SIERRA BANCORP 10-Q

Item 1 – Financial Statements SIERRA BANCORP CONSOLIDATED BALANCE SHEETS (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 December 31, 2023 ASSETS ​ (unaudited) ​ (audited) Cash and due from banks ​ $ 70,908 ​ $ 73,721 Interest-bearing deposits in banks ​ ​ 48,336 ​ ​ 4,881 Total cash & cash equivalents ​ ​ 119,244 ​ ​ 78,602 Investment securities ​ ​ ​ ​ ​ ​ Available-for-sale, net of zero allowance for credit losses ​ ​ 741,789 ​ ​ 1,019,201 Held-to-maturity, net of allowance for credit losses of $ 16 and $ 16 ​ ​ 316,406 ​ ​ 320,057 Total investment securities ​ ​ 1,058,195 ​ ​ 1,339,258 Loans: ​ ​ ​ ​ ​ ​ Gross loans ​ ​ 2,156,864 ​ ​ 2,090,075 Deferred loan costs, net ​ ​ 214 ​ ​ 309 Allowance for credit losses on loans ​ ​ ( 23,140 ) ​ ​ ( 23,500 ) Net loans ​ ​ 2,133,938 ​ ​ 2,066,884 Premises and equipment, net ​ ​ 16,067 ​ ​ 16,907 Goodwill ​ ​ 27,357 ​ ​ 27,357 Other intangible assets, net ​ ​ 1,180 ​ ​ 1,399 Bank-owned life insurance ​ ​ 52,977 ​ ​ 51,572 Other assets ​ ​ 144,114 ​ ​ 147,820 Total assets ​ $ 3,553,072 ​ $ 3,729,799 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ ​ Noninterest-bearing ​ $ 968,996 ​ $ 1,020,772 Interest-bearing ​ ​ 1,878,008 ​ ​ 1,740,451 Total deposits ​ ​ 2,847,004 ​ ​ 2,761,223 Repurchase agreements ​ ​ 121,851 ​ ​ 107,121 Other borrowings ​ ​ 80,000 ​ ​ 360,500 Long-term debt ​ ​ 49,326 ​ ​ 49,304 Subordinated debentures ​ ​ 35,704 ​ ​ 35,660 Allowance for credit losses on unfunded loan commitments ​ ​ 540 ​ ​ 510 Other liabilities ​ ​ 73,553 ​ ​ 77,384 Total liabilities ​ ​ 3,207,978 ​ ​ 3,391,702 ​ ​ ​ ​ ​ ​ ​ Commitments and contingent liabilities (Note 7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shareholders' equity ​ ​ ​ ​ ​ ​ Common stock, no par value; 24,000,000 shares authorized; 14,645,298 and 15,170,372 shares issued and outstanding at March 31, 2024, and December 31, 2023, respectively ​ ​ 109,295 ​ ​ 110,446 Additional paid-in capital ​ ​ 4,815 ​ ​ 4,581 Retained earnings ​ ​ 262,906 ​ ​ 259,050 Accumulated other comprehensive loss, net ​ ​ ( 31,922 ) ​ ​ ( 35,980 ) Total shareholders' equity ​ ​ 345,094 ​ ​ 338,097 Total liabilities and shareholders' equity ​ $ 3,553,072 ​ $ 3,729,799 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 1 Table of Contents SIERRA BANCORP CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2024, and 2023 (dollars in thousands, except per share data, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ 2024 2023 Interest and dividend income ​ ​ ​ ​ ​ ​ Loans, including fees $ 25,426 $ 22,550 Taxable securities ​ ​ 13,303 ​ ​ 11,986 Tax-exempt securities ​ ​ 1,989 ​ ​ 2,813 Federal funds sold and other ​ ​ 243 ​ ​ 70 Total interest income ​ ​ 40,961 ​ ​ 37,419 Interest expense ​ ​ ​ ​ ​ ​ Deposits ​ ​ 9,645 ​ ​ 5,999 Federal funds purchased and repurchase agreements ​ ​ 286 ​ ​ 1,560 Federal Home Loan Bank advances ​ ​ 1,127 ​ ​ 632 Long-term debt ​ ​ 431 ​ ​ 429 Subordinated debentures ​ ​ 755 ​ ​ 667 Total interest expense ​ ​ 12,244 ​ ​ 9,287 Net interest income ​ ​ 28,717 ​ ​ 28,132 Credit loss expense - loans ​ ​ 97 ​ ​ 250 Credit loss expense - unfunded commitments ​ ​ 30 ​ ​ 10 Net interest income after provision for credit losses ​ ​ 28,590 ​ ​ 27,872 Noninterest income ​ ​ ​ ​ ​ ​ Service charges and fees on deposit accounts ​ ​ 5,726 ​ ​ 5,380 Net (loss) gain on sale of securities available-for-sale ​ ​ ( 2,883 ) ​ ​ 45 Net gain on sale of fixed assets ​ ​ 3,799 ​ ​ 14 Increase in cash surrender value of life insurance ​ ​ 1,215 ​ ​ 172 Realized gain on available-for-sale securities ​ ​ 66 ​ ​ — Other income ​ ​ 666 ​ ​ 968 Total noninterest income ​ ​ 8,589 ​ ​ 6,579 Noninterest expense ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 13,197 ​ ​ 12,816 Occupancy and equipment costs ​ ​ 3,025 ​ ​ 2,330 Other ​ ​ 8,304 ​ ​ 7,846 Total noninterest expense ​ ​ 24,526 ​ ​ 22,992 Income before taxes ​ ​ 12,653 ​ ​ 11,459 Provision for income taxes ​ ​ 3,323 ​ ​ 2,708 Net income ​ $ 9,330 ​ $ 8,751 ​ ​ ​ ​ ​ ​ ​ PER SHARE DATA ​ ​ ​ ​ ​ ​ Book value ​ $ 23.56 ​ $ 20.40 Cash dividends ​ $ 0.23 ​ $ 0.23 Earnings per share basic ​ $ 0.64 ​ $ 0.58 Earnings per share diluted ​ $ 0.64 ​ $ 0.58 Average shares outstanding, basic ​ ​ 14,508,468 ​ ​ 14,971,842 Average shares outstanding, diluted ​ ​ 14,553,627 ​ ​ 15,002,366 ​ ​ ​ ​ ​ ​ ​ Total shareholders' equity (in thousands) ​ $ 345,094 ​ $ 307,010 Shares outstanding ​ ​ 14,645,298 ​ ​ 15,050,740 Dividends paid (in thousands) ​ $ 3,396 ​ $ 3,495 ​ The accompanying notes are an integral part of these consolidated financial statements. 2 Table of Contents ​ SIERRA BANCORP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2024, and 2023 (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ 2024 2023 Net income ​ $ 9,330 ​ $ 8,751 Other comprehensive gain, before tax: ​ ​ ​ ​ ​ ​ Unrealized gain on securities: ​ ​ ​ ​ ​ ​ Unrealized holding gain arising during period ​ ​ 2,877 ​ ​ 756 Less: reclassification adjustment for losses (gains) included in net income (1) ​ ​ 2,883 ​ ​ ( 45 ) Other comprehensive gain, before tax ​ ​ 5,760 ​ ​ 711 Income tax expense related to items of other comprehensive gain ​ ​ ( 1,702 ) ​ ​ ( 210 ) Other comprehensive gain, net of tax: ​ ​ 4,058 ​ ​ 501 Comprehensive income ​ $ 13,388 ​ $ 9,252 (1) Amounts are included in net gains on investment securities available-for-sale on the Consolidated Statements of Income in noninterest income. Income tax expenses associated with the reclassification adjustment for the three months ended March 31, 2024, and 2023, was $ 0.8 million and $ 0.01 million, respectively. ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 3 Table of Contents SIERRA BANCORP CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2024, and 2023 (dollars in thousands, except per share data, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Common Stock ​ Paid In ​ Retained ​ Comprehensive ​ Shareholders' ​ Shares Amount Capital Earnings Loss Equity Balance, December 31, 2022 ​ 15,170,372 ​ $ 112,928 ​ $ 4,148 ​ $ 243,082 ​ $ ( 56,576 ) ​ $ 303,582 Net income ​ — ​ ​ — ​ ​ — ​ ​ 8,751 ​ ​ — ​ ​ 8,751 Other comprehensive gain, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 501 ​ ​ 501 Restricted stock granted ​ 29,064 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock surrendered due to employee tax liability ​ ( 1,764 ) ​ ​ ( 13 ) ​ ​ — ​ ​ ( 23 ) ​ ​ — ​ ​ ( 36 ) Restricted stock forfeited / cancelled ​ ( 514 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock based compensation - stock options ​ — ​ ​ — ​ ​ 20 ​ ​ — ​ ​ — ​ ​ 20 Stock based compensation - restricted stock ​ — ​ ​ — ​ ​ 393 ​ ​ — ​ ​ — ​ ​ 393 Stock repurchase ​ ( 146,418 ) ​ ​ ( 1,088 ) ​ ​ — ​ ​ ( 1,592 ) ​ ​ — ​ ​ ( 2,680 ) Excise tax on stock repurchase ​ — ​ ​ ( 26 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 26 ) Cash dividends - $ 0.23 per share ​ — ​ ​ — ​ ​ — ​ ​ ( 3,495 ) ​ ​ — ​ ​ ( 3,495 ) Balance, March 31, 2023 ​ 15,050,740 ​ $ 111,801 ​ $ 4,561 ​ $ 246,723 ​ $ ( 56,075 ) ​ $ 307,010 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2023 ​ 14,793,832 ​ $ 110,446 ​ $ 4,581 ​ $ 259,050 ​ $ ( 35,980 ) ​ $ 338,097 Net income ​ — ​ ​ — ​ ​ — ​ ​ 9,330 ​ ​ — ​ ​ 9,330 Other comprehensive gain, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,058 ​ ​ 4,058 Restricted stock granted ​ 36,114 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted shares withheld for taxes ​ ( 5,062 ) ​ ​ ( 38 ) ​ ​ — ​ ​ ( 63 ) ​ ​ — ​ ​ ( 101 ) Restricted stock forfeited / cancelled ​ ( 649 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock vested in period ​ — ​ ​ 253 ​ ​ ( 253 ) ​ ​ — ​ ​ — ​ ​ — Stock based compensation - stock options ​ — ​ ​ — ​ ​ 14 ​ ​ — ​ ​ — ​ ​ 14 Stock based compensation - restricted stock ​ — ​ ​ — ​ ​ 473 ​ ​ — ​ ​ — ​ ​ 473 Stock repurchase ​ ( 178,937 ) ​ ​ ( 1,334 ) ​ ​ — ​ ​ ( 2,015 ) ​ ​ — ​ ​ ( 3,349 ) Excise tax on stock repurchase ​ — ​ ​ ( 32 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 32 ) Cash dividends - $ 0.23 per share ​ — ​ ​ — ​ ​ — ​ ​ ( 3,396 ) ​ ​ — ​ ​ ( 3,396 ) Balance, March 31, 2024 ​ 14,645,298 ​ $ 109,295 ​ $ 4,815 ​ $ 262,906 ​ $ ( 31,922 ) ​ $ 345,094 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ ​ 4 Table of Contents SIERRA BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2024, AND 2023 (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ 2024 2023 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 9,330 ​ $ 8,751 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Loss (gain) on sales of securities ​ ​ 2,883 ​ ​ ( 45 ) Realized gain on securities transaction ​ ​ ( 66 ) ​ ​ — Gain on disposal of fixed assets ​ ​ ( 3,799 ) ​ ​ ( 14 ) Stock based compensation expense ​ ​ 487 ​ ​ 413 Provision for credit losses on loans ​ ​ 97 ​ ​ 250 Depreciation and amortization ​ ​ 534 ​ ​ 604 Net amortization on securities premiums and discounts ​ ​ 375 ​ ​ 743 Net accretion of premiums/discounts for loans acquired ​ ​ ( 55 ) ​ ​ ( 124 ) Increase in cash surrender value of life insurance policies ​ ​ ( 1,215 ) ​ ​ ( 172 ) Amortization of core deposit intangible ​ ​ 219 ​ ​ 219 Decrease in interest receivable and other assets ​ ​ 1,220 ​ ​ 3,185 Decrease in other liabilities ​ ​ ( 3,833 ) ​ ​ ( 3,643 ) Deferred income tax benefit ​ ​ ( 137 ) ​ ​ ( 119 ) Decrease in value of restricted bank equity securities ​ ​ 311 ​ ​ 291 Amortization of debt issuance costs ​ ​ 22 ​ ​ 22 Net amortization of partnership investment ​ ​ 608 ​ ​ 166 Net cash provided by operating activities ​ ​ 6,981 ​ ​ 10,527 Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Maturities and calls of securities available for sale ​ ​ 33,713 ​ ​ 21,864 Proceeds from sales of securities available for sale ​ ​ 233,187 ​ ​ 14,349 Purchase of securities available for sale ​ ​ — ​ ​ ( 149,172 ) Principal pay downs on securities available for sale ​ ​ 16,733 ​ ​ 11,128 Loan originations and payments, net ​ ​ ( 67,096 ) ​ ​ ( 422 ) Purchases of premises and equipment ​ ​ ( 369 ) ​ ​ ( 413 ) Proceeds from sale of premises and equipment ​ ​ 4,518 ​ ​ 25 Proceeds from sales of foreclosed assets ​ ​ — ​ ​ 19,151 Purchase of bank-owned life insurance ​ ​ ( 190 ) ​ ​ ( 202 ) Proceeds from BOLI death benefit ​ ​ — ​ ​ 235 Net cash provided by (used in) investing activities ​ ​ 220,496 ​ ​ ( 83,457 ) Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Increase in deposits ​ ​ 85,781 ​ ​ 102,824 (Decrease) increase in Fed funds purchased ​ ​ ( 130,000 ) ​ ​ 25,000 Decrease in short-term Federal Home Loan Bank advances ​ ​ ( 150,500 ) ​ ​ ( 27,200 ) Increase (decrease) in customer repurchase agreements ​ ​ 14,730 ​ ​ ( 15,108 ) Cash dividends paid ​ ​ ( 3,396 ) ​ ​ ( 3,495 ) Repurchases of common stock ​ ​ ( 3,450 ) ​ ​ ( 2,716 ) Net cash (used in) provided by financing activities ​ ​ ( 186,835 ) ​ ​ 79,305 ​ ​ ​ ​ ​ ​ ​ Increase in cash and cash equivalents ​ ​ 40,642 ​ ​ 6,375 Cash and cash equivalents ​ ​ ​ ​ ​ ​ Beginning of period ​ ​ 78,602 ​ ​ 77,131 End of period ​ $ 119,244 ​ $ 83,506 Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ Interest paid ​ $ 13,276 ​ $ 8,511 Supplemental schedule of noncash investing and financing activities: ​ ​ ​ ​ ​ ​ Real estate acquired through foreclosure ​ $ — ​ $ 15,406 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 5 Table of Contents ​ SIERRA BANCORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2024 (Unaudited) Note 1 – The Business of Sierra Bancorp Sierra Bancorp (the “Company”) is a California corporation headquartered in Porterville, California, and is a registered bank holding company under federal banking laws. The Company was formed to serve as the holding company for Bank of the Sierra (the “Bank”) and has been the Bank’s sole shareholder since August 2001. The Company exists primarily for the purpose of holding the stock of the Bank and of such other subsidiaries it may acquire or establish. As of March 31, 2024, the Company’s only other subsidiaries were 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 (“TRUPS”). Pursuant to the Financial Accounting Standards Board (“FASB”) standard on the consolidation of variable interest entities, these trusts are not reflected on a consolidated basis in the Company’s financial statements. References herein to the “Company” include Sierra Bancorp and its consolidated subsidiary, the Bank, unless the context indicates otherwise. Bank of the Sierra, a California state-chartered bank headquartered in Porterville, California, offers a wide range of retail and commercial banking services via branch offices located throughout California’s South San Joaquin Valley, the Central Coast, Ventura County, the Sacramento area, and neighboring communities. The Bank was incorporated in September 1977, and opened for business in January 1978 as a one -branch bank with $ 1.5 million in capital. Our growth in the ensuing years has largely been organic in nature but includes four whole-bank acquisitions: Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in October 2017. As of the filing date of this report the Bank operates 35 full-service branches and an online branch and maintains ATMs at all but one of our branch locations as well as at seven non-branch locations. Moreover, the Bank has specialized lending units which focus on agricultural borrowers, commercial real estate, and mortgage warehouse lending. In addition, in February 2020 the Bank opened a loan production office which is currently located in Roseville, CA. To support organic growth in the agricultural and commercial lending sectors the Bank opened a loan production office in Templeton, CA in April 2022. The Company had total assets of $ 3.6 billion at March 31, 2024, and for a number of years we have claimed the distinction of being the largest bank headquartered in the South San Joaquin Valley. The Bank’s deposit accounts, which totaled $ 2.8 billion at March 31, 2024, are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to maximum insurable amounts. ​ Note 2 – Basis of Presentation The accompanying interim unaudited consolidated financial statements have been prepared in a condensed format as allowed under U.S. generally accepted accounting principles (“GAAP”). Therefore, these financial statements do not include all of the information and footnotes required for complete, audited financial statements as presented in the Company’s Annual Report on Form 10-K. The information furnished in these interim statements reflects all adjustments that are, in the opinion of Management, necessary for a fair statement of the results for such periods. Such adjustments can generally be considered as normal and recurring unless otherwise disclosed in this Form 10-Q. In preparing the accompanying financial statements, Management has taken subsequent events into consideration, through May 6, 2024 and recognized them where appropriate. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter, or for the full year. Certain amounts reported for 2023 have been reclassified to be consistent with the reporting for 2024, none of which impacted net income or shareholders’ equity. The interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”). ​ Note 3 – Current Accounting Developments In March 2023 the FASB issued , ASU No. 2023-02 , “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” ASU 2023-02 is intended to improve the accounting and disclosures for investments in tax credit structures. ASU 2023-02 allows entities 6 Table of Contents to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. Previously, this method was only available for qualifying tax equity investments in low-income housing tax credit structures. ASU 2023-02 was effective for the Company on January 1, 2024, and its adoption did not have a significant effect on the Company’s financial statements. ​ On October 9, 2023, the FASB issued ASU 2023-06, “ Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification of Initiative.” ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The ASU was issued in response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant, duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. ASU 2023-06 applies to all reporting entities within the scope of the amended subtopics. Note that some of the amendments introduced by the ASU are technical corrections or clarifications of the FASB’s current disclosure or presentation requirements. The effective date for each amendment of ASU 2023-06 will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company will apply the amendments in ASU 2023-06 prospectively after the effective dates. The adoption of this standard is not expected to have a significant effect on the Company’s financial statements. ​ In November 2023 the FASB issued, ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 expands segment disclosure requirements for public entities to require disclosure of significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 was adopted by the Company on January 1, 2024, and did not have a significant impact on the 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 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 the financial statements. ​ Note 4 – Share Based Compensation On March 17, 2023, the Company’s Board of Directors approved and adopted the 2023 Equity Compensation Plan (the “2023 Plan”), which became effective May 24, 2023, the date approved by the Company’s shareholders. The 2023 Plan replaced the Company’s 2017 Stock Incentive Plan (the “2017 Plan”). Options to purchase 191,600 shares granted under the 2017 Plan and options to purchase 130,649 shares that were granted under the 2007 Plan were still outstanding as of March 31, 2024, and remain unaffected by that plan’s expiration. The 2023 Plan provides for the issuance of various types of equity awards, including options, stock appreciation rights, restricted stock awards, restricted share units, performance share awards, dividend equivalents, or any combination thereof. Such awards may be granted to officers and employees as well as non-employee directors, which awards may be granted on such terms and conditions as are established by the Board of Directors or the Compensation Committee in its discretion. The total number of shares of the Company’s authorized but unissued stock reserved for issuance pursuant to awards under the 2023 Plan was initially 360,000 shares, and the number remaining available for grant as of March 31, 2024, was 259,913 . The potential dilutive impact of unexercised stock options is discussed below in Note 5, Earnings per Share. Pursuant to FASB’s standards on stock compensation, the value of each stock option and restricted stock award is reflected in our income state­ment as employee compensation or directors’ expense by amortizing its grant date fair value over the vesting period of the option or award. The Company utilizes a Black-Scholes model to determine grant date fair values for options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. 7 Table of Contents Forfeitures are reflected in compensation costs as they occur for both types of awards. A pre-tax charge of $ 0.5 million was reflected in the Company’s income statement during the first quarter of 2024 and $ 0.4 million during the first quarter of 2023, as expense related to stock options and restricted stock awards. Restricted Stock Grants The Company’s Restricted Stock Awards are awards of either time-vested or performance-based shares. The Restricted Stock Awards are non-transferrable 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 or performance measures; provided, however, that no installment of any Restricted Stock Award shall become vested less than one year from the grant date. Restricted Stock Awards are valued utilizing the fair value of the Company’s stock at the grant date. These awards are expensed on a straight-line basis over the vesting period and consider the probability of meeting the performance criteria. There were 36,114 shares granted to employees of the Company during the first three months of 2024. As of March 31, 2024, there was $ 3.4 million of unamortized compensation cost related to unvested Restricted Stock Awards granted under the 2017 plan. That cost is expected to be amortized over a weighted average period of 2.3 years. The Company’s restricted stock award activity for the three months ended March 31, 2024, and 2023 is summarized below (unaudited): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ ​ 2024 ​ 2023 ​ ​ Shares ​ ​ Weighted Average Grant-Date Fair Value ​ Shares ​ ​ Weighted Average Grant-Date Fair Value Unvested shares, January 1, ​ 238,179 ​ $ 20.30 ​ 175,619 ​ $ 21.42 Granted ​ 36,114 ​ ​ 19.10 ​ 29,064 ​ ​ 21.50 Vested ​ ( 11,224 ) ​ ​ 22.57 ​ ( 3,162 ) ​ ​ 25.30 Forfeited ​ ( 649 ) ​ ​ 23.10 ​ ( 514 ) ​ ​ 27.16 Unvested shares, March 31, ​ 262,420 ​ $ 20.00 ​ 201,007 ​ $ 21.35 ​ ​ Stock Option Grants The Company has issued equity instruments in the form of Incentive Stock Options and Nonqualified Stock Options to certain officers and directors. No options have been granted since 2020, but the Company could elect to issue under the 2023 Plan. The exercise price of each stock option is determined at the time of the grant and may be no less than 100 % of the fair market value of such stock at the time the option is granted. The Company’s stock option activity during