Heritage Commerce - 10-Q quarterly report FY2025 Q3

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________

FORM 10-Q

_____________________________________________________________

(MARK ONE)


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

For the quarterly period ended September 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-23877

Heritage Commerce Corp

(Exact name of Registrant as Specified in its Charter)


California (State or Other Jurisdiction of Incorporation or Organization)			77-0469558 (I.R.S. Employer Identification No.)
224 Airport Parkway, San Jose, California (Address of Principal Executive Offices)			95110 (Zip Code)

(408) 947-6900

(Registrant’s Telephone Number, Including Area Code)

N/A

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

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

Title of each class:

Trading Symbol:

Name of each exchange on which registered:

Common Stock, No Par Value

HTBK

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The Registrant had 61,283,541 shares of Common Stock outstanding on October 29, 2025.

Table of Contents

HERITAGE COMMERCE CORP

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page No.
Cautionary Note on Forward-Looking Statements		3
Part I.	FINANCIAL INFORMATION	5
Item 1.	Consolidated Financial Statements (unaudited)	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Changes in Shareholders’ Equity	8
	Consolidated Statements of Cash Flows	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	88
Item 4.	Controls and Procedures	88
PART II.	OTHER INFORMATION	89
Item 1.	Legal Proceedings	89
Item 1A.	Risk Factors	89
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	90
Item 6.	Exhibits	90
SIGNATURES		91

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) of Heritage Commerce Corp (“we,” “us,” “our” or the “Company”) contains various statements that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements often can be, but are not always, identified by the use of words such as “assume,” “expect,” “intend,” “plan,” “project,” “believe,” “estimate,” “predict,” “anticipate,” “may,” “might,” “should,” “could,” “goal,” “potential” and similar expressions. We base these forward-looking statements on our current expectations and projections about future events, our assumptions regarding these events and our knowledge of facts at the time the statements are made. Forward-looking statements may include, among other things, statements relating to our projected growth, anticipated future financial performance, management’s long-term performance goals and operational strategies, the performance of our loan and investment portfolios, as well as statements relating to the anticipated effects of those conditions, events and developments on the Company’s financial condition and results of operations.

These forward-looking statements are subject to various risks and uncertainties that may be outside our control, and our actual results could differ materially from our projected results. Risks and uncertainties that could cause our financial performance to differ materially from our goals, plans, expectations and projections expressed in forward-looking statements include those set forth in our filings with the Securities and Exchange Commission, Part II, Item 1A. Risk Factors, on pages 73 – 95 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, and the following listed below:

◦cybersecurity risks that may affect us directly or may impact us indirectly by virtue of their effects on our clients, markets or vendors, including our ability to identify and address cybersecurity risks, including those posed by the increasing use of artificial intelligence (such as, but not limited to, ransomware, data security breaches, “denial of service” attacks, “hacking” and identity theft) affecting us, our clients, and our third-party vendors and service providers;

◦events that affect our ability to attract, recruit, and retain qualified officers and other personnel to implement our strategic plan, and that enable current and future personnel to protect and develop our relationships with clients, and to promote our business, results of operations and growth prospects;

◦media items and consumer confidence as those factors affect our clients’ confidence in the banking system generally and in our bank specifically;

◦adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting;

◦market, geographic and sociopolitical factors that arise by virtue of the fact that we operate primarily in the general San Francisco Bay Area of Northern California;

◦risks of geographic concentration of our client base, our loans, and the collateral securing our loans, as those clients and assets may be particularly subject to natural disasters and to events and conditions that directly or indirectly affect those regions, including the particular risks of natural disasters (including earthquakes, fires, and flooding) and other events that disproportionately affect that region;

◦political events that have accompanied or that may in the future accompany or result from recent political changes, particularly including the impact of a prolonged U.S. federal government shutdown, the imposition of tariffs or retaliatory tariffs, sociopolitical events and other conditions that result from political conflicts and law enforcement activities that may adversely affect our markets or our clients;

◦our ability to estimate accurately, and to establish adequate reserves against, the risk of loss associated with our loan and lease portfolios and our factoring business;

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◦inflationary pressures and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans to clients, whether held in the portfolio or in the secondary market;

◦factors that affect the value and liquidity of our investment portfolios, particularly the values of securities available-for-sale, including any impairment or other charges in connection with declines in asset values or repositioning of securities held in our investment portfolio;

◦factors that affect our liquidity and our ability to meet client demands for withdrawals from deposit accounts and undrawn lines of credit, including our cash on hand and the availability of funds from our own lines of credit;

◦increased capital requirements for our continual growth or as imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

◦the expense and uncertain resolution of litigation matters whether occurring in the ordinary course of business or otherwise, particularly including but not limited to the effects of recent and ongoing developments in California labor and employment laws, regulations and court decisions;

◦operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which we are highly dependent; and

◦our success in managing the risks involved in the foregoing factors.

Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. You should consider any forward-looking statements in light of this explanation, and we caution you about relying on forward-looking statements.

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Part I—FINANCIAL INFORMATION

ITEM 1—CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

HERITAGE COMMERCE CORP
CONSOLIDATED BALANCE SHEETS
(Unaudited)


	September 30,		December 31,
	2025		2024
	(Dollars in thousands)
Assets
Cash and due from banks	$	42,442	$	29,864
Other investments and interest-bearing deposits in other financial institutions		705,300		938,259
Total cash and cash equivalents		747,742		968,123
Securities available-for-sale, at fair value		408,456		256,274
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $11
and $12, respectively (fair value of $476,834 and $497,012, respectively)		544,806		590,016
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs		1,325		2,375
Loans held-for-investment, net of deferred fees		3,581,678		3,491,937
Allowance for credit losses on loans		(49,427)		(48,953)
Loans, net		3,532,251		3,442,984
Federal Home Loan Bank ("FHLB"), Federal Reserve Bank ("FRB") stock and other investments, at cost		32,566		32,556
Company-owned life insurance		82,861		81,211
Premises and equipment, net		9,429		10,140
Goodwill		167,631		167,631
Other intangible assets		5,078		6,439
Accrued interest receivable and other assets		91,575		87,257
Total assets	$	5,623,720	$	5,645,006

Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand, noninterest-bearing	$	1,241,603	$	1,214,192
Demand, interest-bearing		922,077		936,587
Savings and money market		1,366,905		1,325,923
Time deposits - under $250		32,462		38,988
Time deposits - $250 and over		223,496		206,755

Insured Cash Sweep ("ICS")/Certificates of Deposit Account Registry Service ("CDARS") -
interest-bearing demand, money market and time deposits		990,003		1,097,586
Total deposits		4,776,546		4,820,031


Subordinated debt, net of issuance costs		39,767		39,653
Accrued interest payable and other liabilities		107,397		95,595
Total liabilities		4,923,710		4,955,279

Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding
at September 30, 2025 and December 31, 2024		—		—
Common stock, no par value; 100,000,000 shares authorized;
61,277,541, and 61,348,095 shares issued and outstanding, respectively		508,664		510,070
Retained earnings		196,526		187,762
Accumulated other comprehensive loss		(5,180)		(8,105)
Total shareholders' equity		700,010		689,727
Total liabilities and shareholders' equity	$	5,623,720	$	5,645,006

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025			2024
	(Dollars in thousands, except per share amounts)
Interest income:
Loans, including fees	$	50,130	$	45,781	$	146,110	$	135,851
Securities, taxable		6,146		4,676		18,051		16,342
Securities, exempt from Federal tax		203		223		635		674
Other investments, interest-bearing deposits
in other financial institutions and Federal funds sold		8,615		10,172		25,155		23,434
Total interest income		65,094		60,852		189,951		176,301

Interest expense:
Deposits		17,769		20,985		53,385		56,989

Subordinated debt		537		538		1,613		1,614
Total interest expense		18,306		21,523		54,998		58,603

Net interest income before provision for credit losses on loans		46,788		39,329		134,953		117,698
Provision for credit losses on loans		416		153		1,206		808
Net interest income after provision for credit losses on loans		46,372		39,176		133,747		116,890

Noninterest income:
Service charges and fees on deposit accounts		898		908		2,719		2,676
FHLB and FRB stock dividends		587		586		1,761		1,765
Increase in cash surrender value of life insurance		564		530		1,650		1,569
Servicing income		77		108		220		288
Gain on sales of SBA loans		—		94		185		348
Termination fees		—		46		314		159
Gain on proceeds from company-owned life insurance		—		—		—		219
Other		1,091		554		2,041		1,304
Total noninterest income		3,217		2,826		8,890		8,328

Noninterest expense:
Salaries and employee benefits		16,948		15,673		49,750		46,976
Occupancy and equipment		2,528		2,599		7,587		7,731
Professional fees		1,175		1,306		4,574		3,705
Other		8,375		7,977		34,906		24,867
Total noninterest expense		29,026		27,555		96,817		83,279
Income before income taxes		20,563		14,447		45,820		41,939
Income tax expense		5,865		3,940		13,107		12,032
Net income	$	14,698	$	10,507	$	32,713	$	29,907

Earnings per common share:
Basic	$	0.24	$	0.17		0.53	$	0.49
Diluted	$	0.24	$	0.17		0.53	$	0.49

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
	(Dollars in thousands)
Net income	$	14,698	$	10,507	$	32,713	$	29,907
Other comprehensive (loss) income:
Change in net unrealized holding gains (losses) on
available-for-sale securities and I/O strips		(207)		4,024		4,375		5,549
Deferred income taxes		61		(1,167)		(1,282)		(1,609)






Change in unrealized gains on securities and I/O strips,
net of deferred income taxes		(146)		2,857		3,093		3,940

Change in net pension and other benefit plan liability adjustment		(52)		(26)		(157)		(79)
Deferred income taxes		(4)		(8)		(11)		(23)
Change in pension and other benefit plan liability, net of
deferred income taxes		(56)		(34)		(168)		(102)
Other comprehensive (loss) income		(202)		2,823		2,925		3,838

Total comprehensive income	$	14,496	$	13,330	$	35,638	$	33,745

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)


						Accumulated
						Other		Total
	Common Stock			Retained		Comprehensive		Shareholders’
	Shares	Amount		Earnings		Income (Loss)		Equity
	(Dollars in thousands, except per share amounts)
































































Balance, January 1, 2024	61,146,835	$	506,539	$	179,092	$	(12,730)	$	672,901
Net income	—		—		10,166		—		10,166
Other comprehensive income, net of taxes	—		—		—		142		142
Issuance of restricted stock awards, net of forfeitures	33,908		—		—		—		—

Net amortization of restricted stock awards	—		311		—		—		311
Cash dividend declared $0.13 per share	—		—		(7,952)		—		(7,952)
Restricted stock units ("RSUs") and performance-based
restricted stock units ("PRSUs") expense, net of taxes	—		198		—		—		198
Stock option expense, net of forfeitures and taxes	—		145		—		—		145
Stock options exercised	72,882		385		—		—		385
Balance, March 31, 2024	61,253,625		507,578		181,306		(12,588)		676,296
Net income	—		—		9,234		—		9,234
Other comprehensive income, net of taxes	—		—		—		873		873
Issuance (forfeitures) of restricted stock awards, net	(8,000)		—		—		—		—
Net amortization of restricted stock awards	—		165		—		—		165
Cash dividend declared $0.13 per share	—		—		(7,969)		—		(7,969)
RSUs and PRSUs expense, net of taxes	—		413		—		—		413
RSUs vested	35,837		—		—		—		—
Stock option expense, net of forfeitures and taxes	—		129		—		—		129
Stock options exercised	10,632		58		—		—		58
Balance, June 30, 2024	61,292,094		508,343		182,571		(11,715)		679,199
Net income	—		—		10,507		—		10,507
Other comprehensive income, net of taxes	—		—		—		2,823		2,823


Amortization of restricted stock awards,
net of forfeitures and taxes	—		239		—		—		239
Cash dividend declared $0.13 per share	—		—		(7,968)		—		(7,968)
RSUs and PRSUs expense, net of taxes	—		396		—		—		396
Stock option expense, net of forfeitures and taxes	—		121		—		—		121
Stock options exercised	5,250		35		—		—		35
Balance, September 30, 2024	61,297,344	$	509,134	$	185,110	$	(8,892)	$	685,352

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)


						Accumulated
						Other		Total
	Common Stock			Retained		Comprehensive		Shareholders’
	Shares	Amount		Earnings		Income (Loss)		Equity
	(Dollars in thousands, except per share amounts)
Balance, January 1, 2025	61,348,095	$	510,070	$	187,762	$	(8,105)	$	689,727
Net income	—		—		11,626		—		11,626
Other comprehensive income, net of taxes	—		—		—		1,298		1,298
Issuance of restricted stock awards, net of forfeitures	39,104		—		—		—		—

Net amortization of restricted stock awards	—		145		—		—		145
Cash dividend declared $0.13 per share	—		—		(7,987)		—		(7,987)
RSUs and PRSUs expense, net of taxes	—		278		—		—		278
RSUs vested	71,700		—		—		—		—
Stock option expense, net of forfeitures and taxes	—		117		—		—		117
Stock options exercised	152,222		986		—		—		986
Balance, March 31, 2025	61,611,121		511,596		191,401		(6,807)		696,190
Net income	—		—		6,389		—		6,389
Other comprehensive income, net of taxes	—		—		—		1,829		1,829
Issuance (forfeitures) of restricted stock awards, net	(1,682)		—		—		—		—
Net amortization of restricted stock awards	—		165		—		—		165
Cash dividend declared $0.13 per share	—		—		(7,996)		—		(7,996)
RSUs and PRSUs expense, net of taxes	—		(81)		—		—		(81)
RSUs vested	39,643		—		—		—		—
Stock option expense, net of forfeitures and taxes	—		92		—		—		92
Common stock repurchased	(207,989)		(1,912)		—		—		(1,912)
Stock options exercised	5,670		28		—		—		28
Balance, June 30, 2025	61,446,763		509,888		189,794		(4,978)		694,704
Net income	—		—		14,698		—		14,698
Other comprehensive loss, net of taxes	—		—		—		(202)		(202)
Issuance of restricted stock awards, net	41,379		—		—		—		—
Net amortization of restricted stock awards	—		157		—		—		157
Cash dividend declared $0.13 per share	—		—		(7,966)		—		(7,966)
RSUs and PRSUs expense, net of taxes	—		506		—		—		506
RSUs vested	347		—		—		—		—
Stock option expense, net of forfeitures and taxes	—		73		—		—		73
Common stock repurchased	(231,198)		(2,137)		—		—		(2,137)
Stock options exercised	20,250		177		—		—		177
Balance, September 30, 2025	61,277,541	$	508,664	$	196,526	$	(5,180)	$	700,010

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine months ended
	September 30,
	2025			2024
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	32,713	$	29,907
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of premiums and accretion of discounts on securities, net		(775)		(2,139)

Gain on sale of SBA loans		(185)		(348)
Proceeds from sale of SBA loans originated for sale		2,664		4,563
SBA loans originated for sale		(2,167)		(3,659)

Provision for credit losses on loans		1,206		808
Increase in cash surrender value of life insurance		(1,650)		(1,569)
Depreciation and amortization		970		977
Amortization of other intangible assets		1,361		1,661
Stock option expense, net		282		395
RSUs and PRSUs expense, net		703		1,007
Amortization of restricted stock awards, net		467		715
Amortization of subordinated debt issuance costs		113		113
Gain on proceeds from company-owned life insurance		—		(219)

Effect of changes in:
Accrued interest receivable and other assets		(6,100)		202
Accrued interest payable and other liabilities		12,101		(9,262)
Net cash provided by operating activities		41,703		23,152

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available-for-sale		(348,793)		—

Maturities/paydowns/calls of securities available-for-sale		202,322		213,508
Maturities/paydowns/calls of securities held-to-maturity		44,682		45,598



Net change in loans		(89,734)		(60,805)
Changes in FHLB stock and other investments		(10)		(13)
Proceeds from redemption of company-owned life insurance		—		595
Purchase of premises and equipment		(258)		(1,518)
Net cash (used in) provided by investing activities		(191,791)		197,365

CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits		(43,485)		351,075

Exercise of stock options		1,191		478
Payment of cash dividends		(23,950)		(23,889)


Repurchase shares of the Company common stock		(4,049)		—
Net cash (used in) provided by financing activities		(70,293)		327,664
Net (decrease) increase in cash and cash equivalents		(220,381)		548,181
Cash and cash equivalents, beginning of period		968,123		408,129
Cash and cash equivalents, end of period	$	747,742	$	956,310

Supplemental disclosures of cash flow information:
Interest paid	$	54,463	$	56,140
Income taxes paid, net	$	14,078	$	12,342

Supplemental schedule of non-cash activity:
Transfer of loans held-for-sale to loan portfolio	$	738	$	—
Recording of right of use assets in exchange for lease obligations	$	—	$	3,045

See notes to consolidated financial statements (unaudited).

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HERITAGE COMMERCE CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025

(Unaudited)

1) Basis of Presentation

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

HBC is a commercial bank serving clients primarily located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. CSNK Working Capital Finance Corp. a California corporation, dba Bay View Funding (“Bay View Funding”) is a wholly owned subsidiary of HBC, and provides business-essential working capital factoring financing to various industries throughout the United States. No client accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for two segments: banking and factoring. The Company’s management uses segment results in its operating and strategic planning.

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

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expense in the financial statements. Various elements of our accounting policies, by their nature, involve the application of highly sensitive and judgmental estimates and assumptions. Some of these policies and estimates relate to matters that are highly complex and contain inherent uncertainties. Material estimates that are particularly susceptible to significant change include the determination of the allowance for credit losses and any impairment of goodwill or intangible assets. It is possible that, in some instances, different estimates and assumptions could reasonably have been made and used by management, instead of those we applied, which might have produced different results that could have had a material effect on the financial statements.

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

Reclassifications

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

Issued But Not Yet Effective Accounting Standards

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-06 - Disclosure Improvements - Codification Amendments in Response to the Securities and Exchange Commission’s (“SEC”) Disclosure Update and Simplification Initiative. ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (“ASC”). ASU 2023-06 was issued in response to the SEC's August 2018 final rule that updated and simplified disclosure requirements. In the final rule, the SEC identified 27 disclosure requirements that were incremental to those in the ASC and referred them to the FASB for potential incorporation into the generally accepted accounting principles. To avoid duplication, the SEC intended to eliminate those disclosure requirements from existing SEC regulations if the FASB incorporated them into the relevant ASC subtopics. The disclosure requirements are currently included in either SEC Regulation S-X or SEC Regulation S-K. ASU 2023-06 adds 14 of the 27 identified disclosure or presentation requirements to the ASC.

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For entities like HCC that are subject to the SEC's existing disclosure requirements, the effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments are to be applied prospectively and, if by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the ASC and will not become effective for any entity. Management intends to adopt the provisions of ASU 2023-06 on their respective effective dates. The adoption of the provisions of ASU 2023-06 is not expected to have a material impact on HCC's consolidated financial statements.

In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The updated accounting guidance requires expanded income tax disclosures, including the disaggregation of existing disclosures related to the tax rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024. Prospective application is required, with retrospective application permitted. The Company will update the related disclosures upon adoption.

In November 2024, FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 was issued in order to improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. The amendments in ASU 2024-03 require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses in interim and year-end reporting periods. The amendments in this ASU apply to all public business entities and are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments are to be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company will update the related disclosures upon adoption.

2) Shareholders’ Equity and Earnings Per Share

Share Repurchase Program – At September 30, 2025, the Company was authorized to repurchase up to $15,000,000 of the Company’s shares of its issued and outstanding common stock under a share repurchase program (the “Repurchase Program”) adopted by the Board of Directors (the “Board”) in July 2024. On October 23, 2025, the Board approved an increase in the maximum total value of shares authorized for repurchase under the Company’s Repurchase Program doubling the authorization from $15,000,000 to $30,000,000. The term of the Repurchase Program was also extended by the Board to October 31, 2026. Under the Repurchase Program, the Company is authorized to purchase its common stock from time-to-time in open market transactions, made pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The actual timing, price, value and amount of any repurchases under the Repurchase Program will depend on various factors, including the market price of the Company’s common stock, trading volume, general market conditions and other corporate and economic considerations, including the best interests of our shareholders. During the second and third quarters of 2025, the Company repurchased 439,187 shares of its common stock with a weighted average price of $9.22 per share for a total of $4,049,000. The remaining capacity under the Repurchase Program as of the filing date, after giving effect to the amendment as described above, is $25,951,000.

Earnings Per Share – Basic earnings per common share is computed by dividing net income by the weighted average common shares outstanding. Diluted earnings per share reflect potential dilution from outstanding stock options using the treasury stock method. Unvested restricted stock units are not considered participating securities and as a result are not considered outstanding under the two class method of computing basic earnings per common share. There were 1,364,621 and 1,390,055 weighted average stock options outstanding for the three and nine months ended September 30, 2025, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were 1,440,168 and 1,841,601 weighted average stock options outstanding for the three months and nine months ended September 30, 2024, considered to be antidilutive and excluded from the computation of diluted earnings per share. There were no weighted average RSUs outstanding for the three months and nine months ended September 30, 2025, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per shares. There were 1,467 and 493 weighted average RSUs outstanding for the three months and nine months ended September 30, 2024,

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Dollars in thousands, except per share amounts)
Net income	$	14,698	$	10,507	$	32,713	$	29,907

Weighted average common shares outstanding
for basic earnings per common share		61,333,951		61,295,877		61,440,570		61,254,138
Dilutive potential common shares		282,834		250,280		247,046		243,789
Shares used in computing diluted earnings per common share		61,616,785		61,546,157		61,687,616		61,497,927

Basic earnings per share	$	0.24	$	0.17	$	0.53	$	0.49
Diluted earnings per share	$	0.24	$	0.17	$	0.53	$	0.49

3) Accumulated Other Comprehensive Income (Loss) (“AOCI”)

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


	Three Months Ended September 30, 2025 and 2024
	Unrealized
	Gains (Losses)
	on Available-		Defined
	for-Sale		Benefit
	Securities		Pension
	and I/O		Plan
	Strips		Items(1)			Total
	(Dollars in thousands)
Beginning balance July 1, 2025, net of taxes	$	(354)		$	(4,624)		$	(4,978)
Other comprehensive loss before reclassification,
net of taxes		(146)			(19)			(165)
Amounts reclassified from other comprehensive income
(loss), net of taxes		—			(37)			(37)
Net current period other comprehensive loss,
net of taxes		(146)			(56)			(202)

Ending balance September 30, 2025, net of taxes	$	(500)		$	(4,680)		$	(5,180)

Beginning balance July 1, 2024, net of taxes	$	(5,946)		$	(5,769)		$	(11,715)
Other comprehensive income (loss) before reclassification,
net of taxes		2,857			(16)			2,841
Amounts reclassified from other comprehensive income
(loss), net of taxes		—			(18)			(18)
Net current period other comprehensive income (loss),
net of taxes		2,857			(34)			2,823

Ending balance September 30, 2024, net of taxes	$	(3,089)		$	(5,803)		$	(8,892)

__________________________________________________________

(1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8 “Benefit Plans”) and includes split-dollar life insurance benefit plan.
__________________________________________________________

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	Nine Months Ended September 30, 2025 and 2024
	Unrealized
	Gains (Losses)
	on Available-		Defined
	for-Sale		Benefit
	Securities		Pension
	and I/O		Plan
	Strips		Items(1)			Total
	(Dollars in thousands)
Beginning balance January 1, 2025, net of taxes	$	(3,593)		$	(4,512)		$	(8,105)
Other comprehensive income (loss) before reclassification,
net of taxes		3,093			(57)			3,036
Amounts reclassified from other comprehensive income
(loss), net of taxes		—			(111)			(111)
Net current period other comprehensive income (loss),
net of taxes		3,093			(168)			2,925

Ending balance September 30, 2025, net of taxes	$	(500)		$	(4,680)		$	(5,180)

Beginning balance January 1, 2024, net of taxes	$	(7,029)		$	(5,701)		$	(12,730)
Other comprehensive income (loss) before reclassification,
net of taxes		3,940			(47)			3,893
Amounts reclassified from other comprehensive income
(loss), net of taxes		—			(55)			(55)
Net current period other comprehensive income (loss),
net of taxes		3,940			(102)			3,838
Ending balance September 30, 2024, net of taxes	$	(3,089)		$	(5,803)		$	(8,892)

_________________________________________________________


	Amounts Reclassified from
	AOCI
	Three Months Ended
	September 30,				Affected Line Item Where
Details About AOCI Components	2025		2024		Net Income is Presented
	(Dollars in thousands)










Amortization of defined benefit pension plan items (1)

Prior transition obligation and actuarial losses (2)	$	64	$	52
Prior service cost and actuarial losses (3)		(12)		(26)
		52		26	Other noninterest expense
		(15)		(8)	Income tax benefit

Total reclassification from AOCI for the period	$	37	$	18	Net of tax

_______________________________________________________

(1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8 “Benefit Plans”).

