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Item 8. Financial Statements and Supplementary Data

2025-03-03 compared with 2024-03-22 · 282 added, 274 removed, 1336 unchanged (29% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Sierra Bancorp

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

Opinion on the Financial Statements

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

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

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

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

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

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

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

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

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

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

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

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

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

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

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

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

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

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

Critical Audit Matter

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

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

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

Allowance for Credit Losses – Loans and Leases

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

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

Critical Audit Matters

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

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

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

Allowance for Credit Losses—Loans

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

The allowance for credit losses is calculated under the expected credit loss model and is an estimate of life-of-loan and -lease losses.

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

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

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

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

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

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

The Company uses a regression analysis that links historical losses of the Company and its peer group to national unemployment rates in order to calculate expected default rates.

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

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

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

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

The qualitative reserve is calculated using a combination of numeric frameworks and management’s judgment in order to determine the risk categorization in each of the qualitative factor.

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

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

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

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

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

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

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

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

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

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

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

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

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

San Francisco, California

Las Vegas, Nevada

March 3, 2025

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Sierra Bancorp Porterville, California

Opinion on the Financial Statements

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

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

To the shareholders and Board of Directors

Sierra Bancorp and Subsidiary

Porterville, California

Opinion on the Consolidated Financial Statements

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

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

Basis for Opinion

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

Our responsibility is to express an opinion on these financial statements based on our audits.

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

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

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

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

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

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

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

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

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

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

We have served as Sierra Bancorp’s auditor from 2004 through 2022 (such dates incorporate the

acquisition of certain assets of Vavrinek, Trine, Day & Co., LLP by Eide Bailly in 2019).

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

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

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

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

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

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

We served as the Company’s auditor from 2004 to 2022.

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

San Ramon, California

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Interest-bearing deposits in banks

Cash and cash equivalents

Total cash & cash equivalents

Investment securities

Available-for-sale, net of zero allowance for credit losses

Available-for-sale, net of allowance for credit losses of zero

Held-to-maturity, net of allowance for credit losses of $ 15 and $ 16

Total investment securities

Deferred loan costs (fees), net

Deferred loan costs, net

Allowance for credit losses on loans

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Other intangible assets, net

Company owned life insurance

Bank-owned life insurance

LIABILITIES AND SHAREHOLDERS' EQUITY

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24,000,000 shares authorized;

14,793,832 and 15,170,372 shares issued and outstanding , respectively

14,223,046 and 14,793,832 shares issued and outstanding , at December 31, 2024 and 2023, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss, net of taxes of $ 14,874 and $ 23,746

Accumulated other comprehensive loss

Total shareholders' equity

Total liabilities and shareholders' equity

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

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Interest expense

Other borrowings

Federal funds purchased and repurchase agreements

Federal Home Loan Bank advances

Long-term debt

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Net interest income

Provision (benefit) for credit losses on loans

Benefit for credit losses on unfunded loan commitments

(Benefit) provision for credit losses on held-to-maturity securities

Net interest income after provision for credit losses

Credit loss expense - loans

Credit loss expense (benefit) - unfunded commitments

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

Net interest income after credit loss expense

Noninterest income

Service charges on deposits

Net gains on sale of securities available-for-sale

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

Net gains (losses) on sale of fixed assets

Increase (decrease) in cash surrender value of life insurance

Realized losses on available-for-sale securities

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

Total noninterest income

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Total noninterest expense

Income before income taxes

Income before taxes

Provision for income taxes

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

Income tax expense associated with the reclassification adjustment for the years ended 2023, 2022 and 2021 was $ 4.2 million, $ 0.4 million, and 0.003 million respectively.

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

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

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Balance, January 1, 2022

Cumulative effect of change in accounting principle

Other comprehensive loss, net of tax

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Balance, December 31, 2022

Cumulative effect of change in accounting principle

Other comprehensive loss, net of tax

Other comprehensive gain, net of tax

Stock options exercised, net of shares surrendered for cashless exercises

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Restricted stock forfeited / cancelled

Restricted stock vested in period

Stock based compensation - stock options

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Stock repurchase

Excise tax on stock repurchases

Cash dividends - $ 0.92 per share

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Other comprehensive gain, net of tax

Stock options exercised, net of shares surrendered for cashless exercises

Restricted stock granted

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

Gain on sales of securities

Realized loss on available-for-sale securities

Loss (gain) on disposal of fixed assets

Loss (gain) on sales of securities

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

(Gain) loss on disposal of fixed assets

Gain on sale of foreclosed assets

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Stock based compensation expense

Provision (benefit) for credit losses on loans

(Benefit) provision for credit losses on held-to-maturity securities

Credit loss expense - loans

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

Depreciation and amortization

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Amortization of core deposit intangible

(Increase) decrease in interest receivable and other assets

Increase in interest receivable and other assets

Increase in other liabilities

Deferred income tax (benefit) provision

Decrease (increase) in equity securities

Deferred income tax provision (benefit)

