What changed in this filing

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Item 1. Financial Statements

2025-05-02 compared with 2024-11-07 · 257 added, 251 removed, 738 unchanged (41% of the section changed)

3 unchanged sentences

(dollars in thousands)

September 30, 2024

March 31, 2025

December 31, 2024

3 unchanged sentences

Investment securities

Available-for-sale, net of allowance for credit losses of $ 0 and $ 0

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

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

Total investment securities

Deferred loan costs, net

Deferred loan (fees) and costs, net

Allowance for credit losses on loans

Premises and equipment, net

Other intangible assets, net

Bank-owned life insurance

7 unchanged sentences

Subordinated debentures

Allowance for credit losses on unfunded loan commitments

Other liabilities

4 unchanged sentences

24,000,000 shares authorized;

14,414,561 and 15,170,372 shares issued and outstanding at September 30, 2024 (unaudited), and December 31, 2023, respectively

13,818,770 and 14,223,046 shares issued and outstanding at March 31, 2025, and December 31, 2024, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive loss, net

Total shareholders' equity

3 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, and 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2025, and 2024

(dollars in thousands, except per share data, unaudited)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Interest and dividend income

12 unchanged sentences

Credit loss expense - loans

Credit loss expense (benefit) - unfunded commitments

Credit loss benefit - debt securities held-to-maturity

Credit loss expense - unfunded commitments

Net interest income after credit loss expense

2 unchanged sentences

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

Net gain on sale of fixed assets

Increase in cash surrender value of life insurance

Net (loss) gain on sale of fixed assets

(Decrease) increase in cash surrender value of life insurance

Total noninterest income

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, and 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2025, and 2024

(dollars in thousands, unaudited)

Three months ended September 30,

Nine months ended September 30,

Other comprehensive gain (loss), before tax:

Unrealized gain (loss) on securities:

Unrealized holding gain (loss) arising during period

Three months ended March 31,

Other comprehensive income, net of tax:

Unrealized gain on securities:

Unrealized holding gain arising during period

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

Other comprehensive gain (loss), before tax

Income tax (expense) benefit related to items of other comprehensive gain

Other comprehensive gain (loss), net of tax:

Other comprehensive income, net of tax

Comprehensive income

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

Income tax expenses associated with the reclassification adjustment were negligible for the three months ended September 30, 2024 and 2023.

Income tax expenses (benefits) associated with the reclassification adjustment for the nine months ended September 30, 2024 and 2023 were $ 0.8 million and $( 0.1 ) million, respectively.

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

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024, and 2023

(dollars in thousands, except per share data, unaudited)

Comprehensive

Shareholders'

Balance, June 30, 2023

Other comprehensive loss, net of tax

Restricted shares withheld for taxes

Restricted stock vested in period

Stock-based compensation - stock options

Stock-based compensation - restricted stock

Stock repurchased

Excise tax on stock repurchased

Cash dividends - $ 0.23 per share

Balance, September 30, 2023

Balance, June 30, 2024

Other comprehensive gain, net of tax

Stock options exercised, net of shares surrendered for cashless exercises

Restricted shares withheld for taxes

Restricted stock forfeited / cancelled

Restricted stock vested in period

Stock-based compensation - restricted stock

Stock repurchased

Excise tax on stock repurchased

Cash dividends - $ 0.24 per share

Balance, September 30, 2024

Income tax expenses associated with the reclassification adjustment were $( 36 ) thousand and $ 852 thousand for the three months ended March 31, 2025 and 2024, respectively.

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2025, and 2024

(dollars in thousands, except per share data, unaudited)

2 unchanged sentences

Balance, December 31, 2023

Other comprehensive loss, net of tax

Other comprehensive gain, net of tax

Restricted stock granted

Restricted stock surrendered due to employee tax liability

Restricted shares withheld for taxes

Restricted stock forfeited / cancelled

2 unchanged sentences

Stock based compensation - restricted stock

Stock repurchased

Excise tax on stock repurchased

Stock repurchase

Excise tax on stock repurchase

Cash dividends - $ 0.23 per share

Balance, September 31, 2023

Balance, March 31, 2024

Balance, December 31, 2024

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Stock based compensation - restricted stock

Stock repurchased

Excise tax on stock repurchased

Stock repurchase

Excise tax on stock repurchase

Cash dividends - $ 0.25 per share

Balance, September 30, 2024

Balance, March 31, 2025

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2025, AND 2024

(dollars in thousands, unaudited)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

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

Loss (gain) on sales of securities

Realized gain on securities transaction

Gain on disposal of fixed assets

(Gain) loss on sales of securities

Loss (gain) on disposal of fixed assets

Stock based compensation expense

Provision for credit losses on loans

Benefit for credit losses on held-to-maturity securities

Provision for credit losses on unfunded commitments

Depreciation and amortization

Net amortization on securities premiums and discounts

Net (accretion) amortization on securities premiums and discounts

Net accretion of premiums/discounts for loans acquired

Increase in cash surrender value of life insurance policies

Decrease (increase) in cash surrender value of life insurance policies

Amortization of core deposit intangible

Increase in interest receivable and other assets

Decrease in other liabilities

(Increase) decrease in interest receivable and other assets

Increase (decrease) in other liabilities

Deferred income tax benefit

1 unchanged sentence

Amortization of debt issuance costs

Net amortization of partnership investment

Net amortization of variable interest entities

Net cash provided by operating activities

2 unchanged sentences

Proceeds from sales of securities available for sale

Purchases of securities available-for-sale

Purchase of securities available for sale

Principal pay downs on securities available for sale

Net purchases of FHLB stock

Loan originations and payments, net

Loan payments and (originations), net

Purchases of premises and equipment

Proceeds from sale of premises and equipment

Proceeds from sales of foreclosed assets

Purchase of bank-owned life insurance

Investments in variable interest entities

Proceeds from bank -owned life insurance death benefit

Net cash provided by (used in) investing activities

Proceeds from BOLI death benefit

Net cash provided by investing activities

Cash flows from financing activities:

