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Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-03-03 · 354 added, 319 removed, 1299 unchanged (34% of the section changed)

1 unchanged sentence

The following financial statements and independent auditors’ report listed below are included herein:

Report of Independent Registered Public Accounting Firm (Forvis Mazars LLP Denver, Colorado PCAOB ID # 686 )

Report of Independent Registered Public Accounting Firm (RSM US LLP San Francisco, California PCAOB ID 49 )

Report of Independent Registered Public Accounting Firm (Eide Bailly LLP San Ramon, California PCAOB ID 286)

Consolidated Balance Sheets – December 31, 2025 and 2024

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Sierra Bancorp and Subsidiary

To the Shareholders and the Board of Directors

Sierra Bancorp and Subsidiary

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheet of Sierra Bancorp and its wholly owned subsidiary (the “Company”) as of December 31, 2025, the related consolidated statements of income, comprehensive (loss) income, changes in shareholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

Basis for Opinion

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting .

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definitions and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses – Loans

As of December 31, 2025, the Company’s allowance for credit losses (“ACL”) totaled $21.5 million.

The Company calculates its ACL in accordance with Topic 326, Financial Instruments – Credit Losses .

As described in Notes 2 and 4 to the consolidated financial statements, the ACL for loans is separated between a collective reserve evaluation, for loans where similar risk characteristics exist, and an individual reserve evaluation for loans without similar risk characteristics.

The collective quantitative ACL for loans is estimated using the remaining life or discounted cash flow (“DCF”) methodology based on the loan portfolio segment.

In addition, for the collective reserve, management utilizes qualitative factors to adjust for current and expected conditions not captured within the quantitative loss estimates.

The qualitative reserve is calculated using a combination of numeric frameworks and management judgement to determine risk categorizations in each of the qualitative factors.

The amount of qualitative reserves is also contingent upon the historical peer, life-of-loan equivalent, loss rate ranges and the relative weighting of qualitative factors.

We identified the Company’s estimate of the ACL, and more specifically the qualitative factor adjustments applied in the ACL, as a critical audit matter.

The principal consideration for our determination is the subjectivity and judgment involved in management’s determination of credit loss estimates and assumptions (segment risk rating assigned), specifically for management’s determination of the changes in value of underlying collateral qualitative factor adjustment, management’s determination of the loan category and concentrations qualitative factor adjustment, and management’s determination of the use of peer loss/default levels in the DCF regression analysis qualitative factor assigned to each loan segment.

Auditing these assumptions required increased auditor effort and a high degree of auditor subjectivity and judgment.

The primary procedures we performed to address this critical audit matter included:

● We obtained an understanding of the Company’s process for determining the ACL including the assumptions used to develop the qualitative factors mentioned, performed an ACL risk assessment to identify various components, data inputs, and assumptions utilized in the overall ACL model, and evaluated the design and implementation and tested operating effectiveness of controls relating to the ACL, including:

o Controls over the completeness and accuracy of data input into the model used to determine the ACL.

o Controls over management’s review and approval of the ACL, specifically focusing on management’s determination of the segment risk rating applied to the qualitative factor adjustments noted above, and applied within the qualitative framework of the overall ACL.

● We evaluated management’s determination of the mentioned qualitative adjustments, including :

o Evaluated and tested the data, inputs and segment risk rating assumption utilized within the ACL calculation for completeness and accuracy including comparing key factors to independent sources as well as mathematical accuracy of the calculation driving the segment risk rating assigned.

o Evaluated the reasonableness and adequacy of management’s qualitative factor adjustment framework and the application of the qualitative factor adjustments noted above within the framework associated with the qualitative factor scorecard risk rating assumptions against third-party or internal sources.

o Evaluated the reasonableness of the segment risk rating related to the qualitative adjustments noted above by analyzing relevant trends in managements risk rating assumptions applied and evaluating the relationship of the trends to the qualitative adjustments applied to the ACL.

/s/ Forvis Mazars, LLP

We have served as the Company’s auditor since 2025.

Denver, Colorado

February 27, 2026

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Sierra Bancorp and Subsidiary

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sierra Bancorp and its subsidiary (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 3, 2025, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We have audited the accompanying consolidated balance sheet of Sierra Bancorp and its subsidiary (the Company) as of December 31, 2024, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it relates.

Allowance for Credit Losses—Loans

As described in Notes 2 and 4 to the financial statements, the Company’s allowance for credit losses totaled $24.8 million as of December 31, 2024.

The allowance for credit losses represents principal which is not expected to be collected over the contractual life of the loans, adjusted for expected prepayment.

The allowance for credit losses for loans consists of a collective reserve evaluation for loans with similar risk characteristics and an individual reserve evaluation for loans without similar risk characteristics.

The allowance for the collective reserve evaluation is derived from an estimate of expected loan losses primarily using an expected loss methodology that incorporates certain risk characteristics using either the remaining life or discounted cash flow (DCF) methodology depending on the loan portfolio segment.

The discounted cash flow quantitative reserve methodology incorporates the consideration of probability of default (PD) and loss given default (LGD) assumptions to estimate periodic losses, and LGD is derived from the application of the Frye-Jacobs theory which relates LGD to PD based on historical peer data.

The Company uses a regression analysis that links historical losses of the Company and its peer group to national unemployment rates, along with real growth domestic product or the housing price index in order to calculate expected default rates.

The expected default rates are then applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments.

The Company utilizes a four-quarter forecast period, after which the expected default rates revert to the historical average over a four-quarter reversion period on a straight-line basis.

For the remaining life quantitative reserve method, the Company’s and peer group’s average historical losses are used to determine the loss rates, and the loss rates are applied to expected loan balances over an estimated remaining life of loans.

The estimated remaining life is calculated using the Company’s historical attrition data.

Reasonable and supportable forecasts of the national unemployment rate, real growth domestic product and the housing price index are considered through estimation of qualitative reserves on portfolios using the remaining life method.

The quantitative estimates are adjusted to incorporate considerations of current and expected conditions that are not captured in the quantitative credit loss estimates through the use of qualitative factors.

The qualitative reserve is calculated using a combination of numeric frameworks and management judgment to determine risk categorizations in each of the qualitative factors.

The amount of qualitative reserves is also contingent upon the historical peer, life-of-loan equivalent, loss rate ranges and the relative weighting of qualitative factors according to management’s judgment.

The estimation of the allowance for credit losses involves many inputs and assumptions.

These inputs and assumptions include, among others, the selection, evaluation and measurement of the reasonable and supportable forecasts and the qualitative factors discussed above, which require management to apply judgment and that are subject to change as forecasted economic events or internal assessments evolve.

We identified the determination and evaluation of the economic forecasts and qualitative factors of the allowance for credit losses as a critical audit matter because auditing the underlying assumptions and evaluation of the economic forecasts and qualitative factors used in the allowance for credit losses involved a degree of complexity and high degree of auditor judgment.

Our audit procedures related to management’s evaluation and establishment of the economic forecasts and qualitative factors in the allowance for credit losses included the following, among others:

● We obtained an understanding of the relevant controls related to the evaluation and establishment of the economic forecasts and qualitative factors of the allowance for credit losses and tested such controls for design and operating effectiveness, including controls related to management’s establishment, review and approval of the economic forecasts and qualitative factors and the completeness and accuracy of the underlying data.

● We tested management’s process and significant judgments in the evaluation and establishment of the economic forecasts, which included:

o Evaluating management’s considerations and data utilized as a basis for the selection of economic forecasts by tracing data points used to company provided source documents and assessing the appropriateness of their source.

o Evaluating the reasonableness of management’s judgments related to the selection of economic forecasts.

● We tested management’s process and evaluated their judgments and assumptions in the determination of the qualitative factors, which included:

o Evaluating the reasonableness of management’s selection of data inputs used as a basis for the adjustments related to the qualitative factors, and testing the completeness and accuracy of the data utilized by comparing them to internal and external source data.

o Evaluating the reasonableness of the qualitative factors assessed by management, including the directional consistency and magnitude of the resulting qualitative component of the allowance for credit losses, as compared to internal and external source data, and how the data correlated with the risk categorization and numeric framework established by management.

/s/ RSM US LLP

We have served as the Company’s auditor since 2023.

Las Vegas, Nevada

March 3, 2025

Report of Independent Registered Public Accounting Firm

To the shareholders and Board of Directors

Sierra Bancorp and Subsidiary

Porterville, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Sierra Bancorp and Subsidiary (the “Company”) as of December 31, 2022, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022, and the consolidated results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 2023 to 2024.

Such date incorporates the acquisition of certain assets of Vavrinek, Trine, Day & Co., LLP, by Eide Bailly LLP in 2019.