Decrease in equity securities

Net amortization of partnership investment

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Net purchases of FHLB stock

Loan (payments) and originations, net

Loan (originations) and payments, net

Purchases of premises and equipment, net

Proceeds from sales of fixed assets

Proceeds from sales of premises and equipment

Proceeds from sales of foreclosed assets

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Liquidation of bank-owned life insurance

Proceeds from BOLI death benefit

Proceeds from bank-owned life insurance death benefit

Amortization of debt issuance costs

Net increase in partnership investment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

(Decrease) increase in deposits

Increase (decrease) in fed funds purchased

Increase (decrease) in borrowed funds

Increase (decrease) in deposits

(Decrease) increase in fed funds purchased

(Decrease) increase in borrowed funds

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

(Decrease) increase in repurchase agreements

Increase (decrease) in repurchase agreements

Cash dividends paid

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Stock options exercised

Proceeds from issuance of subordinated debt

Net cash provided by financing activities

Net cash (used in) provided by financing activities

(Decrease) increase in cash and due from banks

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

At December 31, 2023, the Bank operated 35 full service branch offices and an online branch and provides specialized lending services through a dedicated agricultural credit office, Mortgage Warehouse lending divisions, a dedicated loan production office in Roseville, California and an agricultural production office in Templeton, California.

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

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

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Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and the consolidated accounts of its wholly owned subsidiary, Bank of the Sierra.

The consolidated financial statements include the accounts of the Company and the accounts of its wholly owned subsidiary, Bank of the Sierra.

All significant intercompany balances and transactions have been eliminated.

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The subordinated debentures issued and guaranteed by the Company and held by the trusts are reflected on the Company’s consolidated balance sheet.

The Bank has subsidiary interests in variable interest entities (“VIE”) for which the Bank does not have a controlling financial interest and is not the primary beneficiary.

These subsidiary interests are not included in the Company’s consolidated financial statements.

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

Segment information

An operating segment is generally defined as a component of business for which discrete financial information is available and whose operating results are regularly reviewed by the chief operating decision maker.

As a community-oriented financial institution, substantially all of the Company’s operations involve the delivery of loan and deposit products to customers.

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

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

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

The chief operating decision maker uses consolidated expense information to manage the operations of the segment.

The consolidated expense information is the same as is reported on the income statement as consolidated net income.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

The chief operating decision maker uses consolidated net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the community banking segment or into other parts of the entity, such as for whole bank or branch acquisitions or to pay dividends.

Net income is used to monitor budget versus actual results.

The chief operating decision maker also uses net income in competitive analysis by benchmarking to the Company’s peer banking competitors.

The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation.

The Company does not have intra-entity revenues or transfers.

Use of Estimates

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The securities were transferred at their fair value as of the transfer date, with the related unrealized gain or loss as of the date of transfer included in the amortized cost basis of the transferred security and subject to amortization or accretion over each security’s remaining life.

An unrealized loss of $ 28.4 million, on securities transferred from the available-for-sale to held-to-maturity categorization, remains

as of December 31, 2023 and is included in accumulated other comprehensive income, net of tax.

An unrealized loss of $ 26.3 million, on securities transferred from the available-for-sale to held-to-maturity categorization, remains as of December 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.

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

As of December 31, 2023, an allowance for credit losses of $ 0.02 million had been established on the Bank’s held-to-maturity portfolio, a slight decrease from the allowance for credit losses of $ 0.06 million at December 31, 2022.

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

FHLB Stock and Other Investments

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Both cash and stock dividends are reported as income.

The Bank’s investment in FHLB stock was approximately $ 14.7 million at December 31, 2023, and $ 12.7 million at December 31, 2022.

The Bank’s investment in FHLB stock was approximately $ 14.7 million at December 31, 2024, and December 31, 2023.

Loans (Financing Receivables)

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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 non-accrual.

Once a loan is on non-accrual 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.

Once a loan is on non-accrual 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.

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The Allowance for Credit Losses (“ACL”) on the loan portfolio is a valuation allowance deducted from the recorded balance in loans.

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

The ACL is increased by a provision for credit losses charged to expense, and by principal recovered on charged-off balances.

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

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

Generally, the borrowers for 1-4 Family

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

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

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in the corridor stretching between Santa Paula and Santa Clarita in Southern California, and on the Central Coast.

Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in those

Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economy in those regions.

The Company considers this concentration of credit risk when assessing and assigning qualitative factors in the allowance for credit.

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

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

Prior period expense have not been reclassified for comparative purposes.

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

credit loss expense from its prior presentation in noninterest expense.

Prior period expense has not been reclassified for comparative purposes.

Premises and Equipment

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The lease term is also used to calculate straight-line lease expense.

Leasehold improvements are amortized over the shorter of the useful life and the

estimated lease term.

Leasehold improvements are amortized over the shorter of the useful life and the estimated lease term.

The Company’s leases do not contain residual value guarantees or material variable lease payments that will impact the Company's ability to pay dividends or cause the Company to incur additional expenses.