Increase in deposits

(Decrease) increase in Fed funds purchased

Decrease (increase) in short-term Federal Home Loan Bank advances

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

Increase (decrease) in customer repurchase agreements

(Decrease) increase in deposits

Decrease in Fed funds purchased

Decrease in short-term Federal Home Loan Bank advances

Increase in customer repurchase agreements

Cash dividends paid

Repurchases of common stock

Repurchase of common stock, net

Stock options exercised

Net cash (used in) provided by financing activities

Net cash used in financing activities

Increase in cash and cash equivalents

4 unchanged sentences

Interest paid

Income taxes paid

Supplemental schedule of noncash investing and financing activities:

Real estate acquired through foreclosure

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

March 31, 2025

Note 1 – The Business of Sierra Bancorp

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The Company exists primarily for the purpose of holding the stock of the Bank and of such other subsidiaries it may acquire or establish.

As of September 30, 2024, the Company’s only other subsidiaries were Sierra Statutory Trust II, Sierra Capital Trust III, and Coast Bancorp Statutory Trust II, which were formed solely to facilitate the issuance of capital trust pass-through securities (“TRUPS”).

As of March 31, 2025, the Company’s only other subsidiaries were Sierra Statutory Trust II, Sierra Capital Trust III, and Coast Bancorp Statutory Trust II, which were formed solely to facilitate the issuance of capital trust pass-through securities (“TRUPS”).

Pursuant to the Financial Accounting Standards Board (“FASB”) standard on the consolidation of variable interest entities, these trusts are not reflected on a consolidated basis in the Company’s financial statements.

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To support organic growth in the agricultural and commercial lending sectors the Bank opened a loan production office in Templeton, CA in April 2022.

In addition, the Bank maintains an administrative office in Roseville, CA.

The Company had total assets of $ 3.7 billion at September 30, 2024.

The Company’s deposit accounts, which totaled $ 3.0 billion at September 30, 2024, are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to maximum insurable amounts.

The Company had total assets of $ 3.6 billion at March 31, 2025.

The Company’s deposit accounts, which totaled $ 2.8 billion at March 31, 2025, are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to maximum insurable amounts.

Note 2 – Basis of Presentation

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Such adjustments can generally be considered as normal and recurring unless otherwise disclosed in this Form 10-Q.

In preparing the accompanying financial statements, Management has taken subsequent events into consideration, through November 7, 2024, and recognized them where appropriate.

In preparing the accompanying financial statements, Management has taken subsequent events into consideration, through May 2, 2025, and recognized them where appropriate.

The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter, or for the full year.

1 unchanged sentence

The interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission (the “SEC”).

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.

Note 3 – Current Accounting Developments

In March 2023, the FASB issued ASU No.

2023-02 , “Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” ASU 2023-02 is intended to improve the accounting and disclosures for investments in tax credit structures.

ASU 2023-02 allows entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the

program giving rise to the related income tax credits.

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

ASU 2023-02 was effective for the Company on January 1, 2024, and its adoption did not have a significant effect on the Company’s financial statements.

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

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

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

ASU 2023-09 is effective for the Company for annual periods beginning after December 15, 2024, though early adoption is permitted.

ASU 2023-09 is not expected to have a significant impact on the 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.

The effective date of Update 2024-03 was amended by ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date.

Public business entities are required to adopt the guidance 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.

Note 4 – Share Based Compensation

1 unchanged sentence

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

Options to purchase 194,000 shares granted under the 2017 Plan and options to purchase 106,800 shares that were granted under the 2007 Plan were still outstanding as of September 30, 2024, and remain unaffected by that plan’s expiration.

Options to purchase 161,593 shares granted under the 2017 Plan and options to purchase 58,600 shares that were granted under the 2007 Plan were still outstanding as of March 31, 2025, and remain unaffected by that plan’s expiration.

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

Such awards may be granted to officers and employees as well as non-employee directors, which 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 360,000 shares, and the number remaining available for grant as of September 30, 2024, was 306,052 .

The total number of shares of the Company’s authorized but unissued stock reserved for issuance pursuant to awards under the 2023 Plan was initially 360,000 shares, and the number remaining available for grant as of March 31, 2025 was 248,735 .

Any unexercised, unvested, or undistributed portion of any expired, cancelled, terminated, or forfeited awards under the Company’s 2017 Plan are added to the number of shares available to grant under the 2023 Plan.

There were 92,882 unvested Restricted Stock Awards issued under the 2017 Plan at September 30, 2024 and are included in shares outstanding.

There were 48,658 unvested Restricted Stock Awards issued under the 2017 Plan and 147,246 unvested Restricted Stock Awards issued under the 2023 Equity Compensation Plan at March 31, 2025 and are included in shares outstanding.

The potential dilutive impact of unexercised stock options and unvested restricted stock is discussed below in Note 5, Earnings per Share.

Pursuant to FASB’s standards on stock compensation, the value of each stock option and restricted stock award is reflected in the income statement as employee compensation or directors’ expense by amortizing its grant date fair value over the

vesting period of the option or award.

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

Forfeitures are reflected in compensation costs as they occur for both types of awards.