(2) This is related to the split dollar life insurance benefit plan.

(3) This is related to the supplemental executive retirement plan.

__________________________________________________________

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	Amounts Reclassified from
	AOCI
	Nine Months Ended
	September 30,				Affected Line Item Where
Details About AOCI Components	2025		2024			Net Income is Presented
	(Dollars in thousands)









Amortization of defined benefit pension plan items (1)

Prior transition obligation and actuarial losses (2)	$	193	$	157
Prior service cost and actuarial losses (3)		(36)		(78)
		157		79			Other noninterest expense
		(46)		(24)			Income tax benefit

Total reclassification from AOCI for the period	$	111	$	55			Net of tax

__________________________________________________________

(1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8 “Benefit Plans”).

(2) This is related to the split dollar life insurance benefit plan.

(3) This is related to the supplemental executive retirement plan.

__________________________________________________________

4) Securities

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


			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for Credit		Fair
September 30, 2025	Cost		Gains		(Losses)		Losses		Value
	(Dollars in thousands)
Securities available-for-sale:
Agency mortgage-backed securities	$	232,181	$	1,375	$	(2,667)	$	—	$	230,889
Collateralized mortgage obligations		122,281		379		(342)		—		122,318
U.S. Treasury		54,646		603		—		—		55,249
Total	$	409,108	$	2,357	$	(3,009)	$	—	$	408,456

			Gross		Gross		Estimated		Allowance
	Amortized		Unrecognized		Unrecognized		Fair		for Credit
September 30, 2025	Cost		Gains		(Losses)		Value		Losses
	(Dollars in thousands)
Securities held-to-maturity:
Agency mortgage-backed securities	$	516,918	$	235	$	(67,848)	$	449,305	$	—
Municipals - exempt from Federal tax		27,899		2		(372)		27,529		(11)
Total	$	544,817	$	237	$	(68,220)	$	476,834	$	(11)

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			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for Credit		Fair
December 31, 2024	Cost		Gains		(Losses)		Losses		Value
	(Dollars in thousands)
Securities available-for-sale:
U.S. Treasury	$	187,095	$	—	$	(912)	$	—	$	186,183
Agency mortgage-backed securities		74,239		—		(4,148)		—		70,091
Total	$	261,334	$	—	$	(5,060)	$	—	$	256,274

			Gross		Gross		Estimated		Allowance
	Amortized		Unrecognized		Unrecognized		Fair		for Credit
December 31, 2024	Cost		Gains		(Losses)		Value		Losses
	(Dollars in thousands)
Securities held-to-maturity:
Agency mortgage-backed securities	$	559,548	$	—	$	(91,585)	$	467,963	$	—
Municipals - exempt from Federal tax		30,480		—		(1,431)		29,049		(12)
Total	$	590,028	$	—	$	(93,016)	$	497,012	$	(12)

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


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2025	Value		(Losses)		Value		(Losses)		Value		(Losses)
	(Dollars in thousands)
Securities available-for-sale:
Agency mortgage-backed securities	$	46,888	$	(409)	$	43,899	$	(2,258)	$	90,787	$	(2,667)

Collateralized mortgage obligations		45,964		(342)		—		—		45,964		(342)
Total	$	92,852	$	(751)	$	43,899	$	(2,258)	$	136,751	$	(3,009)

Securities held-to-maturity:
Agency mortgage-backed securities	$	—	$	—	$	438,785	$	(67,848)	$	438,785	$	(67,848)
Municipals — exempt from Federal tax		—		—		20,568		(372)		20,568		(372)
Total	$	—	$	—	$	459,353	$	(68,220)	$	459,353	$	(68,220)


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2024	Value		(Losses)		Value		(Losses)		Value		(Losses)
	(Dollars in thousands)
Securities available-for-sale:
U.S. Treasury	$	9,778	$	(4)	$	176,405	$	(908)	$	186,183	$	(912)
Agency mortgage-backed securities		20,383		(100)		49,708		(4,048)		70,091		(4,148)
Total	$	30,161	$	(104)	$	226,113	$	(4,956)	$	256,274	$	(5,060)

Securities held-to-maturity:
Agency mortgage-backed securities	$	10,280	$	(53)	$	456,906	$	(91,532)	$	467,186	$	(91,585)
Municipals — exempt from Federal tax		4,076		(65)		23,733		(1,366)		27,809		(1,431)
Total	$	14,356	$	(118)	$	480,639	$	(92,898)	$	494,995	$	(93,016)

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

At the dates and during the periods covered by these financial statements, there were zero holdings of securities of any one issuer, other than the U.S. Government and its sponsored entities, in an amount greater than 10% of shareholders’

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equity. At September 30, 2025, the Company held 383 securities (130 available-for-sale and 253 held-to-maturity), of which 338 had fair value below amortized cost. The unrealized/unrecognized losses were due to higher interest rates at period end compared to when the securities were purchased. The issuers are of high credit quality and all principal amounts are expected to be paid when securities mature. The fair value is expected to recover as the securities approach their maturity date and/or market rates decline. The Company does not believe that it is more likely than not that the Company will be required to sell a security in an unrealized loss position prior to recovery in value.

The amortized cost and estimated fair values of securities as of September 30, 2025, are shown by contractual maturity below. The expected maturities will differ from contractual maturities if borrowers have the right to call or pre-pay obligations with or without call or pre-payment penalties. Securities not due at a single maturity date are shown separately.


	Available-for-sale
	Amortized		Estimated
	Cost		Fair Value
	(Dollars in thousands)


Due after one through five years	$	54,646	$	55,249


Agency mortgage-backed securities and
collateralized mortgage obligations		354,462		353,207
Total	$	409,108	$	408,456

	Held-to-maturity
	Amortized		Estimated
	Cost (1)		Fair Value
	(Dollars in thousands)

Due within one year	$	1,250	$	1,246
Due after one through five years		10,430		10,330
Due after five through ten years		16,219		15,953

Agency mortgage-backed securities		516,918		449,305
Total	$	544,817	$	476,834

__________________________________________________________

(1) Gross of the allowance for credit losses of $11 at September 30, 2025.

__________________________________________________________

Securities with amortized cost of $545,165,000 and $753,369,000 as of September 30, 2025 and December 31, 2024, respectively, were pledged to secure the Bank’s lines of credit and for other purposes as required or permitted by law or contract. The decrease in pledged securities at September 30, 2025 was due to securities maturities.

The allowance for credit losses on the Company’s held-to-maturity debt securities is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company’s Consolidated Balance Sheet. The table below presents a roll-forward by major security type for the first, second and third quarters of 2025 of the allowance for credit losses on debt securities held-to-maturity at period end:

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		Municipals
		(Dollars in thousands)
Beginning balance January 1, 2025	$	12
Provision for credit losses		—
Ending Balance at March 31, 2025		12
Provision for credit losses		4
Ending Balance at June 30, 2025		16
Provision for (recapture of) credit losses		(5)
Ending Balance at September 30, 2025	$	11

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

5) Loans and Allowance for Credit Losses on Loans

The allowance for credit losses on loans was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. The loan portfolio is classified into eight segments of loans - commercial, commercial real estate – owner occupied, commercial real estate – non-owner occupied, land and construction, home equity, multifamily, residential mortgage and consumer and other. Descriptions of the Company’s loan portfolio segments are included in Note 1 “Summary of Significant Accounting Policies” of the 2024 Form 10-K.

Loan Distribution

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


	September 30, 2025		December 31, 2024

	(Dollars in thousands)
Loans held-for-investment:
Commercial	$	523,110	$	531,350
Real estate:
CRE - owner occupied		629,855		601,636
CRE - non-owner occupied		1,416,987		1,341,266
Land and construction		137,170		127,848
Home equity		125,742		127,963
Multifamily		290,077		275,490
Residential mortgages		443,143		471,730
Consumer and other		15,938		14,837
Loans		3,582,022		3,492,120
Deferred loan fees, net		(344)		(183)
Loans, net of deferred fees		3,581,678		3,491,937
Allowance for credit losses on loans		(49,427)		(48,953)
Loans, net	$	3,532,251	$	3,442,984

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


	Three Months Ended September 30, 2025
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,699	$	6,194	$	25,413	$	2,438	$	801	$	4,467	$	3,459	$	162	$	48,633
Charge-offs		(133)		—		—		—		—		—		—		(5)		(138)
Recoveries		36		36		—		—		251		—		—		193		516
Net (charge-offs) recoveries		(97)		36		—		—		251		—		—		188		378
Provision for (recapture of)
credit losses on loans		248		(157)		1,233		(448)		(235)		(113)		58		(170)		416
End of period balance	$	5,850	$	6,073	$	26,646	$	1,990	$	817	$	4,354	$	3,517	$	180	$	49,427


	Three Months Ended September 30, 2024
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,010	$	5,344	$	26,847	$	1,523	$	814	$	4,269	$	3,960	$	187	$	47,954
Charge-offs		(174)		—		—		—		—		—		—		(300)		(474)
Recoveries		154		14		—		—		18		—		—		—		186
Net (charge-offs) recoveries		(20)		14		—		—		18		—		—		(300)		(288)
Provision for (recapture of)
credit losses on loans		(273)		62		603		(195)		(72)		86		(291)		233		153
End of period balance	$	4,717	$	5,420	$	27,450	$	1,328	$	760	$	4,355	$	3,669	$	120	$	47,819


	Nine Months Ended September 30, 2025
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	6,060	$	5,225	$	26,779	$	1,400	$	798	$	4,735	$	3,618	$	338	$	48,953
Charge-offs		(1,188)		—		—		—		—		—		—		(197)		(1,385)
Recoveries		121		43		—		—		296		—		—		193		653
Net (charge-offs) recoveries		(1,067)		43		—		—		296		—		—		(4)		(732)
Provision for (recapture of)
credit losses on loans		857		805		(133)		590		(277)		(381)		(101)		(154)		1,206
End of period balance	$	5,850	$	6,073	$	26,646	$	1,990	$	817	$	4,354	$	3,517	$	180	$	49,427


	Nine Months Ended September 30, 2024
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,853	$	5,121	$	25,323	$	2,352	$	644	$	5,053	$	3,425	$	187	$	47,958
Charge-offs		(1,042)		—		—		—		—		—		—		(300)		(1,342)
Recoveries		300		24		—		—		71		—		—		—		395
Net (charge-offs) recoveries		(742)		24		—		—		71		—		—		(300)		(947)
Provision for (recapture of)
credit losses on loans		(394)		275		2,127		(1,024)		45		(698)		244		233		808
End of period balance	$	4,717	$	5,420	$	27,450	$	1,328	$	760	$	4,355	$	3,669	$	120	$	47,819

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


	September 30, 2025
					Restructured
	Nonaccrual		Nonaccrual		Loans
	with no Specific		with Specific		over 90 Days
	Allowance for		Allowance for		Past Due
	Credit		Credit		and Still
	Losses		Losses		Accruing		Total
	(Dollars in thousands)
Commercial	$	83	$	384	$	194	$	661
Real estate:
CRE - Owner Occupied		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—
Land and construction		2,346		—		—		2,346
Home equity		655		—		—		655



Total	$	3,084	$	384	$	194	$	3,662


	December 31, 2024
	Nonaccrual		Nonaccrual		Loans
	with no Specific		with no Specific		over 90 Days
	Allowance for		Allowance for		Past Due
	Credit		Credit		and Still
	Losses		Losses		Accruing		Total
	(Dollars in thousands)
Commercial	$	313	$	701	$	489	$	1,503
Real estate:
CRE - Owner Occupied		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—
Land and construction		5,874		—		—		5,874
Home equity		77		—		—		77


Consumer and other		—		213		—		213
Total	$	6,264	$	914	$	489	$	7,667

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


	September 30, 2025
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(Dollars in thousands)
Commercial	$	7,887	$	1,705	$	581	$	10,173	$	512,937	$	523,110
Real estate:
CRE - Owner Occupied		—		—		—		—		629,855		629,855
CRE - Non-Owner Occupied		—		—		—		—		1,416,987		1,416,987
Land and construction		—		—		2,346		2,346		134,824		137,170
Home equity		—		—		655		655		125,087		125,742
Multifamily		—		—		—		—		290,077		290,077
Residential mortgages		—		—		—		—		443,143		443,143
Consumer and other		—		—		—		—		15,938		15,938
Total	$	7,887	$	1,705	$	3,582	$	13,174	$	3,568,848	$	3,582,022


	December 31, 2024
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(Dollars in thousands)
Commercial	$	7,364	$	2,295	$	1,393	$	11,052	$	520,298	$	531,350
Real estate:
CRE - Owner Occupied		1,879		—		—		1,879		599,757		601,636
CRE - Non-Owner Occupied		4,479		—		—		4,479		1,336,787		1,341,266
Land and construction		4,290		2,323		5,874		12,487		115,361		127,848
Home equity		78		750		—		828		127,135		127,963
Multifamily		—		—		—		—		275,490		275,490
Residential mortgages		850		—		—		850		470,880		471,730
Consumer and other		—		117		213		330		14,507		14,837
Total	$	18,940	$	5,485	$	7,480	$	31,905	$	3,460,215	$	3,492,120

The following table presents the past due loans on nonaccrual and current loans on nonaccrual at the dates indicated:


	September 30, 2025		December 31, 2024
	(Dollars in thousands)
Past due nonaccrual loans	$	3,388	$	7,068
Current nonaccrual loans		80		110
Total nonaccrual loans	$	3,468	$	7,178

Credit Quality Indicators

Credit quality indicators, specifically the Company's internal risk rating systems, reflect how the Company monitors credit losses and represents factors used by the Company when measuring the allowance for credit losses. Descriptions of the Company’s credit quality indicators by financial asset are included in Note 4 “Loans and Allowance for Credit Losses on Loans” of the 2024 Form 10-K.

Table of Contents

The following tables present term loans amortized cost by vintage and loan grade classification, and revolving loans amortized cost by loan grade classification at September 30, 2025 and December 31, 2024. The loan grade classifications are based on the Bank’s internal loan grading methodology. Loan grade categories for doubtful and loss rated loans are not included on the tables below as there are no loans with those grades at September 30, 2025 and December 31, 2024. The vintage year represents the period the loan was originated or in the case of renewed loans, the period last renewed. The amortized balance is the loan balance less any purchase discounts, plus any loan purchase premiums. The loan categories are based on the loan segmentation in the Company's CECL reserve methodology based on loan purpose and type.

Table of Contents


														Revolving
														Loans
		Term Loans Amortized Cost Basis by Originated Period as of September 30, 2025												Amortized
	9/30/2025		2024		2023		2022		2021		Prior Periods			Cost Basis		Total
	(Dollars in thousands)
Commercial:
Pass	$	98,940	$	26,670	$	20,050	$	12,275	$	13,476	$	28,944	$	310,578	$	510,933
Special Mention		1,985		981		565		257		185		362		3,001		7,336
Substandard		—		—		—		40		258		4,107		—		4,405
Substandard-Nonaccrual		11		—		270		—		—		155		—		436
Total		100,936		27,651		20,885		12,572		13,919		33,568		313,579		523,110

CRE - Owner Occupied:
Pass		71,679		52,157		27,235		76,206		95,406		289,941		6,085		618,709
Special Mention		—		—		—		—		—		2,938		—		2,938
Substandard		—		—		—		—		5,083		3,094		—		8,177
Substandard-Nonaccrual		—		—		—		—		31		—		—		31
Total		71,679		52,157		27,235		76,206		100,520		295,973		6,085		629,855

CRE - Non-Owner Occupied:
Pass		140,551		128,822		212,373		216,040		247,035		441,727		5,106		1,391,654
Special Mention		—		—		—		5,938		2,131		943		—		9,012
Substandard		—		—		—		—		4,358		11,363		600		16,321
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		140,551		128,822		212,373		221,978		253,524		454,033		5,706		1,416,987

Land and construction:
Pass		40,291		51,490		22,492		20,175		168		208		—		134,824
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		—		1,368		978		—		2,346
Total		40,291		51,490		22,492		20,175		1,536		1,186		—		137,170

Home equity:
Pass		—		—		—		—		—		2,392		120,585		122,977
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		2,110		2,110
Substandard-Nonaccrual		—		—		—		—		—		655		—		655
Total		—		—		—		—		—		3,047		122,695		125,742

Multifamily:
Pass		32,814		19,968		44,974		35,989		43,964		108,792		1,575		288,076
Special Mention		—		—		—		—		—		2,001		—		2,001
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		32,814		19,968		44,974		35,989		43,964		110,793		1,575		290,077

Residential mortgage:
Pass		459		3,707		1,639		173,302		231,185		32,062		—		442,354
Special Mention		—		—		—		—		637		—		—		637
Substandard		—		—		—		—		—		152		—		152
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		459		3,707		1,639		173,302		231,822		32,214		—		443,143

Consumer and other:
Pass		6,046		73		194		105		27		1,910		7,583		15,938
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		6,046		73		194		105		27		1,910		7,583		15,938

Total loans	$	392,776	$	283,868	$	329,792	$	540,327	$	645,312	$	932,724	$	457,223	$	3,582,022

Risk Grades:
Pass	$	390,780	$	282,887	$	328,957	$	534,092	$	631,261	$	905,976	$	451,512	$	3,525,465
Special Mention		1,985		981		565		6,195		2,953		6,244		3,001		21,924
Substandard		—		—		—		40		9,699		18,716		2,710		31,165
Substandard-Nonaccrual		11		—		270		—		1,399		1,788		—		3,468
Grand Total	$	392,776	$	283,868	$	329,792	$	540,327	$	645,312	$	932,724	$	457,223	$	3,582,022

Table of Contents


														Revolving
														Loans
		Term Loans Amortized Cost Basis by Originated Period as of December 31, 2024												Amortized
	2024		2023		2022		2021		2020		Prior Periods			Cost Basis		Total
	(Dollars in thousands)
Commercial:
Pass	$	133,643	$	27,101	$	17,114	$	16,312	$	10,444	$	28,671	$	289,147	$	522,432
Special Mention		1,927		—		327		86		—		358		423		3,121
Substandard		—		146		—		32		—		4,405		200		4,783
Substandard-Nonaccrual		—		—		591		209		—		214		—		1,014
Total		135,570		27,247		18,032		16,639		10,444		33,648		289,770		531,350

CRE - Owner Occupied:
Pass		57,988		31,688		81,133		95,939		65,152		244,430		6,899		583,229
Special Mention		—		—		—		7,132		443		1,342		—		8,917
Substandard		—		—		—		6,333		3,157		—		—		9,490
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		57,988		31,688		81,133		109,404		68,752		245,772		6,899		601,636

CRE - Non-Owner Occupied:
Pass		137,935		222,142		229,993		250,266		27,031		442,105		5,356		1,314,828
Special Mention		—		—		4,810		4,890		—		—		—		9,700
Substandard		—		—		—		4,480		—		11,658		600		16,738
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		137,935		222,142		234,803		259,636		27,031		453,763		5,956		1,341,266

Land and construction:
Pass		32,691		45,250		31,599		9,899		212		—		—		119,651
Special Mention		—		—		—		—		—		2,323		—		2,323
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		3,815		978		1,081		—		5,874
Total		32,691		45,250		31,599		13,714		1,190		3,404		—		127,848

Home equity:
Pass		—		—		—		—		—		2,378		122,207		124,585
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		750		—		2,551		3,301
Substandard-Nonaccrual		—		—		—		—		—		77		—		77
Total		—		—		—		—		750		2,455		124,758		127,963

Multifamily:
Pass		20,218		46,304		39,609		53,488		5,249		109,930		692		275,490
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		20,218		46,304		39,609		53,488		5,249		109,930		692		275,490

Residential mortgage:
Pass		3,757		1,659		180,979		251,167		1,006		32,384		—		470,952
Special Mention		—		—		—		607		—		—		—		607
Substandard		—		—		—		—		—		171		—		171
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		3,757		1,659		180,979		251,774		1,006		32,555		—		471,730

Consumer and other:
Pass		405		237		1,338		43		—		2,027		10,574		14,624
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		—		—		—		213		213
Total		405		237		1,338		43		—		2,027		10,787		14,837

Total loans	$	388,564	$	374,527	$	587,493	$	704,698	$	114,422	$	883,554	$	438,862	$	3,492,120

Risk Grades:
Pass	$	386,637	$	374,381	$	581,765	$	677,114	$	109,094	$	861,925	$	434,875	$	3,425,791
Special Mention		1,927		—		5,137		12,715		443		4,023		423		24,668
Substandard		—		146		—		10,845		3,907		16,234		3,351		34,483
Substandard-Nonaccrual		—		—		591		4,024		978		1,372		213		7,178
Grand Total	$	388,564	$	374,527	$	587,493	$	704,698	$	114,422	$	883,554	$	438,862	$	3,492,120

Table of Contents

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


		Gross Charge-offs by Originated Period for the Three Months Ended September 30, 2025
											Prior			Revolving
	9/30/2025		2024		2023		2022		2021		Periods			Loans		Total
	(Dollars in thousands)
Commercial	$		$	—	$	83	$	50	$	—	$	—	$	—	$	133
Real estate:
CRE - Owner Occupied		—		—		—		—		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—		—		—		—		—
Land and construction		—		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		5		—		5
Total	$	—	$	—	$	83	$	50	$	—	$	5	$	—	$	138


		Gross Charge-offs by Originated Period for the Three Months Ended September 30, 2024
											Prior			Revolving
	9/30/2024		2023		2022		2021		2020		Periods			Loans		Total
	(Dollars in thousands)
Commercial	$	—	$	—	$	—	$	—	$	—	$	25	$	149	$	174
Real estate:
CRE - Owner Occupied		—		—		—		—		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—		—		—		—		—
Land and construction		—		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		—		300		300
Total	$	—	$	—	$	—	$	—	$	—	$	25	$	449	$	474


		Gross Charge-offs by Originated Period for the Nine Months Ended September 30, 2025
											Prior			Revolving
	9/30/2025		2024		2023		2022		2021		Periods			Loans		Total
	(Dollars in thousands)
Commercial	$	16	$	—	$	228	$	607	$	—	$	137	$	200	$	1,188
Real estate:
CRE - Owner Occupied		—		—		—		—		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—		—		—		—		—
Land and construction		—		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—		—		—
Consumer and other		—		—		191		—		—		6				197
Total	$	16	$	—	$	419	$	607	$	—	$	143	$	200	$	1,385

Table of Contents


		Gross Charge-offs by Originated Period for the Nine Months Ended September 30, 2024
											Prior			Revolving
	9/30/2024		2023		2022		2021		2020		Periods			Loans		Total
	(Dollars in thousands)
Commercial	$	—	$	416	$	—	$	—	$	—	$	477	$	149	$	1,042
Real estate:
CRE - Owner Occupied		—		—		—		—		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—		—		—		—		—
Land and construction		—		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		—		300		300
Total	$	—	$	416	$	—	$	—	$	—	$	477	$	449	$	1,342

The amortized cost basis of collateral-dependent loans at September 30, 2025 was $384,000, of which $114,000 were secured by business assets and $270,000 were secured by real estate properties. The amortized cost basis of collateral-dependent loans at December 31, 2024 was $701,000 and were secured by business assets.

When management determines that foreclosures are probable, expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For loans which foreclosure is not probable, but for which repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty, management has elected the practical expedient under ASC 326 to estimate expected credit losses based on the fair value of collateral, adjusted for selling costs as appropriate. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

Loan Modifications

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay, or interest reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

During the three months ended September 30, 2025 and September 30, 2024, there were no loan modifications. During the nine months ended September 30, 2025 there were commercial loan modifications with a term extension totaling $4,000, representing 0.00% of the total class of financing receivables, and included a weighted average term extension of 11 months. During the nine months ended September 30, 2024, there were commercial loan modifications with a term extension totaling $15,000, representing less than 0.01% of the total class of financing receivables, and included a weighted average term extension of 12 months

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

6) Goodwill and Other Intangible Assets

Goodwill

At September 30, 2025, the carrying value of goodwill was $167,631,000, which included goodwill related to the acquisition of Bay View Funding, the Bank’s factoring subsidiary, and from prior acquisitions of multiple regional business banks.

Table of Contents

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


	September 30,		December 31,
	2025		2024
	(Dollars in thousands)
Banking	$	154,587	$	154,587
Factoring		13,044		13,044
Total	$	167,631	$	167,631

ASC 350-20 outlines the methodology used to determine if goodwill has been impaired and to measure any loss resulting from an impairment. The Company assesses goodwill for impairment annually as of November 30 or more frequently if events or changes in circumstances indicate that impairment may exist, in accordance with ASC 350-20. The Company first performs a qualitative assessment ("Step Zero") to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the qualitative assessment indicates it is more likely than not that the fair value of equity of a reporting unit is less than book value, then a quantitative impairment test is required. The quantitative assessment identifies if a reporting unit’s fair value is less than its carrying value. If it is, then the Company will recognize goodwill impairment equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of goodwill.