San Ramon, California

Las Vegas, Nevada

March 3, 2025

10 unchanged sentences

Total investment securities

Deferred loan costs, net

Deferred loan (fees) costs, net

Allowance for credit losses on loans

Foreclosed assets

Premises and equipment, net

7 unchanged sentences

Other borrowings

Long-term debt

Long-term debt, net

Subordinated debentures, net

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Noninterest income

Service charges on deposits

Net (losses) gains on sale of securities available-for-sale

Net gains (losses) on sale of fixed assets

Increase (decrease) in cash surrender value of life insurance

Realized gain (losses) on available-for-sale securities

Service charges and fees on deposit accounts

Net (loss) gain on sale of securities available-for-sale

Net (loss) gain on sale of fixed assets

Increase in cash surrender value of life insurance

Realized gain (loss) on available-for-sale securities

Total noninterest income

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(dollars in thousands, except footnotes)

Other comprehensive gain (loss), before tax

Unrealized gain (loss) on securities:

Unrealized holding gain (loss) arising during period

Reclassification adjustment for losses (gains) included in net income (1)

Other comprehensive gain (loss), before tax

Other comprehensive gain:

Unrealized gain on debt securities:

Unrealized holding gain arising during period (2)

Reclassification adjustment for net realized losses included in net income (1)

Other comprehensive gain, before tax

Income tax expense benefit related to items of other comprehensive income

Total other comprehensive gain (loss), net of tax

Comprehensive income (loss)

Total other comprehensive gain, net of tax

Comprehensive income

(1) Amounts are included in net gains on securities available-for-sale on the Consolidated Statements of Income in noninterest income.

Income tax (benefit) expense associated with the reclassification adjustment for the years ended 2024, 2023 and 2022 was $( 0.8 ) million, $( 4.2 ) million, and $ 0.4 million, respectively.

Income tax benefit associated with the reclassification adjustment for the years ended 2025, 2024 and 2023 was $( 0.04 ) million, $( 0.8 ) million, and $( 4.2 ) million, respectively.

(2) Included in the unrealized holding gain arising during the period is the accretion of the net unrealized loss on debt securities transferred to held-to-maturity from available-for-sale of $ 2.2 million, $ 2.1 million, and $ 2.3 million for the years ended 2025, 2024, and 2023, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

6 unchanged sentences

Balance, January 1, 2023

Cumulative effect of change in accounting principle

Other comprehensive loss, net of tax

Other comprehensive gain, net of tax

Stock options exercised, net of shares surrendered for cashless exercises

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Restricted stock forfeited / cancelled

Restricted stock vested in period

Stock based compensation - stock options

1 unchanged sentence

Stock repurchase

Excise tax on stock repurchases

Cash dividends - $ 0.92 per share

21 unchanged sentences

Stock repurchase

( 1,024,792 )

Excise tax on stock repurchases

8 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Loss (gain) on sales of securities

(Gain) loss on sales of securities

Realized (gain) loss on available-for-sale securities

(Gain) loss on disposal of fixed assets

Gain on sale of foreclosed assets

Writedown of foreclosed assets

Loss (gain) on disposal of fixed assets

Stock based compensation expense

Credit loss expense - loans

Credit loss (benefit) expense - debt securities held-to-maturity

Credit loss (benefit) - debt securities held-to-maturity

Depreciation and amortization

Net amortization on securities premiums and discounts

Net (accretion) amortization on securities premiums and discounts

Accretion of discounts for loans acquired and net deferred loan fees

(Increase) decrease in cash surrender value of life insurance policies

Increase in cash surrender value of life insurance policies

Amortization of core deposit intangible

Increase in interest receivable and other assets

Increase in other liabilities

Deferred income tax provision (benefit)

Decrease (increase) in interest receivable and other assets

(Decrease) increase in other liabilities

Deferred income tax (benefit) provision

Decrease in equity securities

2 unchanged sentences

Cash flows from investing activities:

Maturities and calls of securities available for sale

Proceeds from sales of securities available for sale

Purchases of securities available for sale

Principal paydowns on securities available for sale

Net purchases of FHLB stock

Maturities and calls of debt securities available-for-sale

Proceeds from sales of debt securities available-for-sale

Purchases of debt securities available-for-sale

Principal paydowns on debt securities available-for-sale

Maturities and calls of debt securities held-to-maturity

Principal paydowns on debt securities held-to-maturity

Purchases of FHLB stock

Loan (originations) and payments, net

Purchases of premises and equipment, net

Purchases of premises and equipment

Proceeds from sales of premises and equipment

Proceeds from sales of foreclosed assets

Purchase of bank-owned life insurance

Purchase of separate account life insurance

Purchase of split dollar life insurance

Liquidation of bank-owned life insurance

2 unchanged sentences

Net increase in partnership investment

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Increase (decrease) in deposits

(Decrease) increase in fed funds purchased

(Decrease) increase in borrowed funds

(Decrease) increase in deposits

Increase (decrease) in fed funds purchased

Increase (decrease) in short-term borrowed funds

Proceeds from long-term Federal Home Loan Bank advances and other debt

3 unchanged sentences

Stock options exercised

Net cash (used in) provided by financing activities

(Decrease) increase in cash and due from banks

Net cash provided by (used in) financing activities

Increase in cash and due from banks

Cash and cash equivalents, beginning of year

10 unchanged sentences

Operating lease liability from branch facilities sale leaseback transaction

Right-of-use assets obtained in exchange for new lease liabilities (excluding sale/leaseback)

The accompanying notes are an integral part of these consolidated financial statements.

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The Company’s only other direct subsidiaries are Sierra Statutory Trust II, Sierra Capital Trust III, and Coast Bancorp Statutory Trust II, which were formed solely to facilitate the issuance of capital trust pass-through securities.

At December 31, 2024, the Bank operated 35 full service branch offices and an online branch and provides specialized lending services through a dedicated agricultural credit office, Mortgage Warehouse lending divisions, and an agricultural production office in Templeton, California.

At December 31, 2025, the Bank operated 34 full-service branch offices and provides specialized lending services through a Mortgage Warehouse lending division.

The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to applicable legal limits.

The Bank maintains a diversified loan portfolio comprised of agricultural, commercial, consumer, real estate, construction, and mortgage loans.

Loans are made in California within the market area of the South Central San Joaquin Valley, the Central Coast, Ventura County, and neighboring communities.

These areas have diverse economies with principal industries being agriculture, real estate, and light manufacturing.

The Bank maintains a diversified loan portfolio comprised of commercial, real estate, construction, mortgage loans, consumer, and mortgage warehouse lines.

Loans are primarily made in California within the market area of the South Central San Joaquin Valley, the Central Coast, Ventura County, and neighboring communities while mortgage warehouse customers are located throughout the United States.

Our California footprint has diverse economies with principal industries being agriculture, real estate, oil and gas, service, government, healthcare, and light manufacturing.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

11 unchanged sentences

For additional information on the Bank’s interest in VIEs, see Note 23.

Subsequent Events

The Company has evaluated subsequent events for recognition and disclosure through February 27, 2025, which is the date the financial statements were available to be issued.

Segment information

2 unchanged sentences

The chief operating decision maker makes operating decisions and assesses performance based on an ongoing review of the Company’s community banking activities (loan and deposit products), which constitutes the Company’s only operating segment for financial reporting purposes.

The Company’s single segment is managed on a consolidated basis by the chief operating decision maker, which is the Executive Committee, consisting of the chief executive officer, chief financial officer, chief risk officer, chief credit officer, and chief banking officer.

The accounting policies of the community banking segment are the same as those described in the summary of significant accounting policies of the Company.

16 unchanged sentences

The reclassifications had no effect on net income or stockholders’ equity as previously reported.

Revision of Previously Issued Financial Statements

Certain immaterial prior period amounts in the Consolidated Statement of Cash Flows have been revised and are reflected below.

Specifically, cash flows from investing activities related to available-for-sale and held-to-maturity debt securities were combined on the Consolidated Statement of Cash Flows.

These have been disaggregated and presented gross by classification.

The changes were presentation only and had no impact on previously reported net income, total assets, total liabilities, or shareholders’ equity.

The changes also had no impact on net cash provided by (used in) investing activities or total change in cash and cash equivalents.

The effect of the above revision on previously reported financial statements is presented below (dollars in thousands):

As previously reported

Impact of Revision

Consolidated statement of cash flows for the year ended December 31, 2024

Cash flows from investing activities:

Maturities and calls of debt securities available-for-sale

Maturities and calls of debt securities held-to-maturity

Principal paydowns on debt securities available-for-sale

Principal paydowns on debt securities held-to-maturity

Consolidated statement of cash flows for the year ended December 31, 2023

Cash flows from investing activities:

Maturities and calls of debt securities available-for-sale

Maturities and calls of debt securities held-to-maturity

Principal paydowns on debt securities available-for-sale

Principal paydowns on debt securities held-to-maturity

For purposes of reporting cash flows, cash and cash equivalents include cash and deposits with other financial institutions with original maturities within 90 days, and federal funds sold.

2 unchanged sentences

Debt securities are classified as available for sale when they might be sold before maturity.

Equity securities with readily determinable fair values are classified as available for sale.

Debt securities classified as available for sale are carried at fair value with unrealized holding gains and losses reported in other comprehensive income, net of tax.

1 unchanged sentence

Notably, the Company has elected the practical expedient under GAAP to exclude accrued interest from the amortized-cost-basis of held-to-maturity securities and does not evaluate accrued interest receivable for an allowance for credit losses because any past due interest receivable on its held-to-maturity portfolio is reversed from income timely.

Accrued interest on held-to-maturity securities and available-for-sale securities continues to be included in other assets on the Company’s balance sheet and measured $ 2.4 million and $ 7.5 million, respectively, as of December 31, 2024.

Accrued interest on held-to-maturity securities and available-for-sale securities continues to be included in other assets on the Company’s balance sheet and measured $ 2.4 million and $ 4.8 million, respectively, as of December 31, 2025, and $ 2.4 million and $ 7.5 million, respectively, as of December 31, 2024.

Interest income includes amortization of purchase premium or discount.