A pre-tax charge of $ 0.4 million was reflected in the Company’s income statement during the third quarter of 2024 and $ 0.3 million during the third quarter of 2023, as expense related to stock options and restricted stock awards.

For the first nine months of 2024 and 2023, the charges totaled $ 1.4 million and $ 1.2 million, respectively.

A pre-tax charge of $ 0.5 million was reflected in the Company’s income statement during the first quarters of 2025 and 2024, as expense related to stock options and restricted stock awards.

Restricted Stock Grants

The Company’s Restricted Stock Awards are awards of either time-vested or performance-based shares.

The Restricted Stock Awards are non-transferrable shares of common stock and are available to be granted to the Company’s employees and directors.

The Restricted Stock Awards are non-transferable shares of common stock and are available to be granted to the Company’s employees and directors.

The vesting period of Restricted Stock Awards is determined at the time the awards are issued, and different awards may have different vesting terms or performance measures;

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These awards are expensed on a straight-line basis over the vesting period and consider the probability of meeting the performance criteria.

There were 36,114 shares granted to employees of the Company during the first nine months of 2024.

As of September 30, 2024, there was $ 2.2 million of unamortized compensation cost related to unvested Restricted Stock Awards granted under the 2017 and 2023 plans.

There were 62,692 shares granted to employees of the Company during the first three months of 2025.

As of March 31, 2025, there was $ 3.5 million of unamortized compensation cost related to unvested Restricted Stock Awards granted under the 2017 and 2023 plans.

That cost is expected to be amortized over a weighted average period of 2.3 years.

The Company’s restricted stock award activity for the nine months ended September 30, 2024, and 2023 is summarized below (unaudited):

Nine months ended September 30,

The Company’s restricted stock award activity for the three months ended March 31, 2025, and 2024 is summarized below (unaudited):

Three months ended March 31,

Weighted Average Grant-Date Fair Value

1 unchanged sentence

Unvested shares, January 1,

Unvested shares, September 30,

Unvested shares, March 31,

Stock Option Grants

2 unchanged sentences

The exercise price of each stock option is determined at the time of the grant and may be no less than 100 % of the fair market value of such stock at the time the option is granted.

The Company’s stock option activity during the nine months ended September 30, 2024, and 2023 are summarized below (dollars in thousands, except per share data, unaudited):

Nine months ended September 30,

The Company’s stock option activity during the three months ended March 31, 2025, and 2024 are summarized below (dollars in thousands, except per share data, unaudited):

Three months ended March 31,

Weighted Average

6 unchanged sentences

Forfeited/Expired

Outstanding at September 30,

Exercisable at September 30,

Outstanding at March 31,

Exercisable at March 31,

(1) The aggregate intrinsic value of stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option that would have been received by the option holders had all option holders exercised their options on the last day of the period.

2 unchanged sentences

The computation of earnings per share, as presented in the Consolidated Statements of Income, is based on the weighted average number of shares outstanding during each period, excluding unvested restricted stock awards.

There were 14,188,051 weighted average shares outstanding during the third quarter of 2024 and 14,583,132 during the third quarter of 2023, while there were 14,331,032 weighted average shares outstanding during the first nine months of 2024 and 14,762,231 during the first nine months of 2023.

There were 13,820,008 weighted average shares outstanding during the first quarter of 2025 and 14,508,468 during the first quarter of 2024.

Diluted earnings per share calculations include the effect of the potential issuance of common shares, which for the Company is limited to shares that would be issued on the exercise of “in-the-money” stock options, and unvested restricted stock awards.

For the third quarter of 2024, calculations under the treasury stock method resulted in the equivalent of 147,655 shares being added to basic weighted average shares outstanding for purposes of determining diluted earnings per share, while zero shares were excluded from the calculation due to being underwater and thus anti-dilutive.

For the third quarter of 2023 the equivalent of 53,345 shares were added in calculating diluted earnings per share, while 278,374 anti-dilutive shares were not factored into the computation.

Likewise, for the first nine months of 2024 the equivalent of 106,754 shares were added to basic weighted average shares outstanding in calculating diluted earnings per share and a weighted average of 255,414 shares that were anti-dilutive for the period were not included, compared to the addition of the equivalent of 29,465 shares and non-inclusion of 326,036 anti-dilutive shares in calculating diluted earnings per share for first nine months of 2023.

For the first quarter of 2025, calculations under the treasury stock method resulted in the equivalent of 96,333 shares being added to basic weighted average shares outstanding for purposes of determining diluted earnings per share, while 32,739 shares were excluded from the calculation due to being underwater and thus anti-dilutive.

For the first quarter of 2024 the equivalent of 45,159 shares were added in calculating diluted earnings per share, while 268,991 anti-dilutive shares were not factored into the computation.

Note 6 – Comprehensive Income

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Those financial instruments currently consist of unused commitments to extend credit and standby letters of credit.

They involve, to varying degrees, elements of risk in excess of the amount recognized in the balance sheet.

They involve, to varying degrees, elements of risk in excess of the amount recognized in the consolidated balance sheet.

The Company’s exposure to credit loss in the event of nonperformance by counterparties for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments.

The Company uses the same credit policies in making

commitments and issuing letters of credit as it does for originating loans included on the balance sheet.

The Company uses the same credit policies in making commitments and issuing letters of credit as it does for originating loans included on the consolidated balance sheet.

The following financial instruments represent off-balance-sheet credit risk (dollars in thousands):

September 30, 2024

March 31, 2025

December 31, 2024

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Included in unused commitments are mortgage warehouse lines which are in the form of repo lines and are unconditionally cancellable.