On a quarterly basis, management assesses whether it is necessary to perform a quantitative impairment test of goodwill. In addition, the Company hires a third-party vendor to perform a qualitative assessment annually as of November 30, or on an interim basis if an event triggering impairment assessment may have occurred. Potential impairment indicators considered include the condition of the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting units; performance of the Company’s stock and other relevant events. The Company completed its annual goodwill impairment assessment as of November 30, 2024 with the assistance of a third-party vendor. The goodwill related to the acquisition of Bay View Funding was evaluated separately for impairment under this analysis. The qualitative assessment indicated that it was more likely than not that the fair value of the reporting units exceeded the carrying value. No events or circumstances since the November 30, 2024 annual impairment test were noted that would indicate it was more likely than not a goodwill impairment exists.

Other Intangible Assets

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


	September 30, 2025
	Gross
	Carrying		Accumulated
	Amount		Amortization		Total
	(Dollars in thousands)
Core deposit intangibles	$	25,023		(20,016)	$	5,007

Below market leases		110		(39)		71
Total	$	25,133	$	(20,055)	$	5,078


	December 31, 2024
	Gross
	Carrying		Accumulated
	Amount		Amortization		Total
	(Dollars in thousands)
Core deposit intangibles	$	25,023		(18,670)	$	6,353
Customer relationship and brokered relationship intangibles		1,900		(1,900)		—
Below market leases		110		(24)		86
Total	$	27,033	$	(20,594)	$	6,439

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


				Below/
	Core			(Above)	Total
	Deposit			Market	Amortization
Year	Intangible			Lease	Expense
		(Dollars in thousands)
2025 Remaining	$	448	$	3	$	451
2026		1,512		18		1,530
2027		1,438		18		1,456
2028		999		18		1,017
2029		610		14		624
	$	5,007	$	71	$	5,078

Impairment testing of the intangible assets is performed at the individual asset level. Impairment exists if the carrying amount of the asset is not recoverable and exceeds its fair value at the date of the impairment test. For intangible assets, estimates of expected future cash flows (cash inflows less cash outflows) that are directly associated with an intangible asset are used to determine the fair value of that asset. Management makes certain estimates and assumptions in determining the expected future cash flows from core deposit and customer relationship intangibles including account attrition, expected lives, discount rates, interest rates, servicing costs and other factors. Significant changes in these estimates and assumptions could adversely impact the valuation of these intangible assets. If an impairment loss exists, the carrying amount of the intangible asset is adjusted to a new cost basis. The new cost basis is then amortized over the remaining useful life of the asset. Based on its assessment, management concluded that there was no impairment of intangible assets at September 30, 2025 and December 31, 2024.

7) Income Taxes

Some items of income and expense are recognized in one year for tax purposes, and another when applying generally accepted accounting principles, which leads to timing differences between the Company’s actual current tax liability and the amount accrued for this liability based on book income. These temporary differences comprise the “deferred” portion of the Company’s tax expense or benefit, which is accumulated on the Company’s books as a deferred tax asset or deferred tax liability until such time as they reverse.

Under generally accepted accounting principles, a valuation allowance is required if it is “more likely than not” that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions.

The Company had net deferred tax assets of $29,375,000 and $27,817,000, at September 30, 2025 and December 31, 2024, respectively. After consideration of the matters in the preceding paragraph, the Company determined that it is more likely than not that the net deferred tax assets at September 30, 2025 and December 31, 2024 will be fully realized in future years.

The following table reflects the carrying amounts of the low income housing investments included in accrued interest receivable and other assets, and the future commitments included in accrued interest payable and other liabilities for the periods indicated:


	September 30,		December 31,
	2025		2024
	(Dollars in thousands)
Low income housing investments	$	4,859	$	2,201
Future commitments	$	2,846	$	475

Table of Contents

The Company expects $4,000 of the future commitments to be paid in 2025, and $1,380,000 in 2026 through 2027.

For tax purposes, the Company had low income housing tax credits of $121,000 and $141,000 for the three months ended September 30, 2025 and 2024, respectively, and low income housing investment expense of $150,000 and $148,000. For tax purposes, the Company had low income housing tax credits of $278,000 and $422,000 for the nine months ended September 30, 2025 and 2024, respectively, and low income housing investment expense of $341,000 and $445,000, respectively. The Company recognized low income housing investment expense as a component of income tax expense.

8) Benefit Plans

Supplemental Retirement Plan

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Dollars in thousands)
Components of net periodic benefit cost:
Service cost	$	43	$	52	$	131	$	154
Interest cost		337		318		1,009		954

Amortization of net actuarial loss		12		26		36		78
Net periodic benefit cost	$	392	$	396	$	1,176	$	1,186

Amount recognized in other comprehensive income (loss)	$	37	$	18	$	111	$	54

The components of net periodic benefit cost other than the service cost component are included in the line item “other noninterest expense” in the Consolidated Statements of Income.

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Split-Dollar Life Insurance Benefit Plan

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


	September 30, 2025		December 31, 2024
	(Dollars in thousands)
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	6,616	$	6,951
Interest cost		273		344
Actuarial loss		—		(679)
Projected benefit obligation at end of period	$	6,889	$	6,616


	September 30,		December 31,
	2025		2024
	(Dollars in thousands)
Net actuarial loss	$	1,989	$	1,728
Prior transition obligation		543		611
Accumulated other comprehensive income (loss)	$	2,532	$	2,339


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Dollars in thousands)
Amortization of prior transition obligation
and actuarial losses	$	(64)	$	(53)	$	(193)	$	(157)
Interest cost		91		87		273		259
Net periodic benefit cost	$	27	$	34	$	80	$	102

Amount recognized in other comprehensive income (loss)	$	(64)	$	(53)	$	(193)	$	(157)

9) Fair Value

Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data (for example, interest rates and yield curves observable at commonly quoted intervals, prepayment speeds, credit risks, and default rates).

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Financial Assets and Liabilities Measured on a Recurring Basis

The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to

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value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair value of interest-only (“I/O”) strip receivable assets is based on a valuation model used by a third party. The Company is able to compare the valuation model inputs and results to widely available published industry data for reasonableness (Level 2 inputs).


			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Balance		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
Assets at September 30, 2025
Available-for-sale securities:
Agency mortgage-backed securities	$	230,889	$	—	$	230,889	$	—
Collateralized mortgage obligations		122,318		—		122,318		—
U.S. Treasury		55,249		55,249		—		—
I/O strip receivables		49		—		49		—

Assets at December 31, 2024
Available-for-sale securities:
U.S. Treasury	$	186,183	$	186,183	$	—	$	—
Agency mortgage-backed securities		70,091		—		70,091		—
I/O strip receivables		82		—		82		—

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

Assets and Liabilities Measured on a Non-Recurring Basis

The fair value of collateral dependent loans individually evaluated with specific allocations of the allowance for credit losses on loans is generally based on recent real estate appraisals. The appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. There were no material collateral dependent loans carried at fair value on a non-recurring basis at September 30, 2025 or December 31, 2024.

Foreclosed assets are valued at the time the loan is foreclosed upon and the asset is transferred to foreclosed assets. The fair value is based primarily on third-party appraisals, less costs to sell. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. At September 30, 2025 and December 31, 2024, there were no foreclosed assets on the balance sheet.

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


				Estimated Fair Value
						Significant
				Quoted Prices in		Other		Significant
				Active Markets for		Observable		Unobservable
	Carrying			Identical Assets		Inputs		Inputs
	Amounts			(Level 1)		(Level 2)		(Level 3)		Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	747,742		$	747,742	$	—	$	—	$	747,742
Securities available-for-sale		408,456			55,249		353,207		—		408,456
Securities held-to-maturity		544,806			—		476,834		—		476,834
Loans (including loans held-for-sale)		3,583,003	(1)		—		1,325		3,416,188		3,417,513
FHLB stock, FRB stock, and other
investments		32,566			—		—		—		N/A
Accrued interest receivable		16,245			454		3,432		12,359		16,245
I/O strips receivables		49			—		49		—		49
Liabilities:
Time deposits	$	559,501		$	—	$	560,818	$	—	$	560,818
Other deposits		4,217,045			—		4,217,045		—		4,217,045


Subordinated debt		39,767			—		36,967		—		36,967
Accrued interest payable		6,772			—		6,772		—		6,772

________________________________________________________

(1) Before allowance for credit losses on loans of $49,427.

________________________________________________________

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


				Estimated Fair Value
						Significant
				Quoted Prices in		Other		Significant
				Active Markets for		Observable		Unobservable
	Carrying			Identical Assets		Inputs		Inputs
	Amounts			(Level 1)		(Level 2)		(Level 3)		Total
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	968,123		$	968,123	$	—	$	—	$	968,123
Securities available-for-sale		256,274			186,183		70,091		—		256,274
Securities held-to-maturity		590,016			—		497,012		—		497,012
Loans (including loans held-for-sale)		3,494,312	(1)		—		2,375		3,304,196		3,306,571
FHLB stock, FRB stock, and other
investments		32,556			—		—		—		N/A
Accrued interest receivable		14,940			506		2,141		12,293		14,940
I/O strips receivables		82			—		82		—		82
Liabilities:
Time deposits	$	564,447		$	—	$	566,695	$	—	$	566,695
Other deposits		4,255,584			—		4,255,584		—		4,255,584
Subordinated debt		39,653			—		34,853		—		34,853
Accrued interest payable		6,350			—		6,350		—		6,350

__________________________________________________________

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

__________________________________________________________

10) Equity Plan

The Company maintained an Amended and Restated 2004 Equity Plan (the “2004 Plan”) for directors, officers, and key employees. The 2004 Plan was terminated on May 23, 2013. On May 23, 2013, the Company’s shareholders approved the 2013 Equity Incentive Plan (the “2013 Plan”). On May 21, 2020, the shareholders approved an amendment to the 2013 Plan to increase the number of shares available from 3,000,000 to 5,000,000 shares. The 2013 Plan was terminated on May 25, 2023. The shareholders approved the 2023 Equity Incentive Plan (the “2023 Plan”) on May 25, 2023, which reserved for issuance 600,000 shares, plus the number of shares available for issuance under the 2013 Plan that had not been made subject to outstanding awards as of the effective date of the 2023 Plan. These plans are collectively referred to as “Equity Plans.” The Equity Plans provide for the grant of incentive and nonqualified stock options, restricted stock, restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”). The Equity Plans provide that the option price for both incentive and nonqualified stock options will be determined by the Board of Directors at no less than the fair value at the date of grant. Each RSU granted to non-executive employees generally vests ratably over three years. For the nine months ended September 30, 2025, the Company granted 211,696 RSUs. Options granted vest on a schedule determined by the Board of Directors at the time of grant. Generally, options vest over four years. All options expire no later than ten years from the date of grant. There were 521,442 shares available for the issuance of equity awards under the 2023 Plan as of September 30, 2025.

The executive officers that participate in the Company’s Long Term Performance Incentive Equity Program receive 50% of their award value in RSUs and 50% of their award value in PRSUs contingent on return on average tangible common equity (“ROATCE”) performance compared to a peer group at the end of a three year performance period. PRSUs are subject to cliff vesting after a three year performance period commencing in the initial year of grant. The earned PRSUs, if any, shall vest on the date on which the Board of Directors certifies whether and to what extent the performance goal has been achieved following the end of the performance period. For the nine months ended September 30, 2025, the Company granted 115,912 shares of PRSUs.

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Restricted stock is subject to time vesting. Restricted stock granted generally vests in one to three years. For the nine months ended September 30, 2025, the Company granted 88,099 shares of restricted stock.

Stock option activity under the Equity Plans is as follows:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
Total Stock Options	of Shares	Price		Life (Years)	Value
Outstanding at January 1, 2025	2,222,496	$	10.73

Exercised	(178,142)	$	6.70
Forfeited or expired	(168,966)	$	11.36
Outstanding at September 30, 2025	1,875,388	$	11.06	4.74	$	1,183,814
Vested or expected to vest	1,762,865			4.74	$	1,112,785
Exercisable at September 30, 2025	1,672,726			4.42	$	811,393

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


		Three Months Ended September 30,			Nine Months Ended September 30,
		2025		2024	2025		2024
Intrinsic value of options exercised	$	20,226	$	25,009	$	519,799	$	321,882
Cash received from option exercise	$	177,053	$	34,806	$	1,191,296	$	478,358
Tax (expense) benefit realized from option exercises	$	(822)	$	211	$	219	$	(17,785)
Weighted average fair value of options granted		N/A		N/A		N/A		N/A

As of September 30, 2025, there was $306,000 of total unrecognized compensation cost related to unvested stock options granted under the Equity Plans. That cost is expected to be recognized over a weighted-average period of approximately 1.29 years.

Restricted stock activity under the Equity Plans is as follows:


		Weighted
		Average Grant
	Number	Date Fair
Total Restricted Stock Award	of Shares	Value
Nonvested shares at January 1, 2025	88,061	$	9.45
Granted	88,099	$	9.71
Vested	(81,086)	$	9.38
Forfeited or expired	(9,298)	$	10.62
Nonvested shares at September 30, 2025	85,776	$	9.65

As of September 30, 2025, there was $570,000 of total unrecognized compensation cost related to unvested restricted stock awards granted under the Equity Plans. The cost is expected to be recognized over a weighted-average period of approximately 1.90 years.

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RSU activity under the Equity Plans is as follows:


		Weighted
		Average Grant
	Number	Date Fair
Total RSUs	of Shares	Value
Nonvested shares at January 1, 2025	357,666	$	8.53
Granted	211,696	$	10.02
Dividend Equivalent Units	33,614	$	9.24
Vested	(111,690)	$	7.67
Forfeited or expired	(48,330)	$	7.93
Nonvested shares at September 30, 2025	442,956	$	8.90

As of September 30, 2025, there were $3,016,000 of total unrecognized compensation cost related to unvested RSUs granted under the Equity Plans. The cost is expected to be recognized over a weighted average period of 2.05 years.

PRSU activity under the Equity Plans is as follows:


		Weighted
		Average Grant
	Number	Date Fair
Total PRSUs	of Shares	Value
Nonvested shares at January 1, 2025	229,419	$	8.06
Granted	115,912	$	10.02

Dividend Equivalent Units	27,608	$	9.02
Forfeited or expired	(60,231)	$	7.61
Nonvested shares at September 30, 2025	312,708	$	8.16

As of September 30, 2025, there were $88,000 of total unrecognized compensation cost related to unvested PRSUs granted under the Equity Plans, based on the probable level of achievement of the performance conditions. The cost is expected to be recognized over a weighted average period of 0.59 years.

11) Borrowing Arrangements

Federal Home Loan Bank Borrowings, Federal Reserve Bank Borrowings, and Available Lines of Credit

HBC has off-balance sheet liquidity in the form of Federal funds purchase arrangements with correspondent banks, and lines of credit from the FHLB and FRB. HBC maintains a collateralized line of credit with the FHLB of San Francisco. Under this line, HBC can borrow from the FHLB on a short-term (typically overnight) or long-term (over one year) basis. HBC can also borrow from the FRB discount window. The holding company had a $25,000,000 line of credit with a correspondent bank at December 31, 2024 that was not renewed in 2025. The following table shows the collateral value of loans and securities pledged for the lines of credit (if collateralized), total available lines of credit, the amounts outstanding, and the remaining available at the dates indicated:


	September 30, 2025
	Collateral		Total					Remaining
	Value		Available		Outstanding			Available
	(Dollars in thousands)
FHLB collateralized borrowing capacity	$	1,226,879	$	819,580	$	—	$	819,580
FRB discount window collateralized line of credit		1,515,563		1,199,219		—		1,199,219
Federal funds purchase arrangements		N/A		75,000		—		75,000
Total	$	2,742,442	$	2,093,799	$	—	$	2,093,799

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	December 31, 2024
	Collateral		Total					Remaining
	Value		Available		Outstanding			Available
	(Dollars in thousands)
FHLB collateralized borrowing capacity	$	1,233,768	$	815,760	$	—	$	815,760
FRB discount window collateralized line of credit		1,755,347		1,383,149		—		1,383,149
Federal funds purchase arrangements		N/A		90,000		—		90,000
Holding company line of credit		N/A		25,000		—		25,000
Total	$	2,989,115	$	2,313,909	$	—	$	2,313,909

HBC may also utilize securities sold under repurchase agreements to manage its liquidity position. There were no securities sold under agreements to repurchase at September 30, 2025 and December 31, 2024.

Subordinated Debt

On May 11, 2022, the Company completed a private placement offering of $40,000,000 aggregate principal amount of its 5.00% fixed-to-floating rate subordinated notes due May 15, 2032 (“Sub Debt due 2032”). The Company used the net proceeds of the Sub Debt due 2032 for general corporate purposes, including the repayment on June 1, 2022 of the Company’s $40,000,000 aggregate principal amount of 5.25% fixed-to-floating rate subordinated notes due June 1, 2027. The Sub Debt due 2032, net of unamortized issuance costs of $233,000, totaled $39,767,000 at September 30, 2025, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Board.

12) Capital Requirements

The Company and HBC are subject to various regulatory capital requirements administered by the banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements and operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and HBC must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Company’s consolidated capital ratios and HBC’s capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at September 30, 2025. There are no conditions or events since September 30, 2025, that management believes have changed the categorization of the Company or HBC as “well-capitalized.”

Quantitative measures established by regulation to help ensure capital adequacy require the Company and HBC to maintain minimum amounts and ratios (set forth in the tables below) of total, Tier 1 capital, and common equity Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes that, at September 30, 2025 and December 31, 2024, the Company and HBC met all capital adequacy guidelines to which they were subject.

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The Company’s consolidated capital amounts and ratios are presented in the following table, together with capital adequacy requirements, under the Basel III regulatory requirements at the dates indicated:


						Required For
						Capital
						Adequacy
						Purposes
	Actual					Under Basel III
	Amount		Ratio			Amount	Ratio (1)
	(Dollars in thousands)
As of September 30, 2025
Total Capital	$	620,762	15.4	%	$	422,102	10.5	%
(to risk-weighted assets)
Tier 1 Capital	$	530,835	13.2	%	$	341,702	8.5	%
(to risk-weighted assets)
Common Equity Tier 1 Capital	$	530,835	13.2	%	$	281,401	7.0	%
(to risk-weighted assets)
Tier 1 Capital	$	530,835	9.9	%	$	215,116	4.0	%
(to average assets)

__________________________________________________________

(1) Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

__________________________________________________________


						Required For
						Capital
						Adequacy
						Purposes
	Actual					Under Basel III
	Amount		Ratio			Amount	Ratio (1)
		(Dollars in thousands)
As of December 31, 2024
Total Capital	$	610,643	15.6	%	$	411,383	10.5	%
(to risk-weighted assets)
Tier 1 Capital	$	524,204	13.4	%	$	333,024	8.5	%
(to risk-weighted assets)
Common Equity Tier 1 Capital	$	524,204	13.4	%	$	274,255	7.0	%
(to risk-weighted assets)
Tier 1 Capital	$	524,204	9.6	%	$	217,451	4.0	%
(to average assets)

__________________________________________________________

(1) Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

__________________________________________________________

The Subordinated Debt, net of unamortized issuance costs, totaled $39,767,000 at September 30, 2025 and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Board.

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HBC’s actual capital amounts and ratios are presented in the following table, together with capital adequacy requirements, under the Basel III regulatory requirements at the dates indicated:


									Required For
									Capital
					To Be Well-Capitalized				Adequacy
					Under PCA Regulatory				Purposes
	Actual				Guidelines				Under Basel III
	Amount		Ratio		Amount		Ratio		Amount		Ratio (1)
	(Dollars in thousands)
As of September 30, 2025
Total Capital	$	605,781	15.1	%	$	401,700	10.0	%	$	421,785	10.5	%
(to risk-weighted assets)
Tier 1 Capital	$	555,621	13.8	%	$	321,360	8.0	%	$	341,445	8.5	%
(to risk-weighted assets)
Common Equity Tier 1 Capital	$	555,621	13.8	%	$	261,105	6.5	%	$	281,190	7.0	%
(to risk-weighted assets)
Tier 1 Capital	$	555,621	10.3	%	$	268,742	5.0	%	$	214,993	4.0	%
(to average assets)

__________________________________________________________

(1) Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

__________________________________________________________


									Required For
									Capital
					To Be Well-Capitalized				Adequacy
					Under PCA Regulatory				Purposes
	Actual				Guidelines				Under Basel III
	Amount		Ratio		Amount		Ratio		Amount		Ratio (1)
		(Dollars in thousands)
As of December 31, 2024
Total Capital	$	590,658	15.1	%	$	391,459	10.0	%	$	411,038	10.5	%
(to risk-weighted assets)
Tier 1 Capital	$	543,872	13.9	%	$	313,167	8.0	%	$	332,745	8.5	%
(to risk-weighted assets)
Common Equity Tier 1 Capital	$	543,872	13.9	%	$	254,448	6.5	%	$	274,025	7.0	%
(to risk-weighted assets)
Tier 1 Capital	$	543,872	10.0	%	$	271,640	5.0	%	$	217,312	4.0	%
(to average assets)

_______________________________________________________________

(1) Includes 2.5% capital conservation buffer, except the Tier 1 Capital to average assets ratio.

________________________________________________________________

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Under the California General Corporation Law, the holders of common stock are entitled to receive dividends when and as declared by the Board of Directors, out of funds legally available. The California Financial Code provides that a state licensed bank may not make a cash distribution to its shareholders in excess of the lesser of the following: (i) the bank’s retained earnings; or (ii) the bank’s net income for its last three fiscal years, less the amount of any distributions made by the bank to its shareholders during such period. However, a bank, with the prior approval of the Commissioner of the California Department of Financial Protection and Innovation (“DFPI”) may make a distribution to its shareholders of an amount not to exceed the greater of (i) a bank’s retained earnings; (ii) its net income for its last fiscal year; or (iii) its net income for the current fiscal year. Also with the prior approval of the Commissioner of the DFPI and the shareholders of the bank, the bank may make a distribution to its shareholders, as a reduction in capital of the bank. In the event that the Commissioner determines that the shareholders’ equity of a bank is inadequate or that the making of a distribution by a bank would be unsafe or unsound, the Commissioner may order a bank to refrain from making such a proposed distribution. As of September 30, 2025, HBC would not be required to obtain regulatory approval, and the amount available for cash dividends is $64,670,000. HBC distributed to HCC dividends of $8,000,000 during each of the first three quarters of 2025 for a total of $24,000,000.

13) Commitments and Loss Contingencies

Loss Contingencies

Within the ordinary course of our business, we are from time to time subject to private lawsuits, government audits and examinations, administrative proceedings and other claims. Under certain circumstances, we also may be subjected to increased risk associated with the acts or omissions of our clients (such as clients who, unbeknownst to the Bank or the Company, may engage in or become associated with fraudulent or unlawful transactions, Ponzi schemes, money laundering, and similar unlawful acts), or we may be subject to subpoenas or similar demands for customer information. A number of these claims and processes may exist at any given time, and some of the claims may be pled as class actions. We could be affected by adverse publicity and litigation costs resulting from such allegations, regardless of whether they are valid or whether we are ultimately determined to be liable.

Following an agreement on preliminary settlement terms in May 2025, the Company entered into a settlement agreement to resolve a lawsuit pending in Alameda County Superior Court that alleges that the Company and the Bank violated certain wage-and-hour and related laws and regulations during certain prior payroll periods. The claim seeks recovery on behalf of representative plaintiffs and other employees and seeks unspecified damages, penalties and attorney fees under the California Labor Code, the California Business and Professions Code, and the California Private Attorneys General Act (“PAGA”). The settlement was reached without admission of liability by the Company and includes a full release of all claims related to the matter. The settlement amount was accrued in the Company’s financial statements during the fiscal quarter ended June 30, 2025.

On October 21, 2025, the Alameda County Superior Court issued the Order granting preliminary approval of the settlement. No adjustment to the previously recorded accrual was required as a result of the preliminary approval.

The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The outcomes of legal proceedings and other contingencies are, however, inherently unpredictable and subject to significant uncertainties. As a result, the Company cannot always reasonably estimate the amount or range of possible losses, particularly including but not limited to losses that could arise as a result of application of non-monetary remedies, with respect to the contingencies it faces, and the Company’s estimates, once made, may prove inaccurate.

