The complexity of our operations, including our international operations, may increase our exposure to regulatory scrutiny. Accordingly, maintaining compliance with AML and sanctions laws and regulations involves significant investments in technology, personnel, and internal processes, and as regulatory requirements evolve and regulatory expectations heighten, we have in the past incurred, and may in the future incur, increased costs, and may face operational challenges to maintain and improve our compliance programs. Further, there can be no assurances that we will identify all suspicious activity or high-risk transactions our clients engage in or prevent all instances of fraud or other financial crimes that our clients may commit. Additionally, our compliance program is reliant on the accuracy of information provided to us by our clients and other external sources, and, although we take steps that we believe are reasonably designed to verify and monitor client activities, we may not always detect or prevent fraudulent activities or non-compliance by clients. Failure to comply with AML and sanctions laws or regulations, or to meet evolving regulatory expectations, may expose us to penalties, fines, operational restrictions, or reputational damage, which could adversely affect our business, financial condition, or results of operations.

 

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The Bank is subject to numerous “fair and responsible banking” laws and regulations designed to protect consumers, which increase our compliance costs and subject us to potential legal liability or reputational damage.

The Bank is subject to numerous “fair and responsible banking” laws and regulations designed to protect consumers. For example, the CRA, the ECOA, the FHA, and other fair lending laws and regulations, including state laws and regulations, prohibit discriminatory lending practices by financial institutions. The Federal Trade Commission Act and the Dodd-Frank Act prohibit unfair, deceptive, or abusive acts or practices by financial institutions. These laws and regulations increase our compliance costs and failure to comply with these laws and regulations could result in a wide variety of sanctions. The U.S. Department of Justice, federal banking agencies, and other federal and state agencies are responsible for enforcing these fair and responsible banking laws and regulations. A challenge to an institution’s compliance with fair and responsible banking 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 class action litigation. Such actions could have a material adverse effect on the Bank’s reputation, business, financial condition, and results of operations.

We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to potential costs, risks, and consumer protection laws.

Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property. The amount that we, as a mortgagee, may realize after a foreclosure may depend on a variety of factors, including, but not limited to, general or local economic conditions, assessments, interest rates, real estate tax rates, condition of the collateral property, operating expenses of the mortgaged properties, our ability to effectively operate the properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, environmental cleanup liabilities, 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 our other real estate owned, could have a material adverse effect on our business, financial condition, and results of operations.

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. Additionally, federal and state regulators have prosecuted or pursued enforcement action against a number of mortgage-servicing companies for alleged consumer law violations. If new federal or state laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or raise outright barriers to foreclosure, they could have a material adverse effect on our business, financial condition, and results of operations.

Additionally, if the Bank forecloses on, and takes title to, real estate, it may become subject to environmental liabilities associated with such properties, which could adversely affect our business, financial condition, and results of operations. We may be liable for remediation costs, as well as for personal injury and property damage, civil fines, and criminal penalties regardless of when the hazardous conditions or toxic substances first affected the property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability, and we may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties.

 

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Increases in FDIC insurance premiums could adversely affect our earnings and results of operations.

The Bank is a member of the FDIC and the deposits of each of its depositors are insured to the maximum amount provided by the FDI Act, subject to the Bank’s payment of deposit insurance premiums to the FDIC. The FDIC calculates assessment rates applicable to the Bank based on a variety of factors, including capital adequacy, asset quality, management practices, earnings performance, liquidity, and sensitivity to market risk. Any deterioration of these factors could result in an increase in the Bank’s FDIC assessment rate. In addition, to maintain a strong funding position and restore the reserve ratios of the DIF following the financial crisis, the FDIC increased deposit insurance assessment rates generally and, in response to recent bank failures, charged special assessments applicable to certain FDIC-insured financial institutions. Further increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures. Any future special assessments, increases in assessment rates or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could have a material adverse effect on our business, financial condition, and results of operations.

The Federal Reserve may require the Company to commit capital resources to support the Bank at a time when our resources are limited, which may require us to borrow funds or raise capital on unfavorable terms.

The Company is required by the Federal Reserve to act as a source of financial and managerial strength to the Bank and may be required to commit capital and financial resources to support the Bank. Such support may be required at times when, absent this requirement, the Company otherwise might determine not to provide it, including because our resources may be limited, and we may be required to borrow the funds or raise capital to make the required capital injection. Any loan by the Company to the Bank would be subordinate in right of repayment to payments to depositors and certain other creditors of the Bank. In the event of the Company’s bankruptcy, the bankruptcy trustee will assume any commitment by the Company to a federal bank regulatory agency to maintain the capital of the 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 Company’s general unsecured creditors, including the holders of any note obligations. Thus, any borrowing by the Company for making a capital injection to the Bank may be more difficult and expensive relative to other corporate borrowings. Borrowing funds or raising capital on unfavorable terms for such a capital injection may have a material adverse effect on our business, financial condition, and results of operations.

Fulfilling our public company financial reporting and other regulatory obligations and transitioning to a public company will be expensive and time consuming and may strain our resources.

As a public company, we will be subject to the reporting requirements of the Exchange Act and will be required to implement specific corporate governance practices and adhere to a variety of reporting requirements under the Sarbanes-Oxley Act and the related rules and regulations of the SEC, as well as the rules of NASDAQ. The Exchange Act will require us to file annual, quarterly, and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act will require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Compliance with these requirements will place additional demands on our legal, accounting, finance, operations, and investor relations staff and on our accounting, financial, and information systems, and will increase our legal and accounting compliance costs as well as our compensation expense as we expect to hire additional legal, accounting, tax, finance, and investor relations staff. As a public company we may need to enhance our investor relations and corporate communications functions and attract additional qualified board members. These additional efforts may strain our resources and divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, and results of operations. We expect to incur additional incremental ongoing and one-time expenses in connection with our transition to a public company.

 

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The actual amount of the incremental expenses we will incur may be higher, perhaps significantly, from our current estimates for a number of reasons, including, among others, additional costs we may incur that we have not currently anticipated.

In accordance with Section 404 of the Sarbanes-Oxley Act, our management will be required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in the annual reports we will file with the SEC on Form 10-K. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls until we are no longer an emerging growth company and no longer a non-accelerated filer. When required, this process will require significant documentation of policies, procedures and systems, review of that documentation by our accounting staff and our outside independent registered public accounting firm and testing of our internal control over financial reporting by our accounting staff and our outside independent registered public accounting firm. This process will involve considerable time and attention, may strain our internal resources and will increase our operating costs. We may experience higher than anticipated operating expenses and outside auditor fees during the implementation of these changes and thereafter. If our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by NASDAQ, the SEC, or other regulatory authorities, which could require additional financial and management resources.

We have not performed an evaluation of our internal control over financial reporting nor have we engaged our independent registered public accounting firm to perform an audit of our internal control over financial reporting, in each case as contemplated by Section 404 of the Sarbanes-Oxley Act, as of any balance sheet date reported in our financial statements. Had we performed such an evaluation of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, control deficiencies, including material weaknesses and significant deficiencies, may have been identified.