Unused commitments on mortgage warehouse lines were $ 237.7 million at September 30, 2024, and $ 204.5 million at December 31, 2023.

Unused commitments on mortgage warehouse lines were $ 414.8 million at March 31, 2025, and $ 311.6 million at December 31, 2024.

The allowance for credit losses, (ACL) on unfunded commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment.

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

The ACL on unfunded loan commitments is located in other liabilities while any related provision expense is recorded as a provision for credit losses.

At September 30, 2024, the Company was also utilizing a letter of credit in the amount of $ 127.9 million issued by the Federal Home Loan Bank (“FHLB”) on the Company’s behalf as security for certain deposits and to facilitate certain credit arrangements with the Company’s customers.

The ACL on unfunded loan commitments is located within liabilities on the consolidated balance sheet while any related provision expense is recorded as a provision for credit losses.

At March 31, 2025, the Company was also utilizing a letter of credit in the amount of $ 127.9 million issued by the Federal Home Loan Bank (“FHLB”) on the Company’s behalf as security for certain deposits and to facilitate certain credit arrangements with the Company’s customers.

That letter of credit is backed by loans which are pledged to the FHLB by the Company.

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FASB’s standards on financial instruments, and on fair value measurements and disclosures, require public business entities to disclose in their financial statement footnotes the estimated fair values of financial instruments.

In addition to disclosure requirements, FASB’s standard on investments requires that debt securities that are classified as available-for-sale and any equity securities which have readily determinable fair values be measured and reported at fair value in the statement of financial position.

Certain individually identified loans are also reported at fair value, as explained in greater detail below, and foreclosed assets are carried at the lower of cost or fair value.

In addition to

disclosure requirements, FASB’s standard on investments requires that debt securities that are classified as available-for-sale and any equity securities which have readily determinable fair values be measured and reported at fair value in the statement of financial position.

Certain collateral dependent individually evaluated loans are also reported at fair value, as explained in greater detail below, and foreclosed assets are carried at the lower of cost or fair value.

FASB’s standard on financial instruments permits companies to report certain other financial assets and liabilities at fair value, but the Company has not elected the fair value option for any of those financial instruments.

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(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

Fair Value Measurements

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Investment securities held-to-maturity

Loans held for investment

Financial liabilities:

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Cash and cash equivalents

Investment securities available-for-sale

Investment securities held-to-maturity

Securities available-for-sale

Securities held-to-maturity

Loans held for investment

Financial liabilities:

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Subordinated debentures

For financial asset categories that were carried on the balance sheet at fair value as of September 30, 2024, and December 31, 2023, the Company used the following methods and significant assumptions:

For financial asset categories that were carried on the consolidated balance sheet at fair value as of March 31, 2025, and December 31, 2024, the Company used the following methods and significant assumptions:

● Investment securities :

Fair values are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities.

● Individually evaluated loans :

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

● Foreclosed assets :

Repossessed real estate (known as other real estate owned, or “OREO”) and other foreclosed assets are carried at the lower of cost or fair value.

Fair value is the appraised value less expected disposition costs for OREO;

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

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

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

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

For securities where quoted prices or market prices of similar securities are not available, fair values are estimated using broker expertise and other market indicators (Level 3).

For bonds that are hand priced, actual recent trades for the exact bond are used in determining the price, adjusted for changes in market conditions since the time of the observable trade.

For bonds, where no recent observable trades have occurred, our brokers consider recent trades made for similar bonds, issued by banks with similar financial position or credit and adjusted for changes in conditions since the time of the observable trades.

● Collateral dependent individually evaluated loans :

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

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

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

Fair Value Measurements – Recurring

(dollars in thousands, unaudited)

Fair Value Measurements at September 30, 2024, using

Fair Value Measurements at March 31, 2025, using

Quoted Prices in

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Total available-for-sale securities

The following tables present quantitative information about recurring level 3 fair value measurements at March 31, 2025 and December 31, 2024 (dollars in thousands):

March 31, 2025

Valuation Technique(s)

Unobservable Input(s)

Weighted Average

Corporate Bonds

New issue pricing

Risk appetite

Secondary market pricing

Market volatility

Credit quality of issuer

Credit spread

December 31, 2024

Valuation Technique(s)

Unobservable Input(s)

Weighted Average

Corporate Bonds

New issue pricing

Risk appetite

Secondary market pricing

Market volatility

Credit quality of issuer

Credit spread

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 three months ended March 31, 2025 and 2024:

Fair Value Measurements - Level 3 Recurring

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Included in other comprehensive income

Balance of recurring Level 3 assets at September 30,

Transfers into Level 3

Balance of recurring Level 3 assets at March 31,

Certain Corporate Bonds with a fair value of $ 2.9 million as of December 31, 2024 were transferred out of Level 2 and into Level 3 because of a lack of observable market data for these investments due to a decrease in the market activity for these securities.

Fair Value Measurements – Nonrecurring

(dollars in thousands, unaudited)

Fair Value Measurements at September 30, 2024, using

Fair Value Measurements at March 31, 2025, using

Quoted Prices in

4 unchanged sentences

Individually evaluated collateral dependent loans

Commercial real estate

Other commercial

Total assets measured on a nonrecurring basis

12 unchanged sentences

Adjusting any of those inputs could result in a significantly lower or higher fair value measurement.

For example, an increase or decrease in actual loss rates would create a directionally opposite change in the fair value of unsecured individually identified loans.