At this time, we believe that the amount of reasonably possible losses resulting from final disposition of pending or threatened lawsuits, audits, proceedings and claims will not have a material adverse effect individually or in the aggregate on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, proceedings or claims, including claims that have not yet been asserted, and that, associated with the defense of such claims, we may incur elevated levels of attorney fees and other litigation costs. Likewise, factors that affect the insurance coverage for these matters may affect our estimates of the relevant contingent liabilities, and we generally adjust our estimates based on known factors that affect that coverage as those factors come to light. Legal costs related to such claims generally are expensed as incurred.

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Off-Balance Sheet Arrangements

In the normal course of business the Company makes commitments to extend credit to its clients as long as there are no violations of any conditions established in the contractual arrangements. These commitments are obligations that represent a potential credit risk to the Company, but are not reflected on the Company’s consolidated balance sheets. Total unused commitments to extend credit were $1,056,843,000 at September 30, 2025, and $1,033,982,000 at December 31, 2024. Unused commitments represented 30% of outstanding gross loans at September 30, 2025 and December 31, 2024, respectively.

The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of the commitments to provide credit cannot be reasonably predicted because there is no certainty that lines of credit and letters of credit will ever be fully utilized. The following table presents the Company’s commitments to extend credit at the dates indicated:


	September 30, 2025						December 31, 2024
	Fixed		Variable				Fixed		Variable
	Rate		Rate			Total	Rate		Rate		Total
	(Dollars in thousands)
Unused lines of credit and commitments to make loans	$	88,298	$	952,958	$	1,041,256	$	78,818	$	939,992	$	1,018,810
Standby letters of credit		5,597		9,990		15,587		5,136		10,036		15,172
	$	93,895	$	962,948	$	1,056,843	$	83,954	$	950,028	$	1,033,982

For the nine months ended September 30, 2025, there was an increase of $62,000 to the allowance for credit losses on the Company’s off-balance sheet credit exposures. The increase in the allowance for credit losses for off-balance sheet credit exposures in the first nine months of 2025 was driven by an increase in loan commitments and loss factors. The allowance for credit losses on the Company’s off-balance sheet credit exposures was $722,000 at September 30, 2025 and $660,000 at December 31, 2024.

14) Revenue Recognition

The majority of our revenue-generating transactions are not subject to ASC 606 "Revenue from Contracts with Customers", including revenue generated from financial instruments, including revenue from loans and securities, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, gain on sale of securities, bank-owned life insurance, gain on sales of SBA loans, and certain credit card fees, as these activities are subject to other GAAP discussed elsewhere within our disclosures. Substantially all of the Company’s revenue is generated from contracts with clients. Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of noninterest income are as follows:

Service charges and fees on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. We sometimes charge clients fees that are not specifically related to the client accessing its funds, such as account maintenance or dormancy fees. The amount of deposit fees assessed varies based on a number of factors, such as the type of client and account, the quantity of transactions, and the size of the deposit balance. We charge, and in some circumstances do not charge, fees to earn additional revenue and influence certain client behavior. An example would be where we do not charge a monthly service fee, or do not charge for certain transactions, for clients that have a high deposit balance. Deposit fees are considered either transactional in nature (such as wire transfers, nonsufficient fund fees, and stop payment orders) or non-transactional (such as account maintenance and dormancy fees). These fees are recognized as earned or as transactions occur and services are provided. Check orders and other deposit account related fees are largely transactional based and, therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to clients’ accounts.

The Company currently accounts for sales of foreclosed assets in accordance with ASC 606. In most cases the Company will seek to engage a real estate agent for the sale of foreclosed assets immediately upon foreclosure. However, in some cases, where there is clear demand for the property in question, the Company may elect to allow for a marketing period of no more than six months to attempt a direct sale of the property. We generally recognize the sale, and any

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associated gain or loss, of a real estate property when control of the property transfers. Any gains or losses from the sale are recorded to noninterest income/expense.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of ASC 606, for the periods indicated:


	Three Months Ended September 30,
	2025		2024
	(Dollars in thousands)
Noninterest Income In-scope of Topic 606:
Service charges and fees on deposit accounts	$	898	$	908
Total noninterest income in-scope of Topic 606		898		908
Noninterest Income Out-of-scope of Topic 606		2,319		1,918
Total noninterest income	$	3,217	$	2,826


	Nine Months Ended September 30,
	2025		2024
	(Dollars in thousands)
Noninterest Income In-scope of Topic 606:
Service charges and fees on deposit accounts	$	2,719	$	2,676
Total noninterest income in-scope of Topic 606		2,719		2,676
Noninterest Income Out-of-scope of Topic 606		6,171		5,652
Total noninterest income	$	8,890	$	8,328

15) Noninterest Expense

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Dollars in thousands)
Salaries and employee benefits	$	16,948	$	15,673	$	49,750	$	46,976
Occupancy and equipment		2,528		2,599		7,587		7,731
Data processing		1,359		800		3,321		2,635
Professional fees		1,175		1,306		4,574		3,705
Client services		1,112		809		2,949		2,497
Software subscriptions		836		743		2,299		2,034
Insurance expense		337		1,715		3,804		4,988
Legal settlement and other charges (1)		—		—		9,184		—
Other		4,731		3,910		13,349		12,713
Total noninterest expense	$	29,026	$	27,555	$	96,817	$	83,279

__________________________________________________________

(1) During the second quarter of 2025, the Company recorded expenses of $9,184,000, primarily due to pre-tax charges related to the settlement of certain litigation matters, including the anticipated settlement of a previously disclosed class action and PAGA lawsuit that alleged the violation of certain California wage-and-hour and related laws and regulations, and charges related to the planned closure of a Bank branch. __________________________________________________________

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16) Leases

The Company recognizes the following for all leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use, of a specified asset for the lease term. The Company is impacted as a lessee of the offices and real estate used for operations. The Company's lease agreements include options to renew at the Company's option. No lease extensions are reasonably certain to be exercised, therefore it was not considered in the calculation of the ROU asset and lease liability. As of September 30, 2025, operating lease ROU assets, included in other assets, totaled $28,652,000, and lease liabilities, included in other liabilities, totaled $28,652,000.

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


		Three Months Ended September 30,						Nine Months Ended September 30,
		2025			2024			2025			2024
	(Dollars in thousands)
Operating Lease Cost (Cost resulting from lease payments)	$	1,715		$	1,727		$	5,152		$	5,125
Operating Lease - Operating Cash Flows (Fixed Payments)	$	1,695		$	1,764		$	5,099		$	5,165
Operating Lease - ROU assets	$	28,652		$	31,912		$	28,652		$	31,912
Operating Lease - Liabilities	$	28,652		$	31,912		$	28,652		$	31,912
Weighted Average Lease Term - Operating Leases		4.77 years			5.32 years			4.77 years			5.32 years
Weighted Average Discount Rate - Operating Leases		5.81	%		5.56	%		5.81	%		5.56	%

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


	(Dollars in thousands)
2025 remaining	$	1,762
2026		6,958
2027		6,899
2028		6,314
2029		6,053
Thereafter		4,908
Total undiscounted cash flows		32,894
Discount on cash flows		(4,242)
Total lease liability	$	28,652

17) Business Segment Information

The Company's reportable segments are determined by the Chief Executive Officer, who is the designated chief operating decision maker, based upon information provided about the Company's products and services offered, primarily distinguished between Banking and Factoring. They are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products and services, and clients are similar. The chief operating decision maker analyzes the financial performance of the Company's segments, allocates resources and assesses compensation of certain employees by evaluating revenue streams, significant expenses and budget to actual results. The performance of the Banking segment is assessed by monitoring the margin between interest income and interest expense related to loans, investments, deposits and other borrowings. Pretax profit and loss is used to assess the performance of the Factoring segment. Interest expense, provisions for credit losses and salaries and employee benefits provide significant expenses in the Banking segment, while salaries and employee benefits provide the significant expenses in the Factoring segment.

The Banking segment provides a diversified mix of business loans encompassing the following loan products: commercial and industrial loans; commercial real estate loans; construction loans; and SBA loans. From time to time the Banking segment has purchased single family residential mortgage loans. The Banking segment also offers home equity

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lines of credit, to accommodate the needs of business owners and individual clients, as well as consumer loans (both secured and unsecured). The Banking segment focuses deposit generation on relationship accounts, encompassing non-interest bearing demand, interest bearing demand, and money market accounts. In order to facilitate the generation of non-interest bearing demand deposits, the Banking segment requires, depending on the circumstances and the type of relationship, its borrowers to maintain deposit balances with it as a typical condition of granting loans. The Banking segment also offers certificates of deposit and savings accounts.

The Factoring segment consists of the factored receivables portfolio originated by Bay View Funding. Factored receivables are receivables that have been acquired from the originating company and typically have not been subject to previous collection efforts. These receivables are acquired from a variety of companies, including but not limited to service providers, transportation companies, manufacturers, distributors, wholesalers, apparel companies, advertisers, and temporary staffing companies. The average life of the factored receivables was 36 days for the nine months ended September 30, 2025.

Reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. The accounting policies of the segments are substantially the same as those described in “Note 1 – Summary of Significant Accounting Policies.” of the 2024 Form 10-K.

Transactions between segments consist primarily of borrowed funds. Intersegment interest expense is allocated to the Factoring segment based on the Banking segment’s prime rate and funding costs. The provision for credit losses on loans is allocated based on the segment’s allowance for credit losses on loans determination which considers the effects of charge-offs. Noninterest income and expense directly attributable to a segment are assigned to it. Taxes are paid on a consolidated basis and allocated for segment purposes.

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


	Three Months Ended September 30, 2025
	Banking (1)		Factoring		Consolidated
	(Dollars in thousands)
Interest income	$	61,440	$	3,654	$	65,094
Intersegment interest allocations		620		(620)		—
Total interest expense		18,306		—		18,306
Net interest income		43,754		3,034		46,788
Provision for credit losses on loans		339		77		416
Net interest income after provision		43,415		2,957		46,372
Noninterest income		2,937		280		3,217
Salaries and employee benefits		15,435		1,513		16,948
Other segment items (2)		11,615		463		12,078
Intersegment expense allocations		120		(120)		—
Income before income taxes		19,422		1,141		20,563
Income tax expense		5,528		337		5,865
Net income	$	13,894	$	804	$	14,698

Total assets	$	5,531,642	$	92,078	$	5,623,720
Loans, net of deferred fees	$	3,501,950	$	79,728	$	3,581,678
Goodwill	$	154,587	$	13,044	$	167,631


	Three Months Ended September 30, 2024
	Banking (1)		Factoring		Consolidated
	(Dollars in thousands)
Interest income	$	58,708	$	2,144	$	60,852
Intersegment interest allocations		470		(470)		—
Total interest expense		21,523		—		21,523
Net interest income		37,655		1,674		39,329
Provision for (recapture of) credit losses on loans		186		(33)		153
Net interest income after provision		37,469		1,707		39,176
Noninterest income		2,568		258		2,826
Salaries and employee benefits		14,308		1,365		15,673
Other segment items (2)		11,500		382		11,882
Intersegment expense allocations		121		(121)		—
Income before income taxes		14,350		97		14,447
Income tax expense		3,911		29		3,940
Net income	$	10,439	$	68	$	10,507

Total assets	$	5,466,494	$	85,102	$	5,551,596
Loans, net of deferred fees	$	3,353,037	$	57,199	$	3,410,236
Goodwill	$	154,587	$	13,044	$	167,631

__________________________________________________________

(1) Includes the holding company’s results of operations.

(2) Other segment items for the Banking segment includes expenses for occupancy and equipment, professional fees, insurance, information technology, client services, marketing and other miscellaneous expenses. Other segment items for the Factoring segment includes expenses for occupancy and equipment, professional fees, information technology, marketing, credit reports, broker fees, and other miscellaneous expenses.

__________________________________________________________

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	Nine Months Ended September 30, 2025
	Banking (1)		Factoring		Consolidated
	(Dollars in thousands)
Interest income	$	180,008	$	9,943	$	189,951
Intersegment interest allocations		1,643		(1,643)		—
Total interest expense		54,998		—		54,998
Net interest income		126,653		8,300		134,953
Provision for credit losses on loans		1,038		168		1,206
Net interest income after provision		125,615		8,132		133,747
Noninterest income		7,996		894		8,890
Salaries and employee benefits		45,687		4,063		49,750
Other segment items (2)		45,721		1,346		47,067
Intersegment expense allocations		412		(412)		—
Income before income taxes		42,615		3,205		45,820
Income tax expense		12,160		947		13,107
Net income	$	30,455	$	2,258	$	32,713

Total assets	$	5,531,642	$	92,078	$	5,623,720
Loans, net of deferred fees	$	3,501,950	$	79,728	$	3,581,678
Goodwill	$	154,587	$	13,044	$	167,631


	Nine Months Ended September 30, 2024

	Banking (1)		Factoring		Consolidated
	(Dollars in thousands)
Interest income	$	168,405	$	7,896	$	176,301
Intersegment interest allocations		1,346		(1,346)		—
Total interest expense		58,603		—		58,603
Net interest income		111,148		6,550		117,698
Provision for credit losses on loans		556		252		808
Net interest income after provision		110,592		6,298		116,890
Noninterest income		7,795		533		8,328
Salaries and employee benefits		43,288		3,688		46,976
Other segment items (2)		35,150		1,153		36,303
Intersegment expense allocations		381		(381)		—
Income before income taxes		40,330		1,609		41,939
Income tax expense		11,556		476		12,032
Net income	$	28,774	$	1,133	$	29,907

Total assets	$	5,466,494	$	85,102	$	5,551,596
Loans, net of deferred fees	$	3,353,037	$	57,199	$	3,410,236
Goodwill	$	154,587	$	13,044	$	167,631

__________________________________________________________

(1) Includes the holding company’s results of operations.

__________________________________________________________

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18) Subsequent Events

On October 21, 2025, the Alameda County Superior Court issued the Order granting preliminary approval of the settlement of the California wage-and-hour and PAGA lawsuit described in Note 13 (Commitments and Loss Contingencies). The settlement amount was previously accrued during the second quarter of 2025, and no adjustment to the accrual was required as a result of the preliminary approval.

On October 23, 2025, the Company announced that the Board declared a $0.13 per share quarterly cash dividend to holders of common stock. The dividend will be payable on November 20, 2025 to shareholders of record at the close of the business day on November 6, 2025.

On October 23, 2025, the Company announced that the Board adopted an amendment to the Company's existing share repurchase program to increase the maximum of shares of the Company's common stock that may be repurchased under the program doubling the authorization from $15,000,000 to $30,000,000. The term of the Repurchase Program was also extended by the Board through October 31, 2026.

On May 27, 2025, the Company filed a Current Report on Form 8-K disclosing that Jack W. Conner, Chair Emeritus of the Board of Directors of the Company and the Bank, notified the Company and the Bank of his intention to retire in October 2025. On October 31, 2025, Mr. Conner informed the Board of his decision to delay his retirement and to continue in his role as a Director and Chair Emeritus of the Board of Directors of the Company and the Bank.

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ITEM 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the consolidated results of operations, financial condition, liquidity, and capital resources of Heritage Commerce Corp (the “Company” or “HCC”), its wholly-owned subsidiary, Heritage Bank of Commerce (the “Bank” or “HBC”), and HBC’s wholly-owned subsidiary, CSNK Working Capital Finance Corp, a California Corporation, dba Bay View Funding. This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of operations. This discussion and analysis should be read in conjunction with our consolidated financial statements and the accompanying notes presented elsewhere in this Quarterly Report on Form 10-Q (this “Report”). Unless we state otherwise or the context indicates otherwise, references to the “Company,” “Heritage,” “we,” “us,” and “our,” in this Report refer to Heritage Commerce Corp and its subsidiaries.

Reclassifications

Beginning in the first quarter of 2025, we reclassified Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock dividends from interest income to noninterest income and the related average asset balances were reclassified from interest earning assets to other assets on the “Net Interest Income and Net Interest Margin” tables. The amounts for the prior periods were reclassified to conform to the current presentation. These reclassifications did not affect previously reported net income or shareholders’ equity.

Non-GAAP Financial Measures

Financial results are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. These measures include “adjusted” operating metrics that have been adjusted to exclude notable expenses incurred in the second quarter as well as other performance measures and ratios adjusted for notable items. Management believes these non-GAAP financial measures enhance comparability between periods and in some instances are common in the banking industry. These non-GAAP financial measures should be supplemental to primary GAAP financial measures and should not be read in isolation or relied upon as a substitute for primary GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is presented in the tables under “Reconciliation of Non-GAAP Financial Measures.”

CRITICAL ACCOUNTING POLICIES

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

EXECUTIVE SUMMARY

The Company conducts a general commercial banking business through the Bank. Our primary operations are located in the general San Francisco Bay Area of California in the counties of Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara. Our market includes the cities of Oakland, San Francisco, and San Jose, the headquarters of a number of technology based companies in the region known commonly as Silicon Valley. The Bank’s clients are primarily closely held businesses and professionals. We also have limited operations in other regions primarily conducted through Bay View Funding, the Bank’s factoring subsidiary, which provides factoring and other alternative corporate financing services.

Performance Overview

We executed well in the third quarter of 2025, generating double digit earnings per share growth and positive operating leverage. We had positive trends in loan and deposit growth, an expansion in our net interest margin, disciplined expense management, and an improvement in our asset quality. Loan and deposit growth was 5% and 1%, respectively, over the same period a year ago, and we continue to add clients in key markets across our footprint, while maintaining our underwriting and pricing criteria.

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Our financial foundation is solid — marked by high capital reserves, strong liquidity, and sound asset quality. These fundamentals position us to continue to execute on our strategy, which is focused on increasing market share, growing our client franchise, and generating profitable growth, as we continue to support our community, colleagues, and shareholders. We are strengthening our platform to perform and position ourselves to deliver sustained, high-quality financial results for our shareholders.

For the three months ended September 30, 2025, net income was $14.7 million, or $0.24 per average diluted common share, compared to $10.5 million, or $0.17 per average diluted common share, for the three months ended September 30, 2024. The Company’s annualized return on average assets was 1.05%, the annualized return on average equity was 8.37%, and the annualized return on average tangible common equity was 11.14% for the three months ended September 30, 2025, compared to 0.78%, 6.14% and 8.27%, respectively, for the three months ended September 30, 2024. The annualized return on average tangible common equity is a non-GAAP financial measure.

For the nine months ended September 30, 2025, net income was $32.7 million, or $0.53 per average diluted common share, compared to $29.9 million, or $0.49 per average diluted common share, for the nine months ended September 30, 2024. The Company’s annualized return on average assets was 0.79%, the annualized return on average equity was 6.29%, and the annualized return on average tangible common equity was 8.38%, for the nine months ended September 30, 2025, compared to 0.76%, and 5.91%, and 7.98%, respectively, for the nine months ended September 30, 2024.

During the second quarter of 2025, the Company recorded an accrual of $9.2 million, primarily due to pre-tax expenses related to the settlement of certain litigation matters, including the anticipated settlement of a previously disclosed class action and PAGA lawsuit that alleges the violation of certain California wage-and-hour and related laws and regulations, and charges related to the planned closure of a Bank branch.

Adjusted net income, excluding the impact of the legal settlement and other charges, was $39.3 million, or $0.64 per average diluted common share, for the first nine months of 2025. The adjusted annualized return on average assets was 0.95%, the adjusted annualized return on average equity was 7.55%, and adjusted annualized return on average tangible common equity was 10.06% for the nine months ended September 30, 2025, compared to 0.76% and 5.91% and 7.98%, respectively, for the nine months ended September 30, 2024. Adjusted net income, adjusted earnings per share, adjusted annualized return on average assets, adjusted annualized return on average equity, annualized return on average tangible common equity, and adjusted annualized return on average tangible common equity are non-GAAP financial measures.

Third Quarter 2025 Highlights

Results of Operations:

◦Total revenue, which is defined as net interest income before provision for credit losses on loans plus noninterest income, increased $7.9 million, or 19%, to $50.0 million in the third quarter of 2025 from $42.2 million for the third quarter of 2024. Total revenue increased $17.8 million, or 14%, to $143.8 million for the first nine months of 2025, compared to $126.0 million for the first nine months of 2024.

◦Net interest income increased $7.5 million, or 19%, to $46.8 million for the third quarter of 2025, compared to $39.9 million for the third quarter of 2024. The fully tax equivalent (“FTE”) net interest margin was 3.60%, an increase over 3.15% for the third quarter of 2024 primarily due to lower rates paid on customer deposits, an increase in the average yields of loans and securities, a higher average balance of loans, and an increase in the average balance of deposits resulting in a higher average balance of overnight funds, partially offset by a lower average yield on overnight funds. The FTE net interest margin is a non-GAAP financial measure.

◦For the first nine months of 2025, net interest income increased $17.3 million, or 15% to $135.0 million, compared to $117.7 million for the first nine months of 2024. The FTE net interest margin increased 28 basis points to 3.51% for the first nine months of 2025, from 3.23% for the first nine months of 2024, primarily due to decrease in rates paid on client deposits, an increase in the average balances of average interest earning assets, and an increase in the average yields on loans and securities, partially offset by a lower yield on overnight funds. The FTE net interest margin is a non-GAAP financial measure.

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◦The average yield on the total loan portfolio increased to 5.65% for the third quarter of 2025, compared to 5.42% for the third quarter of 2024. The average yield on the total loan portfolio increased to 5.60% for the nine months of 2025, compared to 5.45% for the first nine months of 2024.

◦The average cost of total deposits decreased to 1.50% for the third quarter of 2025, compared to 1.84% for the third quarter of 2024. The average cost of funds decreased to 1.54% for the third quarter of 2025, compared to 1.88% for the third quarter of 2024. The average cost of total deposits decreased to 1.53% for the first nine months of 2025 compared to 1.72% for the first nine months of 2024. The average cost of funds decreased to 1.56% for the first nine months of 2025, compared to 1.75% for the first nine months of 2024.

◦Total noninterest income increased 8% to $3.2 million for the third quarter of 2025, compared to $2.8 million for the third quarter of 2024. Total noninterest income increased 7% to $8.9 million for the first nine months of 2025, compared to $8.3 million for the first nine months of 2024. The increase in noninterest income for the third quarter and first nine months of 2025 was primarily driven by a $386,000 recovery on an acquired loan that had been previously charged off and by higher facility fees. For the first nine months of 2025, the increase was partially offset by a $219,000 gain on proceeds from company-owned life insurance recorded in the same period of 2024.

◦Total noninterest expense for the third quarter of 2025 increased to $29.0 million, compared to $27.6 million for the third quarter of 2024. Noninterest expense totaled $96.8 million for the first nine months of 2025, compared to $83.3 million for the first nine months of 2024. Adjusted noninterest expense for the first nine months of 2025, excluding the impact of the $9.2 million accrual for the legal settlement and other charges, increased to $87.6 million, compared to $83.3 million for the first nine months of 2024. The increase in adjusted noninterest expense for the third quarter and first nine months of 2025 compared to the respective periods in 2024 was primarily due to higher salaries and employee benefits, partially offset by a decrease in insurance expense. The first nine months of 2025 was also impacted by higher professional fees and information technology expenses related to ongoing investments in infrastructure enhancements. Adjusted noninterest expense is a non-GAAP financial measure.

◦For the third quarter of 2025, the Company’s reported pre-provision net revenue ("PPNR"), which is defined as total revenue less noninterest expense, was $21.0 million, compared to $14.6 million for the third quarter of 2024. For the first nine months of 2025, the Company’s PPNR was $47.0 million, compared to $42.7 million for the first nine months of 2024. For the first nine months of 2025, the Company’s adjusted PPNR increased 31% to $56.2 million from $42.7 million for the first nine months of 2024. Adjusted PPNR is a non-GAAP financial measure.

◦We recorded a provision for credit losses on loans of $416,000 for the third quarter of 2025, compared to $153,000 for the third quarter of 2024. There was a provision for credit losses on loans of $1.2 million for the nine months ended September 30, 2025, compared to $808,000 for the nine months ended September 30, 2024. The increase in the provision for credit losses on loans for the third quarter and first nine months of 2025 was primarily due to loan growth.

◦Income tax expense increased to $5.9 million for the third quarter of 2025, compared to $3.9 million for the third quarter of 2024, primarily due to higher pre-tax income. The effective tax rate for the third quarter of 2025 was 28.6%, compared to 27.3% for the third quarter of 2024.

◦Income tax expense for the nine months ended September 30, 2025 was $13.1 million, compared to $12.0 million for the nine months ended September 30, 2024. The effective tax rate for nine months ended September 30, 2025 was 28.6%, compared to 28.7% for the nine months ended September 30, 2024.

◦The efficiency ratio improved to 58.05% for the third quarter of 2025, compared to 65.37% for the third quarter of 2024, primarily due to higher total revenue. The efficiency ratio was 67.31% for the first nine months of 2025. The adjusted efficiency ratio improved to 60.92% for the first nine months of 2025 from

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66.08% for the first nine months of 2024, primarily due to higher total revenue, partially offset by higher noninterest expense. The adjusted efficiency ratio is a non-GAAP financial measure.