If we are unable to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to accurately report our financial results, or report them within the time frames required by law or stock exchange regulations. Failure to comply with the Sarbanes-Oxley Act, when and as applicable, could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. If material weaknesses or other deficiencies occur, our ability to accurately and timely report our financial position could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements, a decline in our stock price, or suspension or delisting of our common stock from NASDAQ and could have a material adverse effect on our business, results of operations, and financial condition. Even if we are able to report our financial statements accurately and in a timely manner, any failure in our efforts to implement the improvements or disclosure of material weaknesses in our future filings with the SEC could cause our reputation to be harmed and our stock price to decline significantly.

Regulations relating to privacy, information security, and data protection could increase our costs, affect or limit how we collect and use personal information, and adversely affect our business opportunities.

We are subject to a dynamic regulatory landscape with evolving laws and regulations governing privacy, information security, and data protection, including the GLB Act. Compliance with these requirements includes, among other things, privacy disclosure processes and maintenance of a robust information security program with stringent controls. The intricate nature of these laws and their constant evolution introduces the potential for change, which could lead us to incur substantial costs and have a significant impact on our current and planned privacy, data protection, and information security-related practices.

In addition to the risks from the collection, use, retention, security, and transfer of data, we are also subject to specific obligations relating to information considered sensitive under applicable laws, such as the CCPA,

 

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which came into effect on January 1, 2020, and bolstered by amendments contained in the California Privacy Act effective January 1, 2023. The original CCPA, as enlarged and amended, provides businesses, employees, and consumers privacy rights regarding the use and sharing practices associated with their collected data, allows consumers to opt out of certain data sharing with third parties, and allows consumers to pursue litigation for certain non-compliance activities.

Our regulators also hold us responsible for privacy and data protection obligations performed by our third-party service providers while providing services to us, as well as disclosures and notifications during a cyber or information security incident. The introduction of new laws or modification of existing laws not only increase our costs of compliance but also present challenges to our privacy-related enforcement activities and business operations. This may be in the form of increased technology costs and/or potential income reduction and could restrict our ability to provide certain products and services. Our failure to comply with privacy, data protection, and information security laws could trigger significant regulatory or governmental investigations and we can be liable for associated investigatory expense, litigation costs, fines, sanctions, and damage to our reputation. Such outcomes could have material adverse effects on our business, financial condition, and results of operations.

Risks Related to Competition

Our ability to attract and retain qualified employees is critical to our success.

In light of our relationship-based banking model, our employees are our most important resource. Competition for qualified personnel is intense in many areas of the financial services industry. We endeavor to attract talented and diverse new employees and retain and motivate our existing employees to assist in executing our growth, acquisition, and business strategies. We seek to retain proven, experienced senior employees with superior talent, augmented from time to time by external hires, to provide continuity and succession within our executive management team. Our ability to compete effectively depends on our ability to attract new employees and retain and motivate employees, while managing compensation and other costs. Losses or changes in our current executive officers or other key personnel, or the inability to recruit, retain, and develop leadership effectively, could materially and adversely affect our financial condition and results of operations.

We face strong competition from financial services companies and other companies that offer banking services, which could materially and adversely affect our business.

The financial services industry has become even more competitive as a result of legislative, regulatory, and technological changes and continued banking consolidation, which may increase in connection with current economic, market, and political conditions. We face substantial competition in all phases of our operations from a variety of competitors, including national banks, regional and community banks, nonbank financial services companies, and fintech companies. We also compete with many forms of payments offered by both bank and nonbank providers, including a variety of new and evolving alternative payment mechanisms, systems and products, such as aggregators and web-based and wireless payment platforms or technologies, digital or “crypto” currencies, prepaid systems and payment services targeting users of social networks, communications platforms and online gaming. Further, as a result of the GENIUS Act, passed in 2025 to provide a regulatory framework for stablecoins in the United States, increased competition may emerge from issuers of stablecoins and providers of related technology. We also face a growing risk associated with disintermediation, as more clients and prospective clients invest directly in U.S. Treasury securities, which carry high rates of return in the current environment and are considered as safe if not safer than FDIC-insured deposits. In addition, we compete against institutions that offer money market mutual funds, including funds that maintain a large percentage of their holdings in U.S. Treasury securities, offering relative safety at higher interest rates to customers. With the rise of U.S. Treasury rates, we have been competing directly with U.S. Treasury securities and the investment funds that emphasize them.

Many of our competitors offer the same banking services that we offer, and our success depends on our ability to adapt our products and services to evolving industry standards. In addition to product and service

 

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offerings, we compete on a number of other factors, including financial and other terms, underwriting standards, technological capabilities, brand, and reputation. Increased competition in our market may result in reduced new loan production and/or decreased deposit balances or less favorable terms on loans and leases and/or deposit accounts. We also face competition from many other types of financial institutions, including without limitation, nonbank specialty lenders, insurance companies, private investment funds, investment banks, and other financial intermediaries, some with significantly greater resources, more locations, and longer operating histories. In addition, competition has increased in recent years from institutions not subject to the same regulatory restrictions as domestic banks and bank holding companies. If we are unable to attract and retain banking customers, we may be unable to grow or maintain the levels of our loans and deposits and our results of operations and financial condition may be adversely affected as a result.

The financial services industry, including the banking sector, is undergoing rapid technological change due to changes in customer behavior, competition, and the legal and regulatory framework, and we may not be able to compete effectively due to these changes.

The financial services industry experiences continuous technological change with frequent introductions of new technology-driven products and services, including as a result of AI. The effective use of technology increases efficiency and enables financial institutions to serve customers better and reduce costs. Our future success depends, 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, and create additional efficiencies in our operations. Many of our competitors, however, have substantially greater resources to invest in technological improvements or are technology-focused start-ups with internally developed cloud-native systems that offer improved user interfaces and experiences. We may not be able to effectively bring to market new technology-driven products and services at the same speed as certain competitors or fintech firms, or be as successful in marketing these products and services to our customers. In addition, we depend on internal and outsourced technology to support all aspects of our business operations. Interruption or failure of these systems creates a risk of business loss due to adverse customer experiences possibly diminishing our reputation, damage claims, or civil fines. Failure to keep pace with technological change affecting the financial services industry or implement core processing strategies successfully could adversely impact our business and, in turn, our financial condition and the results of our operations.

Changes in the legal and regulatory framework under which we operate require us to update our information systems to ensure compliance. Our need to review and evaluate the impact of ongoing rule proposals, final rules and implementation guidance from regulators further complicates developing and implementing new information systems for our business. Also, recent regulatory guidance has focused on the need for financial institutions to perform increased due diligence and ongoing monitoring of third-party vendor relationships, thus increasing the scope of management involvement and decreasing the efficiency otherwise resulting from our relationships with third-party technology providers. Given the significant number of ongoing regulatory reform initiatives, we may incur higher than expected information technology costs to comply with current and impending regulations.