The following table presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis at March 31, 2025 (dollars in thousands, unaudited):

March 31, 2025

Collateral-dependent individually evaluated loans, net of ACL

Sales comparison approach

Selling costs

Net realizable value

Expected recovery rates

Sales comparison approach

Selling costs

Adjust to comparables

Note 9 – Investments

Investment Securities

Pursuant to FASB’s guidance on accounting for debt securities, available-for-sale securities are carried on the Company’s financial statements at their estimated fair market values, with monthly tax-effected “mark-to-market” adjustments made vis-à-vis accumulated other comprehensive income in shareholders’ equity.

Held-to-maturity securities are carried on the Company’s financial statements at their amortized cost, net of the allowance for credit losses.

2 unchanged sentences

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

Allowance for Credit Losses

31 unchanged sentences

Total held-to-maturity securities

An unrealized loss of $ 26.8 million, on securities transferred from the available-for-sale to held-to-maturity categorization, remains as of September 30, 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.

An unrealized loss of $ 25.8 million and $ 26.3 million, on securities transferred from the available-for-sale to held-to-maturity categorization, remains as of March 31, 2025 and December 31, 2024, respectively, and is included in accumulated other comprehensive income (loss), net of tax.

The Company elected the practical expedient available under the current expected credit losses (“CECL”) accounting standard to exclude accrued interest receivable from the amortized cost basis of all categorizations of investment securities, and resultingly did not estimate reserves on accrued interest receivable balances, as any past due interest income is reversed on a timely basis.

Accrued interest receivable is included in other assets on the Company’s balance sheet and as of

September 30, 2024, measured at $ 8.4 million and $ 1.7 million for available-for-sale securities and held-to-maturity securities, respectively.

Accrued interest receivable is included in other assets on the Company’s consolidated balance sheet and as of March 31, 2025, measured at $ 4.7 million and $ 1.6 million for available-for-sale securities and held-to-maturity securities, respectively.

Accrued interest receivable as of December 31, 2024, on these same classes of investment securities measured at $ 7.5 million and $ 2.4 million, respectively.

During the first nine months of 2024 and 2023, no interest receivable on available-for-sale or held-to-maturity securities was reversed against interest income and the Company did not have any held-to-maturity debt securities past due.

During the first three months of 2025 and 2024, no interest receivable on available-for-sale or held-to-maturity securities was reversed against interest income and the Company did not have any held-to-maturity debt securities past due.

A discounted cash-flow reserve calculation is performed on securities designated as held-to-maturity on a quarterly basis.

As of September 30, 2024, an allowance for credit losses of $ 15 thousand had been established on the Company’s held-to-maturity portfolio, which is a slight decrease from the December 31, 2023 allowance for credit losses of $ 16 thousand.

As of March 31, 2025 and December 31, 2024, an allowance for credit losses of $ 15 thousand had been established on the Company’s held-to-maturity portfolio.

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

The following table summarizes the amortized cost of held-to-maturity municipal bonds aggregated by nationally recognized statistical rating organizations (“NRSRO”) credit rating:

2 unchanged sentences

Held-To-Maturity

September 30, 2024

March 31, 2025

December 31, 2024

4 unchanged sentences

If Management’s evaluation indicates that a credit loss exists then a present value of the expected cash flows is calculated and compared to the amortized cost basis of the security in question and to the degree that the amortized cost basis exceeds the present value an allowance for credit loss (“ACL”) is established, with the caveat that the maximum amount of the reserve on any individual security is the difference between the fair value and amortized cost balance of the security in question.

Any unrealized loss that has not been recorded through an ACL is recognized in other comprehensive income.

Any unrealized loss that has not been recorded through an ACL is recognized in other comprehensive income (loss).

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.

1 unchanged sentence

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

Less than twelve months

21 unchanged sentences

(dollars in thousands, unaudited)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Proceeds from sales, calls and maturities of securities available for sale

2 unchanged sentences

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

The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at September 30, 2024, and December 31, 2023 (dollars in thousands), are shown below, grouped by the remaining time to contractual maturity dates.

The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at March 31, 2025, and December 31, 2024 (dollars in thousands), are shown below, grouped by the remaining time to contractual maturity dates.

The expected life of investment securities may not be consistent with contractual maturity dates since the issuers of the securities might have the right to call or prepay obligations with or without penalties.

September 30, 2024

March 31, 2025

Available-for-Sale

21 unchanged sentences

Collateralized loan obligations

At September 30, 2024, the Company’s investment portfolio included 223 municipal bonds issued by 188 different government municipalities and agencies located within 28 different states, with an aggregate fair value of $ 219.8 million.

The largest exposure to any single municipality or agency was a combined $ 5.3 million (fair value) in general obligation bonds issued by the City of New York (NY).

At March 31, 2025, the Company’s investment portfolio included 223 municipal bonds issued by 188 different government municipalities and agencies located within 28 different states, with an aggregate fair value of $ 207.9 million.

The largest exposure to any single municipality or agency was a combined $ 5.5 million (fair value) in general obligation bonds issued

by the City of New York (NY).

In addition, the Company owned 68 subordinated debentures issued by bank-holding companies totaling $ 68.5 million (fair value).

8 unchanged sentences

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

December 31, 2024

1 unchanged sentence

State of issuance

Other (20 and 26 states, respectively)

Other (21 & 26 states, respectively)

Total general obligation bonds

1 unchanged sentence

State of issuance

Other (20 and 15 states, respectively)

Other (20 & 15 states, respectively)

Total revenue bonds

Total obligations of states and political subdivisions

The revenue bonds in the Company’s investment securities portfolios were issued by government municipalities and agencies to fund public services such as utilities (water, sewer, and power), educational facilities, and general public and economic improvements.

economic improvements.