the three months ended March 31, 2024, and 2023 are summarized below (dollars in thousands, except per share data, unaudited): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ ​ 2024 ​ 2023 ​ Shares Weighted Average Exercise Price ​ Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1) Shares Weighted Average Exercise Price ​ Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1) Outstanding at January 1, ​ 343,449 ​ $ 25.02 ​ ​ ​ $ 447 ​ 352,249 ​ $ 25.06 ​ ​ ​ $ 348 Forfeited/Expired ​ ( 11,000 ) ​ $ 27.43 ​ ​ ​ $ — ​ ( 2,200 ) ​ $ 27.67 ​ ​ ​ $ — Outstanding at March 31, ​ 332,449 ​ $ 24.94 ​ 3.96 ​ $ 264 ​ 350,049 ​ $ 25.04 ​ 4.99 ​ $ 33 Exercisable at March 31, ​ 332,449 ​ $ 24.87 ​ 3.90 ​ $ 264 ​ 325,649 ​ $ 24.89 ​ 4.85 ​ $ 33 (1) The aggregate intrinsic value of stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2024. This amount changes based on changes in the market value of the Company's stock. ​ 8 Table of Contents ​ Note 5 – Earnings per Share The computation of earnings per share, as presented in the Consolidated Statements of Income, is based on the weighted average number of shares outstanding during each period, excluding unvested restricted stock awards. There were 14,508,468 weighted average shares outstanding during the first quarter of 2024 and 14,971,842 during the first quarter of 2023. Diluted earnings per share calculations include the effect of the potential issuance of common shares, which for the Company is limited to shares that would be issued on the exercise of “in-the-money” stock options, and unvested restricted stock awards. For the first quarter of 2024, calculations under the treasury stock method resulted in the equivalent of 45,159 , shares being added to basic weighted average shares outstanding for purposes of determining diluted earnings per share, while a weighted average of 268,991 stock options were excluded from the calculation because they were underwater and thus anti-dilutive. For the first quarter of 2023 the equivalent of 30,524 shares were added in calculating diluted earnings per share, while 327,141 anti-dilutive stock options were not factored into the computation. Note 6 – Comprehensive Income As presented in the Consolidated Statements of Comprehensive Income, comprehensive income includes net income and other comprehensive income. The Company’s only source of other comprehensive income is unrealized gains and losses on available-for-sale investment securities. Investment gains or losses that were realized and reflected in net income of the current period, which had previously been included in other comprehensive income as unrealized holding gains or losses in the period in which they arose, are considered to be reclassification adjustments that are excluded from other comprehensive income in the current period. Note 7 – Commitments and Contingent Liabilities The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business. Those financial instruments currently consist of unused commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss in the event of nonperformance by counterparties for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and issuing letters of credit as it does for originating loans included on the balance sheet. The following financial instruments represent off-balance-sheet credit risk (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 December 31, 2023 Commitments to extend credit ​ $ 512,305 ​ $ 482,054 Standby letters of credit ​ $ 4,790 ​ $ 5,040 ​ Commitments to extend credit consist primarily of the unused or unfunded portions of the following: mortgage warehouse lines, home equity lines of credit, commercial real estate construction loans, where disbursements are made over the course of construction; commercial revolving lines of credit, unsecured personal lines of credit and formalized (disclosed) deposit account overdraft lines. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn upon, the unused portions of committed amounts do not necessarily represent future cash requirements. Standby letters of credit are issued by the Company to guarantee the performance of a customer to a third party, and the credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. Included in unused commitments are mortgage warehouse lines which are in the form of repo lines and are unconditionally cancellable. Unused commitments on mortgage warehouse lines were $ 206.4 million at March 31, 2024, and $ 204.5 million at December 31, 2023. The ACL on unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment. The funding rate represents management’s estimate of the amount of the current unfunded commitment that will be funded over the 9 Table of Contents remaining contractual life of the commitment and is based on historical data. The ACL on unfunded loan commitments is located in other liabilities while any related provision expense is recorded as a provision for credit losses. At March 31, 2024, the Company was also utilizing a letter of credit in the amount of $ 127.9 million issued by the Federal Home Loan Bank on the Company’s behalf as security for certain deposits and to facilitate certain credit arrangements with the Company’s customers. That letter of credit is backed by loans which are pledged to the FHLB by the Company. The Company is subject to loss contingencies, including claims and legal actions arising in the ordinary course of business, which are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the financial statements. Note 8 – Fair Value Disclosures and Reporting and Fair Value Measurements FASB’s standards on financial instruments, and on fair value measurements and disclosures, require public business entities to disclose in their financial statement footnotes the estimated fair values of financial instruments. In addition to disclosure requirements, FASB’s standard on investments requires that our debt securities that are classified as available for sale and any equity securities which have readily determinable fair values be measured and reported at fair value in our statement of financial position. Certain individually identified loans are also reported at fair value, as explained in greater detail below, and foreclosed assets are carried at the lower of cost or fair value. FASB’s standard on financial instruments permits companies to report certain other financial assets and liabilities at fair value, but the Company has not elected the fair value option for any of those financial instruments. Fair value measurement and disclosure standards also establish a framework for measuring fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Further, the standards establish a fair value hierarchy that encourages an entity to maximize the use of observable inputs and limit the use of unobservable inputs when measuring fair values. The standards describe three levels of inputs that may be used to measure fair values: ● Level 1 : Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. ● Level 2 : Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. ● Level 3 : Significant unobservable inputs that reflect a company’s own assumptions about the factors that market participants would likely consider in pricing an asset or liability. Fair value estimates are made at a specific point in time based on relevant market data and information about the financial instruments. Fair value disclosures for deposits include demand deposits, which are, by definition, equal to the amount payable on demand at the reporting date. Fair value calculations for loans reflect exit pricing and incorporate our assumptions with regard to the impact of prepayments on future cash flows and credit quality adjustments based on risk characteristics of various financial instruments, among other things. Since the estimates are subjective and involve uncertainties and matters of significant judgment they cannot be determined with precision, and changes in assumptions could significantly alter the fair values presented. ​ 10 Table of Contents Carrying amounts and estimated fair values for the Company’s financial instruments are as follows, as of the dates noted: Fair Value of Financial Instruments (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ ​ ​ ​ ​ Fair Value Measurements ​ Carrying Amount Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Financial assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 119,244 ​ $ 119,244 ​ $ — ​ $ — ​ $ 119,244 Investment securities available-for-sale ​ $ 741,789 ​ $ — ​ $ 687,130 ​ $ 54,659 ​ $ 741,789 Investment securities held-to-maturity ​ $ 316,406 ​ $ — ​ $ 306,156 ​ $ — ​ $ 306,156 Loans, net ​ $ 2,133,938 ​ $ — ​ $ 5,889 ​ $ 1,975,688 ​ $ 1,981,577 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ $ 2,847,004 ​ $ 968,997 ​ $ 1,874,287 ​ $ — ​ $ 2,843,284 Repurchase agreements ​ $ 121,851 ​ $ — ​ $ 121,851 ​ $ — ​ $ 121,851 Other borrowings ​ $ 80,000 ​ $ — ​ $ 54,786 ​ $ — ​ $ 54,786 Long-term debt ​ $ 49,326 ​ $ — ​ $ 44,189 ​ $ — ​ $ 44,189 Subordinated debentures ​ $ 35,704 ​ $ — ​ $ 35,453 ​ $ — ​ $ 35,453 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ Fair Value Measurements ​ Carrying Amount Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Financial assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 78,602 ​ $ 78,602 ​ $ — ​ $ — ​ $ 78,602 Investment securities available-for-sale ​ $ 1,019,201 ​ $ — ​ $ 967,161 ​ $ 52,040 ​ $ 1,019,201 Investment securities held-to-maturity ​ $ 320,057 ​ $ — ​ $ 314,924 ​ $ — ​ $ 314,924 Loans, net ​ $ 2,066,884 ​ $ — ​ $ 5,889 ​ $ 1,918,654 ​ $ 1,924,543 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ $ 2,761,223 ​ $ 1,020,772 ​ $ 1,738,566 ​ $ — ​ $ 2,759,338 Repurchase agreements ​ $ 107,121 ​ $ — ​ $ 107,121 ​ $ — ​ $ 107,121 Other borrowings ​ $ 360,500 ​ $ — ​ $ 360,500 ​ $ — ​ $ 360,500 Long-term debt ​ $ 49,304 ​ $ — ​ $ 44,097 ​ $ — ​ $ 44,097 Subordinated debentures ​ $ 35,660 ​ $ — ​ $ 35,423 ​ $ — ​ $ 35,423 ​ For financial asset categories that were carried on our balance sheet at fair value as of March 31, 2024, and December 31, 2023, the Company used the following methods and significant assumptions: ● Investment securities : Fair values are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities. ● Collateral-dependent loans : Collateral-dependent loans are carried at fair value when foreclosure is probable or repayment is expected through the sale or operation of collateral and borrower is experiencing financial difficulty. ● Foreclosed assets : Repossessed real estate (known as other real estate owned, or “OREO”) and other foreclosed assets are carried at the lower of cost or fair value. Fair value is the appraised