Risks from Accounting and Other Estimates

The Company’s consolidated financial statements are based in part on assumptions and estimates which, if incorrect, could cause unexpected losses in the future.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). Actual results could differ from these estimates. Material estimates subject to change in the near term include, among other items, the allowance for credit losses, the carrying value of goodwill or other intangible assets, the fair value estimates of certain assets and liabilities, and the realization of deferred tax assets and liabilities. These estimates may be

 

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adjusted as more current information becomes available, and any adjustment may be significant, which could have a material adverse effect on our financial condition and results of operations.

There are risks resulting from the extensive use of models in our business, and we rely on third parties for the provision of economic forecasts and other key inputs used in our models.

We rely on quantitative models to measure risks, estimate certain financial values, and inform certain business decisions. We use models in such processes as determining the pricing of various products, measuring interest rate and other market risks, predicting or estimating losses, assessing capital adequacy, estimating the value of financial instruments and balance sheet items, developing strategic planning initiatives, and other operational functions. Inadequately designed or implemented models present the risk that our business decisions based on information incorporating model output could be adversely affected due to the inaccuracy of that information. Models are often based on historical experience to predict future outcomes, as a result new experiences or events which are not part of historical experience can significantly increase model imprecision and impact model reliability. In addition, we rely on model inputs that are provided by third parties. For example, we rely on third parties to provide forecasts of key macroeconomic variables such as U.S. unemployment rates, U.S. real GDP growth, and CRE market trends.

Risks Related to Investments in Our Securities

An active, liquid trading market for our common stock may not develop, which may limit the ability of shareholders to sell their shares.

Currently, there has been a limited public market for our common stock on the OTCQX Market. NASDAQ’s approval of our application to list our common stock on NASDAQ is a condition to the effectiveness of this Registration Statement. If our common stock is listed on NASDAQ, there can be no assurance that an active trading market in our common stock will develop or be sustained. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration in an acquisition of another company or business.

The market price of shares of our common stock may be volatile or may decline regardless of our operating performance, which could cause the value of your investment to decline.

Even if a trading market develops, the market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume on our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares of common stock at or above your purchase price, if at all. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. Stock markets and the price of our shares of common stock may experience extreme price and volume fluctuations. Some, but certainly not all, of the factors that could negatively affect the price of our common stock, or result in fluctuations in the price or trading volume of our common stock, include:

 

•

general market conditions;

 

•

domestic and international economic factors unrelated to our performance;

 

•

variations in our quarterly operating results or failure to meet the market’s earnings expectations;

 

•

publication of research reports about us or the financial services industry in general;

 

•

the failure of securities analysts to cover our common stock;

 

•

additions to or departures of our key personnel;

 

49

•

adverse market reactions to any indebtedness we may incur or securities we may issue in the future;

 

•

actions by our shareholders;

 

•

the expiration of contractual lock-up agreements;

 

•

the operating and securities price performance of companies that investors consider to be comparable to us;

 

•

changes or proposed changes in laws or regulations affecting our business;

 

•

the inclusion or exclusion of the Company on stock indexes; and

 

•

actual or potential litigation and governmental investigations.

In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of the common stock could decline for reasons unrelated to our business, financial conditions or results of operations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We may issue shares of preferred stock in the future, which could adversely affect holders of our common stock and depress the price of our common stock.

Our Articles authorize us to issue up to 20,000,000 shares of one or more series of preferred stock. Our Board has the authority to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our shareholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price, and materially adversely affect the market price and the voting and other rights of the holders of our common stock.

We currently do not pay dividends on our common stock, and any future declaration and payment of dividends may be subject to restrictions.

Holders of our common stock are only entitled to receive dividends when, as and if declared by our Board out of funds legally available for dividends. We currently do not pay dividends on our common stock. Any declaration and payment of dividends on our common stock in the future will depend on regulatory restrictions, our earnings and financial condition, our liquidity and capital requirements, the general economic climate, contractual restrictions, our ability to service any equity or debt obligations senior to our common stock, and other factors deemed relevant by our Board. Furthermore, consistent with our strategic plans, business objectives, capital availability, projected liquidity needs, and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely affect the amount of dividends, if any, paid to our common shareholders. See the section entitled “Supervision and Regulation — Dividends” in Item 1 of this Registration Statement.

The Federal Reserve has indicated that bank holding companies should carefully review their dividend policy in relation to the organization’s overall asset quality, current and prospective earnings and level, composition, and quality of capital. The guidance provides that we inform and consult with the Federal Reserve prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in an adverse change to our capital structure, including interest on the Company’s subordinated debt obligations. If required payments on our debt obligations are not made, or dividends on any

 

50

preferred stock we may issue are not paid, we will be prohibited from paying dividends on our common stock. Among other considerations, our ability to pay dividends further depends on the following factors:

 

•

Because the Company is a legal entity separate and distinct from the Bank and does not have any stand-alone operations, our ability to pay dividends depends on the ability of the Bank to pay dividends to us, and the Federal Reserve and California state law may, under certain circumstances, restrict the payment of dividends to us from the Bank;

 

•

Federal Reserve policy states that bank holding companies should not maintain cash dividends on common shares at a rate that would be in excess of net income available over the past year or that would result in prospective earnings retention being inconsistent with the organization’s expected future needs and financial condition; and

 

•

Our Board may determine that, even though funds are available for dividend payments, retaining the funds for internal uses, such as expansion of our operations, is necessary or appropriate in light of our business plan and objectives.

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

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

If the Bank fails or is put into receivership or conservatorship by the FDIC, investors will likely lose their entire investment in the Company.

The Company’s common stock is effectively subordinate to the claims of all creditors, including depositors, of the Bank. Based on the history of the FDIC in resolving failed institutions, if the Bank fails, or is placed into receivership, it is expected that the FDIC would incur a loss on the payout of the Bank’s insured deposits, uninsured deposits, and sale of assets. As such, it is extremely unlikely that there would be any remaining funds available for payment to the Company as the sole shareholder of the Bank, or to its creditors or shareholders. The common stock is an investment in the Company only, and is not a deposit, savings account, or other liability of the Bank, and is not insured by the FDIC or any other governmental agency. As the Bank is the principal asset of the Company, its receivership will likely result in the Company’s bankruptcy, and the loss of shareholders’ investments in their entirety.

We qualify as an “emerging growth company” and the reduced public company reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.

Although we are still evaluating our options under the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting obligations that will be available to us so long as we qualify as an “emerging growth company,” and thus the level of information we provide may be different from that of other public companies. If we do take advantage of any of these exemptions, some investors may find our securities less attractive, which could result in a less active trading market for our common stock, and the price of our common stock may be more volatile.