3 unchanged sentences

All transfers between categories are accounted for at fair value.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent.

Interest accrued but not received for a security placed on non-accrual is reversed against interest income.

There were no debt securities past due or on nonaccrual in either available-for-sale or held-to-maturity for the years ended December 31, 2025 and December 31, 2024.

For available-for-sale debt securities in an unrealized loss position for which management has an intent to sell the security or considers it more likely-than-not that the security in question will be sold prior to a recovery of its amortized cost basis, the security will be written down to fair value through a direct charge to income.

4 unchanged sentences

At December 31, 2025, the Company had no recorded Allowance for Credit Losses on its securities designated as available-for-sale.

Under CECL, held-to-maturity debt securities are evaluated for reserves in the same manner as loans.

On April 1, 2022, the Company transferred $ 162.1 million of Agency, Mortgaged-Backed, and Municipal securities from available-for-sale to held-to-maturity.

2 unchanged sentences

An unrealized loss of $ 24.2 million, on securities transferred from the available-for-sale to held-to-maturity categorization, remains as of December 31, 2025, and is included in accumulated other comprehensive income, net of tax.

Applying the Company’s combined marginal tax rate of 29.56 %, this amount reflects a tax-effected unrealized loss of approximately $ 17.1 million.

As of December 31, 2024, and December 31, 2023, the gross unrealized loss was $ 26.3 million and $ 28.4 million, respectively.

The year-over-year decrease in the unrealized loss is attributable to the ongoing accretion into income.

The remaining unrealized loss on the securities transferred from available-for-sale to held-to-maturity, will be accreted over the remaining term of the securities, with the amortized-cost basis of these securities and accumulated comprehensive income each increasing over time.

Under CECL, held-to-maturity debt securities are evaluated for reserves in a similar manner as loans.

Because of the implicit and explicit guarantees of the Federal Government on the Agency and Mortgage-Backed, securities there is no expectation of future losses on any of these securities and no allowance for credit losses has been established for these securities.

1 unchanged sentence

A discounted-cash-flow reserve calculation was performed upon the transfer of these securities into the held-to-maturity designation and is updated on a quarterly basis.

As of December 31, 2024, an allowance for credit losses of $ 0.02 million had been established on the Bank’s held-to-maturity portfolio, which remained unchanged from December 31, 2023.

FHLB Stock and Other Investments

7 unchanged sentences

These classifications are defined in Note 4 to the consolidated financial statements.

Loans are reported on the amortized cost basis.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported on the amortized cost basis and make up the entirety of the Company’s loan portfolio.

The amortized cost basis of the Company’s loans is comprised of the principal balance outstanding, net of remaining deferred loan fees and costs, purchase premiums and discounts, and also net of any write-downs.

Notably, the Company elected the practical expedient available under CECL to exclude accrued interest receivable from the amortized cost basis of all categorizations of loans and resultingly did not estimate reserves on accrued interest receivable balances, as any past due interest income is reversed on a timely basis.

Accrued interest receivable on the Company’s Loans continues to be included in other assets on the Company’s balance sheet and as of December 31, 2024, measured $ 6.1 million.

Accrued interest receivable on the Company’s loans continues to be included in other assets on the Company’s balance sheet and measured $ 7.0 million and $ 6.1 million as of December 31, 2025, and 2024, respectively.

Loan origination fees, net of certain deferred origination costs, and purchase premiums and discounts are recognized in interest income as an adjustment to yield of the related loans over the contractual life of the loan using both the effective interest and straight-line methods without anticipating prepayments.

Interest income for all performing loans, regardless of classification (Pass, Special Mention, Substandard), is recognized on an accrual basis, with interest accrued daily.

Interest income for all performing loans, regardless of classification (Pass, Special Mention, Substandard), is accrued on unpaid principal balances, with interest accrued daily.

Costs associated with successful loan originations are netted from loan origination fees, with the net amount (net deferred loan fees) amortized over the contractual life of the loan in interest income.

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Generally, loans are not restored to accrual status until the obligation is brought current and has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Due to loans being placed on nonaccrual status, $ 0.2 million of interest receivable on loans was reversed from interest income for the year ended December 31, 2024.

Due to loans being placed on nonaccrual status, $ 0.3 million of interest receivable on loans was reversed from interest income for the year ended December 31, 2025 and $ 0.2 million was reversed for the year ended December 31, 2024.

Allowance for Credit Losses - Loans

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The collective evaluation of loans is performed at the portfolio segment level, using call code as the primary segmentation key but also considering similarity in quantitative reserve methodology.

The Company’s ACL is categorized according to the following portfolio segments:

The Company’s ACL is categorized according to the

following portfolio segments:

1-4 Family Real Estate, Commercial Real Estate, Farmland & Agricultural Production, Commercial & Industrial, Mortgage Warehouse, and Consumer.

Loans secured by 1-4 family residences have a different profile from loans secured by Commercial Real Estate.

Generally, the borrowers for 1-4 Family

loans are consumers whereas borrowers for Commercial Real Estate are often businesses.

Generally, the borrowers for 1-4 Family loans are consumers whereas borrowers for Commercial Real Estate are often businesses.

The COVID-19 pandemic illustrated how these different categories of real estate loans were subject to different risks, which was exacerbated by the widespread work-from-home model adopted by many companies during and since the pandemic.

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However, estimates are reviewed periodically, and as adjustments become necessary, they are reported in earnings during the periods they become known.

In addition, the FDIC and the California Department of Financial Protection and Innovation, as an integral part of their examination processes, review the allowance for credit losses.

These agencies may require additions to the allowance for credit losses based on their judgment about information available at the time of their examinations.

Allowance for Credit Losses - Off-Balance Sheet Commitments

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The funding rate represents management’s estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data.

Under CECL the ACL on unfunded loan commitments remains in Other Liabilities while any related provision expense has been moved to provision for

credit loss expense from its prior presentation in noninterest expense.

Prior period expense has not been reclassified for comparative purposes.

Under CECL, the ACL on unfunded loan commitments remains in Other Liabilities while any related provision expense has been moved to provision for credit loss expense from its prior presentation in noninterest expense.

Premises and Equipment

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The amortization of the right-of-use asset arising from finance leases is expensed through occupancy and equipment expense.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been relinquished.

Control over transferred assets is deemed to be surrendered when the assets have been legally isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets.

Foreclosed Assets

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Operating costs after acquisition are expensed.

The Company had no foreclosed properties recorded at December 31, 2024.

The Company had one foreclosed property with a fair value of $ 1.6 million recorded at December 31, 2025.

At December 31, 2025, there were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process.

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The Company recognizes interest and penalties related to uncertain tax positions as part of income tax expense.

Company Owned Life Insurance (General Account)

The Company has purchased life insurance policies on certain key executives and officers.

Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Bank Owned Life Insurance (Separate Account)

Bank-owned life insurance (“BOLI”) is “separate account” which consists of specific directed investments in underlying assets (generally equity and bond funds) that closely mirror investment choices of deferred compensation participants.

Deferred compensation participants can make investment choices similar to a traditional 401k plan;

as the deferred compensation plan is a nonqualified plan, the liability is a corporate liability.

To offset this deferred compensation plan, the Company has chosen to use separate account BOLI designed to be an economic hedge against deferred compensation.

Therefore, the income on BOLI generally offsets the deferred compensation expense each year.

The separate account BOLI earnings are decreased by the underlying cost of life insurance, however, the earnings on separate account BOLI income are tax-free, whereas the related deferred compensation expense is tax deductible.

Salary Continuation Agreements and Directors’ Retirement Plan

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The Company accrues for these future benefits from the effective date of the plan until the director’s or executive’s expected retirement date in a systematic and rational manner.

At the consolidated balance sheet date, the amount of accrued

benefits equals the then present value of the benefits expected to be provided to the director or employee, any beneficiaries, and covered dependents in exchange for the director’s or employee’s services to that date.

At the consolidated balance sheet date, the amount of accrued benefits equals the then present value of the benefits expected to be provided to the director or employee, any beneficiaries, and covered dependents in exchange for the director’s or employee’s services to that date.

Comprehensive Income

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Unrealized gains and losses on the Company’s available for sale securities, net of tax, are included in other comprehensive income after adjusting for the effects of realized gains and losses.

Total comprehensive income and the components of accumulated other comprehensive income (loss) are presented in the consolidated statements of comprehensive income.

Total comprehensive income and the components of accumulated other comprehensive income are presented in the consolidated statements of comprehensive income.

Stock-Based Compensation

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Compensation cost and director’s expense is recognized for stock options and restricted stock awards issued to employees and directors and is recognized over the required service period, generally defined as the vesting period.

The Company is using the Black-Scholes model to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards.

The Company utilized the Black-Scholes model to estimate the fair value of stock options, while the market price

of the Company’s common stock at the date of grant is used for restricted stock awards.

The “multiple option” approach for stock options is used to allocate the resulting valuation to actual expense for current period.

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No stock options were granted during the years ended December 31, 2025, 2024, and 2023.

Low Income Housing Tax Credit (LIHTC) Partnerships

The Company’s LITHCs are indirect federal subsidies to finance low-income housing and are used in connection with both newly constructed and renovated residential rental buildings.

Once a project is placed in service, it is generally eligible for the tax credit for ten years.

To continue generating the tax credit and to avoid tax credit recapture, a LIHTC building must satisfy specific low-income housing compliance rules for a full fifteen years.