The primary sources of revenue for these bonds are delineated in the table below, which shows the amortized cost and fair market values for the largest revenue concentrations as of the indicated dates.

1 unchanged sentence

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

December 31, 2024

2 unchanged sentences

Sales tax revenue

Local or guaranteed housing

Local or GTD housing

Other (9 and 10 sources, respectively)

2 unchanged sentences

The Company has the ability to invest in limited partnerships which own housing projects that qualify for federal and/or California state tax credits, by mandating a specified percentage of low-income tenants for each project.

investment return comes from tax credits that flow through to investors.

The primary investment return comes from tax credits that flow through to investors.

Because rent levels are lower than standard market rents and the projects are generally highly leveraged, each project also typically generates tax-deductible operating losses that are allocated to the limited partners for tax purposes.

The Company currently has investments in seven different LIHTC fund limited partnerships made in 2014, 2015, two in 2022, one in 2023, and two in the second quarter of 2024, all of which were California-focused funds that help the Company meet its obligations under the Community Reinvestment Act.

The Company utilized the cost method of accounting for LIHTC fund investments, under which were initially recorded on the balance sheet an asset that represents the total cash expected to be invested over the life of the partnership.

The Company currently has investments in eight different LIHTC fund limited partnerships made in 2014, 2015, two in 2022, one in 2023, and three in 2024, all of which were California-focused funds that help the Company meet its obligations under the Community Reinvestment Act.

The Company utilized the cost method of accounting for LIHTC fund investments, under which were initially recorded on the consolidated balance sheet as an asset that represents the total cash expected to be invested over the life of the partnership.

Any commitments or contingent commitments for future investment are reflected as a liability.

The income statement reflects tax credits and any other tax benefits from these investments “below the line” within income tax provision, while the initial book value of the investment is amortized on the proportional amortization method as a “below the line” expense, over the time period in which the tax credits and tax benefits are expected to be received.

As of September 30, 2024, the Company’s total LIHTC investment book balance was $ 22.8 million, which includes $ 19.1 million in remaining commitments for additional capital contributions.

There were approximately $ 1.4 million in tax credits derived from the Company’s LIHTC investments that were recognized during the nine months ended September 30, 2024, and “below the line” amortization expense of $ 1.6 million associated with those investments was recorded for the same time period.

As of March 31, 2025, the Company’s total LIHTC investment book balance was $ 24.7 million, which includes $ 18.3 million in remaining commitments for additional capital contributions, which is included in other liabilities on the consolidated balance sheet.

There were approximately $ 0.7 million in tax credits derived from the Company’s LIHTC investments that were recognized during the three months ended March 31, 2025, and “below the line” amortization expense of $ 0.7 million associated with those investments was recorded for the same time period.

LIHTC investments are evaluated annually for potential impairment, and the Company concluded that the carrying value of the investments is stated fairly and is not impaired.

11 unchanged sentences

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

Accrued interest receivable on loans of $ 7.7 million and $ 5.6 million at September 30, 2024, and December 31, 2023, respectively is included in other assets on the Company’s balance sheet.

Accrued interest receivable on loans of $ 7.5 million and $ 6.1 million at March 31, 2025, and December 31, 2024, respectively is included in other assets on the Company’s consolidated balance sheet.

The majority of the disclosures in this footnote are prepared at the class level which is equivalent to the call report or call code classification.

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

Unless specifically noted otherwise, the disclosures in this footnote are prepared on an amortized cost basis.

Loan Distribution

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

December 31, 2024

17 unchanged sentences

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

Nonaccrual Loans

15 unchanged sentences

Other commercial

The Company did not recognize any interest on nonaccrual loans during the three or nine months ended September 30, 2024, and would have recognized an additional $ 0.1 million in interest income on nonaccrual loans during the third quarter and $ 0.4 million during the first nine months of 2024 had those loans not been designated as nonaccrual.

Due to loans being placed on nonaccrual status, during the third quarter and first nine months of 2024, $ 0.1 million and $ 0.2 million respectively, of interest receivable on loans was reversed against interest income.

The following table presents the amortized cost basis of collateral-dependent loans by class as of September 30, 2024, and December 31, 2023:

Consumer loans

The Company did not recognize any interest on nonaccrual loans during the three months ended March 31, 2025, and would have recognized an additional $ 0.4 million in interest income on nonaccrual loans during the first quarter of 2025 had those loans not been designated as nonaccrual.

Due to loans being placed on nonaccrual status, during the first quarter of 2025, $ 0.2 million of interest receivable on loans was reversed against interest income.

The following table presents the amortized cost basis of collateral-dependent loans by class as of March 31, 2025, and December 31, 2024:

Collateral Dependent Loans

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

December 31, 2024

7 unchanged sentences

Other commercial

During the first nine months of 2024 the amortized cost balance of collateral-dependent loans increased by $ 2.2 million due primarily to an agriculture real estate secured loan and a commercial real estate loan, offset by the foreclosure and subsequent sale of an office real estate loan.

The weighted average loan-to-value ratio of collateral-dependent loans was 97 % at September 30, 2024.

There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of September 30, 2024.

During the first three months of 2025 the amortized cost balance of collateral-dependent loans decreased by $ 1.6 million due primarily to principal payments received on an agricultural production loan, offset by a commercial real estate relationship secured by a hotel property which was placed on nonaccrual status.

The weighted average loan-to-value ratio of collateral-dependent loans was 80.9 % at March 31, 2025.

There were no consumer mortgage loans secured by

residential real estate properties for which formal foreclosure proceedings were in process as of March 31, 2025 and December 31, 2024.