As an “emerging growth company” under the JOBS Act, we are permitted to delay the adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made

 

51

applicable to private companies. We do not intend to take advantage of this extended transition period, which means that the financial statements included in this Registration Statement, as well as any financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. The decision not to take advantage of the extended transition period is irrevocable.

We could remain an “emerging growth company” for up to five years, or until the earliest to occur of: (1) the first fiscal year after our annual gross revenues are $1.235 billion or more; (2) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (3) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. We have taken advantage of reduced disclosure regarding executive compensation arrangements in this Registration Statement, and we may choose to take advantage of some but not all of these reduced disclosure obligations in future filings. If we do, the information that we provide to our shareholders may be different from what you might get from other public companies in which you hold stock.

We cannot predict if investors will find our securities less attractive due to our reliance on these exemptions. If investors were to find our securities less attractive as a result of our election, we may have difficulty raising capital in future offerings and the market price of our securities may be more volatile.

 

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Item 2. Financial Information

Financial Highlights

The table below summarizes the Company’s financial information for the periods indicated. The selected financial information included herein at or for the three months ended March 31, 2026 and 2025 has been derived from our unaudited consolidated financial statements included elsewhere in this Registration Statement. The selected financial information included herein as of and for the years ended December 31, 2025, 2024 and 2023 has been derived from our audited consolidated financial statements included elsewhere in this Registration Statement. You should read the following selected historical consolidated financial and other data in conjunction with the section entitled “Management’s Discussion and analysis of Financial Condition and Results of Operations” below and with the accompanying consolidated financial statements contained in Item 13 of this Registration Statement. Our historical results are not necessarily indicative of the results to be expected in any future period.

 

(Dollars in thousands except per share data)		March 31, 2026				December 31, 2025				December 31, 2024				December 31, 2023
Selected financial condition data
Total assets		$	2,693,926			$	2,535,057			$	2,424,011			$	2,152,468
Total loans held for investment			2,140,964				2,126,147				2,085,149				1,847,161
Total deposits			2,374,695				2,223,881				2,134,459				1,875,370
Total shareholders’ equity		$	272,732			$	263,964			$	223,534			$	185,783
Asset quality ratios
Nonaccrual loans		$	34,584			$	42,227			$	11,474			$	5,028
Other real estate owned		$	8,568			$	8,568			$	—			$	—
Allowance for loan losses		$	30,236			$	29,323			$	27,267			$	24,476
Allowance for loan losses to loans held for investment			1.41%				1.38%				1.31%				1.33%
Allowance for loan losses to nonaccrual loans			87.43%				69.44%				237.64%				486.79%
Nonperforming assets to total assets			1.60%				2.00%				0.47%				0.23%
Nonperforming loans to total loans held for investment			1.62%				1.99%				0.55%				0.27%
Shares and per common share data
Book value per common share		$	47.72			$	46.08			$	38.76			$	32.48
Tangible book value per share(1)		$	47.38			$	45.75			$	38.40			$	32.08
Shares outstanding			5,715,049				5,728,187				5,766,810				5,719,115
Capital ratios (The Bank)
Tier 1 capital (to average assets)			11.3%				10.8%				10.4%				10.1%
Tier 1 capital (to risk-weighted assets)			13.0%				12.6%				11.3%				11.0%
Total capital (to risk-weighted assets)			14.2%				13.9%				12.5%				12.3%

(1)

These are non-GAAP financial measures we believe are helpful in interpreting our financial results. For more information on non-GAAP financial measures, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures — Non-GAAP Financial Measures Reconciliations.”

 

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		For the three months ended								For the year ended
(Dollars in thousands except per share data)		March 31, 2026				March 31, 2025				December 31, 2025				December 31, 2024				December 31, 2023
Selected operating data
Net interest income		$	32,609			$	27,732			$	118,230			$	100,552			$	90,319
Provision for credit losses			2,019				299				5,942				2,690				(6,146)
Noninterest income			1,935				1,613				6,928				6,344				4,922
Noninterest expense			15,680				14,055				61,382				53,360				43,970
Net income			12,027				10,562				40,666				35,822				40,856
Pre-tax pre-provision net revenue(1)		$	18,864			$	15,290			$	63,776			$	53,536			$	51,271
Per common share data
Basic earnings per share		$	2.10			$	1.83			$	7.03			$	6.24			$	7.18
Diluted earnings per share		$	2.07			$	1.80			$	6.92			$	6.15			$	7.11
Return on average assets			1.88%				1.74%				1.61%				1.58%				2.07%
Return on average equity			17.94%				18.56%				16.45%				17.51%				24.65%
Return on average tangible common equity(1)			18.07%				18.74%				16.59%				17.70%				25.07%
Operating metrics
Net interest margin			5.21%				4.61%				4.76%				4.48%				4.65%
Net interest spread			5.04%				4.41%				4.57%				4.25%				4.49%
Efficiency ratio(1)			45.39%				47.90%				49.04%				49.92%				46.17%
Noninterest expense / average assets			2.41%				2.31%				2.43%				2.35%				2.23%
Selected Average Balances
Total assets		$	2,593,472			$	2,467,778			$	2,524,163			$	2,270,206			$	1,972,016
Earning assets			2,540,198				2,439,242				2,483,689				2,244,966				1,943,574
Total loans, including loans held for sale			2,125,318				2,078,588				2,085,204				1,958,793				1,702,321
Total deposits			2,273,818				2,173,402				2,225,026				1,988,409				1,692,685
Total shareholders’ equity		$	271,873			$	230,731			$	247,138			$	204,620			$	165,749
Shares outstanding data
Weighted average basic common shares outstanding			5,694,148				5,734,688				5,737,682				5,698,207				5,646,409
Weighted average diluted common shares outstanding			5,773,819				5,826,229				5,825,268				5,782,385				5,704,519

(1)

These are non-GAAP financial measures we believe are helpful in interpreting our financial results. For more information on non-GAAP financial measures, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures — Non-GAAP Financial Measures Reconciliations.”

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes thereto and other financial information included elsewhere in this Registration Statement. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause such differences are discussed in the sections entitled “Risk Factors” in Item 1A and “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Registration Statement. We assume no obligation to update any of these forward-looking statements except to the extent required by law.

 

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The following discussion relates to our historical results, on a consolidated basis. Because we conduct all our material business operations through our wholly owned subsidiary, the Bank, the discussion and analysis primarily focus on activities conducted at the subsidiary level.

Overview

Private Bancorp of America, Inc. was incorporated in California in 2015 and is a registered bank holding company headquartered in La Jolla, California. Our wholly owned subsidiary, CalPrivate Bank, was founded in 2006 and is a California state-chartered commercial bank with deposits insured by the FDIC. At March 31, 2026, we had total assets of $2.7 billion, total deposits of $2.4 billion, and total equity of $272.7 million, and the Bank was considered “well capitalized” for regulatory capital purposes at that date.