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Operating costs after acquisition are expensed.

The Company had no foreclosed residential real estate properties recorded at December 31, 2023.

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

At December 31, 2024, there were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process.

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

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

At the consolidated balance sheet date, the amount of accrued

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

Comprehensive Income

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Debit card interchange income is derived from our customers’ use of various interchange and ATM/debit card networks which are the primary sources of revenue generated in an agent capacity.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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

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Previously, this method was only available for qualifying tax equity investments in low-income housing tax credit structures.

ASU 2023-02 was adopted by the

Company on January 1, 2023, and its adoption did not have a significant effect on the Company’s financial statements.

ASU 2023-02 was adopted by the Company on January 1, 2023, and its adoption did not 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 was adopted by the Company in 2024, and its adoption did not have a significant impact on our financial statements.

Recent Accounting Pronouncements

On October 9, 2023, the FASB issued ASU 2023-06, “Disclosure Improvements:

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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):

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 is not expected to have a significant impact on our financial statements.

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

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

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

The objective of the disclosure requirements is to provide disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities.

ASU 2024-03 is effective for us in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption of Update 2024-03 is permitted.

ASU 2024-03 is not expected to have a significant impact on our financial statements.

INVESTMENT SECURITIES

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

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

There were no securities sold during 2023 for which a loss was realized.

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

The securities were sold with 100 other debt securities, for which a $ 2.9 million loss was realized.

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

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

There were no securities sold during 2021 for which a loss was realized.

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

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

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

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

December 31, 2024

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Corporate bonds

Collateralized loan obligations

Total available-for-sale

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

Securities available-for-sale with amortized costs totaling $ 186.7 million and estimated fair values totaling $ 183.5 million were pledged to secure other contractual obligations and short-term borrowing arrangements at December 31, 2022 (see Note 10).

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

At December 31, 2024, the Company’s investment portfolio included securities issued by 188 different government municipalities and agencies located within 28 states with a fair value of $ 212.6 million.

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In addition, the Company owned 56 subordinated debentures issued by bank holding companies totaling $ 58.6 million (fair value).

At December 31, 2023, the Company’s investment portfolio included securities issued by 398 different government municipalities and agencies located within 36 states with a fair value of $ 372.4 million.

The largest exposure to any single municipality or agency was $ 5.3 million (fair value) in four 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 states, municipalities and political subdivisions are evaluated in accordance with Supervision and Regulation Letter 12-15 (SR 12-15) issued by the Board of Governors of the Federal Reserve System, “Investing in Securities without Reliance on Nationally Recognized Statistical Rating Organization Ratings”, and other regulatory guidance.

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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.

Certain prior period credit quality disclosures related to impaired loans and individually and collectively evaluated loans were superseded with the current guidance and have not been included below as of December 31, 2023.

Under CECL, disclosures are required on the amortized cost basis, whereas legacy GAAP required presentation on the recorded investment basis, with the primary difference being net deferred fees and costs.

Unless specifically noted otherwise, December 31, 2023 and 2022 disclosures are prepared on the amortized cost basis and December 31, 2021 disclosures present information according to the recorded investment basis.

We adopted the current expected credit loss accounting guidance, CECL, and all related amendments as of January 1, 2022.

Under CECL, disclosures are presented on the amortized cost basis.

Unless specifically noted otherwise, December 31, 2024, 2023, and 2022 disclosures are prepared on the amortized cost basis.

Accrued interest receivable on loans of $ 6.1 million and $ 5.6 million at December 31, 2024 and December 31, 2023 respectively is not included in the loans included in the table below but is included in other assets on the Company’s balance sheet.

The December 31, 2022 balance in residential real estate loans reflects year-to-date 2022 loan purchases of $ 173.1 million.

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

The final table in this section separates a roll forward

of the Allowance for Credit Losses at the portfolio segment level.

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

The following table presents loans by class as of December 31, 2024 and December 31, 2023 (dollars in thousands).

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Consumer loans

Plus (less) net deferred loan fees and costs

Plus net deferred loan fees

Allowance for credit losses on loans

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Residential real estate

Commercial real estate

Total real estate

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The weighted average loan-to-value ratio of collateral dependent loans was 92 % at December 31, 2024 and 54 % at December 31, 2023.

There were no collateral dependent loans in the process of foreclosure as of December 31, 2023 and four collateral dependent loans in the process of foreclosure as of December 31, 2022.

There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process as of December 31, 2024 or 2023.

The following tables present the aging of the amortized cost basis in past-due loans, according to class, as of December 31, 2024 and 2023 (dollars in thousands):

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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.

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

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

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principal forgiveness, rate reductions, payment deferral, and/or term extension.

The following table presents the amortized cost basis of loans at December 31, 2023 that were both experiencing financial difficulty and modified during the year ended December 31, 2023, by class and by type of modification.