value less expected disposition costs for OREO; fair values for any other foreclosed assets are represented by estimated sales proceeds as 11 Table of Contents 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 reevaluation 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 reported at fair value on a recurring basis are summarized below: Fair Value Measurements – Recurring (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at March 31, 2024, using ​ ​ ​ ​ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Realized Gain/(Loss) (Level 3) Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ — ​ $ 65,437 ​ $ — ​ $ 65,437 ​ $ — Mortgage-backed securities ​ ​ — ​ ​ 13,448 ​ ​ — ​ ​ 13,448 ​ ​ — State and political subdivisions ​ ​ — ​ ​ 44,675 ​ ​ — ​ ​ 44,675 ​ ​ — Corporate bonds ​ ​ — ​ ​ — ​ ​ 54,659 ​ ​ 54,659 ​ ​ — Collateralized loan obligations ​ ​ — ​ ​ 563,570 ​ ​ — ​ ​ 563,570 ​ ​ — Total available-for-sale securities ​ $ — ​ $ 687,130 ​ $ 54,659 ​ $ 741,789 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2023, using ​ ​ ​ ​ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Realized Gain/(Loss) (Level 3) Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ — ​ $ 102,749 ​ $ — ​ $ 102,749 ​ $ — Mortgage-backed securities ​ ​ — ​ ​ 99,544 ​ ​ — ​ ​ 99,544 ​ ​ — State and political subdivisions ​ ​ — ​ ​ 194,206 ​ ​ — ​ ​ 194,206 ​ ​ — Corporate bonds ​ ​ — ​ ​ — ​ ​ 52,040 ​ ​ 52,040 ​ ​ — Collateralized loan obligations ​ ​ — ​ ​ 570,662 ​ ​ — ​ ​ 570,662 ​ ​ — Total available-for-sale securities ​ $ — ​ $ 967,161 ​ $ 52,040 ​ $ 1,019,201 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements - Level 3 Recurring ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ Corporate Bonds ​ ​ 2024 ​ 2023 Balance of recurring Level 3 assets at January 1, ​ $ 52,040 ​ $ 57,435 Total gains or losses for the period: ​ ​ ​ ​ ​ ​ Included in other comprehensive income ​ ​ 2,619 ​ ​ ( 5,436 ) Balance of recurring Level 3 assets at March 31, ​ $ 54,659 ​ $ 51,999 ​ ​ ​ 12 Table of Contents Assets reported at fair value on a nonrecurring basis are summarized below: Fair Value Measurements – Nonrecurring (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at March 31, 2024, using ​ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Individually evaluated collateral dependent loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ — ​ $ — ​ $ — ​ $ — Commercial real estate ​ ​ — ​ ​ 5,889 ​ ​ — ​ ​ 5,889 Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate ​ ​ — ​ ​ 5,889 ​ ​ — ​ ​ 5,889 Other commercial ​ ​ — ​ ​ — ​ ​ — ​ ​ — Consumer loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total collateral dependent loans ​ $ — ​ $ 5,889 ​ $ — ​ $ 5,889 Foreclosed assets ​ $ — ​ $ — ​ $ — ​ $ — Total assets measured on a nonrecurring basis ​ $ — ​ $ 5,889 ​ $ — ​ $ 5,889 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2023, using ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Individually evaluated collateral dependent loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ — ​ $ — ​ $ — ​ $ — Commercial real estate ​ ​ — ​ ​ 5,889 ​ ​ — ​ ​ 5,889 Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate ​ ​ — ​ ​ 5,889 ​ ​ — ​ ​ 5,889 Other commercial ​ ​ — ​ ​ — ​ ​ — ​ ​ — Consumer loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total collateral dependent loans ​ $ — ​ $ 5,889 ​ $ — ​ $ 5,889 Foreclosed assets ​ $ — ​ $ — ​ $ — ​ $ — Total assets measured on a nonrecurring basis ​ $ — ​ $ 5,889 ​ $ — ​ $ 5,889 ​ The table above includes collateral-dependent loan balances for which a specific reserve has been established or on which a write-down has been taken. Information on the Company’s total collateral dependent loan balances and specific loss reserves associated with those balances is included in Note 10 below. The unobservable inputs are based on Management’s best estimates of appropriate discounts in arriving at fair market value. Adjusting any of those inputs could result in a significantly lower or higher fair value measurement. For example, an increase or decrease in actual loss rates would create a directionally opposite change in the fair value of unsecured individually identified loans. ​ 13 Table of Contents Note 9 – Investments Investment Securities Pursuant to FASB’s guidance on accounting for debt securities, available for sale securities are carried on the Company’s financial statements at their estimated fair market values, with monthly tax-effected “mark-to-market” adjustments made vis-à-vis accumulated other comprehensive income in shareholders’ equity. Held-to-maturity securities are carried on the Company’s financial statements at their amortized cost, net of the allowance for credit losses. The amortized cost, estimated fair value, and allowance for credit losses of available-for-sale and held-to-maturity investment securities are as follows: Amortized Cost and Estimated Fair Value (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ Amortized Cost Gross Unrealized Gains Gross Unrealized Losses ​ Allowance for Credit Losses Estimated Fair Value Available-for-sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 65,579 ​ $ 7 ​ $ ( 149 ) ​ $ — ​ $ 65,437 Mortgage-backed securities ​ ​ 14,181 ​ ​ 18 ​ ​ ( 751 ) ​ ​ — ​ ​ 13,448 State and political subdivisions ​ ​ 51,060 ​ ​ 81 ​ ​ ( 6,466 ) ​ ​ — ​ ​ 44,675 Corporate bonds ​ ​ 65,303 ​ ​ — ​ ​ ( 10,644 ) ​ ​ — ​ ​ 54,659 Collateralized loan obligations ​ ​ 563,099 ​ ​ 1,478 ​ ​ ( 1,007 ) ​ ​ — ​ ​ 563,570 Total available-for-sale securities ​ $ 759,222 ​ $ 1,584 ​ $ ( 19,017 ) ​ $ — ​ $ 741,789 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses ​ Estimated Fair Value Allowance for Credit Losses Held-to-maturity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 5,033 ​ $ — ​ $ ( 652 ) ​ $ 4,381 ​ $ — Mortgage-backed securities ​ ​ 139,225 ​ ​ — ​ ​ ( 12,585 ) ​ ​ 126,640 ​ ​ — State and political subdivisions ​ ​ 172,164 ​ ​ 2,971 ​ ​ — ​ ​ 175,135 ​ ​ ( 16 ) Total held-to-maturity securities ​ $ 316,422 ​ $ 2,971 ​ $ ( 13,237 ) ​ $ 306,156 ​ $ ( 16 ) ​ 14 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Amortized Cost Gross Unrealized Gains Gross Unrealized Losses ​ Allowance for Credit Losses Estimated Fair Value Available-for-sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 102,823 ​ $ 23 ​ $ ( 97 ) ​ $ — ​ $ 102,749 Mortgage-backed securities ​ ​ 100,745 ​ ​ 21 ​ ​ ( 1,222 ) ​ ​ — ​ ​ 99,544 State and political subdivisions ​ ​ 200,057 ​ ​ 572 ​ ​ ( 6,423 ) ​ ​ — ​ ​ 194,206 Corporate bonds ​ ​ 65,273 ​ ​ — ​ ​ ( 13,233 ) ​ ​ — ​ ​ 52,040 Collateralized loan obligations ​ ​ 573,027 ​ ​ 1,113 ​ ​ ( 3,478 ) ​ ​ — ​ ​ 570,662 Total available-for-sale securities ​ $ 1,041,925 ​ $ 1,729 ​ $ ( 24,453 ) ​ $ — ​ $ 1,019,201 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized Cost ​ Gross Unrecognized Gains ​ Gross Unrecognized Losses ​ Estimated Fair Value ​ Allowance for Credit Losses Held-to-maturity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ 5,522 ​ $ — ​ $ ( 617 ) ​ $ 4,905 ​ $ — Mortgage-backed securities ​ ​ 142,295 ​ ​ — ​ ​ ( 10,441 ) ​ ​ 131,854 ​ ​ — State and political subdivisions ​ ​ 172,256 ​ ​ 5,909 ​ ​ — ​ ​ 178,165 ​ ​ ( 16 ) Total held-to-maturity securities ​ $ 320,073 ​ $ 5,909 ​ $ ( 11,058 ) ​ $ 314,924 ​ $ ( 16 ) ​ ​ An unrealized loss of $ 27.9 million, on securities transferred from the available-for-sale to held-to-maturity categorization, remains as of March 31, 2024, and is included in accumulated other comprehensive income, net of tax. 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. ​ 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. The Bank’s municipal bonds moved to the held-to-maturity designation all have credit ratings considered investment grade or equivalent. 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. ​ The Company elected the practical expedient available under the current expected credit losses (“CECL”) accounting standard to exclude accrued interest receivable from the amortized cost basis of all categorizations of investment securities, 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 is included in other assets on the Company’s balance sheet and as of March 31, 2024, measured at $ 9.6 million and $ 1.7 million for available-for-sale securities and held-to-maturity securities, respectively. Accrued interest receivable as of December 31, 2022, on these same classes of investment securities measured at $ 9.3 million and $ 2.7 million, respectively. During the first quarter of 2024 , no interest receivable on available-for-sale or held-to-maturity securities was reversed against interest income and the Company did not have any held-to-maturity debt securities past due. ​ As of March 31, 2024, an allowance for credit losses of $ 0.02 million had been established on the Bank’s held-to-maturity portfolio, which is unchanged from the December 31, 2023, allowance for credit losses. ​ ​ 15 Table of Contents The following table summarizes the amortized cost of held-to-maturity municipal bonds aggregated by NRSRO credit rating: ​ Held-To-Maturity by Credit Rating (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ Held-To-Maturity ​ ​ March 31, 2024 ​ December 31, 2023 State and political subdivisions ​ ​ ​ ​ ​ ​ AAA/Aaa ​ $ 57,781 ​ $ 57,792 AA/Aa ​ ​ 112,901 ​ ​ 112,978 A/A2 ​ ​ 540 ​ ​ 542 Not rated ​ ​ 942 ​ ​ 944 Total ​ $ 172,164 ​ $ 172,256 ​ ​ ​ 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. For the remainder of available sale debt securities in an unrealized loss position, which don’t meet the previously outlined criteria, management evaluates whether the decline in fair value is a reflection of credit deterioration or other factors. In performing this evaluation, management considers the extent which fair value has fallen below amortized cost, changes in ratings by rating agencies, and other information indicating a deterioration in repayment capacity of either the underlying issuer or the borrowers providing repayment capacity in a securitization. If management’s evaluation indicates that a credit loss exists then a present value of the expected cash flows is calculated and compared to the amortized cost basis of the security in question and to the degree that the amortized cost basis exceeds the present value an allowance for credit loss (“ACL”) is established, with the caveat that the maximum amount of the reserve on any individual security is the difference between the fair value and amortized cost balance of the security in question. Any unrealized loss that has not been recorded through an ACL is recognized in other comprehensive income. 