We are a relationship-based bank that specializes in serving the unique needs of our private banking clients, the businesses they own and operate, and the advisors that serve them. We organize our business development activities and operations around three categories — private banking, business banking, and SBA lending. We leverage our deep understanding of our clients’ banking needs, coupled with innovative technology, to deliver customized banking products and services for our private and business banking clients, which include high-net-worth individuals, real estate entrepreneurs, professionals, closely-held businesses, and for-profit and nonprofit businesses. We serve our clients from our seven branches located throughout coastal Southern California, specifically Beverly Hills, Coronado, La Jolla, Montecito, Newport Beach, San Diego and El Segundo, California.

Three Months Ended March 31, 2026 Highlights

Highlights of our results of operations and financial condition as of and for the three months ended March 31, 2026 are provided below:

 

•

Net income was $12.0 million, or $2.07 per diluted share, for the three months ended March 31, 2026, compared to $10.6 million, or $1.80 per diluted share, for the same period in 2025.

 

•

Total assets were $2.7 billion at March 31, 2026, compared to $2.5 billion at December 31, 2025.

 

•

Loans held for investment were $2.14 billion at March 31, 2026, compared to $2.13 billion at December 31, 2025.

 

•

Total deposits were $2.4 billion at March 31, 2026, compared to $2.2 billion at December 31, 2025.

 

•

Net interest margin was 5.21% for the three months ended March 31, 2026, compared to 4.61% for the same period in 2025.

 

•

The efficiency ratio(1) was 45.39% for the three months ended March 31, 2026, compared to 47.90% for the same period in 2025.

 

•

Return on average assets was 1.88% for the three months ended March 31, 2026, compared to 1.74% for the same period in 2025.

 

•

Return on average tangible common equity(1) was 18.07% for the three months ended March 31, 2026, compared to 18.74% for the same period in 2025.

 

•

Tangible book value per share(1) was $47.38 at March 31, 2026, compared to $45.75 at December 31, 2025.

 

•

During the first quarter of 2026, the Company repurchased 44,214 shares of common stock at an average price of $67.80 per share, excluding brokerage commissions and other execution costs.

(1)

For more information on non-GAAP financial measures, see the section entitled “— Non-GAAP Financial Measures — Non-GAAP Financial Measures Reconciliations” below.

 

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP and with general practices within the financial services industry. The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes. Actual results could differ from those estimates.

Our significant accounting policies and the effects of new accounting pronouncements are described in Note 1 — Summary of Significant Accounting Policies of the notes to the consolidated financial statements included in Item 13 of this Registration Statement. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We consider an accounting estimate to be critical when it involves a significant level of estimation uncertainty and has had, or is reasonably likely to have, a material impact on our financial condition or results of operations. The following discussion addresses the estimates that management believes are most critical to an understanding of our consolidated financial statements.

Pursuant to 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 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 will adopt the standard on the application date for public companies.

We have elected to take advantage of certain 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.

The following is a discussion of these critical accounting policies and significant estimates that require us to make complex and subjective judgments.

Allowance for Credit Losses

We account for credit losses on loans held for investment under the CECL methodology. The allowance for credit losses represents management’s estimate of expected lifetime credit losses in the loan portfolio and expected losses on unfunded lending commitments as of the balance sheet date. The estimate is based on relevant available information, including historical credit loss experience, current portfolio conditions, reasonable and supportable economic forecasts, loan risk characteristics, collateral values, borrower-specific information, and qualitative factors.

For loans that share similar risk characteristics, management estimates expected credit losses on a collective basis using third-party lifetime loss rate models for CRE, commercial business, and consumer loans. The models consider exposure at default, loan attributes, prepayment assumptions, expected utilization assumptions, and reasonable and supportable economic forecasts. Key assumptions include portfolio segmentation, risk ratings, prepayment assumptions, economic scenario weighting, and calibration scalars. The economic scenarios include various projections of gross domestic product, interest rates, property price indices, and employment measures. Scenario weighting and model parameters are reviewed each reporting period and are subject to change as economic conditions, portfolio composition and credit quality change.

Management also applies qualitative adjustments when the model output does not fully capture expected credit losses. These adjustments may reflect management’s assessment of current and expected economic conditions, credit concentrations, collateral-specific risks, regulatory and external factors, model limitations, underwriting changes, portfolio segmentation, and other factors that may affect expected credit losses. Because these judgments are inherently subjective, changes in the underlying assumptions or in management’s assessment of credit risk could materially affect the allowance for credit losses and provision for credit losses.

 

 

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Loans that do not share risk characteristics with other loans are evaluated individually. These loans generally include nonaccrual loans and collateral-dependent loans. For collateral-dependent loans, expected credit losses are measured based on the fair value of the collateral, less estimated costs to sell when applicable. This estimate is sensitive to changes in collateral values, appraisal assumptions, market conditions, expected liquidation timing and estimated selling costs.

At March 31, 2026, the allowance for loan losses was $30.2 million, or 1.41% of loans held for investment, compared to $29.3 million, or 1.38% of loans held for investment, at December 31, 2025. The increase in the allowance ratio during the three months ended March 31, 2026 was primarily driven by higher levels of past due loans and increased weighting toward the downside economic scenario used in our CECL model, partially offset by lower reserves for individually evaluated loans, primarily due to loan paydowns. At December 31, 2025, the allowance for loan losses was $29.3 million, compared to $27.3 million at December 31, 2024 and $24.5 million at December 31, 2023.

The provision for credit losses is directly affected by changes in the allowance for credit losses. For the three months ended March 31, 2026, we recorded provision for credit losses of $2.0 million, compared to $299 thousand for the three months ended March 31, 2025. For the year ended December 31, 2025, we recorded provision for credit losses of $5.9 million, compared to $2.7 million for the year ended December 31, 2024 and a reversal of provision of credit losses of $6.1 million for the year ended December 31, 2023.

The allowance for credit losses is sensitive to changes in portfolio composition, borrower risk ratings, nonaccrual and past due loans, collateral values, charge-off experience, economic forecasts, probability weighting of economic scenarios, qualitative factors and model calibration. As an illustration of this sensitivity, a 10 basis point change in the allowance for loan losses as a percentage of loans held for investment would have changed the allowance by approximately $2.1 million at March 31, 2026 and $2.1 million, $2.1 million and $1.8 million at December 31, 2025, 2024 and 2023, respectively. A 10% change in the recorded allowance for loan losses would have changed the allowance by approximately $3.0 million at March 31, 2026 and $2.9 million, $2.7 million and $2.4 million at December 31, 2025, 2024 and 2023, respectively. These sensitivities are provided for illustrative purposes only and do not reflect management’s expectation of future changes in the allowance, because actual changes in the allowance depend on multiple factors that may not move independently or proportionately.

Deferred Tax Assets and Income Taxes

Deferred tax assets and liabilities are recognized for temporary differences between the financial statement carrying amounts of assets and liabilities and their tax bases. Management evaluates deferred tax assets for realizability and records a valuation allowance when, based on available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. This assessment requires judgment regarding future taxable income, the timing of reversals of temporary differences, tax planning strategies, tax credit utilization, and changes in applicable tax laws and rates.