Financial Condition and Liquidity Position:

◦Cash, interest-bearing deposits in other financial institutions and securities available-for-sale, at fair value, remained relatively flat at $1.2 billion at September 30, 2025, September 30, 2024 and December 31, 2024.

◦Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $11,000, totaled $544.8 million at September 30, 2025, compared to $604.2 million at September 30, 2024, and $590.0 million, at December 31, 2024.

◦Loans held-for-investment (“HFI”), increased $171.4 million, or 5%, to $3.6 billion at September 30, 2025, compared to $3.4 billion at September 30, 2024, and increased $89.7 million or 3% from $3.5 billion at December 31, 2024. Loans, excluding residential mortgages, increased $207.8 million, or 7%, to $3.1 billion at September 30, 2025, compared to $2.9 billion September 30, 2024, and increased $118.3 million or 4% from $3.0 billion at December 31, 2024.

◦There were 6 relationships included in nonperforming assets (“NPAs”) totaling $3.7 million, or 0.07% of total assets, at September 30, 2025, compared to 10 borrowers totaling $7.2 million, or 0.13% of total assets, at September 30, 2024, and 9 borrowers totaling $7.7 million, or 0.14% of total assets at December 31, 2024.

◦Classified assets totaled $34.6 million, or 0.62% of total assets, at September 30, 2025, compared to $32.6 million, or 0.59% of total assets, at September 30, 2024, and $41.7 million, or 0.74% of total assets, at December 31, 2024.

◦Net recoveries totaled $378,000 for the third quarter of 2025, compared to net charge-offs of $288,000 for the third quarter of 2024. Net charge-offs totaled $732,000 for the first nine months of 2025, compared to $947,000 for the first nine months of 2024.

◦The allowance for credit losses on loans (“ACLL”) at September 30, 2025 was $49.4 million, or 1.38% of total loans, representing 1,350% of total nonperforming loans. The ACLL at September 30, 2024 was $47.8 million, or 1.40% of total loans, representing 668% of total nonperforming loans. The ACLL at December 31, 2024 was $49.0 million, or 1.40% of total loans, representing 638% of nonperforming loans.

◦Total deposits increased $47.0 million, or 1%, to $4.8 billion at September 30, 2025, compared to $4.7 billion at September 30, 2024. Total deposits remained relatively flat from $4.8 billion at December 31, 2024.

◦The Company’s total available liquidity and borrowing capacity was $3.3 billion at September 30, 2025, compared to $3.2 billion at September 30, 2024, and $3.3 billion at December 31, 2024.

◦The ratio of noncore funding (which consists of time deposits of $250,000 and over, brokered deposits, securities under an agreement to repurchase, subordinated debt, and short-term borrowings) to total assets was 4.68% at September 30, 2025, compared to 4.26% at September 30, 2024, and 4.37% at December 31, 2024.

◦The loan to deposit ratio was 74.99% at September 30, 2025, compared to 72.11% at September 30, 2024, and 72.45% at December 31, 2024.

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Capital Adequacy:

◦The Company’s consolidated capital ratios exceeded regulatory guidelines and HBC’s capital ratios exceeded the prompt corrective action (“PCA”) regulatory guidelines for a well-capitalized financial institution, and the Basel III minimum regulatory requirements at September 30, 2025, as reflected in the following table:


					Well-capitalized
					Regulatory		Regulatory
	Heritage		Heritage		Financial Institution		Basel III Minimum
	Commerce		Bank of		PCA Regulatory		Regulatory
Capital Ratios	Corp		Commerce		Guidelines		Requirements(1)
Total Capital	15.4	%	15.1	%	10.0	%	10.5	%
Tier 1 Capital	13.2	%	13.8	%	8.0	%	8.5	%
Common Equity Tier 1 Capital	13.2	%	13.8	%	6.5	%	7.0	%
Tier 1 Leverage	9.9	%	10.3	%	5.0	%	4.0	%
Tangible common equity / tangible assets (2)	9.7	%	10.1	%	N/A		N/A

__________________________________________________________

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

(2) This is a non-GAAP financial measure that represents shareholders’ equity minus goodwill and other intangible assets divided by total assets minus goodwill and other intangible assets.

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RESULTS OF OPERATIONS

The Company earns income from two primary sources. The first is net interest income, which is interest income generated by earning assets less interest expense on interest-bearing liabilities. The second is noninterest income, which primarily consists of gains on the sale of loans, loan servicing fees, customer service charges and fees, the increase in cash surrender value of life insurance, and gains on the sale of securities. The majority of the Company’s noninterest expenses are operating costs that relate to providing banking services to our clients.

Net Interest Income and Net Interest Margin

The level of net interest income depends on several factors in combination, including growth in earning assets, yields on earning assets, the cost of interest-bearing liabilities, the relative volumes of earning assets and interest-bearing liabilities, and the mix of products that comprise the Company’s earning assets, deposits, and other interest-bearing liabilities. Net interest income can also be impacted by the reversal of interest on loans placed on nonaccrual status, and recovery of interest on loans that have been on nonaccrual and are either sold or returned to accrual status. To maintain its net interest margin, the Company must manage the relationship between interest earned and interest paid.

The following Distribution, Rate and Yield table presents for the periods indicated, the average amounts outstanding for the major categories of the Company’s balance sheet, the average interest rates earned or paid thereon, and the resulting net interest margin on average interest earning assets for the periods indicated. Average balances are based on daily averages.

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Distribution, Rate and Yield


	For the Quarter Ended						For the Quarter Ended
	September 30, 2025						September 30, 2024
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
	(Dollars in thousands)
Assets:





Loans, gross (1)(2)	$	3,521,005	$	50,130	5.65	%	$	3,361,140	$	45,781	5.42	%
Securities - taxable		842,998		6,146	2.89	%		838,375		4,676	2.22	%
Securities - exempt from Federal tax (3)		28,683		256	3.54	%		31,311		282	3.58	%
Other investments and interest-bearing deposits
in other financial institutions (4)		775,024		8,615	4.41	%		749,256		10,172	5.40	%
Total interest earning assets (3) (4)		5,167,710		65,147	5.00	%		4,980,082		60,911	4.87	%
Cash and due from banks		30,764						33,425
Premises and equipment, net		9,651						10,471
Goodwill and other intangible assets		172,989						174,953
Other assets		170,343						153,136
Total assets	$	5,551,457					$	5,352,067

Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,187,357					$	1,172,304

Demand, interest-bearing		932,996		1,463	0.62	%		907,346		1,714	0.75	%
Savings and money market		1,340,419		8,452	2.50	%		1,188,057		9,128	3.06	%
Time deposits - under $100		10,620		40	1.49	%		11,133		47	1.68	%
Time deposits - $100 and over		233,145		1,977	3.36	%		229,565		2,349	4.07	%

ICS/CDARS (5) - interest-bearing demand, money market
and time deposits		982,757		5,837	2.36	%		1,017,541		7,747	3.03	%
Total interest-bearing deposits		3,499,937		17,769	2.01	%		3,353,642		20,985	2.49	%
Total deposits		4,687,294		17,769	1.50	%		4,525,946		20,985	1.84	%

Short-term borrowings		26		—	0.00	%		32		—	0.00	%
Subordinated debt, net of issuance costs		39,743		537	5.36	%		39,590		538	5.41	%
Total interest-bearing liabilities		3,539,706		18,306	2.05	%		3,393,264		21,523	2.52	%
Total interest-bearing liabilities and demand,											0.00
noninterest-bearing / cost of funds		4,727,063		18,306	1.54	%		4,565,568		21,523	1.88	%
Other liabilities		128,009						106,095
Total liabilities		4,855,072						4,671,663
Shareholders’ equity		696,385						680,404
Total liabilities and shareholders’ equity	$	5,551,457					$	5,352,067

Net interest income / margin (3)				46,841	3.60	%				39,388	3.15	%
Less tax equivalent adjustment (3)				(53)						(59)
Net interest income			$	46,788	3.59	%			$	39,329	3.14	%

____________________________________________

(1) Includes loans held-for-sale. Nonaccrual loans are included in average balance.

(2) Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $246,000 for the third quarter of 2025, compared to $184,000 for the third quarter of 2024. Prepayment fees totaled $185,000 for the third quarter of 2025, compared to $4,000 for the third quarter of 2024.

(3) Reflects the non-GAAP FTE adjustment for Federal tax-exempt income based on a 21% tax rate.

(4) FHLB and FRB stock dividends were reclassed from interest income to noninterest income and the related average asset balances were reclassified from interest earning assets to other assets.

(5) Insured Cash Sweep (“ICS”)/Certificate of Deposit Account Registry Service (“CDARS”).

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	For the Nine Months Ended						For the Nine Months Ended
	September 30, 2025						September 30, 2024
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
	(Dollars in thousands)
Assets:





Loans, gross (1)(2)	$	3,486,688	$	146,110	5.60	%	$	3,330,442	$	135,851	5.45	%
Securities - taxable		873,789		18,051	2.76	%		940,755		16,342	2.32	%
Securities - exempt from Federal tax (3)		29,801		803	3.60	%		31,683		853	3.60	%
Other investments and interest-bearing deposits
in other financial institutions (4)		757,352		25,155	4.44	%		574,581		23,434	5.45	%
Total interest earning assets (3) (4)		5,147,630		190,119	4.94	%		4,877,461		176,480	4.85	%
Cash and due from banks		31,222						33,353
Premises and equipment, net		9,870						10,235
Goodwill and other intangible assets		173,441						175,495
Other assets		161,064						151,794
Total assets	$	5,523,227					$	5,248,338

Liabilities and shareholders’ equity:
Deposits:
Demand, noninterest-bearing	$	1,167,134					$	1,158,891

Demand, interest-bearing		942,371		4,385	0.62	%		919,786		4,987	0.72	%
Savings and money market		1,325,567		24,730	2.49	%		1,120,324		23,644	2.82	%
Time deposits - under $100		11,150		135	1.62	%		11,020		135	1.64	%
Time deposits - $100 and over		233,065		6,101	3.50	%		226,353		6,658	3.93	%

ICS/CDARS (5) - interest-bearing demand, money market
and time deposits		994,875		18,034	2.42	%		990,868		21,565	2.91	%
Total interest-bearing deposits		3,507,028		53,385	2.04	%		3,268,351		56,989	2.33	%
Total deposits		4,674,162		53,385	1.53	%		4,427,242		56,989	1.72	%

Short-term borrowings		21		—	0.00	%		22		—	0.00	%
Subordinated debt, net of issuance costs		39,705		1,613	5.43	%		39,553		1,614	5.45	%
Total interest-bearing liabilities		3,546,754		54,998	2.07	%		3,307,926		58,603	2.37	%
Total interest-bearing liabilities and demand,
noninterest-bearing / cost of funds		4,713,888		54,998	1.56	%		4,466,817		58,603	1.75	%
Other liabilities		113,948						105,570
Total liabilities		4,827,836						4,572,387
Shareholders’ equity		695,391						675,951
Total liabilities and shareholders’ equity	$	5,523,227					$	5,248,338

Net interest income / margin (3)				135,121	3.51	%				117,877	3.23	%
Less tax equivalent adjustment (3)				(168)						(179)
Net interest income			$	134,953	3.51	%			$	117,698	3.22	%

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(1) Includes loans held-for-sale. Nonaccrual loans are included in average balance.

(2) Yield amounts earned on loans include fees and costs. The accretion of net deferred loan fees into loan interest income was $713,000 for the first nine months of 2025, compared to $461,000 for the first nine months of 2024. Prepayment fees totaled $882,000 for the first nine months of 2025, compared to $82,000 for the first nine months of 2024.

(3) Reflects the non-GAAP FTE adjustment for Federal tax-exempt income based on a 21% tax rate.

(4) FHLB and FRB stock dividends were reclassed from interest income to noninterest income and the related average asset balances were reclassified from interest earning assets to other assets.

(5) Insured Cash Sweep (“ICS”)/Certificate of Deposit Account Registry Service (“CDARS”).

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Volume and Rate Variances

The Volume and Rate Variances table below sets forth the dollar difference in interest earned and paid for each major category of interest-earning assets and interest-bearing liabilities for the noted periods, and the amount of such change attributable to changes in average balances (volume) or changes in average interest rates. Volume variances are equal to the increase or decrease in the average balance multiplied by prior period rates and rate variances are equal to the increase or decrease in the average rate multiplied by the prior period average balance. Variances attributable to both rate and volume changes are equal to the change in rate multiplied by the change in average balance and are included below in the average volume column.


	Three Months Ended September 30,
	2025 vs. 2024
	Increase (Decrease)
	Due to Change in:
	Average		Average		Net
	Volume		Rate		Change
	(Dollars in thousands)
Income from the interest earning assets:
Loans, gross	$	2,264	$	2,085	$	4,349
Securities — taxable		39		1,431		1,470
Securities — exempt from Federal tax (1)		(23)		(3)		(26)
Other investments, interest-bearing deposits
in other financial institutions and Federal funds sold		287		(1,844)		(1,557)
Total interest income on interest-earning assets		2,567		1,669		4,236

Expense from the interest-bearing liabilities:
Demand, interest-bearing		45		(296)		(251)
Savings and money market		966		(1,642)		(676)
Time deposits — under $100		(2)		(5)		(7)
Time deposits — $100 and over		33		(405)		(372)

ICS/CDARS — interest-bearing demand, money market
and time deposits		(216)		(1,694)		(1,910)

Subordinated debt, net of issuance costs		2		(3)		(1)
Total interest expense on interest-bearing liabilities		828		(4,045)		(3,217)
Net interest income	$	1,739	$	5,714		7,453
Less tax equivalent adjustment						6
Net interest income					$	7,459

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

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	Nine Months Ended September 30,
	2025 vs. 2024
	Increase (Decrease)
	Due to Change in:
	Average		Average		Net
	Volume		Rate		Change
	(Dollars in thousands)
Income from the interest earning assets:
Loans, gross	$	6,615	$	3,644	$	10,259
Securities — taxable		(1,369)		3,078		1,709
Securities — exempt from Federal tax (1)		(50)		—		(50)
Other investments, interest-bearing deposits
in other financial institutions and Federal funds sold		6,074		(4,353)		1,721
Total interest income on interest-earning assets		11,270		2,369		13,639

Expense from the interest-bearing liabilities:
Demand, interest-bearing		120		(722)		(602)
Savings and money market		3,865		(2,779)		1,086
Time deposits — under $100		1		(1)		—
Time deposits — $100 and over		176		(733)		(557)

CDARS — interest-bearing demand, money market
and time deposits		99		(3,630)		(3,531)

Subordinated debt, net of issuance costs		7		(8)		(1)
Total interest expense on interest-bearing liabilities		4,268		(7,873)		(3,605)
Net interest income	$	7,002	$	10,242		17,244
Less tax equivalent adjustment						11
Net interest income					$	17,255

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

__________________________________________________________

Net interest income increased $7.5 million, or 19%, to $46.8 million for the third quarter of 2025, compared to $39.9 million for the third quarter of 2024. The non-GAAP FTE net interest margin was 3.60% for the third quarter of 2025, an increase over 3.15% for the third quarter of 2024. The increase in the net interest margin primarily due to lower rates paid on customer deposits, an increase in the average yields on loans and securities, a higher average balance of loans, and an increase in the average balance of deposits resulting in a higher average balance of overnight funds, partially offset by a lower average yield on overnight funds.

For the first nine months of 2025, net interest income increased $17.3 million, or 15% to $135.0 million, compared to $117.7 million for the first nine months of 2024. The FTE net interest margin increased 28 basis points to 3.51% for the first nine months of 2025, from 3.23% for the first nine months of 2024, primarily due to decrease in rates paid on client deposits, an increase in the average balances of average interest earning assets, and an increase in the average yields on loans and securities, partially offset by a lower yield on overnight funds.

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


	For the Quarter Ended						For the Quarter Ended
	September 30, 2025						September 30, 2024
	Average		Interest		Average		Average		Interest		Average
	Balance		Income		Yield		Balance		Income		Yield
Loans, core bank	$	3,039,478	$	42,655	5.57	%	$	2,867,076	$	39,621	5.50	%
Prepayment fees		—		185	0.02	%		—		4	0.00	%
Bay View Funding factored receivables		74,353		3,654	19.50	%		55,391		2,144	15.40	%
Purchased residential mortgages		408,810		3,472	3.37	%		441,294		3,779	3.41	%
Loan fair value mark / accretion		(1,636)		164	0.02	%		(2,621)		233	0.03	%
Total loans (includes loans held-for-sale)	$	3,521,005	$	50,130	5.65	%	$	3,361,140	$	45,781	5.42	%

The average yield on the total loan portfolio increased to 5.65% for the third quarter of 2025, compared to 5.42% for the third quarter of 2024, primarily due to an increase in the average yield on loans in the core bank and an increase in prepayment fees.


	Nine Months Ended						Nine Months Ended
	September 30, 2025						September 30, 2024
	Average		Interest		Average		Average		Interest		Average
	Balance		Income		Yield		Balance		Income		Yield
Loans, core bank	$	3,002,040	$	124,151	5.53	%	$	2,831,035	$	115,838	5.47	%
Prepayment fees		—		882	0.04	%		—		82	0.00	%
Bay View Funding factored receivables		67,505		9,943	19.69	%		54,603		7,896	19.33	%
Purchased residential mortgages		418,948		10,617	3.39	%		447,709		11,306	3.37	%
Loan fair value mark / accretion		(1,805)		517	0.02	%		(2,865)		729	0.03	%
Total loans (includes loans held-for-sale)	$	3,486,688	$	146,110	5.60	%	$	3,330,482	$	135,851	5.45	%

The average yield on the total loan portfolio increased to 5.60% for the first nine months of 2025, compared to 5.45% for 2024, primarily due to an increase in the average yield on loans in the core bank and an increase in prepayment fees.

The average cost of total deposits decreased to 1.50% for the third quarter of 2025, compared to 1.84% for the third quarter of 2024. The average cost of total deposits decreased to 1.53% for the first nine months of 2025, compared to 1.72% for the first nine months of 2024. The decline in the cost of deposits for the third quarter and first nine months of 2025 was driven by proactive management of exception based deposit pricing and favorable noninterest-bearing deposit mix shift. The average cost of funds decreased to 1.54% for the third quarter of 2025, compared to 1.88% for the third quarter of 2024. The average cost of funds decreased to 1.56% for the first nine months of 2025, compared to 1.75% for the first nine months of 2024.

Provision for Credit Losses on Loans

Credit risk is inherent in the business of making loans. The Company establishes an allowance for credit losses on loans through charges to earnings, which are presented in the statements of income as the provision for credit losses on loans. Specifically identifiable and quantifiable known losses are promptly charged off against the allowance. The provision for credit losses on loans is determined by conducting a quarterly evaluation of the adequacy of the Company’s allowance for credit losses on loans and charging the shortfall or excess, if any, to the current quarter’s expense. This has the effect of creating variability in the amount and frequency of charges to the Company’s earnings. The provision for credit losses on loans and level of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in the Company’s market area. The provision for credit losses on loans and level of allowance for each period are also dependent on forecast data for the state of California including GDP, unemployment rate, home value and commercial real estate value projections.

There was a provision for credit losses on loans of $416,000 for the third quarter of 2025, compared to a provision for credit losses on loans of $153,000 for the third quarter of 2024. There was a provision for credit losses on loans of

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$1,206,000 for the nine months ended September 30, 2025, compared to $808,000 for the nine months ended September 30, 2024. The increase in the provision for credit losses on loans for the third quarter and first nine months of 2025, was primarily due to loan growth. Provisions for credit losses on loans are charged to operations to bring the allowance for credit losses on loans to a level deemed appropriate by the Company based on the factors discussed under “Credit Quality and Allowance for Credit Losses on Loans.”

Noninterest Income

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


					Increase
	Three Months Ended				(decrease)
	September 30,				2025 versus 2024
	2025		2024		Amount		Percent
	(Dollars in thousands)
Service charges and fees on deposit accounts	$	898	$	908	$	(10)	(1)	%
FHLB and FRB stock dividends		587		586		1	—	%
Increase in cash surrender value of life insurance		564		530		34	6	%
Servicing income		77		108		(31)	(29)	%
Gain on sales of SBA loans		—		94		(94)	(100)	%
Termination fees		—		46		(46)	(100)	%

Other		1,091		554		537	97	%
Total	$	3,217	$	2,826	$	391	14	%



						Increase
	Nine Months Ended				(decrease)
	September 30,				2025 versus 2024
	2025		2024			Amount			Percent
	(Dollars in thousands)
Service charges and fees on deposit accounts	$	2,719	$	2,676			$	43		2	%
FHLB and FRB stock dividends		1,761		1,765				(4)		—	%
Increase in cash surrender value of life insurance		1,650		1,569				81		5	%
Servicing income		220		288				(68)		(24)	%
Gain on sales of SBA loans		185		348				(163)		(47)	%
Termination fees		314		159				155		97	%
Gain on proceeds from company-owned life insurance		—		219				(219)		(100)	%
Other		2,041		1,304				737		57	%
Total	$	8,890	$	8,328			$	562		7	%

Total noninterest income increased to $3.2 million for the third quarter of 2025, compared to $2.8 million for the third quarter of 2024. For the nine months ended September 30, 2025, total noninterest income increased 7% to $8.9 million, compared to $8.3 million for the nine months ended September 30, 2024. The increase in noninterest income for the third quarter and first nine months of 2025 was primarily driven by a $386,000 recovery on an acquired loan that had been previously charged off and by higher facility fees. For the nine months ended September 30, 2025, this increase was partially offset by the absence of a $219,000 gain from company-owned life insurance proceeds that benefited the prior year period.

A portion of the Company’s noninterest income is associated with its Small Business Administration (“SBA”) lending activity, as gain on the sales of loans sold in the secondary market and servicing income from loans sold with servicing rights retained. For the third quarter of 2025, there was no gain on sales of SBA loans, compared to a $94,000 gain on sales of SBA loans for the third quarter of 2024. For the nine months ended September 30, 2025, SBA loan sales resulted in a $185,000 gain, compared to a $348,000 gain for the nine months ended September 30, 2024.

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The servicing assets that result from the sales of SBA loans with servicing retained are amortized over the expected term of the loans using a method approximating the interest method. Servicing income generally declines as the respective loans are repaid.

Noninterest Expense

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


					Increase
	Three Months Ended				(Decrease)
	September 30,				2025 versus 2024
	2025		2024		Amount		Percent
	(Dollars in thousands)
Salaries and employee benefits	$	16,948	$	15,673	$	1,275	8	%
Occupancy and equipment		2,528		2,599		(71)	(3)	%
Data processing		1,359		800		559	70	%
Professional fees		1,175		1,306		(131)	(10)	%
Client services		1,112		809		303	37	%
Software subscriptions		836		743		93	13	%
Insurance expense		337		1,715		(1,378)	(80)	%

Other		4,731		3,910		821	21	%
Total noninterest expense	$	29,026	$	27,555	$	1,471	5	%


					Increase
	Nine Months Ended					(Decrease)
	September 30,					2025 versus 2024
	2025		2024		Amount			Percent
	(Dollars in thousands)
Salaries and employee benefits	$	49,750	$	46,976		$	2,774		6	%
Occupancy and equipment		7,587		7,731			(144)		(2)	%
Data processing		3,321		2,635			686		26	%
Professional fees		4,574		3,705			869		23	%
Client services		2,949		2,497			452		18	%
Software subscriptions		2,299		2,034			265		13	%
Insurance expense		3,804		4,988			(1,184)		(24)	%
Legal settlement and other charges		9,184		—			9,184		N/A
Other		13,349		12,713			636		5	%
Total noninterest expense	$	96,817	$	83,279		$	13,538		16	%

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


	Three Months Ended September 30,
			Percent				Percent
	2025		of Total		2024		of Total
	(Dollars in thousands)
Salaries and employee benefits	$	16,948	58	%	$	15,673	57	%
Occupancy and equipment		2,528	9	%		2,599	9	%
Data processing		1,359	5	%		800	3	%
Professional fees		1,175	4	%		1,306	5	%
Client services		1,112	4	%		809	3	%
Software subscriptions		836	3	%		743	3	%
Insurance expense		337	1	%		1,715	6	%

Other		4,731	16	%		3,910	14	%
Total noninterest expense	$	29,026	100	%	$	27,555	100	%


	Nine Months Ended September 30,
			Percent				Percent
	2025		of Total		2024		of Total
	(Dollars in thousands)
Salaries and employee benefits	$	49,750	52	%	$	46,976	56	%
Occupancy and equipment		7,587	8	%		7,731	9	%
Data processing		3,321	3	%		2,635	3	%
Professional fees		4,574	5	%		3,705	5	%
Client services		2,949	3	%		2,497	3	%
Software subscriptions		2,299	2	%		2,034	3	%
Insurance expense		3,804	4	%		4,988	6	%
Legal settlement and other charges		9,184	9	%		—	—	%
Other		13,349	14	%		12,713	15	%
Total noninterest expense	$	96,817	100	%	$	83,279	100	%

Total noninterest expense for the third quarter of 2025 increased to $29.0 million, compared to $27.6 million for the third quarter of 2024. Total noninterest expense for the first nine months of 2025 increased to $96.8 million compared to $83.3 million for the first nine months of 2024. During the second quarter of 2025, the Company recorded an accrual of $9.2 million, primarily due to pre-tax charges related to the settlement of certain litigation matters and charges related to the planned closure of a Bank branch. Adjusted noninterest expense for the first nine months of 2025, excluding the $9.2 million accrual, was $87.6 million, compared to $83.3 million for the first nine months of 2024. The increase in adjusted noninterest expense for the third quarter and first nine months of 2025 compared to the respective periods in 2024 was primarily due to higher salaries and employee benefits as a result of annual salary increases, partially offset by a decrease in insurance expense. The first nine months of 2025 was also impacted by higher professional fees and information technology expenses related to ongoing investments in infrastructure enhancements. Adjusted noninterest expense is a non-GAAP financial measure.