The following table presents the amortized cost basis of loans at December 31, 2024 that were both experiencing financial difficulty and modified during the years ended December 31, 2024 and 2023, by class and by type of modification.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below (dollars in thousands):

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Principal Forgiveness

Payment Delay

Term Extension

Combination Term Extension Interest Rate Reduction

Combination Term Extension and Principal Forgiveness

Total Class of Financing Receivable

Commercial real estate

Other construction/land

Total real estate

Other commercial

December 31, 2023

Principal Forgiveness

Payment Delay

Term Extension

Combination Term Extension and Principal Forgiveness

Total Class of Financing Receivable

Residential real estate

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Consumer loans

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2023:

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2024 and 2023:

December 31, 2024

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Weighted-Average Term Extension (years)

Other construction/land

Other commercial

December 31, 2023

Principal Forgiveness

Weighted-Average Interest Rate Reduction

Weighted-Average Term Extension (years)

Residential real estate

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

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

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

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

The tables below summarize TDRs which were modified during the year ended December 31, 2021, by type of concession.

Troubled Debt Restructurings, by Type of Loan Modification

( dollars in thousands)

December 31, 2021

Interest Only

Term & Interest

Troubled debt restructurings

Other construction/land

1-4 family - closed-end

Multi-family residential

Commercial real estate owner occupied

Commercial real estate non-owner occupied

Total real estate loans

Commercial and industrial

Consumer loans

Small Business Administration Loans

Troubled Debt Restructurings

(dollars in thousand)

Pre-Modification

Post-Modification

December 31, 2021

Difference (1)

Other construction/land

1-4 family - closed-end

Multi-family residential

Commercial real estate - owner occupied

Commercial real estate - non-owner occupied

Total real estate loans

Commercial and industrial

Consumer loans

The Company had no finance receivables modified as TDRs within the previous twelve months that defaulted or were charged off during years ending December 31, 2022 and 2021.

Credit Quality

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Special Mention

Special mention

Other commercial

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Special Mention

Special mention

Other commercial

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Special mention

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

Gross charge-offs

CECL replaced 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.

Due to the immaterial balance in the Company’s PCI loans at the CECL implementation date, management elected not to transition these loans into the PCD designation.

As of December 31, 2024 the Company had no loans categorized as PCD.

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

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

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

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

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

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

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

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

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.

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 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.

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

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

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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 December 31, 2023, 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.

The call code multiple factor regression models utilized as of December 31, 2024, for Residential Real Estate loans relied upon reasonable and supportable forecasts of the National Unemployment Rate and House Price Index (HPI).

The call code multiple factor regression models utilized as of December 31, 2024, for Commercial Real Estate and Other Construction loans relied upon reasonable and supportable forecasts of the National Unemployment Rate and Gross Domestic Product (GDP).

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

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

The estimated remaining life is calculated using historical peer data.

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

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Balance, December 31, 2022

Impact of adopting ASC 326

Provision for credit losses

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Balance, December 31, 2024

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

PREMISES AND EQUIPMENT

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OPERATING LEASES

The Company leases space under non-cancelable operating leases for 28 branch locations, four off-site ATM locations, one administrative building, three loan production offices and a warehouse.

The Company leases space under non-cancelable operating leases for 30 branch locations, three off-site ATM locations, one administrative building, and two loan production offices.

Many of our leases include both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g., common-area or other maintenance costs).

Payments for taxes and insurance as well as non-lease components are not included in the accounting of the lease component but are separately accounted for in occupancy expense.

The Company recognized lease expense of $ 2.3 million for the year ended December 31, 2023 and $ 2.2 million for the years ended December 31, 2022 and 2021.

The Company recognized lease expense of $ 4.5 million for the year ended December 31, 2024, $ 2.3 million for the year ended December 31, 2023, and $ 2.2 million for the year ended December 31, 2022.

Most leases include one or more renewal options available to exercise.

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In December 2023, the Company completed a sale and leaseback transaction on 11 branch buildings with a book value of $ 4.8 million, for a gain on sale of $ 15.3 million.

In the first quarter of 2024 the Company completed another sale leaseback transaction of two additional branch buildings with a book value of $ 0.7 million, for a gain on sale of $ 3.8 million.

These branch buildings were subsequently leased back to the Company and are reflected in the tables in this footnote.

This sale and leaseback transaction resulted in additions to the Company’s right of use asset and operating lease liability of $ 18.0 million and $ 13.8 million, respectively at the year ended December 31, 2023.

The new leases have an average life of 18 years .

There were no sale and leaseback transactions during the year ended December 31, 2022.

The 2023 sale and leaseback transaction resulted in additions to the Company’s right of use asset and operating lease liability of $ 18.0 million and $ 13.8 million, respectively at the year ended December 31, 2023.

The 2024 sale and leaseback transaction resulted in additions to the Company’s right of use asset and operating lease liability of $ 3.9 million and $ 3.1 million, respectively at the year ended December 31, 2024.

Each of the new leases have an average life of 18 years .