The estimate is subject to uncertainty because future taxable income, tax law changes, state apportionment, utilization of tax credits and discrete tax items may differ from management’s assumptions. Changes in those assumptions could affect the amount of deferred tax assets recognized and the provision for income taxes. Deferred tax assets, net, were $11.6 million at March 31, 2026 and $10.5 million, $12.8 million and $12.8 million at December 31, 2025, 2024 and 2023, respectively.

Non-GAAP Financial Measures

This Registration Statement contains certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. Generally, a non-GAAP financial measure is a numerical measure

 

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of a company’s financial performance, financial position, or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures and may not be comparable to non-GAAP financial measures that may be presented by other companies. Management believes that these non-GAAP financial measures provide useful information to gain an understanding of the operating results of our core business. The non-GAAP measures the Company uses include the following:

 

•

Efficiency Ratio: This figure is calculated by dividing noninterest expense by total net interest income and noninterest income. We believe this measure provides investors with useful supplemental information regarding our operating efficiency by showing the portion of revenue used to support noninterest expense.

 

•

Pre-tax pre-provision net revenue: This figure is calculated as net interest income plus noninterest income, less noninterest expense, before provision for credit losses and income tax expense. We believe this measure provides investors with useful supplemental information regarding our ability to generate earnings from operations before the effects of credit loss provisioning and income taxes.

 

•

Return on average tangible common equity: This figure is calculated by dividing net income, annualized for interim periods, by average tangible common equity, which is average shareholders’ equity less average intangible assets. We believe this measure provides investors with useful supplemental information regarding returns generated on tangible common equity.

 

•

Tangible book value per share: This figure is calculated by dividing total tangible equity, which is total equity less total intangible assets, by shares outstanding. We believe this measure provides investors with useful supplemental information regarding the Company’s tangible net asset value on a per share basis.

Non-GAAP Financial Measures Reconciliations

The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP:

Efficiency Ratio:

 

		For the three months ended								For the year ended
(Dollars in thousands except per share data)		March 31, 2026				March 31, 2025				December 31, 2025				December 31, 2024				December 31, 2023
Efficiency Ratio
Noninterest expense		$	15,680			$	14,055			$	61,382			$	53,360			$	43,970
Net interest income			32,609				27,732				118,230				100,552				90,319
Noninterest income			1,935				1,613				6,928				6,344				4,922
Total net interest income and noninterest income		$	34,544			$	29,345			$	125,158			$	106,896			$	95,241
Efficiency ratio (non-GAAP)			45.39%				47.90%				49.04%				49.92%				46.17%

 

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Pre-tax pre-provision net revenue:

 

		For the three months ended								For the year ended
(Dollars in thousands except per share data)		March 31, 2026				March 31, 2025				December 31, 2025				December 31, 2024				December 31, 2023
Pre-tax pre-provision net revenue
Net interest income		$	32,609			$	27,732			$	118,230			$	100,552			$	90,319
Noninterest income			1,935				1,613				6,928				6,344				4,922
Total net interest income and noninterest income			34,544				29,345				125,158				106,896				95,241
Less: Noninterest expense			15,680				14,055				61,382				53,360				43,970
Pre-tax pre-provision net revenue (non-GAAP)		$	18,864			$	15,290			$	63,776			$	53,536			$	51,271

Return on average tangible common equity:

 

		For the three months ended								For the year ended
(Dollars in thousands except per share data)		March 31, 2026				March 31, 2025				December 31, 2025				December 31, 2024				December 31, 2023
Return on Average Tangible Equity
Net income		$	12,027			$	10,562			$	40,666			$	35,822			$	40,856
Average shareholders’ equity			271,873				230,731				247,138				204,620				165,749
Less: Average intangible assets			1,910				2,185				1,997				2,185				2,774
Average tangible common equity (non-GAAP)		$	269,963			$	228,546			$	245,141			$	202,435			$	162,975
Return on average equity			17.94%				18.56%				16.45%				17.51%				24.65%
Return on average tangible common equity (non-GAAP)			18.07%				18.74%				16.59%				17.70%				25.07%

Tangible book value per share:

 

(Dollars in thousands except per share data)		March 31, 2026				December 31, 2025				December 31, 2024				December 31, 2023
Tangible book value per share
Total equity		$	272,732			$	263,964			$	223,534			$	185,783
Less: Total intangible assets			1,957				1,913				2,087				2,318
Total tangible equity		$	270,775			$	262,051			$	221,447			$	183,465
Shares outstanding			5,715,049				5,728,187				5,766,810				5,719,115
Tangible book value per share (non-GAAP)		$	47.38			$	45.75			$	38.40			$	32.08

Results of Operations

The following is a discussion and analysis of our results of operations for the three months ended March 31, 2026 compared to March 31, 2025, the year ended December 31, 2025 compared to the year ended December 31, 2024 and the year ended December 31, 2024 compared to the year ended December 31, 2023.

Net Income and Profitability

Net income was $12.0 million for the three months ended March 31, 2026, compared to $10.6 million for the three months ended March 31, 2025. The increase was primarily due to a $4.9 million increase in net interest income and a $322 thousand increase in noninterest income, partially offset by a $1.7 million increase in provision for credit losses, a $1.6 million increase in noninterest expense and a $389 thousand increase in

 

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provision for income taxes. Diluted earnings per common share were $2.07 for the three months ended March 31, 2026, compared to $1.80 for the same period in 2025. Return on average assets was 1.88% for the three months ended March 31, 2026, compared to 1.74% for the same period in 2025, and return on average equity was 17.94%, compared to 18.56%. Return on average tangible common equity, a non-GAAP financial measure, was 18.07% for the three months ended March 31, 2026, compared to 18.74% for the same period in 2025. The decrease in return on average equity and return on average tangible common equity was primarily due to growth in average shareholders’ equity and average tangible common equity, which outpaced the growth in net income. See the section entitled “— Non-GAAP Financial Measures — Non-GAAP Financial Measures Reconciliations” for a reconciliation of return on average tangible common equity to the most directly comparable GAAP measure.

Pre-tax pre-provision net revenue, a non-GAAP financial measure, was $18.9 million for the three months ended March 31, 2026, compared to $15.3 million for the three months ended March 31, 2025. The increase was primarily due to higher net interest income, driven by higher interest income from loans and investment securities and lower interest expense on deposits, as well as higher noninterest income, primarily due to higher gain on sale of SBA loans. These increases were partially offset by higher noninterest expense, primarily due to higher compensation and employee benefits and higher administrative and other expense. See the section entitled “— Non-GAAP Financial Measures — Non-GAAP Financial Measures Reconciliations” for a reconciliation of pre-tax pre-provision net revenue to the most directly comparable GAAP measure.