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

Income Tax Expense

The Company computes its provision for income taxes on a monthly basis. The effective tax rate is determined by applying the Company’s statutory income tax rates to pre-tax book income as adjusted for permanent differences between pre-tax book income and actual taxable income. These permanent differences include, but are not limited to, increases in the cash surrender value of life insurance policies, interest on tax-exempt securities, certain expenses that are not allowed as tax deductions, and tax credits.

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


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Effective income tax rate	28.5	%	27.3	%	28.6	%	28.7	%

The Company’s Federal and state income tax expense for the third quarter of 2025 increased to $5.9 million, compared to $3.9 million for the third quarter of 2024, primarily due to higher pre-tax income. The Company’s Federal and state income tax expense for the first nine months of 2025 was $13.1 million, compared to $12.0 million for the first nine months of 2024.

Some items of income and expense are recognized in different years for tax purposes than when applying generally accepted accounting principles leading to timing differences between the Company’s actual tax liability, and the amount accrued for this liability based on book income. These temporary differences comprise the “deferred” portion of the Company’s tax expense or benefit, which is accumulated on the Company’s books as a deferred tax asset or deferred tax liability until such time as they reverse.

Realization of the Company’s deferred tax assets is primarily dependent upon the Company generating sufficient future taxable income to obtain benefit from the reversal of net deductible temporary differences and the utilization of tax credit carryforwards and the net operating loss carryforwards for Federal and state income tax purposes. The amount of deferred tax assets considered realizable is subject to adjustment in future periods based on estimates of future taxable income. Under generally accepted accounting principles a valuation allowance is required to be recognized if it is “more likely than not” that the deferred tax assets will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions (see Note 7 “Income Taxes”).

FINANCIAL CONDITION

At September 30, 2025, total assets increased 1% to $5.6 billion, compared to $5.6 billion at September 30, 2024, primarily due to an increase in deposits resulting in an increase in loans and investment securities, partially offset by a decrease in overnight funds. Total assets were relatively flat from $5.6 billion at December 31, 2024.

Securities available-for-sale, at fair value, were $408.5 million at September 30, 2025, an increase of 72% from $237.6 million at September 30, 2024, and increased 59% from $256.3 million at December 31, 2024. Securities held-to-maturity, at amortized cost, net of allowance for credit losses, were $544.8 million at September 30, 2025, a decrease of 10% from $604.2 million at September 30, 2024, and a decrease of 8% from $590.0 million at December 31, 2024.

Loans HFI, net of deferred costs and fees, increased $171.4 million, or 5%, to $3.6 billion at September 30, 2025, compared to $3.4 billion at September 30, 2024, and increased $89.7 million, or 3% from $3.5 billion at December 31, 2024. Loans HFI, excluding residential mortgages, increased $207.8 million, or 7%, to $3.1 billion at September 30, 2025, compared to $2.9 billion at September 30, 2024, and increased $118.3 million, or 4% from $3.0 billion at December 31, 2024.

Total deposits increased $47.0 million, or 1%, to $4.8 billion at September 30, 2025, compared to $4.7 billion at September 30, 2024, and relatively flat from $4.8 billion at December 31, 2024.

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Securities Portfolio

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


	September 30,				December 31,
	2025		2024		2024
	(Dollars in thousands)
Securities available-for-sale (at fair value):
Agency mortgage-backed securities	$	230,889	$	53,450	$	70,091
Collateralized mortgage obligations		122,318		—		—
U.S. Treasury		55,249		184,162		186,183
Total	$	408,456	$	237,612	$	256,274
Securities held-to-maturity (at amortized cost):
Agency mortgage-backed securities	$	516,918	$	573,621	$	559,548
Municipals — exempt from Federal tax (1)		27,899		30,584		30,480
Total (1)	$	544,817	$	604,205	$	590,028

__________________________________________________________

(1)Gross of the allowance for credit losses of $11 at September 30, 2025 and $12 at both December 31, 2024 and September 30, 2024.

__________________________________________________________

During the first nine months of 2025, the Company purchased $174.2 million of agency mortgage-backed securities, $129.8 million of collateralized mortgage obligations, and $44.8 million of U.S. Treasury securities, for total purchases of $348.8 million in the available-for-sale portfolio. Securities purchased had a book yield of 4.92% and an average life of 5.42 years.

The following table summarizes the weighted average life and weighted average yields of securities at September 30, 2025:


	Weighted Average Life
					After One and				After Five and
	Within One				Within Five				Within Ten				After Ten
	Year or Less				Years				Years				Years					Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield			Amount		Yield
	(Dollars in thousands)
Securities available-for-sale (at fair value):
Agency mortgage-backed securities	$	304	2.07	%	$	67,810	3.64	%	$	142,631	4.62	%	$	20,144	4.93		%	$	230,889	4.36	%
U.S. Treasury		—	—	%		55,249	4.31	%		—	—	%		—	—		%		55,249	4.31	%
Collateralized mortgage obligations		—	—	%		30,179	5.15	%		92,139	5.37	%		—	—		%		122,318	5.32	%
Total	$	304	2.07	%	$	153,238	4.18	%	$	234,770	4.92	%	$	20,144	4.93		%	$	408,456	4.64	%

Securities held-to-maturity (at amortized cost):
Agency mortgage-backed securities	$	2,310	2.23	%	$	83,454	1.90	%	$	350,546	1.83	%	$	80,608	2.68		%	$	516,918	1.98	%
Municipals — exempt from Federal tax (1) (2)		7,345	3.99	%		7,945	3.34	%		12,609	3.47	%		—	$	—	%		27,899	3.57	%
Total (2)	$	9,655	3.57	%	$	91,399	2.03	%	$	363,155	1.89	%	$	80,608	2.68		%	$	544,817	2.06	%

__________________________________________________________

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

(2)Gross of the allowance for credit losses of $11 at September 30, 2025.

__________________________________________________________

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The securities portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to even out cash flows from the loan and deposit activities of clients; (iii) it can be used as an interest rate risk management tool, since it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and other funding sources of the Company; and (iv) it is an alternative interest-earning use of funds when loan demand is weak or when deposits grow more rapidly than loans.

The Company’s portfolio may include: (i) U.S. Treasury securities and U.S. Government sponsored entities’ debt securities for liquidity and pledging; (ii) mortgage-backed securities, which in many instances can also be used for pledging, and which generally enhance the yield of the portfolio; (iii) municipal obligations, which provide tax free income and limited pledging potential; (iv) single entity issue trust preferred securities, which generally enhance the yield on the portfolio; (v) corporate bonds, which also enhance the yield on the portfolio; (vi) money market mutual funds; (vii) certificates of deposit; (viii) commercial paper; (ix) bankers acceptances; (x) repurchase agreements; (xi) collateralized mortgage obligations; and (xii) asset-backed securities.

The Company classifies its securities as either available-for-sale or held-to-maturity at the time of purchase. Accounting guidance requires available-for-sale securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders’ equity. Monthly adjustments are made to reflect changes in the fair value of the Company’s available-for-sale securities.

The following table shows the net pre-tax unrealized and unrecognized gain (loss) on securities available-for-sale and securities held-to-maturity and the allowance for credit losses at the dates indicated:


	September 30,				December 31,
	2025		2024		2024
	(Dollars in thousands)
Securities available-for-sale pre-tax unrealized gain (loss):
Agency mortgage-backed securities	$	(1,292)	$	(2,923)	$	(4,148)
Collateralized mortgage obligations		37		—		—
U.S. Treasury		603		(1,440)		(912)
Total	$	(652)	$	(4,363)	$	(5,060)
Securities held-to-maturity pre-tax unrecognized (loss):
Agency mortgage-backed securities	$	(67,613)	$	(71,996)	$	(91,585)
Municipals — exempt from Federal tax		(370)		(676)		(1,431)
Total	$	(67,983)	$	(72,672)	$	(93,016)

Allowance for credit losses on municipal securities	$	(11)	$	(12)	$	(12)

The net pre-tax unrealized loss on the securities available-for-sale was $652,000, or $540,000 net of taxes, which equaled less than 1% of total shareholders’ equity at September 30, 2025. The pre-tax unrecognized loss on securities held-to-maturity was $68.0 million, or $47.9 million net of taxes, which equaled 7% of total shareholders’ equity at September 30, 2025. The unrealized and unrecognized losses in both the available-for-sale and held-to-maturity portfolios were due to higher interest rates at September 30, 2025, compared to when the securities were purchased. The issuers are of high credit quality and all principal amounts are expected to be repaid at maturity. Fair values are expected to recover as the securities approach maturity and/or if interest rates decline.

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


				Agency
				Mortgage-
		U.S.		backed and
		Treasury		Municipal
		(Par Value)		Securities		Total
	(Dollars in thousands)
Fourth quarter of 2025		$	—	$	33,954	$	33,954
First quarter of 2026			—		32,936		32,936
Second quarter of 2026			—		32,608		32,608
Third quarter of 2026			—		32,629		32,629
Fourth quarter of 2026			15,000		30,378		45,378
First quarter of 2027			15,000		28,924		43,924
Second quarter of 2027			—		28,435		28,435
Third quarter of 2027			15,000		27,917		42,917
Total		$	45,000	$	247,781	$	292,781

Loans

The Company’s loans represent the largest portion of earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing the Company’s financial condition. Loans HFI, net of deferred costs and fees, represented 64% of total assets at September 30, 2025, compared to 61% at September 30, 2024, and 62% at December 31, 2024. The loan to deposit ratio was 74.99% at September 30, 2025, compared to 72.11% at September 30, 2024, and 72.45% at December 31, 2024.

Loan Distribution

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


	September 30, 2025				September 30, 2024				December 31, 2024
	Balance		% to Total		Balance		% to Total		Balance		% to Total
	(Dollars in thousands)
Commercial	$	523,110	15	%	$	481,266	14	%	$	531,350	15	%
Real estate:
CRE - owner occupied		629,855	18	%		602,062	18	%		601,636	17	%
CRE - non-owner occupied		1,416,987	39	%		1,310,578	38	%		1,341,266	38	%
Land and construction		137,170	4	%		125,761	4	%		127,848	4	%
Home equity		125,742	4	%		124,090	4	%		127,963	4	%
Multifamily		290,077	8	%		273,103	8	%		275,490	8	%
Residential mortgages		443,143	12	%		479,524	14	%		471,730	14	%
Consumer and other		15,938	< 1	%		14,179	< 1	%		14,837	<1	%
Total Loans		3,582,022	100	%		3,410,563	100	%		3,492,120	100	%
Deferred loan fees, net		(344)	—			(327)	—			(183)	—
Loans, net of deferred fees		3,581,678	100	%		3,410,236	100	%		3,491,937	100	%
Allowance for credit losses on loans		(49,427)				(47,819)				(48,953)
Loans, net	$	3,532,251			$	3,362,417			$	3,442,984

The Company’s loan portfolio is concentrated in commercial loans (primarily manufacturing, wholesale, and services oriented entities), and CRE, with the remaining balance in land development and construction, home equity, purchased residential mortgages, and consumer loans. The Company does not have any concentrations by industry or group of industries in its loan portfolio, however, 85% of its gross loans were secured by real property at September 30, 2025 and December 31, 2024, compared to 86% at September 30, 2024. While no specific industry concentration is considered significant, the Company’s bank lending operations are substantially located in areas that are dependent on the technology and real estate industries and their supporting companies.

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The Company has established concentration limits in its loan portfolio for commercial real estate loans, commercial loans, construction loans and unsecured lending, among others. All loan types are within established limits. The Company uses underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending to allow the Company to react to a borrower’s deteriorating financial condition, should that occur. Stress testing and debt service on commercial real estate loans are reviewed quarterly.

The Company’s commercial loans are made for working capital, financing the purchase of equipment or for other business purposes. Commercial loans include loans with maturities ranging from thirty days to two years and “term loans” with maturities normally ranging from one to five years. Short-term business loans are generally intended to finance current transactions and typically provide for periodic principal payments, with interest payable monthly. Term loans normally provide for floating interest rates, with monthly payments of both principal and interest.

The Company is an active participant in the SBA and U.S. Department of Agriculture guaranteed lending programs, and has been approved by the SBA as a lender under the Preferred Lender Program. The Company regularly makes such loans conditionally guaranteed by the SBA (collectively referred to as “SBA loans”). The guaranteed portion of these loans is typically sold in the secondary market depending on market conditions. When the guaranteed portion of an SBA loan is sold, the Company retains the servicing rights for the sold portion. During the three months ended September 30, 2025 there was no gain on sales of SBA loans. During the three months ended September 30, 2024, loans were sold resulting in a gain on sales of SBA loans of $94,000. During the nine months ended September 30, 2025 and 2024, loans were sold resulting in a gain on sales of SBA loans of $185,000 and $348,000, respectively.

The Company’s factoring receivables are from the operations of Bay View Funding, whose primary business is purchasing and collecting factored receivables on a nation-wide basis. Factored receivables are receivables that have been transferred by the originating organization and typically have not been subject to previous collection efforts. These receivables are acquired from a variety of companies, including but not limited to service providers, transportation companies, manufacturers, distributors, wholesalers, apparel companies, advertisers, and temporary staffing companies. The portfolio of factored receivables is included in the Company’s commercial loan portfolio. The average life of the factored receivables was 36 days for the first nine months of 2025, compared to 35 days for the first nine months of 2024.

The following table shows the balance of factored receivables at period end, average balances during the period, and full time equivalent employees of Bay View Funding at period end:


	September 30,		September 30,
	2025		2024
	(Dollars in thousands)
Total factored receivables at period-end	$	79,728	$	57,199
Average factored receivables:
For the three months ended		74,353		55,391
For the nine months ended	$	67,505	$	54,563
Total full time equivalent employees at period-end		30		30

The commercial loan portfolio increased $41.8 million, or 9%, to $523.1 million at September 30, 2025, from $481.3 million at September 30, 2024, and decreased $8.2 million, or 2%, from $531.4 million at December 31, 2024. Commercial and industrial line usage was 35% at September 30, 2025, compared to 31% at September 30, 2024 and 34% at December 31, 2024.

The Company’s CRE loans consist primarily of loans based on the borrower’s cash flow and are secured by deeds of trust on commercial property to provide a secondary source of repayment. The Company generally restricts real estate term loans to no more than 75% of the property’s appraised value or the purchase price of the property depending on the type of property and its utilization. For each category of CRE, the Company has set its requirements for loan to appraised value or purchase price to a level that is below supervisory limits. The Company offers both fixed and floating rate loans. Maturities for CRE loans are generally between five and ten years (with amortization ranging from fifteen to twenty five years and a balloon payment due at maturity), however, SBA and certain other real estate loans that can be sold in the secondary market may be granted for longer maturities.

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The CRE owner occupied loan portfolio increased $27.8 million, or 5%, to $629.9 million at September 30, 2025, from $602.1 million at September 30, 2024, and increased $28.2 million, or 5%, from $601.6 million at December 31, 2024. CRE non-owner occupied loans increased $106.4 million, or 8%, to $1.4 billion at September 30, 2025, compared to $1.3 billion at September 30, 2024, and increased $75.7 million, or 6%, from $1.3 billion at December 31, 2024. At September 30, 2025, 31% of the CRE loan portfolio was secured by owner-occupied real estate. Owner occupied CRE loans also totaled 31% at both September 30, 2024 and December 31, 2024.

During the third quarter of 2025, there were 38 new owner occupied and non-owner occupied CRE loans originated totaling $75 million with a weighted average loan-to-value (“LTV”) of 46%; the weighted average debt-service coverage ratio (“DSCR”) for the non-owner occupied portfolio was 1.69 times. The average loan size for all CRE loans at September 30, 2025 was $1.7 million, and the average loan size for office CRE loans was also $1.7 million. The Company has personal guarantees on 92% of its CRE portfolio. A substantial portion of the unguaranteed CRE loans were made to credit-worthy non-profit organizations.

Total office exposure (excluding medical/dental offices) in the CRE portfolio was $439 million, including 33 loans totaling approximately $72 million in San Jose, 18 loans totaling approximately $26 million in San Francisco, and eight loans totaling approximately $16 million in Oakland, at September 30, 2025. Non-owner occupied CRE with office exposure totaled $334 million at September 30, 2025. At September 30, 2025, the weighted average LTV and DSCR for the entire non-owner occupied office portfolio were 41.1% and 2.13 times, respectively. Total medical/dental office exposure in the non-owner occupied CRE portfolio consisted of 17 loans totaling $18 million, with a weighted average LTV and DSCR ratio of 42% and 2.57 times, respectively, at September 30, 2025.

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


	CRE - Non-owner Occupied					CRE - Owner Occupied				Total CRE
Collateral Type	Outstanding		LTV		DSCR	Outstanding		LTV		Outstanding		LTV
Retail	26	%	37.2	%	2.07	14	%	47.4	%	23	%	38.8	%
Industrial	19	%	39.1	%	2.47	35	%	42.1	%	23	%	40.3	%
Mixed-Use, Special
Purpose and Other	19	%	42.0	%	1.90	33	%	41.1	%	23	%	41.6	%
Office	19	%	41.1	%	2.13	18	%	43.8	%	19	%	41.8	%
Multifamily	17	%	42.8	%	1.92	0	%	0.0	%	12	%	42.8	%
Hotel/Motel	< 1	%	15.9	%	0.64	0	%	0.0	%	< 1	%	15.9	%
Total	100	%	40.0	%	2.09	100	%	42.8	%	100	%	40.8	%

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


	CRE - Non-owner Occupied					CRE - Owner Occupied				Total CRE
County	Outstanding		LTV		DSCR	Outstanding		LTV		Outstanding		LTV
Alameda	25	%	43.6	%	1.77	18	%	43.8	%	23	%	43.7	%
Contra Costa	7	%	39.9	%	1.91	8	%	44.4	%	7	%	41.4	%
Marin	6	%	43.6	%	1.94	3	%	56.8	%	6	%	45.8	%
Monterey	2	%	37.9	%	2.10	2	%	37.6	%	2	%	37.8	%
Napa	<1	%	28.5	%	2.70	<1	%	45.6	%	<1	%	33.3	%
Out of Area	8	%	42.7	%	1.87	9	%	49.6	%	8	%	44.6	%
San Benito	1	%	37.5	%	2.08	2	%	39.1	%	2	%	38.2	%
San Francisco	9	%	37.9	%	2.24	4	%	39.6	%	8	%	38.1	%
San Mateo	12	%	40.0	%	2.26	15	%	40.6	%	12	%	40.2	%
Santa Clara	24	%	37.4	%	2.32	35	%	41.3	%	27	%	38.8	%
Santa Cruz	2	%	32.0	%	1.89	1	%	47.3	%	2	%	34.7	%
Solano	1	%	32.9	%	3.30	1	%	36.0	%	1	%	33.6	%
Sonoma	3	%	37.9	%	2.52	2	%	41.8	%	2	%	38.7	%
Total	100	%	40.0	%	2.09	100	%	42.8	%	100	%	40.8	%

The Company’s land and construction loans are primarily to finance the development and construction of commercial and single family residential properties. The Company utilizes underwriting guidelines to assess the likelihood of repayment from sources such as sale of the property or availability of permanent mortgage financing prior to making the construction loan. Construction loans are provided primarily in our market area, and we have extensive controls for the disbursement process. Land and construction loans increased $11.4 million, or 9%, to $137.2 million at September 30, 2025, compared to $125.8 million at September 30, 2024, and increased $9.3 million, or 7%, from $127.8 million at December 31, 2024.

The Company makes home equity lines of credit available to its existing clients. Home equity lines of credit are underwritten initially with a maximum 75% loan to value ratio. Home equity lines of credit increased $1.7 million, or 1%, to $125.7 million at September 30, 2025, compared to $124.1 million at September 30, 2024, and decreased $2.2 million, or 2%, from $128.0 million at December 31, 2024.

Multifamily loans increased $17.0 million, or 6%, to $290.1 million at September 30, 2025, compared to $273.1 million at September 30, 2024, and increased $14.6 million, or 5%, from $275.5 million at December 31, 2024.

From time to time the Company has purchased single family residential mortgage loans. Purchases of residential loans have been an attractive alternative for replacing mortgage-backed security paydowns in the investment securities portfolio. Residential mortgage loans decreased $36.4 million, or 8%, to $443.1 million at September 30, 2025, compared to $479.5 million at September 30, 2024, and decreased $28.6 million, or 6% from $471.7 million at December 31, 2024.

Additionally, the Company makes consumer loans for the purpose of financing automobiles, various types of consumer goods, and other personal purposes. Consumer loans generally provide for the monthly payment of principal and interest. Most of the Company’s consumer loans are secured by the personal property being purchased or, in the instances of home equity loans or lines of credit, real property. Consumer and other loans increased $1.8 million, or 12%, to $15.9 million at September 30, 2025, compared to $14.2 million at September 30, 2024 and increased $1.1 million, or 7%, from $14.8 million at December 31, 2024.

With certain exceptions, state chartered banks are permitted to make extensions of credit to any one borrowing entity up to 15% of the bank’s capital and reserves for unsecured loans and up to 25% of the bank’s capital and reserves for secured loans. For HBC, these lending limits were $116.1 million and $193.6 million at September 30, 2025, respectively.

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Loan Maturities

The following table presents the maturity distribution of the Company’s loans (excluding loans held-for-sale) as of September 30, 2025. The table shows the distribution of such loans between those loans with predetermined fixed interest rates and those with variable (floating) interest rates. Floating rates generally fluctuate with changes in the prime rate and contractual repricing dates. As of September 30, 2025, approximately 23% of the Company’s loan portfolio consisted of floating interest rate loans.



			Over One
	Due in		Year But
	One Year		Less than		Over
	or Less		Five Years		Five Years		Total
	(Dollars in thousands)
Commercial	$	314,184	$	171,298	$	37,628	$	523,110
Real estate:
CRE - owner occupied		34,556		247,247		348,052		629,855
CRE - non-owner occupied		92,197		571,625		753,165		1,416,987
Land and construction		111,070		23,624		2,476		137,170
Home equity		5,585		22,907		97,250		125,742
Multifamily		23,194		150,251		116,632		290,077
Residential mortgages		2,274		14,983		425,886		443,143
Consumer and other		7,177		7,897		864		15,938
Loans	$	590,237	$	1,209,832	$	1,781,953	$	3,582,022

Loans with variable interest rates	$	378,602		214,530		222,258	$	815,390

Loans with fixed interest rates		211,635		995,302		1,559,695		2,766,632
Loans	$	590,237	$	1,209,832	$	1,781,953	$	3,582,022

Loan Servicing

As of September 30, 2025 and 2024, SBA loans that the Company serviced for others totaled $41.9 million and $48.9 million, respectively. Activity for loan servicing rights was as follows for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Dollars in thousands)
Beginning of period balance	$	291	$	363	$	344	$	415
Additions		—		20		39		81
Amortization		(30)		(24)		(122)		(137)
End of period balance	$	261	$	359	$	261	$	359

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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Dollars in thousands)
Beginning of period balance	$	52	$	101	$	82	$	117
Unrealized holding loss		(3)		(6)		(33)		(22)
End of period balance	$	49	$	95	$	49	$	95

Credit Quality and Allowance for Credit Losses on Loans

Like all financial institutions, HBC has exposure to credit quality risk, which generally arises because we could potentially receive less than a full return of principal and interest if a debtor becomes unable or unwilling to repay. Since loans are the Company’s most significant assets and generate the largest portion of its revenues, the Company’s management of credit quality risk is focused primarily on loan quality. Banks have generally suffered their most severe earnings declines as a result of clients’ inability to generate sufficient cash flow to service their debts and/or downturns in national and regional economies and declines in overall asset values, including real estate. In addition, certain debt securities that the Company may purchase have the potential of declining in value if the obligor’s financial capacity to repay deteriorates.