The maximum exposure to loss in the VIEs is the amount of equity invested, and credit extended by the Company.

The Company has evaluated the variable interests held by the Company in each LIHTC investment and determined that the Company does not have controlling financial interests in such investments and is not the primary beneficiary.

The Company reports the investments in the unconsolidated LIHTCs as other assets on the Company’s statements of financial condition.

Revenue Recognition

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Recently Adopted Accounting Pronouncements

In September 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which eliminates the probable initial recognition threshold for credit losses in current U.S.

GAAP, and instead requires an organization to record an estimate of expected credit losses over the contractual term for financial assets carried at amortized cost (generally loans and held-to-maturity investment securities) in addition to certain off balance-sheet credit exposure.

Under the current expected credit losses (“CECL”) methodology expected credit losses for financial assets are estimated over the contractual life of the financial asset, adjusted for expected prepayments, considering historical experience, current conditions, and reasonable and supportable forecasts.

Additionally, under CECL the accounting for credit losses on available-for-sale debt securities is addressed through an allowance for credit losses which is a change from legacy GAAP which previously required the direct write-down of securities through the other-than-temporary impairment approach.

The Company implemented CECL on January 1, 2022 , using the modified retrospective approach to estimate lifetime expected losses on financial assets measured at amortized cost in addition to certain off balance sheet credit exposures.

The January 1, 2022, increase in the Company’s allowance for credit losses, of $ 9.5 million on loans and $ 0.9 million in off balance sheet credit exposures, net of the impact of deferred taxes, was reflected in a transition adjustment of $ 7.3 million to retained earnings.

There was no cumulative effect adjustment related to our available-for-sale investment portfolio upon adoption and the company had no securities designated as held-to-maturity as of January 1, 2022.

Results for reporting periods beginning after December 31, 2021, are presented under CECL whereas prior comparative periods are presented under legacy GAAP.

In March 2023, the FASB issued ASU No.

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ASU 2023-07 was adopted by the Company in 2024, and its adoption did not have a significant impact on our financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold.

ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.

ASU 2023-09 was adopted by the Company prospectively on January 1, 2025.

ASU 2023-09 did not have a significant impact on our financial statements.

Recent Accounting Pronouncements

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The adoption of this standard is not expected to have a significant effect on the Company’s financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

ASU 2023-09 is effective for us on January 1, 2025, though early adoption is permitted.

ASU 2023-09 is not expected to have a significant impact on our financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40).” ASU 2024-03 requires public business entities to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods.

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As of both dates the Company considers the unrealized loss across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value.

The Company maintains that it has intent and ability to hold these securities until the amortized cost basis of each security is recovered and likewise concluded as of both January 1, 2022 and December 31, 2024 that it was not more likely than not that any of the securities in an unrealized loss position would be required to be sold.

The Company maintains that it has intent and ability to hold these securities until the amortized cost basis of each security is recovered and likewise concluded as December 31, 2025, that it was not more likely than not that any of the securities in an unrealized loss position would be required to be sold.

For the years ended December 31, 2025, 2024, and 2023, proceeds from sales of securities available-for-sale were $ 3.0 million, $ 233.2 million, and $ 25.7 million, respectively.

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The Company has reviewed all sectors and securities in the portfolio for impairment.

During the year ended December 31, 2025, the Company realized gains through earnings from the sale and call of 73 debt securities for $ 0.1 million and one debt security for which a loss was realized.

During the year ended December 31, 2024, the Company realized gains through earnings from the sale and call of eight debt securities for $ 0.2 million.

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During the year ended December 31, 2023, the Company realized gains through earnings from the sale and call of 37 debt securities for $ 0.4 million.

There were no securities sold during 2022 for which a loss was realized.

During the year ended December 31, 2022 the Company realized gains through earnings from the sale and call of 54 debt securities for $ 1.5 million.

The Company recognized a $ 14.5 million loss for the year ending December 31, 2023 on investment securities intended for sale and subsequently sold in January 2024.

The Company recognized a $ 14.5 million loss for the year ended December 31, 2023, on investment securities intended for sale and subsequently sold in January 2024.

Included in this sale were $ 4.0 million in U.S.

government agencies, $ 74.8 million in mortgage-backed securities, and $ 117.9 million in state and political subdivisions.

position, including the number of available-for-sale debt securities in an unrealized loss position, as of the dates indicated below (dollars in thousands):

The following table summarizes available-for-sale debt securities that were in an unrealized loss position for which an ACL has not been recorded, based on the length of time the individual securities have been in an unrealized loss position, including the number of available-for-sale debt securities in an unrealized loss position, as of the dates indicated below (dollars in thousands):

December 31, 2025

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Corporate bonds

Collateralized loan obligations

Total available-for-sale

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Corporate bonds

Collateralized loan obligations

Total available-for-sale

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Securities with amortized costs totaling $ 382.2 million and carrying values totaling $ 367.5 million were pledged to secure other contractual obligations and short-term borrowing arrangements at December 31, 2025 (see Note 10).

Securities with amortized costs totaling $ 570.4 million and estimated fair values totaling $ 551.5 million were pledged to secure other contractual obligations and short-term borrowing arrangements at December 31, 2023 (see Note 10).

Securities with amortized costs totaling $ 420.4 million and carrying values totaling $ 403.4 million were pledged to secure other contractual obligations and short-term borrowing arrangements at December 31, 2024 (see Note 10).

At December 31, 2025, the Company’s investment portfolio included securities issued by 199 different government municipalities and agencies located within 28 states with a fair value of $ 221.0 million.

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Accrued interest receivable on loans of $ 7.0 million and $ 6.1 million at December 31, 2025, and December 31, 2024, respectively is not included in the loans included in the table below but is included in other assets on the Company’s balance sheet.

The majority of the disclosures in this footnote are prepared at the class level which combines certain related call report or call code classification.

The majority of the disclosures in this footnote are prepared at the class level which combines certain related call report code classification.

The final table in this section separates a roll forward of the Allowance for Credit Losses at the portfolio segment level.

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Consumer loans

Plus net deferred loan fees

Plus net deferred loan (fees) cost

Allowance for credit losses on loans

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Residential real estate

Commercial real estate

Total real estate

Other commercial

Consumer loans

December 31, 2024

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Residential real estate

Commercial real estate

Total real estate

Other commercial

Consumer loans

The Company did not recognize any interest on nonaccrual loans during 2025, 2024, or 2023 and would have recognized an additional $ 0.9 million, $ 0.9 million, and $ 0.1 million in interest income on nonaccrual loans for the same periods, respectively, had those loans not been designated as nonaccrual.

During 2025, there were no significant changes to collateral which secures the collateral-dependent loans, whether due to general deterioration or other reasons.

The following tables present the amortized cost basis of collateral-dependent loans by class as of December 31, 2025 and 2024 (dollars in thousands):

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Residential real estate

Commercial real estate

Other construction/land

Total real estate

Other commercial (1)

Mortgage warehouse lines

Consumer loans

December 31, 2024

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Residential real estate

Commercial real estate

Other construction/land

Total real estate

Other commercial (1)

Mortgage warehouse lines

Consumer loans

(1) The collateral type on these loan categories is mainly agricultural assets.

The weighted average loan-to-value ratio of collateral dependent loans was 69 % at December 31, 2025, and 92 % at December 31, 2024.

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When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In certain cases, the Company provides multiple types on concessions on one loan.

In certain cases, the Company provides multiple types of concessions on one loan.

Typically, one type of concession, such as a term extension, is granted initially.

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Term Extension

Combination Term Extension and Principal Forgiveness

Combination Term Extension Interest Rate Reduction

Total Class of Financing Receivable

Commercial real estate

Other construction/land

Total real estate

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Term Extension

Combination Term Extension and Principal Forgiveness

Combination Term Extension Interest Rate Reduction

Total Class of Financing Receivable

Residential real estate

Commercial real estate

Other construction/land

Total real estate

Other commercial

Consumer loans

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2025 and 2024:

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Weighted-Average Term Extension (years)

Other construction/land

Commercial real estate

Other commercial

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Weighted-Average Term Extension (years)

Residential real estate

Commercial real estate

Other construction/land

Other commercial

Consumer loans

During the year ending December 31, 2024, there were no payment defaults, within a twelve-month period of the modification date on loans identified as modifications made to borrowers experiencing financial difficulty.

During the years ending December 31, 2025, and 2024, there were no payment defaults, within a twelve-month period of the modification date on loans identified as modifications made to borrowers experiencing financial difficulty.

For purposes of this disclosure the Company defines a payment default as 90 days past due.

The company had $ 0.1 million in additional funds committed on loans which have been modified to borrowers experiencing financial difficulty as of December 31, 2024 and none as of December 31, 2023.

The company had $ 0.1 million in additional funds committed on loans which have been modified to borrowers experiencing financial difficulty as of both December 31, 2025, and December 31, 2024.

In estimating the allowance for credit losses, the Company considers the performance of accruing loans which have been identified as modifications made to borrower’s experiencing financial difficulty, in the same way it considers the performance of other collectively evaluated accruing loans.

Loan modifications made to borrowers experiencing financial difficulty which have been placed on nonaccrual status are subject to an individual reserve evaluation.

For the year ended December 31, 2022, under the legacy troubled debt restructuring (TDR) guidance, there were no new TDRs and no modifications of existing TDRs.