Past Due Loans

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

30-59 Days Past Due

32 unchanged sentences

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

The following tables present the amortized cost basis of loans at September 30, 2024, that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2024, by class and by type of modification.

There were no modifications of loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023.

The following tables present the amortized cost basis of loans at March 31, 2025 and 2024, that were both experiencing financial difficulty and modified during the three months ended March 31, 2025 and 2024, by class and by type of modification.

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

Three months ended September 30, 2024

March 31, 2025

Principal Forgiveness

3 unchanged sentences

Total Class of Financing Receivable

Nine months ended September 30, 2024

Other commercial

March 31, 2024

Principal Forgiveness

6 unchanged sentences

Other commercial

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2024 (dollars in thousands, unaudited):

Three months ended September 30, 2024

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2025 and 2024 (dollars in thousands, unaudited):

March 31, 2025

Principal Forgiveness

1 unchanged sentence

Weighted-Average Term Extension (years)

Nine months ended September 30, 2024

Other commercial

March 31, 2024

Principal Forgiveness

3 unchanged sentences

Other commercial

There were no payment defaults on loans previously modified in the preceding 12 months for either of the periods ending September 30, 2024, and 2023.

There were no payment defaults on loans previously modified in the preceding 12 months for either of the periods ending March 31, 2025, and 2024.

For the purpose 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 September 30, 2024 and none as of September 30, 2023.

The Company had $ 0.1 million in additional funds committed on loans which have been modified to borrowers experiencing financial difficulty as of March 31, 2025 and none as of March 31, 2024.

The Company monitors the credit quality of loans on a continuous basis using the regulatory and accounting classifications of pass, special mention and substandard to characterize and qualify the associated credit risk.

7 unchanged sentences

(dollars in thousands, unaudited)

September 30, 2024

March 31, 2025

Term Loans Amortized Cost Basis by Origination Year

3 unchanged sentences

Special mention

Current period gross charge-offs

Commercial real estate

Special mention

Current period gross charge-offs

Other construction/land

Special mention

Current period gross charge-offs

Special mention

Current period gross charge-offs

Other commercial

Special mention

Current period gross charge-offs

Mortgage warehouse lines

Current period gross charge-offs

Consumer loans

Special mention

Gross charge-offs

Current period gross charge-offs

Loan Credit Quality by Vintage

6 unchanged sentences

Special mention

Current period gross charge-offs

Commercial real estate

Special mention

Current period gross charge-offs

Other construction/land

Special mention

Current period gross charge-offs

Special mention

Current period gross charge-offs

Other commercial

Special mention

Current period gross charge-offs

Mortgage warehouse lines

Current period gross charge-offs

Consumer loans

Special mention

Gross charge-offs

Current period gross charge-offs

Purchased credit deteriorated (“PCD”) loans are loans acquired or purchased, which as of acquisition, had evidence of more than insignificant credit deterioration since origination.

As of September 30, 2024, the Company had no loans categorized as PCD.

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

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

16 unchanged sentences

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 multiple factor regression models utilized as of September 30, 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 September 30, 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).

The call code multiple factor regression models utilized as of March 31, 2025, 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 March 31, 2025, 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.

3 unchanged sentences

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

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

As current and expected conditions may vary

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

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

22 unchanged sentences

Commercial & Industrial loans are separated into a unique segment given the uniqueness of these loans, which are often revolving and secured by other business assets as opposed to real estate.

Mortgage warehouse loans are also unique in the Company’s portfolio and warrant separate presentation as an individual portfolio segment, given the specific nature of these constantly revolving lines to mortgage originators and also attributable to a very limited loss history, even after consideration of peer data.

to a very limited loss history, even after consideration of peer data.

Finally, the Company splits out Consumer loans as a separate segment as a result of the small balance, homogeneous terms that characterize these loans.

Management individually evaluates loans that do not share risk characteristics with other loans when estimating reserves.

As of September 30, 2024 and 2023, the only loans that Management considered to have different risk characteristics from other loans sharing the same Federal Call Report code were loans designated nonaccrual.

The following tables present the activity in the allowance for credit losses by portfolio segment for the quarters ended September 30, 2024, and 2023:

As of March 31, 2025 and 2024, the only loans that Management considered to have different risk characteristics from other loans sharing the same Federal Call Report code were loans designated nonaccrual.

The following tables present the activity in the allowance for credit losses by portfolio segment for the quarters ended March 31, 2025, and 2024:

Allowance for Credit Losses

6 unchanged sentences

Allowance for credit losses:

Balance, June 30, 2024

(Benefit) provision for credit losses

Balance, September 30, 2024

Residential Real Estate

Commercial Real Estate

Farmland & Agricultural Production

Commercial & Industrial

Mortgage Warehouse

Allowance for credit losses:

Balance, June 30, 2023

(Benefit) provision for credit losses

Balance, September 30, 2023

The following tables present the activity in the allowance for credit losses by portfolio segment for the nine months ended September 30, 2024 and 2023:

Residential Real Estate

Commercial Real Estate

Farmland & Agricultural Production

Commercial & Industrial

Mortgage Warehouse

Allowance for credit losses:

Balance, December 31, 2024

(Benefit) provision for credit losses

Balance, September 30, 2024

Ending allowance balance:

Residential Real Estate

6 unchanged sentences

(Benefit) provision for credit losses

Balance, September 30, 2023

Ending allowance balance:

Note 11 – Goodwill

The balance of goodwill at the three and nine months beginning and ended September 30, 2024 and 2023 was $ 27.4 million.

There was no acquired goodwill for the three or nine months ended September 30, 2024 and 2023.