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. Investment Portfolio - Unrealized Losses (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ ​ ​ Less than twelve months ​ Twelve months or more ​ Total ​ Number of Securities Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Available-for-sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies 14 ​ $ ( 62 ) ​ $ 25,523 ​ $ ( 87 ) ​ $ 27,913 ​ $ ( 149 ) ​ $ 53,436 Mortgage-backed securities 39 ​ ​ — ​ ​ — ​ ​ ( 751 ) ​ ​ 9,578 ​ ​ ( 751 ) ​ ​ 9,578 State and political subdivisions 48 ​ ​ ( 1 ) ​ ​ 201 ​ ​ ( 6,465 ) ​ ​ 35,646 ​ ​ ( 6,466 ) ​ ​ 35,847 Corporate bonds 51 ​ ​ — ​ ​ — ​ ​ ( 10,644 ) ​ ​ 54,659 ​ ​ ( 10,644 ) ​ ​ 54,659 Collateralized loan obligations 29 ​ ​ ( 378 ) ​ ​ 133,658 ​ ​ ( 629 ) ​ ​ 126,235 ​ ​ ( 1,007 ) ​ ​ 259,893 Total available-for-sale 181 ​ $ ( 441 ) ​ $ 159,382 ​ $ ( 18,576 ) ​ $ 254,031 ​ $ ( 19,017 ) ​ $ 413,413 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 16 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ Less than twelve months ​ Twelve months or more ​ Total ​ Number of Securities Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Available-for-sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies 14 ​ $ ( 97 ) ​ $ 46,823 ​ $ — ​ $ 3,929 ​ $ ( 97 ) ​ $ 50,752 Mortgage-backed securities 321 ​ ​ — ​ ​ 20 ​ ​ ( 1,222 ) ​ ​ 94,505 ​ ​ ( 1,222 ) ​ ​ 94,525 State and political subdivisions 201 ​ ​ ( 33 ) ​ ​ 6,950 ​ ​ ( 6,390 ) ​ ​ 125,283 ​ ​ ( 6,423 ) ​ ​ 132,233 Corporate bonds 51 ​ ​ ( 118 ) ​ ​ 2,316 ​ ​ ( 13,115 ) ​ ​ 49,724 ​ ​ ( 13,233 ) ​ ​ 52,040 Collateralized loan obligations 47 ​ ​ — ​ ​ — ​ ​ ( 3,478 ) ​ ​ 393,258 ​ ​ ( 3,478 ) ​ ​ 393,258 Total available-for-sale 634 ​ $ ( 248 ) ​ $ 56,109 ​ $ ( 24,205 ) ​ $ 666,699 ​ $ ( 24,453 ) ​ $ 722,808 ​ ​ The table below summarizes the Company’s gross realized gains and losses as well as gross proceeds from the sales of securities, for the periods indicated: Investment Portfolio - Realized Gains/(Losses) (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ 2024 2023 Proceeds from sales, calls and maturities of securities available for sale ​ $ 266,900 ​ $ 36,213 Gross gains on sales, calls and maturities of securities available for sale ​ ​ 54 ​ ​ 45 Gross losses on sales, calls and maturities of securities available for sale ​ ​ ( 17,371 ) ​ ​ — Net (loss) gain on sale of securities available for sale ​ $ ( 17,317 ) ​ $ 45 ​ The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at March 31, 2024, and December 31, 2023 (dollars in thousands), are shown below, grouped by the remaining time to contractual maturity dates. The expected life of investment securities may not be consistent with contractual maturity dates since the issuers of the securities might have the right to call or prepay obligations with or without penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ ​ Available-for-Sale ​ Held-to-Maturity ​ Amortized Cost Fair Value Amortized Cost Fair Value Maturing within one year ​ $ 2,200 ​ $ 2,202 ​ $ 145 ​ $ 145 Maturing after one year through five years ​ ​ 22,034 ​ ​ 21,914 ​ ​ 2,401 ​ ​ 2,358 Maturing after five years through ten years ​ ​ 102,687 ​ ​ 92,029 ​ ​ 19,362 ​ ​ 17,771 Maturing after ten years ​ ​ 55,021 ​ ​ 48,626 ​ ​ 155,289 ​ ​ 159,242 Securities not due at a single maturity date: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage-backed securities ​ ​ 14,181 ​ ​ 13,448 ​ ​ 139,225 ​ ​ 126,640 Collateralized loan obligations ​ ​ 563,099 ​ ​ 563,570 ​ ​ — ​ ​ — Total ​ $ 759,222 ​ $ 741,789 ​ $ 316,422 ​ $ 306,156 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Available-for-Sale ​ Held-to-Maturity ​ Amortized Cost Fair Value Amortized Cost Fair Value Maturing within one year ​ $ 583 ​ $ 582 $ 145 ​ $ 145 Maturing after one year through five years ​ ​ 40,187 ​ ​ 39,916 ​ ​ 2,413 ​ ​ 2,384 Maturing after five years through ten years ​ ​ 156,541 ​ ​ 143,516 ​ ​ 19,895 ​ ​ 18,350 Maturing after ten years ​ ​ 170,842 ​ ​ 164,981 ​ ​ 155,325 ​ ​ 162,191 Securities not due at a single maturity date: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage-backed securities ​ ​ 100,745 ​ ​ 99,544 ​ ​ 142,295 ​ ​ 131,854 Collateralized loan obligations ​ ​ 573,027 ​ ​ 570,662 ​ ​ — ​ ​ — Total ​ $ 1,041,925 ​ $ 1,019,201 ​ $ 320,073 ​ $ 314,924 ​ 17 Table of Contents At March 31, 2024, the Company’s investment portfolio included 227 municipal bonds issued by 191 different government municipalities and agencies located within 28 different states, with an aggregate fair value of $ 219.8 million. The largest exposure to any single municipality or agency was a combined $ 5.3 million (fair value) in general obligation bonds issued by the City of New York (NY). In addition, the Company owned 51 subordinated debentures issued by bank holding companies totaling $ 54.7 million (fair value). At December 31, 2023, the Company’s investment portfolio included 485 municipal bonds issued by 398 different government municipalities and agencies located within 36 states, with an aggregate fair value of $ 372.4 million. The largest exposure to any single municipality or agency was a combined $ 5.3 million (fair value) in general obligation bonds issued by the City of New York (NY). In addition, the company owned 51 subordinated debentures issued by bank holding companies totaling $ 52.0 million (fair value). The Company’s investments in bonds issued by corporations, states, municipalities and political subdivisions are evaluated in accordance with Financial Institution Letter 48-2012, issued by the FDIC, “Revised Standards of Creditworthiness for Investment Securities,” and other regulatory guidance. Credit ratings are considered in our analysis only as a guide to the historical default rate associated with similarly rated bonds. There have been no significant differences in our internal analyses compared with the ratings assigned by the third-party credit rating agencies. The following table summarizes the amortized cost and fair values of general obligation and revenue bonds in the Company’s investment securities portfolio at the indicated dates, identifying the state in which the issuing municipality or agency operates for our largest geographic concentrations: Revenue and General Obligation Bonds by Location (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ December 31, 2023 ​ ​ Amortized ​ Fair Market ​ Amortized ​ Fair Market General obligation bonds Cost Value Cost Value State of issuance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Texas ​ $ 83,196 ​ $ 82,208 ​ $ 146,215 ​ $ 146,589 California ​ ​ 51,523 ​ ​ 49,174 ​ ​ 63,316 ​ ​ 61,048 Other (20 & 26 states, respectively) ​ ​ 63,033 ​ ​ 63,238 ​ ​ 115,148 ​ ​ 117,006 Total general obligation bonds ​ ​ 197,752 ​ ​ 194,620 ​ ​ 324,679 ​ ​ 324,643 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ State of issuance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Texas ​ ​ 5,438 ​ ​ 5,393 ​ ​ 8,850 ​ ​ 8,899 California ​ ​ 3,571 ​ ​ 3,496 ​ ​ 3,794 ​ ​ 3,735 Other (20 & 15 states, respectively) ​ ​ 16,463 ​ ​ 16,301 ​ ​ 34,990 ​ ​ 35,094 Total revenue bonds ​ ​ 25,472 ​ ​ 25,190 ​ ​ 47,634 ​ ​ 47,728 Total obligations of states and political subdivisions ​ $ 223,224 ​ $ 219,810 ​ $ 372,313 ​ $ 372,371 ​ The revenue bonds in the Company’s investment securities portfolios were issued by government municipalities and agencies to fund public services such as utilities (water, sewer, and power), educational facilities, and general public and 18 Table of Contents economic improvements. The primary sources of revenue for these bonds are delineated in the table below, which shows the amortized cost and fair market values for the largest revenue concentrations as of the indicated dates. Revenue Bonds by Type (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ December 31, 2023 ​ ​ Amortized ​ Fair Market ​ Amortized ​ Fair Market Revenue bonds Cost Value Cost Value Revenue source: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Water ​ $ 9,211 ​ $ 9,064 ​ $ 19,113 ​ $ 19,158 Lease ​ ​ 3,932 ​ ​ 4,210 ​ ​ 6,323 ​ ​ 6,380 Sewer ​ ​ 3,607 ​ ​ 3,760 ​ ​ 6,070 ​ ​ 6,312 Sales tax revenue ​ ​ 1,690 ​ ​ 1,630 ​ ​ 4,349 ​ ​ 4,010 Local or GTD housing ​ ​ 1,032 ​ ​ 852 ​ ​ — ​ ​ — Other (9 and 10 sources, respectively) ​ ​ 6,000 ​ ​ 5,674 ​ ​ 11,779 ​ ​ 11,868 Total revenue bonds ​ $ 25,472 ​ $ 25,190 ​ $ 47,634 ​ $ 47,728 ​ Low-Income Housing Tax Credit (“LIHTC”) Fund Investments The Company has the ability to invest in limited partnerships which own housing projects that qualify for federal and/or California state tax credits, by mandating a specified percentage of low-income tenants for each project. The primary investment return comes from tax credits that flow through to investors. Because rent levels are lower than standard market rents and the projects are generally highly leveraged, each project also typically generates tax-deductible operating losses that are allocated to the limited partners for tax purposes. The Company currently has investments in five different LIHTC fund limited partnerships made in 2014, 2015, two in 2022, and one in 2023, all of which were California-focused funds that help the Company meet its obligations under the Community Reinvestment Act. We utilize the cost method of accounting for our LIHTC fund investments, under which we initially record on our balance sheet an asset that represents the total cash expected to be invested over the life of the partnership. Any commitments or contingent commitments for future investment are reflected as a liability. The income statement reflects tax credits and any other tax benefits from these investments “below the line” within our income tax provision, while the initial book value of the investment is amortized on the proportional amortization method as a “below the line” expense, over the time period in which the tax credits and tax benefits are expected to be received. As of March 31, 2024, our total LIHTC investment book balance was $ 13.8 million, which includes $ 10.1 million in remaining commitments for additional capital contributions. There were approximately $ 0.3 million in tax credits derived from our LIHTC investments that were recognized during the three months ended March 31, 2024, and “below the line” amortization expense of $ 0.6 million associated with those investments was recorded for the same time period. Our LIHTC investments are evaluated annually for potential impairment, and we have concluded that the carrying value of the investments is stated fairly and is not impaired. As of December 31, 2023, our total LIHTC investment book balance was $ 14.4 million, which includes $ 10.5 million in remaining commitments for additional capital contributions. There were $ 0.7 million in tax credits derived from our LIHTC investments that were recognized during the year ended December 31, 2023, and “below the line” amortization expense of $ 0.7 million associated with those investments was netted against pre-tax noninterest income for the same time period. The Company’s investments in qualified affordable housing projects, and small business investment companies meet the definition of a variable interest entity as the entities are structured such that the limited partner investors lack substantive voting rights. Pursuant to the FAS standard on the consolidation of variable interest entities, these investments are not reflected on a consolidated basis in the Company’s financial statements. 