The Company’s policies and procedures identify market segments, set goals for portfolio growth or contraction, and establish limits on industry and geographic credit concentrations. In addition, these policies establish the Company’s underwriting standards and the methods of monitoring ongoing credit quality. The Company’s internal credit risk controls are centered in underwriting practices, credit granting procedures, training, risk management techniques, and familiarity with loan clients as well as the relative diversity and geographic concentration of our loan portfolio.

The Company’s credit risk also may be affected by external factors such as the level of interest rates, employment, general economic conditions, real estate values, and trends in particular industries or geographic markets. As an independent community bank serving a specific geographic area, the Company must contend with the unpredictable changes in the general California market and, particularly, primary local markets. The Company’s asset quality has suffered in the past from the impact of national and regional economic recessions, consumer bankruptcies, and depressed real estate values.

Nonperforming assets are comprised of the following: loans for which the Company is no longer accruing interest; restructured loans which have been current under six months; loans 90 days or more past due and still accruing interest (although they are generally placed on nonaccrual when they become 90 days past due, unless they are both well-secured and in the process of collection); and foreclosed assets. The following tables present the aging of past due loans by class at the dates indicated:


	September 30, 2025
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(Dollars in thousands)
Commercial	$	7,887	$	1,705	$	581	$	10,173	$	512,937	$	523,110
Real estate:
CRE - Owner Occupied		—		—		—		—		629,855		629,855
CRE - Non-Owner Occupied		—		—		—		—		1,416,987		1,416,987
Land and construction		—		—		2,346		2,346		134,824		137,170
Home equity		—		—		655		655		125,087		125,742
Multifamily		—		—		—		—		290,077		290,077
Residential mortgages		—		—		—		—		443,143		443,143
Consumer and other		—		—		—		—		15,938		15,938
Total	$	7,887	$	1,705	$	3,582	$	13,174	$	3,568,848	$	3,582,022

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	December 31, 2024
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(Dollars in thousands)
Commercial	$	7,364	$	2,295	$	1,393	$	11,052	$	520,298	$	531,350
Real estate:
CRE - Owner Occupied		1,879		—		—		1,879		599,757		601,636
CRE - Non-Owner Occupied		4,479		—		—		4,479		1,336,787		1,341,266
Land and construction		4,290		2,323		5,874		12,487		115,361		127,848
Home equity		78		750		—		828		127,135		127,963
Multifamily		—		—		—		—		275,490		275,490
Residential mortgages		850		—		—		850		470,880		471,730
Consumer and other		—		117		213		330		14,507		14,837
Total	$	18,940	$	5,485	$	7,480	$	31,905	$	3,460,215	$	3,492,120

The following table presents the past due loans on nonaccrual and current loans on nonaccrual at the dates indicated:


	September 30,		December 31,
	2025		2024
	(Dollars in thousands)
Past due nonaccrual loans	$	3,388	$	7,068
Current nonaccrual loans		80		110
Total nonaccrual loans	$	3,468	$	7,178

Management’s classification of a loan as “nonaccrual” is an indication that there is reasonable doubt as to the full recovery of principal or interest on the loan. At that point, the Company stops accruing interest income, and reverses any uncollected interest that had been accrued as income. The Company resumes recognizing interest income only as cash interest payments are received and it has been determined the collection of all outstanding principal is not in doubt. The loans may or may not be collateralized, and collection efforts are pursued. Loans may be restructured by management when a borrower has experienced some change in financial status causing an inability to meet the original repayment terms and where the Company believes the borrower will eventually overcome those circumstances and make full restitution. Foreclosed assets consist of properties and other assets acquired by foreclosure or similar means that management is offering or will offer for sale.

There were no foreclosed assets on the balance sheet at September 30, 2025, September 30, 2024, or December 31, 2024. There were no Shared National Credits or material purchased participations included in NPAs or total loans at September 30, 2025, September 30, 2024, or December 31, 2024.

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


	September 30,				December 31,
	2025		2024		2024

Nonaccrual loans — held-for-investment	$	3,468	$	6,698	$	7,178
Loans 90 days past due and still accruing		194		460		489
Total nonperforming loans		3,662		7,158		7,667
Foreclosed assets		—		—		—
Total nonperforming assets	$	3,662	$	7,158	$	7,667

Nonperforming assets as a percentage of loans
plus foreclosed assets		0.10	%	0.21	%	0.22	%
Nonperforming assets as a percentage of total assets		0.07	%	0.13	%	0.14	%

The following table presents the amortized cost basis of nonperforming loans and loans past due over 90 days and still accruing at the dates indicated:


	September 30, 2025
					Restructured
	Nonaccrual		Nonaccrual		Loans
	with no Specific		with Specific		over 90 Days
	Allowance for		Allowance for		Past Due
	Credit		Credit		and Still
	Losses		Losses		Accruing		Total
	(Dollars in thousands)
Commercial	$	83	$	384	$	194	$	661
Real estate:


Land and construction		2,346		—		—		2,346
Home equity		655		—		—		655

Total	$	3,084	$	384	$	194	$	3,662


	December 31, 2024
	Nonaccrual		Nonaccrual		Loans
	with no Specific		with Specific		over 90 Days
	Allowance for		Allowance for		Past Due
	Credit		Credit		and Still
	Losses		Losses		Accruing		Total
	(Dollars in thousands)
Commercial	$	313	$	701	$	489	$	1,503
Real estate:


Land and construction		5,874		—		—		5,874
Home equity		77		—		—		77
Consumer and other		—		213		—		213
Total	$	6,264	$	914	$	489	$	7,667

Loans with a well-defined weakness, which are characterized by the distinct possibility that the Company will sustain a loss if the deficiencies are not corrected, are categorized as “classified.” Classified loans include all loans considered as substandard, substandard-nonaccrual, and doubtful and may result from problems specific to a borrower’s business or from economic downturns that affect the borrower’s ability to repay or that cause a decline in the value of the underlying collateral (particularly real estate). Loans held-for-sale are carried at the lower of cost or estimated fair value, and are not allocated an allowance for credit losses.

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The amortized cost basis of collateral-dependent loans at September 30, 2025 was $384,000, of which $270,000 were secured by real estate and $114,000 were secured by business assets. The amortized cost basis of collateral-dependent loans at December 31, 2024 was $701,000 and were secured by business assets.

When management determines that foreclosures are probable, expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For loans for which foreclosure is not probable, but for which repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty, management has elected the practical expedient under ASC 326 to estimate expected credit losses based on the fair value of collateral, adjusted for selling costs as appropriate. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

Classified loans were $34.6 million, or 0.62% of total assets, at September 30, 2025, compared to $32.6 million, or 0.59% of total assets, at September 30, 2024, and $41.7 million, or 0.74% of total assets at December 31, 2024.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s underwriting policy.

The ACLL is calculated by using the CECL methodology. The ACLL estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments. These segments are further disaggregated into loan classes, the level at which credit risk is monitored. When computing the level of expected credit losses, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.

The allowance level is influenced by loan volumes, loan risk rating migration or delinquency status, changes in historical loss experience, and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans; and second, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics. Descriptions of the Company’s loan portfolio segments are included in Note 1 “Summary of Significant Accounting Policies – Allowance for Credit Losses on Loans” of the 2024 Form 10-K.

Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses on loans.

Allocation of Allowance for Credit Losses on Loans

As a result of the matters mentioned above, changes in the financial condition of individual borrowers, economic conditions, historical loss experience and the condition of the various markets in which collateral may be sold may all affect the required level of the allowance for credit losses on loans and the associated provision for credit losses on loans.

On an ongoing basis, we have engaged an outside firm to perform independent credit reviews of our loan portfolio on a sample basis, subject to review by the Federal Reserve Board and the California Department of Financial Protection and Innovation. Based on information currently available, management believes that the allowance for credit losses on loans is adequate. However, the loan portfolio can be adversely affected if economic conditions in general, and the real estate market in the San Francisco Bay Area market in particular, were to weaken further. Also, any weakness of a prolonged nature in the technology industry would have a negative impact on the local market. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased loan losses, which could adversely affect the Company’s future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

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


	Three Months Ended September 30, 2025
				CRE			CRE
				Owner			Non-owner			Land &			Home			Multi-			Residential			Consumer
	Commercial			Occupied			Occupied			Construction			Equity			Family			Mortgages			and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,699		$	6,194		$	25,413		$	2,438		$	801		$	4,467		$	3,459		$	162	$	48,633
Charge-offs		(133)			—			—			—			—			—			—			(5)		(138)
Recoveries		36			36			—			—			251			—			—			193		516
Net (charge-offs) recoveries		(97)			36			—			—			251			—			—			188		378
Provision for (recapture of)
credit losses on loans		248			(157)			1,233			(448)			(235)			(113)			58			(170)		416
End of period balance	$	5,850		$	6,073		$	26,646		$	1,990		$	817		$	4,354		$	3,517		$	180	$	49,427
Percent of ACLL to Total ACLL
at end of period		12	%		12	%		54	%		4	%		2	%		9	%		7	%		< 1%		100	%


	Three Months Ended September 30, 2024
				CRE			CRE
				Owner			Non-owner			Land &			Home			Multi-			Residential			Consumer
	Commercial			Occupied			Occupied			Construction			Equity			Family			Mortgages			and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,010		$	5,344		$	26,847		$	1,523		$	814		$	4,269		$	3,960		$	187	$	47,954
Charge-offs		(174)			—			—			—			—			—			—			(300)		(474)
Recoveries		154			14			—			—			18			—			—			—		186
Net (charge-offs) recoveries		(20)			14			—			—			18			—			—			(300)		(288)
Provision for (recapture of)
credit losses on loans		(273)			62			603			(195)			(72)			86			(291)			233		153
End of period balance	$	4,717		$	5,420		$	27,450		$	1,328		$	760		$	4,355		$	3,669		$	120	$	47,819
Percent of ACLL to Total ACLL
at end of period		10	%		11	%		57	%		3	%		2	%		9	%		8	%		< 1%		100	%


	Nine Months Ended September 30, 2025
				CRE			CRE
				Owner			Non-owner			Land &			Home			Multi-			Residential			Consumer
	Commercial			Occupied			Occupied			Construction			Equity			Family			Mortgages			and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	6,060		$	5,225		$	26,779		$	1,400		$	798		$	4,735		$	3,618		$	338	$	48,953
Charge-offs		(1,188)			—			—			—			—			—			—			(197)		(1,385)
Recoveries		121			43			—			—			296			—			—			193		653
Net (charge-offs) recoveries		(1,067)			43			—			—			296			—			—			(4)		(732)
Provision for (recapture of)
credit losses on loans		857			805			(133)			590			(277)			(381)			(101)			(154)		1,206
End of period balance	$	5,850		$	6,073		$	26,646		$	1,990		$	817		$	4,354		$	3,517		$	180	$	49,427





Percent of ACLL to Total ACLL
at end of period		12	%		12	%		54	%		4	%		2	%		9	%		7	%		< 1%		100	%

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	Nine Months Ended September 30, 2024
				CRE			CRE
				Owner			Non-owner			Land &			Home			Multi-			Residential			Consumer
	Commercial			Occupied			Occupied			Construction			Equity			Family			Mortgages			and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,853		$	5,121		$	25,323		$	2,352		$	644		$	5,053		$	3,425		$	187	$	47,958
Charge-offs		(1,042)			—			—			—			—			—			—			(300)		(1,342)
Recoveries		300			24			—			—			71			—			—			—		395
Net (charge-offs) recoveries		(742)			24			—			—			71			—			—			(300)		(947)
Provision for (recapture of)
credit losses on loans		(394)			275			2,127			(1,024)			45			(698)			244			233		808
End of period balance	$	4,717		$	5,420		$	27,450		$	1,328		$	760		$	4,355		$	3,669		$	120	$	47,819






Percent of ACLL to Total ACLL
at end of period		10	%		11	%		57	%		3	%		2	%		9	%		8	%		< 1%		100	%

The increase in the allowance for credit losses on loans of $474,000 for the nine months ended September 30, 2025, compared to December 31, 2024, was primarily attributed to loan growth.

The following table provides a summary of the allocation of the allowance for credit losses on loans by class at the dates indicated. The allocation presented should not be interpreted as an indication that charges to the allowance for credit losses on loans will be incurred in these amounts or proportions, or that the portion of the allowance allocated to each category represents the total amount available for charge-offs that may occur within these classes.


	September 30,
	2025				2024				December 31, 2024
			Percent				Percent				Percent
			of loans				of loans				of loans
			in each				in each				in each
			category				category				category
			to total				to total				to total
	Allowance		loans		Allowance		loans		Allowance		loans
	(Dollars in thousands)
Commercial	$	5,850	15	%	$	4,717	14	%	$	6,060	15	%
Real estate:
CRE - owner occupied		6,073	18	%		5,420	18	%		5,225	17	%
CRE - non-owner occupied		26,646	39	%		27,450	38	%		26,779	38	%
Land and construction		1,990	4	%		1,328	4	%		1,400	4	%
Home equity		817	4	%		760	4	%		798	4	%
Multifamily		4,354	8	%		4,355	8	%		4,735	8	%
Residential mortgages		3,517	12	%		3,669	14	%		3,618	14	%
Consumer and other		180	< 1	%		120	< 1	%		338	<1	%
Total	$	49,427	100	%	$	47,819	100	%	$	48,953	100	%

The ACLL totaled $49.4 million, or 1.38% of total loans at September 30, 2025, compared to $47.8 million, or 1.40% of total loans at September 30, 2024, and $49.0 million, or 1.40% of total loans at December 31, 2024. The ACLL was 1,350% of nonperforming loans at September 30, 2025, compared to 668% of nonperforming loans at September 30, 2024, and 638% of nonperforming loans at December 31, 2024. The Company had net recoveries of $378,000, or 0.04% annualized of average loans, for the third quarter of 2025, compared to net charge-offs of $288,000, or 0.03% annualized of average loans, for the third quarter of 2024. Net charge-offs totaled $732,000, or 0.03% annualized of average loans, for the first nine months of 2025, compared to $947,000, or 0.04% annualized of average loans, for the first nine months of 2024.

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


	(Dollars in thousands)
ACLL at December 31, 2024	$	48,953
Portfolio changes during the first quarter of 2025		(299)
Qualitative and quantitative changes during the first
quarter of 2025 including changes in economic forecasts		(392)
ACLL at March 31, 2025		48,262
Portfolio changes during the second quarter of 2025		716
Qualitative and quantitative changes during the second
quarter of 2025 including changes in economic forecasts		(345)
ACLL at June 30, 2025		48,633
Portfolio changes during the third quarter of 2025		620
Qualitative and quantitative changes during the third
quarter of 2025 including changes in economic forecasts		174
ACLL at September 30, 2025	$	49,427

Leases

The Company recognizes the following for all leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company's lease agreements include options to renew at the Company's discretion. The extensions are not reasonably certain to be exercised, therefore it was not considered in the calculation of the ROU asset and lease liability. Total assets and total liabilities included $28.7 million at September 30, 2025 as a result of recognizing right-of-use assets, which are included in other assets, and lease liabilities, included in other liabilities, related to non-cancelable operating lease agreements for office space. At December 31, 2024, $30.6 million was included in both other assets and other liabilities as a result of recognizing right-of-use assets and lease liabilities, related to non-cancelable operating lease agreements for office space. See Note 16 to the consolidated financial statements.

Deposits

The composition and cost of the Company’s deposit base are important components in analyzing the Company’s net interest margin and balance sheet liquidity characteristics, both of which are discussed in greater detail in other sections herein. The Company’s liquidity is impacted by the volatility of deposits from the propensity of that money to leave the institution for rate-related or other reasons. Deposits can be adversely affected if economic conditions weaken in California, and the Company’s market area in particular. Potentially, the most volatile deposits in a financial institution are jumbo certificates of deposit, meaning time deposits with balances that equal or exceed $250,000, as clients with balances of that magnitude are typically more rate-sensitive than clients with smaller balances.

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


	September 30, 2025				September 30, 2024					December 31, 2024
	Balance		% to Total		Balance		% to Total			Balance		% to Total
	(Dollars in thousands)
Demand, noninterest-bearing	$	1,241,603	26	%	$	1,272,139	27		%	$	1,214,192	25	%
Demand, interest-bearing		922,077	19	%		913,910	19		%		936,587	19	%
Savings and money market		1,366,905	28	%		1,309,676	28		%		1,325,923	28	%
Time deposits — under $250		32,462	1	%		39,060	1		%		38,988	1	%
Time deposits — $250 and over		223,496	5	%		196,945	4		%		206,755	4	%
ICS/CDARS — interest-bearing demand,
money market and time deposits		990,003	21	%		997,803	21		%		1,097,586	23	%
Total deposits	$	4,776,546	100	%	$	4,729,533	$	100	%	$	4,820,031	100	%

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The Company obtains deposits from a cross-section of the communities it serves. The Company’s business is not generally seasonal in nature. Public funds were less than 1% of deposits at September 30, 2025, September 30, 2024, and December 31, 2024.

Total deposits increased $47.0 million, or 1%, to $4.8 billion at September 30, 2025, from $4.7 billion at September 30, 2024. Total deposits remained relatively flat from $4.8 billion at December 31, 2024.

The Company had 25,337 deposits accounts at September 30, 2025, with an average balance of $189,000, compared to 25,373 deposit accounts at September 30, 2024, with an average balance of $186,000. At December 31, 2024, the Company had 25,427 deposit accounts, with an average balance of $190,000.

Deposits from the Bank’s top 100 client relationships, representing 22% of total number of accounts, totaled $2.2 billion, representing 47% of total deposits, with an average account size of $400,000 at September 30, 2025. At September 30, 2024, deposits from the Bank’s top 100 client relationships, representing 22% of the total number of accounts, totaled $2.2 billion, representing 47% of total deposits, with an average account size of $394,000. At December 31, 2024, deposits from the Bank’s top 100 client relationships, representing 22% of the total number of accounts, totaled $2.2 billion, representing 47% of total deposits, with an average account size of $400,000 at December 31, 2024.

The Bank’s uninsured deposits were approximately $2.2 billion, or 46% of the Company’s total deposits, at September 30, 2025, compared to $2.2 billion, or 47% of the Company’s total deposits, at September 30, 2024, and $2.2 billion, or 45% of total deposits at December 31, 2024.

At September 30, 2025, the $990.0 million of ICS/CDARS deposits were comprised of $403.0 million of interest-bearing demand deposits, $283.5 million of money market accounts and $303.5 million of time deposits. At September 30, 2024, the $997.8 million of ICS/CDARS deposits comprised $417.1 million of interest-bearing demand deposits, $293.3 million of money market accounts and $287.4 million of time deposits. At December 31, 2024, the $1.1 billion of ICS/CDARS deposits were comprised of $433.4 million of interest-bearing demand deposits, $345.5 million of money market accounts and $318.7 million of time deposits.

The following table indicates the contractual maturity schedule of the Company’s uninsured time deposits in excess of $250,000 as of September 30, 2025:


	Balance		% of Total
	(Dollars in thousands)
Three months or less	$	49,603	30	%
Over three months through six months		44,984	27	%
Over six months through twelve months		42,141	25	%
Over twelve months		29,018	18	%
Total	$	165,746	100	%

The Company focuses primarily on providing and servicing business deposit accounts that are frequently over $250,000 in average balance per account. As a result, certain types of business clients that the Company serves typically carry average deposits in excess of $250,000. The account activity for some account types and client types necessitates appropriate liquidity management practices by the Company to help ensure its ability to fund deposit withdrawals.

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Return on Equity and Assets

The following table indicates the ratios for return on average assets and average equity, and average equity to average assets for the periods indicated:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Return on average assets	1.05	%	0.78	%	0.79	%	0.76	%
Return on average tangible assets(1)	1.08	%	0.81	%	0.82	%	0.79	%
Return on average equity	8.37	%	6.14	%	6.29	%	5.91	%
Return on average tangible common equity(1)	11.14	%	8.27	%	8.38	%	7.98	%
Average equity to average assets ratio	12.54	%	12.71	%	12.59	%	12.88	%

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Adjusted:	2025		2024		2025		2024

Return on average assets(1)	1.05	%	0.78	%	0.95	%	0.76	%
Return on average tangible common equity(1)	11.14	%	8.27	%	10.06	%	7.98	%

____________________________________

(1)This is a non-GAAP financial measure.

______________________________

Liquidity, Asset/Liability Management and Available Lines of Credit

The Company’s liquidity position supports its ability to maintain cash flows sufficient to fund operations, meet all of its financial obligations and commitments, and accommodate unexpected sudden changes in balances of loans and demand for deposits in a timely manner. At various times the Company requires funds to meet short term cash requirements brought about by loan growth or deposit outflows, the purchase of assets, or repayment of liabilities. An integral part of the Company’s ability to manage its liquidity position appropriately is derived from its large base of core deposits which are generated by offering traditional banking services in its service area and which have historically been a stable source of funds.

The Company manages liquidity to be able to meet unexpected sudden changes in levels of its assets or deposit liabilities without maintaining excessive amounts of balance sheet liquidity. In order to meet short term liquidity needs the Company utilizes overnight Federal funds purchase arrangements and other borrowing arrangements with correspondent banks, solicits brokered deposits if cost effective deposits are not available from local sources, and maintains collateralized lines of credit with the FHLB and FRB.

The Company monitors its liquidity position and funding strategies on a daily basis, but recognizes that unexpected events, economic or market conditions, earnings issues or situations beyond its control could cause either a short or long term liquidity crisis. The Company has a detailed Contingency Funding Plan that will be used in the event of a “Liquidity Event” defined as a reduction in liquidity such that a normal deposit and liquidity environment cannot meet funding needs. In addition to other tools used to monitor liquidity and funding, the Company prepares liquidity stress scenarios that include lower-probability, higher impact scenarios, with various levels of severity. The liquidity stress scenarios incorporate the impact of moderate risk and higher risk situations, on a quarterly basis, or more often as circumstances require. The liquidity stress scenarios include a dashboard showing key liquidity ratios compared to established target limits and estimated cash flows for the next several quarters.

One of the measures of liquidity is the loan to deposit ratio. The loan to deposit ratio was 74.99% at September 30, 2025, compared to 72.11% at September 30, 2024, and 72.45% at December 31, 2024.

The Company’s total liquidity and borrowing capacity at September 30, 2025 was $3.3 billion, all of which remained available. The available liquidity and borrowing capacity included $2.1 billion in Federal funds purchase arrangements and lines of credit, $759.3 million of excess funds at the FRB, and $408.3 million of unpledged investment

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securities, at fair value, at September 30, 2025. The available liquidity and borrowing capacity was 68% of the Company’s total deposits and approximately 148% of the Bank’s estimated uninsured deposits, at September 30, 2025.

HBC has off-balance sheet liquidity in the form of Federal funds purchase arrangements with correspondent banks, and lines of credit from the FHLB and FRB. HBC maintains a collateralized line of credit with the FHLB of San Francisco. Under this line, HBC can borrow from the FHLB on a short-term (typically overnight) or long-term (over one year) basis. HBC can also borrow from the FRB discount window. The holding company had a $25.0 million line of credit with a correspondent bank at December 31, 2024 that was not renewed in 2025. The following table shows the collateral value of loans and securities pledged for the lines of credit (if collateralized), total available lines of credit, the amounts outstanding, and the remaining available at the dates indicated:


	September 30, 2025
	Collateral		Total					Remaining
	Value		Available		Outstanding			Available
	(Dollars in thousands)
FHLB collateralized borrowing capacity	$	1,226,879	$	819,580	$	—	$	819,580
FRB discount window collateralized line of credit		1,515,563		1,199,219		—		1,199,219
Federal funds purchase arrangements		N/A		75,000		—		75,000
Total	$	2,742,442	$	2,093,799	$	—	$	2,093,799


	December 31, 2024
	Collateral		Total					Remaining
	Value		Available		Outstanding			Available
	(Dollars in thousands)
FHLB collateralized borrowing capacity	$	1,233,768	$	815,760	$	—	$	815,760
FRB discount window collateralized line of credit		1,755,347		1,383,149		—		1,383,149
Federal funds purchase arrangements		N/A		90,000		—		90,000
Holding company line of credit		N/A		25,000		—		25,000
Total	$	2,989,115	$	2,313,909	$	—	$	2,313,909

HBC may also utilize securities sold under repurchase agreements to manage our liquidity position. There were no securities sold under agreements to repurchase at September 30, 2025 and December 31, 2024.