The balance of goodwill at the three months beginning and ended March 31, 2025 and 2024 was $ 27.4 million.

There was no acquired goodwill for the three months ended March 31, 2025 and 2024.

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

3 unchanged sentences

Management continues to evaluate whether or not a triggering event occurs, or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount before the next annual test in 2025 and has concluded no such events have occurred.

Therefore, goodwill was not impaired as of September 30, 2024, and there were no impairment charges related to the Company’s goodwill recorded during the three or nine months ended September 30, 2024 and 2023.

Therefore, goodwill was not impaired as of March 31, 2025, and there were no impairment charges related to the Company’s goodwill recorded during the three months ended March 31, 2025 and 2024.

Note 12 – Borrowings and Other Arrangements

Repurchase Agreements – Repurchase agreements represent “sweep accounts,” where commercial deposit balances above a specified threshold are transferred at the close of each business day into non-deposit accounts secured by investment securities.

Repurchase agreements totaled $ 125.5 million at September 30, 2024, relative to a balance of $ 107.1 million at December 31, 2023.

Long-Term Debt – The Company has long-term debt in the form of fixed to floating rate subordinated debentures with a fixed rate of 3.25 % until September 30, 2026, then floating rate at 253.5 basis points over 3-month term Secured Overnight

Financing Rate (“SOFR”) until maturity on October 1, 2031.

The balance of the Company’s long-term debt, net of unamortized issuance costs, was $ 49.4 million at September 30, 2024, and $ 49.3 million at December 31, 2023.

The balances of the non-deposit accounts are used by customers to purchase government bonds from the Company daily, subject to an agreement from the Company to repurchase such securities the next business day.

Repurchase agreements totaled $ 118.8 million at March 31, 2025, relative to a balance of $ 108.9 million at December 31, 2024.

The balance of the Company’s long-term debt, net of unamortized issuance costs, was $ 49.4 million at March 31, 2025, and $ 49.4 million at December 31, 2024.

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

2 unchanged sentences

These instruments are benchmarked against the SOFR, effective June 30, 2023.

At September 30, 2024, and December 31, 2023, the Company’s trust preferred securities totaled $ 35.8 million and $ 35.7 million, respectively.

The following table summarizes the Company’s other borrowings as of September 30, 2024, and December 31, 2023:

September 30, 2024

At March 31, 2025, and December 31, 2024, the Company’s trust preferred securities totaled $ 35.9 million and $ 35.8 million, respectively.

The following table summarizes the Company’s other borrowings as of March 31, 2025, and December 31, 2024:

March 31, 2025

December 31, 2024

Overnight Federal funds purchased

Overnight Fed funds purchased

Short-term FHLB advance

2 unchanged sentences

The Company has established secured and unsecured lines of credit under which it may borrow funds from time to time on a term or overnight basis from the FHLB, FRB, and other correspondent banks.

Federal Funds Purchased – The Company had unsecured available lines of credit with correspondent banks and the FHLB for short-term borrowings totaling $ 504.8 million at September 30, 2024, and $ 374.8 million at December 31, 2023.

In general, interest rates on these lines approximate the federal funds target rate.

Secured FHLB Borrowings – At September 30, 2024, and December 31, 2023, the Company had secured available lines of credit with the FHLB totaling $ 618.1 million and $ 586.7 million, respectively, based on eligible collateral of certain loans and investment securities.

Federal Funds Purchased – 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 March 31, 2025 and December 31, 2024, at fixed interest rates which vary with market conditions.

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

Secured FHLB Borrowings – At March 31, 2025, and December 31, 2024, the Company had secured available lines of credit with the FHLB totaling $ 633.4 million and $ 629.1 million, respectively, based on eligible collateral of certain loans and investment securities.

Federal Reserve Line of Credit – The Company has an available line of credit with the Federal Reserve Bank (“FRB”) of San Francisco secured by certain loans and investments.

At September 30, 2024, and December 31, 2023, the Company had borrowing capacity under this line totaling $ 342.7 million and $ 392.0 million, respectively.

The Company had no outstanding borrowings on this line of credit as of September 30, 2024, and December 31, 2023.

At March 31, 2025, and December 31, 2024, the Company had borrowing capacity under this line totaling $ 258.1 million and $ 298.3 million, respectively.

The Company had no outstanding borrowings on this line of credit as of March 31, 2025, and December 31, 2024.

Note 13 – Revenue Recognition

5 unchanged sentences

All of the Company’s revenue from contracts within the scope of ASC 606 is recognized as noninterest income.

Due to the short-term nature of the Company’s contracts with customers, an insignificant amount of receivables related to such revenue was recorded at September 30, 2024 and December 31, 2023.

Due to the short-term nature of the Company’s contracts with customers, an insignificant amount of receivables related to such revenue was recorded at March 31, 2025, March 31, 2024, and December 31, 2024.

The following table presents the Company’s sources of noninterest income.

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

For the three months ended September 30,

Nine months ended September 30,

For the three months ended March 31,

Noninterest income

11 unchanged sentences

With regard to noninterest income associated with customer contracts, the Company has determined that transaction prices are fixed, and performance obligations are satisfied as services are rendered, thus there is little or no judgment involved in the timing of revenue recognition under contracts that are within the scope of ASC 606.

Note 14 – Subsequent Events

Full Payment of Nonaccrual Loan

Subsequent to March 31, 2025, the Company received full payment on a nonaccrual loan secured by commercial real estate with a carrying amount of $ 5.9 million.

The receipt of payment in full totaling $ 6.5 million, included all principal, interest, and fees due.

PART I - FINANCIAL INFORMATION

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-Q

Item 1. Financial Statements