19 Table of Contents Note 10 – Loans and Allowance for Credit Losses We adopted the new current expected credit loss accounting guidance, CECL, and all related amendments as of January 1, 2022. Similar to practice under legacy GAAP, the ACL on the loan portfolio is a valuation allowance deducted from the recorded balance in loans. However, under CECL the ACL represents principal which is not expected to be collected over the contractual life of the loans, adjusted for expected prepayment, whereas under legacy GAAP the allowance represented only losses already incurred as of the balance sheet date. The ACL is increased by a provision for credit losses charged to expense, and by principal recovered on charged-off balances. It is reduced by principal charge-offs. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, using information from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Adjustments are also made for changes in risk profile, credit concentrations, historical trends, and other economic conditions. 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 as a result 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 loans of $ 6.8 million and $ 5.6 million at March 31, 2024, and December 31, 2023, respectively is included in other assets on the Company’s balance sheet. The following table presents loans by class as of March 31, 2024, and December 31, 2023. The majority of the disclosures in this footnote are prepared at the class level which is equivalent to the call report or call code classification. The final table in this section separates a roll forward of the Allowance for Credit Losses at the portfolio segment level. ​ ​ ​ ​ ​ ​ ​ ​ Loan Distribution ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ March 31, 2024 December 31, 2023 Real estate: ​ ​ ​ ​ ​ ​ Residential real estate ​ $ 406,443 ​ $ 412,063 Commercial real estate ​ ​ 1,327,482 ​ ​ 1,328,224 Other construction/land ​ ​ 6,115 ​ ​ 6,256 Farmland ​ ​ 66,133 ​ ​ 67,276 Total real estate ​ ​ 1,806,173 ​ ​ 1,813,819 Other commercial ​ ​ 143,448 ​ ​ 156,272 Mortgage warehouse lines ​ ​ 203,561 ​ ​ 116,000 Consumer loans ​ ​ 3,682 ​ ​ 3,984 Subtotal ​ ​ 2,156,864 ​ ​ 2,090,075 Net deferred loan fees and costs ​ ​ 214 ​ ​ 309 Loans, amortized cost basis ​ ​ 2,157,078 ​ ​ 2,090,384 Allowance for credit losses ​ ​ ( 23,140 ) ​ ​ ( 23,500 ) Net Loans ​ $ 2,133,938 ​ $ 2,066,884 ​ ​ 20 Table of Contents The Company places loans on nonaccrual status when management has determined that the full repayment of principal and collection of contractually agreed upon interest is unlikely or when the loan in question has become delinquent more than 90 days. The Company may decide that it is appropriate to continue to accrue interest on certain loans more than 90 days delinquent if they are well-secured by collateral and collection is in process. When a loan is placed on nonaccrual status, any accrued but uncollected interest for the loan is reversed out of interest income in the period in which the loan’s status changed. For loans with an interest reserve, i.e., where loan proceeds are advanced to the borrower to make interest payments, all interest recognized from the inception of the loan is reversed when the loan is placed on nonaccrual. Once a loan is on nonaccrual status subsequent payments received from the customer are applied to principal, and no further interest income is recognized until the principal has been paid in full or until circumstances have changed such that payments are again consistently received as contractually required. 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. ​ The following tables present the amortized cost basis of nonaccrual loans, according to loan class, with and without individually evaluated reserves as of March 31, 2024, and December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ ​ Nonaccrual Loans ​ ​ ​ ​ With no allowance for credit loss With an allowance for credit loss ​ Total ​ Loans Past Due 90+ Accruing Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ 95 ​ $ — ​ $ 95 ​ $ — Commercial real estate ​ ​ — ​ ​ 7,437 ​ ​ 7,437 ​ ​ — Farmland ​ ​ 6,503 ​ ​ — ​ ​ 6,503 ​ ​ — Total real estate ​ ​ 6,598 ​ ​ 7,437 ​ ​ 14,035 ​ ​ — Other commercial ​ ​ 153 ​ ​ — ​ ​ 153 ​ ​ — Consumer loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total ​ $ 6,751 ​ $ 7,437 ​ $ 14,188 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Nonaccrual Loans ​ ​ ​ ​ With no allowance for credit loss With an allowance for credit loss ​ Total ​ Loans Past Due 90+ Accruing Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ 414 ​ $ — ​ $ 414 ​ $ — Commercial real estate ​ ​ — ​ ​ 7,457 ​ ​ 7,457 ​ ​ — Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate ​ ​ 414 ​ ​ 7,457 ​ ​ 7,871 ​ ​ — Other commercial ​ ​ 114 ​ ​ — ​ ​ 114 ​ ​ 14 Consumer loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total ​ $ 528 ​ $ 7,457 ​ $ 7,985 ​ $ 14 ​ ​ 21 Table of Contents The Company did not recognize any interest on nonaccrual loans during the three months ended March 31, 2024, and would have recognized an additional $ 0.003 million in interest income on nonaccrual loans had those loans not been designated as nonaccrual. Due to loans being placed on nonaccrual status, during the three months ended March 31, 2023, $ 0.04 million of interest receivable on loans was reversed against interest income. The following table presents the amortized cost basis of collateral-dependent loans by class as of March 31, 2024, and December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collateral Dependent Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ December 31, 2023 ​ Amortized Cost ​ Individual Reserves ​ Amortized Cost ​ Individual Reserves Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ 95 ​ $ — ​ $ 414 ​ $ — Commercial real estate ​ ​ 7,437 ​ ​ 1,548 ​ ​ 7,457 ​ ​ 1,600 Farmland ​ ​ 6,503 ​ ​ — ​ ​ — ​ ​ — Total real estate ​ ​ 14,035 ​ ​ 1,548 ​ ​ 7,871 ​ ​ 1,600 Other commercial ​ ​ 153 ​ ​ — ​ ​ 114 ​ ​ — Total Loans ​ $ 14,188 ​ $ 1,548 ​ $ 7,985 ​ $ 1,600 ​ ​ During the first three months of 2024 the amortized cost balance of collateral-dependent loans increased by $ 6.2 million due primarily to a single agriculture real estate secured loan, offset by declines resulting from upgrades and payoffs. The weighted average loan-to-value ratio of collateral dependent loans was 100 % at March 31, 2024. There were no collateral dependent loans in the process of foreclosure as of March 31, 2024. 22 Table of Contents The following tables presents the aging of the amortized cost basis in past-due loans, according to class, as of March 31, 2024, and December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Past Due Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ 30-59 Days Past Due 60-89 Days Past Due ​ Loans Past Due 90+ Days ​ Total Past Due ​ Loans not Past Due ​ Total Loans Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ 868 ​ $ — ​ $ 20 ​ $ 888 ​ $ 406,727 ​ $ 407,615 Commercial real estate ​ ​ 507 ​ ​ — ​ ​ 7,437 ​ ​ 7,944 ​ ​ 1,316,821 ​ ​ 1,324,765 Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,139 ​ ​ 6,139 Farmland ​ ​ — ​ ​ 6,503 ​ ​ — ​ ​ 6,503 ​ ​ 59,844 ​ ​ 66,347 Total real estate ​ ​ 1,375 ​ ​ 6,503 ​ ​ 7,457 ​ ​ 15,335 ​ ​ 1,789,531 ​ ​ 1,804,866 Other commercial ​ ​ 184 ​ ​ 1 ​ ​ 103 ​ ​ 288 ​ ​ 144,586 ​ ​ 144,874 Mortgage warehouse lines ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 203,561 ​ ​ 203,561 Consumer loans ​ ​ 3 ​ ​ — ​ ​ — ​ ​ 3 ​ ​ 3,774 ​ ​ 3,777 Total Loans ​ $ 1,562 ​ $ 6,504 ​ $ 7,560 ​ $ 15,626 ​ $ 2,141,452 ​ $ 2,157,078 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ 30-59 Days Past Due 60-89 Days Past Due ​ Loans Past Due 90+ Days ​ Total Past Due ​ Loans not Past Due ​ Total Loans Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ 1,768 ​ $ — ​ $ — ​ $ 1,768 ​ $ 411,494 ​ $ 413,262 Commercial real estate ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,325,494 ​ ​ 1,325,494 Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,268 ​ ​ 6,268 Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 67,510 ​ ​ 67,510 Total real estate ​ ​ 1,768 ​ ​ — ​ ​ — ​ ​ 1,768 ​ ​ 1,810,766 ​ ​ 1,812,534 Other commercial ​ ​ 158 ​ ​ 171 ​ ​ 14 ​ ​ 343 ​ ​ 157,417 ​ ​ 157,760 Mortgage warehouse lines ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 116,000 ​ ​ 116,000 Consumer loans ​ ​ 47 ​ ​ — ​ ​ — ​ ​ 47 ​ ​ 4,043 ​ ​ 4,090 Total Loans ​ $ 1,973 ​ $ 171 ​ $ 14 ​ $ 2,158 ​ $ 2,088,226 ​ $ 2,090,384 ​ ​ 23 Table of Contents Loan Modifications Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, rate reductions, payment deferral, or term extension. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses. In some cases, the Company provides multiple types on concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: principal forgiveness, rate reduction, payment deferral, and/or term extension. ​ The following table presents the amortized cost basis of loans at March 31, 2024 that were both experiencing financial difficulty and modified during the quarter ended March 31, 2024, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans to Borrowers Experiencing Financial Difficulty ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ Principal Forgiveness ​ Term Extension ​ Combination Term Extension Interest Rate Reduction ​ Total Class of Financing Receivable Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ — ​ $ — ​ $ — ​ ​ — Commercial real estate ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.00 % Other construction/land ​ ​ — ​ ​ 240 ​ ​ — ​ ​ 3.91 % Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate ​ ​ — ​ ​ 240 ​ ​ — ​ ​ 0.01 % Other commercial ​ ​ — ​ ​ 170 ​ ​ — ​ ​ 0.12 % Consumer loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total ​ $ — ​ $ 410 ​ $ — ​ ​ 0.02 % ​ The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended March 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Borrower Experiencing Financial Difficulty - Financial Effect ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ ​ Principal Forgiveness ​ Weighted-Average Interest Rate Reduction ​ ​ Weighted-Average Term Extension (years) Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential real estate ​ $ — ​ ​ — ​ ​ — Commercial real estate ​ $ — ​ ​ — ​ ​ — Other construction/land ​ $ — ​ ​ — ​ ​ 3.00 Farmland ​ $ — ​ ​ — ​ ​ — Other commercial ​ $ — ​ ​ — ​ ​ 3.94 Mortgage warehouse lines ​ $ — ​ ​ — ​ ​ — Consumer loans ​ $ — ​ ​ — ​ ​ — ​ There were no payment defaults on loans previously modified in the preceding 12 months for either of the quarters ending March 31, 2024, and 2023. For the purpose of this disclosure the Company defines a payment default as 90 days past due. 24 Table of Contents The Company had no additional funds committed on loans which have been modified to borrowers experiencing financial difficulty. The Company monitors the credit quality of loans on a continuous basis using the regulatory and accounting classifications of pass, special mention and substandard to characterize and qualify the associated credit risk. Loans classified as “loss” are immediately charged-off. The Company uses the following definitions of risk classifications: Pass – Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions below and smaller, homogeneous loans not assessed on an individual basis. Special Mention – Loans classified as special mention have the potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard – Loans classified as substandard are those loans with clear and well-defined weaknesses such as a highly leveraged position, unfavorable financial operating results and/or trends, or uncertain repayment sources or poor financial condition, which may jeopardize ultimate recoverability of the debt. ​ 25 Table of Contents The following tables present the amortized cost of loans by credit quality classification in addition to loan vintage as of March 31, 2024, and December 31, 2023: Loan Credit Quality by Vintage (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ ​ Term Loans Amortized Cost Basis by Origination Year ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ Prior ​ Revolving Loans Amortized Cost ​ Revolving Loans Converted to Term Loans ​ Total Loans Residential real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ — ​ $ — ​ $ 101,467 ​ $ 226,926 ​ $ 7,559 ​ $ 51,864 ​ $ 14,070 ​ $ 2,262 ​ $ 404,148 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,714 ​ ​ — ​ ​ 279 ​ ​ 2,993 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 240 ​ ​ 20 ​ ​ 214 ​ ​ 474 Subtotal ​ ​ — ​ ​ — ​ ​ 101,467 ​ ​ 226,926 ​ ​ 7,559 ​ ​ 54,818 ​ ​ 14,090 ​ ​ 2,755 ​ ​ 407,615 Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 17,809 ​ ​ 109,867 ​ ​ 273,653 ​ ​ 57,509 ​ ​ 469,266 ​ ​ 292,669 ​ ​ 26,133 ​ ​ — ​ ​ 1,246,906 Special mention ​ ​ — ​ ​ 146 ​ ​ — ​ ​ — ​ ​ 37,501 ​ ​ 12,260 ​ ​ 1,500 ​ ​ — ​ ​ 51,407 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 21,770 ​ ​ 4,682 ​ ​ — ​ ​ — ​ ​ 26,452 Subtotal ​ ​ 17,809 ​ ​ 110,013 ​ ​ 273,653 ​ ​ 57,509 ​ ​ 528,537 ​ ​ 309,611 ​ ​ 27,633 ​ ​ — ​ ​ 1,324,765 Other construction/land ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 240 ​ ​ 351 ​ ​ — ​ ​ — ​ ​ 3,596 ​ ​ 1,952 ​ ​ — ​ ​ — ​ ​ 6,139 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Subtotal ​ ​ 240 ​ ​ 351 ​ ​ — ​ ​ — ​ ​ 3,596 ​ ​ 1,952 ​ ​ — ​ ​ — ​ ​ 6,139 Farmland ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 950 ​ ​ 6,788 ​ ​ 11,535 ​ ​ 11,734 ​ ​ 2,623 ​ ​ 13,554 ​ ​ 2,782 ​ ​ 387 ​ ​ 50,353 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 835 ​ ​ 8,206 ​ ​ — ​ ​ — ​ ​ 9,041 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,953 ​ ​ — ​ ​ — ​ ​ 6,953 Subtotal ​ ​ 950 ​ ​ 6,788 ​ ​ 11,535 ​ ​ 11,734 ​ ​ 3,458 ​ ​ 28,713 ​ ​ 2,782 ​ ​ 387 ​ ​ 66,347 Other commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 891 ​ ​ 18,501 ​ ​ 6,135 ​ ​ 2,476 ​ ​ 6,341 ​ ​ 12,725 ​ ​ 89,409 ​ ​ 1,142 ​ ​ 137,620 Special mention ​ ​ 16 ​ ​ 75 ​ ​ — ​ ​ 250 ​ ​ 2,724 ​ ​ 21 ​ ​ 252 ​ ​ 3,743 ​ ​ 7,081 Substandard ​ ​ 1 ​ ​ — ​ ​ — ​ ​ 50 ​ ​ — ​ ​ 103 ​ ​ — ​ ​ 19 ​ ​ 173 Subtotal ​ ​ 908 ​ ​ 18,576 ​ ​ 6,135 ​ ​ 2,776 ​ ​ 9,065 ​ ​ 12,849 ​ ​ 89,661 ​ ​ 4,904 ​ ​ 144,874 Mortgage warehouse lines ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 203,561 ​ ​ — ​ ​ 203,561 Subtotal ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 203,561 ​ ​ — ​ ​ 203,561 Consumer loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 576 ​ ​ 633 ​ ​ 195 ​ ​ 82 ​ ​ 77 ​ ​ 250 ​ ​ 1,899 ​ ​ — ​ ​ 3,712 Special mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 14 ​ ​ 3 ​ ​ — ​ ​ — ​ ​ 17 Substandard ​ ​ 2 ​ ​ 46 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 48 Subtotal ​ ​ 578 ​ ​ 679 ​ ​ 195 ​ ​ 82 ​ ​ 91 ​ ​ 253 ​ ​ 1,899 ​ ​ — ​ ​ 3,777 Total ​ $ 20,485 ​ $ 136,407 ​ $ 392,985 ​ $ 299,027 ​ $ 552,306 ​ $ 408,196 ​ $ 339,625 ​ $ 8,046 ​ $ 2,157,078 Gross charge-offs ​ $ 392 ​ $ 24 ​ $ 5 ​ $ 3 ​ $ 20 ​ $ 410 ​ $ 274 ​ $ ​ ​ $ 1,128 ​ ​ 26 Table of Contents Loan Credit Quality by Vintage (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Term Loans Amortized Cost Basis by Origination Year ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ Prior ​ Revolving Loans Amortized Cost ​ Revolving Loans Converted to Term Loans ​ Total Loans Residential real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass $ — ​ $ 104,141 ​ $ 228,849 ​ $ 7,611 ​ $ 1,979 ​ $ 50,295 ​ $ 12,797 ​ $ 2,302 ​ $ 407,974 Special mention ​ — ​ ​ — ​ ​ 1,241 ​ ​ — ​ ​ — ​ ​ 2,942 ​ ​ 20 ​ ​ 284 ​ ​ 4,487 Substandard ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 494 ​ ​ 115 ​ ​ 192 ​ ​ 801 Subtotal ​ — ​ ​ 104,141 ​ ​ 230,090 ​ ​ 7,611 ​ ​ 1,979 ​ ​ 53,731 ​ ​ 12,932 ​ ​ 2,778 ​ ​ 413,262 Commercial real estate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ 112,254 ​ ​ 275,626 ​ ​ 58,310 ​ ​ 475,353 ​ ​ 51,100 ​ ​ 251,163 ​ ​ 22,929 ​ ​ — ​ ​ 1,246,735 Special mention ​ 148 ​ ​ — ​ ​ — ​ ​ 39,654 ​ ​ 3,010 ​ ​ 8,489 ​ ​ — ​ ​ — ​ ​ 51,301 Substandard ​ — ​ ​ — ​ ​ — ​ ​ 21,872 ​ ​ — ​ ​ 5,586 ​ ​ — ​ ​ — ​ ​ 27,458 Subtotal ​ 112,402 ​ ​ 275,626 ​ ​ 58,310 ​ ​ 536,879 ​ ​ 54,110 ​ ​ 265,238 ​ ​ 22,929 ​ ​ — ​ ​ 1,325,494 Other construction/land ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ 352 ​ ​ — ​ ​ — ​ ​ 3,646 ​ ​ 638 ​ ​ 1,632 ​ ​ — ​ ​ — ​ ​ 6,268 Special mention ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Subtotal ​ 352 ​ ​ — ​ ​ — ​ ​ 3,646 ​ ​ 638 ​ ​ 1,632 ​ ​ — ​ ​ — ​ ​ 6,268 Farmland ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ 6,731 ​ ​ 11,645 ​ ​ 11,793 ​ ​ 2,650 ​ ​ 1,652 ​ ​ 11,608 ​ ​ 2,750 ​ ​ 394 ​ ​ 49,223 Special mention ​ — ​ ​ — ​ ​ — ​ ​ 840 ​ ​ — ​ ​ 10,471 ​ ​ — ​ ​ — ​ ​ 11,311 Substandard ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,976 ​ ​ — ​ ​ — ​ ​ 6,976 Subtotal ​ 6,731 ​ ​ 11,645 ​ ​ 11,793 ​ ​ 3,490 ​ ​ 1,652 ​ ​ 29,055 ​ ​ 2,750 ​ ​ 394 ​ ​ 67,510 Other commercial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ 18,319 ​ ​ 6,501 ​ ​ 2,666 ​ ​ 6,622 ​ ​ 4,534 ​ ​ 9,354 ​ ​ 101,163 ​ ​ 1,171 ​ ​ 150,330 Special mention ​ — ​ ​ — ​ ​ 273 ​ ​ 2,783 ​ ​ — ​ ​ 128 ​ ​ 143 ​ ​ 3,748 ​ ​ 7,075 Substandard ​ — ​ ​ — ​ ​ 55 ​ ​ — ​ ​ — ​ ​ — ​ ​ 208 ​ ​ 92 ​ ​ 355 Subtotal ​ 18,319 ​ ​ 6,501 ​ ​ 2,994 ​ ​ 9,405 ​ ​ 4,534 ​ ​ 9,482 ​ ​ 101,514 ​ ​ 5,011 ​ ​ 157,760 Mortgage warehouse lines ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 116,000 ​ ​ — ​ ​ 116,000 Subtotal ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 116,000 ​ ​ — ​ ​ 116,000 Consumer loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ 1,366 ​ ​ 229 ​ ​ 102 ​ ​ 82 ​ ​ 67 ​ ​ 177 ​ ​ 1,949 ​ ​ — ​ ​ 3,972 Special mention ​ — ​ ​ — ​ ​ — ​ ​ 15 ​ ​ — ​ ​ 35 ​ ​ 13 ​ ​ — ​ ​ 63 Substandard ​ 55 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 55 Subtotal ​ 1,421 ​ ​ 229 ​ ​ 102 ​ ​ 97 ​ ​ 67 ​ ​ 212 ​ ​ 1,962 ​ ​ — ​ ​ 4,090 Total $ 139,225 ​ $ 398,142 ​ $ 303,289 ​ $ 561,128 ​ $ 62,980 ​ $ 359,350 ​ $ 258,087 ​ $ 8,183 ​ $ 2,090,384 Gross charge-offs $ 2,145 ​ $ 45 ​ $ 250 ​ $ 2,266 ​ $ 81 ​ $ 1,345 ​ $ 489 ​ $ ​ ​ $ 6,621 ​ CECL replaces the legacy accounting for loans designated as purchased credit impaired (“PCI”) with loans designated as purchased credit deteriorated (“PCD”). PCD loans are loans acquired or purchased, which as of acquisition, had evidence of more than insignificant credit deterioration since origination. Due to the immaterial balance in the Company’s PCI loans as of December 31, 2021, management elected not to transition these loans into the PCD designation. As of March 31, 2024, the Company had no loans categorized as PCD. As noted in footnote 3, 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 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. 27 Table of Contents 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 DCF quantitative reserve methodology incorporates the consideration of probability of default (“PD”) and loss given default (“LGD”) estimates to estimate periodic losses. The PD estimates are derived through the application of reasonable and supportable economic forecasts to call code specific regression models, derived from the consideration of historical bank-specific and peer loss-rate data. 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 on an annual basis, 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. 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 for each call code, over a four-quarter reversion period, on a straight-line basis. 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. 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. Economic forecasts are considered over a four-quarter forecast period, with reversion to mean occurring on a straight-line basis over four quarters. The call code regression models utilized upon implementation of CECL on January 1, 2022, and as of March 31, 2024, were identical, and relied upon reasonable and supportable forecasts of the National Unemployment Rate. Management selected the National Unemployment Rate as the driver of quantitative portion of collectively 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 FOMC forecast, and given the widespread familiarity of stakeholders with this economic metric. The quantitative reserves for Farmland, Agricultural Production and Consumer loans are calculated using a Remaining Life methodology where average historical bank specific and 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 estimated remaining life is calculated using historical bank-specific loan attrition 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. ● Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices ● Changes in international, regional and local economic and business conditions, and developments that affect the collectability of the portfolio, as reflected in forecasts of the Housing Price Index, Real GDP and the National Unemployment Rate (Farmland & Agricultural Production and Consumer segments only) ● Changes in the nature and volume of the loan portfolio ● Changes in the experience, ability, and depth of lending management and other relevant staff ● 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 28 Table of Contents ● Changes in the quality of the Bank’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, 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 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. 