Credit Quality

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Special mention

Current period gross write offs

Commercial real estate

Special mention

Current period gross write offs

Other construction/land

Special Mention

Current period gross write offs

Special mention

Current period gross write offs

Other commercial

Special mention

Current period gross write offs

Mortgage warehouse lines

Current period gross write offs

Consumer loans

Special mention

Current period gross write offs (1)

Gross charge-offs

(1) Consumer overdrafts are included in consumer loans and commercial overdrafts are included in other commercial and make up the majority of the gross charge-offs of loans originated in the current period for these loan classes.

December 31, 2024

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Special mention

Current period gross write offs

Commercial real estate

Special mention

Current period gross write offs

Other construction/land

Special Mention

Current period gross write offs

Special mention

Current period gross write offs

Other commercial

Special mention

Current period gross write offs

Mortgage warehouse lines

Current period gross write offs

Consumer loans

Special mention

Current period gross write offs (1)

Gross charge-offs

CECL replaced the legacy accounting for loans designated as purchased credit impaired (“PCI”) with loans designated as purchased credit deteriorated (“PCD”).

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As of December 31, 2025, the Company had no loans categorized as PCD.

As noted in footnote 2, on January 1, 2022 the Company implemented CECL and increased our ACL, previously the allowance for loan losses, with a $ 9.5 million cumulative adjustment.

The model used for calculating the Company’s ACL is refreshed periodically, most recently in the third quarter of 2024.

As a result of this refresh process the Company changed to a Multi-factor Regression Model from a Single Factor Regression Model which was used in previous periods.

The model used for calculating the Company’s ACL is reviewed and revised periodically, most recently a full review with modifications in the third quarter of 2024, with a partial review and minimal modifications completed in the third quarter of 2025.

In the most recent full review, the Company changed to a Multi-Factor Regression Model from a Single-Factor Regression Model used in previous periods.

Additionally, legacy peer groups were expanded to include California banks with an asset size between $ 1.5 billion to $ 10 billion.

The Company’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL trued-up through an entry to the provision for credit losses.

For purposes of estimating the Company’s ACL, Management generally evaluates collectively evaluated loans by Federal Call code in order to group loans with similar risk characteristics together, however management has grouped loans in

selected call codes together in determining portfolio segments, due to similar risk characteristics and reserve methodologies used for certain call code classifications.

Management calculates the quantitative portion of collectively evaluated reserves for all loan categories, with the exception of Farmland, Agricultural Production and Consumer loans, using a discounted cash flow (“DCF”) methodology.

For purposes of calculating the quantitative portion of collectively evaluated reserves on Farmland, Agricultural Production, and Consumer categories a Remaining Life methodology is utilized.

The Company’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL adjusted through an entry to the provision (benefit) for credit losses.

For purposes of estimating the Company’s ACL, Management generally evaluates collectively evaluated loans by call code in order to group loans with similar risk characteristics together;

however, Management has grouped loans in selected call codes together in determining portfolio segments, due to similar risk characteristics and reserve methodologies used for certain call code classifications.

The DCF quantitative reserve methodology incorporates the consideration of probability of default (“PD”) and loss given default (“LGD”) estimates to estimate periodic losses.

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The loss-rate data has been regressed against benchmark economic indicators, for which reasonable and supportable forecasts exist, in the development of the call-code specific regression models.

Regression models are generally refreshed periodically, in order to pull in more recent loss rate data.

Regression models are updated periodically, in order to pull in more recent loss-rate data.

Reasonable and supportable forecasts of the selected economic metric are then input into the regression model to calculate an expected default rate.

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The prepayment assumptions applied to expected cash flow over the contractual life of the loans are estimated based on historical, bank-specific experience, peer data, and the consideration of current and expected conditions and circumstances including the level of interest rates.

The prepayment assumptions may be updated by Management in the event that changing conditions impact Management’s estimate or additional historical data gathered has resulted in the need for a reevaluation.

Management may update prepayment assumptions when changing conditions impact Management’s estimate or additional historical data indicates a reevaluation is warranted.

LGD utilized in the DCF is derived from the application of the Frye-Jacobs theory, which relates LGD to PD based on historical peer data, as calculated by a third-party.

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Management selected the National Unemployment Rate, HPI, and GDP as the drivers of quantitative portion of collectively evaluated reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts including the quarterly Federal Open Market Committee (FOMC) forecast and given the widespread familiarity of stakeholders with these economic metrics.

The quantitative reserves for Farmland, Agricultural Production and Consumer loans are calculated using a Remaining Life methodology where average historical peer loss rates are applied to expected loan balances over an estimated remaining life of loans in calculation of the quantitative portion of collectively evaluated loans in these classes.

The quantitative reserves for Farmland, Agricultural Production, and Consumer loans are calculated using a Remaining Life methodology where the Company’s average historical loss-rates are applied to expected loan balances over an estimated remaining life of loans in calculation of the quantitative portion of collectively evaluated loans in these classes.

The estimated remaining life is calculated using historical peer data.

For the Farmland, Agricultural Production and Consumer classes of loans, reasonable and supportable forecasts of the National Unemployment Rate, real GDP and the housing price index are considered through estimation of qualitative reserves.

Management recognizes that there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of reserves on collectively evaluated loans.

As current and expected conditions, may vary compared with conditions over the historical lookback period, which is utilized in the calculation of quantitative reserves, management considers whether additional or reduced reserve levels on collectively evaluated loans may be warranted given the consideration of a variety of qualitative factors.

Several of the following qualitative factors (“Q-factors”) considered by management reflect the legacy regulatory guidance on Q-factors, whereas several others represent factors unique to the Company or unique to the current time period.

Management recognizes there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of reserves on collectively evaluated loans.

As current and expected conditions

may vary compared with conditions over the historical lookback period, which is utilized in the calculation of quantitative reserves, Management considers whether additional or reduced reserve levels on collectively evaluated loans may be warranted given the consideration of a variety of qualitative factors.

Several of the following qualitative factors (“Q-factors”) considered by Management reflects the legacy regulatory guidance on Q-factors, whereas several others represent factors unique to the Company or unique to the current time period.

● Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices

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● Changes in the experience, ability, and depth of lending Management and other relevant staff

● Changes in the volume and severity of past due, non-accruals loans, and adversely classified loans, as reflected in changes of the relative level of loans classified as substandard and special mention

● Changes in the quality of the Bank’s loan review processes

● Changes in the volume and severity of past due, nonaccruals loans, and adversely classified loans, as reflected in changes of the relative level of loans classified as substandard and special mention

● Changes in the quality of the Company’s loan review processes

● Changes in the value of underlying collateral for loans not identified as collateral-dependent

● Changes in loan categorization concentrations

● Other external factors, which include, the influence of peer data on estimated quantitative reserves, expected impact of current and expected inflationary environment, reliance on the National Unemployment rate as opposed to the California unemployment rate in the calculation of quantitative reserves, the expected impact of current and expected geo-political conditions

The qualitative portion of the Company’s reserves on collectively evaluated loans are calculated using a combination of numeric frameworks and management judgement, to determine risk categorizations in each of the Q-factors presented above.

The amount of qualitative reserves is also contingent upon the historical peer, life-of-loan-equivalent, loss rate ranges and the relative weighting of Q-factors according to management’s judgement.

● Other external factors, which include the influence of peer data on estimated quantitative reserves, residual COVID-19 related risk, expected impact of current and expected inflationary environment, reliance on the National Unemployment rate as opposed to the California unemployment rate in the calculation of quantitative reserves, the expected impact of current and expected geo-political conditions

The qualitative portion of the Company’s reserves on collectively evaluated loans are calculated using a combination of numeric frameworks and Management judgment to determine risk categorizations in each of the Q-factors presented above.

The amount of qualitative reserves is also contingent upon the historical peer, life-of-loan-equivalent, loss-rate ranges, and the relative weighting of Q-factors according to Management’s judgment.

Although collectively evaluated reserves are generally calculated separately at the call code or loan class level, Management has grouped loan classes with similar risk characteristics into the following portfolio segments:

● 1-4 Family Real Estate

● Commercial Real Estate

● Farmland & Agricultural Production

● Commercial & Industrial

● Mortgage Warehouse

The following table presents the activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2025 and 2024 (dollars in thousands):

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Balance, December 31, 2024

(1) Includes overdraft charge-offs of $ 1.4 million and $ 1.6 million for the years ended December 31, 2024 and 2023, respectively, and overdraft recoveries of $ 0.9 million for both years ended December 31, 2024 and 2023.

Provision for credit losses

Balance, December 31, 2025

(1) Includes overdraft charge-offs of $ 0.9 million and $ 1.4 million for the years ended December 31, 2025 and 2024, respectively, and overdraft recoveries of $ 0.4 million and $ 0.9 million for the years ended December 31, 2025 and 2024, respectively.

PREMISES AND EQUIPMENT

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Less accumulated depreciation and amortization

Construction in progress

Total premises and equipment, net

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therefore, the majority of renewals to extend the lease terms are not included in our right-of-use assets and lease liabilities as they are not reasonably certain of exercise.

We regularly evaluate the renewal options and when they are reasonably certain of exercise, we include the renewal period in our lease term.

We regularly evaluate the renewal options and when they are reasonably

certain of exercise, we include the renewal period in our lease term.

As most of our leases do not provide an implicit rate, we used our incremental borrowing rate in determining the present value of the lease payments.

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Lease liabilities from new right-of-use assets obtained during the year ending December 31, 2025, and December 31, 2024, were $ 1.4 million and $ 4.7 million, respectively.