At December 31, 2024, the Company’s right-of-use assets and operating lease liabilities were $ 27.8 million and $ 23.7 million, respectively.

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Lease liabilities from new right-of-use assets obtained during the year ending December 31, 2024 and December 31, 2023 were $ 4.7 million and $ 20.7 million, respectively.

There was $ 0.2 million, $ 0.03 million, and $ 0.008 million in variable lease costs for the years ending December 31, 2023, 2022, and 2021, respectively.

Cash paid on operating leases was $ 2.3 million for both of the years ending December 31, 2023 and 2022, respectively.

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

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

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

Future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2024 are as follows (dollars in thousands):

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Federal Home Loan Bank stock, at cost

The Company holds ownership interests in limited partnerships and limited liability companies that invest in affordable housing, and small business investment companies which are included in other assets.

These investments are designed to generate a return primarily through the realization of federal tax credits and deductions, which may be subject to recapture by taxing authorities if compliance requirements are not met, or for CRA credits.

The Company accounts for its low income housing investments using the proportional amortization method and management analyzes these investments annually for potential impairment.

The Company evaluates its interests in these entities to determine whether it has a variable interest and whether it is required to consolidate these entities.

A variable interest is an investment or other interest that will absorb portions of an entity's expected losses or receive portions of the entity's expected residual returns.

If the Company determines it has a variable interest in an entity, it evaluates whether such interest is in a Variable Interest Entity (“VIE”).

A VIE is broadly defined as an entity where either:

1) The equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity's economic performance;

2) The equity investment at risk is insufficient to finance that entity's activities without additional subordinated financial support.

The Company is required to consolidate any VIE when it is determined to be the primary beneficiary of the VIE's operations.

A variable interest holder is considered to be the primary beneficiary of a VIE if it has both the power to direct the activities of a VIE that most significantly impact the entity's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE.

The Company’s assessment of whether it is the primary beneficiary of a VIE includes consideration of various factors such as:

1) The Company's ability to direct the activities that most significantly impact the entity's economic performance;

2) its form of ownership interest;

3) its representation on the entity's governing body;

4) the size and seniority of its investment, the maximum of which is four percent;

5) its ability and the rights of other investors to participate in policy making decisions and to replace the manager of and/or liquidate the entity.

The Company is required to evaluate whether to consolidate a VIE both at inception and on an ongoing basis as changes in circumstances require reconsideration.

The Company’s investments in qualified affordable housing projects, and small business investment companies meet the definition of a VIE as the entities are structured such that the limited partner investors lack substantive voting rights.

The Company, as a limited partner, is liable only to make the payments due on its subscription and is not liable for the debts, liabilities, contracts or other obligations of the Partnership.

The Company had $10.5 million in remaining capital commitments to these partnerships at December 31, 2023.

The general partner or managing member has both the power to direct the activities that most significantly impact the economic performance of the entities and the obligation to absorb losses or the right to receive benefits that could be significant to the entities.

Accordingly, as a limited partner, the Company is not the primary beneficiary and is not required to consolidate these entities.

The Company accounts for its investment in limited partnerships which invest in small business investment companies under the cost method.

(1) See Note 23 for additional details.

The Company accounts for its investment in limited partnerships which invest in small business investment companies and fintech companies under the cost method.

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

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Federal Home Loan Bank advances, maturing 2028

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

At December 31, 2022 there were $ 94.0 million outstanding in fixed-rate overnight FHLB advances and no fixed-rate short term FHLB advances.

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

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

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

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Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow up to the total of $ 836.7 million at year-end 2024, with a remaining borrowing capacity of $ 715.4 million if sufficient additional collateral was pledged.

The carrying value of the securities pledged to collateralize repurchase agreements was $ 169.5 million at December 31, 2024 and $ 185.8 million at December 31, 2023.

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

The Company was eligible to borrow up to $ 298.3 million from FRB at year end 2024, which was collateralized by $ 174.8 million in first mortgage loans under a blanket lien arrangement.

The Company had unsecured lines of credit with its correspondent banks which, in the aggregate, amounted to $ 382.0 million and $ 362.0 million at December 31, 2023 and 2022, respectively, at fixed interest rates which vary with market conditions.

Included in short term borrowings above there was $ 130.0 million outstanding overnight under these lines of credit at December 31, 2023 and $ 125.0 million outstanding overnight at December 31, 2022.

The Company had lines of credit with its correspondent banks which, in the aggregate, amounted to $ 479.8 million unsecured and $ 25.0 million secured at December 31, 2024 and $ 349.8 million unsecured and $ 25.0 million secured at December 31, 2023, at fixed interest rates which vary with market conditions.

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

LONG-TERM DEBT

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

Those Subordinated Debentures mature on March 17, 2034, bear a current interest rate of 8.39 % (based on 3-month CME Term SOFR plus tenor spread adjustment of 0.26161 % plus 2.75 %), with re-pricing and payments due quarterly.