Net income was $40.7 million for the year ended December 31, 2025, compared to $35.8 million for the year ended December 31, 2024 and $40.9 million for the year ended December 31, 2023. The increase in net income for 2025 compared to 2024 was primarily due to a $17.7 million increase in net interest income and a $584 thousand increase in noninterest income, partially offset by an $8.0 million increase in noninterest expense, a $3.3 million increase in provision for credit losses and a $2.1 million increase in provision for income taxes. The decrease in net income for 2024 compared to 2023 was primarily due to an $8.8 million unfavorable change in provision for credit losses, as the Company recorded provision for credit losses in 2024 compared to a reversal of provision for credit losses in 2023, and a $9.4 million increase in noninterest expense, partially offset by a $10.2 million increase in net interest income, a $1.4 million increase in noninterest income and a $1.5 million decrease in provision for income taxes.

Diluted earnings per common share were $6.92 for the year ended December 31, 2025, compared to $6.15 for the year ended December 31, 2024 and $7.11 for the year ended December 31, 2023. Return on average assets was 1.61% for the year ended December 31, 2025, compared to 1.58% for the year ended December 31, 2024 and 2.07% for the year ended December 31, 2023. Return on average equity was 16.45% for the year ended December 31, 2025, compared to 17.51% for the year ended December 31, 2024 and 24.65% for the year ended December 31, 2023. Return on average tangible common equity, a non-GAAP financial measure, was 16.59% for the year ended December 31, 2025, compared to 17.70% for the year ended December 31, 2024 and 25.07% for the year ended December 31, 2023. The decrease in return on average equity and return on average tangible common equity in 2025 compared to 2024 was primarily due to growth in average shareholders’ equity and average tangible common equity, which outpaced the growth in net income. The decrease in 2024 compared to 2023 was primarily due to lower net income and higher average shareholders’ equity and average tangible common equity. See the section entitled “— Non-GAAP Financial Measures — Non-GAAP Financial Measures Reconciliations” for a reconciliation of return on average tangible common equity to the most directly comparable GAAP measure.

Pre-tax pre-provision net revenue, a non-GAAP financial measure, was $63.8 million for the year ended December 31, 2025, compared to $53.5 million for the year ended December 31, 2024 and $51.3 million for the year ended December 31, 2023. The increase in 2025 compared to 2024 was primarily due to higher net interest income, driven by higher average balances of loans, investment securities and deposits in other financial institutions, and lower total interest expense, primarily due to lower interest expense on brokered deposits and FHLB advances. The increase in 2025 was also supported by higher noninterest income, primarily due to higher

 

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service charges on deposit accounts, higher servicing income, and higher other fees and miscellaneous income, partially offset by lower gain on sale of SBA loans. These increases were partially offset by higher noninterest expense, primarily due to higher compensation and employee benefits, administrative and other expense, professional services and data processing expense. The increase in 2024 compared to 2023 was primarily due to higher net interest income and higher noninterest income, partially offset by higher noninterest expense. The increase in net interest income reflected higher average loan balances and higher loan yields, partially offset by higher interest expense on deposits. The increase in noninterest income was primarily due to higher gain on sale of SBA loans and higher service charges on deposit accounts, while the increase in noninterest expense was primarily due to higher compensation and employee benefits, professional services, administrative and other expense, and data processing expense. See the section entitled “— Non-GAAP Financial Measures — Non-GAAP Financial Measures Reconciliations” for a reconciliation of pre-tax pre-provision net revenue to the most directly comparable GAAP measure.

Net Interest Income

Our primary source of revenue is net interest income, which is the difference between the interest and fees earned on loans and investments (“interest-earning assets”) and the interest paid on deposits and borrowed funds (“interest-bearing liabilities”). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. Net interest income is affected by changes in volume, mix, and rates of interest-earning assets and interest-bearing liabilities, as well as days in a period.

Average Balance Sheet, Interest and Yield/Rate Analysis for the Three Months Ended March 31, 2026 and 2025

The following table presents average balance sheet information, interest income, interest expense and the corresponding average yield earned and rates paid for the periods indicated. The average balances are daily averages and include both performing and nonperforming loans.

 

		For the Three Months Ended
		March 31, 2026												March 31, 2025
(Dollars in thousands)		Average Balance				Interest				Average Yield/Rate				Average Balance				Interest				Average Yield/Rate
Interest-Earnings Assets
Deposits in other financial institutions		$	184,847			$	1,785				3.92%			$	202,907			$	2,198				4.39%
Investment securities			230,033				2,661				4.63%				157,747				1,505				3.82%
Loans, including loans held for sale(1)(2)			2,125,318				37,967				7.24%				2,078,588				36,565				7.13%
Total interest-earning assets			2,540,198				42,413				6.77%				2,439,242				40,268				6.70%
Noninterest-earning assets			53,274												28,536
Total Assets		$	2,593,472											$	2,467,778
Interest-Bearing Liabilities
Interest bearing demand deposits, excluding brokered		$	297,364			$	576				0.79%			$	244,301			$	970				1.61%
Savings & MMA, excluding brokered			1,057,767				6,278				2.41%				955,259				6,830				2.90%
Time deposits, excluding brokered			216,661				1,852				3.47%				196,375				1,956				4.04%
Total deposits, excluding brokered			1,571,792				8,706				2.25%				1,395,935				9,756				2.83%
Total brokered deposits			61,950				654				4.28%				183,059				2,143				4.75%
Total Interest-Bearing Deposits		$	1,633,742			$	9,360				2.32%			$	1,578,994			$	11,899				3.06%

 

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		For the Three Months Ended
		March 31, 2026												March 31, 2025
(Dollars in thousands)		Average Balance				Interest				Average Yield/Rate				Average Balance				Interest				Average Yield/Rate
FHLB advances		$	10,333			$	110				4.32%			$	24,122			$	272				4.57%
Other borrowings			17,976				334				7.54%				17,981				365				8.23%
Total Interest-Bearing Liabilities		$	1,662,051			$	9,804				2.39%			$	1,621,097			$	12,536				3.14%
Noninterest-bearing deposits		$	640,076											$	594,408
Total Funding Sources		$	2,302,127			$	9,804				1.73%			$	2,215,505			$	12,536				2.29%
Noninterest-bearing liabilities		$	19,472											$	21,542
Shareholders’ equity			271,873												230,731
Total Liabilities and Shareholders’ Equity		$	2,593,472											$	2,467,778
Net interest income/spread(3)						$	32,609				5.04%							$	27,732				4.41%
Net interest margin(4)											5.21%												4.61%

(1)	Loan balances presented above include both loans held for investment and loans held for sale. Nonaccrual loans are included in total loan balances. No adjustment has been made for these loans in the yield calculations.

(2)	Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(3)	Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.

(4)	Net interest margin is net interest income divided by total interest-earning assets.