There was $ 0.2 million, $ 0.2 million, and $ 0.03 million in variable lease costs for the years

ending December 31, 2024, 2023, and 2022, respectively.

Cash paid on operating leases was $ 4.0 million the year ended December 31, 2024 and $ 2.3 million for the year ended December 31, 2023.

There was $ 0.2 million in variable lease costs for each of the years ending December 31, 2025, 2024, and 2023.

Cash paid on operating leases was $ 4.0 million for the year ended December 31, 2025, and $ 4.0 million for the year ended December 31, 2024.

Future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2025, are as follows (dollars in thousands):

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There was no acquired goodwill or impairment for the years ended December 31, 2025, 2024, and 2023.

The Company performs its annual goodwill impairment tests annually, or more often if events or circumstances indicate the carrying value may not be recoverable.

The annual assessment date was changed to October 1 in 2023 as it was December 31 in 2022, to allow more time for evaluation of impairment.

The Company performed a Step 1 goodwill impairment assessment as of October 1, 2024 using a market approach.

The Company performed a quantitative impairment assessment as of October 1, 2025, using a market approach.

Based on the results of the Company’s goodwill impairment assessment, the Company determined that the fair value of its reporting unit, which was at the consolidated level, exceeded the carrying value.

Therefore, goodwill was not impaired as of December 31, 2024 and there was no impairment charges related to the Company’s goodwill recorded during the year ended December 31, 2024.

Therefore, goodwill was not

impaired as of December 31, 2025, and there was no impairment charges related to the Company’s goodwill recorded during the year ended December 31, 2025.

Acquired Intangible Assets

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Under this method, the investments are initially recorded at their historical cost.

Dividends received from these investments is recorded in Other Income in the Income Statement.

Dividends received from these investments are recorded in Other Income in the Income Statement.

Management analyzes these investments annually for potential impairment.

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The largest of these is the Company’s $ 14.7 million investment in FHLB stock, carried at cost.

Quarterly, the FHLB evaluates and adjusts the Company’s minimum stock requirement based on the Company’s borrowing activity and membership requirements.

Quarterly, the FHLB evaluates and adjusts the Company’s minimum stock requirement based on the Company’s borrowing activity and membership

requirements.

Any stock deemed in excess is automatically repurchased by the FHLB at cost.

The only equity investment noted above that is carried at Fair Value is the Company’s investment in PCBB stock.

Time deposits that meet or exceed the FDIC Insurance limit of $250,000 at year-ends 2025 and 2024 were $ 234.2 million and $ 271.5 million, respectively.

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Federal Home Loan Bank advances, maturing 2028

There were short-term borrowings of $ 222.7 million at December 31, 2025.

Included in short term borrowings at December 31, 2025, were $ 12.7 million outstanding in fixed-rate overnight FHLB advances and $ 210.0 million in overnight Fed Funds Purchased.

There were no outstanding short-term borrowings at December 31, 2024.

Included in short term borrowings at December 31, 2023, was $ 25.5 million outstanding in fixed-rate overnight FHLB advances and $ 125.0 million in fixed-rate short term FHLB advances.

Each FHLB advance is payable at its maturity date, with a prepayment penalty for fixed rate advances.

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The carrying value of the securities pledged to collateralize repurchase agreements was $ 168.6 million at December 31, 2025, and $ 169.5 million at December 31, 2024.

The Company had no borrowings at December 31, 2024 and 2023 from the FRB.

The Company had borrowings of $ 210 million at December 31, 2025, and no borrowings at year end 2024 from the FRB.

The Company was eligible to borrow up to $ 254.9 million from FRB at year end 2025, which was collateralized by $ 129.9 million in first mortgage loans under a blanket lien arrangement.

The Company had lines of credit with its correspondent banks which, in the aggregate, amounted to $ 250.8 million unsecured and $ 25.0 million secured at December 31, 2025, and $ 479.8 million unsecured and $ 25.0 million secured at December 31, 2024, at fixed interest rates which vary with market conditions.

There were no outstanding overnight balances under these lines of credit at December 31, 2024 and $ 130.0 million outstanding overnight at December 31, 2023.

There were outstanding overnight balances of $ 210 million under these lines of credit at December 31, 2025, and no outstanding overnight balances under these lines of credit at December 31, 2024.

LONG-TERM DEBT

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Fixed - floating rate subordinated debentures, due 2031 (1)

(1) 3.25 % fixed rate for five years then floating rate at 253.5 bps over 3-month term SOFR .

(1) 3.25 % fixed rate for five years then floating rate at 253.5 bps over 3-month term SOFR starting September 30, 2026.

SUBORDINATED DEBENTURES

Sierra Statutory Trust II (“Trust II”), Sierra Capital Trust III (“Trust III”), and Coast Bancorp Statutory Trust II (“Trust IV”), (collectively, the “Trusts”) exist solely for the purpose of issuing trust preferred securities fully and unconditionally guaranteed by the Company.

For financial reporting purposes, the Trusts are not consolidated and the Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Subordinated Debentures”) held by the Trusts and issued and guaranteed by the Company are reflected in the Company’s consolidated balance sheet in accordance with provisions of ASC Topic 810.

accordance with provisions of ASC Topic 810.

Under applicable regulatory guidance, the amount of trust preferred securities that is eligible as Tier 1 capital is limited to twenty-five percent of the Company’s Tier 1 capital on a pro forma basis.

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The Subordinated Debentures, purchased by Trust II, represent the sole assets of the Trust II.

Those Subordinated Debentures mature on March 17,

2034, bear a current interest rate of 7.36 % (based on 3-month CME Term SOFR plus tenor spread adjustment of 0.26161 % plus 2.75 %), with re-pricing and payments due quarterly.

Those Subordinated Debentures mature on March 17, 2034, bear a current interest rate of 6.72 % (based on 3-month CME Term SOFR plus tenor spread adjustment of 0.26161 % plus 2.75 %), with re-pricing and payments due quarterly.

Those Subordinated Debentures are currently redeemable by the Company, subject to receipt by the Company of prior approval from the Federal Reserve Bank, on any March 17 th , June 17 th , September 17 th , or December 17 th .

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The Subordinated Debentures, purchased by Trust IV, represent the sole assets of the Trust IV.

Those Subordinated Debentures mature on December 15, 2037 , bear a current interest rate of 6.12 % (based on 3-month CME Term SOFR plus tenor spread adjustment of 0.26161 % plus 1.50 %), with re-pricing and payments due quarterly.

Those Subordinated Debentures mature on December 15, 2037 , bear a current interest rate of 5.48 % (based on 3-month

CME Term SOFR plus tenor spread adjustment of 0.26161 % plus 1.50 %), with re-pricing and payments due quarterly.

Those Subordinated Debentures are currently redeemable by the Company, subject to receipt by the Company of prior approval from the FRBSF, on any March 15 th , June 15 th , September 15 th , or December 15 th .

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Year Ended December 31,

Effect of tax act

Total federal

Total tax provision

Current expense:

Total current tax expense

Deferred expense:

Total deferred tax (benefit) expense

Total income tax expense

The components of the net deferred tax asset, included in other assets, are as follows (dollars in thousands):

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State income tax deduction

Unrealized losses on securities available-for-sale

Unrealized losses on debt securities

Total deferred tax assets

Deferred tax liabilities:

Deferred loan costs

Deferred loan origination costs

Right-of-use asset

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The Company believes that the deferred tax assets will be fully realized, therefore no valuation allowance has been recorded.

The expense for income taxes differs from amounts computed by applying the statutory Federal income tax rates to income before income taxes.

The significant items comprising these differences consisted of the following (dollars in thousands):

The Company adopted ASU 2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” on a prospective basis beginning with the year ended December 31, 2025.

A reconciliation of income tax expense at the U.S.

federal statutory rate ( 21 % in 2025) to the Company’s actual income tax expense for the year ended December 31, 2025, is shown below:

Year Ended December 31, 2025

Income tax expense at federal statutory rate

State and local income tax, net of federal tax effect (1)

Affordable housing tax credits, net of amortization and other income tax benefit

Nontaxable or nondeductible items

Tax-exempt interest, net of disallowance

Bank-owned life insurance

Other adjustments

(1) State taxes in California made up the majority ( greater than 50 percent ) of the tax effect in this category.

The following table is a reconciliation of the statutory U.S.

corporate federal income tax rate to the Company’s effective tax rate for 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:

Year Ended December 31,

Income tax expense at federal statutory rate

Increase (decrease) resulting from:

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Effective tax rate

Income taxes paid were as follows (dollars in thousands):

Other state and local

The Company is subject to federal income tax and income tax of various states.

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unsecured personal lines of credit;

and formalized (disclosed) deposit account overdraft lines.

and formalized deposit account overdraft lines.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

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In the ordinary course of our business, the Company is subject to legal proceedings and claims which we believe are incidental to the operation of our business.

The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict.

Upon consultation with legal counsel and based on information currently available to us, management does not expect the amount of any resulting liability, in addition to amounts already accrued and taking into consideration insurance which may be applicable, to have a material adverse effect on the consolidated financial position or results of operations of the Company.

The outcome of such legal actions and the timing of ultimate resolution

are inherently difficult to predict.

Given the nature, scope, and complexity of the extensive legal and regulatory landscape applicable to banking (including laws and regulations governing consumer protection, fair lending, privacy, information security, and anti-money laundering and anti-terrorism laws), we like all banking organizations, are subject to heightened legal and regulatory compliance and litigation risk.