Those Subordinated Debentures mature on March 17,

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

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

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During the second quarter of 2006, Sierra Capital Trust III issued 15,000 Floating Rate Capital Trust Pass-Through Securities (TruPS III), with a liquidation value of $ 1,000 per security, for gross proceeds of $ 15,000,000 .

The entire proceeds of the issuance were invested by Trust III in $ 15,464,000 of Subordinated Debentures issued by the Company, with identical maturity, repricing and payment terms as the TRUPS III.

The entire proceeds of the issuance were invested by Trust III in $ 15,464,000 of Subordinated Debentures issued by the Company, with identical maturity, re-pricing, and payment terms as the TruPS III.

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

Those Subordinated Debentures mature on

September 23, 2036 , bear a current interest rate of 7.02 % (based on 3-month CME Term SOFR plus tenor spread adjustment of 0.26261 % plus 1.40 %), with repricing and payments due quarterly.

Those Subordinated Debentures are redeemable by the Company, subject to receipt by the Company of prior approval from the Federal Reserve Bank, on any March 23 rd , June 23 rd , September 23 rd , or December 23 rd .

Those Subordinated Debentures mature on September 23, 2036 , bear a current interest rate of 6.00 % (based on 3-month CME Term SOFR plus tenor spread adjustment of 0.26261 % plus 1.40 %), with repricing and payments due quarterly.

Those Subordinated Debentures are redeemable by the Company, subject to receipt by the Company of prior approval from the FRBSF, on any March 23 rd , June 23 rd , September 23 rd , or December 23 rd .

The redemption price is par plus accrued and unpaid interest, except in the case of redemption under a special event which is defined in the debenture.

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Trust III has the option to defer payment of the distributions for a period of up to five years , subject to certain conditions, including that the Company may not pay dividends on its common stock during such period.

The TRUPS III issued in the offering were sold in private transactions pursuant to an exemption from registration under the Securities Act of 1933, as amended.

The TruPS III issued in the offering were sold in private transactions pursuant to an exemption from registration under the Securities Act of 1933.

The Company has guaranteed, on a subordinated basis, distributions and other payments due on the TruPS III.

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

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

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

The redemption price is par plus accrued and unpaid interest, except in the case of redemption under a special event which is defined in the debenture.

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Coast Bancorp Statutory Trust II has the option to defer payment of the distributions for a period of up to five years , subject to certain conditions, including that the Company may not pay dividends on its common stock during such period.

The TRUPS IV issued in the offering were sold in private transactions pursuant to an exemption from registration under the Securities Act of 1933, as amended.

The TruPS IV issued in the offering were sold in private transactions pursuant to an exemption from registration under the Securities Act of 1933.

The Company has guaranteed, on a subordinated basis, distributions and other payments due on the TruPS IV.

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Year Ended December 31,

Effect of tax act

Total federal

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Tax exempt municipal income

Nondeductible interest expense

Affordable housing tax credits

Excess tax benefit of stock-based compensation

Excess tax (benefit) expense of stock-based compensation

Cash surrender value - life insurance

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Our federal income tax returns for the years ended December 31, 2021, 2022 and 2023 are open to audit by the federal authorities and our California state tax returns for the years ended December 31, 2020, 2021, 2022 and 2023 are open to audit by the state authorities.

At December 31, 2023, the Company has net federal net operating loss carry forwards of approximately $ 3.4 million which expire at various dates from 2031 to 2034.

At December 31, 2024, the Company has federal net operating loss carry forwards of approximately $ 3.1 million which expire at various dates from 2031 to 2036.

The Company also had California Franchise tax net operating loss carry forwards of approximately $ 5.4 million which expire at various dates from 2034 to 2041.

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Should the standby letter of credit be drawn upon, the customer would reimburse the Company from an existing line of credit.

Federal Reserve Requirements

Historically banks were required to maintain reserves with the Federal Reserve Bank equal to a specified percentage of their reservable deposits less vault cash.

Effective March 26, 2020 the Federal Reserve Board reduced the reserve requirement to zero percent indefinitely.

Financial Instruments with Off-Balance-Sheet Risk

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

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

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

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

SHAREHOLDERS’ EQUITY

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This share repurchase plan replaced the 2023 Share Repurchase Plan which expired on October 31, 2024.

During the year ended December 31, 2023, the Company repurchased 481,094 shares under the 2022 Share Repurchase Plan and no shares under the 2023 Share Repurchase Plan.

During the year ended December 31, 2024, the Company repurchased 197,247 shares under the 2024 Share Repurchase Plan and 439,412 shares under the 2023 Share Repurchase Plan.

The total number of shares available for repurchase at December 31, 2023 was 770,150 .

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Basic Earnings Per Share

Net income (dollars in thousands)

Weighted average shares outstanding

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Diluted Earnings Per Share

Net income (dollars in thousands)

Weighted average shares outstanding

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

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.

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

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 December 31, 2024 was 306,374 .