Net interest income increased $4.9 million, or 17.6%, to $32.6 million for the three months ended March 31, 2026, compared to $27.7 million for the three months ended March 31, 2025. Net interest margin increased 60 basis points to 5.21% for the three months ended March 31, 2026, compared to 4.61% for the same period in 2025. The increase in net interest income was driven by a $2.1 million increase in total interest income and a $2.7 million decrease in total interest expense, primarily due to higher average balances and yields on loans and investment securities, together with lower funding costs, including lower rates paid on deposits and a lower average balance of brokered deposits.

Analysis of Changes in Interest Income and Expenses for the Three Months Ended March 31, 2026, compared to the Three Months Ended March 31, 2025

Changes in our net interest income are a function of changes in volume and rates of interest-earning assets and interest-bearing liabilities. Changes in net interest income that are not a function of changes in volume and rates of interest-earning assets and interest-bearing liabilities are allocated proportionately to the change due to volume and the change due to rate. The following table presents the impact the volume and rate changes have had on our net interest income for the period indicated. For each category of interest-earning assets and interest-bearing liabilities, we have provided information on changes to our net interest income with respect to:

 

•

Changes in volume (changes in volume multiplied by the prior period rate);

 

•

Changes in interest rates (changes in interest rates multiplied by the prior period volume and includes the recognition of discounts/premiums and deferred fees/costs); and

 

•

The total change or the combined impact of volume and rate changes allocated proportionately to changes in volume and changes in interest rates.

 

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		For the Three Months Ended March 31, 2026 to 2025
		Variance Due To
(Dollars in thousands)		Volume				Yield/Rate				Total
Interest-Earnings Assets:
Deposits in other financial institutions		$	(186)			$	(227)			$	(413)
Investment securities			790				366				1,156
Loans			830				572				1,402
Total interest-earning assets			1,434				711				2,145
Interest-Bearing Liabilities
Interest bearing demand deposits, excluding brokered			290				(684)				(394)
Savings and money market, excluding brokered			946				(1,498)				(552)
Time deposits, excluding brokered			279				(383)				(104)
Total deposits, excluding brokered			1,515				(2,565)				(1,050)
Total brokered deposits			(1,297)				(192)				(1,489)
Total Interest-Bearing Deposits			218				(2,757)				(2,539)
FHLB advances			(148)				(14)				(162)
Other borrowings			—				(31)				(31)
Total Interest-Bearing Liabilities			70				(2,802)				(2,732)
Net interest income		$	1,364			$	3,513			$	4,877

Total interest income increased $2.1 million, or 5.3%, to $42.4 million for the three months ended March 31, 2026, compared to $40.3 million for the same period in 2025. The increase was primarily due to higher interest income from loans and investment securities. Interest income on loans increased $1.4 million, reflecting a $46.7 million increase in average loan balances and an 11 basis point increase in loan yield. Interest income on investment securities increased $1.2 million, reflecting a $72.3 million increase in average investment securities balances and an 81 basis point increase in investment securities yield. These increases were partially offset by a $0.4 million decrease in interest income on deposits in other financial institutions.

Total interest expense decreased $2.7 million, or 21.8%, to $9.8 million for the three months ended March 31, 2026, compared to $12.5 million for the same period in 2025. The decrease was primarily driven by lower deposit costs, including a $1.5 million decrease in interest expense on brokered deposits as average brokered deposits decreased $121.1 million. The total cost of deposits decreased 55 basis points to 1.67% for the three months ended March 31, 2026, compared to 2.22% for the same period in 2025. The decrease in total costs of deposits was primarily due to lower rates paid on interest-bearing deposit products and reduction of average brokered deposits.

 

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Average Balance Sheet, Interest and Yield/Rate Analysis for the Years Ended December 31, 2025, 2024 and 2023

The following table presents average balance sheet information, interest income, interest expense and the corresponding average yield earned and rates paid for the years ended December 31, 2025, 2024 and 2023. The average balances are daily averages and include both performing and nonperforming loans.

 

		Year to Date												Year to Date												Year to Date
		December 31, 2025												December 31, 2024												December 31, 2023
(Dollars in thousands)		Average Balance				Interest				Average Yield/Rate				Average Balance				Interest				Average Yield/Rate				Average Balance				Interest				Average Yield/Rate
Interest-Earnings Assets:
Deposits in other financial institutions		$	207,220			$	9,108				4.40%			$	150,654			$	7,814				5.19%			$	134,783			$	6,757				5.01%
Investment securities			191,265				7,644				3.99%				135,519				4,924				3.62%				106,470				2,357				2.21%
Loans(1)(2)			2,085,204				148,630				7.13%				1,958,793				142,156				7.26%				1,702,321				116,548				6.85%
Total interest-earning assets			2,483,689				165,382				6.66%				2,244,966				154,894				6.90%				1,943,574				125,662				6.47%
Noninterest-earning assets			40,474												25,240												28,442
Total Assets		$	2,524,163											$	2,270,206											$	1,972,016
Interest-Bearing Liabilities
Interest bearing demand deposits, excluding brokered			261,661				3,440				1.31%				142,543				2,154				1.51%				102,972				1,612				1.57%
Savings and money market, excluding brokered			1,001,107				28,021				2.80%				852,130				28,513				3.35%				659,191				16,007				2.43%
Time deposits, excluding brokered			220,809				8,375				3.79%				171,048				7,134				4.17%				105,810				3,263				3.08%
Total deposits, excluding brokered			1,483,577				39,836				2.69%				1,165,721				37,801				3.24%				867,973				20,882				2.41%
Total brokered deposits			115,776				5,231				4.52%				262,266				13,134				5.01%				192,060				9,707				5.05%
Total Interest-Bearing Deposits			1,599,353				45,067				2.82%				1,427,987				50,935				3.57%				1,060,033				30,589				2.89%
FHLB advances			14,703				652				4.43%				40,680				1,975				4.85%				72,322				3,666				5.07%
Other borrowings			17,975				1,433				7.97%				17,966				1,432				7.97%				17,966				1,088				6.06%
Total Interest-Bearing Liabilities			1,632,031				47,152				2.89%				1,486,633				54,342				3.66%				1,150,321				35,343				3.07%
Noninterest-bearing deposits			625,673												560,422												632,652
Total Funding Sources			2,257,704				47,152				2.09%				2,047,055				54,342				2.65%				1,782,973				35,343				1.98%
Noninterest-bearing liabilities			19,321												18,531												23,294
Shareholders’ equity			247,138												204,620												165,749
Total Liabilities and Shareholders’ Equity		$	2,524,163											$	2,270,206											$	1,972,016
Net interest income/spread(3)						$	118,230				4.57%							$	100,552				4.25%							$	90,319				4.49%
Net interest margin(4)											4.76%												4.48%												4.65%

(1)	Loan balances presented above include both loans held for investment and loans held for sale. Nonaccrual loans are included in total loan balances. No adjustment has been made for these loans in the yield calculations.

(2)	Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(3)	Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.

(4)	Net interest margin is net interest income divided by total interest-earning assets.

 

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