The Company will establish litigation and legal reserves, where appropriate, in accordance with FASB guidance over loss contingencies (ASC 450).

The outcome of litigation and other legal and regulatory matters is inherently uncertain, however, and it is possible that one or more of the legal or regulatory matters currently pending or

threatened could have a material adverse effect on our liquidity, consolidated financial position, and/or results of operations.

The outcome of litigation and other legal and regulatory matters is inherently uncertain, however, and it is possible that one or more of the legal or regulatory matters currently pending or threatened could have a material adverse effect on our liquidity, consolidated financial position, and/or results of operations.

SHAREHOLDERS’ EQUITY

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Stock options and unvested restricted stock awards for 250,391 and 298,986 shares of common stock were not considered in computing diluted earnings per common share for 2024 and 2023, respectively, because they were antidilutive.

There were no antidilutive shares of common stock in 2025.

Stock Options

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The 2023 Plan replaced the Company’s 2017 Stock Incentive Plan (the “2017 Plan”).

Options to purchase 172,600 shares granted under the 2017 Plan and options to purchase 67,000 shares that were granted under the 2007 Plan were still outstanding as of December 31, 2024, and remain unaffected by that plan’s expiration.

Options to purchase 139,400 shares granted under the 2017 Plan and options to purchase 50,000 shares that were granted under the 2007 Plan were still

outstanding as of December 31, 2025, and remain unaffected by that plan’s expiration.

The 2023 Plan provides for the issuance of several types of equity awards, including options, stock appreciation rights, restricted stock awards, restricted share units, performance share awards, dividend equivalents, or any combination thereof.

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All options granted under the 2023 , 2017 , and 2007 Plans have been or will be granted at an exercise price of not less than 100 % of the fair market value of the stock on the date of grant, exercisable in installments as provided in individual stock option agreements.

In the event of a “Change in Control” as defined in the Plans, all outstanding options shall become exercisable in full (subject to certain notification requirements) and

shall terminate if not exercised within a specified period of time unless such options are assumed by the successor corporation or substitute options are granted.

In the event of a “Change in Control” as defined in the Plans, all outstanding options shall become exercisable in full (subject to certain notification requirements) and shall terminate if not exercised within a specified period of time unless such options are assumed by the successor corporation or substitute options are granted.

Options also terminate in the event an optionee ceases to be employed by or to serve as a director of the Company or its subsidiaries, and the vested portion thereof must be exercised within a specified period after such cessation of employment or service.

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This amount changes based on changes in the market value of the Company’s stock.

(2) The weighted average remaining contractual life of stock options outstanding and exercisable on December 31, 2024 was 3.72 years and 3.69 years, respectively.

(2) The weighted average remaining contractual life of stock options outstanding and exercisable on December 31, 2025 was 2.83 years.

Information related to stock options during each year follows (dollars in thousands):

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Total fair value of stock options vested

$ 1.5 million in cash was received from the exercise of 78,249 shares during the year ended December 31, 2024, with a related tax benefit of $ 0.2 million.

During the year ended December 31, 2025, $ 0.9 million in cash was received from the exercise of 35,200 shares with a small related tax benefit.

During the year ended December 31, 2024, $ 1.5 million in cash was received from the exercise of 78,249 shares with a related tax benefit of $ 0.2 million.

No shares were exercised during the year ended December 31, 2023.

$ 0.3 million in cash was received from the exercise of 29,640 shares during the period ended December 31, 2022, with a related tax benefit of $ 0.1 million.

The Company is using the Black-Scholes model to value stock options.

The Company used the Black-Scholes model to value stock options.

In accordance with U.S.

GAAP, charges of $ 0.03 million, $ 0.1 million, and $ 0.1 million are reflected in the Company’s income statements for the years ended December 31, 2024, 2023, and 2022, respectively, as pre-tax compensation and directors’ expense related to stock options.

The related tax benefit of these options is $ 0.01 million for the year ended December 31, 2024, $ 0.02 million for the year ended December 31, 2023 and $ 0.03 million for the year ended December 31, 2022.

Unamortized compensation expense associated with unvested stock options outstanding at December 31, 2024 was immaterial and all unvested stock options will be fully amortized by February 2025.

GAAP, charges $ 0.03 million and $ 0.1 million are reflected in the Company’s income statements for the years ended December 31, 2024 and 2023, respectively, as pre-tax compensation and directors’ expense related to stock options.

There was an inconsequential expense recorded for the year ended December 31, 2025, and all outstanding stock options are now fully vested and therefore fully expensed.

The related tax benefit of these options was inconsequential for the years ended December 31, 2025 and 2024.

There is no unamortized compensation expense associated with unvested stock options outstanding at December 31, 2025, and all stock options are fully amortized as of February 2025.

Restricted Stock Grants

The Company’s restricted stock awards granted under the 2017 Plan and 2023 Plan are non-transferrable shares of common stock and are available to be granted to the Company’s employees and directors.

The Company’s restricted stock awards granted under the 2017 Plan and 2023 Plan are non-transferable shares of common stock and are available to be granted to the Company’s employees and directors.

The vesting period of restricted stock awards is determined at the time the awards are issued, and different awards may have different vesting terms;

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These awards are expensed on a straight-line basis over the vesting period.

Compensation expense related to restricted stock units for the years ended December 31, 2024, 2023 and 2022 was $ 1.9 million,

$ 1.7 million, and $ 1.2 million respectively, and the recognized income tax benefit related to this expense was $ 0.6 million, $ 0.5 million, and $ 0.4 million, respectively.

Compensation expense related to restricted stock units for the years ended December 31, 2025, 2024, and 2023 was $ 2.2 million, $ 1.9 million, and $ 1.7 million respectively, and the recognized income tax benefit related to this expense was $ 0.8 million, $ 0.6 million, and $ 0.5 million, respectively.

As of December 31, 2025, there was $ 2.7 million of unamortized compensation and directors’ cost related to unvested restricted stock awards granted under the 2023 and 2017 plans.

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Under the final rule, an eligible banking organization can opt out of the CBLR framework and revert back to the risk-weighting framework without restriction.

Both the Company and the Bank have continuously remained as qualifying community banking organizations and elected to adopt and measure capital adequacy under the CBLR framework since it became effective in 2020.

The CBLR framework removes the requirement for qualifying banking organizations to calculate and report risk-based capital but rather only requires a Tier 1 to average assets (leverage) ratio.

Both the Company and the Bank have continuously remained as qualifying

community banking organizations and elected to adopt and measure capital adequacy under the CBLR framework since it became effective in 2020.

The CBLR framework removes the requirement for qualifying banking organizations to calculate and report risk-based capital ratios, but rather only requires a Tier 1 to average assets (leverage) ratio.

Qualifying banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than required minimums will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies' capital rules (generally applicable rule) and, if applicable, will be considered to have met the well capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act.

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Salary Continuation Agreements, Directors’ Retirement and Officer Supplemental Life Insurance Plans

The Company entered into salary continuation agreements with its executive officers in 2002 and 2007 and has established retirement plans for certain qualifying members of the Board of Directors.

The Company entered into salary continuation agreements with certain senior officers in 2002 and 2007 and also established retirement plans for certain qualifying members of the Board of Directors at the same time.

The plans provide for annual benefits for up to fifteen years after retirement or death.

The benefit obligation under these plans totaled $ 4.1 million and $ 4.7 million for the years ended December 31, 2024 and 2023 and was fully accrued for both years.

There was no expense accrual recognized under these arrangements for the year ended December 31, 2024.

The expense recognized under these arrangements totaled $ 0.3 million for both years ended December 31, 2023 and 2022.

The benefit obligation under these plans is recognized on the consolidated balance sheet in other liabilities and totaled $ 3.9 million and $ 4.1 million for the years ended December 31, 2025 and 2024, and was fully accrued for both years.

There was a $ 0.2 million expense accrual recognized under these arrangements for the year ended December 31, 2025, and no expense accrual recorded in 2024.

The expense recognized under these arrangements totaled $ 0.3 million for the year ended December 31, 2023.

Salary continuation benefits paid to former directors or executives of the Company, or their beneficiaries totaled $ 0.4 million, $ 0.5 million, and $ 0.5 million for the years ended December 31, 2025, 2024, and 2023.

Certain officers of the Company have supplemental life insurance policies with death benefits available to the officers’ beneficiaries with an accumulated post-retirement benefit liability of $ 0.9 million for the years ended December 31, 2024 and 2023.

Certain officers of the Company have supplemental life insurance policies with death benefits available to the officers’ beneficiaries with an accumulated post-retirement benefit liability of $ 0.8 million and $ 0.9 million for the years ended December 31, 2025 and 2024, respectively.

In connection with these plans and other employee benefit plans of the Company, the Company has purchased, or acquired through merger, single premium life insurance policies with cash surrender values totaling $ 56.1 million and $ 41.3 million at December 31, 2025 and 2024.

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however, the changes to the liability related to income earned on participant deferrals can be significant.

The deferred compensation liability totaled $ 12.3 million and $ 10.2 million at December 31, 2024 and 2023, respectively.

The deferred compensation liability totaled $ 13.7 million and $ 12.3 million at December 31, 2025 and 2024, respectively, and is in other liabilities on the Company’s consolidated balance sheet.