All options granted under the 2023, 2017 and 2007 Plans have been or will be granted at an

exercise price of not less than 100 % of the fair market value of the stock on the date of grant, exercisable in installments as provided in individual stock option agreements.

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

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

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

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

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

A summary of the Company’s stock option activity follows (shares in thousands, except exercise price):

A summary of the Company’s stock option activity follows (dollars and shares in thousands, except exercise price):

Weighted Average

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Exercised or released

Forfeited/canceled

Outstanding, end of year

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

Information related to stock options during each year follows (dollars in thousands, except per share data):

Weighted-average grant-date fair value per share

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

Total intrinsic value of stock options exercised

Total fair value of stock options vested

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

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

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

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

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

The related tax benefit of these options is $ 0.02 million for the year ended December 31, 2023 and $ .03 million for the years ended December 31, 2022 and December 31, 2021.

Unamortized compensation expense associated with unvested stock options outstanding at December 31, 2023 was $ 0.1 million, which will be recognized over a weighted average period of 1.0 years.

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

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

Restricted Stock Grants

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Restricted stock awards are valued utilizing the fair value of the Company’s stock at the grant date.

During the year ending 2023, 129,904 shares were granted to employees and directors of the Company ( 29,064 under the 2017 Plan and 100,840 under the 2023 Plan).

These awards are expensed on a straight-line basis

over the vesting period.

Compensation expense related to restricted stock units for the years ended December 31, 2023, 2022 and 2021 was $ 1.7 million, $ 1.2 million, and $ 0.9 million respectively, and the recognized income tax benefit related to this expense was $ 0.4 million, $ 0.4 million, and $ 0.3 million, respectively.

During the year ending 2024, 48,724 shares were granted to employees and directors of the Company under the 2023 Plan.

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

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

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

As of December 31, 2023, there was $ 2.2 million of unamortized compensation and directors’ cost related to unvested restricted stock awards granted under the 2023 and 2017 plans.

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The total fair value of shares vested during the year ended December 31, 2024, 2023 and 2022 was $ 1.8 million, $ 1.2 million, and $ 1.3 million, respectively.

A summary of the Company’s nonvested shares for the year follows (shares in thousands, except grant date fair value):

A summary of the Company’s nonvested shares for the year follows (shares in thousands):

Nonvested Shares

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Nonvested at January 1, 2024

Forfeited/canceled

Nonvested at December 31, 2024

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There are no conditions or events since that notification that management believes have changed the Bank's categorization.

In 2019, the federal banking agencies jointly issued a final rule that provides for an optional, simplified measure of capital adequacy, the community bank leverage ratio framework (CBLR framework), for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

The final rule became effective on January 1, 2020 and was elected by the Bank at that time.

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

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

Under the interim final rules the community bank leverage ratio minimum requirement is 8% as of December 31, 2020, 8.5% for calendar year 2021, and 9% for calendar year 2022 and beyond.

The interim rule allows for a two-quarter grace period to correct a ratio that falls below the required amount, provided that the bank maintains a

leverage ratio of 7% as of December 31, 2020, 7.5% for calendar year 2021, and 8% for calendar year 2022 and beyond.

The federal banking agencies jointly provide for an optional, simplified measure of capital adequacy known as the community bank leverage ratio framework (CBLR framework), for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

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

As of December 31, 2023, both the Company and Bank were qualifying community banking organizations as defined by the federal banking agencies and elected to measure capital adequacy under the CBLR framework.

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

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

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

Actual and required capital amounts (dollars in thousands) and ratios are presented below at year end.

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Bank of the Sierra

To Be Well Capitalized Under Prompt Corrective Action Regulations

To Be Well Capitalized Under Prompt Corrective Action Regulations (CBLR Framework)

Capital Amount

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

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

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

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

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

The expense recognized

under these arrangements totaled $ 0.3 million, $ 0.3 million and $ 0.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

Salary continuation benefits paid to former directors or executives of the Company, or their beneficiaries totaled $ 0.5 million, $ 0.5 million, and $ 0.4 million for the years ended December 31, 2024, 2023 and 2022.

Certain officers of the Company have supplemental life insurance policies with death benefits available to the officers’ beneficiaries.

In connection with these plans the Company has purchased, or acquired through merger, single premium life insurance policies with cash surrender values totaling $ 41.7 million and $ 43.2 million at December 31, 2023 and 2022.

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

In connection with these plans and other employee benefit plans of the Company, the Company has purchased, or acquired through merger, single premium life insurance policies with cash surrender values totaling $ 41.3 million and $ 41.7 million at December 31, 2024 and 2023.

Officer and Director Deferred Compensation Plan

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The related administrative expense was not material for the years ended December 31, 2024, 2023 and 2022;

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

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

Although there is no requirement to fund this plan, the Company has purchased life insurance policies with cash surrender values totaling $ 11.8 million and $ 9.9 million at December 31, 2024 and 2023, respectively, which are specific account policies with underlying investments similar to the hypothetical investments elected inside the participant deferred compensation accounts.