Capital Resources

The Company uses a variety of measures to evaluate capital adequacy. Management reviews various capital measurements on a regular basis and takes appropriate action to ensure that such measurements are within established internal and external guidelines. The external guidelines, which are issued by the Federal Reserve and the FDIC, establish a risk adjusted ratio relating capital to different categories of assets and off-balance sheet exposures.

At September 30, 2025, the Company was authorized to repurchase up to $15 million of the Company’s shares of its issued and outstanding common stock under a share repurchase program (the “Repurchase Program”) adopted by the Board of Directors (the “Board”) in July 2024. On October 23, 2025, the Board approved an increase in the maximum total value of shares authorized for repurchase under the Company’s Repurchase Program from $15 million to $30 million. The term of the Repurchase Program was also extended by the Board to October 31, 2026. Under the Repurchase Program, the Company is authorized to purchase its common stock from time-to-time in open market transactions, made pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The actual timing, price, value and amount of any repurchases under the Repurchase Program will depend on various factors, including the market price of the Company’s common stock, trading volume, general market conditions and other corporate and economic considerations, including the best interests of our shareholders. During the second and third quarters of 2025, the Company repurchased 439,187 shares of its common stock with a weighted average price of $9.22 per share for a total of $4.0 million. The remaining capacity under the Repurchase Program as of the filing date, after giving effect to the amendment above, is $26 million.

On May 11, 2022, the Company completed a private placement offering of $40.0 million aggregate principal amount of its 5.00% fixed-to-floating rate subordinated notes due May 15, 2032 (“Sub Debt due 2032”). The Company used the net proceeds of the Sub Debt due 2032 for general corporate purposes, including the repayment on June 1, 2022 of

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the Company’s $40.0 million aggregate principal amount of 5.25% fixed-to-floating rate subordinated notes due June 1, 2027. The Sub Debt due 2032, net of unamortized issuance costs of $233,000, totaled $39.8 million at September 30, 2025, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank.

The following table summarizes risk-based capital, risk-weighted assets, and risk-based capital ratios of the consolidated Company under the Basel III requirements at the dates indicated:


	September 30,			September 30,			December 31,
	2025			2024			2024
	(Dollars in thousands)
Capital components:
Common Equity Tier 1 capital	$	530,835		$	520,133		$	524,204
Additional Tier 1 capital		—			—			—
Tier 1 Capital		530,835			520,133			524,204
Tier 2 Capital		89,927			85,263			86,439
Total Capital	$	620,762		$	605,396		$	610,643

Risk-weighted assets	$	4,020,021		$	3,875,418		$	3,917,931
Average assets for capital purposes	$	5,377,907		$	5,181,966		$	5,436,274

Capital ratios:
Total Capital		15.4	%		15.6	%		15.6	%
Tier 1 Capital		13.2	%		13.4	%		13.4	%
Common Equity Tier 1 Capital		13.2	%		13.4	%		13.4	%
Tier 1 Leverage(1)		9.9	%		10.0	%		9.6	%

__________________________________________________________

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

__________________________________________________________

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The following table summarizes risk based capital, risk-weighted assets, and risk-based capital ratios of HBC under the Basel III requirements at the dates indicated:


	September 30,			September 30,			December 31,
	2025			2024			2024
	(Dollars in thousands)
Capital components:
Common Equity Tier 1 capital	$	555,621		$	539,386		$	543,872
Additional Tier 1 capital		—			—			—
Tier 1 Capital		555,621			539,386			543,872
Tier 2 Capital		50,160			45,648			46,786
Total Capital	$	605,781		$	585,034		$	590,658

Risk-weighted assets	$	4,016,999		$	3,872,418		$	3,914,648
Average assets for capital purposes	$	5,374,831		$	5,178,977		$	5,432,806

Capital ratios:
Total Capital		15.1	%		15.1	%		15.1	%
Tier 1 Capital		13.8	%		13.9	%		13.9	%
Common Equity Tier 1 Capital		13.8	%		13.9	%		13.9	%
Tier 1 Leverage(1)		10.3	%		10.4	%		10.0	%

__________________________________________________________

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

__________________________________________________________

The following table presents the applicable well-capitalized regulatory guidelines and the standards for minimum capital adequacy requirements under Basel III and the regulatory guidelines for a “well–capitalized” financial institution under PCA:


			Well-capitalized
			Financial
	Minimum		Institution PCA
	Regulatory		Regulatory
	Requirements(1)		Guidelines
Capital ratios:
Total Capital	10.5	%	10.0	%
Tier 1 Capital	8.5	%	8.0	%
Common equity Tier 1 Capital	7.0	%	6.5	%
Tier 1 Leverage	4.0	%	5.0	%

__________________________________________________________

(1) Includes 2.5% capital conservation buffer, except the leverage capital ratio.

___________________________________________________________

The Basel III capital rules introduced a “capital conservation buffer,” for banking organizations to maintain a common equity Tier 1 ratio more than 2.5% above these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

At September 30, 2025, the Company’s consolidated capital ratio exceeded regulatory guidelines and HBC’s capital ratios exceed the highest regulatory capital requirement of “well-capitalized” under Basel III prompt corrective action provisions. Quantitative measures established by regulation to help ensure capital adequacy require the Company and HBC to maintain minimum amounts and ratios of total risk-based capital, Tier 1 capital, and common equity Tier 1 (as

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defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes that, as of September 30, 2025, September 30, 2024, and December 31, 2024, the Company and HBC met all capital adequacy guidelines to which they were subject. There are no conditions or events since September 30, 2025, that management believes have changed the categorization of the Company or HBC as well-capitalized.

At September 30, 2025, the Company had total shareholders’ equity of $700.0 million, compared to $685.4 million at September 30, 2024, and $689.7 million at December 31, 2024. At September 30, 2025, total shareholders’ equity included $508.7 million in common stock, $196.5 million in retained earnings, and $5.2 million of accumulated other comprehensive loss. The book value per share was $11.42 at September 30, 2025, compared to $11.18 at September 30, 2024, and $11.24 at December 31, 2024. The tangible book value per share was $8.61 at September 30, 2025, compared to $8.33 at September 30, 2024, and $8.41 at December 31, 2024. The adjusted tangible book value per share was $8.71 at September 30, 2025. Tangible book value per share is a non-GAAP financial measure.

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


	September 30,				December 31,
Accumulated Other Comprehensive Loss	2025		2024		2024
	(Dollars in thousands)
Actuarial losses associated with:
Split dollar insurance contracts	$	(2,532)	$	(2,965)	$	(2,339)
Supplemental executive retirement plan		(2,148)		(2,838)		(2,173)
Unrealized loss on securities available-for-sale		(540)		(3,161)		(3,656)
Unrealized gain on interest-only strip from SBA loans		40		72		63
Total accumulated other comprehensive loss	$	(5,180)	$	(8,892)	$	(8,105)

Market Risk

Market risk is the risk of loss of future earnings, fair values, or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributed to all market risk sensitive financial instruments, including securities, loans, deposits and borrowings, as well as the Company’s role as a financial intermediary in client-related transactions. The objective of market risk management is to avoid excessive exposure of the Company’s earnings and equity to loss and to reduce the volatility inherent in certain financial instruments.

Interest Rate Management

The Company’s market risk exposure is primarily that of interest rate risk. Interest rate risk arises when the maturity or re-pricing periods and interest rate indices of the interest-earning assets and interest-bearing liabilities are different. It is the risk that changes in the level of market interest rates will result in disproportionate changes in the value of, and the net earnings generated from, the Company’s interest-earning assets and interest-bearing liabilities. Management has established policies and procedures to monitor and limit earnings and balance sheet exposure to changes in interest rates. The Company does not engage in the trading of financial instruments, nor does the Company have exposure to currency exchange rates.

The principal objective of interest rate risk management (often referred to as “asset/liability management”) is to manage the financial components of the Company in a manner that will optimize the risk/reward equation for earnings and capital in relation to changing interest rates. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. Management realizes certain risks are inherent, and that the goal is to identify and manage the risks. Management uses two methodologies to manage interest rate risk: (i) a standard GAP analysis; and (ii) an interest rate shock simulation model.

The planning of asset and liability maturities is an integral part of the management of an institution’s net interest margin. To the extent maturities of assets and liabilities do not match in a changing interest rate environment, the net

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interest margin may change over time. Even with perfectly matched repricing of assets and liabilities, risks remain in the form of prepayment of loans or securities or in the form of delays in the adjustment of rates of interest applying to either earning assets with floating rates or to interest-bearing liabilities.

Interest rate changes do not affect all categories of assets and liabilities equally or at the same time. Varying interest rate environments can create unexpected changes in prepayment levels of assets and liabilities, which may have a significant effect on the net interest margin and are not reflected in the interest sensitivity analysis table. Because of these factors, an interest sensitivity GAP report may not provide a complete assessment of the exposure to changes in interest rates.

The Company uses modeling software for asset/liability management in order to simulate the effects of potential interest rate changes on the Company’s net interest margin, and to calculate the estimated fair values of the Company’s financial instruments under different interest rate scenarios. The program imports current balances, interest rates, maturity dates and repricing information for individual financial instruments, and incorporates assumptions on the characteristics of embedded options along with pricing and duration for new volumes to project the effects of a given interest rate change on the Company’s interest income and interest expense. Rate scenarios consisting of key rate and yield curve projections are run against the Company’s investment, loan, deposit and borrowed funds’ portfolios. These rate projections can be shocked (an immediate and parallel change in all base rates, up or down) and ramped (an incremental increase or decrease in rates over a specified time period), based on current trends and econometric models or stable economic conditions (unchanged from current actual levels). Critical assumptions in the Company’s interest rate risk model, like deposit betas, deposit rate change lags and decay rate assumptions, are reviewed and updated regularly to reflect current market conditions.

The following tables set forth the estimated changes in the Company’s annual net interest income and economic value of equity (a non-GAAP financial measure) that would result from the designated instantaneous parallel shift in interest rates noted, and assuming a flat balance sheet with consistent product mix as of September 30, 2025:


	Increase/(Decrease) in
	Estimated Net
	Interest Income(1)
Change in Interest Rates	Amount		Percent
(basis points)	(Dollars in thousands)
+400	$	15,204	7.5	%
+300	$	11,412	5.6	%
+200	$	7,643	3.8	%
+100	$	3,877	1.9	%
0		—	—
−100	$	(6,470)	(3.2)	%
−200	$	(15,684)	(7.7)	%
−300	$	(27,235)	(13.5)	%
−400	$	(41,630)	(20.6)	%

_______________________________________________________

(1)Computations of prospective effects of hypothetical interest rate changes are for illustrative purposes only, are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. These projections are forward-looking and should be considered in light of the “Cautionary Note Regarding Forward-Looking Statements” on page 3. Actual rates paid on deposits may differ from the hypothetical interest rates modeled due to competitive or market factors, which could affect any actual impact on net interest income.

__________________________________________________________

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	Increase/(Decrease) in
	Estimated Economic
	Value of Equity(1)
Change in Interest Rates	Amount		Percent
(basis points)	(Dollars in thousands)
+400	$	35,094	2.5	%
+300	$	33,017	2.3	%
+200	$	27,266	1.9	%
+100	$	17,081	1.2	%
0		—	—
−100	$	(44,566)	(3.1)	%
−200	$	(115,573)	(8.1)	%
−300	$	(201,616)	(14.2)	%
−400	$	(311,273)	(21.9)	%

_______________________________________________________

__________________________________________________________

As with any method of gauging interest rate risk, there are certain shortcomings inherent to the methodology noted above. The model assumes interest rate changes are instantaneous parallel shifts in the yield curve. In reality, rate changes are rarely instantaneous. The use of the simplifying assumption that short-term and long-term rates change by the same degree may also misstate historic rate patterns, which rarely show parallel yield curve shifts. Further, the model assumes that certain assets and liabilities of similar maturity or period to repricing will react in the same way to changes in rates. In reality, certain types of financial instruments may react in advance of changes in market rates, while the reaction of other types of financial instruments may lag behind the change in general market rates. Additionally, the methodology noted above does not reflect the full impact of annual and lifetime restrictions on changes in rates for certain assets, such as adjustable rate loans. When interest rates change, actual loan prepayments and actual early withdrawals from certificates may deviate significantly from the assumptions used in the model. Finally, this methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan clients’ ability to service their debt. All of these factors are considered in monitoring the Company’s exposure to interest rate risk.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

The accounting and reporting policies of the Company conform to GAAP in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. These measures include “adjusted” operating metrics that have been adjusted to exclude notable expenses incurred in the second quarter of 2025 as well as other performance measures and ratios adjusted for notable items. The Company believes these non-GAAP financial measures are common in the banking industry, and may enhance comparability for peer comparison purposes. These non-GAAP financial measures should be supplemental to primary GAAP financial measures and should not be read in isolation or relied upon as a substitute for primary GAAP financial measures.

Management considers adjusted net income and adjusted earnings per share, which exclude the $9.2 million of charges primarily related to a legal settlement and charges related to the planned closure of a Bank branch in the first nine months of 2025 as a useful measurement of the Company’s profitability compared to prior periods.

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


	For the Three Months Ended					For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2025		2024		2025		2024
	(Dollars in thousands, except per share amount)
Reported net income (GAAP)	$	14,698	$	10,507	$	32,713	$	29,907
Add: pre-tax legal settlement and other charges		—		—		9,184		—
Less: related income taxes		—		—		(2,618)		—
Adjusted net income (non-GAAP)	$	14,698	$	10,507	$	39,279	$	29,907

Weighted average shares outstanding - diluted		61,616,785		61,546,157		61,687,616		61,497,927

Reported diluted earnings per share (GAAP)	$	0.24	$	0.17	$	0.53	$	0.49

Adjusted diluted earnings per share (non-GAAP)	$	0.24	$	0.17	$	0.64	$	0.49

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Management reviews yields on certain asset categories and the net interest margin of the Company on a FTE basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources.

The following table summarizes components of FTE net interest income of the Company for the periods indicated:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024
	(Dollars in thousands)
Net interest income before provision for
credit losses on loans (GAAP)	$	46,788		$	39,329		$	134,953		$	117,698
Tax-equivalent adjustment on securities - exempt from Federal tax		53			59			168			179
Net interest income, FTE (non-GAAP)	$	46,841		$	39,388		$	135,121		$	117,877

Average balance of total interest earning assets	$	5,167,710		$	4,980,082		$	5,147,630		$	4,909,240

Net interest margin (annualized net interest income divided by the
average balance of total interest earnings assets) (GAAP)		3.59	%		3.14	%		3.51	%		3.22	%

Net interest margin, FTE (annualized net interest income, FTE, divided
by average balance of total interest earnings assets) (non-GAAP)		3.60	%		3.15	%		3.51	%		3.23	%

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Management views its PPNR as a key metric for assessing the Company’s earnings power. The following table summarizes the components of PPNR for the periods indicated:


	For the Three Months Ended:				For the Nine Months Ended:
	September 30,				September 30,
	2025			2024	2025		2024
	(Dollars in thousands)
Net interest income before credit losses on loans	$	46,788	$	39,329	$	134,953	$	117,698
Noninterest income		3,217		2,826		8,890		8,328
Total revenue		50,005		42,155		143,843		126,026
Less: Noninterest expense		(29,026)		(27,555)		(96,817)		(83,279)
Reported PPNR (GAAP)		20,979		14,600		47,026		42,747
Add: pre-tax legal settlement and other charges		—		—		9,184		—
Adjusted PPNR (non-GAAP)	$	20,979	$	14,600	$	56,210	$	42,747

The efficiency ratio, which is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income), measures how much it costs to produce one dollar of revenue. The following table summarizes components of noninterest expense and the efficiency ratio of the Company for the periods indicated:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2025			2024		2025			2024
	(Dollars in thousands)
Reported noninterest expense (GAAP)	$	29,026		$	27,555		$	96,817		$	83,279
Less: pre-tax legal settlement and other charges		—			—			(9,184)			—
Adjusted noninterest expense (non-GAAP)	$	29,026		$	27,555		$	87,633		$	83,279

Net interest income before provision for credit losses on loans	$	46,788		$	39,329		$	134,953		$	117,698
Noninterest income		3,217			2,826			8,890			8,328
Total revenue	$	50,005		$	42,155		$	143,843		$	126,026

Reported efficiency ratio (noninterest expense divided by
total revenue) (GAAP)		58.05	%		65.37	%		67.31	%		66.08	%

Adjusted efficiency ratio (noninterest expense divided by
total revenue) (non-GAAP)		58.05	%		65.37	%		60.92	%		66.08	%

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Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability. The following table summarizes components of the annualized return on average assets, annualized return on average equity, and the annualized return on average tangible common equity for the periods indicated:


	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2025			2024				2025		2024
	(Dollars in thousands)
Reported net income (GAAP)	$	14,698		$	10,507		$	32,713		$	29,907
Add: pre-tax legal settlement and other charges		—			—			9,184			—
Less: related income taxes		—			—			(2,618)			—
Adjusted net income (non-GAAP)	$	14,698		$	10,507		$	39,279		$	29,907

Average Assets (GAAP)	$	5,551,457		$	5,352,067		$	5,523,227		$	5,248,338

Reported annualized return on average assets (GAAP)		1.05	%		0.78	%		0.79	%		0.76	%

Adjusted annualized return on average assets (non-GAAP)		1.05	%		0.78	%		0.95	%		0.76	%

Average tangible common equity components:
Average Equity (GAAP)	$	696,385		$	680,404		$	695,391		$	675,951
Less: Goodwill		(167,631)			(167,631)			(167,631)			(167,631)
Less: Other Intangible Assets		(5,358)			(7,322)			(5,810)			(7,864)
Total Average Tangible Common Equity (non-GAAP)	$	523,396		$	505,451		$	521,950		$	500,456

Reported annualized return on average equity (GAAP)		8.37	%		6.14	%		6.29	%		5.91	%
Adjusted annualized return on average equity (non-GAAP)		8.37	%		6.14	%		7.55	%		5.91	%

Reported annualized return on average tangible
common equity (non-GAAP)		11.14	%		8.27	%		8.38	%		7.98	%

Adjusted annualized return on average tangible
common equity (non-GAAP)		11.14	%		8.27	%		10.06	%		7.98	%

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


	September 30,			September 30,			December 31,
	2025			2024			2024
	(Dollars in thousands)
Capital components:
Total Equity (GAAP)	$	700,010		$	685,352		$	689,727
Less: Preferred Stock		—			—			—
Total Common Equity		700,010			685,352			689,727
Less: Goodwill		(167,631)			(167,631)			(167,631)
Less: Other Intangible Assets		(5,078)			(6,966)			(6,439)
Total Tangible Common Equity (non-GAAP)	$	527,301		$	510,755		$	515,657

Asset components:
Total Assets (GAAP)	$	5,623,720		$	5,551,596		$	5,645,006
Less: Goodwill		(167,631)			(167,631)			(167,631)
Less: Other Intangible Assets		(5,078)			(6,966)			(6,439)
Total Tangible Assets (non-GAAP)	$	5,451,011		$	5,376,999		$	5,470,936

Tangible common equity / tangible assets (non-GAAP)		9.67	%		9.50	%		9.43	%

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


	September 30,			September 30,			December 31,
	2025			2024			2024
	(Dollars in thousands)
Capital components:
Total Equity (GAAP)	$	724,780		$	704,585		$	709,379
Less: Preferred Stock		—			—			—
Total Common Equity		724,780			704,585			709,379
Less: Goodwill		(167,631)			(167,631)			(167,631)
Less: Other Intangible Assets		(5,078)			(6,966)			(6,439)
Total Tangible Common Equity (non-GAAP)	$	552,071		$	529,988		$	535,309

Asset components:
Total Assets (GAAP)	$	5,620,681		$	5,548,576		$	5,641,646
Less: Goodwill		(167,631)			(167,631)			(167,631)
Less: Other Intangible Assets		(5,078)			(6,966)			(6,439)
Total Tangible Assets (non-GAAP)	$	5,447,972		$	5,373,979		$	5,467,576

Tangible common equity / tangible assets (non-GAAP)		10.13	%		9.86	%		9.79	%

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


	September 30,		September 30,		December 31,
	2025		2024		2024
	(Dollars in thousands, except per share amounts)
Capital components:
Total Equity (GAAP)	$	700,010	$	685,352	$	689,727
Less: Preferred Stock		—		—		—
Total Common Equity		700,010		685,352		689,727
Less: Goodwill		(167,631)		(167,631)		(167,631)
Less: Other Intangible Assets		(5,078)		(6,966)		(6,439)
Total Tangible Common Equity (non-GAAP)		527,301		510,755		515,657
Add: pre-tax legal settlement and other charges		9,184		—		—
Less: related income taxes		(2,618)		—		—
Adjusted tangible common equity (non-GAAP)	$	533,867	$	510,755	$	515,657

Common shares outstanding at period-end		61,277,541		61,297,344		61,348,095

Reported tangible book value per share (non-GAAP)	$	8.61	$	8.33	$	8.41

Adjusted tangible book value per share (non-GAAP)	$	8.71	$	8.33	$	8.41

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4—CONTROLS AND PROCEDURES

Disclosure Control and Procedures

The Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2025. As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported on a timely basis. Disclosure controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded the Company’s disclosure controls were effective at September 30, 2025, the period covered by this Report.

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

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

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Part II—OTHER INFORMATION

ITEM 1—LEGAL PROCEEDINGS

We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and counterclaims, settlement or litigation potential and the expected effect on us. The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Any claims and other lawsuits, and the disposition of such claims and lawsuits, whether through settlement or litigation, could be time-consuming and expensive to resolve, divert our attention from executing our business plan, result in efforts to enjoin our activities, and lead to attempts by third parties to seek similar claims. As of September 30, 2025, we were party to no litigation that we believe to be material to our business, financial condition, results of operations, or cash flows.

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

ITEM 1A—RISK FACTORS

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

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


				Total Number of		Maximum Value of
	Total		Average	Shares Purchased		Shares that May Yet Be
	Number		Price	as Part of Publicly		Purchased Under the
	of Shares		Paid	Announced Plans		Plans or Programs
Period	Purchased		per Share	or Programs		(in thousands)
First Quarter of 2025	—	$	—	—
April 1 - 30, 2025	32,923		9.06	32,923
May 1- 31, 2025	175,066		9.22	175,066
June 1 - 30, 2025	—		—	—
Second Quarter of 2025	207,989		9.19	207,989
July 1 - 31, 2025	—		—	—
August 1- 31, 2025	231,198		9.24	231,198
September 1 - 30, 2025	—		—	—
Third Quarter of 2025	231,198		9.24	231,198
First Nine Months of 2025	439,187	$	9.22	439,187	$	25,951

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ITEM 3—DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4—MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5—OTHER INFORMATION

On May 23, 2025, the Company filed a Current Report on Form 8-K disclosing that Jack Conner, Chair Emeritus of the Board of Directors of the Company and the Bank, notified the Company and the Bank of his intention to retire in October 2025. On October 31, 2025, Mr. Conner informed the Board of his decision to delay his retirement and to continue in his role as a Director and Chair Emeritus of the Board of Directors of the Company and the Bank.

ITEM 6—EXHIBITS



Exhibit						Description
3.1						Heritage Commerce Corp Restated Articles of Incorporation, (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K filed on March 16, 2009).
3.2						Certificate of Amendment of Articles of Incorporation of Heritage Commerce Corp as filed with the California Secretary of State on June 1, 2010 (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 filed July 23, 2010).
3.3						Certificate of Amendment of Articles of Incorporation of Heritage Commerce Corp as filed with the California Secretary of State on August 29, 2019 (incorporated by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q filed on November 7, 2019).
3.4						Heritage Commerce Corp Bylaws, as amended (incorporated by reference to Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q filed on August 8 , 20 25 ).
31.1						Certification of Registrant’s Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Registrant’s Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 .
32.1**						Certification of Registrant’s Chief Executive Officer Pursuant To 18 U.S.C. Section 1350 .
32.2**						Certification of Registrant’s Chief Financial Officer Pursuant To 18 U.S.C. Section 1350 .
101.INS						Inline XBRL Instance Document Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase.
104.						The cover page from Heritage Commerce Corp's Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, formatted in Inline XBRL. * Management contract or compensatory plan or arrangement. **Furnished and not filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Heritage Commerce Corp (Registrant)

Date: November 5, 2025			/s/ ROBERTSON CLAY JONES
			Robertson Clay Jones
			Chief Executive Officer (Duly Authorized Officer)

Date: November 5, 2025			/s/ SETH FONTI
			Seth Fonti
			Chief Financial Officer (Principal Financial Officer)

Heritage Commerce - 10-Q quarterly report FY2025 Q3

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