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: Residential Real Estate, Commercial Real Estate, Farmland & Agricultural Production, Commercial & Industrial, Mortgage Warehouse and Consumer loans. Loans secured by Residential Real Estate have a different profile from loans secured by Commercial Real Estate. Generally, the borrowers for Residential Real Estate 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. Farmland and Agricultural Production loans are included in a single segment as these loans are often times to the same borrowers, facing the same risks relating to commodity prices, water supply and drought conditions in addition to other environmental concerns. Commercial & Industrial loans are separated into a unique segment given the uniqueness of these loans, which are often revolving and secured by other business assets as opposed to real estate. Mortgage warehouse loans are also unique in the Company’s portfolio and warrant separate presentation as an individual portfolio segment, given the specific nature of these constantly revolving lines to mortgage originators and also attributable to a very limited loss history, even after consideration of peer data. Finally, the Company splits out Consumer loans as a separate segment as a result of the small balance, homogeneous terms that characterize these loans. Management individually evaluates loans that do not share risk characteristics with other loans when estimating reserves. As of March 31, 2024, the only loans that Management considered to have different risk characteristics from other loans sharing the same Federal Call Report code were loans designated nonaccrual. ​ ​ 29 Table of Contents The following tables present the activity in the allowance for credit losses by portfolio segment for the quarters ended March 31, 2024, and 2023: Allowance for Credit Losses and Recorded Investment in Financing Receivables (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential Real Estate ​ Commercial Real Estate Farmland & Agricultural Production Commercial & Industrial ​ Mortgage Warehouse Consumer Total Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2023 ​ $ 2,727 ​ $ 18,554 ​ $ 586 ​ $ 1,148 ​ $ 174 ​ $ 311 ​ $ 23,500 Charge-offs ​ ​ — ​ ​ ( 20 ) ​ ​ ( 410 ) ​ ​ ( 287 ) ​ ​ — ​ ​ ( 411 ) ​ ​ ( 1,128 ) Recoveries ​ ​ — ​ ​ — ​ ​ — ​ ​ 440 ​ ​ — ​ ​ 231 ​ ​ 671 (Benefit) provision for credit losses ​ ​ ( 184 ) ​ ​ 117 ​ ​ 379 ​ ​ ( 456 ) ​ ​ 131 ​ ​ 110 ​ ​ 97 Ending allowance balance: ​ $ 2,543 ​ $ 18,651 ​ $ 555 ​ $ 845 ​ $ 305 ​ $ 241 ​ $ 23,140 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential Real Estate ​ Commercial Real Estate Farmland & Agricultural Production Commercial & Industrial ​ Mortgage Warehouse Consumer Total Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2022 ​ $ 3,593 ​ $ 17,319 ​ $ 376 ​ $ 1,133 ​ $ 41 ​ $ 340 ​ $ 22,802 Charge-offs ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 85 ) ​ ​ — ​ ​ ( 371 ) ​ ​ ( 456 ) Recoveries ​ ​ — ​ ​ — ​ ​ — ​ ​ 36 ​ ​ — ​ ​ 196 ​ ​ 232 (Benefit) provision for credit losses ​ ​ ( 262 ) ​ ​ 249 ​ ​ 1,034 ​ ​ 67 ​ ​ 6 ​ ​ 118 ​ ​ 1,212 Ending allowance balance: ​ $ 3,331 ​ $ 17,568 ​ $ 1,410 ​ $ 1,151 ​ $ 47 ​ $ 283 ​ $ 23,790 ​ There were no significant changes in the Company’s loan portfolio ACL in the first quarter of 2024. ​ ​ ​ Note 11 – Goodwill The balance of goodwill at the three months beginning and ended March 31, 2024 and 2023 was $ 27.4 million. There was no acquired goodwill or impairment for the three months ended March 31, 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 its annual Step 1 goodwill impairment assessment as of October 1, 2023, 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. Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2024, and has concluded no such events have occurred. Therefore, goodwill was not impaired as of March 31, 2024, and there were no impairment charges related to the Company’s goodwill recorded during the quarter ended March 31, 2024. ​ ​ ​ 30 Table of Contents Note 12 – Borrowings and Other Arrangements The following table summarizes the Company’s other borrowings as of March 31, 2024, and December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2024 ​ December 31, 2023 ​ ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ Average ​ Balance Rate Balance Rate Overnight Fed funds purchased (1) ​ $ — ​ 6.60 % ​ $ 130,000 ​ 5.25 % Short-term FHLB advance (2) ​ ​ — ​ 5.73 % ​ ​ 150,500 ​ 3.73 % Long-term FHLB advance (2) ​ ​ 80,000 ​ 3.91 % ​ ​ 80,000 ​ 3.91 % Total other borrowings ​ $ 80,000 ​ 4.62 % ​ $ 360,500 ​ 4.27 % ​ The Company has established secured and unsecured lines of credit under which it may borrow funds from time to time on a term or overnight basis from the FHLB, FRB, and other correspondent banks. ​ Federal Funds Purchased (1) – The Company had unsecured available lines of credit with correspondent banks and the Federal Home Loan Bank for short-term borrowings totaling $ 504.8 million at March 31, 2024, and $ 374.8 million at December 31, 2023. In general, interest rates on these lines approximate the federal funds target rate. Secured Federal Home Loan Bank Borrowings (2) – At March 31, 2024, and December 31, 2023, the Company had secured available lines of credit with the FHLB totaling $ 676.8 million and $ 586.7 million, respectively, based on eligible collateral of certain loans and investment securities. ​ Federal Reserve Line of Credit – The Company has an available line of credit with the Federal Reserve Bank of San Francisco secured by certain loans and investments. At March 31, 2024, and December 31, 2023, the Company had borrowing capacity under this line totaling $ 376.2 million and $ 392.0 million, respectively. The Company had no outstanding borrowings on this line of credit as of March 31, 2024, and December 31, 2022. ​ Repurchase Agreements – Repurchase agreements represent “sweep accounts”, where commercial deposit balances above a specified threshold are transferred at the close of each business day into non-deposit accounts secured by investment securities. Repurchase agreements totaled $ 121.9 million at March 31, 2024, relative to a balance of $ 107.1 million at December 31, 2023. ​ Long-Term Debt – The Company has long-term debt in the form of fixed to floating rate subordinated debentures with a fixed rate of 3.25 % until September 30, 2026, then floating rate at 253.5 basis points over 3-month term SOFR until maturity on October 1, 2031. The balance of the Company’s long-term debt, net of unamortized issuance costs, was $ 49.3 million at March 31, 2024, and December 31, 2023. ​ 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. Trust preferred securities are variable rate instruments which were benchmarked against the London Interbank Offered Rate (LIBOR) plus a spread until LIBOR was phased out on June 30, 2023. These instruments are benchmarked against the Secured Overnight Financing Rate (SOFR), effective June 30, 2023. At March 31, 2024, and December 31, 2023, the Company’s trust preferred securities totaled $ 35.7 million. ​ Note 13 – Revenue Recognition The Company utilizes the guidance found in ASU 2014-09, Revenue from Contracts with Customers (ASC 606), when accounting for certain noninterest income. The core principle of this guidance is that an entity should recognize revenue 31 Table of Contents to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Sufficient information should be provided to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company’s revenue streams that are within the scope of and accounted for under Topic 606 include service charges on deposit accounts, debit card interchange fees, and fees levied for other services the Company provides its customers. The guidance does not apply to revenue associated with financial instruments such as loans and investments, and other noninterest income such as loan servicing fees and earnings on bank-owned life insurance, which are accounted for on an accrual basis under other provisions of GAAP. All of the Company’s revenue from contracts within the scope of ASC 606 is recognized when incurred as noninterest income and gains on the sale of OREO which is classified as noninterest expense. These gains were immaterial for each of the three months ended March 31, 2024, and 2023, and the year ended December 31, 2023. The following table presents the Company’s sources of noninterest income. Items outside the scope of ASC 606 are noted as such (dollars in thousands, unaudited). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended March 31, ​ For the year ended December 31, ​ 2024 2023 2023 Noninterest income ​ ​ ​ ​ ​ ​ ​ ​ ​ Service charges on deposits ​ ​ ​ ​ ​ ​ ​ ​ ​ Returned item and overdraft fees $ 1,324 $ 1,258 ​ $ 5,261 Other service charges on deposits ​ ​ 2,454 ​ ​ 2,093 ​ ​ 9,790 Debit card interchange income ​ ​ 1,948 ​ ​ 2,029 ​ ​ 8,052 Loss on limited partnerships (1) ​ ​ — ​ ​ ( 166 ) ​ ​ — Dividends on equity investments (1) ​ ​ 375 ​ ​ 276 ​ ​ 1,076 Unrealized losses recognized on equity investments (1) ​ ​ ( 311 ) ​ ​ ( 291 ) ​ ​ ( 291 ) Net (loss) gain on sale of securities (1) ​ ​ ( 2,883 ) ​ ​ 45 ​ ​ 396 Other (1) ​ ​ 5,682 ​ ​ 1,335 ​ ​ 6,116 Total noninterest income ​ $ 8,589 ​ $ 6,579 ​ $ 30,400 Percentage of noninterest income not within scope of ASC 606. ​ ​ 33.33 % ​ ​ 18.22 % ​ ​ 24.00 % ​ (1) Not within scope of ASC 606. Revenue streams are not related to contracts with customers and are accounted for under other provisions of GAAP. ​ With regard to noninterest income associated with customer contracts, the Company has determined that transaction prices are fixed, and performance obligations are satisfied as services are rendered, thus there is little or no judgment involved in the timing of revenue recognition under contracts that are within the scope of ASC 606. ​ ​ ​ ​ 32 Table of Contents PART I - FINANCIAL INFORMATION