Although there is no requirement to fund this plan, the Company has purchased life insurance policies with cash surrender values totaling $ 13.2 million and $ 11.8 million at December 31, 2025 and 2024, respectively, which are specific account policies with underlying investments similar to the hypothetical investments elected inside the participant deferred compensation accounts.

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The 401(k) savings plan (the “Plan”) allows participants to defer, on a pre-tax basis, up to 15 % of their salary (subject to Internal Revenue Service limitations) and accumulate tax-deferred earnings as a retirement fund.

The amount of the matching contribution was 80 % for each of the years ended December 31, 2023 and 2022, with vesting over a period of five years from the participants’ hire date.

The amount of the matching contribution was 80 % for the year ended December 31, 2022, with vesting over a period of five years from the participants’ hire date.

Starting in 2024, the Company has adopted a safe-harbor plan and matched 100 % of the first 2% of participants’ 401(k) elective deferral contributions, and 50 % of participants’ 401(k) elective deferral contributions which are over 2% of participants’ pay but are not over 6% of participants’ pay.

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Included in other income:

Amortization of limited partnerships

Dividends on equity investments

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Foreclosed assets expense

Regulatory assessments

Total other noninterest expense

(1) Includes directors’ fees and deferred directors’ fees.

RELATED PARTY TRANSACTIONS

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In certain circumstances live trading desk pricing from brokerages and third-party internal models are used to value debt securities that we classify as Level 3.

Collateral-dependent loans :

A specific loss allowance is created for collateral dependent loans, representing the difference between the face value of the loan and the current appraised value of its associated collateral, less estimated disposition costs.

Individually evaluated collateral dependent loans :

Individually evaluated collateral dependent loans are measured based on the fair value of collateral when foreclosure is probable, or repayment is expected through the sale or operation of collateral and borrower is experiencing financial difficulty.

For real estate loans, fair value of the loan’s collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral.

For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property.

For example, land is generally based on the sales comparable method while construction is based on the income and/or sales comparable methods.

The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach.

The Company reviews the third-party appraisal for appropriateness and adjusts the value downward to consider selling and closing costs, which typically range from 5 % to 10 % of the appraised value.

Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on Management’s historical knowledge, changes in market conditions from the time of the valuation, and Management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.

Collateral-dependent loans are evaluated on a quarterly basis and adjusted in accordance with the allowance for credit losses policy.

Foreclosed assets :

Repossessed real estate (OREO) and other assets are carried at the lower of cost or fair value.

Fair value is the appraised value less expected selling costs for OREO and some other assets such as mobile homes, and for all other assets fair value is represented by the estimated sales proceeds as determined using reasonably available sources.

Foreclosed assets for which appraisals can be feasibly obtained are periodically measured for impairment using updated appraisals.

Fair values for other foreclosed assets are adjusted as necessary, subsequent to a periodic re-evaluation of expected cash flows and the timing of resolution.

If impairment is determined to exist, the book value of a foreclosed asset is immediately written down to its estimated impaired value through the income statement, thus the carrying amount is equal to the fair value and there is no valuation allowance.

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired or when foreclosure is imminent.

Repossessed real estate (known as other real estate owned, or “OREO”) and other foreclosed assets are reported at fair value on a non-recurring basis.

Fair values of OREO are based on recent real estate appraisals which are updated no less frequently than annually.

These appraisals may use a single valuation approach or a combination of approaches including sales comparison, cost approach, and the income approach.

Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data.

Management also incorporates assumptions regarding market trends or other relevant factors and selling and commission costs ranging from 5 % to 10 %.

Such adjustments can be significant and typically result in a

Level 3 classification of the unobservable inputs for determining fair value.

Fair values for any other foreclosed assets are represented by estimated sales processed as determined using reasonably available sources.

The valuation technique used for Level 3 non-recurring OREO is primarily the sales comparison approach less estimated selling costs.

Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in thousands):

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Included in other comprehensive income

Transfers out of Level 3

Balance of recurring Level 3 assets at December 31,

Corporate bonds with a fair value of $ 54.5 million as of December 31, 2024 were transferred from Level 3 to Level 2 in the third quarter of 2025 because observable market data became available for the securities.

The following table present quantitative information about recurring level 3 fair value measurements at December 31, 2025 (dollars in thousands):

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Corporate Bonds

New issue pricing

Risk appetite

Secondary market pricing

Market volatility

Credit quality of issuer

Credit spread

Broker estimate

Discount rate

The following table presents quantitative information about recurring level 3 fair value measurements at December 31, 2024 (dollars in thousands):

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Collateral dependent loans

Foreclosed assets

Year Ended December 31, 2024

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Collateral dependent loans

There were no assets measured at fair value on a non-recurring basis with level 3 fair value measurements at December 31, 2024 or 2023.

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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The estimation of fair values of loans results in a Level 3 classification as it requires various assumptions and considerable judgement to incorporate factors relevant when selling loans to market participants, such as funding costs, return requirements of likely buyers and performance expectations of the loans given the current market environment and quality of loans.

Mortgage loans :

Fair value of mortgage loans, included in the table with loans held for investment, are based on the exit price notion set forth by ASU 2016-01 effective January 1, 2018 and estimated using discounted cash flow analyses.

The estimation of fair values of mortgage loans results in a Level 3 classification as it requires various assumptions and considerable judgement to incorporate factors relevant when selling loans to market participants,

such as funding costs, return requirements of likely buyers and performance expectations of the loans given the current market environment and quality of loans.

Collateral-dependent loans :

Fair values for non-maturity deposits are equal to the amount payable on demand at the reporting date, which is the carrying amount.

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The fair values of subordinated debentures are determined based on the current market value for like instruments of a similar maturity and structure.

Carrying amount and estimated fair values of financial instruments not carried at fair value were as follows (dollars in thousands):

Carrying amount and estimated fair values of financial instruments were as follows (dollars in thousands):

December 31, 2025

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Cash and cash equivalents

Securities available-for-sale

Securities held-to-maturity

Loans held for investment

Investment securities available-for-sale

Investment securities held-to-maturity

Loans held for investment, net

Financial Liabilities:

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Other borrowings

Long-term borrowings

Long-term debt

Subordinated debentures

Off-balance-sheet financial instruments:

Commitments to extend credit

Standby letters of credit

December 31, 2024

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Other borrowings

Long-term borrowings

Long-term debt

Subordinated debentures

Off-balance-sheet financial instruments:

Commitments to extend credit

Standby letters of credit

UNCONSOLIDATED VARIABLE INTEREST ENTITIES

T he Company has equity investments in Low Income Housing Tax Credit (LIHTC) partnerships, with carrying values of $ 22.6 million and $ 25.4 million as of December 31, 2025 and 2024, respectively.

The LITHCs are indirect federal subsidies to finance low-income housing and are used in connection with both newly constructed and renovated residential rental buildings.

Once a project is placed in service, it is generally eligible for the tax credit for ten years.

To continue generating the tax credit and to avoid tax credit recapture, a LIHTC building must satisfy specific low-income housing compliance rules for a full fifteen years.

The maximum exposure to loss in the VIEs is the amount of equity invested, and credit extended by the Company.

The Company reports the investments in the unconsolidated LIHTCs as other assets on the Company’s statements of financial condition.

There were no impairment losses on the Company’s LIHTC investments during the years ended December 31, 2025, 2024, and 2023.

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The Company has elected to use the proportional amortization method, and more specifically, the practical expedient method, for the amortization of all eligible LIHTC investments and amortization expense is recognized as a component of income tax expense.

The following table summarizes the amortization expense, and the amount of tax

credits and other tax benefits recognized for qualified affordable housing project investments during the period presented (dollars in thousands).

The following table summarizes the amortization expense, and the amount of tax credits and other tax benefits recognized for qualified affordable housing project investments during the period presented (dollars in thousands).

Year Ended December 31,

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All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within Noninterest Income.

The following table presents the Company’s sources of Noninterest Income for the twelve months ended December 31, 2024 and 2023.

The following table presents the Company’s sources of Noninterest Income for the

twelve months ended December 31, 2025 and 2024.

Items outside the scope of ASC 606 are noted as such (dollars in thousands).

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Debit card interchange income

Gain on limited partnerships (1)

Dividends on equity investments (1)

Unrealized losses recognized on equity investments (1)

Net gains on sale of securities (1)

Net gains (losses) on sale of securities (1)

Total noninterest income

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Undistributed net income of subsidiary

Gain on sale of securities

(Increase) decrease in other assets

Increase (decrease) in other liabilities

(Decrease) Increase in other liabilities

Net cash provided by operating activities

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Dividends paid

Issuance of debentures, net

Net cash (used) in provided by financing activities

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Cash paid during the year for:

CONDENSED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth the Company’s unaudited results of operations for the four quarters of 2024 and 2023.

In management’s opinion, the results of operations reflect all adjustments (which include only recurring adjustments) necessary to present fairly the condensed results for such periods (dollars in thousands, except per share data).

2024 Quarter Ended

September 30,

Interest income

Interest expense

Net interest income

Provision for credit losses

Noninterest income

Noninterest expense

Net income before taxes

Provision for taxes

Diluted earnings per share

Cash dividend per share

2023 Quarter Ended

September 30,

Interest income

Interest expense

Net interest income

Provision (benefit) for credit losses

Noninterest income

Noninterest expense

Net income before taxes

Provision for taxes

Diluted earnings per share

Cash dividend per share

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data