The purpose of these specific account life insurance policies is to provide an economic offset against changes to the participant liability.

401(k) Savings Plan

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

The Bank may make a discretionary contribution to match a specified percentage of the first 6 % of the participants’ contributions annually.

The amount of the matching contribution was 80 %, 80 % and 95 % for the years ended December 31, 2023, 2022 and 2021, respectively.

The matching contribution is discretionary, vests over a period of five years from the participants’ hire date, and is subject to the approval of the Board of Directors.

The Company contributed $ 1.2 million to the Plan in each of the years ended 2022 and 2021 and contributed $ 1.3 million to the Plan in 2023.

Starting in 2024, the Company has adopted a safe-harbor plan and will match 100 % of the first 1% and 50 % of the next 5% of employee contributions each pay period.

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

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

The matching contribution is discretionary, vests over a period of two years from the participants’ hire date and is subject to the approval of the Board of Directors.

The Company contributed $ 1.2 million, $ 1.3 million, and $ 1.2 million to the Plan in the years ended 2024, 2023, and 2022, respectively.

NONINTEREST INCOME

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Dividends on equity investments

Unrealized gains recognized on equity investments

Unrealized losses recognized on equity investments

SBA loan fund income

Credit card and other loan fees

Total other noninterest income

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Year Ended December 31,

Legal, audit, professional, and director's fees

Professional expenses

Data processing

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Loan and credit card processing

Foreclosed assets expense (income), net

Foreclosed assets expense

Total other noninterest expense

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The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2024 and 2023 (dollars in thousands):

Collateralized Loan Obligations

Corporate Bonds

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Included in other comprehensive income

Transfers out of Level 3

Balance of recurring Level 3 assets at December 31,

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Identical Assets

Collateral dependent impaired loans

There were no assets measured at fair value on a non-recurring basis with level 3 fair value measurements at December 31, 2022.

Collateral dependent loans

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

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

Collateral-dependent loans :

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Cash and cash equivalents

Securities available-for-sale

Securities held-to-maturity

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Financial Liabilities:

Time deposits

Noninterest bearing

Interest bearing

Repurchase agreements

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Cash and cash equivalents

Securities available for sale

Securities held-to-maturity

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Financial Liabilities:

Time deposits

Noninterest bearing

Interest bearing

Repurchase agreements

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Standby letters of credit

QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS

T he Company invests in qualified affordable housing projects.

At December 31, 2023 and 2022, the balance of the investment for qualified affordable housing projects totaled $ 14.4 million and $ 10.1 million, respectively.

These balances are reflected in the other assets line on the consolidated balance sheet.

Unfunded commitments related to these investments in qualified affordable housing projects totaled $ 10.5 million and $ 7.0 million at December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023, 2021 and 2021, the Company recognized amortization expense on these investments of $ 0.7 million, $ 0.5 million, and $ 0.5 million, respectively which was included within the tax provision using the proportional amortization method on the consolidated statements of income.

Additionally, during the year ended December 31, 2023, the Company recognized $ 0.6 million in tax credits and other benefits from its investment in affordable housing tax credits and $ 0.5 million for each of the years ended December 31, 2022 and 2021.

The Company had no impairment losses during the years ended December 31, 2023, 2022 and 2021.

UNCONSOLIDATED VARIABLE INTEREST ENTITIES

T he Company has equity investments in Low Income Housing Tax Credit (LIHTC) partnerships, with carrying values of $ 25.4 million and $ 14.4 million as of December 31, 2024 and 2023, respectively.

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

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

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

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

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

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

There were no impairment losses on the Company’s LIHTC investments during the years ended December 31, 2024, 2023 and 2022.

Future unfunded contingent equity commitments related to the Company’s LIHTC investments at December 31, 2024 are as follows (dollars in thousands):

Year Ending December 31,

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

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

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

Year Ended December 31,

Amortization expense

Tax credits and other tax benefits recognized

REVENUE FROM CONTRACTS WITH CUSTOMERS

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Debit card interchange income

Gain (loss) on limited partnerships (1)

Gain on limited partnerships (1)

Dividends on equity investments (1)

Unrealized (losses) gains recognized on equity investments (1)

Unrealized losses recognized on equity investments (1)

Net gains on sale of securities (1)

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Net cash (used) in provided by financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Supplemental disclosure of cash flow information:

Cash paid during the year for:

CONDENSED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

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Net interest income

Provision (benefit) for credit losses

Provision for credit losses

Noninterest income

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Net interest income

Provision for credit losses

Provision (benefit) for credit losses

Noninterest income

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Cash dividend per share

SUBSEQUENT EVENTS

Subsequent to year end, $ 196.7 million of bonds were sold.

The bonds had a weighted average book yield of 2.61 %.

The proceeds from the bond sale were used to pay down short-term borrowings at an average rate of 5.52 %.

The loss on this transaction of $ 14.5 million was recognized in 2023 as management had the intent to sell such bonds at December 31, 2023.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data